<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 11, 1996
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934)
MARKET FACTS, INC.
(NAME OF ISSUER)
MARKET FACTS, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK
(Title of Class of Securities)
570559-10-4
(CUSIP Number of Class of Securities)
COPIES TO:
GLENN W. SCHMIDT JANET O. LOVE
EXECUTIVE VICE PRESIDENT KECK, MAHIN & CATE
MARKET FACTS, INC. 77 WEST WACKER DRIVE
3040 WEST SALT CREEK LANE CHICAGO, IL 60601
ARLINGTON HEIGHTS, IL 60005
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
JUNE 11, 1996
(DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDERS)
CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE
$13,050,000 $2,610
*Calculated solely for the purpose of determining the filing fee, based upon
the purchase of 900,000 shares at $14.50 per share.
[_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: N/A
Form or Registration No.: N/A
</TABLE>
<TABLE>
<S> <C>
Filing Party: N/A
Date Filed: N/A
</TABLE>
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<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) The issuer of the securities to which this Schedule 13E-4 relates is
Market Facts, Inc., a Delaware corporation (the "Company"), and the address of
its principal executive office is 3040 West Salt Creek Lane, Arlington
Heights, Illinois 60005.
(b) This Schedule 13E-4 relates to the offer by the Company to purchase up
to 900,000 shares (or such lesser number of shares as are properly tendered
or, in the sole discretion of the Company, a greater number of shares) of its
common stock, $1.00 par value per share (the "Shares"), at $14.50 per Share,
net to the sellers in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated June 11, 1996 (the "Offer to Purchase"),
and in the related Letter of Transmittal (or similar materials distributed to
participants in the Company's employee stock ownership plan and profit sharing
plan), which together constitute the "Offer," copies of which are attached as
Exhibit (a)(l) and (a)(2), respectively, and incorporated herein by reference.
Executive officers and directors of the Company may participate in the Offer
on the same basis as the Company's other stockholders. The information set
forth in "Introduction," "The Offer--Section 1, Number of Shares; Proration,"
and "The Offer--Section 11, Interest of Directors and Executive Officers;
Transactions and Arrangements Concerning Shares" of the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in "Introduction" and "The Offer--Section 8,
Price Range of Shares; Dividends" of the Offer to Purchase is incorporated
herein by reference.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in "The Offer--Section 9, Source and
Amount of Funds" of the Offer to Purchase is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE
(a)-(j) The information set forth in "Introduction," "The Offer--Section 2,
Purpose of the Offer; Certain Effects of the Offer," "The Offer--Section 9,
Source and Amount of Funds," "The Offer--Section 11, Interest of Directors and
Executive Officers; Transactions and Arrangements Concerning Shares" and "The
Offer--Section 12, Effects of the Offer on the Market for Shares; Registration
under the Exchange Act" of the Offer to Purchase is incorporated herein by
reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
The information set forth in "The Offer--Section 11, Interest of Directors
and Executive Officers; Transactions and Arrangements Concerning Shares" and
Schedule A, "Certain Transactions Involving Shares," of the Offer to Purchase
is incorporated herein by reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
The information set forth in "Introduction," "The Offer--Section 2, Purpose
of the Offer; Certain Effects of the Offer," "The Offer--Section 9, Source and
Amount of Funds," and "The Offer--Section 11, Interest of Directors and
Executive Officers; Transactions and Arrangements Concerning Shares" of the
Offer to Purchase is incorporated herein by reference.
ITEM 6. PERSONS RETAINED, EMPLOYED, OR TO BE COMPENSATED.
The information set forth in "Introduction" and "The Offer--Section 16, Fees
and Expenses" of the Offer to Purchase is incorporated herein by reference.
<PAGE>
ITEM 7. FINANCIAL INFORMATION.
(a)-(b) The information set forth in "The Offer--Section 10, Certain
Information Concerning the Company" of the Offer to Purchase is incorporated
herein by reference, the information set forth on pages 6 through 15 of the
Company's Annual Report to Stockholders incorporated by reference into the
Company's Annual Report on Form 10-K for the year ended December 31, 1995,
filed as Exhibit (g)(1) hereto, is incorporated herein by reference, and the
information set forth on pages 1 through 5 of the Company's Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 1996, filed as Exhibit
(g)(2), is incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) Not applicable.
(b) The information set forth in "The Offer--Section 13, Certain Legal
Matters; Regulatory Approvals" of the Offer to Purchase is incorporated herein
by reference.
(c) The information set forth in "The Offer--Section 12, Effects of the
Offer on the Market for Shares; Registration under the Exchange Act" of the
Offer to Purchase is incorporated herein by reference.
(d) Not applicable.
(e) The information set forth in the Offer to Purchase and Letter of
Transmittal is incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
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<C> <S>
99(a)(1) Form of Offer to Purchase, dated June 11, 1996.
99(a)(2) Form of Letter of Transmittal (including Certification of
Taxpayer Identification Number on Substitute Form W-9 and the
guidelines relating thereto).
99(a)(3) Form of Notice of Guaranteed Delivery.
99(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
99(a)(5) Form of Letter to Clients for Use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
99(a)(6) Form of Letter, dated June 11, 1996, to Participants in the
Market Facts, Inc. Profit Sharing and Retirement Plan.
99(a)(7) Form of Letter, dated June 11, 1996, to Participants in the
Market Facts, Inc. Employee Stock Ownership Plan.
99(a)(8) Text of Press Release issued by the Company, dated June 6, 1996.
99(a)(9) Form of Letter to Stockholders of the Company, dated June 11,
1996, from Verne B. Churchill, Chairman of the Board, and Thomas
H. Payne, Chief Executive Officer of the Company.
99(a)(10) Text of Press Release issued by the Company, dated June 11,
1996.
99(b) Credit Agreement dated June 7, 1996 between the Company and
Harris Trust and Savings Bank.
99(c)(1) Investment Agreement dated June 6, 1996 among the Company, MFI
Investors L.P. and MFI Associates, Inc.
99(c)(2) Financial Advisory Agreement dated June 6, 1996 between the
Company and MFI Associates, Inc.
</TABLE>
2
<PAGE>
<TABLE>
<C> <S>
99(c)(3) Convertible Note dated June 6, 1996 in the principal amount of
$8,250,000 issued by the Company to MFI Investors L.P.
99(c)(4) Certificate of Designation, Preferences and Rights of Series B
Preferred Stock.
99(c)(5) Irrevocable Proxy dated June 6, 1996.
99(c)(6) Form of letter agreement dated June 6, 1996 executed by employee
directors of the Company, agreeing to vote their Shares in
compliance with the Investment Agreement.
99(d) Not applicable.
99(e) Not applicable.
99(f) Not applicable
99(g)(l) Pages 6 through 15 of the Company's Annual Report to
Stockholders incorporated by reference into the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
99(g)(2) Pages 1 through 5 of the Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1996.
</TABLE>
3
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this Schedule 13E-4 is true, complete and
correct.
June 11, 1996
Market Facts, Inc.
/s/ Glenn W. Schmidt
By: _________________________________
Name: Glenn W. Schmidt
Title: Executive Vice President
4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
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<C> <S> <C>
99(a)(1) Form of Offer to Purchase, dated June 11, 1996.
99(a)(2) Form of Letter of Transmittal (including Certification of
Taxpayer Identification Number on Substitute Form W-9 and the
guidelines relating thereto).
99(a)(3) Form of Notice of Guaranteed Delivery.
99(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
99(a)(5) Form of Letter to Clients for Use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
99(a)(6) Form of Letter, dated June 11, 1996, to Participants in the
Market Facts, Inc. Profit Sharing and Retirement Plan.
99(a)(7) Form of Letter, dated June 11, 1996, to Participants in the
Market Facts, Inc. Employee Stock Ownership Plan.
99(a)(8) Text of Press Release issued by the Company, dated June 6,
1996.
99(a)(9) Form of Letter to Stockholders of the Company, dated June 11,
1996, from Verne B. Churchill, Chairman of the Board, and
Thomas H. Payne, Chief Executive Officer of the Company.
99(a)(10) Text of Press Release issued by the Company, dated June 11,
1996.
99(b) Credit Agreement dated June 7, 1996, between the Company and
Harris Trust and Savings Bank.
99(c)(1) Investment Agreement dated June 6, 1996 among the Company, MFI
Investors L.P. and MFI Associates, Inc.
99(c)(2) Financial Advisory Agreement dated June 6, 1996 between the
Company and MFI Investors L.P.
99(c)(3) Convertible Note dated June 6, 1996 in the principal amount of
$8,250,000 issued by the Company to MFI Investors L.P.
99(c)(4) Certificate of Designation, Preferences and Rights of Series B
Preferred Stock.
99(c)(5) Irrevocable Proxy dated June 6, 1996.
99(c)(6) Form of letter agreement dated June 6, 1996 executed by
employee directors of the Company, agreeing to vote their
Shares in compliance with the Investment Agreement.
99(d) Not applicable.
99(e) Not applicable.
99(f) Not applicable
99(g)(l) Pages 6 through 15 of the Company's Annual Report to
Stockholders incorporated by reference into the Company's
Annual Report on Form 10-K for the year ended December 31,
1995.
99(g)(2) Pages 1 through 5 of the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1996.
</TABLE>
<PAGE>
MARKET FACTS, INC.
OFFER TO PURCHASE FOR CASH
UP TO 900,000 SHARES OF ITS COMMON STOCK
AT A PURCHASE PRICE OF
$14.50 NET PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 5:00 P.M., NEW YORK CITY TIME, ON TUESDAY, JULY 9, 1996,
UNLESS THE OFFER IS EXTENDED.
Market Facts, Inc., a Delaware corporation (the "Company"), hereby invites
its stockholders to tender shares of its Common Stock, $1.00 par value per
share (the "Shares"), to the Company at $14.50 per Share, net to the seller in
cash (the "Purchase Price"), upon the terms and subject to the conditions set
forth herein and in the related Letter of Transmittal (or similar materials
distributed to participants in the Company's employee stock ownership plan and
profit sharing plan), which together constitute the "Offer." Subject to the
terms and the conditions of the Offer, including the proration and conditional
tender provisions, all Shares properly tendered and not withdrawn will be
purchased at the Purchase Price. The Company reserves the right, in its sole
discretion, to purchase more than 900,000 shares pursuant to the Offer. See
Section 15.
THE OFFER IS NOT CONDITIONED ON ANY
MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER
CONDITIONS. SEE SECTION 7.
The Shares are listed on the National Market System of the Nasdaq Stock
Market ("Nasdaq") under the symbol "MFAC." On June 6, 1996, the last full
trading day prior to the announcement of the Offer, the closing per Share
sales price as reported by Nasdaq was $14.00.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
SEE SECTION 8. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION TO STOCKHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING THEIR SHARES. EACH STOCKHOLDER MUST MAKE THE DECISION WHETHER TO
TENDER SHARES AND, IF SO, HOW MANY SHARES. THE COMPANY HAS BEEN ADVISED THAT
CERTAIN OF ITS DIRECTORS AND EXECUTIVE OFFICERS INTEND TO TENDER SHARES
PURSUANT TO THE OFFER. SEE SECTION 11.
Any stockholder wishing to tender all or any part of his or her Shares
should either (a) complete and sign a Letter of Transmittal in accordance with
the instructions in the Letter of Transmittal and either mail or deliver it
with any required signature guarantee and any other required documents to
First Chicago Trust Company of New York (the "Depositary" or the "Information
Agent"), and either mail or deliver the stock certificates for such Shares to
the Depositary (with all such other documents) or tender such Shares pursuant
to the procedure for book-entry transfer set forth in Section 3, or (b)
request a broker, dealer, commercial bank, trust company or other nominee to
effect the transaction for such stockholder. Holders of Shares registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
should contact such person if they desire to tender their Shares. Any
stockholder who desires to tender Shares and whose certificates for such
Shares cannot be delivered to the Depositary or who cannot comply with the
procedure for book-entry transfer or whose other required documents cannot be
delivered to the Depositary, in any case, by the expiration of the Offer must
tender such Shares pursuant to the guaranteed delivery procedure set forth in
Section 3.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery
may be directed to the Information Agent or the Company at their respective
addresses as set forth on the back cover page hereof.
THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON
BEHALF OF THE COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION
WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN OR IN THE RELATED LETTER OF
TRANSMITTAL (OR SIMILAR MATERIALS DISTRIBUTED TO PARTICIPANTS IN THE COMPANY'S
EMPLOYEE STOCK OWNERSHIP PLAN AND PROFIT SHARING PLAN). IF GIVEN OR MADE, ANY
SUCH RECOMMENDATION OR ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
---------------
The Information Agent and Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
June 11, 1996
<PAGE>
SUMMARY
This general summary is solely for the convenience of the Company's
stockholders and is qualified in its entirety by reference to the full text
and more specific details in this Offer to Purchase.
Purchase Price................... The Company hereby offers, subject to the
conditions set forth in this Offer to
Purchase and in the related Letter of
Transmittal, to purchase up to 900,000
shares of its Common Stock, $1.00 par value
(the "Shares"), at $14.50 per Share.
Number of Shares to be
Purchased....................... Up to 900,000 Shares (or such lesser number
of Shares as are properly tendered or, in
the sole discretion of the Company, a
greater number of Shares).
Source and Amount of Funds to
Purchase Shares................. The purchase of the first 568,965 Shares
tendered in the Offer will be funded by the
private sale to MFI Investors L.P. of a ten-
year, 7% convertible subordinated note in the
principal amount of $8,250,000. The purchase
of Shares tendered in excess of 568,965 will
be funded by a bank loan. Assuming that
900,000 Shares are purchased pursuant to the
Offer, such bank loan would be in the
principal amount of $4,800,000.
How to Tender Shares............. See Section 3. Contact the Information Agent
or the Company at their respective addresses
or telephone numbers set forth on the back
cover page hereof, or consult your broker for
assistance.
Brokerage Commissions............ None.
Stock Transfer Tax............... None, if payment is made to the registered
holder.
Expiration and Proration Dates... Tuesday, July 9, 1996, at 5:00 P.M., New
York City time, unless extended by the
Company. Upon the terms and subject to the
conditions of the Offer, if at the
expiration of the Offer more than 900,000
Shares are properly tendered and not
withdrawn, the Company will buy Shares
first from all Odd Lot Holders (as defined
in Section 1) who properly tender all their
Shares and then on a pro rata basis from
all other stockholders who properly tender
Shares (and do not withdraw them prior to
the expiration of the Offer). See Section
1. All Shares not purchased pursuant to the
Offer and not withdrawn, including Shares
not purchased because of proration or
conditional tenders, will be returned at
the Company's expense to the stockholders
who tendered such Shares.
Payment Date..................... As soon as practicable after the
termination of the Offer.
Position of the Company and its
Directors....................... Neither the Company nor its Board of
Directors makes any recommendation to any
stockholders as to whether to tender or
refrain from tendering Shares.
Withdrawal Rights................ Tendered Shares may be withdrawn at any
time until 5:00 P.M., New York City time,
on Tuesday, July 9, 1996, unless the Offer
is extended by the Company, and, unless
previously purchased, after 12:00 Midnight,
New York City time, on Tuesday, August 6,
1996. See Section 3.
i
<PAGE>
Odd Lots......................... There will be no proration of Shares
tendered by any stockholder owning
beneficially less than 100 Shares as of the
close of business on June 10, 1996 and as
of the Expiration Date, who tenders all
such Shares prior to the Proration Date and
who checks the "Odd Lots" box in the Letter
of Transmittal. See Section 1.
Further Developments Regarding
the Offer ....................... Call the Information Agent or the Company
or consult your broker.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION............................................................... 1
THE OFFER.................................................................. 2
1. Number of Shares; Proration.......................................... 2
2. Purpose of the Offer; Certain Effects of the Offer................... 4
3. Procedures for Tendering Shares...................................... 11
4. Withdrawal Rights.................................................... 14
5. Purchase of Shares and Payment of Purchase Price..................... 14
6. Conditional Tender of Shares......................................... 15
7. Certain Conditions of the Offer...................................... 16
8. Price Range of Shares; Dividends..................................... 17
9. Source and Amount of Funds........................................... 17
10. Certain Information Concerning the Company........................... 19
11. Interest of Directors and Executive Officers; Transactions and
Arrangements Concerning Shares....................................... 22
12. Effects of the Offer on the Market for Shares; Registration under the
Exchange Act......................................................... 23
13. Certain Legal Matters; Regulatory Approvals.......................... 24
14. Certain Federal Income Tax Consequences.............................. 24
15. Extension of Offer; Termination; Amendment........................... 27
16. Fees and Expenses.................................................... 27
17. Miscellaneous........................................................ 28
SCHEDULE A Certain Transactions Involving Shares........................... A-1
</TABLE>
iii
<PAGE>
To the Holders of Common Stock of Market Facts, Inc.:
INTRODUCTION
Market Facts, Inc., a Delaware corporation (the "Company"), invites its
stockholders to tender shares of its Common Stock, par value $1.00 per share
(the "Shares"), for purchase by the Company at $14.50 per Share, net to the
seller in cash (the "Purchase Price"), upon the terms and subject to the
conditions set forth herein and in the related Letter of Transmittal (or
similar materials distributed to participants in the Company's employee stock
ownership plan and profit sharing plan), which together constitute the
"Offer." Upon the terms and subject to the conditions of the Offer, including
the proration and conditional tender provisions, all Shares properly tendered
and not withdrawn will be purchased at the Purchase Price. Shares not
purchased because of proration or conditional tender will be returned. The
Company reserves the right, in its sole discretion, to purchase more than
900,000 Shares pursuant to the Offer. See Section 15.
THIS OFFER IS NOT CONDITIONED UPON THE TENDER OF ANY MINIMUM NUMBER OF
SHARES BUT IS SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 7.
Upon the terms and subject to the conditions of the Offer, if at the
expiration of the Offer more than 900,000 Shares are properly tendered and not
withdrawn, the Company will buy Shares first from all Odd Lot Holders (as
defined in Section 1) who properly tender all their Shares and then on a pro
rata basis from all other stockholders who properly tender Shares (and do not
withdraw them prior to the expiration of the Offer). See Section 1. All Shares
not purchased pursuant to the Offer and not withdrawn, including Shares not
purchased because of proration or conditional tenders, will be returned at the
Company's expense to the stockholders who tendered such Shares.
The Purchase Price will be paid net to the tendering stockholder in cash for
all Shares purchased. Tendering stockholders will not be obligated to pay
brokerage commissions, solicitation fees or, subject to Instruction 7 of the
Letter of Transmittal, stock transfer taxes on the purchase of Shares by the
Company. HOWEVER, ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO
COMPLETE, SIGN AND RETURN TO THE DEPOSITARY THE SUBSTITUTE FORM W-9 THAT IS
INCLUDED IN THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED BACKUP
FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAYABLE TO SUCH
STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 3. The Company
will pay all fees and expenses of First Chicago Trust Company of New York (the
"Depositary" or the "Information Agent") incurred in connection with the
Offer. See Section 16.
The Market Facts, Inc. Profit Sharing and Retirement Plan (the "Profit
Sharing Plan") held 156,355 Shares (approximately 7.8% of the outstanding
Shares) in accounts for participants as of May 20, 1996. The Market Facts,
Inc. Employee Stock Ownership Plan (the "ESOP") held 108,830 Shares
(approximately 5.4% of the outstanding Shares) in accounts for participants as
of May 20, 1996. Harris Trust and Savings Bank (the "Plan Trustee") serves as
trustee for both the Profit Sharing Plan and the ESOP. Under the terms of the
Profit Sharing Plan and the ESOP, a participant may instruct the Plan Trustee
to tender some or all of the Shares allocated to the participant's accounts by
using the separate letters and election forms provided to such participant. A
participant electing to tender Shares allocated to his or her Profit Sharing
Plan account and ESOP account must submit to the Plan Trustee a separate
election form for each plan. See Section 3. The special Odd Lot purchase rules
described below do not apply to any Shares held in an account in the Plans.
See Section 1.
THE OFFER IS BEING MADE PURSUANT TO AN INVESTMENT AGREEMENT DATED JUNE 6,
1996 AMONG MFI INVESTORS L.P. (THE "PARTNERSHIP"), MFI ASSOCIATES, INC. (THE
"GENERAL PARTNER") AND THE COMPANY, WHEREBY THE PARTNERSHIP PURCHASED FROM THE
COMPANY A TEN-YEAR, 7% CONVERTIBLE SUBORDINATED NOTE IN THE PRINCIPAL
1
<PAGE>
AMOUNT OF $8,250,000 (THE "CONVERTIBLE NOTE"). IMMEDIATELY PRIOR TO THE
PURCHASE OF THE SHARES IN THIS OFFER, THE CONVERTIBLE NOTE WILL BE
AUTOMATICALLY CONVERTED AT THE RATE OF $14.50 PER SHARE INTO A NUMBER OF
SHARES EQUAL TO THE NUMBER OF SHARES (UP TO 568,965) PURCHASED IN THIS OFFER.
IF LESS THAN 568,965 SHARES ARE PURCHASED PURSUANT TO THIS OFFER, THE
CONVERTIBLE NOTE SHALL THEREAFTER CONVERT INTO SHARES AT THE RATE OF $14.50
PER SHARE AS SUCH SHARES MAY BE REPURCHASED BY THE COMPANY FROM TIME TO TIME.
SEE SECTIONS 2, 7 AND 9.
THE COMPANY HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") AN ISSUER TENDER OFFER STATEMENT, INCLUDING EXHIBITS, ON
SCHEDULE 13E-4 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WITH
RESPECT TO THIS OFFER. STATEMENTS AND DESCRIPTIONS OF DOCUMENTS CONTAINED
HEREIN CONCERNING THE PROVISIONS OF ANY DOCUMENTS ARE NOT NECESSARILY
COMPLETE, AND IN EACH INSTANCE REFERENCE IS MADE TO THE COPY OF SUCH DOCUMENT
FILED AS AN EXHIBIT TO SUCH TENDER OFFER STATEMENT. EACH SUCH STATEMENT AND
DESCRIPTION IS QUALIFIED IN ITS ENTIRETY BY SUCH REFERENCE.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
STOCKHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING THEIR SHARES.
EACH STOCKHOLDER MUST MAKE THE DECISION WHETHER TO TENDER SHARES AND, IF SO,
HOW MANY SHARES SHOULD BE TENDERED. THE COMPANY HAS BEEN ADVISED THAT CERTAIN
OF ITS DIRECTORS AND EXECUTIVE OFFICERS INTEND TO TENDER SHARES PURSUANT TO
THE OFFER. SEE SECTION 11. THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE
ANY RECOMMENDATION ON BEHALF OF THE COMPANY AS TO WHETHER STOCKHOLDERS SHOULD
TENDER OR REFRAIN FROM TENDERING SHARES PURSUANT TO THE OFFER.
As of June 6, 1996, the Company had issued and outstanding 2,000,769 Shares.
The 900,000 Shares that the Company is offering to purchase pursuant to the
Offer represent approximately 45% of the outstanding Shares; however, up to
568,965 Shares will be issued upon conversion of the Convertible Note.
Assuming that 900,000 Shares are purchased by the Company and that the
Convertible Note is converted into 568,965 Shares, the number of outstanding
Shares of the Company will decrease by a net amount of 331,035 Shares, or
16.5% of the outstanding Shares.
The Shares are listed on Nasdaq under the symbol "MFAC." On June 6, 1996,
the last trading day prior to the announcement of the Offer, the closing per
Share sales price as reported on Nasdaq was $14.00. STOCKHOLDERS ARE URGED TO
OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. See Section 8.
THE OFFER
1. NUMBER OF SHARES; PRORATION
Upon the terms and subject to the conditions of the Offer, the Company will
purchase up to 900,000 Shares or such lesser number of Shares as are properly
tendered (and not withdrawn in accordance with Section 4) prior to the
Expiration Date (as defined below) at $14.50 net per Share in cash. The term
"Expiration Date" means 5:00 P.M., New York City time, on Tuesday, July 9,
1996, unless and until the Company, in its sole discretion, shall have
extended the period of time during which the Offer will remain open, in which
event the term "Expiration Date" shall refer to the latest time and date at
which the Offer, as so extended by the Company, shall expire. See Section 15
for a description of the Company's right to extend, delay, terminate or amend
the Offer. The Company reserves the right to purchase more than 900,000 Shares
pursuant to the Offer in its sole discretion. In accordance with applicable
regulations of the Securities and Exchange Commission (the
2
<PAGE>
"Commission"), the Company may purchase pursuant to the Offer an additional
amount of Shares not to exceed 2% of the outstanding Shares without amending
or extending the Offer. See Section 15. In the event of an over-subscription
of the Offer as described below, Shares tendered prior to the Expiration Date
will be subject to proration, except for Odd Lots and conditional tenders as
explained below and in Section 6. The proration period also expires on the
Expiration Date.
All Shares properly tendered and not withdrawn will be purchased at the
Purchase Price, subject to the terms and the conditions of the Offer,
including the proration and conditional tender provisions.
THE OFFER IS NOT CONDITIONED UPON THE TENDER OF ANY MINIMUM NUMBER OF
SHARES, BUT IS SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 7.
Shares properly tendered pursuant to the Offer and not withdrawn will be
purchased at the Purchase Price, subject to the terms and conditions of the
Offer, including the proration and conditional tender provisions. All Shares
tendered and not purchased pursuant to the Offer, including Shares not
purchased because of proration or conditional tender, will be returned to the
tendering stockholders at the Company's expense as promptly as practicable
following the Expiration Date.
Priority of Purchasers. Upon the terms and subject to the conditions of the
Offer, if more than 900,000 Shares have been properly tendered and not
withdrawn prior to the Expiration Date, the Company will purchase properly
tendered Shares on the basis set forth below:
(a) first, all Shares properly tendered and not withdrawn prior to the
Expiration Date by any Odd Lot Holder (as defined below) who:
(1) tenders all Shares beneficially owned by such Odd Lot Holder
(tenders of less than all Shares owned by such stockholder will not
qualify for this preference); and
(2) completes the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed Delivery;
and
(b) second, after purchase of all of the foregoing Shares, all Shares
conditionally tendered in accordance with Section 6, for which the
condition was satisfied, and all other Shares tendered properly and
unconditionally and not withdrawn prior to the Expiration Date, on a pro
rata basis (with appropriate adjustments to avoid purchases of fractional
Shares) as described below; and
(c) third, if necessary, Shares conditionally tendered for which the
condition was not satisfied, if all shares held by such holder are tendered
and not withdrawn prior to the Expiration Date, selected by random lot in
accordance with Section 6.
Odd Lots. For purposes of the Offer, the term "Odd Lots" shall mean all
Shares properly tendered prior to the Expiration Date and not withdrawn by any
person (an "Odd Lot Holder") who owned, beneficially or of record, as of the
close of business on June 10, 1996 and as of the Expiration Date, an aggregate
of fewer than 100 Shares (and so certified in the appropriate place on the
Letter of Transmittal and, if applicable, on the Notice of Guaranteed
Delivery). In order to qualify for this preference, an Odd Lot Holder must
tender all such Shares in accordance with the procedures described in Section
3. As set forth above, Odd Lots will be accepted for payment before proration,
if any, of the purchase of other tendered Shares. This preference is not
available to partial tenders or to beneficial or record holders of an
aggregate of 100 or more Shares, even if such holders have separate accounts
or certificates representing fewer than 100 Shares. By accepting the Offer, an
Odd Lot Holder would not only avoid the payment of brokerage commissions but
also would avoid any applicable odd lot discounts in a sale of such holder's
Shares. Any stockholder wishing to tender all of such stockholder's Shares
pursuant to this Section should complete the box captioned "Odd Lots" on the
Letter of Transmittal and, if applicable, on the Notice of Guaranteed
Delivery.
The Company also reserves the right, but will not be obligated, to purchase
all Shares duly tendered by any stockholder who tendered all Shares owned,
beneficially or of record, and who, as a result of proration, would
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then own, beneficially or of record, an aggregate of fewer than 100 Shares. If
the Company exercises this right, it will increase the number of Shares that
it is offering to purchase by the number of Shares purchased through the
exercise of the right.
The special Odd Lot purchase rules described above do not apply to any
Shares held in an account in the Profit Sharing Plan or the ESOP.
Proration. In the event that proration of tendered Shares is required, the
Company will determine the proration factor as soon as practicable following
the Expiration Date. Proration for each stockholder tendering Shares, other
than Odd Lot Holders, shall be based on the ratio of the number of Shares
tendered by such stockholder to the total number of Shares tendered by all
stockholders, other than Odd Lot Holders, subject to the conditional tender
provisions described in Section 6. Because of the difficulty in determining
the number of Shares properly tendered (including Shares tendered by
guaranteed delivery procedures, as described in Section 3) and not withdrawn,
and because of the Odd Lot procedure, the Company does not expect that it will
be able to announce the final proration factor or to commence payment for any
Shares purchased pursuant to the Offer until approximately five Nasdaq trading
days after the Expiration Date. The preliminary results of any proration will
be announced by press release as promptly as practicable after the Expiration
Date. Stockholders may obtain such preliminary information from the Company
and may be able to obtain such information from their brokers.
This Offer to Purchase and the related Letter of Transmittal will be mailed
to record holders of Shares and will be furnished to brokers, banks and
similar persons whose names, or the names of whose nominees, appear on the
Company's stockholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
2. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER
Background and Purpose of the Offer. During the last two years, the
Company's Board of Directors has been reviewing strategic alternatives
available to the Company in order to maximize stockholder value through
growing its business or otherwise, and in June 1994 the Company engaged
Schroder Wertheim & Co. Incorporated, then known as Wertheim Schroder & Co.
Incorporated (referred to herein as "Schroders"), to assist in its review. In
April 1995, the Company received a proposal from a third party to acquire the
entire Company in a transaction whereby the public stockholders would receive
$14.00 per Share. Further discussions resulted in a revised proposal submitted
in August 1995 whereby the public stockholders would receive $15.25 per Share.
Schroders advised the Company that, based upon the terms and conditions of the
proposed transaction, it was unable to render an opinion at that time that
$15.25 per Share, as part of a transaction to acquire the entire Company, was
fair to the Company's stockholders from a financial point of view. The Company
also received advice from its legal counsel concerning the terms of the
proposal. The amount proposed was not increased, and discussions were
discontinued. See "Section 10-- Certain Information Concerning the Company."
In February 1996, the Company commenced discussions with an investor group
that had expressed an interest in the purchase of a significant equity
interest in the Company, coupled with an issuer tender offer, and in assisting
the Company in accomplishing its long-term growth objectives. The Company
again retained Schroders to advise it in connection with the proposed
transaction and also retained special Delaware counsel to provide legal advice
on certain aspects of the transaction. By April 1996, these discussions
resulted in a proposal by MFI Investors L.P., a limited partnership (the
"Partnership") formed by the ZS Fund L.P., a New York-based investment
partnership, to invest $8,250,000 in the Company through the purchase of a
ten-year, 7% convertible subordinated note (the "Note"), such purchase to be
followed by an issuer tender offer for up to 900,000 Shares at a price equal
to the conversion price of the Note. Pursuant to further discussions among the
Company, its advisors and the Partnership, the Company and the Partnership
agreed to a conversion price of $14.50 per Share for the Note (the "Note
Conversion Price"), subject to the approval of the Board of Directors. The
proposal included the right of the Partnership to elect three of the Company's
11 directors and to approve certain actions of the Company, and contemplated
that the Partnership would be subject to restrictions on its ability to
acquire
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Shares beyond a maximum percentage, to sell and vote its Shares and to take
control of the Company. In addition, the general partner of the Partnership,
MFI Associates, Inc. (the "General Partner") would provide financial advisory
services to the Company for five years and be paid an annual financial
advisory fee of $125,000 (less any directors' fees paid to the Partnership's
board designees).
In the judgment of the Board, an investment and Board participation by the
Partnership could enhance the Company's prospects for future growth by adding
financially knowledgeable board members with a major financial stake in the
Company without transferring control of the Company. In addition, the Board
considered that the investment by the Partnership is an advantageous way of
financing a major portion of the issuer tender offer.
Further, in the judgment of the Board, in light of the general lack of
trading opportunities in the Shares, it is appropriate to provide stockholders
a one-time opportunity to liquidate significant holdings of Shares. In
addition, the Board considered that, despite good financial results in recent
years, the Shares continue to trade at multiples lower than those of many of
its competitors, due in part to a perceived excess of sellers in the market.
The Board believes that a one-time liquidity event may alleviate this
situation, even though an issuer tender offer may reduce the public float of
the Shares thereafter.
The Board of Directors held a meeting on June 5, 1996 at which it received
presentations addressing the proposed transactions with the Partnership and
the issuer tender offer from Schroders and the Company's legal advisors. At
that meeting, Schroders delivered to the Board its written opinion dated June
5, 1996 that, based upon the assumptions made, procedures followed, matters
considered and limits of its review described in its opinion, the Note
Conversion Price is fair, from a financial point of view, to the holders of
the Shares.
The Schroders opinion does not address any aspect of the transactions with
the Partnership other than the fairness of the Note Conversion Price, from a
financial point of view, to the holders of the Shares. In addition, Schroders
has not been engaged to render an opinion, nor has it rendered an opinion,
with respect to the Purchase Price being offered by the Company in connection
with the Offer. Schroders' opinion does not constitute a recommendation to the
Company's stockholders as to whether to tender or refrain from tendering any
or all of such stockholders' Shares.
In addition to the other factors described above, the Board discussed the
financial analyses and the presentation of Schroders and the presentation of
the Company's legal advisors. The Board did not find it practicable to, and
did not, quantify or otherwise attempt to assign relative weights to the
specific factors considered in reaching its determination. By a unanimous vote
of those present at the June 5, 1996 Board meeting, the proposed transactions
with the Partnership and the proposed tender offer were approved by the Board
of Directors.
Pursuant to a letter agreement dated June 13, 1994, the Company paid
Schroders a fee of $75,000 for financial advisory services rendered in
connection with the Company's exploration of strategic alternatives and
discussions with third parties relating thereto. Pursuant to amendments dated
March 22, 1996 and May 30, 1996 to the June 13 letter agreement, the Company
paid Schroders additional fees of $150,000 in connection with the transactions
contemplated by the Investment Agreement (defined below), of which $75,000 was
paid on or about March 22, 1996 and $75,000 was paid at the Investment Closing
(defined below). In addition, on June 5, 1996, a fee of $100,000 was paid to
Schroders in connection with the fairness opinion delivered to the Board. The
Company also agreed to reimburse Schroders for its reasonable out-of-pocket
expenses in connection with the services rendered pursuant to its engagement
by the Company.
On June 6, 1996 (the "Investment Closing"), the Company entered into an
Investment Agreement (the "Investment Agreement") among the Partnership, the
General Partner and the Company, whereby the Partnership purchased from the
Company a ten-year, 7% subordinated note in the principal amount of
$8,250,000, convertible into 568,965 Shares (the "Convertible Note") at the
Note Conversion Price.
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The Partnership, whose principal business is holding, monitoring the
performance of and ultimately disposing of an investment in the Company, was
formed pursuant to the Agreement of Limited Partnership of the ZS Fund L.P., a
New York investment group. Currently, Mr. Ned L. Sherwood and Madison Dearborn
Capital Partners, L.P. are the sole limited partners of the Partnership. The
Partnership expects that additional limited partners will be admitted to the
Partnership from time to time after the Investment Closing. The General
Partner is the sole general partner of the Partnership. Messrs. Sherwood,
Henrik Falktoft, Robert Horne and Jeffery Oyster are the sole voting
stockholders of the General Partner. A custodian holds non-voting shares of
the General Partner for the benefit of four of Mr. Sherwood's children.
The Company also entered into a Financial Advisory Agreement with the
General Partner under which the General Partner will make available to the
Company financial advisory services as requested from time to time, such
services to include, without limitation, financial analysis and structuring
strategies in connection with acquisitions. In addition, the Company issued to
the Partnership, for the sum of $100 and in consideration of the purchase of
the Convertible Note, 100 shares of a new class of Series B Preferred Stock,
no par value ("Series B Shares"), entitling the Partnership to elect three
directors, subject to decrease as described below. See Sections 9 and 10 for a
further description of the Investment Agreement and the Convertible Note. This
Offer to Purchase is being made as contemplated by the Investment Agreement.
Immediately prior to the purchase of the Shares in this Offer, the
Convertible Note will be converted automatically into a number of Shares equal
to the number of Shares (up to 568,965) purchased in this Offer at the rate of
$14.50 per Share. If 900,000 Shares are purchased in the Offer, the
Partnership will own 34.1% of the outstanding Shares immediately after such
purchase. If 568,965 Shares are purchased in the Offer, the Partnership will
own 28.4% of the outstanding Shares immediately after such purchase. It is a
condition of the Offer that such conversion occurs. See Sections 7 and 9.
On June 5, 1996, the Company amended certain provisions of its Rights
Agreement dated as of July 26, 1989 (the "Rights Plan") to permit the purchase
by the Partnership of the Convertible Note and its conversion into Shares. In
general, the Rights Plan provides that in the event a person or group acquires
20% or more of the Shares, a certificate representing one "right" for each
outstanding Share will be distributed to the Company's stockholders (other
than the acquiring group or person) which will entitle its holder to purchase
1/100 of a share of Series A Preferred Stock at a price of $20 per 1/100
share. The amendments to the Rights Plan adopted by the Company permit the
Standstill Persons (defined as the Partnership, the General Partner, each
officer, director and stockholder of the General Partner and their respective
spouses and children, and any person for whom any of the foregoing has the
power to direct or cause the direction of the acquisition, disposition or
voting of securities) to purchase up to 37.5% of all Voting Securities (which
percentage will be reduced to 20% if at any time the Standstill Persons
beneficially own less than 15% of all Voting Securities) without triggering
the provisions of the Rights Plan.
The terms of the Series B Shares provide that as long as the Partnership
continues to beneficially own at least 20% of the total combined voting power
of all Shares and any other class of securities of the Company entitled to
vote generally in the election of directors then outstanding ("Voting
Securities"), the Partnership has the right to elect three directors to the
Company's Board of Directors. The number of directors which the Partnership is
entitled to elect decreases to two if such beneficial ownership of Voting
Securities is below 20% but at least 10%, and to one if such beneficial
ownership of Voting Securities is below 10% but at least 5%. If the amount of
Voting Securities beneficially owned by the Partnership should fall below 5%,
the Partnership's right to elect directors pursuant to the provisions of the
Series B Shares terminates. As long as the Partnership beneficially owns at
least 15% of the total combined voting power of all outstanding Voting
Securities, it shall also have the right to have one of its directors
appointed to each of the audit and compensation committees of the Board. In
addition, as long as any Series B Shares are outstanding, the Company shall
not, without the vote of the Partnership as the holder of the outstanding
Series B Shares, expand the Board of Directors to more than 11 directors.
The terms of the Series B Shares further provide that no director elected by
the Partnership may be a competitor of the Company, and so long as at least 3
members of the Board (other than those elected by the
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Partnership) are independent directors and the Partnership is entitled to
elect 3 directors, one of the directors elected by the Partnership shall be an
independent director.
The Series B Shares may not be transferred without the prior written consent
of the Company, and all of the Company's obligations thereunder shall
terminate upon the occurrence of a change of control of the Partnership.
The Series B Shares shall be redeemed, at a redemption price of $1.00 per
share, at any time that the holders thereof shall not be entitled to elect any
directors as described above. Notice of such redemption shall be given at
least 5 business days prior to redemption (the "Redemption Date"). From and
after the Redemption Date, unless the Company shall fail to make available
sufficient funds to effect the redemption, such shares shall no longer be
deemed to be outstanding shares for any purpose, and the holders of such
shares shall not have any rights with respect thereto, except the right to
receive the Redemption Price upon surrender to the Company of the certificates
therefor.
On June 5, 1996, Messrs. John C. Robertson and Timothy Q. Rounds resigned as
directors of the Company, and Mr. Wesley S. Walton resigned as a director
effective May 28, 1996. As of the Investment Closing, Messrs. Ned L. Sherwood
and Henrik Falktoft (the "Investor Directors") were elected by the Partnership
to the Board of Directors of the Company. Mr. Sherwood, age 47, has served as
President of Zaleski, Sherwood & Co., Inc., a private investment firm which is
the general partner of the ZS Fund L.P., since September 1985. He is also a
director of Sun Television Appliances, Inc. Mr. Sherwood is an officer and
director of MFI Associates, Inc., the sole general partner of MFI Investors
L.P. Mr. Falktoft, age 38, has been employed by the ZS Fund L.P. since
September, 1990. Prior to joining the ZS Fund L.P. he was employed by Morgan
Stanley & Co., Inc. Mr. Falktoft is an officer and director of MFI Associates,
Inc., the sole general partner of MFI Investors L.P. Messrs. Sherwood and
Falktoft are both directors Kaye Group, Inc, an insurance brokerage firm.
The Investment Agreement provides that the Company will not take certain
actions unless at least one director elected by the Partnership votes in favor
of the action. These "approval rights" will apply so long as the Partnership:
(i) shall not at any time have beneficially owned less than 285,000 shares of
Voting Securities (adjusted for subdivisions, combinations or
reclassifications of Voting Securities), (ii) is entitled to elect and has
actually elected at least one director, and (iii) there shall not have been a
change of control of the Partnership or the General Partner. Such actions
include business acquisitions of $1,000,000 or more, the incurrence of certain
indebtedness (unless the Company has given the General Partner an opportunity
to assist in arranging financing on terms superior to those of the debt to be
incurred), the sale (other than in the ordinary course of business) of any
single tangible asset or group of related assets in excess of $100,000 (but
not a sale of all or substantially all of the Company's assets), the
declaration of certain dividends in excess of 150% over the prior year's
dividends and compensation increases for highly paid employees unless approved
by the compensation committee of the Board consisting of independent
directors. In addition, the provisions of the Series B Shares provide that
without the affirmative vote of the Partnership as the holder of the
outstanding Series B Shares, the Company shall not take any action at a
meeting of the Board of Directors unless at least one director elected by the
Partnership is present, or written notice of such meeting has been provided at
least 5 days in advance of such meeting.
With respect to the election or removal of directors other than those
elected by the Partnership, the Investment Agreement provides that all Voting
Securities entitled to be voted by Standstill Persons are to be voted
proportionally in accordance with the vote of the Public Stockholders (defined
as stockholders other than Standstill Persons and certain executive officers
of the Company).
With respect to matters other than the election or removal of directors
submitted to a vote of Company stockholders, the Standstill Persons may vote
in their discretion that number of Voting Securities entitled to be voted by
them equal to 19.9% of the total combined voting power of all Voting
Securities then outstanding, and shall vote proportionally in accordance with
the votes cast by the Public Stockholders that number of Voting Securities in
excess of such 19.9%.
The total beneficial ownership of all Standstill Persons is not permitted at
any time to exceed 37.5% of the total combined voting power of all Voting
Securities then outstanding (the "Standstill Percentage"); provided that this
provision will not be violated solely by reason of a reduction in the number
of Voting Securities
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outstanding due to the repurchase of Shares by the Company, unless and until
the Standstill Persons shall become the beneficial owners of additional
Shares. Any Voting Securities in excess of the Standstill Percentage shall be
voted by the Standstill Persons in the manner described above for Voting
Securities in excess of 19.9%.
The Investment Agreement contains certain other restrictions which are
intended to have the effect of preventing the Partnership from taking control
of the Company without the prior approval of a majority of the Board of
Directors, including restrictions against participating in any tender offer or
proposal to effect a business combination or similar transaction involving the
Company, soliciting proxies and participating in any election contest
involving the Company. The restrictions against proxy solicitations and
election contests do not apply for any period in which the Company does not
meet predetermined operating income targets.
If the Company should issue any equity securities (or any securities
convertible, exchangeable or exercisable for any equity security), including
shares of Voting Securities ("Equity Securities"), the Partnership shall have
the right to purchase an additional amount of such Equity Securities in an
amount sufficient to permit the Partnership to own a percentage of such Equity
Securities equal to the lesser of (i) the Standstill Percentage, and (ii) its
percentage of the outstanding Voting Securities of the Company immediately
prior to such issuance or sale. Such right would not be triggered by certain
events, including a registered public offering of securities in which the
Partnership is a selling securityholder and the issuance of any Equity
Securities pursuant to the Rights Plan, and will terminate upon the first to
occur of a change in control of the Partnership (unless the Company otherwise
agrees in advance to the change in control) and the date on which the
Partnership shall own less than 10% of the total combined voting power of all
Voting Securities then outstanding.
The Shares to be issued upon conversion of the Convertible Note will not be
registered under the Securities Act of 1933, as amended (the "1933 Act"), and
will therefore be "restricted securities" within the meaning of Rule 144 of
the 1933 Act. Market sales of such Shares pursuant to Rule 144 may not occur
for at least two years from the date of issuance of the Convertible Note.
Before the Partnership effects any sales pursuant to Rule 144, the Company
will have the right to purchase such Shares at the average closing price of
the Shares during the 20-day period prior to notification of such sales.
One or more Standstill Persons may transfer shares of Voting Securities in a
private sale to any single purchaser in an aggregate amount of 5% or less of
the total combined voting power of all Voting Securities then outstanding.
If one or more Standstill Persons proposes to sell Shares to a single
purchaser in a private sale in an amount in excess of 5%, but less than 10%,
of the total combined voting power of all Voting Securities then outstanding,
the Company will have a right of first offer to purchase all (but not part) of
such Shares at a price offered by the Company. If the Company's offer is not
accepted as to the Shares proposed to be sold, such Shares may be sold by the
transferring Standstill Persons at the price offered by the Company or at a
greater price.
If one or more Standstill Persons proposes to sell Shares to a single
purchaser in a private sale in an amount equal to 10% or more of the total
combined voting power of all Voting Securities then outstanding, the Company
will have a right of first refusal to purchase all (but not part) of such
Shares at the price and upon the terms stated in a written notice of such sale
delivered to the Company. Such notice of sale must state the identity of the
proposed transferee, that such transferee is a bona fide purchaser whom the
Standstill Persons reasonably believe is financially able to purchase the
Shares in question, and the price, terms and conditions upon which the
transfer is to be made.
If the Company does not exercise its right of first offer or right of first
refusal, as applicable, as set forth in the Investment Agreement, the
transferring Standstill Persons would not be prohibited from transferring the
Shares subject to such right, so long as certain requirements are met,
including: (i) the proposed transferee shall not beneficially own Voting
Securities in an amount in excess of the Standstill Percentage immediately
after such transfer, and (ii) if the proposed transferee would beneficially
own more than 15% of the total combined voting power of all Voting Securities
then outstanding, such transferee first agrees in writing to be bound by
substantially all of the obligations of a Standstill Person under the
Investment Agreement.
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The Standstill Persons may not sell Voting Securities in an aggregate amount
in excess of 20% of the total combined voting power of all outstanding Voting
Securities to a single transferee unless such transferee agrees (if so
required by the Company) to offer to purchase all of the outstanding Voting
Securities for the same price offered to such Standstill Persons.
A change of control of the Partnership also gives rise to first offer and
first refusal rights, depending upon the number of Shares owned by the
Partnership at the time the change of control occurs. Once a change of control
of the Partnership has occurred, the Partnership will no longer have the right
to elect directors, any approval rights over certain actions of the Company or
the protective option to maintain its percentage ownership interest in the
Company, although it would retain the registration rights described below.
After the Investment Closing, if the beneficial ownership of Voting
Securities of the Standstill Persons should be less than 15% of the total
combined voting power of all outstanding Voting Securities, the Partnership
may terminate the provisions of the Investment Agreement that restrict their
ability to take control of the Company and their voting of Voting Securities
held by them, limit their beneficial ownership to the Standstill Percentage,
and restrict their ability to transfer Voting Securities and the Convertible
Note. Such a termination would also terminate the right of the Partnership to
elect directors to the Board pursuant to the provisions of the Series B
Shares, to approve certain actions of the Company and to maintain their
percentage ownership interest in the Company. In the event that the beneficial
ownership of Voting Securities of the Standstill Persons should be less than
such 15%, however, the provisions of the Company's Rights Plan would be
triggered if the Standstill Persons were to once again beneficially own 20% or
more of the Company's Shares.
Commencing 18 months after the Investment Closing, the Partnership will have
the right (no more frequently than once every 12 months and no more than three
times in total) to cause the Company to file a registration statement for the
registration of its Shares and to cooperate with underwriters reasonably
selected by the Partnership for the sale and distribution of such Shares. In
addition, if the Company shall at any time propose to file a registration
statement relating to an underwritten sale of Shares, the Partnership has the
right to include its Shares in such registration, except to the extent that
the underwriters in such offering shall determine that such inclusion would
have a material adverse effect on the successful distribution of Shares by the
Company.
The Partnership must give notice of any proposed transfer of all or any
portion of the Convertible Note to the Company, and the Company will have 10
days after receipt of such notice to notify the Partnership of the Company's
intention to prepay such amount, plus all accrued and unpaid interest thereon,
and will have 20 days thereafter to make such prepayment and to deliver to the
Partnership a warrant for the amount so prepaid.
Notwithstanding any other provision of the Investment Agreement, the
Partnership may not make any transfers of the Convertible Note or any Voting
Securities to the partners of the Partnership for a period of 5 years from the
Investment Closing. After such period of 5 years, transfers may be made so
long as the transferee would not become the beneficial owner of Voting
Securities in excess of 37.5% and, if the transferee becomes the beneficial
owner of 15% or more of the total combined voting power of all Voting
Securities then outstanding, such transferee agrees to be bound by
substantially all of the obligations of a Standstill Person.
Unless otherwise agreed in writing by the Company in advance of any proposed
transfer of Voting Securities or the Convertible Note or the occurrence of a
change of control of the Partnership, the rights accruing to the Partnership
to elect directors under the Series B Shares, to approve certain Company
actions, to maintain its percentage ownership and to demand to have its Shares
registered for sale shall not be transferred to any transferee of Voting
Securities or the Convertible Note.
Further, any transferee of Shares or the Convertible Note acquiring thereby
beneficial ownership of 15% or more of the outstanding Voting Securities would
be subject to the anti-takeover provisions of Section 203 of the Delaware
General Corporation Law which, with certain exceptions, precludes, for a
period of 3 years, a holder of 15% or more of a corporation's outstanding
stock from engaging in certain business combinations without obtaining the
approval of two-thirds of the corporation's other stockholders. The provisions
of the Company's Rights Plan would also be in effect as to any such
transferee.
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In connection with the Investment Agreement, the Company has entered into a
Financial Advisory Agreement whereby the General Partner will make available
to the Company financial advisory services as requested from time to time,
such services to include, without limitation, financial analysis and
structuring strategies in connection with acquisition opportunities and other
financing sources and opportunities. The Company will pay the General Partner
a fee of $125,000 per annum until such time as the Partnership owns less than
15% of the outstanding Shares of the Company, and $62,500 per annum if at any
time the Partnership owns less than 15% of the outstanding Shares, but more
than 5%. Any fees payable pursuant to the Financial Advisory Agreement are to
be reduced by the amount of directors fees paid to Investor Directors who are
not independent directors. Such agreement will terminate upon the earliest to
occur of 5 years following the Investment Closing, the first date that the
Partnership owns less than 5% of the outstanding Shares, and a change of
control of the Partnership without the Company's prior written consent.
Certain Effects of the Offer. The Offer provides stockholders who are
considering a sale of all or a portion of their Shares with the opportunity,
subject to the terms and conditions of the Offer, to sell those Shares for
cash without the usual transaction costs associated with market sales. In
addition, stockholders owning fewer than 100 Shares whose Shares are purchased
pursuant to the Offer not only will avoid the payment of brokerage commissions
but also will avoid any applicable odd lot discounts payable on a sale of
their Shares in a market transaction. The Offer also allows stockholders to
sell a portion of their Shares while retaining a continuing equity interest in
the Company. Stockholders who determine not to accept the Offer will realize a
proportionate increase in their relative equity interest in the Company (if
more than 568,965 Shares are purchased in the Offer), and thus in the
Company's future earnings and assets, subject to increased risks arising from
an increase in the Company's indebtedness and a lower stockholders' equity
resulting from the purchase of more than 568,965 Shares by the Company, and
subject to the Company's right to issue additional Shares and other equity
securities in the future, subject to certain limitations. The Company's
repurchase of Shares in the Offer will reduce the number of Shares that might
otherwise be traded publicly and may have the effect of reducing the trading
volume for the Shares.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL
OF SUCH STOCKHOLDER'S SHARES, NOR HAS EITHER OF THEM AUTHORIZED ANY PERSON TO
MAKE ANY SUCH RECOMMENDATION. STOCKHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL
INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND
MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES
TO TENDER.
The Company may in the future purchase additional Shares on the open market,
in private transactions, through tender offers or otherwise, subject to the
approval of the Board of Directors. Any such purchase may be on the same terms
or on terms which are more or less favorable to stockholders than the terms of
the Offer. However, Rule 13e-4 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), prohibits the Company and its affiliates from
purchasing any Shares, other than pursuant to the Offer, until at least ten
business days after the Expiration Date. Any possible future purchases by the
Company will depend on many factors, including the market price of the Shares,
the results of the Offer, the Company's business and financial position and
general economic and market conditions. If less than 568,965 Shares are
purchased in the Offer, the Convertible Note shall continue to be mandatorily
convertible into Shares at the rate of $14.50 per Share, up to 568,965 Shares,
as and when Shares may be repurchased by the Company from time to time. The
conversion rate of $14.50 per Share (subject to adjustment) shall apply
regardless of the repurchase price paid by the Company.
The Partnership has informed the Company that it intends to review the
advisability of purchasing additional Shares from time to time, in the open
market or in privately negotiated transactions, in amounts that would not
cause the beneficial ownership of Shares by the Standstill Persons to exceed
the Standstill Percentage, and anticipates having up to $3,750,000 available
to fund such purchases. Subject to the limitations in the Investment
Agreement, the Partnership may also sell Shares in the open market or in
privately negotiated transactions from time to time.
10
<PAGE>
Shares the Company acquires pursuant to the Offer will be retained by the
Company as treasury stock and will be available for the Company to issue
without further stockholder action (except as required by applicable law or
the rules of any securities exchange on which the Shares are then listed) for
purposes including, but not limited to, the conversion of the Convertible
Note, the acquisition of other businesses, the raising of additional capital
for use in the Company's business and the satisfaction of obligations under
existing or future employee benefit plans.
The Company is engaged in ongoing evaluations of and discussions with third
parties regarding possible acquisitions, and plans to acquire complementary
businesses. The Company intends to pursue its growth strategy through
acquisitions, joint ventures and strategic alliances and may wish to effect
such acquisitions through the issuance of Shares and to account for such
acquisitions using the pooling-of-interests method of accounting. See "Section
10--Certain Information Concerning the Company--Growth Strategy." The purchase
of the Shares pursuant to the Offer may adversely affect, for the next two
years, the Company's ability to account for future acquisitions using the
pooling-of-interests method of accounting.
3. PROCEDURES FOR TENDERING SHARES
Proper Tender of Shares. For Shares to be tendered properly pursuant to the
Offer, (a) the certificates for such Shares (or confirmation of receipt of
such Shares pursuant to the procedures for book-entry transfer set forth
below), together with a properly completed and duly executed Letter of
Transmittal including any required signature guarantees and any other
documents required by the Letter of Transmittal, must be received prior to
5:00 P.M., New York City time, on the Expiration Date by the Depositary at its
address set forth on the back cover of this Offer to Purchase, or (b) the
tendering stockholder must comply with the guaranteed delivery procedure set
forth below.
In addition, Odd Lot Holders who tender all of their Shares must complete
the box captioned "Odd Lots" on the Letter of Transmittal and, if applicable,
on the Notice of Guaranteed Delivery, in order to qualify for the preferential
treatment available to Odd Lot Holders as set forth in Section 1.
Signature Guarantees and Method of Delivery. No signature guarantee is
required (i) if the Letter of Transmittal is signed by the registered holder
of the Shares (which term, for purposes of this Section 3, shall include any
participant in The Depository Trust Company or Philadelphia Depository Trust
Company (collectively, the "Book-Entry Transfer Facilities") whose name
appears on a security position listing as the owner of the Shares) tendered
therewith and such holder has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
the Letter of Transmittal; or (ii) if Shares are tendered for the account of a
member firm of a registered national securities exchange, a member of the
National Association of Securities Dealers, Inc. or a commercial bank or trust
company (not a savings bank or a savings and loan association) having an
office, branch or agency in the United States (each such entity being
hereinafter referred to as an "Eligible Institution"). See Instruction 1 of
the Letter of Transmittal. If a certificate for Shares is registered in the
name of a person other than the person executing a Letter of Transmittal, or
if payment is to be made, or Shares not purchased or tendered are to be
issued, to a person other than the registered holder, then the certificate
must be endorsed or accompanied by an appropriate stock power, in either case,
signed exactly as the name of the registered holder appears on the certificate
or stock power, guaranteed by an Eligible Institution which is a member of a
recognized medallion signature guarantee program.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of
certificates for such Shares (or a timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at a Book-Entry Transfer
Facility as described below), a properly completed and duly executed Letter of
Transmittal and any other documents required by the Letter of Transmittal. The
method of delivery of all documents, including certificates for Shares, the
Letter of Transmittal and any other required documents, is at the election and
risk of the tendering stockholder. If delivery is by mail, then registered
mail with return receipt requested, properly insured, is recommended.
11
<PAGE>
Book-Entry Delivery. The Depositary will establish an account with respect
to the Shares for purposes of the Offer at each Book-Entry Transfer Facility
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in a Book-Entry Transfer
Facility's system may make book-entry delivery of the Shares by causing such
facility to transfer Shares into the Depositary's account in accordance with
the Book-Entry Transfer Facility's procedures for transfer. Although delivery
of Shares may be effected through a book-entry transfer into the Depositary's
account at a Book-Entry Transfer Facility, either (i) a properly completed and
duly executed Letter of Transmittal with any required signature guarantees and
any other required documents must, in any case, be transmitted to and received
by the Depositary at its address set forth on the back cover of this Offer to
Purchase prior to the Expiration Date, or (ii) the guaranteed delivery
procedure described below must be followed. DELIVERY OF DOCUMENTS TO A BOOK-
ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Backup Federal Income Tax Withholding. TO PREVENT BACKUP FEDERAL INCOME TAX
WITHHOLDING EQUAL TO 31% OF THE GROSS PAYMENTS MADE TO STOCKHOLDERS FOR SHARES
PURCHASED PURSUANT TO THE OFFER, EACH STOCKHOLDER WHO DOES NOT OTHERWISE
ESTABLISH AN EXEMPTION FROM SUCH WITHHOLDING MUST PROVIDE THE DEPOSITARY WITH
THE STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND PROVIDE CERTAIN
OTHER INFORMATION BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED WITH THE
LETTER OF TRANSMITTAL. Foreign stockholders may be required to submit Form W-
8, certifying non-United States status, to avoid backup withholding. See
Instructions 13 and 14 of the Letter of Transmittal. For a discussion of
certain federal income tax consequences to tendering stockholders, see Section
14.
Withholding For Foreign Stockholders. Even if a foreign stockholder has
provided the required certification to avoid backup withholding, the
Depositary will withhold federal income taxes equal to 30% of the gross
payments payable to a foreign stockholder or his agent unless the Depositary
determines that an exemption from or a reduced rate of withholding is
available pursuant to a tax treaty or an exemption from withholding is
applicable because such gross proceeds are effectively connected with the
conduct of a trade or business in the United States. In order to obtain an
exemption from or a reduced rate of withholding pursuant to a tax treaty, a
foreign stockholder must deliver to the Depositary a properly completed Form
1001. For this purpose, a foreign stockholder is a stockholder that is not (i)
a citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States,
any State or any political subdivision thereof, or (iii) any estate or trust
the income of which is subject to United States federal income taxation
regardless of the source of such income. In order to obtain an exemption from
withholding on the grounds that the gross proceeds paid pursuant to the Offer
are effectively connected with the conduct of a trade or business within the
United States, a foreign stockholder must deliver to the Depositary a properly
completed Form 4224. The Depositary will determine a stockholder's status as a
foreign stockholder and eligibility for a reduced rate of, or an exemption
from, withholding by reference to any outstanding certificates or statements
concerning eligibility for a reduced rate of, or exemption from, withholding
(e.g., Form 1001 or Form 4224) unless facts and circumstances indicate that
such reliance is not warranted. A foreign stockholder may be eligible to
obtain a refund of all or a portion of any tax withheld if such stockholder
meets one of the three tests for sale treatment described in Section 14 or is
otherwise able to establish that no tax or a reduced amount of tax is due.
Backup withholding generally will not apply to amounts subject to the 30% or
treaty-reduced rate of withholding.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share certificates cannot be delivered to the
Depositary prior to the Expiration Date (or the procedures for book-entry
transfer cannot be completed on a timely basis) or if time will not permit all
required documents to reach the Depositary prior to the Expiration Date, such
Shares may nevertheless be tendered, provided that all of the following
conditions are satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) the Depositary receives by hand, mail, telegram or facsimile
transmission, prior to the Expiration Date, a properly completed and duly
executed Notice of Guaranteed Delivery substantially in the form the
Company has provided with this Offer to Purchase, including a guarantee by
an Eligible Institution in the form set forth in such Notice; and
12
<PAGE>
(c) the certificates for all tendered Shares, in proper form for transfer
(or confirmation of book-entry transfer of such Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities),
together with a properly completed and duly executed Letter of Transmittal
and any required signature guarantees or other documents required by the
Letter of Transmittal, are received by the Depositary within three Nasdaq
trading days after the date of receipt by the Depositary of such Notice of
Guaranteed Delivery.
If any tendered Shares are not purchased, or if less than all Shares
evidenced by a stockholder's certificates are tendered, certificates for
unpurchased Shares will be returned as promptly as practicable after the
expiration or termination of the Offer or, in the case of Shares tendered by
book-entry transfer at a Book-Entry Transfer Facility, such Shares will be
credited to the appropriate account maintained by the tendering stockholder at
the appropriate Book-Entry Transfer Facility, in each case without expense to
such stockholder.
Procedures for Profit Sharing Plan and ESOP Participants. Profit Sharing
Plan Participants and ESOP Participants are each being provided with a
separate letter and election form which can be used to instruct the Plan
Trustee to tender Shares allocated to their accounts in such plans.
Participants in the Profit Sharing Plan and ESOP who wish to have the Plan
Trustee tender some or all of the Shares allocated to their accounts in either
or both of such plans should so indicate by completing, executing and
returning to the Plan Trustee the election form included with the letter
furnished to such participants. THE PARTICIPANTS IN THE PROFIT SHARING PLAN
AND ESOP MAY NOT USE THE LETTER OF TRANSMITTAL TO DIRECT THE TENDER OF THEIR
SHARES IN THE PROFIT SHARING PLAN OR ESOP, BUT MUST USE THE SEPARATE ELECTION
FORM ENCLOSED WITH THE LETTER TO PARTICIPANTS IN THE PROFIT SHARING PLAN OR
THE ESOP, AS THE CASE MAY BE. Profit Sharing Plan and ESOP participants are
urged to read the separate election forms and related materials carefully.
Determination of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the number of Shares
to be accepted and the validity, form, eligibility (including time of receipt)
and acceptance of any tender of Shares will be determined by the Company, in
its sole discretion, and its determination shall be final and binding on all
parties. The Company reserves the absolute right to reject any or all tenders
of any Shares that it determines are not in appropriate form or the acceptance
for payment of or payment for which may be unlawful. The Company also reserves
the absolute right to waive any of the conditions of the Offer or any defect
or irregularity in any tender with respect to any particular Shares or any
particular stockholder. No tender of Shares will be deemed to have been
properly made until all defects or irregularities have been cured by the
tendering stockholder or waived by the Company. None of the Company, the
Depositary, the Plan Trustee or any other person shall be obligated to give
notice of any defects or irregularities in tenders, nor shall any of them
incur any liability for failure to give any such notice.
Tendering Stockholder's Representations and Warranties; Company's Acceptance
Constitutes an Agreement. A tender of Shares pursuant to any of the procedures
described above will constitute the tendering stockholder's acceptance of the
terms and conditions of the Offer, as well as the tendering stockholder's
representation and warranty to the Company that (a) such stockholder has a net
long position in the Shares being tendered within the meaning of Rule 14e-4
promulgated by the Commission under the Exchange Act and (b) the tender of
such Shares complies with Rule 14e-4. It is a violation of Rule 14e-4 for a
person, directly or indirectly, to tender Shares for such person's own account
unless, at the time of tender and at the end of the proration period or period
during which Shares are accepted by lot (including any extensions thereof),
the person so tendering (i) has a net long position equal to or greater than
the amount of (x) Shares tendered or (y) other securities convertible into or
exchangeable or exercisable for the Shares tendered and will acquire such
Shares for tender by conversion, exchange or exercise and (ii) will deliver or
cause to be delivered such Shares in accordance with the terms of the Offer.
Rule 14e-4 provides a similar restriction applicable to the tender or
guarantee of a tender on behalf of another person. The Company's acceptance
for payment of Shares tendered pursuant to the Offer will constitute a binding
agreement between the tendering stockholder and the Company upon the terms and
conditions of the Offer.
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<PAGE>
4. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 4, tenders of Shares pursuant
to the Offer are irrevocable. Shares tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment by the Company pursuant to the Offer, may also be
withdrawn at any time after 12:00 Midnight, New York City time, on Tuesday,
August 6, 1996. The materials distributed to participants in the ESOP or
Profit Sharing Plan describe the withdrawal procedure for plan participants.
For a withdrawal to be effective, a notice of withdrawal must be in written,
telegraphic or facsimile transmission form and must be received in a timely
manner by the Depositary at its address set forth on the back cover of this
Offer to Purchase. Any such notice of withdrawal must specify the name of the
tendering stockholder, the name of the registered holder, if different from
that of the person who tendered such Shares, the number of Shares tendered and
the number of Shares to be withdrawn. If the certificates for Shares to be
withdrawn have been delivered or otherwise identified to the Depositary, then,
prior to the release of such certificates, the tendering stockholder must also
submit the serial numbers shown on the particular certificates for Shares to
be withdrawn and the signature on the notice of withdrawal must be guaranteed
by an Eligible Institution (except in the case of Shares tendered by an
Eligible Institution). If Shares have been tendered pursuant to the procedure
for book-entry transfer set forth in Section 3, the notice of withdrawal also
must specify the name and the number of the account at the applicable Book-
Entry Transfer Facility to be credited with the withdrawn Shares and otherwise
comply with the procedures of such facility. None of the Company, the
Depositary, the Plan Trustee or any other person shall be obligated to give
notice of any defects or irregularities in any notice of withdrawal nor shall
any of them incur liability for failure to give any such notice. All questions
as to the form and validity (including time of receipt) of notices of
withdrawal will be determined by the Company, in its sole discretion, which
determination shall be final and binding.
Withdrawals may not be rescinded and any Shares withdrawn will thereafter be
deemed not properly tendered for purposes of the Offer unless such withdrawn
Shares are properly tendered prior to the Expiration Date by again following
one of the procedures described in Section 3.
If the Company extends the Offer, is delayed in its purchase of Shares or is
unable to purchase Shares pursuant to the Offer for any reason, then, without
prejudice to the Company's rights under the Offer, the Depositary may, subject
to applicable law, retain tendered Shares on behalf of the Company, and such
Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in this Section 4.
5. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE
Upon the terms and subject to the conditions of the Offer, as promptly as
practicable following the Expiration Date, the Company will accept for payment
and pay for (and thereby purchase) Shares properly tendered and not withdrawn
prior to the Expiration Date. For purposes of the Offer, the Company will be
deemed to have accepted for payment (and therefore purchased) Shares that are
tendered and not withdrawn (subject to the proration and conditional tender
provisions of the Offer) only when, as and if it gives oral or written notice
to the Depositary of its acceptance of such Shares for payment pursuant to the
Offer.
Upon the terms and subject to the conditions of the Offer, promptly
following the Expiration Date, the Company will accept for payment and pay the
Purchase Price for 900,000 Shares (subject to increase or decrease as provided
in Section 15) or such lesser number of Shares as are properly tendered and
not withdrawn as permitted in Section 4.
The Company will pay for Shares purchased pursuant to the Offer by
depositing the aggregate Purchase Price therefor with the Depositary, which
will act as agent for tendering stockholders for the purpose of receiving
payment from the Company and transmitting payment to the tendering
stockholders.
14
<PAGE>
In the event of proration, the Company will determine the proration factor
and pay for those tendered Shares accepted for payment as soon as practicable
after the Expiration Date; however, the Company does not expect to be able to
announce the final results of any proration and commence payment for Shares
purchased until approximately five Nasdaq trading days after the Expiration
Date. Certificates for all Shares tendered and not purchased, including all
Shares not purchased due to proration or conditional tender, will be returned
(or, in the case of Shares tendered by book-entry transfer, such Shares will
be credited to the account maintained with the Book-Entry Transfer Facility by
the participant therein who so delivered such Shares) to the tendering
stockholder at the Company's expense as promptly as practicable after the
Expiration Date. Under no circumstances will interest on the Purchase Price be
paid by the Company by reason of any delay in making payment. In addition, if
certain events occur, the Company may not be obligated to purchase Shares
pursuant to the Offer. See Section 7.
The Company will pay all stock transfer taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer. If, however, payment
of the Purchase Price is to be made to, or (in the circumstances permitted by
the Offer) if unpurchased Shares are to be registered in the name of, any
person other than the registered holder, or if tendered certificates are
registered in the name of any person other than the person signing the Letter
of Transmittal, the amount of all stock transfer taxes, if any (whether
imposed on the registered holder or such other person), payable on account of
the transfer to such person will be deducted from the Purchase Price unless
satisfactory evidence of the payment of the stock transfer taxes, or exemption
therefrom, is submitted. See Instruction 7 of the Letter of Transmittal.
ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY, SIGN
AND RETURN TO THE DEPOSITARY THE SUBSTITUTE FORM W-9 INCLUDED WITH THE LETTER
OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED BACKUP FEDERAL INCOME TAX
WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAID TO SUCH STOCKHOLDER OR OTHER
PAYEE PURSUANT TO THE OFFER. SEE SECTION 3. ALSO SEE SECTION 3 REGARDING
FEDERAL INCOME TAX CONSEQUENCES FOR FOREIGN STOCKHOLDERS.
6. CONDITIONAL TENDER OF SHARES
Under certain circumstances set forth in Section 1 above, the Company may
prorate the number of Shares purchased pursuant to the Offer. As discussed in
Section 14, the number of Shares to be purchased from a particular stockholder
might affect the tax consequences to such stockholder of such purchase and
such stockholder's decision whether to tender. Accordingly, a stockholder may
tender Shares subject to the condition that a specified minimum number, if
any, must be purchased, and any stockholder wishing to make such a conditional
tender should so indicate in the box captioned "Conditional Tender" on the
Letter of Transmittal and, if applicable, on the Notice of Guaranteed
Delivery. Conditional tenders may not be made with respect to Shares held in
the Profit Sharing Plan or the ESOP. The specified number in connection with
any conditional tender, therefore, must be satisfied with Shares owned by a
stockholder independently from the Profit Sharing Plan and ESOP.
It is the tendering stockholder's responsibility to calculate such minimum
number of Shares and each stockholder is urged to consult his or her own tax
advisor. If the effect of accepting tenders on a pro rata basis is to reduce
the number of Shares to be purchased from any stockholder below the minimum
number so specified, such tender will automatically be deemed withdrawn except
as provided in the next paragraph, and Shares tendered by such stockholder
will be returned as soon as practicable after the Expiration Date.
However, if so many conditional tenders would be deemed withdrawn that the
total number of Shares to be purchased falls below 900,000 Shares, then to the
extent feasible the Company will select from those conditional tenders
submitted by holders thereof who tender all Shares owned by them, enough of
such conditional tenders, which would otherwise have been deemed withdrawn, to
purchase such desired number of Shares. In selecting among such conditional
tenders, the Company will select by random lot from only those conditional
tenders of holders who tender all Shares owned by them, and will limit its
purchase in each case to the designated minimum number of Shares to be
purchased.
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IN THE EVENT OF PRORATION, ANY SHARES TENDERED PURSUANT TO A CONDITIONAL
TENDER FOR WHICH THE MINIMUM REQUIREMENTS ARE NOT SATISFIED MAY NOT BE
ACCEPTED AND WILL THEREBY BE DEEMED WITHDRAWN.
7. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, the Company shall not be
required to accept for payment, purchase or pay for any Shares tendered, and
may terminate or amend the Offer or may postpone the acceptance for payment
of, or the purchase of and the payment for Shares tendered, subject to Rule
13e-4(f) under the Exchange Act, if at any time on or after June 10, 1996 and
prior to the time of payment for any such Shares any of the following events
shall have occurred (or shall have been determined by the Company to have
occurred) that, in the Company's judgment in any such case and regardless of
the circumstances giving rise thereto (including any action or omission to act
by the Company), makes it inadvisable to proceed with the Offer or with such
acceptance for payment or payment:
(a) there shall have been threatened, instituted or pending any action or
proceeding by any government or governmental, regulatory or administrative
agency, authority or tribunal or any other person, domestic or foreign,
before any court, authority, agency or tribunal that directly or indirectly
(i) challenges the making of the Offer, the sale of the Convertible Note,
the acquisition of some or all of the Shares pursuant to the Offer, the
issuance of Shares upon conversion of the Convertible Note, or otherwise
relates in any manner to the Offer or the sale or conversion of the
Convertible Note or any other transaction contemplated by the Investment
Agreement; or (ii) in the Company's sole judgment, could materially and
adversely affect the business, condition (financial or other), income,
operations or prospects of the Company and its subsidiaries, taken as a
whole, or otherwise materially impair in any way the contemplated future
conduct of the business of the Company or any of its subsidiaries or
materially impair the contemplated benefits of the Offer to the Company;
(b) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to the Offer or the Company or
any of its subsidiaries, by any court or any authority, agency or tribunal
that, in the Company's sole judgment, would or might directly or indirectly
(i) make the acceptance for payment of, or payment for, some or all of the
Shares illegal or otherwise restrict or prohibit consummation of the Offer;
(ii) delay or restrict the ability of the Company, or render the Company
unable, to accept for payment or pay for some or all of the Shares; (iii)
materially impair the contemplated benefits of the Offer to the Company; or
(iv) materially and adversely affect the business, condition (financial or
other), income, operations or prospects of the Company and its
subsidiaries, taken as a whole, or otherwise materially impair in any way
the contemplated future conduct of the business of the Company or any of
its subsidiaries;
(c) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market; (ii) the declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States; (iii) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the
United States; (iv) any limitation (whether or not mandatory) by any
governmental, regulatory or administrative agency or authority on, or any
event that, in the Company's sole judgment, might affect the extension of
credit by banks or other lending institutions in the United States; (v) any
significant decrease in the market price of the Shares or any change in the
general political, market, economic or financial conditions in the United
States or abroad that could, in the sole judgment of the Company, have a
material adverse effect on the Company's business, operations or prospects
or the trading in the Shares; (vi) in the case of any of the foregoing
existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof; or (vii) any decline in either the Dow
Jones Industrial Average or the Standard and Poor's Index of 500 Industrial
Companies by an amount in excess of 10% measured from the close of business
on June 7, 1996;
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(d) a tender or exchange offer with respect to some or all of the Shares
(other than the Offer), or a merger or acquisition proposal for the
Company, shall have been proposed, announced or made by another person or
shall have been publicly disclosed, or the Company shall have learned that
(i) any person or "group" (within the meaning of Section 13(d)(3) of the
Exchange Act), other than the Profit Sharing Plan, the ESOP or the
Partnership shall have acquired or proposed to acquire beneficial ownership
of more than 5% of the outstanding Shares, or (ii) any new group shall have
been formed that beneficially owns more than 5% of the outstanding Shares;
or
(e) any change or changes shall have occurred in the business, financial
condition, assets, income, operations, prospects or stock ownership of the
Company or its subsidiaries that, in the Company's judgment, is or may be
material to the Company or its subsidiaries.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances (including any action
or inaction by the Company) giving rise to any such condition, and may be
waived by the Company, in whole or in part, at any time and from time to time
in its sole discretion. The Company's failure at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time. Any determination by the Company concerning the events
described above will be final and binding.
8. PRICE RANGE OF SHARES; DIVIDENDS
The Shares are listed on Nasdaq. The following table sets forth, for the
periods indicated, the high and low closing prices of the Shares as reported
by Nasdaq, and the cash dividends paid, or to be paid, per Share in each such
fiscal quarter:
<TABLE>
<CAPTION>
FISCAL YEAR HIGH LOW DIVIDENDS
----------- ------ ------ ---------
<S> <C> <C> <C>
1994:
1st Quarter..................................... 11 6 1/2 $0.07
2nd Quarter..................................... 9 7 1/2 $0.07
3rd Quarter..................................... 8 1/4 7 1/4 $0.07
4th Quarter..................................... 8 7 1/4 $0.08
1995:
1st Quarter..................................... 8 1/4 7 1/4 $0.08
2nd Quarter..................................... 11 7 1/2 $0.10
3rd Quarter..................................... 15 10 $0.10
4th Quarter..................................... 14 1/2 12 1/2 $0.10
1996:
1st Quarter..................................... 13 3/4 10 $0.10
2nd Quarter (through June 6, 1996).............. 15 3/4 12 3/4 $0.10
</TABLE>
On June 6, 1996, the last full trading day on Nasdaq prior to the
announcement of the Offer, the closing per Share sales price as reported on
Nasdaq was $14.00. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS
FOR THE SHARES.
9. SOURCE AND AMOUNT OF FUNDS
Assuming that the Company purchases 900,000 Shares pursuant to the Offer at
a price of $14.50 per Share, the total amount required by the Company to
purchase such Shares will be $13,050,000, exclusive of estimated fees and
other expenses of $775,000.
17
<PAGE>
The purchase of the first 568,965 Shares tendered in the Offer will be
funded by the private sale to the Partnership of a ten-year, 7% convertible
subordinated note in the principal amount of $8,250,000. The purchase of
Shares tendered in excess of 568,965 will be funded by a bank loan. Assuming
that 900,000 Shares are purchased pursuant to the Offer, such bank loan would
be in the principal amount of $4,800,000.
Sale of 7% Convertible Subordinated Note. On June 6, 1996 (the "Investment
Closing") the Company entered into an Investment Agreement (the "Investment
Agreement") with MFI Investors L.P., a Delaware limited partnership (the
"Partnership") and MFI Associates, Inc., a Delaware corporation and the
general partner of the Partnership, whereby the Partnership purchased from the
Company a ten-year, 7% convertible subordinated note in the principal amount
of $8,250,000 (the "Convertible Note"). The Partnership delivered $8,250,000
to the Company in payment for the Convertible Note.
Immediately prior to the purchase of the Shares in the Offer, the
Convertible Note shall be mandatorily converted, at the rate of $14.50 per
Share, into a number of Shares (up to 568,965) as is equal to the number of
Shares to be purchased by the Company in the Offer. If less than 568,965
Shares are purchased in the Offer, the Convertible Note shall thereafter be
mandatorily convertible into Shares at the rate of $14.50 per Share, subject
to adjustment in the event of stock splits and other events (the "Conversion
Price") as Shares may be repurchased by the Company from time to time, until
the entire principal amount of the Convertible Note is converted into Shares
or is paid. The Conversion Price shall apply regardless of the repurchase
price paid by the Company. The outstanding principal balance of the
Convertible Note is convertible at any time into Shares at the Conversion
Price, at the option of the holder thereof.
To the extent not earlier converted or paid, the principal amount of the
Convertible Note will be due and payable on the tenth anniversary of the date
of its issuance ("Maturity Date"), and shall bear interest at the rate of 7%
per annum, payable quarterly. The Company may not prepay the Convertible Note
without the written consent of the note holder unless at the time of
prepayment the Company issues a warrant to purchase that number of Shares into
which the outstanding portion of the Convertible Note is then convertible, at
a conversion rate of $14.50 per Share (subject to adjustment), exercisable
until the Maturity Date. The Partnership must give notice of any proposed
transfer of all or any portion of the Convertible Note to the Company, and the
Company will have 10 days after receipt of such notice to notify the
Partnership of the Company's intention to prepay such amount, plus all accrued
and unpaid interest thereon, and will have 20 days thereafter to make such
prepayment and to deliver to the Partnership a warrant for the amount so
prepaid.
Notwithstanding any other provision of the Investment Agreement, the
Partnership may not make any transfers of the Convertible Note or any Voting
Securities to the partners of the Partnership for a period of 5 years from the
Investment Closing. After such period of 5 years, transfers may be made so
long as the transferee would not become the beneficial owner of Voting
Securities in excess of 37.5% and, if the transferee becomes the beneficial
owner of 15% or more of the total combined voting power of all Voting
Securities then outstanding, such transferee agrees to be bound by
substantially all of the obligations of a Standstill Person under the
Investment Agreement.
The Convertible Note is subordinate in right of payment to the prior payment
in full of all indebtedness of the Company existing from time to time to
banks, insurance companies and other financial institutions, and any
debentures, notes or other evidences of indebtedness issued in exchange for
any such indebtedness, or any indebtedness arising from the satisfaction of
such indebtedness by a guarantor.
Assuming that 900,000 Shares are purchased by the Company in the Offer and
that the entire principal amount of the Convertible Note is converted into
Shares, the Partnership will beneficially own approximately 34.1% of the
outstanding Shares immediately after the purchase of Shares in the Offer. If
568,965 Shares are purchased in the Offer, the Partnership will own 28.4% of
the outstanding Shares immediately after such purchases.
18
<PAGE>
See "Section 2--Purpose of the Offer; Certain Effects of the Offer" for a
description of certain other provisions of the Investment Agreement, including
the right of the Partnership to elect directors to the Board of Directors of
the Company, approve certain Company actions, maintain its percentage
ownership interest in the Company and have its Shares registered for sale.
Bank Loan. On June 7, 1996, the Company and Harris Trust and Savings Bank
(the "Bank") entered into a revolving and term credit facility (the "Credit
Facility") pursuant to which the Bank has agreed to provide financing of up to
$7,000,000 (i) to fund the Company's repurchase of Shares pursuant to the
Offer and (ii) for general working capital purposes. The Credit Facility
replaces the Company's $4,000,000 line of credit with the Bank. The revolving
credit portion of the Credit Facility expires on June 30, 1998, and may be
extended for up to five additional one-year periods, subject to the Bank's
approval. The Company also has the one-time right at any time prior to June
30, 1998 to convert up to $4,800,000 of the revolving credit portion of the
Credit Facility into a five year term loan, to be repaid in quarterly
installments.
Borrowings under the Credit Facility will bear interest, at the Company's
option, at either (i) the Domestic Rate, or (ii) a reserve adjusted LIBOR rate
(as determined by the Bank), plus between .75% and 1.5% per annum, depending
on the Company's then current funded debt-to-earnings ratio. The "Domestic
Rate" means the higher of (a) the Bank's prime rate, and (b) the effective
Federal funds rate, as determined by the Bank based upon the quotes of two or
more Federal funds brokers selected by the Bank. The term loan portion of the
Credit Facility may, at the Company's option, bear interest for its entire
term at a single fixed rate quoted to the Company at its inception. In
addition, the Company is required to pay a commitment fee of .25% per annum on
the available but unused amount of the revolving credit portion of the Credit
Facility.
The Credit Facility contains customary representations and warranties,
covenants and conditions to borrowing and events of default. The Credit
Facility contains a number of negative covenants which limit the Company's
ability to, among other things, incur additional indebtedness, create
additional liens on the Company's assets, make certain investments, advances
or guarantees, make certain acquisitions or merge with or into any other
person, or sell 10% or more of the Company's assets.
The Credit Facility also contains various financial covenants that require
the Company to maintain (i) a ratio of senior funded debt to the sum of
tangible net worth and total liabilities of not more than .55 to 1, (ii) a
ratio of funded debt-to-earnings (before deduction of interest expense, income
taxes, depreciation and amortization) of not more than 3.0 to 1 through March
31, 1997 and not more than 2.5 to 1 thereafter, and (iii) a minimum tangible
net worth of $7 million through September 10, 1996, which amount will be
increased by 50% of the Company's net income in each fiscal quarter after the
second quarter of 1996 in which the Company achieves net income.
10. CERTAIN INFORMATION CONCERNING THE COMPANY
GENERAL
The predecessor to the Company was incorporated in 1946 under the laws of
the State of Illinois. The Company was incorporated in 1966 under the laws of
the State of Delaware and is engaged in the business of market research. The
Company provides information to assist its clients in their marketing
decisions relating primarily to consumer products and services.
The Company collects information using three methods, namely, interviews
conducted by mail, by telephone and in person. The Company typically
customizes projects to the specific needs of each client, developing
questionnaires or other instruments to be used to elicit the required
information, and determining the method to be used depending upon the project
requirements such as type of data to be obtained, the geographic scope of the
study, the size of the sample and budget considerations.
The Company's mail interviews are conducted through its proprietary Consumer
Mail Panel, a panel of over 460,000 households throughout the continental
United States and Canada constructed by the Company. The
19
<PAGE>
Company's telephone interviews are conducted through over 225 interviewing
stations in approximately eight locations throughout Illinois and Canada. In-
person interviews are primarily performed by independent field interviewing
organizations.
The Company also focuses on data interpretation and analysis, which it
believes to be one of the fastest growing areas within the market research
industry. The Company has developed or licensed proprietary products and
services in this area. MarkeTest 2000 is a sales forecasting system that
combines consumer reactions with brand category data and marketing plans to
estimate sales potential for new product concepts, particularly those in the
early stages of the product development process. The Conversion Model is a
product that examines the dimensions that lock consumers to their current
product choice and thereby measures consumers' strength of commitment to a
given brand and their susceptibility of conversion to another brand.
BrandVision is a custom continuous tracking product which measures the effect
of altering components in the advertising mix. Compete is a PC-based
multimedia concept database system which enables clients to query a database
of their proprietary concept test results. TeleNation is a twice a week
national telephone survey that offers clients the ability to collect consumer
opinion, attitude and buying pattern data from a nationally representative
sample at low cost and with short lead time. National ShowCase is a weekly
mall omnibus survey conducted in the United States and Canada that provides
clients with rapid turnaround of test results where consumer exposure to
stimuli is required. Data Gage is a monthly mailing service of the Consumer
Mail Panel that permits noncompeting clients to share data collection costs
while providing responses to specific questions from a nationally
representative sample of households.
GROWTH STRATEGY
The Company has entered into a Financial Advisory Agreement with the
Partnership whereby the Partnership will make available to the Company
financial advisory services as requested from time to time, such services to
include, without limitation, financial analysis and structuring strategies in
connection with acquisitions. In the last two years the Company has focused on
opportunities available to expand its business through acquisitions, joint
ventures and strategic alliances and has begun to seek candidates for such
transactions. The Company believes that acquisitions and other business
combination transactions are an important element of its growth strategy. The
Company is engaged in ongoing evaluations of and discussions with third
parties regarding possible acquisitions of complementary businesses for not
more than $5,000,000 and is contemplating one or more such acquisitions within
the next year. It is contemplated that the Company would borrow the funds
required for any such acquisitions. The Company currently has no definitive
agreements with respect to any such acquisitions, however, and there is no
assurance that any of its discussions will result in actual transactions.
Further, there is no assurance that appropriate acquisition candidates will be
available at prices deemed reasonable by the Company or that the Company will
be able to successfully integrate such acquisitions into its existing
operations. Further, the Company may wish to effect acquisitions through the
issuance of Shares and to account for such acquisitions using the pooling-of-
interests method of accounting. The purchase of the Shares pursuant to the
Offer may adversely affect, for the next two years, the Company's ability to
account for future acquisitions using the pooling-of-interests method of
accounting.
PRIOR PROPOSAL TO ACQUIRE THE COMPANY
During the spring of 1995, the Company held discussions with a third party
regarding a proposal to acquire all of the outstanding Shares of the Company
in a cash merger. In April 1995, the Company received a proposal from such
party to acquire the entire Company in a transaction whereby the public
stockholders would receive $14.00 per Share. Further discussions resulted in a
revised proposal submitted in August 1995 whereby the public stockholders
would receive $15.25 per Share. The Company's financial advisor advised the
Company that, based upon the terms and conditions of the proposed transaction,
it was unable to render an opinion at that time that $15.25 per Share, as part
of a transaction to acquire the entire Company, was fair to the Company's
stockholders from a financial point of view. The Company also received advice
from its legal counsel concerning the terms of the proposal. The proposing
company did not increase the amount proposed, and discussions were
discontinued. See Section 2.
20
<PAGE>
CERTAIN FINANCIAL INFORMATION
Historical Summary Financial Information. The following is certain
historical summary consolidated financial information with the respect to the
Company. Historical consolidated financial information as of December 31, 1995
and 1994 and for the years then ended was derived from the audited
consolidated financial statements of the Company contained in the Company's
1995 Annual Report to Stockholders which is incorporated by reference into the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
Historical consolidated financial information as of March 31, 1996 and for the
three month periods ended March 31, 1996 and 1995 was derived from the
consolidated financial statements of the Company contained in the Company's
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1996.
The historical financial information which follows is qualified in its
entirety by reference to such reports (copies of which may be obtained in the
manner set forth under "Additional Information" below) and the financial
information and related notes contained therein.
MARKET FACTS, INC. AND SUBSIDIARIES
HISTORICAL SUMMARY CONSOLIDATED BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -----------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Working Capital............................ $ 5,858,025 $ 5,995,108 $ 3,624,220
Total Assets............................... $33,787,363 $34,376,637 $31,681,983
Total Assets Less Goodwill................. $33,240,249 $33,819,069 $31,082,597
Total Indebtedness......................... $11,550,784 $11,633,454 $12,079,362
Stockholders' Equity....................... $12,362,227 $12,049,807 $ 9,746,185
Book Value Per Share....................... $ 6.18 $ 6.22
</TABLE>
MARKET FACTS, INC. AND SUBSIDIARIES
HISTORICAL SUMMARY CONSOLIDATED STATEMENT OF EARNINGS INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, DECEMBER 31,
----------------------- -----------------------
1996 1995 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue........................ $18,658,743 $15,333,400 $64,608,724 $55,483,032
Net Income..................... $ 527,947 $ 417,314 $ 2,226,119 $ 1,434,167
Ratio of Earnings to Fixed
Charges....................... 3.44 3.05 3.67 2.30
Earnings Per Share............. $ 0.27 $ 0.23 $ 1.15 $ 0.76
</TABLE>
Pro Forma Summary Financial Information. The following is certain pro forma
summary consolidated financial information of the Company based upon
historical information as of December 31, 1995 and for the year then ended and
as of March 31, 1996 and for the three month period then ended, which has been
adjusted to reflect: (i) the sale of the Convertible Note and conversion
thereof into 568,965 Shares at a conversion rate of $14.50 per Share; (ii) the
purchase by the Company of 900,000 Shares in the Offer at $14.50 per Share;
(iii) the incurrence of indebtedness in the amount of $4,800,000 at an
interest rate of 9% per annum for the purchase of Shares in excess of 568,965;
(iv) the issuance of 100 shares of Series B Preferred Stock; and (v) the
incurrence of estimated fees and other expenses of $775,000. The income
statement data give effect to these events as if they had occurred at the
beginning of each period presented. The balance sheet data give effect to
these events as if they had occurred as of the date of the respective balance
sheets. The pro forma financial information should be read in conjunction with
the financial statements and related notes set forth in the Company's 1995
Annual Report to Stockholders which is incorporated by reference into the
Company's Annual Report on Form 10-K for the year ended December 31, 1995 and
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1996,
as well as the historical summary financial information set forth above. Such
pro forma information does not purport to be indicative of the results that
would actually have been obtained had the purchase of the Shares and other
transactions reflected therein been completed at the dates indicated or that
may be obtained in the future.
21
<PAGE>
MARKET FACTS, INC. AND SUBSIDIARIES
PRO FORMA SUMMARY CONSOLIDATED BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995
------------------------------------ ------------------------------------
HISTORICAL PRO FORMA PRO FORMA HISTORICAL PRO FORMA PRO FORMA
RESULTS ADJUSTMENTS RESULTS RESULTS ADJUSTMENTS RESULTS
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Working Capital......... $ 5,858,025 $ (774,900) $ 5,083,125 $ 5,995,108 $ (774,900) $ 5,220,208
Total Assets............ $33,787,363 $ 100 $33,787,463 $34,376,637 $ 100 $34,376,737
Total Asset Less
Goodwill............... $33,240,249 $ 100 $33,240,349 $33,819,069 $ 100 $33,819,169
Total Indebtedness...... $11,550,784 $ 4,800,000 $16,350,784 $11,633,454 $ 4,800,000 $16,433,454
Stockholders' Equity.... $12,362,227 $(5,574,900) $ 6,787,327 $12,049,807 $(5,574,900) $ 6,474,907
Book Value Per Share.... $ 6.18 $ 4.06 $ 6.22 $ 4.03
</TABLE>
MARKET FACTS, INC. AND SUBSIDIARIES
PRO FORMA SUMMARY CONSOLIDATED STATEMENT OF EARNINGS INFORMATION
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
THREE MONTHS ENDED MARCH 31, 1996 1995
----------------------------------- -----------------------------------
HISTORICAL PRO FORMA PRO FORMA HISTORICAL PRO FORMA PRO FORMA
RESULTS ADJUSTMENTS RESULTS RESULTS ADJUSTMENTS RESULTS
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue................. $18,658,743 $ 0 $18,658,743 $64,608,724 $ 0 $64,608,724
Net Income.............. $ 527,947 $(76,587) $ 451,360 $ 2,226,119 $(295,767) $ 1,930,352
Ratio of Earnings to
Fixed Charges.......... $ 3.44 $ 2.64 $ 3.67 $ 2.82
Earnings Per Share ..... $ 0.27 $ 0.28 $ 1.15 $ 1.20
</TABLE>
ADDITIONAL INFORMATION
Additional information concerning the Company is contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, the Company's
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1996
and its Proxy Statement with respect to its 1996 Annual Meeting of
Stockholders. Copies of such documents may be obtained from the Company, 3040
West Salt Creek Lane, Arlington Heights, Illinois 60005, (847) 590-7300
(Attention: Glenn W. Schmidt).
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is obligated to file reports and
other information with the Commission relating to its business, financial
condition and other matters. Information, as of particular dates, concerning
the Company's directors and officers, their remuneration, options granted to
them, the principal holders of the Company's securities and any material
interest of such persons in transactions with the Company is required to be
disclosed in proxy statements distributed to the Company's stockholders and
filed with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 2120, Washington,
D.C. 20549; at its regional offices located at 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511; and 7 World Trade Center, New York, New
York 10048. Copies of such material may also be obtained by mail, upon payment
of the Commission's customary charges, from the Public Reference Section of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. The Company has also filed with the Commission a Statement on Schedule
13E-4 that contains additional information with respect to the Offer. Such
Schedule and certain amendments thereto may be examined and copies may be
obtained at the same places and in the same manner as set forth above (except
that such Schedule may not be available in the regional offices of the
Commission).
11. INTEREST OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND
ARRANGEMENTS CONCERNING SHARES
As of June 6, 1996, the Company had issued and outstanding 2,000,769 Shares.
The 900,000 Shares that the Company is offering to purchase represent
approximately 45% of the outstanding Shares; however, up to
22
<PAGE>
568,965 Shares will be issued upon conversion of the Convertible Note.
Assuming that 900,000 Shares are purchased by the Company in the Offer, the
number of outstanding Shares of the Company will decrease by a net amount of
331,035 Shares, or 16.5% of the outstanding Shares. As of June 6, 1996, the
Company's directors and executive officers as a group (24 persons)
beneficially owned an aggregate of approximately 1,194,130 Shares,
representing approximately 46.5% of the outstanding Shares, which amount
includes 568,965 Shares subject to conversion pursuant to the Convertible Note
held by the Partnership, which Shares may be deemed to be beneficially owned
by Mr. Sherwood, who became a member of the Company's Board of Directors on
June 6, 1996, and who is an officer, director and the controlling shareholder
of the General Partner of the Partnership. The Partnership has informed the
Company that Mr. Falktoft, who also became a director of the Company on June
6, 1996 and is also an officer and director of the General Partner, is not
deemed to have beneficial ownership of such 568,965 Shares.
Certain of the Company's executive officers and directors have advised the
Company that they intend to tender an aggregate of 194,910 Shares pursuant to
the Offer. If the Company purchases 900,000 Shares pursuant to the Offer, then
after the purchase of Shares pursuant to the Offer, including the 194,910
Shares to be tendered by the Company's executive officers and directors, such
executive officers and directors as a group would own beneficially
approximately 59.8% of the outstanding Shares immediately after the Offer.
Certain executive officers and directors have indicated their intention to
conditionally tender their Shares pursuant to the procedures set forth in
Section 6 hereof. If any of their conditional tenders are not accepted, the
percentage ownership of the officers and directors as a group would be greater
than 59.8%.
Except as set forth in Schedule A, neither the Company, nor any subsidiary
of the Company nor, to the best of the Company's knowledge, any of the
Company's directors or executive officers, nor any affiliates of any of the
foregoing, had any transactions involving the Shares during the 40 business
days prior to the date hereof.
Except for the Investment Agreement as described in Sections 2 and 9, and
the Credit Agreement described in Section 9, or as otherwise described herein,
neither the Company nor, to the best of the Company's knowledge, any of its
affiliates, directors or executive officers, is a party to any contract,
arrangement, understanding or relationship with any other person relating,
directly or indirectly, to the Offer with respect to any securities of the
Company including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any
such securities, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss or the giving or withholding of
proxies, consents or authorizations.
12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT
The Company's purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise be traded publicly and may reduce the
number of stockholders. Such reductions may have the effect of reducing the
trading volume for the Shares. Based upon the published guidelines of Nasdaq,
the Company does not believe that its purchase of Shares pursuant to the Offer
will cause the Company's remaining Shares to be delisted from Nasdaq.
The Shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit to their customers using such Shares as collateral. The Company
believes that, following the purchase of Shares pursuant to the Offer, the
Shares will continue to be "margin securities" for purposes of the Federal
Reserve Board's margin regulations.
The Shares are registered under the Exchange Act, which requires, among
other things, that the Company furnish certain information to its stockholders
and the Commission and comply with the Commission's proxy rules in connection
with meetings of the Company's stockholders. The Company believes that its
purchase of Shares pursuant to the Offer will not result in the Shares
becoming eligible for deregistration under the Exchange Act.
23
<PAGE>
13. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
The Company is not aware of any license or regulatory permit that appears to
be material to the Company's business that might be adversely affected by the
Company's acquisition of Shares as contemplated herein or of any approval or
other action by any government or governmental, administrative or regulatory
authority or agency, domestic or foreign, that would be required for the
acquisition or ownership of Shares by the Company as contemplated herein.
Should any such approval or other action be required, the Company presently
contemplates that such approval or other action will be sought. The Company is
unable to predict whether it may determine that it is required to delay the
acceptance for payment of or payment for Shares tendered pursuant to the Offer
pending the outcome of any such matter. There can be no assurance that any
such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that the failure to obtain any such
approval or other action might not result in adverse consequences to the
Company's business. The Company's obligations under the Offer to accept for
payment and pay for Shares is subject to certain conditions. See Section 7.
14. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General. The federal income tax discussion set forth below summarizes the
principal federal income tax consequences to domestic stockholders of sales of
Shares pursuant to the Offer and is included for general information only. The
discussion does not address all aspects of federal income taxation that may be
relevant to a particular stockholder or any relevant foreign, state, local or
other tax laws. Certain stockholders (including insurance companies, tax-
exempt entities, foreign persons, financial institutions, broker dealers,
employee benefit plans, personal holding companies and persons who acquired
their Shares upon the exercise of employee stock options or as compensation)
may be subject to special rules not discussed below. The discussion is based
on laws, regulations, rulings and court decisions currently in effect, all of
which are subject to change. The Company has neither requested nor obtained a
written opinion of counsel or a ruling from the Internal Revenue Service (the
"Service") with respect to the tax matters discussed below. Each stockholder
is urged to consult and rely on the stockholder's own tax advisor as to the
particular tax consequences to the stockholder of selling Shares pursuant to
the Offer, including the application of foreign, state, local or other tax
laws.
A sale of Shares pursuant to the Offer will constitute a "redemption" under
the Internal Revenue Code of 1986 (the "Code") and will be a taxable
transaction for federal income tax purposes. If the redemption qualifies as a
sale of Shares by a stockholder under Section 302 of the Code, the stockholder
will recognize gain or loss equal to the difference between (i) the cash
received pursuant to the Offer; and (ii) the stockholder's tax basis in the
Shares surrendered pursuant to the Offer. If the redemption does not qualify
as a sale of Shares under Section 302, the stockholder will not be treated as
having sold Shares but will be treated as having received a dividend taxable
as ordinary income in an amount equal to the cash received pursuant to the
Offer. As described below, whether a redemption qualifies for sale treatment
will depend largely on the total number of the stockholder's Shares (including
any Shares constructively owned by the stockholder) that are purchased. A
stockholder desiring to obtain sale treatment therefore may want to make a
conditional tender, as described in Section 6, to make sure that a minimum
number of his or her Shares (if any) are purchased.
Sale Treatment. Under Section 302 of the Code, a redemption of Shares
pursuant to the Offer will be treated as a sale of such Shares for federal
income tax purposes if such redemption (i) results in a "complete redemption"
of all of the stockholder's stock in the Company, (ii) is "substantially
disproportionate" with respect to the stockholder, or (iii) is "not
essentially equivalent to a dividend" with respect to the stockholder. In
determining whether any of these three tests under Section 302 is satisfied, a
stockholder must take into account not only Shares that the stockholder
actually owns, but also any Shares that the stockholder is treated as owning
pursuant to the constructive ownership rules of Section 318 of the Code. Under
these rules, a stockholder generally is treated as owning (i) Shares owned by
the stockholder's spouse, children, grandchildren, and parents, (ii) Shares
owned by certain trusts of which the stockholder is a beneficiary, (iii)
Shares owned by any estate of which the stockholder is a beneficiary, (iv)
Shares owned by any partnership or "S corporation" in which the stockholder is
a partner or stockholder, (v) Shares owned by any non-S corporation of which
the stockholder
24
<PAGE>
owns at least 50% in value of the stock and (vi) Shares that the stockholder
has an option or similar right to acquire. A stockholder that is a partnership
or S corporation, estate, trust, or non-S corporation is treated as owning
stock owned (as the case may be) by partners or S corporation stockholders, by
estate beneficiaries, by certain trust beneficiaries, and by 50% stockholders
of a non-S corporation. Stock constructively owned by a person generally is
treated as being owned by that person for the purpose of attributing ownership
to another person.
A redemption of Shares from a stockholder pursuant to the Offer will result
in a "complete redemption" of all the stockholder's stock in the Company if
either (i) the Company purchases all of the Shares actually and constructively
owned by the stockholder, or (ii) the stockholder actually owns no Shares
after all transfers of Shares pursuant to the Offer, constructively owns only
Shares owned by certain family members, and the stockholder qualifies to and
does waive (pursuant to Section 302(c)(2) of the Code) constructive ownership
of Shares owned by family members. Any stockholder desiring to waive such
constructive ownership of Shares should consult a tax advisor about the
applicability of Section 302(c)(2).
A redemption of Shares from a stockholder pursuant to the Offer will be
"substantially disproportionate" with respect to the stockholder if the
percentage of Shares actually and constructively owned by the stockholder
compared to all Shares outstanding immediately after all redemptions of Shares
pursuant to the Offer is less than 80% of the percentage of Shares actually
and constructively owned by the stockholder compared to all Shares outstanding
immediately before such redemptions. If exactly 900,000 Shares are redeemed
pursuant to the Offer, the number of Shares outstanding after consummation of
the Offer will be approximately 83.5% of the number of Shares currently
outstanding. Consequently, in that case a stockholder must dispose of more
than 33.2% (i.e., 1 minus 80% of 83.5%) of the number of Shares the
stockholder actually and constructively owns in order possibly to qualify for
a substantially disproportionate redemption. If the Company were to exercise
its right to purchase an additional 2% of the outstanding Shares, a
stockholder would have to dispose of more than 34.8% (i.e., 1 minus 80% of
81.5%) of the number of Shares the stockholder actually and constructively
owns in order possibly to qualify for a substantially disproportionate
redemption.
A redemption of Shares from a stockholder pursuant to the Offer will be "not
essentially equivalent to a dividend" if, pursuant to the Offer, the
stockholder experiences a "meaningful reduction" in his proportionate interest
in the Company (including voting rights, participation in earnings, and
liquidation rights) arising from the actual and constructive ownership of
Shares. The Service has indicated in a published ruling that a very small
reduction in the proportionate interest of a small minority stockholder who
does not exercise any control over corporate affairs generally constitutes a
"meaningful reduction" in the stockholder's interest. The fact that the
redemption fails to qualify as a sale pursuant to the other two tests is not
taken into account in determining whether the redemption is "not essentially
equivalent to a dividend." If exactly 900,000 Shares are redeemed pursuant to
the Offer, the number of Shares outstanding will be reduced by approximately
16.5%. Consequently, in that case a stockholder must dispose of more than
16.5% of the number of Shares the stockholder actually and constructively owns
in order to have any reduction in the stockholder's proportionate stock
interest in the Company. If the Company were to exercise its right to purchase
an additional 2% of the outstanding Shares, a stockholder would have to
dispose of more than 18.5% of the number of Shares the stockholder actually
and constructively owns in order to have any reduction in the stockholder's
proportionate interest.
Stockholders should be aware that their ability to satisfy any of the
foregoing tests also may be affected by proration pursuant to the Offer.
THEREFORE, UNLESS A STOCKHOLDER MAKES A CONDITIONAL TENDER (SEE SECTION 6),
THE STOCKHOLDER (OTHER THAN AN ODD LOT HOLDER WHO TENDERS ALL OF HIS OR HER
SHARES AND WHOSE CONSTRUCTIVE OWNERSHIP, IF ANY, OF OTHER SHARES WOULD NOT
PREVENT SATISFACTION OF ALL THE FOREGOING TESTS) CAN BE GIVEN NO ASSURANCE,
EVEN IF ALL OF HIS OR HER SHARES ARE TENDERED, THAT THE COMPANY WILL PURCHASE
A SUFFICIENT NUMBER OF SUCH SHARES TO SATISFY ANY OF THE FOREGOING TESTS.
Stockholders also should be aware that an acquisition or disposition of Shares
in the market or otherwise as part of a plan that includes the stockholder's
tender of Shares pursuant to the Offer might be taken into account in
determining whether any of the foregoing tests is satisfied. Stockholders are
urged to consult their own tax advisors with regard to whether acquisitions
from or sales to third parties, including market sales, and a tender may be so
integrated.
25
<PAGE>
If any of the foregoing three tests are satisfied, the stockholder will
recognize gain or loss equal to the difference between the amount of cash
received pursuant to the Offer and the stockholder's tax basis in the Shares
sold. Such gain or loss must be determined separately for each block of Shares
sold (i.e., Shares that were acquired in a single transaction), and will be
capital gain or loss if the stockholder held the Shares as a capital asset.
Capital gain or loss generally will be long-term capital gain or loss if, when
the Company accepts the Shares for payment, the stockholder held the Shares
for more than one year. Long-term capital gains of individuals, estates and
trusts currently are subject to federal income tax at a maximum rate of 28%,
short-term capital gains of individuals, estates and trusts generally are
subject to a maximum federal income tax rate of 39.6%, and capital gains of
corporations generally are taxed at the federal income tax rates applicable to
corporate ordinary income. The effective rate for long-term capital gains,
however, might be lowered by proposed legislation.
Dividend Treatment. If none of the foregoing three tests under Section 302
of the Code is satisfied, the stockholder generally will be treated as having
received a dividend taxable as ordinary income in an amount equal to the
amount of cash received by the stockholder pursuant to the Offer, to the
extent the Company has sufficient accumulated or current earnings and profits.
Dividend income of individuals, estates and trusts generally is subject to
federal income tax at a maximum rate of 39.6%. Dividend income of
corporations, subject to the provisions discussed below, generally is subject
to federal income tax at a maximum rate of 35%. To the extent that the
purchase of Shares from any stockholder pursuant to the Offer is treated as a
dividend, the stockholder's tax basis in any Shares that the stockholder
actually or constructively owns after consummation of the Offer should be
increased by the stockholder's tax basis in the Shares surrendered pursuant to
the Offer.
Treatment of Dividend Income for Corporate Stockholders. In the case of a
corporate Stockholder, if the cash received for Shares pursuant to the Offer
is treated as a dividend, the dividend income may be eligible for the 70%
dividends-received deduction under Section 243 of the Code. The dividends-
received deduction is subject to certain limitations; for example, the
deduction may not be available if the corporate stockholder does not satisfy
certain holding-period requirements with respect to its tendered Shares or if
the Shares are "debt-financed portfolio stock." If a dividends-received
deduction is available, the dividend (having arisen in a non-pro rata
redemption) also likely will be treated as an extraordinary dividend under
Section 1059 of the Code. In that case the corporate stockholder's tax basis
in its remaining Shares (for purposes of determining gain or loss on a future
disposition) will be reduced (but not below zero) by the amount of any
extraordinary dividend not taxed because of the dividends-received deduction.
Any amount of the extraordinary dividend not taxed because of the dividends-
received deduction and in excess of the corporate stockholder's tax basis for
the remaining Shares generally will be subject to tax, under current law, as
gain on a subsequent sale or disposition of those Shares.
IF ENACTED INTO LAW AS PROPOSED, CERTAIN PENDING LEGISLATION WOULD APPLY TO
CORPORATE STOCKHOLDERS WHOSE RECEIPT OF CASH FOR SHARES PURSUANT TO THE OFFER
IS TREATED AS A DIVIDEND. UNDER SUCH LEGISLATION, (I) ANY EXCESS OF THE
PORTION OF AN EXTRAORDINARY DIVIDEND NOT OTHERWISE TAXED BECAUSE OF THE
DIVIDENDS-RECEIVED DEDUCTION OVER THE STOCKHOLDER'S TAX BASIS IN ITS REMAINING
SHARES GENERALLY WOULD BE TAXABLE CURRENTLY AS GAIN ON THE SALE OF SHARES;
(II) IF A REDEMPTION OF SHARES FROM A CORPORATE STOCKHOLDER PURSUANT TO THE
OFFER IS TREATED AS A DIVIDEND AS A RESULT OF THE STOCKHOLDER'S CONSTRUCTIVE
OWNERSHIP OF OTHER SHARES THAT IT HAS AN OPTION OR OTHER RIGHT TO ACQUIRE, THE
PORTION OF THE EXTRAORDINARY DIVIDEND NOT OTHERWISE TAXED BECAUSE OF THE
DIVIDENDS-RECEIVED DEDUCTION WOULD REDUCE THE STOCKHOLDER'S BASIS ONLY IN ITS
SHARES SOLD PURSUANT TO THE OFFER, AND ANY EXCESS OF SUCH NON-TAXED PORTION
OVER SUCH BASIS WOULD BE CURRENTLY TAXABLE AS GAIN ON THE SALE OF SUCH SHARES;
(III) THE PERCENTAGE OF DIVIDENDS POTENTIALLY QUALIFYING FOR THE DIVIDENDS-
RECEIVED DEDUCTION WOULD BE REDUCED TO 50%; AND (IV) THE HOLDING-PERIOD
REQUIREMENTS FOR THE DIVIDENDS-RECEIVED DEDUCTION WOULD BE MORE DIFFICULT TO
SATISFY. Corporate stockholders should consult their tax advisors as to the
availability of the dividends-received deduction, the application of Section
1059 of the Code, and the potential impact of the proposed legislation.
SEE SECTION 3 WITH RESPECT TO THE APPLICATION OF BACKUP FEDERAL INCOME TAX
WITHHOLDING.
26
<PAGE>
15. EXTENSION OF OFFER; TERMINATION; AMENDMENT
The Company expressly reserves the right, in its sole discretion, at any
time and from time to time, and regardless of whether or not any of the events
set forth in Section 7 shall have occurred or shall be deemed by the Company
to have occurred, to extend the period of time during which the Offer is open
and thereby delay acceptance for payment of, and payment for, any Shares by
giving oral or written notice of such extension to the Depositary and making a
public announcement thereof. The Company also expressly reserves the right, in
its sole discretion, to terminate the Offer and not accept for payment or pay
for any Shares not theretofore accepted for payment or paid for or, subject to
applicable law, to postpone payment for Shares upon the occurrence (or failure
as the case may be) of any of the conditions specified in Section 7 hereof by
giving oral or written notice of such termination or postponement to the
Depositary and making a public announcement thereof. The Company's reservation
of the right to delay payment for Shares which it has accepted for payment is
limited by Rule 13e-4(f)(5) promulgated under the Exchange Act, which requires
that the Company must pay the consideration offered or return the Shares
tendered promptly after termination or withdrawal of a tender offer. Subject
to compliance with applicable law, the Company further reserves the right, in
its sole discretion, and regardless of whether any of the events set forth in
Section 7 shall have occurred or shall be deemed by the Company to have
occurred, to amend the Offer in any respect (including, without limitation, by
decreasing or increasing the consideration offered in the Offer to holders of
Shares or by decreasing or increasing the number of Shares being sought in the
Offer). Amendments to the Offer may be made at any time and from time to time
effected by public announcement thereof, such announcement, in the case of an
extension, to be issued no later than 9:00 am., New York City time, on the
next business day after the last previously scheduled or announced Expiration
Date. Any public announcement made pursuant to the Offer will be disseminated
promptly to stockholders in a manner reasonably designed to inform
stockholders of such change. Without limiting the manner in which the Company
may choose to make a public announcement except as required by applicable law,
the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by making a release to the
Dow Jones News Service.
If the Company materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Company will disclose promptly such material change and extend the Offer to
the extent required by Rule 13e-4(f)(1)(ii) promulgated under the Exchange
Act. The minimum period during which an offer must remain open following
material changes in the terms of the offer or information concerning the offer
(other than a change in price or a change in percentage of securities sought)
will depend on the facts and circumstances, including the relative materiality
of such terms or information. Rule 13e-4(f)(1)(ii) requires that if (i) the
Company increases or decreases the price to be paid for Shares or the number
of Shares being sought in the Offer and, in the event of an increase in the
number of Shares being sought, such increase exceeds 2% of the outstanding
Shares and (ii) the Offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from and including,
the date that such notice of an increase or decrease is first published, sent
or given in the manner specified in this Section 15, the Offer will be
extended until the expiration of such period of ten business days.
16. FEES AND EXPENSES
The Company has retained First Chicago Trust Company of New York to act as
Depositary and Information Agent in connection with the Offer. The Company or
the Depositary/Information Agent may contact holders of Shares by mail,
telephone, telegraph and personal interviews and may request brokers, dealers
and other nominee stockholders to forward materials relating to the Offer to
beneficial owners. The Depositary/Information Agent will receive reasonable
and customary compensation for its services, will be reimbursed by the Company
for certain reasonable out-of-pocket expenses and will be indemnified against
certain liabilities in connection with the Offer, including certain
liabilities under the federal securities laws.
No fees or commissions will be payable to brokers, dealers or other persons
(other than fees to the Depositary/Information Agent as described above) for
soliciting tenders of Shares pursuant to the Offer. The Company, however, upon
request, will reimburse brokers, dealers and commercial banks for customary
mailing
27
<PAGE>
and handling expenses incurred by such persons in forwarding the Offer and
related materials to the beneficial owners of Shares held by any such person
as a nominee or in a fiduciary capacity. No broker, dealer, commercial bank or
trust company has been authorized to act as the agent of the Company or the
Depositary/Information Agent for purposes of the Offer. The Company will pay
or cause to be paid all stock transfer taxes, if any, on its purchase of
Shares except as otherwise provided in Instruction 7 in the Letter of
Transmittal.
17. MISCELLANEOUS
The Company is not aware of any jurisdiction where the making of the Offer
is not in compliance with applicable law. If the Company becomes aware of any
jurisdiction where the making of the Offer is not in compliance with any valid
applicable law, the Company will make a good faith effort to comply with such
law. If, after such good faith effort, the Company cannot comply with such
law, the Offer will not be made to (nor will tenders be accepted from or on
behalf of) the holders of Shares residing in such jurisdiction.
Pursuant to Rule 13e-4 of the General Rules and Regulations under the
Exchange Act, the Company has filed with the Commission an Issuer Tender Offer
Statement on Schedule 13E-4 which contains additional information with respect
to the Offer. Such Schedule 13E-4, including the exhibits and any amendments
thereto, may be examined, and copies may be obtained, at the same places and
in the same manner as is set forth in Section 10 with respect to information
concerning the Company.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE COMPANY IN CONNECTION WITH THE OFFER OTHER
THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF
TRANSMITTAL (OR SIMILAR MATERIALS DISTRIBUTED TO PARTICIPANTS IN THE COMPANY'S
ESOP AND PROFIT SHARING PLAN). IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY.
28
<PAGE>
SCHEDULE A
CERTAIN TRANSACTIONS INVOLVING SHARES
EXECUTIVE OFFICERS AND DIRECTORS
During the 40 business days prior to June 11, 1996 the only transactions
effected in the Shares by the Company's executive officers and directors were
the purchase of the Convertible Note by the Partnership and transactions
through the Profit Sharing Plan and the ESOP.
On June 6, 1996, the Partnership purchased the Convertible Note from the
Company for $8,250,000 in cash. The Convertible Note shall be mandatorily
converted, at the rate of $14.50 per Share, into a number of Shares (up to
568,965) equal to the number of Shares to be purchased by the Company pursuant
to the Offer. The 568,965 Shares subject to conversion pursuant to the
Convertible Note may be deemed to be beneficially owned by Mr. Ned L.
Sherwood, who became a member of the Board of Directors of the Company on June
6, 1996, and who is an officer, director and the controlling shareholder of
the General Partner of the Partnership. The Partnership has informed the
Company that Mr. Falktoft, who also became a director of the Company on June
6, 1996 and is also an officer and director of the General Partner, is not
deemed to have beneficial ownership of such 568,965 Shares.
Transactions through the Profit Sharing Plan and the ESOP on behalf of the
Company's executive officers are described in the following tables:
PROFIT SHARING PLAN TRANSACTIONS FOR THE
ACCOUNTS OF EXECUTIVE OFFICERS OF THE COMPANY*
<TABLE>
<CAPTION>
PURCHASES SALES
---------------------- ----------------------
NAME OF NUMBER NUMBER
EXECUTIVE CASH OF AVERAGE CASH OF AVERAGE
OFFICERS BASIS SHARES PRICE BASIS SHARES PRICE
- - - --------- ------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Verne Churchill................... $143.99 11.012 $13.08 $763.85 58.752 $13.00
Ronald Duda....................... $ 44.77 3.416 $13.11 $237.44 18.263 $13.00
Michael Freehill.................. $ 18.57 1.415 $13.12 $ 98.55 7.580 $13.00
Lawrence Labash................... $ 25.25 1.930 $13.08 $133.99 10.306 $13.00
Donald Morrison................... $ 1.81 0.138 $13.12 $ 9.61 0.740 $12.99
Thomas Payne...................... $ 18.92 1.442 $13.12 $100.35 7.720 $13.00
Timothy Rounds.................... $ 10.51 0.808 $13.01 $ 55.83 4.294 $13.00
Glenn Schmidt..................... $ 15.44 1.178 $13.11 $ 81.86 6.298 $13.00
Sanford Schwartz.................. $ 5.65 0.430 $13.14 $ 29.92 2.301 $13.00
Timothy Sullivan.................. $ 9.09 0.694 $13.10 $ 48.22 3.709 $13.00
</TABLE>
* Shares allocated on May 9, 1996.
A-1
<PAGE>
ESOP TRANSACTIONS FOR THE ACCOUNTS
OF EXECUTIVE OFFICERS OF THE COMPANY*
<TABLE>
<CAPTION>
PURCHASES
----------------------
NAME OF NUMBER
EXECUTIVE CASH OF AVERAGE
OFFICERS BASIS SHARES PRICE
- - - --------- ------- ------ -------
<S> <C> <C> <C>
Verne Churchill.......................................... $103.14 8.943 $11.53
Ronald Duda.............................................. $ 84.91 7.363 $11.53
Michael Freehill......................................... $ 87.13 7.556 $11.53
Janith Fuller............................................ $ 86.77 7.523 $11.53
Lawrence Labash.......................................... $ 86.77 7.524 $11.53
Peter LaSalle............................................ $ 75.02 6.505 $11.53
Lawrence Levin........................................... $ 78.61 6.817 $11.53
Gregory McMahon.......................................... $ 80.24 6.958 $11.53
Donald Morrison.......................................... $ 71.76 6.223 $11.53
Thomas Payne............................................. $ 99.43 8.622 $11.53
Timothy Rounds........................................... $ 87.43 7.581 $11.53
Glenn Schmidt............................................ $ 97.43 8.449 $11.53
Sanford Schwartz......................................... $ 76.57 6.640 $11.53
William Seymour.......................................... $ 81.54 7.071 $11.53
Timothy Sullivan......................................... $ 78.65 6.820 $11.53
Stephen Weber............................................ $ 90.43 7.842 $11.53
</TABLE>
* Shares allocated on April 23, 1996
A-2
<PAGE>
The Letter of Transmittal and certificates for Shares and any other required
documents should be sent or delivered by each stockholder or his or her
broker, dealer, commercial bank, trust company or nominee to the Depositary as
set forth below.
The Depositary and Information Agent for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Hand or by Overnight Courier: By Mail:
First Chicago Trust First Chicago Trust
Company of New York Company of New York
Tenders & Exchanges Tenders & Exchanges
Suite 4680-MF Suite 4660-MF
14 Wall Street, 8th Floor P.O. Box 2559
New York, New York 10005 Jersey City, New Jersey 07303-2559
Telephone: 1-800-438-0057
Any questions or requests for assistance or additional copies of the Offer
to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery
may be directed to the Depositary/Information Agent at the telephone number
and location listed above. Stockholders may also contact the Company at the
address listed below or their local broker, dealer, commercial bank, trust
company or nominee for assistance concerning the Offer.
Attention: Glenn W. Schmidt
Market Facts, Inc.
3040 West Salt Creek Lane
Arlington Heights, Illinois 60005
Telephone: 847-590-7300
Fax: 847-590-7111
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
MARKET FACTS, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED JUNE 11, 1996
- - - --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON TUESDAY, JULY 9, 1996, UNLESS THE OFFER IS EXTENDED.
- - - --------------------------------------------------------------------------------
To: First Chicago Trust Company of New York
By Hand or Overnight Courier: By Mail:
First Chicago Trust Company First Chicago Trust Company
of New York of New York
Tenders & Exchanges Tenders & Exchanges
Suite 4680--MF Suite 4660--MF
14 Wall Street, 8th Floor P.O. Box 2559
New York, NY 10005 Jersey City, NJ 07303-2559
DELIVERY OF THIS INSTRUMENT AND ALL OTHER DOCUMENTS TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THE ENTIRE LETTER
OF TRANSMITTAL, INCLUDING THE ACCOMPANYING INSTRUCTIONS,
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
This Letter of Transmittal is to be used only if (a) certificates for Shares
(as defined below) are to be delivered with it, or (b) a tender of Shares is
being made concurrently by book-entry transfer to the account maintained by
First Chicago Trust Company of New York (the "Depositary") at The Depository
Trust Company or the Philadelphia Depository Trust Company (hereinafter,
collectively referred to as the "Book-Entry Transfer Facilities") pursuant to
Section 3 of the Offer to Purchase. See Instruction 2.
- - - --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
<TABLE>
<CAPTION>
- - - -------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) TENDERED CERTIFICATES
(PLEASE USE PREADDRESSED LABEL OR FILL IN (ATTACH SIGNED ADDITIONAL LIST IF
EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S)). NECESSARY).
- - - -------------------------------------------------------------------------------------------
CERTIFICATE NO. OF SHARES NO. OF SHARES
NUMBER(S) REPRESENTED BY TENDERED**
CERTIFICATES*
<S> <C> <C> <C>
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
TOTAL SHARES
- - - -------------------------------------------------------------------------------------------
</TABLE>
Indicate in this box the order (by certificate number) in which Shares are to
be purchased in event of proration. (Attach signed additional list if
necessary.) *** See Instructions 3 and 9.
1st: 2nd: 3rd: 4th: 5th: 6th:
- - - -------------------------------------------------------------------------------
*Does not need to be completed if Shares are tendered by book-entry
transfer.
**If you desire to tender fewer than all Shares evidenced by any
certificates listed above, please indicate in this column the number of
Shares you wish to tender. Otherwise, all Shares evidenced by such
certificates will be deemed to have been tendered. See Instruction 4.
***If you do not designate an order, in the event less than all Shares
tendered are purchased due to proration, Shares will be selected for
purchase by the Depositary.
- - - --------------------------------------------------------------------------------
1
<PAGE>
NOTE: SIGNATURE MUST BE PROVIDED BELOW.
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
SHARES HELD IN THE MARKET FACTS, INC. EMPLOYEE STOCK OWNERSHIP PLAN (THE
"ESOP") AND THE MARKET FACTS, INC. PROFIT SHARING AND RETIREMENT PLAN (THE
"PROFIT SHARING PLAN") MAY BE TENDERED ONLY BY SUBMITTING A SEPARATE ELECTION
FORM TO THE ESOP OR PROFIT SHARING PLAN TRUSTEE. IF YOU HOLD SHARES IN EITHER
THE ESOP OR THE PROFIT SHARING PLAN AS WELL AS OUTSIDE OF SUCH PLANS, YOU MUST
TENDER SUCH SHARES SEPARATELY. THIS LETTER OF TRANSMITTAL MAY BE USED ONLY FOR
TENDERING SHARES NOT HELD IN EITHER THE ESOP OR THE PROFIT SHARING PLAN.
Stockholders who desire to tender Shares pursuant to the Offer (as defined
below) and who cannot deliver their certificates for their Shares (or who are
unable to comply with the procedures for book-entry transfer on a timely
basis) and all other documents required by this Letter of Transmittal to the
Depositary at or before the Expiration Date (as defined in the Offer to
Purchase) may tender their Shares according to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2.
Delivery of documents to one of the Book-Entry Transfer Facilities does not
constitute delivery to the Depositary.
- - - --------------------------------------------------------------------------------
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH ONE OF THE BOOK-ENTRY
TRANSFER FACILITIES AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ____________________________________________
Check Box of Applicable Book-Entry Transfer Facility:
[_] The Depository Trust Company
[_] The Philadelphia Depository Trust Company
Account Number: ___________________________________________________________
Transaction Code Number: __________________________________________________
[_] CHECK HERE IF CERTIFICATES FOR TENDERED SHARES ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE
DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s): __________________________________________
Date of Execution of Notice of Guaranteed Delivery: _______________________
Name of Institution Which Guaranteed Delivery: ____________________________
Check Box of Applicable Book-Entry Transfer Facility and Give Account
Number if Delivered by
Book-Entry Transfer:
[_] The Depository Trust Company
[_] The Philadelphia Depository Trust Company
Account Number: ___________________________________________________________
Transaction Code Number: __________________________________________________
- - - --------------------------------------------------------------------------------
2
<PAGE>
- - - --------------------------------------------------------------------------------
CONDITIONAL TENDER
(See Instruction 8)
[_] Check here if tender of Shares is conditional on the Company purchasing
all or a minimum number of the tendered Shares and complete the following:
Minimum number of Shares to be sold: ______________________________________
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
ODD LOTS
(See Instruction 5)
To be completed ONLY if the Shares are being tendered by or on behalf of
a person owning beneficially or of record, as of the close of business on
Monday, June 10, 1996, an aggregate of fewer than 100 Shares. The
undersigned either (check one box):
[_] was the beneficial or record owner, as of the close of business on
Monday, June 10, 1996 and will continue to be the beneficial or record
owner as of the Expiration Date, of an aggregate of fewer than 100 Shares
all of which are being tendered; or
[_] is a broker, dealer, commercial bank, trust company, or other nominee
that (a) is tendering for the beneficial owner(s) thereof, Shares with
respect to which it is the record holder, and (b) believes, based upon
representations made to it by such beneficial owner(s), that each such
person was the beneficial owner, as of the close of business on Monday,
June 10, 1996 and each such person will continue to be the beneficial owner
as of the Expiration Date, of an aggregate of fewer than 100 Shares and is
tendering all of such Shares.
ODD LOT SHARES CANNOT BE CONDITIONALLY TENDERED.
- - - --------------------------------------------------------------------------------
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Market Facts, Inc., a Delaware corporation
(the "Company"), the above described shares of the Company's common stock,
$1.00 par value per share (the "Shares"), at a price of $14.50 per Share (the
"Purchase Price"), net to the seller in cash, upon the terms and subject to
the conditions set forth in the Company's Offer to Purchase, dated June 11,
1996 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and
in this Letter of Transmittal (which together constitute the "Offer").
Subject to and effective upon acceptance for payment of the Shares tendered
hereby in accordance with the terms and subject to the conditions of the Offer
(including, if the Offer is extended or amended, the terms and conditions of
such extension or amendment), the undersigned hereby sells, assigns and
transfers to, or upon the order of, the Company all right, title and interest
in and to all the Shares tendered hereby, or orders the registration of all
such Shares tendered by book-entry transfer, that are purchased pursuant to
the Offer and hereby irrevocably constitutes and appoints the Depositary as
the true and lawful agent and attorney-in-fact of the undersigned (with full
knowledge that said Depositary also acts as the agent of the Company) with
respect to such Shares with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to:
(a) deliver certificate(s) for such Shares or transfer ownership of such
Shares on the account books maintained by either of the Book-Entry Transfer
Facilities, together in either such case, with all accompanying evidence of
transfer and authenticity, to, or upon the order of, the Company upon
receipt by the Depositary, as the undersigned's agent, of the aggregate
Purchase Price with respect to such Shares;
(b) present certificates for such Shares for cancellation and transfer on
the Company's books; and
(c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares, all in accordance with the terms of the Offer.
3
<PAGE>
The undersigned hereby represents and warrants to the Company that:
(a) the undersigned understands that tenders of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and
in the instructions hereto will constitute the undersigned's acceptance of
the terms and conditions of the Offer, including the undersigned's
representation and warranty that:
(i) the undersigned has a net long position in Shares or equivalent
securities at least equal to the Shares tendered within the meaning of
Rule 14e-4 under the Securities Exchange Act of 1934, as amended ("Rule
14e-4"), and
(ii) such tender of Shares complies with Rule 14e-4;
(b) the undersigned has full power and authority to tender, sell, assign
and transfer the Shares tendered hereby and, when and to the extent the
Company accepts such Shares for purchase, the Company will acquire good,
marketable and unencumbered title to them, free and clear of all security
interests, liens, charges, encumbrances, conditional sales agreements or
other obligations relating to their sale or transfer, and not subject to
any adverse claim;
(c) on request, the undersigned will execute and deliver any additional
documents the Depositary or the Company deems necessary or desirable to
complete the assignment, transfer and purchase of the Shares tendered
hereby; and
(d) the undersigned has read and agrees to all of the terms of the Offer.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned, and any
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, executors, administrators, successors, assigns,
trustees in bankruptcy, and legal representatives of the undersigned. Except
as stated in the Offer to Purchase, this tender is irrevocable.
The name(s) and address(es) of the registered holder(s) should be printed,
if they are not already printed above, exactly as they appear on the
certificates representing Shares tendered hereby. The certificate numbers, the
number of Shares represented by such certificates and the number of Shares
that the undersigned wishes to tender, should be set forth in the appropriate
boxes above.
The undersigned understands that all Shares properly tendered and not
withdrawn will be purchased at $14.50 per Share (or such other price that may
be set forth in an amendment to the Offer) net to the seller in cash, upon the
terms and subject to the conditions of the Offer, including the proration
provisions thereof.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Company may terminate or amend the Offer or may
postpone the acceptance for payment of, or the payment for, Shares tendered or
may accept for payment fewer than all of the Shares tendered hereby. In any
such event, the undersigned understands that certificate(s) for any Shares
delivered herewith but not tendered or not purchased will be returned to the
undersigned at the address indicated above, unless otherwise indicated under
the "Special Payment Instructions" or "Special Delivery Instructions" below.
The undersigned recognizes that the Company has no obligation, pursuant to the
Special Payment Instructions, to transfer any certificate for Shares from the
name of its registered holder, or to order the registration or transfer of
Shares tendered by book-entry transfer, if the Company purchases none of the
Shares represented by such certificate or tendered by such book-entry
transfer.
4
<PAGE>
The undersigned understands that acceptance of Shares by the Company for
payment will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Offer.
The check for the aggregate Purchase Price for such of the Shares tendered
hereby as are purchased will be issued to the order of the undersigned and
mailed to the address indicated above, unless otherwise indicated under the
Special Payment Instructions or the Special Delivery Instructions below.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
- - - --------------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS (SEE SPECIAL DELIVERY INSTRUCTIONS
INSTRUCTIONS 1, 4, 6, 7 AND 10) (SEE INSTRUCTIONS 1, 4, 6 AND 10)
To be completed ONLY if To be completed ONLY if
certificates for Shares not certificates for Shares not
tendered or not purchased and/or tendered or not purchased and/or
any check for the aggregate any check for the Purchase Price
Purchase Price (less any required of Shares purchased (less any
withholding taxes) of Shares required withholding taxes),
purchased are to be issued in the issued in the name of the
name of and sent to someone other undersigned, are to be mailed to
than the undersigned. someone other than the
undersigned, or to the
undersigned at an address other
than that shown above.
Issue: Mail:
[_] Check to: [_] Check to:
[_] Certificates to: [_] Certificates to:
Name(s): _________________________ Name(s): _________________________
(Please Print) (Please Print)
Address: _________________________ Address: _________________________
__________________________________ ----------------------------------
(Zip Code) (Zip Code)
__________________________________
(Taxpayer identification or
Social Security No.)
- - - --------------------------------------------------------------------------------
5
<PAGE>
- - - --------------------------------------------------------------------------------
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL STOCKHOLDERS)
(PLEASE COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 BELOW)
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
certificate(s) or on a security position listing or by person(s) authorized
to become registered holder(s) by certificate(s) and documents transmitted
with this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or
another person acting in a fiduciary or representative capacity, please set
forth full title and see Instruction 6.)
______________________________________________________________________________
______________________________________________________________________________
Signature(s) of Owner(s)
Dated: _________________________, 1996
Name(s): _____________________________________________________________________
(Please Print)
Capacity (full title): _______________________________________________________
Address: _____________________________________________________________________
(Include Zip Code)
Area Code(s) and
Telephone Number(s): _________________________________________________________
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 6)
Name of Firm: ________________________________________________________________
Authorized Signature: ________________________________________________________
Name: ________________________________________________________________________
(Please Print)
Title: _______________________________________________________________________
Address: _____________________________________________________________________
(Include Zip Code)
Area Code and
Telephone Number: ____________________________________________________________
Dated: _________________________, 1996
- - - --------------------------------------------------------------------------------
6
<PAGE>
TO BE COMPLETED BY ALL STOCKHOLDERS
(SEE INSTRUCTION 13)
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
- - - --------------------------------------------------------------------------------
SUBSTITUTE PART 1--PLEASE PROVIDE Social security number(s)
FORM W-9 YOUR TIN IN THE BOX AT
RIGHT AND CERTIFY BY --------------------------
SIGNING AND DATING BELOW
DEPARTMENT OF THE OR
TREASURY
INTERNAL REVENUE
SERVICE Employer identification
number(s)
PAYER'S REQUEST FOR
TAXPAYER --------------------------
IDENTIFICATION NUMBER
(TIN)
- - - -------------------------------------------------------------------------------
PART 2
- - - -------------------------------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification
number (or I am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding because (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTION--You must cross out item (2) above if you have
been notified by the IRS that you are currently subject to backup withholding
because of underreporting interest or dividends on your tax return. However,
if after being notified by the IRS that you were subject to backup
withholding you received another notification from the IRS that you are no
longer subject to backup withholding, do not cross out such
item (2).
- - - -------------------------------------------------------------------------------
SIGNATURE _____________________ DATE _____________________, 1996 PART 3
Awaiting
NAME (PLEASE PRINT) ____________________________________________ TIN [_]
- - - --------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
- - - --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that, notwithstanding that I have checked the box in Part 3 (and
completed this Certificate of Awaiting Taxpayer Identification Number), all
reportable payments made to me before the time I provide the Depositary with
a properly-certified taxpayer identification number will be subject to a 31%
backup withholding tax.
SIGNATURE ________________________________________ DATE _______________, 1996
NAME (PLEASE PRINT) __________________________________________________________
- - - --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE
OFFER. SEE SECTION 3 OF THE OFFER TO PURCHASE AND INSTRUCTION 13.
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required if either:
(a) this Letter of Transmittal is signed by the registered holder of the
Shares (which term, for purposes of this document, shall include any
participant in one of the Book-Entry Transfer Facilities whose name appears
on a security position listing as the owner of such Shares) exactly as the
name of the registered holder appears on the certificate tendered with this
Letter of Transmittal and payment and delivery are to be made directly to
such owner and such owner has not completed either of the boxes entitled
"Special Payment Instructions" or "Special Delivery Instructions" above; or
(b) such Shares are tendered for the account of a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc. or a commercial bank or trust
company (not a savings bank or savings and loan association) having an
office, branch or agency in the United States (each such entity, an
"Eligible Institution").
In all other cases, an Eligible Institution which is a member of a
recognized medallion signature guarantee program must guarantee all signatures
on this Letter of Transmittal. See Section 3 of the Offer to Purchase and
Instruction 6.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be used only if (a) certificates
for Shares are delivered with it to the Depositary (or such certificates will
be delivered pursuant to a Notice of Guaranteed Delivery previously sent to
the Depositary) or (b) a tender for Shares is being made concurrently pursuant
to the procedure for tender by book-entry transfer set forth in Section 3 of
the Offer to Purchase. Certificates for all physically tendered Shares or
confirmation of a book-entry transfer of all Shares delivered electronically
into the Depositary's account at one of the Book-Entry Transfer Facilities,
together in each case with a properly completed and duly executed Letter of
Transmittal, with any required signature guarantees and any other documents
required by this Letter of Transmittal, must be received by the Depositary at
the appropriate address set forth herein on or before the Expiration Date (as
defined in the Offer to Purchase). DELIVERY OF DOCUMENTS TO ONE OF THE BOOK-
ENTRY TRANSFER FACILITIES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Stockholders whose certificates are not immediately available or who cannot
deliver certificates for their Shares and all other required documents to the
Depositary on or before the Expiration Date, or whose Shares cannot be
delivered on a timely basis pursuant to the procedures for book-entry
transfer, may nevertheless, tender their Shares by or through any Eligible
Institution by properly completing and duly executing and delivering a Notice
of Guaranteed Delivery (or facsimile of it) and by otherwise complying with
the guaranteed delivery procedure set forth in Section 3 of the Offer to
Purchase. Pursuant to such procedure, certificates for all physically tendered
Shares or book-entry confirmations, as the case may be, as well as a properly
completed and duly executed Letter of Transmittal and all other documents
required by this Letter of Transmittal, must be received by the Depositary
within three Nasdaq Stock Market trading days after receipt by the Depositary
of such Notice of Guaranteed Delivery, all as provided in Section 3 of the
Offer to Purchase.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in such notice. For
Shares to be tendered validly pursuant to the guaranteed delivery procedure,
the Depositary must receive the Notice of Guaranteed Delivery on or before the
Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
DELIVERY.
The Company will not accept any alternative, conditional or contingent
tenders, nor will it purchase any fractional Shares, except as expressly
provided in the Offer to Purchase. All tendering stockholders, by execution of
this Letter of Transmittal, waive any right to receive any notice of the
acceptance of their tender.
8
<PAGE>
3. INADEQUATE SPACE. If the space provided in the box captioned "Description
of Shares Tendered" is inadequate, the certificate numbers and/or the number
of Shares should be listed on a separate, signed schedule and attached to this
Letter of Transmittal.
4. PARTIAL TENDERS AND UNPURCHASED SHARES. (Not applicable to stockholders
who tender by book-entry transfer.) If fewer than all of the Shares evidenced
by any certificate delivered to the Depositary are to be tendered, fill in the
number of Shares that are to be tendered in the column entitled "No. of Shares
Tendered," in the box captioned "Description of Shares Tendered." In such
case, if any tendered Shares are purchased, a new certificate for the
remainder of the Shares (including any Shares not purchased) evidenced by the
old certificate(s) will be issued and sent to the registered holder(s), unless
otherwise specified in either the "Special Payment Instructions" or "Special
Delivery Instructions" box on this Letter of Transmittal, as soon as
practicable after the Expiration Date. Unless otherwise indicated, all Shares
represented by the certificate(s) listed and delivered to the Depositary will
be deemed to have been tendered.
5. ODD LOTS. As described in Section 1 of the Offer to Purchase, if the
Company purchases less than all Shares tendered before the Expiration Date and
not withdrawn, the Shares purchased first will consist of all Shares tendered
by any stockholder who beneficially owned, as of the close of business on
Monday, June 10, 1996 and who continues to own as of the Expiration Date, an
aggregate of fewer than 100 Shares and who tenders all such Shares (partial
tenders of Shares will not qualify for this preference). This preference will
not be available unless the box captioned "Odd Lots" is completed.
6. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered holder(s)
of the Shares tendered hereby, the signature(s) must correspond exactly
with the name(s) as written on the face of the certificate(s) without any
change whatsoever.
(b) If the Shares are registered in the names of two or more joint
holders, each such holder must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
(d) When this Letter of Transmittal is signed by the registered holder(s)
of the Shares tendered hereby, no endorsement(s) of certificate(s)
representing such Shares or separate stock power(s) are required unless
payment is to be made or the certificate(s) for Shares not tendered or not
purchased are to be issued to a person other than the registered holder(s).
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, or if payment is to be
made or the certificate(s) for Shares not tendered or not purchased are to
be issued to a person other than the registered holder(s), the
certificate(s) must be endorsed or accompanied by appropriate stock
power(s), in either case, signed exactly as the name(s) of the registered
holder(s) appears on the certificate(s), and the signature(s) on such
certificate(s) or stock power(s) must be guaranteed by an Eligible
Institution. See Instruction 1.
(e) If this Letter of Transmittal or any certificate(s) or stock power(s)
are signed by trustees, executors, administrators, guardians, attorneys-in-
fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing and
must submit proper evidence satisfactory to the Company of their authority
so to act.
7. STOCK TRANSFER TAXES. Except as provided in this Instruction 7, no stock
transfer tax stamps or funds to cover such stamps need accompany this Letter
of Transmittal. The Company will pay or cause to be paid any stock transfer
taxes payable on the transfer to it of Shares purchased pursuant to the Offer.
If, however:
(a) payment of the aggregate Purchase Price for Shares tendered hereby
and accepted for purchase is to be made to any person other than the
registered holder(s);
(b) Shares not tendered or not accepted for purchase are to be registered
in the name(s) of any person(s) other than the registered holder(s); or
(c) tendered certificates are registered in the name(s) of any person(s)
other than the person(s) signing this Letter of Transmittal;
then the Depositary will deduct from such aggregate Purchase Price the amount
of any stock transfer taxes (whether imposed on the registered holder, such
other person or otherwise) payable on account of the transfer to such person,
unless satisfactory evidence of the payment of such taxes or any exemption
therefrom is submitted.
9
<PAGE>
8. CONDITIONAL TENDERS. As described in Sections 1 and 6 of the Offer to
Purchase, stockholders may condition their tenders on all or a minimum number
of their tendered Shares being purchased ("Conditional Tenders"). If the
Company is to purchase less than all Shares tendered before the Expiration
Date and not withdrawn, the Depositary will perform a preliminary proration,
and any Shares tendered pursuant to a Conditional Tender for which the
condition was not satisfied shall be deemed withdrawn, subject to
reinstatement if such Conditionally Tendered Shares are subsequently selected
by random lot for purchase subject to Sections 1 and 6 of the Offer to
Purchase. Conditional Tenders will not be eligible for selection by random lot
unless all Shares owned by the holder have been tendered. All tendered Shares
shall be deemed unconditionally tendered unless the "Conditional Tender" box
is completed. The Conditional Tender alternative is made available so that a
stockholder may assure that the purchase of Shares from the stockholder
pursuant to the Offer will be treated as a sale of such Shares by the
stockholder, rather than the payment of a dividend to the stockholder, for
federal income tax purposes. Odd Lot Shares, which will not be subject to
proration, cannot be conditionally tendered. It is the tendering stockholder's
responsibility to calculate the minimum number of Shares that must be
purchased from the stockholder for the stockholder to qualify for sale (rather
than dividend) treatment, and each stockholder is urged to consult his or her
own tax advisor.
IN THE EVENT OF PRORATION, ANY SHARES TENDERED PURSUANT TO A CONDITIONAL
TENDER FOR WHICH THE MINIMUM REQUIREMENTS ARE NOT SATISFIED MAY NOT BE
ACCEPTED AND WILL THEREBY BE DEEMED WITHDRAWN.
9. ORDER OF PURCHASE IN EVENT OF PRORATION. As described in Section 1 of the
Offer to Purchase, stockholders may designate the order (by certificate
number) in which their Shares are to be purchased in the event of proration.
The order of purchase may have an effect on the federal income tax treatment
of the Purchase Price for the Shares purchased. See Sections 1 and 14 of the
Offer to Purchase.
10. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If certificate(s) for Shares
not tendered or not purchased and/or check(s) for the aggregate Purchase Price
of any Shares purchased are to be issued in the name of a person other than
the signer of the Letter of Transmittal or if such certificates and/or checks
are to be sent to someone other than the person signing the Letter of
Transmittal or to the signer at a different address, the boxes captioned
"Special Payment Instructions" and/or "Special Delivery Instructions" on this
Letter of Transmittal should be completed as applicable and signatures must be
guaranteed as described in Instruction 1.
11. IRREGULARITIES. All questions as to the number of Shares to be accepted,
and the validity, form, eligibility (including time of receipt) and acceptance
for payment of any tender of Shares will be determined by the Company in its
sole discretion, which determinations shall be final and binding on all
parties. The Company reserves the absolute right to reject any or all tenders
of Shares it determines not to be in proper form or the acceptance of which or
payment for which may, in the opinion of the Company's counsel, be unlawful.
The Company also reserves the absolute right to waive any of the conditions of
the Offer and any defect or irregularity in the tender of any particular
Shares. The Company's interpretation of the terms of the Offer (including
these instructions) will be final and binding on all parties. No tender of
Shares will be deemed to be properly made until all defects and irregularities
have been cured or waived. Unless waived, any defects or irregularities in
connection with tenders must be cured within such time as the Company shall
determine. None of the Company, the Depositary/ Information Agent (as defined
in the Offer to Purchase) or any other person is or will be obligated to give
notice of any defects or irregularities in tenders and none of them will incur
any liability for failure to give any such notice.
12. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to, or additional copies of the
Offer to Purchase, the Notice of Guaranteed Delivery and this Letter of
Transmittal may be obtained from, the Depositary at its address and telephone
number set forth at the end of this Letter of Transmittal or from your broker,
dealer, commercial bank or trust company.
13. FORM W-9 AND FORM W-8. Stockholders other than corporations and certain
foreign persons may be subject to backup federal income tax withholding. Each
tendering stockholder who does not otherwise establish to the satisfaction of
the Depositary an exemption from backup federal income tax withholding is
required to provide the Depositary with a correct taxpayer identification
number ("TIN") on Substitute Form W-9, which is provided in this Letter of
Transmittal. For an individual, his or her TIN will generally be his or her
social security number. Failure to provide the information requested or
10
<PAGE>
to make the certification on the Form W-9 may subject the tendering
stockholder to 31% backup federal income tax withholding on the payments made
to or for the stockholder with respect to Shares purchased pursuant to the
Offer. Failing to furnish a correct TIN may subject the stockholder to a
$50.00 penalty imposed by the Internal Revenue Service. Providing false
information may result in additional penalties. Backup withholding is not an
additional tax. Rather, the tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained. Stockholders who
are foreign persons should submit Form W-8 to certify that they are exempt
from backup withholding. Form W-8 may be obtained from the Depositary.
14. WITHHOLDING ON FOREIGN STOCKHOLDERS. Even if a foreign stockholder has
provided the required certification to avoid backup withholding, the
Depositary will withhold federal income taxes equal to 30% of the gross
payments payable to a foreign stockholder or his agent unless the Depositary
determines that an exemption from or a reduced rate of withholding is
available pursuant to a tax treaty or an exemption from withholding is
applicable because such gross proceeds are effectively connected with the
conduct of a trade or business in the United States. In order to obtain an
exemption from or a reduced rate of withholding pursuant to a tax treaty, a
foreign stockholder must deliver to the Depositary a properly completed Form
1001. For this purpose, a foreign stockholder is a stockholder that is not (i)
a citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States,
any State or any political subdivision thereof or (iii) any estate or trust
the income of which is subject to United States federal income taxation
regardless of the source of such income. In order to obtain an exemption from
withholding on the grounds that the gross proceeds paid pursuant to the Offer
are effectively connected with the conduct of a trade or business within the
United States, a foreign stockholder must deliver to the Depositary a properly
completed Form 4224. The Depositary will determine a stockholder's status as a
foreign stockholder and eligibility for a reduced rate of, or an exemption
from, withholding by reference to outstanding certificates or statements
concerning eligibility for a reduced rate of, or exemption from, withholding
(e.g., Form 1001 or Form 4224) unless facts and circumstances indicate that
such reliance is not warranted. A foreign stockholder may be eligible to
obtain a refund of all or a portion of any tax withheld if such stockholder
meets one of the tests for sale treatment described in Section 14 of the Offer
to Purchase or is otherwise able to establish that no tax or a reduced amount
of tax is due. Backup withholding generally will not apply to amounts subject
to the 30% or treaty-reduced rate of withholding. Foreign stockholders are
urged to consult their tax advisors regarding the application of federal
income tax withholding, including eligibility for a withholding tax reduction
or exemption and refund procedures.
15. ESOP AND PROFIT SHARING PLAN. THE PARTICIPANTS IN THE ESOP AND THE
PROFIT SHARING PLAN MAY NOT USE THIS LETTER OF TRANSMITTAL TO DIRECT THE
TENDER OF SHARES ATTRIBUTABLE TO THEIR ESOP OR PROFIT SHARING PLAN ACCOUNTS,
BUT MUST USE THE ELECTION FORMS ENCLOSED WITH THE LETTER TO PARTICIPANTS. ESOP
AND PROFIT SHARING PLAN PARTICIPANTS ARE URGED TO READ THE SEPARATE ELECTION
FORMS AND RELATED MATERIALS CAREFULLY. ANY ESOP AND PROFIT SHARING PLAN SHARES
TENDERED BUT NOT PURCHASED WILL BE RETURNED TO THE PARTICIPANT'S ESOP OR
PROFIT SHARING PLAN ACCOUNT, AS THE CASE MAY BE.
The Depositary and Information Agent for the Offer is:
First Chicago Trust Company of New York
By Hand or Overnight Courier: By Mail:
First Chicago Trust Company First Chicago Trust Company
of New York of New York
Tenders & Exchanges Tenders & Exchanges
Suite 4680--MF Suite 4660--MF
14 Wall Street, 8th Floor P.O. Box 2559
New York, NY 10005 Jersey City, NJ 07303-2559
Telephone: 1-800-438-0057
IMPORTANT: This Letter of Transmittal (together with certificates for the
Shares being tendered and all other required documents), or a Notice of
Guaranteed Delivery must be received prior to 5:00 P.M., New York City time,
on July 9, 1996. STOCKHOLDERS ARE ENCOURAGED TO RETURN A COMPLETED FORM W-9
WITH THEIR LETTER OF TRANSMITTAL.
11
<PAGE>
NOTICE OF GUARANTEED DELIVERY
MARKET FACTS, INC.
NOTICE OF GUARANTEED DELIVERY TO TENDER SHARES OF COMMON STOCK
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
This form or a facsimile hereof must be used to accept the Offer (as defined
below) if:
(a) certificates for shares of common stock, $1.00 par value per share (the
"Shares"), of Market Facts, Inc., a Delaware corporation (the "Company"),
cannot be delivered to First Chicago Trust Company of New York (the
"Depositary") prior to the Expiration Date, as defined in Section 1 of the
Company's Offer to Purchase dated June 11, 1996 (the "Offer to Purchase"); or
(b) the procedure for book-entry transfer (set forth in Section 3 of the
Offer to Purchase) cannot be completed on a timely basis; or
(c) the Letter of Transmittal and all other required documents cannot be
delivered to the Depositary prior to the Expiration Date.
This form, properly completed and duly executed, may be delivered by hand,
mail or facsimile transmission to the Depositary. See Section 3 of the Offer
to Purchase.
To: First Chicago Trust Company of New York
By Hand or By Overnight Courier: By Mail:
First Chicago Trust Company of First Chicago Trust Company
New York of New York
Tenders & Exchanges Tenders & Exchanges
Suite 4680-MF Suite 4660-MF
14 Wall Street, 8th Floor P.O. Box 2559
New York, NY 10005 Jersey City, NJ 07303-2559
By Facsimile:
(201) 222-4720
or
(201) 222-4721
Confirm Receipt by Telephone:
(201) 222-4707
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE
INSTITUTION" (AS DEFINED IN THE OFFER TO PURCHASE) UNDER THE INSTRUCTIONS
THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED
IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company at a price of $14.50 per
Share, upon the terms and subject to the conditions set forth in the Offer to
Purchase and the related Letter of Transmittal (which together constitute the
"Offer"), receipt of both of which is hereby acknowledged, the number of
Shares indicated below pursuant to the guaranteed delivery procedure set forth
in Section 3 of the Offer to Purchase.
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- - - --------------------------------------------------------------------------------
Number of Shares to be tendered:___________ Shares
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
CONDITIONAL TENDER
(See Instruction 8 of the Letter of Transmittal)
[_] Check here if tender of Shares is conditional on the Company purchasing
all or a minimum of the tendered Shares and complete the following:
Minimum number of Shares to be sold: ________________________________________
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
ODD LOTS
(See Instruction 5 of the Letter of Transmittal)
To be completed ONLY if the Shares are being tendered by or on behalf of a
person owning beneficially or of record, as of the close of business on
Monday, June 10, 1996, an aggregate of fewer than 100 Shares. The
undersigned either (check one box):
[_] was the beneficial or record owner, as of the close of business on
Monday, June 10, 1996 and will continue to be the beneficial or record
owner as of the Expiration Date, of an aggregate of fewer than 100 Shares,
all of which are being tendered; or
[_] is a broker, dealer, commercial bank, trust company, or other nominee that
(a) is tendering for the beneficial owner(s) thereof, Shares with respect
to which it is the record holder, and (b) believes, based upon
representations made to it by such beneficial owner(s), that each such
person was the beneficial owner, as of the close of business on Monday,
June 10, 1996 and each such person will continue to be the beneficial owner
as of the Expiration Date, of an aggregate of fewer than 100 Shares and is
tendering all of such Shares.
ODD LOT SHARES CANNOT BE CONDITIONALLY TENDERED
- - - --------------------------------------------------------------------------------
(Please type or print) SIGN HERE
Certificate Nos. (if available) _____________________________________
_____________________________________
Dated: ______________________________
_____________________________________
Name(s)
If Shares will be tendered by book-
entry transfer, check the box of the
applicable book-entry transfer
_____________________________________ facility:
Address(es)
[_] The Depository Trust Company
_____________________________________
[_] Philadelphia Depository Trust
_____________________________________ Company
Area Code(s) and Telephone Number(s) Account Number: ______________________
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, an "Eligible Institution", is a member firm of a registered
national securities exchange, a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office, branch, or agency in the United States and represents that: (a) the
above-named person(s) "own(s)" the Shares tendered hereby within the meaning
of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as
amended, and (b) such tender of Shares complies with such Rule 14e-4, and
guarantees that the Depositary will receive (i) certificates of the Shares
tendered hereby in proper form for transfer, or (ii) confirmation that the
Shares tendered hereby have been delivered pursuant to the procedure for book-
entry transfer (set forth in Section 3 of the Offer to Purchase) into the
Depositary's account at The Depository Trust
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Company or the Philadelphia Depository Trust Company, as the case may be,
together with a properly completed and duly executed Letter of Transmittal and
any other documents required by the Letter of Transmittal, all within three
Nasdaq trading days after the date the Depositary receives this Notice of
Guaranteed Delivery.
Authorized Signature: Address:
_____________________________________ _____________________________________
Name: _______________________________ _____________________________________
(Please Print) (Including Zip Code)
Title: ______________________________ Area Code and Telephone Number:
Name of Firm: _______________________
_____________________________________
Date: _________________________, 1996
DO NOT SEND STOCK CERTIFICATES WITH THIS FORM. YOUR STOCK CERTIFICATES MUST
BE SENT WITH THE LETTER OF TRANSMITTAL.
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<PAGE>
First Chicago Trust Company
of New York
14 Wall Street, 8th Floor
New York, New York 10005
MARKET FACTS, INC.
OFFER TO PURCHASE FOR CASH UP TO
900,000 SHARES OF ITS COMMON STOCK
AT $14.50 NET PER SHARE
- - - --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON TUESDAY, JULY 9, 1996, UNLESS THE OFFER IS EXTENDED.
- - - --------------------------------------------------------------------------------
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We are enclosing herewith the material listed below relating to the offer by
Market Facts, Inc., a Delaware corporation (the "Company"), to purchase for
cash up to 900,000 shares (or such lesser number of shares as are properly
tendered) of its Common Stock, $1.00 par value per share (the "Shares"), at
$14.50 per Share (the "Purchase Price") net to the seller in cash, upon the
terms and subject to the conditions set forth in its Offer to Purchase, dated
June 11, 1996 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which together constitute the "Offer").
All Shares properly tendered and not withdrawn will be purchased at the
Purchase Price, upon the terms and subject to the conditions of the Offer,
including the provisions relating to "odd lot" tenders, proration and
conditional tenders. Shares tendered and not purchased because of proration
will be returned. The Company reserves the right, in its sole discretion, to
purchase more than 900,000 Shares pursuant to the Offer. See Sections 1, 3, 6
and 15 of the Offer to Purchase.
If, prior to the Expiration Date (as defined in the Offer to Purchase), more
than 900,000 Shares (or such greater number of Shares as the Company may elect
to purchase) are properly tendered and not withdrawn, the Company will, upon
the terms and subject to the conditions of the Offer, accept Shares for
purchase first from all Odd Lot Holders (as defined in the Offer to Purchase)
who properly tender their Shares and then on a pro rata basis from all other
stockholders whose Shares are properly tendered and not withdrawn. If any
stockholder tenders Shares and does not wish to have such Shares purchased
subject to proration, such stockholder may tender Shares subject to the
condition that a specified minimum number of Shares (which may be represented
by designated stock certificates) or none of such Shares be purchased. See
Sections 1, 3 and 6 of the Offer to Purchase.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 7 OF
THE OFFER TO PURCHASE.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are
enclosing the following documents:
1. Offer to Purchase, dated June 11, 1996;
2. Letter to Clients which may be sent to your clients for whose accounts
you hold Shares registered in your name or in the name of your nominee,
with space provided for obtaining such clients' instructions with regard to
the Offer;
3. Letter, dated June 11, 1996, from Verne B. Churchill, Chairman of the
Board and Thomas H. Payne, Chief Executive Officer of the Company, to
stockholders of the Company;
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<PAGE>
4. Letter of Transmittal for your use and for the information of your
clients (together with accompanying Substitute Form W-9 and guidelines
relating thereto); and
5. Notice of Guaranteed Delivery to be used to accept the Offer if the
Share certificates and all other required documents cannot be delivered to
the Depositary by the Expiration Date or if the procedure for book-entry
transfer cannot be completed on a timely basis.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER,
PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON JULY 9, 1996, UNLESS THE OFFER IS EXTENDED.
No fees or commissions will be payable to brokers, dealers or any person for
soliciting tenders of Shares pursuant to the Offer other than fees paid to the
Depositary/Information Agent as described in the Offer to Purchase. The
Company will, however, upon request, reimburse you for customary mailing and
handling expenses incurred by you in forwarding any of the enclosed materials
to the beneficial owners of Shares held by you as a nominee or in a fiduciary
capacity. The Company will pay or cause to be paid any stock transfer taxes
applicable to its purchase of Shares, except as otherwise provided in
Instruction 7 of the Letter of Transmittal.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal and any other required documents should be
sent to the Depositary with either certificate(s) representing the tendered
Shares or confirmation of their book-entry transfer all in accordance with the
instructions set forth in the Letter of Transmittal and the Offer to Purchase.
As described in Section 3 of the Offer to Purchase, tenders may be made
without the concurrent deposit of stock certificates or concurrent compliance
with the procedure for book-entry transfer, if such tenders are made by or
through a broker or dealer which is a member firm of a registered national
securities exchange, or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch
or agency in the United States which is a member of a recognized medallion
signature guarantee program. Certificates for Shares so tendered (or a
confirmation of a book-entry transfer of such Shares into the Depositary's
account at one of the "Book-Entry Transfer Facilities" described in the Offer
to Purchase), together with a properly completed and duly executed Letter of
Transmittal and any other documents required by the Letter of Transmittal,
must be received by the Depositary within three Nasdaq trading days after
timely receipt by the Depositary of a properly completed and duly executed
Notice of Guaranteed Delivery.
Any inquiries you may have with respect to the Offer should be addressed to
the Depositary/Information Agent or to the Company at their respective
addresses and telephone numbers set forth on the back cover page of the Offer
to Purchase.
Additional copies of the enclosed material may be obtained from the
undersigned, telephone: 1-800-438- 0057.
Very truly yours,
First Chicago Trust Company of New
York
Enclosures
- - - --------------------------------------------------------------------------------
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS AN AGENT OF THE COMPANY OR ANY OF ITS AFFILIATES OR
THE DEPOSITARY OR ANY OF ITS AFFILIATES, OR AUTHORIZE YOU OR ANY OTHER
PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN
CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE
STATEMENTS CONTAINED THEREIN.
- - - --------------------------------------------------------------------------------
2
<PAGE>
MARKET FACTS, INC.
OFFER TO PURCHASE FOR CASH UP TO
900,000 SHARES OF ITS COMMON STOCK
AT $14.50 NET PER SHARE
- - - --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON TUESDAY, JULY 9, 1996, UNLESS THE OFFER IS EXTENDED.
- - - --------------------------------------------------------------------------------
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated June 11,
1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") in connection with the Offer by Market Facts,
Inc., a Delaware corporation (the "Company"), to purchase up to 900,000 Shares
(or such lesser number of shares as are properly tendered) of its Common
Stock, $1.00 par value per share (the "Shares"), at a price of $14.50 per
Share, upon the terms and subject to the conditions set forth in the Offer.
If, prior to the Expiration Date (as defined in the Offer to Purchase), more
than 900,000 Shares (or such greater number of Shares as the Company may elect
to purchase) are properly tendered and not withdrawn, the Company will, upon
the terms and subject to the conditions of the Offer, accept Shares for
purchase first from all Odd Lot Holders (as defined in the Offer to Purchase)
who properly tender their Shares and then on a pro rata basis from all other
stockholders whose Shares are properly tendered and not withdrawn. If any
stockholder tenders Shares and does not wish to have such Shares purchased
subject to proration, such stockholder may tender Shares subject to the
condition that a specified minimum number of Shares (which may be represented
by designated stock certificates) or none of such Shares be purchased. See
Sections 1, 3 and 6 of the Offer to Purchase.
We are the holder of record of Shares held for your account. As such, we are
the only ones who can tender your Shares, and then only pursuant to your
instructions. WE ARE SENDING YOU THE LETTER OF TRANSMITTAL FOR YOUR
INFORMATION ONLY; YOU CANNOT USE IT TO TENDER SHARES WE HOLD FOR YOUR ACCOUNT.
Please instruct us as to whether you wish us to tender any or all of the
Shares we hold for your account on the terms and subject to the conditions of
the Offer.
We call your attention to the following:
1. The tender price is $14.50 per Share, net to you in cash.
2. You may condition your tender of Shares on the Company purchasing all
or a minimum number of your Shares.
3. You may designate the priority (by certificate number) in which your
Shares shall be purchased in the event of proration.
4. The Offer is not conditioned upon any minimum number of Shares being
tendered.
5. The Offer, proration period and withdrawal rights will expire at 5:00
P.M., New York City time, on July 9, 1996, unless the Company extends the
Offer.
6. The Offer is for up to 900,000 Shares, constituting approximately 45%
of the Shares outstanding as of June 10, 1996. If all 900,000 Shares are
purchased by the Company, there will be a net decrease in the outstanding
Shares of 16.5% (after giving effect to the conversion of the Convertible
Note, as described in the Offer to Purchase). See Sections 2, 9 and 10 of
the Offer to Purchase.
7. Tendering stockholders will not be obligated to pay any brokerage
commissions, solicitation fees, or, subject to Instruction 7 of the Letter
of Transmittal, stock transfer taxes on the Company's purchase of Shares
pursuant to the Offer.
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<PAGE>
8. If you beneficially held, as of the close of business on Monday, June
10, 1996 and will continue to beneficially hold as of the Expiration Date,
an aggregate of fewer than 100 Shares, and you instruct us to tender on
your behalf all such Shares before the Expiration Date (as defined in the
Offer to Purchase) and check the box captioned "Odd Lots" in the attached
Instruction Form, the Company, upon the terms and subject to the conditions
of the Offer, will accept all such Shares for purchase before proration, if
any, of the purchase of other Shares properly tendered.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the attached
Instruction Form. An envelope to return your Instruction Form to us is
enclosed. If you authorize us to tender your Shares, we will tender all such
Shares unless you specify otherwise on the attached Instruction Form.
YOUR INSTRUCTION FORM SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US
TO SUBMIT A TENDER ON YOUR BEHALF ON OR BEFORE THE EXPIRATION DATE OF THE
OFFER. THE PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON JULY 9, 1996, UNLESS THE COMPANY EXTENDS THE OFFER.
As described in Section 1 of the Offer to Purchase, if more than 900,000
Shares have been properly tendered and not withdrawn prior to the Expiration
Date (as defined in the Offer to Purchase), the Company will purchase properly
tendered Shares on the basis set forth below:
(a) first, all Shares properly tendered and not withdrawn prior to the
Expiration Date by any Odd Lot Holder (as defined in the Offer to Purchase)
who:
(1) tenders all Shares beneficially owned by such Odd Lot Holder
(tenders of less than all Shares owned by such stockholder will not
qualify for this preference); and
(2) completes the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed Delivery;
and
(b) second, after purchase of all of the foregoing Shares, all Shares
conditionally tendered in accordance with Section 6 of the Offer to
Purchase, for which the condition was satisfied, and all other Shares
tendered properly and unconditionally and not withdrawn prior to the
Expiration Date, on a pro rata basis (with appropriate adjustments to avoid
purchases of fractional Shares) as described in Section 1 of the Offer to
Purchase; and
(c) third, if necessary, Shares conditionally tendered, for which the
condition was not satisfied, and not withdrawn prior to the Expiration
Date, selected by random lot in accordance with Section 6 of the Offer to
Purchase.
You may condition your tender on the Company purchasing a minimum number of
your tendered Shares. In such case, if as a result of the preliminary
proration provisions in the Offer to Purchase the Company would purchase less
than such minimum number of your Shares, then the Company will not purchase
any of your Shares, except as provided in the next sentence. In such case, if
as a result of conditionally tendered Shares not being purchased the total
number of Shares that would have been purchased is less than 900,000, the
Company will select, by random lot, for purchase from stockholders who
tendered all Shares owned by them and who conditionally tendered Shares for
which the condition, based on a preliminary proration, has not been satisfied.
See Section 1 of the Offer to Purchase.
The Offer is being made to all holders of Shares. The Company is not aware
of any state where the making of the Offer is prohibited by administrative or
judicial action pursuant to a valid state statute. If the Company becomes
aware of any valid state statute prohibiting the making of the Offer, the
Company will make a good faith effort to comply with such statute. If, after
such good faith effort, the Company cannot comply with such statute, the Offer
will not be made to, nor will tenders be accepted from or on behalf of,
holders of Shares in such state.
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<PAGE>
INSTRUCTION FORM
WITH RESPECT TO THE OFFER TO PURCHASE
FOR CASH UP TO 900,000 SHARES OF COMMON STOCK
OF
MARKET FACTS, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated June 11, 1996 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together constitute the "Offer"), in connection
with the offer by Market Facts, Inc., a Delaware corporation (the "Company"),
to purchase for cash up to 900,000 shares of its common stock, $1.00 par value
per share (the "Shares"), at a price of $14.50 per Share, net to the
undersigned in cash.
The undersigned hereby instruct(s) you to tender to the Company, on (our)
(my) behalf, the number of Shares indicated below, which are beneficially
owned by (us) (me) and registered in your name, at a price of $14.50 per Share
and upon the terms and subject to the conditions contained in the Offer to
Purchase and the related Letter of Transmittal.
- - - --------------------------------------------------------------------------------
Number of Shares to be tendered: _____________________ Shares*
*Unless otherwise indicated, all of the Shares held for the account of the
undersigned will be tendered.
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
CONDITIONAL TENDER
[_] Check here if tender of Shares is conditional on the Company purchasing
all or a minimum number of the tendered Shares and complete the
following:
Minimum number of Shares to be sold: ______________________
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
ODD LOTS
(See Instruction 5)
[_] By checking this box the undersigned represents that the undersigned was
the beneficial or record owner, as of the close of business on June 10,
1996 and will continue to be the beneficial or record owner as of the
Expiration Date, of an aggregate of fewer than 100 Shares and is
tendering all of such Shares.
ODD LOT SHARES CANNOT BE CONDITIONALLY TENDERED
- - - --------------------------------------------------------------------------------
THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE OPTION AND RISK OF THE
TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY.
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<PAGE>
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
STOCKHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING THEIR SHARES.
EACH STOCKHOLDER MUST MAKE THE DECISION WHETHER TO TENDER SHARES AND, IF SO,
HOW MANY SHARES SHOULD BE TENDERED.
Signature(s): _______________________ Address: ____________________________
_____________________________________ _____________________________________
(Including Zip Code)
Name(s): ____________________________
(Please Print) Area Code and Telephone Number:
_____________________________________
(Taxpayer Identification or _____________________________________
Social Security Number)
Date: _________________________, 1996
IMPORTANT: STOCKHOLDERS ARE ENCOURAGED TO RETURN A COMPLETED FORM W-9 WITH
THEIR INSTRUCTION FORM.
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MARKET FACTS, INC.
PROFIT SHARING AND
RETIREMENT PLAN
("PROFIT SHARING PLAN")
LETTER FROM THE PROFIT SHARING COMMITTEE
June 11, 1996
RE: OFFER TO PURCHASE COMMON STOCK OF MARKET FACTS, INC.
Dear Profit Sharing Plan Participant:
Market Facts, Inc. (the "Company") is offering to purchase directly from its
stockholders up to 900,000 shares of the Company's common stock, $1.00 par
value per share (the "Shares"), at a price of $14.50 per Share. The terms and
conditions of the Company's offer are set forth in the enclosed Offer to
Purchase dated June 11, 1996 (the "Offer to Purchase") and this letter, which
together constitute the "Offer".
As a participant in the Market Facts, Inc. Profit Sharing and Retirement
Plan, you may direct the trustee of the Profit Sharing Plan to "tender" (offer
to sell) some or all of the Shares (excluding fractional Shares) allocated to
you in the Market Facts, Inc. Common Stock Fund under your individual account
in the Profit Sharing Plan ("Company Stock Fund Account") as of May 20, 1996,
by following the instructions set out in this letter.
Please note that the Shares in your Company Stock Fund Account are held in
trust for your benefit and that Harris Trust and Savings Bank, the trustee of
the Profit Sharing Plan (the "Trustee"), is the holder of record of those
Shares. Accordingly, the Trustee is the party who actually tenders Shares from
your Company Stock Fund Account. The Trustee will tender some or all of the
Shares in your Company Stock Fund Account according to your submitted
election. ALSO, THE PROCEEDS FROM ANY SALE OF SHARES FROM YOUR COMPANY STOCK
FUND ACCOUNT WILL NOT BE DISTRIBUTED TO YOU. INSTEAD, ANY PROCEEDS WILL
CONTINUE TO BE HELD IN THE PROFIT SHARING PLAN AND WILL BE REINVESTED IN AN
INTEREST BEARING ACCOUNT. (SEE "REINVESTMENT OF SALE PROCEEDS" BELOW.)
If you wish to tender any Shares held in your Company Stock Fund Account,
you must submit the Tender Election Form For Shares in the Market Facts, Inc.
Profit Sharing and Retirement Plan (the "Tender Election Form") included with
this letter. ANY ELECTION TO TENDER SHARES HELD IN YOUR COMPANY STOCK FUND
ACCOUNT MADE ON A FORM OTHER THAN THE TENDER ELECTION FORM SPECIFICALLY
DESIGNATED FOR THE PROFIT SHARING PLAN WILL BE VOID. If you do not submit the
Tender Election Form, no Shares in your Company Stock Fund Account will be
tendered by the Trustee.
Notwithstanding the foregoing, the Trustee is obligated under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), always to carry
out its fiduciary responsibilities to the Profit Sharing Plan and its
participants. THE TRUSTEE, THEREFORE, MAY NOT RECOGNIZE A TENDER ELECTION (OR
FAILURE TO ELECT) IF THE TRUSTEE BELIEVES SUCH RECOGNITION WILL BE
INCONSISTENT WITH THE PROPER EXERCISE OF ITS FIDUCIARY DUTY, OR CONTRARY TO
THE PROVISIONS OF ERISA. If such a situation occurs, the Trustee will act as
it deems appropriate in accordance with its duty and the requirements of
ERISA.
NEITHER THE COMPANY, ITS BOARD OF DIRECTORS, THE PROFIT SHARING PLAN
COMMITTEE, NOR THE PLAN TRUSTEE MAKES ANY RECOMMENDATION TO ANY PARTICIPANT AS
TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. PARTICIPANTS ARE URGED
TO EVALUATE CAREFULLY ALL INFORMATION IN THE OFFER, CONSULT THEIR OWN
INVESTMENT AND TAX ADVISORS AND MAKE THEIR OWN DECISION WHETHER TO TENDER
SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
<PAGE>
Before making a decision, you should read carefully the materials in the
enclosed Offer to Purchase and the Tender Election Form. The Trustee will treat
confidentially your decision whether or not to tender these Shares.
EFFECT OF THE OFFER ON THE PROFIT SHARING PLAN
The Trustee has informed the Profit Sharing Committee of its intention not to
purchase or sell any Shares held in the Profit Sharing Plan during the period
the Offer is open and for 10 business days thereafter. Instead, the Trustee
intends to accumulate any and all contributions made to the Profit Sharing Plan
and to invest these amounts in an interest bearing account. In addition, the
Trustee intends to hold all Participant investment instructions (other than
Tender Election Forms) received during the tender offer period which instruct
the Trustee to adjust the amount of a participant's Profit Sharing Plan account
balance invested in the Company Stock Fund. The Trustee may resume trading in
Shares after the 10th business day following the Expiration Date (as defined in
the Offer to Purchase) of the Offer.
ANY DISTRIBUTIONS THAT MAY BE REQUESTED DURING THE OFFER PERIOD MAY BE
DELAYED UNTIL AFTER THE EXPIRATION OF THE OFFER.
YOUR DECISION WHETHER TO TENDER
As a Profit Sharing Plan participant, you may direct the Trustee to tender
pursuant to the Offer some or all of the Shares allocated to your Company Stock
Fund Account. The label attached to the Tender Election Form states the number
of Shares that are allocated in your Company Stock Fund Account as of May 20,
1996, according to the records of the Profit Sharing Plan record keeper. If you
elect to tender some or all of the Shares in your Company Stock Fund Account,
the Trustee will tender first from the Shares purchased with your Employee
Deferral Contributions. If the number of Shares you elect to tender exceeds the
Shares purchased with your Employee Deferral Contributions, the Trustee will
tender Shares purchased with your Employer Matching Contributions, then Shares
purchased with your Profit Sharing Contributions, and finally, Shares purchased
with your Rollover Contributions, if any, until your elected number of Shares
has been tendered.
Your decision to tender (or not to tender) is a personal one which you should
make based upon your personal circumstances. PARTICIPANTS CONSIDERING TENDERING
SHARES FROM THEIR COMPANY STOCK FUND ACCOUNT SHOULD REVIEW CAREFULLY ALL
INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND
MAKE THEIR OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO
TENDER.
If you are an executive officer of the Company, you should be aware that your
election to tender will be considered a sale for purposes of short swing
trading liability. You will receive under separate cover a letter containing
more detailed information about the potential for short swing liability.
HOW TO TENDER SHARES; COMPLETION OF TENDER ELECTION FORM
If you wish to direct the Trustee to tender some or all of the eligible
Shares in your Company Stock Fund Account, you must complete and return the
enclosed Tender Election Form in accordance with the instructions specified
thereon. Before deciding whether or not to tender your Shares, please carefully
read the enclosed materials.
PLEASE NOTE THAT, ALTHOUGH THE DEADLINE FOR THE TRUSTEE TO TENDER YOUR SHARES
IS JULY 9, 1996, YOU MUST SEND YOUR TENDER ELECTION FORM TO THE TRUSTEE BY
MAIL, COURIER OR HAND DELIVERY FOR RECEIPT NO LATER THAN 5:00 P.M. CHICAGO
TIME, ON JULY 5, 1996. Tender Election Forms that are received after this
deadline, Tender Election Forms which are not properly completed, and tender
elections submitted on the wrong form, will not be accepted. Examples of
improperly completed Tender Election Forms include forms which are not signed
and forms which contain incorrect or incomplete information. You also may
withdraw any tender you have made under the Offer provided you do so prior to
the July 5, 1996 deadline or, if the Company has not yet accepted Shares for
payment, after 12:00 Midnight, New York City time, on August 6, 1996 (See
"Withdrawing Your Instruction to Tender.")
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<PAGE>
Tender Election Forms should be sent to the Trustee in the enclosed envelope
at the address set forth below:
Harris Trust and Savings Bank
c/o Mr. George Flentge
111 West Monroe
Chicago, IL 60603
Telephone: (312) 461-7349
IN ORDER TO HAVE SHARES TENDERED, YOU MUST COMPLETE AND SIGN YOUR TENDER
ELECTION FORM. IF YOU DO NOT SIGN THE FORM, YOUR DIRECTIONS WILL NOT BE
ACCEPTED AND THE INSTRUCTION FORM, AS WELL AS YOUR DIRECTIONS, WILL BE VOID.
IF YOU DO NOT WISH TO TENDER YOUR SHARES, TAKE NO ACTION.
REINVESTMENT OF SALE PROCEEDS
If you direct the Trustee to tender Shares from your Company Stock Fund
Account, the proceeds from such sale will be reinvested under the Profit
Sharing Plan in an interest bearing account. As soon as practicable after the
date that the Trustee receives payment for the tendered Shares (which is
expected to occur promptly following the Expiration Date of the Offer), you
will be able to transfer amounts from the interest bearing account to the
Profit Sharing Plan's other investment funds, as you elect.
ANY SALE PROCEEDS THAT ARE TRANSFERRED FROM THE INTEREST BEARING ACCOUNT TO
THE COMPANY STOCK FUND WILL BE USED TO PURCHASE COMPANY COMMON STOCK AT THE
MARKET PRICE AT THAT TIME. THE REINVESTMENT PURCHASE PRICE MAY BE HIGHER THAN
THE TENDER OFFER SALE PRICE. THIS WOULD RESULT IN A DECREASE IN THE NUMBER OF
SHARES CREDITED TO YOUR COMPANY STOCK FUND ACCOUNT. IT IS ALSO POSSIBLE THAT
THE REINVESTMENT PRICE WILL BE LOWER THAN THE TENDER OFFER SALE PRICE, WHICH
WOULD RESULT IN AN INCREASED NUMBER OF SHARES BEING CREDITED TO YOUR ACCOUNT.
NO ONE CAN ASSURE YOU WHAT THE REINVESTMENT PRICE WILL BE, SINCE IT IS
DEPENDENT ON MARKET CONDITIONS AT THE TIME.
WITHDRAWING YOUR INSTRUCTION TO TENDER
As more fully described in Section 4 of the Offer to Purchase, tenders will
be deemed irrevocable unless withdrawn by the dates specified therein. If you
instruct the Trustee to tender Shares, and you subsequently decide to withdraw
your instructions, you may do so by sending a notice of withdrawal to the
Trustee. The notice of withdrawal will be effective only if it is in writing
and is received by the Trustee at or before 5:00 P.M., Chicago time, on July 5,
1996, or, if the Company has not yet accepted Shares for payment, after 12:00
Midnight, New York City time, on August 6, 1996. A notice of withdrawal may be
delivered to the Trustee by mail, courier or hand delivery at the address shown
above under "How to Tender Shares; Completion of Tender Election Form."
Any notice of withdrawal to the Trustee must specify: (i) your name, (ii)
your social security number, (iii) a telephone number where you can be reached
during the hours of 9:00 A.M. to 5:00 P.M., Chicago time, on business days,
(iv) the number of Shares you initially elected to tender, and (v) the number
of Shares to be withdrawn from the tender. The notice must also be signed by
you. Upon the Trustee's receipt of a timely written notice of withdrawal
containing the required information, previous instructions to tender with
respect to such Shares will be deemed cancelled. If any required information is
omitted from your notice of withdrawal, or if such notice is incorrect or
otherwise not proper, and the Trustee is unable to reach you to correct any
such defect, your notice of withdrawal will be void. After giving a notice of
withdrawal, if you later wish to retender Shares, you may call Timothy J.
Sullivan, Senior Vice President and Treasurer, Market Facts, Inc., 3040 West
Salt Creek Lane, Arlington Heights, IL 60005, (847) 590-7170 to obtain a new
Tender Election Form for the Profit Sharing Plan. Any new Tender Election Form
for the Profit Sharing Plan must be received by the Trustee at or before 5:00
P.M., Chicago time, on July 5, 1996.
3
<PAGE>
TREATMENT OF ELECTIONS WHEN AGGREGATE SHARES TENDERED EXCEED 900,000 SHARES
As described in Section 1 of the Offer to Purchase, if fewer than all Shares
validly tendered and not withdrawn prior to the Expiration of the Offer are to
be purchased by the Company, the Company will purchase Shares in the following
order of priority: (a) all "odd lot" Shares tendered prior to the Expiration
Date of the Offer by any stockholder who owned beneficially as of the close of
business on June 10, 1996 and who will continue to beneficially own as of the
Expiration Date, an aggregate of fewer than 100 Shares, and who validly tenders
all of such Shares (partial tenders will not qualify for this preference); and
(b) then, after purchase of all of the foregoing Shares, all other Shares
validly tendered and not withdrawn prior to the Expiration Date of the Offer on
a pro rata basis (with appropriate adjustments to avoid purchases of fractional
Shares). Please note that even if you hold an "odd lot," as described in
Section 1 of the Offer to Purchase, in your Profit Sharing Plan account, the
special odd lot purchase rule will not apply to your Shares in the Profit
Sharing Plan. THAT IS, IF MORE THAN 900,000 SHARES ARE PROPERLY TENDERED IN THE
OFFER, ONLY A PRO RATA PORTION OF ANY SHARES IN YOUR COMPANY STOCK FUND ACCOUNT
THAT YOU DIRECT THE TRUSTEE TO TENDER MAY BE PURCHASED, EVEN IF YOU ARE AN ODD
LOT HOLDER.
CONDITIONAL OFFERS
As described in Section 6 of the Offer to Purchase, a stockholder may tender
Shares owned independently from the Profit Sharing Plan or the ESOP, subject to
the condition that a specified number, if any, must be purchased. Such
conditional tenders may not be made with respect to Shares held in the Profit
Sharing Plan or the ESOP. If you must make a conditional tender of your Shares
for tax purposes in order to avoid dividend treatment on the tender of your
Shares (See Section 14 of the Offer to Purchase), or for any other reason, your
conditional tender must be made with Shares that you own independently from the
Profit Sharing Plan and the ESOP. In other words, if you would like to
condition your tender on a minimum number of Shares being purchased, the number
of Shares you own outside the Profit Sharing Plan and ESOP must be sufficient
to satisfy the minimum, because Shares held in such plans may not be
conditionally tendered.
IF YOU HAVE QUESTIONS
If you have any questions about the Offer, please call the Information Agent
or the Company. The address and telephone number of the Information Agent and
the Company are set forth on the back cover page of the Offer to Purchase. If
you have questions about tendering the Shares in your Company Stock Fund
Account, please call the Trustee or the Company. The address and telephone
number of the Trustee are set forth herein under "How to Tender Shares;
Completion of Tender Election Form." If you wish, your inquiry may be made on a
confidential basis. The Company contact for questions about tendering Shares is
Mr. Sullivan, whose address and telephone number are set forth herein under
"Withdrawing Your Instruction to Tender." If you have questions about the
Profit Sharing Plan, please refer to the Summary Plan Description (the "SPD")
for the Profit Sharing Plan. Additional copies of the SPD for the Profit
Sharing Plan may be obtained from Mr. Sullivan at the address and telephone
number set forth above.
NEITHER THE COMPANY, ITS BOARD OF DIRECTORS, THE PROFIT SHARING COMMITTEE,
NOR THE PLAN TRUSTEE MAKES ANY RECOMMENDATION TO ANY PARTICIPANT AS TO
WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. EACH PARTICIPANT MUST
MAKE HIS OR HER OWN DECISION WHETHER TO TENDER SHARES, AND, IF SO, HOW MANY
SHARES TO TENDER.
Profit Sharing Committee
Market Facts, Inc. Profit
Sharing and Retirement Plan
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares in any jurisdiction in which the making of the
Offer or acceptance thereof would not be in compliance with the laws of such
jurisdiction.
4
<PAGE>
TENDER ELECTION FORM
FOR SHARES IN THE MARKET FACTS, INC.
PROFIT SHARING AND RETIREMENT PLAN
("PROFIT SHARING PLAN")
(NOTE: Before completing this Tender Election Form, you should refer to the
Letter dated June 11, 1996 from the Profit Sharing Committee of The Market
Facts, Inc. Profit Sharing and Retirement Plan included with this Tender
Election Form (the "Letter")).
TO THE TRUSTEE OF THE PROFIT SHARING AND RETIREMENT PLAN:
I am a participant in the Market Facts, Inc. Profit Sharing and Retirement
Plan who has shares in the Company Stock Fund and, as such, I have received a
copy of the Offer to Purchase dated June 11, 1996 (the "Offer to Purchase"),
relating to the Offer by Market Facts, Inc., a Delaware corporation (the
"Company"), to purchase up to 900,000 shares of its Common Stock (the "Shares")
at a price of $14.50 per Share, net to the seller in cash.
Please tender to the Company, on my behalf, the number of Shares stated
below, which are allocated to my Profit Sharing Plan account and are
beneficially owned by me and held by you under the Company Stock Fund of the
Profit Sharing Plan, at a price of $14.50 per Share and upon the terms and
subject to the conditions contained in the Offer to Purchase, the receipt of
which is hereby acknowledged. I understand that the label attached to this
Tender Election Form sets forth the number of Shares allocated to me as of May
20, 1996 in the Company Stock Fund under my individual account in the Profit
Sharing Plan, according to the records of the Profit Sharing Plan record
keeper.
I have read and understand the Offer to Purchase and the Letter, and I agree
to be bound by the terms of the Offer. I hereby direct the Trustee to tender
these Shares on my behalf. I understand that the Trustee shall first tender
Shares purchased with my Employee Deferral Contributions; if the Shares to be
tendered pursuant to this election exceed the number of Shares purchased with
my Employee Deferral Contributions, the Trustee will tender Shares purchased
with my Employer Matching Contributions, then Shares purchased with my Profit
Sharing Contributions, and finally Shares purchased with my Rollover
Contributions, if any, until the elected number of Shares has been tendered. I
understand that the Trustee will hold and invest the proceeds from the sale of
these Shares in an interest bearing account. As soon as practicable after the
expiration of the Offer, the proceeds shall be reinvested in the Profit Sharing
Plan investment funds, according to my instructions given at that time. I
understand and declare that if the tender of my Shares is accepted, the payment
therefor will be full and adequate compensation for these Shares in my
judgment, notwithstanding any potential fluctuation in the price of the Shares
between the last day I can withdraw my tender and the date the tendered Shares
are taken up and paid for by the Company.
5
<PAGE>
Number of Shares to be Tendered:_____
- - - ------------------------------------- -------------------------------------
Date Signature of Participant
- - - ------------------------------------- -------------------------------------
Social Security Number Please Print Name and Address Here
- - - ------------------------------------- -------------------------------------
Telephone Number
-------------------------------------
NOTE: THIS TENDER ELECTION FORM MUST BE COMPLETED AND SIGNED IF SHARES HELD
IN THE PROFIT SHARING PLAN ARE TO BE TENDERED. IF THE FORM IS NOT SIGNED, THE
DIRECTIONS INDICATED WILL NOT BE ACCEPTED. PLEASE RETURN THIS TENDER ELECTION
FORM TO THE TRUSTEE FOR THE PROFIT SHARING PLAN, USING THE PREADDRESSED REPLY
ENVELOPE PROVIDED WITH YOUR TENDER MATERIALS. THE METHOD OF DELIVERY OF THIS
DOCUMENT IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
DELIVERY. YOUR INSTRUCTION FORM (OR A MANUALLY SIGNED FACSIMILE THEREOF) MUST
BE RECEIVED BY THE TRUSTEE PRIOR TO 5:00 P.M. CHICAGO TIME, ON JULY 5, 1996.
YOUR DECISION WHETHER OR NOT TO HAVE YOUR PROFIT SHARING PLAN SHARES TENDERED
WILL BE KEPT CONFIDENTIAL.
6
<PAGE>
MARKET FACTS, INC.
EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")
LETTER FROM THE ESOP COMMITTEE
June 11, 1996
RE: OFFER TO PURCHASE COMMON STOCK OF MARKET FACTS, INC.
Dear ESOP Participant:
Market Facts, Inc. (the "Company") is offering to purchase directly from its
stockholders up to 900,000 shares of the Company's common stock, $1.00 par
value per share (the "Shares"), at a price of $14.50 per Share. The terms and
conditions of the Company's offer are set forth in the enclosed Offer to
Purchase dated June 11, 1996 (the "Offer to Purchase") and this letter, which
together constitute the "Offer".
As a participant in the Market Facts, Inc. Employee Stock Ownership Plan,
you may direct the trustee of the ESOP to "tender" (offer to sell) some or all
of the Shares (excluding fractional Shares) allocated to your ESOP Account as
of May 20, 1996, by following the instructions set out in this letter.
Please note that the Shares in your ESOP Account are held in trust for your
benefit and that Harris Trust and Savings Bank, the trustee of the ESOP (the
"Trustee"), is the holder of record of those Shares. Accordingly, the Trustee
is the party who actually tenders Shares from your ESOP Account. The Trustee
will tender some or all of the Shares in your ESOP Account according to your
submitted election. ALSO, THE PROCEEDS FROM ANY SALE OF SHARES FROM YOUR ESOP
ACCOUNT WILL NOT BE DISTRIBUTED TO YOU. INSTEAD, ANY PROCEEDS WILL CONTINUE TO
BE HELD IN THE ESOP AND WILL BE REINVESTED AS DESCRIBED UNDER "REINVESTMENT OF
SALE PROCEEDS" BELOW.
If you wish to tender any Shares held in your ESOP Account, you must use the
Tender Election Form For Shares in the Market Facts, Inc. Employee Stock
Ownership Plan (the "Tender Election Form") included with this letter. ANY
ELECTION TO TENDER SHARES HELD IN YOUR ESOP ACCOUNT MADE ON A FORM OTHER THAN
THE TENDER ELECTION FORM SPECIFICALLY DESIGNATED FOR THE ESOP WILL BE VOID. If
you take no action, no Shares in your ESOP Account will be tendered by the
Trustee.
Notwithstanding the foregoing, the Trustee is obligated under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), always to carry
out its fiduciary responsibilities to the ESOP and its participants. THE
TRUSTEE, THEREFORE, MAY NOT RECOGNIZE A TENDER ELECTION (OR FAILURE TO ELECT)
IF THE TRUSTEE BELIEVES SUCH RECOGNITION WILL BE INCONSISTENT WITH THE PROPER
EXERCISE OF ITS FIDUCIARY DUTY, OR CONTRARY TO THE PROVISIONS OF ERISA. If
such a situation occurs, the Trustee will act as it deems appropriate in
accordance with its duty and the requirements of ERISA.
NEITHER THE COMPANY, ITS BOARD OF DIRECTORS, THE ESOP COMMITTEE, NOR THE
PLAN TRUSTEE MAKES ANY RECOMMENDATION TO ANY PARTICIPANT AS TO WHETHER TO
TENDER OR REFRAIN FROM TENDERING SHARES. PARTICIPANTS ARE URGED TO EVALUATE
CAREFULLY ALL INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX
ADVISORS AND MAKE THEIR OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW
MANY SHARES TO TENDER.
Before making a decision, you should read carefully the materials in the
enclosed Offer to Purchase and the Tender Election Form. The Trustee will
treat confidentially your decision whether or not to tender these Shares.
1
<PAGE>
EFFECT OF THE OFFER ON THE ESOP
The Trustee has informed the ESOP Committee of its intention not to purchase
or sell any Shares held in the ESOP during the period the Offer is open and
for 10 business days thereafter. Instead, the Trustee intends to accumulate
any and all contributions made to the ESOP and to invest these amounts in an
interest bearing account. The Trustee may resume trading in Shares after the
10th business day following the Expiration Date (as defined in the Offer to
Purchase) of the Offer.
ANY DISTRIBUTIONS THAT MAY BE REQUESTED DURING THE OFFER PERIOD MAY BE
DELAYED UNTIL AFTER THE EXPIRATION OF THE OFFER.
YOUR DECISION WHETHER TO TENDER
As an ESOP participant, you may direct the Trustee to tender pursuant to the
Offer some or all of the Shares allocated to your ESOP Account. The label
attached to the Tender Election Form states the number of Shares that are
allocated in your ESOP Account as of May 20, 1996, according to the records of
the ESOP record keeper.
Your decision to tender (or not to tender) is a personal one which you
should make based upon your personal circumstances. PARTICIPANTS CONSIDERING
TENDERING SHARES FROM THEIR ESOP ACCOUNT SHOULD REVIEW CAREFULLY ALL
INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS, AND
MAKE THEIR OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES
TO TENDER. (SEE "POTENTIAL TAX CONSEQUENCES OF TENDERING SHARES" BELOW.)
If you are an executive officer of the Company, you should be aware that
your election to tender will be considered a sale for purposes of short swing
trading liability. You will receive under separate cover a letter containing
more detailed information about the potential for short swing liability.
POTENTIAL TAX CONSEQUENCES OF TENDERING SHARES
TENDERING SHARES FROM YOUR ESOP ACCOUNT COULD RESULT IN THE LOSS OF
FAVORABLE TAX TREATMENT AVAILABLE WITH RESPECT TO CERTAIN SHARES THAT
SUBSEQUENTLY ARE DISTRIBUTED TO YOU FROM THE ESOP. Shares that you receive in
certain types of distributions from the ESOP may be eligible for favorable tax
treatment. Specifically, depending upon the type of distribution, all or a
portion of any "net unrealized appreciation" on the Shares is not taxable to
you until you sell the Shares. When you sell the Shares, any gain realized on
the sale is long-term or short-term capital gain. If you tender and sell
Shares from your ESOP Account pursuant to the Offer, the benefit of deferring
any net unrealized appreciation in the Shares that are sold may be lost, and
the amount of tax that you owe immediately upon receipt of an ESOP
distribution may be greater than if you had not tendered and sold in the Offer
the Shares in your ESOP Account. This potential tax consequence will not apply
to any distribution from the ESOP paid solely in cash. ESOP PARTICIPANTS ARE
URGED TO CONSULT THEIR OWN TAX ADVISOR WITH RESPECT TO THIS POTENTIAL TAX
CONSEQUENCE.
HOW TO TENDER SHARES; COMPLETION OF TENDER ELECTION FORM
If you wish to direct the Trustee to tender some or all of the eligible
Shares in your ESOP Account, you must complete, sign and return the enclosed
Tender Election Form in accordance with the instructions specified thereon.
Before deciding whether or not to tender your Shares, please carefully read
the enclosed materials.
PLEASE NOTE THAT, ALTHOUGH THE DEADLINE FOR THE TRUSTEE TO TENDER YOUR
SHARES IS JULY 9, 1996, YOU MUST SEND YOUR TENDER ELECTION FORM TO THE TRUSTEE
BY MAIL, COURIER OR HAND DELIVERY FOR RECEIPT NO LATER THAN 5:00 P.M. CHICAGO
TIME, ON JULY 5, 1996. Tender Election Forms that are received after this
deadline, Tender Election Forms which are not properly completed, and tender
elections submitted on the wrong form, will not be accepted. Examples of
improperly completed Tender Election Forms include forms which are not signed
and forms which contain incorrect or incomplete information. You also may
withdraw any tender you have made under the Offer provided you do so prior to
the July 5, 1996 deadline, or, if the Company has not yet accepted Shares for
payment, after 12:00 Midnight, New York City time, on August 6, 1996. (See
"Withdrawing Your Instruction to Tender.")
2
<PAGE>
Tender Election Forms should be sent to the Trustee in the enclosed envelope
at the address set forth below:
Harris Trust and Savings Bank
c/o Mr. George Flentge
111 West Monroe
Chicago, IL 60603
Telephone: (312) 461-7349
IN ORDER TO HAVE SHARES TENDERED YOU MUST COMPLETE AND SIGN YOUR TENDER
ELECTION FORM. IF YOU DO NOT SIGN THE FORM, YOUR DIRECTIONS WILL NOT BE
ACCEPTED AND THE INSTRUCTION FORM, AS WELL AS YOUR DIRECTIONS, WILL BE VOID.
IF YOU DO NOT WISH TO TENDER YOUR SHARES, TAKE NO ACTION.
REINVESTMENT OF SALE PROCEEDS
The Company is applying for a private letter ruling from the Internal
Revenue Service ("IRS") to allow the Company to direct the Trustee to transfer
the proceeds from the tender of Shares in your ESOP Account ("ESOP Tender
Offer Proceeds") to your Profit Sharing Plan account, where such proceeds may
be invested in the Profit Sharing Plan investment funds according to your
instructions to the Trustee. The IRS has no deadline by which it must respond
to private letter ruling requests, although it attempts to respond promptly.
The Company anticipates that it will receive a response in approximately three
to six months, but the response period may be longer.
Pending receipt of the letter ruling, your ESOP Tender Offer Proceeds will
be held in an interest bearing account. If the Company is unable to obtain a
favorable letter ruling from the IRS, the ESOP Tender Offer Proceeds will
continue to be held in the ESOP and the ESOP will be amended to permit
participant direction with respect to the investment of such proceeds.
WITHDRAWING YOUR INSTRUCTION TO TENDER
As more fully described in Section 4 of the Offer to Purchase, tenders will
be deemed irrevocable unless withdrawn by the dates specified therein. If you
instruct the Trustee to tender Shares, and you subsequently decide to withdraw
your instructions, you may do so by sending a notice of withdrawal to the
Trustee. The notice of withdrawal will be effective only if it is in writing
and is received by the Trustee at or before 5:00 P.M., Chicago time, on July
5, 1996, or, if the Company has not yet accepted Shares for payment, after
12:00 Midnight, New York City time, on August 6, 1996. A notice of withdrawal
may be delivered to the Trustee by mail, courier or hand delivery at the
address shown above under "How to Tender Shares; Completion of Tender Election
Form."
Any notice of withdrawal to the Trustee must specify: (i) your name, (ii)
your social security number, (iii) a telephone number where you can be reached
during the hours of 9:00 A.M. to 5:00 P.M., Chicago time, on business days,
(iv) the number of Shares you initially elected to tender, and (v) the number
of Shares to be withdrawn from the tender. The notice must also be signed by
you. Upon the Trustee's receipt of a timely written notice of withdrawal
containing the required information, previous instructions to tender with
respect to such Shares will be deemed cancelled. If any required information
is omitted from your notice of withdrawal, or if such notice is incorrect or
otherwise not proper, and the Trustee is unable to reach you to correct any
such defect, your notice of withdrawal will be void. After giving a notice of
withdrawal, if you later wish to retender Shares, you may call Mr. Timothy J.
Sullivan, Senior Vice President and Treasurer, Market Facts, Inc., 3040 West
Salt Creek Lane, Arlington Heights, IL 60005, (847) 590-7170 to obtain a new
Tender Election Form for the ESOP. Any new Tender Election Form for the ESOP
must be received by the Trustee at or before 5:00 P.M., Chicago time, on July
5, 1996.
3
<PAGE>
TREATMENT OF ELECTIONS WHEN AGGREGATE SHARES TENDERED EXCEED 900,000 SHARES
As described in Section 1 of the Offer to Purchase, if fewer than all Shares
validly tendered and not withdrawn prior to the Expiration of the Offer are to
be purchased by the Company, the Company will purchase Shares in the following
order of priority: (a) all "odd lot" Shares tendered prior to the Expiration
Date of the Offer by any stockholder who owned beneficially as of the close of
business on June 10, 1996 and who will continue to beneficially own as of the
Expiration Date, an aggregate of fewer than 100 Shares, and who validly
tenders all of such Shares (partial tenders will not qualify for this
preference); and (b) then, after purchase of all of the foregoing Shares, all
other Shares validly tendered and not withdrawn prior to the Expiration Date
of the Offer on a pro rata basis (with appropriate adjustments to avoid
purchases of fractional Shares). Please note that even if you hold an "odd
lot," as described in Section 1 of the Offer to Purchase, in your ESOP
account, the special odd lot purchase rule will not apply to your Shares in
the ESOP. THAT IS, IF MORE THAN 900,000 SHARES ARE PROPERLY TENDERED IN THE
OFFER, ONLY A PRO RATA PORTION OF ANY SHARES IN YOUR ESOP ACCOUNT THAT YOU
DIRECT THE TRUSTEE TO TENDER MAY BE PURCHASED, EVEN IF YOU ARE AN ODD LOT
HOLDER.
CONDITIONAL OFFERS
As described in Section 6 of the Offer to Purchase, a stockholder may tender
Shares owned independently from the ESOP or the Profit Sharing Plan, subject
to the condition that a specified number, if any, must be purchased. Such
conditional tenders may not be made with respect to Shares held in the ESOP or
the Profit Sharing Plan. If you must make a conditional tender of your Shares
for tax purposes in order to avoid dividend treatment on the tender of your
Shares (See Section 14 of the Offer to Purchase), or for any other reason,
your conditional tender must be made with Shares that you own independently
from the ESOP and the Profit Sharing Plan. In other words, if you would like
to condition your tender on a minimum number of Shares being purchased, the
number of Shares you own outside the Profit Sharing Plan and ESOP must be
sufficient to satisfy the minimum, because Shares held in such plans may not
be conditionally tendered.
IF YOU HAVE QUESTIONS
If you have any questions about the Offer, please call the Information Agent
or the Company. The address and telephone number of the Information Agent and
the Company are set forth on the back cover page of the Offer to Purchase. If
you have questions about tendering the Shares in your ESOP Account, please
call the Trustee or the Company. The address and telephone number of the
Trustee are set forth herein under "How to Tender Shares; Completion of Tender
Election Form." If you wish, your inquiry may be made on a confidential basis.
The Company contact for questions about tendering Shares is Mr. Sullivan whose
address and telephone number are set forth herein under "Withdrawing Your
Instruction to Tender." If you have questions about the ESOP, please refer to
the Summary Plan Description (the "SPD") for the ESOP. Additional copies of
the SPD for the ESOP may be obtained from Mr. Sullivan at the address and
telephone number set forth above.
NEITHER THE COMPANY, ITS BOARD OF DIRECTORS, THE ESOP COMMITTEE, NOR THE
PLAN TRUSTEE MAKES ANY RECOMMENDATION TO ANY PARTICIPANT AS TO WHETHER TO
TENDER OR REFRAIN FROM TENDERING SHARES. EACH PARTICIPANT MUST MAKE HIS OR
HER OWN DECISION WHETHER TO TENDER SHARES, AND, IF SO, HOW MANY SHARES TO
TENDER.
ESOP Committee
Market Facts, Inc.
Employee Stock Ownership Plan
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares in any jurisdiction in which the making of the
Offer or acceptance thereof would not be in compliance with the laws of such
jurisdiction.
4
<PAGE>
TENDER ELECTION FORM
FOR SHARES IN THE MARKET FACTS, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
("ESOP")
(NOTE: Before completing this Tender Election Form, you should refer to the
Letter dated June 11, 1996 from the ESOP Committee of the Market Facts, Inc.
Employee Stock Ownership Plan included with this Tender Election Form (the
"Letter")).
TO THE TRUSTEE OF THE EMPLOYEE STOCK OWNERSHIP PLAN:
I am a participant in the Market Facts, Inc. Employee Stock Ownership Plan
who has shares in my ESOP Account and, as such, I have received a copy of the
Offer to Purchase dated June 11, 1996 (the "Offer to Purchase"), relating to
the Offer by Market Facts, Inc., a Delaware corporation (the "Company"), to
purchase up to 900,000 shares of its Common Stock (the "Shares") at a price of
$14.50 per Share, net to the seller in cash.
Please tender to the Company, on my behalf, the number of Shares stated
below, which are allocated to my ESOP Account and are beneficially owned by me
and held by you under the ESOP, at a price of $14.50 per Share and upon the
terms and subject to the conditions contained in the Offer to Purchase, the
receipt of which is hereby acknowledged. I understand that the label attached
to this Tender Election Form sets forth the number of Shares allocated as of
May 20, 1996, to my ESOP Account, according to the records of the ESOP record
keeper.
I have read and understand the Offer to Purchase and the Letter, and I agree
to be bound by the terms of the Offer. I hereby direct the Trustee to tender
these Shares on my behalf. I understand that the Trustee will hold and invest
the proceeds from the sale of these Shares in an interest bearing account, to
be transferred as soon as practicable, after receipt of a favorable private
letter ruling from the IRS (as described in "Reinvestment of Sale Proceeds" in
the Letter), to my account in the Profit Sharing Plan and invested in the
Profit Sharing Plan investment funds according to my instructions given to the
Trustee at the time of such investment. I understand and declare that if the
tender of my Shares is accepted, the payment therefor will be full and
adequate compensation for these Shares in my judgment, notwithstanding any
potential fluctuation in the price of the Shares between the last day I can
withdraw my tender and the date the tendered Shares are taken up and paid for
by the Company.
5
<PAGE>
Number of Shares to be Tendered: ____
- - - ------------------------------------- -------------------------------------
Date Signature of Participant
- - - ------------------------------------- -------------------------------------
Social Security Number Please Print Name and Address Here
- - - ------------------------------------- -------------------------------------
Telephone Number
-------------------------------------
NOTE: THIS TENDER ELECTION FORM MUST BE COMPLETED AND SIGNED IF SHARES HELD
IN THE ESOP ARE TO BE TENDERED. IF THE FORM IS NOT SIGNED, THE DIRECTIONS
INDICATED WILL NOT BE ACCEPTED. PLEASE RETURN THIS TENDER ELECTION FORM TO THE
TRUSTEE FOR THE ESOP, USING THE PREADDRESSED REPLY ENVELOPE PROVIDED WITH YOUR
TENDER MATERIALS. THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE OPTION AND
RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY. YOUR INSTRUCTION FORM
(OR A MANUALLY SIGNED FACSIMILE THEREOF) MUST BE RECEIVED BY THE TRUSTEE PRIOR
TO 5:00 P.M. CHICAGO TIME, ON JULY 5, 1996.
YOUR DECISION WHETHER OR NOT TO HAVE YOUR ESOP SHARES TENDERED WILL BE KEPT
CONFIDENTIAL.
6
<PAGE>
Exhibit (a)(8)
MARKET FACTS ANNOUNCES MAJOR EQUITY INVESTMENT BY
INVESTMENT PARTNERSHIP AND SELF TENDER OFFER
ARLINGTON HEIGHTS, ILLINOIS, JUNE 6, 1996. Market Facts, Inc., an international
market research and information company, today announced an investment of
$8,250,000 in the Company by an investment partnership formed by ZS Fund L.P., a
New York based investment firm, and plans for a related self tender offer for up
to 900,000 shares of the Company's common stock at $14.50 per share, to commence
within a week. "Discussions with the ZS Fund arose out of a general exploration
by management of strategic alternatives available to the Company," explained
Thomas H. Payne, Chief Executive Officer of Market Facts, "We have, in the last
two years, been reviewing strategic alternatives to maximize stockholder value
and to grow the Company's business."
MFI Investors L.P., a limited partnership formed by the ZS Fund, invested
$8,250,000 in the Company for a 10-year, 7% convertible subordinated note. The
agreement between the parties requires the Company to commence a self tender
offer within 5 business days. The note is convertible into 568,965 shares of
common stock at the rate of $14.50 per share, and immediately prior to the
consummation of the tender offer, will automatically convert into as many shares
(up to 568,965) as are purchased by the Company in the self tender offer. If
900,000 shares are purchased by the Company in the tender offer, MFI Investors
L.P. will beneficially own 34.1% of the Company's outstanding shares.
A new class of Series B preferred shares was also issued to MFI Investors L.P.,
granting it the right to elect 3 of the 11 Company directors, subject to
decrease as its ownership interest decreases. Messrs. Ned L. Sherwood and Henrik
Falktoft were elected to the Company's board, and Messrs. John C. Robertson,
Timothy Q. Rounds and Wesley S. Walton resigned their directorships. Messrs.
Sherwood and Falktoft are officers of the sole general partner of MFI Investors
L.P. and are associated with ZS Fund L.P.
The parties' agreement prohibits MFI Investors and certain of its affiliates
from acquiring more than 37.5% of the Company's voting securities, and contains
various limitations and restrictions on the voting of the fund's shares, its
ability to take control of the Company and its ability to transfer its preferred
shares and the note.
The Company also entered into a financial advisory agreement with the general
partner of MFI Investors L.P., under which the Company is to receive assistance
as requested in financial analysis and structuring strategies in connection with
acquisitions.
<PAGE>
Mr. Payne stated that a self tender offer would provide a liquidity event to the
Company's stockholders who are interested in selling all or some of their
shares. The Board also felt that the financial advisory services available
through MFI Investors L.P. will be beneficial to the Company in seeking
potential acquisition candidates and business partners, thereby enhancing the
Company's ability to achieve long-term growth. "We look forward to a successful
association with Mr. Sherwood, Mr. Falktoft and the other members of the ZS Fund
team," Payne stated.
Immediately prior to this investment, the Company amended its Rights Plan to
permit MFI Investors and certain of its affiliates to purchase up to 37.5% of
the Company's voting securities without triggering the provisions of the Rights
Plan.
Otherwise, the existing restrictions of the Rights Plan remain unchanged.
Market Facts, Inc. common stock trades on the NASDAQ stock market under the
ticker symbol MFAC.
#####
<PAGE>
To Our Stockholders:
Market Facts, Inc. is offering to purchase up to 900,000 shares (or such
lesser number as are properly tendered) of its common stock (the "Shares")
from stockholders at a price of $14.50 per Share (the "Purchase Price"). The
terms and conditions of the Offer are described in the enclosed Offer to
Purchase and Letter of Transmittal.
On June 6, 1996, the last trading day prior to the announcement of the
Offer, the closing price per Share on the National Market System of the Nasdaq
Stock Market ("Nasdaq") was $14.00. Any stockholder whose Shares are purchased
in the Offer will receive the aggregate Purchase Price in cash (subject to any
withholding taxes required) and will not incur the usual transaction costs
associated with open-market sales. Generally, any stockholders owning an
aggregate of less than 100 Shares whose Shares are purchased pursuant to the
Offer will avoid any applicable odd lot discounts payable on sales of odd lots
on Nasdaq.
Subject to the terms and conditions described in the Offer to Purchase and
the related Letter of Transmittal, all Shares properly tendered and not
withdrawn on or prior to the Expiration Date (as defined in the Offer to
Purchase) will be purchased at the Purchase Price, net to the seller in cash.
Those terms and conditions include, among other things, provisions relating to
possible proration, conditional tenders and the tender of odd lots. All stock
certificates representing Shares that are tendered and not purchased will be
returned promptly to the stockholder.
The Offer, proration period and withdrawal rights expire at 5:00 p.m., New
York City time on Tuesday, July 9, 1996, unless the Offer is extended.
The Offer is explained in detail in the Offer to Purchase and Letter of
Transmittal. We encourage you to read these materials carefully before making
any decision with respect to the Offer. If you want to tender your Shares, the
instructions on how to tender Shares are also explained in detail in the
accompanying materials.
We have retained First Chicago Trust Company of New York as our Information
Agent to help you tender your Shares pursuant to the Offer. Please contact
them between 9:00 a.m. and 5:00 p.m., New York City time at their toll free
number, 1-800-438-0057, if you have any questions or need assistance
completing any of the various documents.
Neither Market Facts nor its Board of Directors makes any recommendations to
any stockholder whether to tender or refrain from tendering any or all of
their Shares.
Sincerely,
[SIGNATURE OF VERNE B. CHURCHILL]
Verne B. Churchill
Chairman of the Board
[SIGNATURE OF THOMAS H. PAYNE]
Thomas H. Payne
Chief Executive Officer
<PAGE>
Exhibit 99(a)(10)
MARKET FACTS ANNOUNCES SELF TENDER OFFER
Arlington Heights, Illinois, June 11, 1996. Market Facts, Inc., an
international market research and information company, today announced that it
is offering to purchase up to 900,000 shares of its Common Stock from its
stockholders at a cash price of $14.50 per share. The offering commenced on June
11, 1996 and will remain open until 5:00 p.m., New York time, July 9, 1996. The
Company presently has 2,000,769 shares outstanding.
The Depositary and Information Agent for the tender offer is First Chicago
Trust Company of New York.
Last week the Company announced its sale of a 7% convertible subordinated
note for $8,250,000 to MFI Investors L.P., a limited partnership formed by the
ZS Fund, a New York-based investment firm. The note is convertible into 568,965
shares, and immediately prior to the consummation of the tender offer, will
automatically convert into as many shares (up to 568,965) as are purchased by
the Company in the tender offer. If 900,000 shares are purchased by the Company
in the tender offer, MFI Investors will beneficially own 34.1% of the Company's
outstanding shares.
Immediately prior to the issuance of the note, executive officers
and directors beneficially owned 625,165 shares. Certain of these officers and
directors have informed the Company that they intend to tender 194,910 shares in
the tender offer.
Market Facts, Inc. common stock is traded on the Nasdaq Stock Market under
the ticker symbol MFAC.
# # # # #
<PAGE>
================================================================================
Credit Agreement
Dated as of
June 7, 1996,
between
Market Facts, Inc.
and
Harris Trust and Savings Bank
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Description Page
<S> <C> <C>
Section 1. The Credits............................................................ 1
Section 1.1. Revolving Credit..................................................... 1
Section 1.2. Revolving Loans...................................................... 1
Section 1.3. Conversion of the Revolving Credit into a Term Loan.................. 2
Section 1.4. Manner and Disbursement of Loans..................................... 2
Section 2. Interest and Change In Circumstances................................... 3
Section 2.1. Interest Rate Options................................................ 3
Section 2.2. Minimum Amounts...................................................... 5
Section 2.3. Computation of Interest.............................................. 5
Section 2.4. Manner of Rate Selection............................................. 5
Section 2.5. Change of Law........................................................ 5
Section 2.6. Unavailability of Deposits or Inability to Ascertain Adjusted LIBOR.. 6
Section 2.7. Taxes and Increased Costs............................................ 6
Section 2.8. Change in Capital Adequacy Requirements.............................. 7
Section 2.9. Funding Indemnity.................................................... 7
Section 2.10. Lending Branch....................................................... 8
Section 2.11. Discretion of Bank as to Manner of Funding........................... 8
Section 3. Fees, Prepayments, Terminations and Applications....................... 8
Section 3.1. Commitment Fee....................................................... 8
Section 3.2. Voluntary Prepayments................................................ 9
Section 3.3. Terminations......................................................... 9
Section 3.4. Extensions of the Revolving Credit Termination Date.................. 9
Section 4. Payments and Applications.............................................. 10
Section 4.1. Place and Application of Payments.................................... 10
Section 4.2. Notations............................................................ 10
Section 5. Definitions; Interpretation............................................ 11
Section 5.1. Definitions.......................................................... 11
Section 5.2. Interpretation....................................................... 19
Section 5.3. Change in Accounting Principles...................................... 20
Section 6. Representations and Warranties......................................... 20
Section 6.1. Organization and Qualification....................................... 20
Section 6.2. Subsidiaries......................................................... 20
Section 6.3. Corporate Authority and Validity of Obligations...................... 21
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Section 6.4. Use of Proceeds; Margin Stock....................................... 21
Section 6.5. Financial Reports................................................... 21
Section 6.6. No Material Adverse Change.......................................... 22
Section 6.7. Good Title.......................................................... 22
Section 6.8. Litigation and Other Controversies.................................. 22
Section 6.9. Taxes............................................................... 22
Section 6.10. Approvals........................................................... 22
Section 6.11. Affiliate Transactions.............................................. 23
Section 6.12. Investment Company; Public Utility Holding Company.................. 23
Section 6.13. ERISA............................................................... 23
Section 6.14. Compliance with Laws................................................ 23
Section 6.15. Other Agreements.................................................... 23
Section 6.16. No Default.......................................................... 24
Section 7. Conditions Precedent.................................................. 24
Section 7.1. All Advances........................................................ 24
Section 7.2. Initial Advance..................................................... 24
Section 8. Covenants............................................................. 25
Section 8.1. Maintenance of Business............................................. 25
Section 8.2. Maintenance of Properties........................................... 26
Section 8.3. Taxes and Assessments............................................... 26
Section 8.4. Insurance........................................................... 26
Section 8.5. Financial Reports................................................... 26
Section 8.6. Inspection.......................................................... 28
Section 8.7. Senior Funded Debt to Capitalization Ratio.......................... 28
Section 8.8. Debt to Earnings Ratio.............................................. 28
Section 8.9. Tangible Net Worth.................................................. 28
Section 8.10. Indebtedness for Borrowed Money..................................... 29
Section 8.11. Liens............................................................... 29
Section 8.12. Advances and Guaranties............................................. 30
Section 8.13. Acquisitions........................................................ 31
Section 8.14. Mergers, Consolidations and Sales................................... 31
Section 8.15. Maintenance of Subsidiaries......................................... 32
Section 8.16. Subordinated Debt................................................... 32
Section 8.17. Prohibition on Prepayment or Modification of Mortgage Indebtedness.. 32
Section 8.18. ERISA............................................................... 33
Section 8.19. Compliance with Laws................................................ 33
Section 8.20. Contracts With Affiliates........................................... 33
Section 8.21. No Changes in Fiscal Year........................................... 33
Section 8.22. Change in the Nature of Business.................................... 33
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Section 9. Events of Default and Remedies........................................ 33
Section 9.1. Events of Default................................................... 33
Section 9.2. Non-Bankruptcy Defaults............................................. 35
Section 9.3. Bankruptcy Defaults................................................. 36
Section 10. Miscellaneous......................................................... 36
Section 10.1. Non-Business Day.................................................... 36
Section 10.2. No Waiver, Cumulative Remedies...................................... 36
Section 10.3. Amendments, Etc..................................................... 36
Section 10.4. Costs and Expenses.................................................. 36
Section 10.5. Participants and Note Assignees..................................... 37
Section 10.6. Documentary Taxes................................................... 37
Section 10.7. Survival of Representations......................................... 38
Section 10.8. Survival of Indemnities............................................. 38
Section 10.9. Notices............................................................. 38
Section 10.10. Construction........................................................ 38
Section 10.11. Headings............................................................ 39
Section 10.12. Severability of Provisions.......................................... 39
Section 10.13. Counterparts........................................................ 39
Section 10.14. Binding Nature, Governing Law, Etc.................................. 39
Section 10.15. Submission to Jurisdiction; Waiver of Jury Trial.................... 39
Signature................................................................................ 40
Exhibit A -- Revolving Credit Note
Exhibit B -- Term Loan Note
Exhibit C -- Compliance Certificate
Exhibit D -- Opinion of Counsel
Schedule 6.8 -- Litigation
</TABLE>
-iii-
<PAGE>
CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois
Ladies and Gentlemen:
The undersigned, Market Facts, Inc., a Delaware corporation (the
"Company"), applies to you (the "Bank") for your commitment, subject to the
terms and conditions hereof and on the basis of the representations and
warranties hereinafter set forth, to extend credit to the Company, all as more
fully hereinafter set forth.
Section 1. The Credits.
Section 1.1. Revolving Credit. Subject to the terms and conditions hereof,
the Bank agrees to extend a revolving credit (the "Revolving Credit") to the
Company which may be availed of by the Company from time to time during the
period from and including the date hereof to but not including the Revolving
Credit Termination Date, at which time the commitment of the Bank to extend
credit under the Revolving Credit shall expire. The Revolving Credit may be
utilized by the Company in the form of Revolving Loans, all as more fully
hereinafter set forth, provided that the aggregate principal amount of Revolving
Loans outstanding at any one time shall not exceed $7,000,000 (the "Revolving
Credit Commitment", as such amount may be reduced pursuant to Sections 1.3 and
3.3 hereof). During the period from and including the date hereof to but not
including the Revolving Credit Termination Date, the Company may use the
Revolving Credit Commitment by borrowing, repaying and reborrowing Revolving
Loans in whole or in part, all in accordance with the terms and conditions of
this Agreement.
Section 1.2. Revolving Loans. Subject to the terms and conditions hereof,
the Revolving Credit may be availed of by the Company in the form of loans
(individually a "Revolving Loan" and collectively the "Revolving Loans"). Each
Revolving Loan shall be in a minimum amount of $100,000 or such greater amount
which is an integral multiple of $10,000; provided, however, that Loans which
bear interest with reference to the Adjusted LIBOR shall be in such greater
amount as is required by Section 2 hereof. The Revolving Loans shall be made
against and evidenced by a single promissory note of the Company in the form
(with appropriate insertions) attached hereto as Exhibit A (the "Revolving
Credit Note") payable to the order of the Bank in the principal amount of
$7,000,000. The Revolving Credit Note shall be dated the date of issuance
thereof, be expressed to bear interest as set forth in Section 2 hereof, and be
expressed to mature on the Revolving Credit Termination Date. Without regard to
the principal amount of the Revolving Credit Note stated on its face, the actual
principal amount at any time outstanding and owing by the Company on account of
the Revolving Credit Note shall be the sum of all Revolving Loans made hereunder
less all payments of principal actually received by the Bank.
<PAGE>
Section 1.3. Conversion of the Revolving Credit into a Term Loan. The
Company shall have the one-time option (to be exercised upon at least five (5)
Business Days' advance written notice (such notice being hereinafter referred to
as the "Conversion Notice") to the Bank) on any day prior to June 30, 1998, to
convert all or any part (but, if in part, then in a minimum amount of $100,000
or such greater amount which is an integral multiple of $10,000) of the
aggregate principal amount of the Revolving Loans then outstanding into a term
loan (the amount so converted being hereinafter referred to as the "Term Loan")
(such conversion being hereinafter referred to as the "Term Loan Conversion"),
provided (i) no more than $4,800,000 of the Revolving Loans may be converted
into the Term Loan, (ii) such option may only be exercised once, (iii) no
Default or Event of Default shall have occurred and be continuing at the time of
the Term Loan Conversion and (iv) the Term Loan Conversion shall be subject to
the other terms and conditions hereof (including without limitation Section 2.9
hereof if any LIBOR Portion is so converted). Such Conversion Notice shall be
irrevocable once given unless the Company expressly conditions its request for
such Term Loan Conversion on the Company's acceptance of the Offered Rate set
pursuant to Section 2.1(d) hereof in response to such request. Concurrently with
such conversion into the Term Loan, (i) the proceeds of the Term Loan shall be
deemed applied to reduce the aggregate principal amount of the Revolving Loans
then outstanding and (ii) the Revolving Credit Commitment (and thus the maximum
principal amount of Revolving Loans available hereunder) shall terminate, in
each case, by an amount equal to the principal amount of Revolving Loans so
converted. The Term Loan shall be evidenced by a separate promissory note of the
Company in the form (with appropriate insertions) attached hereto as Exhibit B
(the "Term Note"), with the Term Note payable to the order of the Bank in the
amount of the Revolving Credit so converted. The Term Note shall be dated the
date of issuance thereof, be expressed to bear interest as set forth in Section
2 hereof, and be expressed to mature in twenty (20) equal consecutive quarter-
annual principal installments, each in an amount equal to 1/20th of the original
principal amount of the Term Loan evidenced thereby on the date of the Term Loan
Conversion, with the first such principal installment due and payable on the
last day of the first calendar quarter to commence after the date of the Term
Loan Conversion and with each subsequent principal installment due and payable
on the last day of each calendar quarter occurring thereafter, with a final
installment in the amount of all principal not sooner paid on the Term Note due
and payable on the last day (the "Term Loan Maturity Date") of the twentieth
(20th) calendar quarter to commence following the date of the Term Loan
Conversion.
Section 1.4. Manner and Disbursement of Loans. The Company shall give
written or telephonic notice to the Bank (which notice shall be irrevocable once
given and, if given by telephone, shall be promptly confirmed in writing) by no
later than 11:00 a.m. (Chicago time) (x) in the case of a Revolving Loan, on the
date on which the Company has requested such Loan be made, and (y) in the case
of the Term Loan, on the date five (5) Business Days before the date on which
the Company has requested such Loan be made. Each such notice shall specify
whether the Loan requested is a Revolving Loan or the Term Loan, the date of the
Loan requested (which must be a Business Day) and the amount of such Loan. Each
Loan shall initially constitute part of the Domestic Rate Portion as well,
except to the extent the Company has otherwise timely elected that such Loan, or
any part thereof, constitute part of a LIBOR Portion or in the case of the Term
Loan, an Offered Rate Portion in each case
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<PAGE>
as provided in Section 2 hereof. The Company agrees that the Bank may rely upon
any written or telephonic notice given by any person the Bank in good faith
believes is an Authorized Representative without the necessity of independent
investigation and, in the event any telephonic notice conflicts with the written
confirmation, such telephonic notice shall govern if the Bank has acted in
reliance thereon. Subject to the provisions of Section 7 hereof, the proceeds of
each Revolving Loan shall be made available to the Company at the principal
office of the Bank in Chicago, Illinois, in immediately available funds.
Section 2. Interest and Change In Circumstances.
Section 2.1. Interest Rate Options.
(a) Subject to all of the terms and conditions of this Section 2,
(i) portions of the principal indebtedness evidenced by each Note (all of the
indebtedness evidenced by a given Note bearing interest at the same rate for the
same period of time being hereinafter referred to as a "Portion") may, at the
option of the Company, bear interest with reference to the Domestic Rate (the
"Domestic Rate Portion") or with reference to an Adjusted LIBOR ("LIBOR
Portions") or in the case of the entirety of the Term Note only, with reference
to an Offered Rate (the "Offered Rate Portion"); and (ii) Portions may be
converted from time to time from one basis to the other; provided, however, that
the Company may not convert the Offered Rate Portion of the Term Note. All of
the indebtedness evidenced by a Note which is not part of a Fixed Rate Portion
shall constitute a single domestic rate portion. All of the indebtedness
evidenced by a note which bears interest with reference to a particular Adjusted
LIBOR for a particular interest period shall constitute a single LIBOR Portion.
If the Term Loan bears interest with reference to an Offered Rate, the entire
Term Loan shall constitute a single Offered Rate Portion. Anything contained
herein to the contrary notwithstanding, the obligation of the Bank to create,
continue or effect by conversion any LIBOR Portion shall be conditioned upon the
fact that at the time no Default or Event of Default shall have occurred and be
continuing. The Company hereby promises to pay interest on each Portion at the
rates and times specified in this Section 2.
(b) Domestic Rate Portion. The Domestic Rate Portion shall bear
interest at the rate per annum equal at all times to the Domestic Rate as in
effect from time to time, provided that if the Domestic Rate Portion or any part
thereof is not paid when due (whether by lapse of time, acceleration or
otherwise) such Portion shall bear interest, whether before or after judgment,
until payment in full thereof at the rate per annum determined by adding 2% to
the interest rate which would otherwise be applicable thereto from time to time.
Interest on the Domestic Rate Portion shall be payable monthly in arrears on the
first day of each calendar month (commencing on the first of such dates after
the date hereof) and at maturity of the applicable Note, and interest after
maturity (whether by lapse of time, acceleration or otherwise) shall be due and
payable upon demand. Any change in the interest rate on the Domestic Rate
Portion resulting from a change in the Domestic Rate shall be effective on the
date of the relevant change in the Domestic Rate.
(c) LIBOR Portions. Each LIBOR Portion shall bear interest for each
Interest Period selected therefor at a rate per annum determined by adding the
Applicable Margin to
-3-
<PAGE>
the Adjusted LIBOR for such Interest Period, provided that if any LIBOR Portion
is not paid when due (whether by lapse of time, acceleration or otherwise) such
Portion shall bear interest, whether before or after judgment, until payment in
full thereof through the end of the Interest Period then applicable thereto at
the rate per annum determined by adding 2% to the interest rate which would
otherwise be applicable thereto, and effective at the end of such Interest
Period such LIBOR Portion shall automatically be converted into and added to the
Domestic Rate Portion of the applicable Note and shall thereafter bear interest
at the interest rate applicable to the Domestic Rate Portion after default.
Interest on each LIBOR Portion shall be due and payable on the last day of each
Interest Period applicable thereto and, with respect to any Interest Period
applicable to a LIBOR Portion in excess of 1 month, on the first day of each
month occurring after the date such Interest Period began and at the end of such
Interest Period, and interest after maturity (whether by lapse of time,
acceleration or otherwise) shall be due and payable upon demand. The Company
shall notify the Bank on or before 11:00 a.m. (Chicago time) on the third
Business Day preceding the end of an Interest Period applicable to a LIBOR
Portion whether such LIBOR Portion is to continue as a LIBOR Portion, in which
event the Company shall notify the Bank of the new Interest Period selected
therefor, and in the event the Company shall fail to so notify the Bank, such
LIBOR Portion shall automatically be converted into and added to the Domestic
Rate Portion of the applicable Note as of and on the last day of such Interest
Period.
(d) Offered Rate Portion Available for the Term Loan. Subject to the
terms and conditions of this Section 2.1(d), the entire (and not less than the
entire) principal amount of Term Loan immediately upon the Term Loan Conversion
may, at the option of the Company, bear interest prior to maturity at a single
fixed rate quoted to the Company by the Bank as hereinafter set forth for the
entire period from the Term Loan Conversion to the Term Loan Maturity Date. The
principal of the Term Loan if the same bears interest with reference to such a
rate shall be herein referred to as an "Offered Rate Portion." Upon receipt of
the Conversion Notice, the Bank shall on the next Business Day in its discretion
quote to the Company a single fixed interest rate at which the Bank would be
willing to make the Term Loan available to the Company for such period. For
purposes hereof, the "Offered Rate" shall be the interest rate quoted by the
Bank to the Company for the Term Loan. The Company acknowledges and agrees the
interest rate quote is given for immediate and irrevocable acceptance, and if
the Company does not so immediately accept the Offered Rate quoted by the Bank
for the full amount requested by the Company to be converted into the Term Loan,
the Offered Rate shall be deemed immediately withdrawn and (x) if the Company
had expressly conditioned its request for such Term Loan Conversion on its
acceptance of such Offered Rate, the Company's request for such Term Loan
Conversion shall be deemed revoked and such Term Loan Conversion shall not occur
(nothing herein contained to preclude the Company making a subsequent request
for a Term Loan Conversion in accordance with the terms hereof), (y) such
Borrowing shall be made available by Domestic Rate Portion or LIBOR Portion if
the Company so requested Portions of such type in accordance with the provisions
hereof or (z) if the Company shall have expressly made no such request, the
Company shall be deemed to have requested that the Term Loan constitute a
Domestic Rate Portion. The Term Loan shall bear interest after maturity
(whether by lapse of time, acceleration or otherwise) until paid in full at (i)
a rate per annum equal to the sum of two percent (2%) plus the Domestic Rate
from time to time
-4-
<PAGE>
in effect, or (ii) if the Term Loan constitutes an Offered Rate Portion, at a
rate per annum equal to the sum of 2% plus the rate of interest in effect
thereon at the time of such maturity until the Term Loan Maturity Date and,
thereafter, at a rate per annum equal to the sum of two percent (2%) plus the
Domestic Rate from time to time in effect. Interest on the Offered Rate Portion
shall be due and payable on the first day of each calendar quarter (commencing
on the first of such dates after the date of the Term Loan Conversion) and at
maturity of the Term Note, and interest after maturity (whether by lapse of
time, acceleration or otherwise) shall be due and payable upon demand.
Section 2.2. Minimum Amounts. Each LIBOR Portion shall be in an amount
equal to $1,000,000 or such greater amount which is an integral multiple of
$100,000. The Offered Rate Portion shall be in an amount equal to $1,000,000 or
such greater amount which is an integral multiple of $100,000.
Section 2.3. Computation of Interest. All interest on the Notes shall be
computed on the basis of a year of 360 days for the actual number of days
elapsed.
Section 2.4. Manner of Rate Selection. The Company shall notify the Bank
by (i) 11:00 a.m. (Chicago time) at least three (3) Business Days prior to the
date upon which the Company requests that any LIBOR Portion be created or that
any part of the Domestic Rate Portion be converted into a LIBOR Portion (each
such notice to specify in each instance the amount thereof and the Interest
Period selected therefor). If any request is made to convert a LIBOR Portion
into the Domestic Rate Portion of the applicable Note, such conversion shall
only be made so as to become effective as of the last day of the Interest Period
applicable thereto. All requests for the creation, continuance and conversion of
Portions under this Agreement shall be irrevocable. Such requests may be written
or oral and the Bank is hereby authorized to honor telephonic requests for
creations, continuances and conversions received by it from any person the Bank
in good faith believes to be an Authorized Representative without the necessity
of independent investigation, the Company hereby indemnifying the Bank from any
liability or loss ensuing from so acting.
Section 2.5. Change of Law. Notwithstanding any other provisions of this
Agreement or any Note, if at any time the Bank shall determine in good faith
that any change in applicable laws, treaties or regulations or in the
interpretation thereof makes it unlawful for the Bank to create or continue to
maintain any Fixed Rate Portion, it shall promptly so notify the Company and the
obligation of the Bank to create, continue or maintain any such Fixed Rate
Portion under this Agreement shall terminate until it is no longer unlawful for
the Bank to create, continue or maintain such Fixed Rate Portion. The Company,
on demand, shall, if the continued maintenance of any such Fixed Rate Portion is
unlawful, thereupon prepay the outstanding principal amount of the affected
Fixed Rate Portion, together with all interest accrued thereon and all other
amounts payable to the Bank with respect thereto under this Agreement; provided,
however, that the Company may elect to convert the principal amount of the
affected Portion into another type of Portion available hereunder, subject to
the terms and conditions of this Agreement.
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Section 2.6. Unavailability of Deposits or Inability to Ascertain Adjusted
LIBOR. Notwithstanding any other provision of this Agreement or any Note, if
prior to the commencement of any Interest Period, the Bank shall determine in
good faith that deposits in the amount of any LIBOR Portion scheduled to be
outstanding during such Interest Period are not readily available to the Bank in
the relevant market or, by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining Adjusted
LIBOR, then the Bank shall promptly give notice thereof to the Company and the
obligations of the Bank to create, continue or effect by conversion any such
LIBOR Portion in such amount and for such Interest Period shall terminate until
deposits in such amount and for the Interest Period selected by the Company
shall again be readily available in the relevant market and adequate and
reasonable means exist for ascertaining Adjusted LIBOR.
Section 2.7. Taxes and Increased Costs. With respect to any Fixed Rate
Portion, if the Bank shall determine in good faith that any change in any
applicable law, treaty, regulation or guideline (including, without limitation,
Regulation D of the Board of Governors of the Federal Reserve System) or any new
law, treaty, regulation or guideline, or any interpretation of any of the
foregoing by any governmental authority charged with the administration thereof
or any central bank or other fiscal, monetary or other authority having
jurisdiction over the Bank or its lending branch or the Fixed Rate Portions
contemplated by this Agreement (whether or not having the force of law), shall:
(i) impose, increase, or deem applicable any reserve, special
deposit or similar requirement against assets held by, or deposits in or
for the account of, or loans by, or any other acquisition of funds or
disbursements by, the Bank, except in the case of any LIBOR Portion, to the
extent already accounted for in computing the interest rate applicable to
such LIBOR Portion;
(ii) subject the Bank, any Fixed Rate Portion or any Note to the
extent it evidences such a Portion to any tax (including, without
limitation, any United States interest equalization tax or similar tax
however named applicable to the acquisition or holding of debt obligations
and any interest or penalties with respect thereto), duty, charge, stamp
tax, fee, deduction or withholding in respect of this Agreement, any Fixed
Rate Portion or any Note to the extent it evidences such a Portion, except
such taxes as may be measured by the overall net income or gross receipts
of the Bank or its lending branches and imposed by the jurisdiction, or any
political subdivision or taxing authority thereof, in which the Bank's
principal executive office or its lending branch is located;
(iii) change the basis of taxation of payments of principal and
interest due from the Company to the Bank hereunder or under any Note to
the extent it evidences any Fixed Rate Portion (other than by a change in
taxation of the overall net income or gross receipts of the Bank); or
(iv) impose on the Bank any penalty with respect to the foregoing or
any other condition regarding this Agreement, any Fixed Rate Portion, or
its disbursement, or any Note to the extent it evidences any Fixed Rate
Portion;
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and the Bank shall determine in good faith that the result of any of the
foregoing is to increase the cost (whether by incurring a cost or adding to a
cost) to the Bank of creating or maintaining any Fixed Rate Portion hereunder or
to reduce the amount of principal or interest received or receivable by the Bank
(without benefit of, or credit for, any prorations, exemption, credits or other
offsets available under any such laws, treaties, regulations, guidelines or
interpretations thereof), then the Company shall pay on demand to the Bank from
time to time as specified by the Bank such additional amounts as the Bank shall
reasonably determine are sufficient to compensate and indemnify it for such
increased cost or reduced amount. If the Bank makes such a claim for
compensation, it shall provide to the Company a certificate setting forth the
computation of the increased cost or reduced amount as a result of any event
mentioned herein in reasonable detail and such certificate shall be conclusive
if reasonably determined in the absence of manifest error.
Section 2.8. Change in Capital Adequacy Requirements. If the Bank shall
determine in good faith that the adoption after the date hereof of any
applicable law, rule or regulation regarding capital adequacy, or any change in
any existing law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by the Bank (or any of its branches) with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on the Bank's capital as a consequence of its obligations
hereunder or for the credit which is the subject matter hereof to a level below
that which the Bank could have achieved but for such adoption, change or
compliance (taking into consideration the Bank's policies with respect to
liquidity and capital adequacy) by an amount deemed by the Bank to be material,
then from time to time, within fifteen (15) days after demand by the Bank, the
Company shall pay to the Bank such additional amount or amounts reasonably
determined by the Bank as will compensate the Bank for such reduction. If the
Bank makes such a claim for compensation, it shall provide to the Company a
certificate setting forth the computation of the compensation as a result of any
event mentioned herein in reasonable detail and such certificate shall be
conclusive if reasonably determined in the absence of manifest error.
Section 2.9. Funding Indemnity. (a) Generally. In the event the Bank
shall incur any loss, cost or expense (including, without limitation, any loss
(including loss of profit), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired or contracted to
be acquired by the Bank to fund or maintain any Fixed Rate Portion or the
relending or reinvesting of such deposits or other funds or amounts paid or
prepaid to the Bank) as a result of:
(i) any payment of a Fixed Rate Portion on a date other than the
last day of the then applicable Interest Period for any reason, whether
before or after default, and whether or not such payment is required by any
provision of this Agreement; or
(ii) any failure by the Company to create, borrow, continue or
effect by conversion a Fixed Rate Portion on the date specified in a notice
given pursuant to this Agreement;
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then upon the demand of the Bank, the Company shall pay to the Bank such amount
as will reimburse the Bank for such loss, cost or expense. If the Bank requests
such a reimbursement, it shall provide to the Company a certificate setting
forth the computation of the loss, cost or expense giving rise to the request
for reimbursement in reasonable detail and such certificate shall be conclusive
if reasonably determined in the absence of manifest error.
(b) Offered Rate Portion. If the Company prepays any principal amount of
the Offered Rate Portion before its scheduled due date (whether as the result of
an acceleration, voluntary prepayment or otherwise), the Bank may elect, at its
option, the remedy specified in subsection (a) above or may demand payment of,
and in such event the Company shall pay to the Bank, a funding indemnity equal
to the cost to the Bank of then acquiring an interest rate swap agreement (or an
equivalent instrument or instruments) with another interest rate swap dealer of
the highest credit standing in a notional principal amount equal to the amount
of such prepayment (including any scheduled amortization of such amount) to the
scheduled due date of such prepaid principal amount under which the Bank would
pay quarter-annually a floating rate of interest based upon three month LIBOR
and such other dealer would pay to such Bank on the regularly scheduled interest
payment dates for the Offered Rate Portion a fixed rate of interest equal to the
Offered Rate on the Offered Rate Portion. If a Bank requests such a payment, it
shall provide the Company with a certificate setting forth in reasonable detail
the computation of the costs giving rise to the request for such payment and
such certificate shall be conclusive if reasonably determined in the absence of
manifest error.
Section 2.10. Lending Branch. The Bank may, at its option, elect to make,
fund or maintain Portions of the Loans hereunder at such of its branches or
offices as the Bank may from time to time elect. To the extent reasonably
possible, the Bank shall designate an alternate branch or funding office with
respect to the LIBOR Portions to reduce any liability of the Company to the Bank
under Section 2.7 hereof or to avoid the unavailability of an interest rate
option under Section 2.6 hereof, so long as such designation is not otherwise
disadvantageous to the Bank.
Section 2.11. Discretion of Bank as to Manner of Funding. Notwithstanding
any provision of this Agreement to the contrary, the Bank shall be entitled to
fund and maintain its funding of all or any part of any Note in any manner it
sees fit, it being understood, however, that for the purposes of this Agreement
all determinations hereunder (including, without limitation, determinations
under Sections 2.6, 2.7 and 2.9 hereof) shall be made as if the Bank had
actually funded and maintained each LIBOR Portion during each Interest Period
applicable thereto through the purchase of deposits in the relevant market in
the amount of such LIBOR Portion, having a maturity corresponding to such
Interest Period, and bearing an interest rate equal to the LIBOR for such
Interest Period.
SECTION 3. FEES, PREPAYMENTS, TERMINATIONS AND APPLICATIONS.
Section 3.1. Commitment Fee. For the period from and including the date
hereof to but not including the Revolving Credit Termination Date, the Company
shall pay to the Bank a commitment fee at the rate of 1/4 of 1% per annum
(computed on the basis of a year of
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360 days for the actual number of days elapsed) on the average daily unused
portion of the Revolving Credit Commitment. Such commitment fee shall be payable
quarterly in arrears on the first day of each April, July, October and January
in each year (commencing July 1, 1996) and on the Revolving Credit Termination
Date.
Section 3.2. Voluntary Prepayments.
(a) Domestic Rate Portion. The Company shall have the privilege of
prepaying without premium or penalty and in whole or in part (but if in part,
then in an amount not less than $10,000) the Domestic Rate Portion of any Note
at any time upon notice to the Bank prior to 11:00 a.m. (Chicago time) on the
date fixed for prepayment.
(b) LIBOR Portions. The Company may prepay any LIBOR Portion of any
Note, in whole or in part (but if in part, then in an amount not less than
$100,000 or such greater amount which is an integral multiple of $10,000) any
time upon three (3) Business Days' prior notice to the Bank (which notice shall
be irrevocable once given, must be received by the Bank no later than 11:00 a.m.
(Chicago time) on the third Business Day preceding the date of such prepayment,
and shall specify the principal amount to be repaid). Any such prepayment shall
be effected by payment of the principal amount to be prepaid and any funding
indemnity required pursuant to Section 2.9 hereof.
(c) Offered Rate Portion. The Company may not voluntarily prepay the
Offered Rate Portion.
Section 3.3. Terminations. The Company shall have the right at any time
and from time to time, upon three (3) Business Days' prior notice to the Bank,
to terminate without premium or penalty and in whole or in part (but if in part,
then in an amount not less than $100,000 or such greater amount which is an
integral multiple of $10,000) the Revolving Credit Commitment, provided that the
Revolving Credit Commitment may not be reduced to an amount less than the
aggregate principal amount of the Revolving Loans then outstanding. Any
termination of the Revolving Credit Commitment pursuant to this Section may not
be reinstated.
Section 3.4. Extensions of the Revolving Credit Termination Date. The
Company may advise the Bank in writing of the Company's desire to extend the
Revolving Credit Termination Date for an additional year, provided (i) such
request is made not later than 60 days prior to such Revolving Credit
Termination Date, (ii) not more than one such request for the extension of the
Revolving Credit Termination Date may be made in any one calendar year and (iii)
in no event shall the Revolving Credit Termination Date be extended beyond
June 30, 2003. In the event that the Bank is agreeable to such extension, it
shall so notify the Company in writing (it being understood that the Bank may
accept or decline such a request in its sole discretion and on such terms as it
may elect) and the Company and the Bank shall enter into such documents as the
Bank may deem necessary or appropriate to reflect such extension, and all
reasonable costs and expenses incurred by Bank in connection therewith
(including attorneys' fees) shall be paid by the Company. The Bank shall be
deemed to have refused to grant the requested extension in the event it shall
fail to so notify
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the Company of the Bank's agreement to such an extension within 30 days after
receipt of such request.
SECTION 4. PAYMENTS AND APPLICATIONS.
Section 4.1. Place and Application of Payments. All payments of
principal, interest, fees and all other Obligations payable hereunder and under
the other Loan Documents shall be made to the Bank at its office at 111 West
Monroe Street, Chicago, Illinois (or at such other place as the Bank may
specify) no later than 11:00 a.m. (Chicago time) on the date any such payment is
due and payable. Payments received by the Bank after 11:00 a.m. (Chicago time)
shall be deemed received as of the opening of business on the next Business Day.
All such payments shall be made in lawful money of the United States of America,
in immediately available funds at the place of payment, without set-off or
counterclaim and without reduction for, and free from, any and all present or
future taxes, levies, imposts, duties, fees, charges, deductions, withholdings,
restrictions and conditions of any nature imposed by any government or any
political subdivision or taxing authority thereof (but excluding any taxes
imposed on or measured by the net income of the Bank). Unless the Company
otherwise directs, principal payments on a Note shall be applied first to the
Domestic Rate Portion of such Note until payment in full thereof, with any
balance applied to the LIBOR Portions of such Note in the order in which their
Interest Periods expire. All payments on any Note (whether voluntary or
required) shall be accompanied by any amount due the Bank under Section 2.9
hereof, but no acceptance of such a payment without requiring payment of amounts
due under Section 2.9 shall preclude a later demand by the Bank for any amount
due it under Section 2.9 in respect of such payment. Any amount paid or prepaid
on the Revolving Credit Note may, subject to all of the terms and conditions
hereof, be borrowed, repaid and borrowed again. No amount paid or prepaid on the
Term Note may be reborrowed. All prepayments on the Term Note shall be applied
to the several installments thereof in the order of their maturity.
Section 4.2. Notations. Each Loan made against a Note, the status of all
amounts evidenced by a Note as constituting part of the Domestic Rate Portion or
a Fixed Rate Portion, and, in the case of any LIBOR Portion, the rates of
interest and Interest Periods applicable to such Portion and, in the case of
the Offered Rate Portion, the Offered Rate applicable thereto, in each case
shall be recorded by the Bank on its books and records or, at its option in any
instance, endorsed on a schedule to the applicable Note and the unpaid
principal balance and status, rates and Interest Periods so recorded or endorsed
by the Bank shall be prima facie evidence in any court or other proceeding
brought to enforce such Note of the principal amount remaining unpaid thereon,
the status of the Loan or Loans evidenced thereby and the interest rates and
interest Periods applicable thereto; provided that the failure of the Bank to
record any of the foregoing shall not limit or otherwise affect the obligation
of the Company to repay the principal amount of each Note together with accrued
Interest thereon. Prior to any negotiation of a Note, the Bank shall record on a
schedule thereto the status of all amounts evidenced thereby as constituting
part of the Domestic Rate Portion or a Fixed Rate Portion and, in the case of
any LIBOR Portion, the rates of interest and the Interest Periods applicable
thereto and, in the case of the Offered Rate Portion, the Offered Rate
applicable thereto.
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SECTION 5. DEFINITIONS; INTERPRETATION.
Section 5.1. Definitions. The following terms when used herein shall have
the following meanings:
"Acquisition" means (i) the acquisition of all or any substantial part of
the Property or business of any other firm or corporation or (ii) any
acquisition of a majority of the common stock or other equity interest in any
other firm or corporation.
"Adjusted LIBOR" means a rate per annum determined by the Bank in
accordance with the following formula:
Adjusted LIBOR = LIBOR
-----------------------
100%-Reserve Percentage
"Reserve Percentage" means, for the purpose of computing Adjusted LIBOR, the
maximum rate of all reserve requirements (including, without limitation, any
marginal, emergency, supplemental or other special reserves) imposed by the
Board of Governors of the Federal Reserve System (or any successor) under
Regulation D on Eurocurrency liabilities (as such term is defined in Regulation
D) for the applicable Interest Period as of the first day of such Interest
Period, but subject to any amendments to such reserve requirement by such Board
or its successor, and taking into account any transitional adjustments thereto
becoming effective during such Interest Period. For purposes of this
definition, LIBOR Portions shall be deemed to be Eurocurrency liabilities as
defined in Regulation D without benefit of or credit for prorations, exemptions
or offsets under Regulation D. "LIBOR" means, for each Interest Period, (a) the
LIBOR Index Rate for such Interest Period, if such rate is available, and (b) if
the LIBOR Index Rate cannot be determined, the arithmetic average of the rates
of interest per annum (rounded upward, if necessary, to the nearest 1/100th of
1%) at which deposits in U.S. Dollars in immediately available funds are offered
to the Bank at 11:00 a.m. (London, England time) 2 Business Days before the
beginning of such Interest Period by 3 or more major banks in the interbank
eurodollar market selected by the Bank for a period equal to such Interest
Period and in an amount equal or comparable to the applicable LIBOR Portion
scheduled to be outstanding from the Bank during such Interest Period. "LIBOR
Index Rate" means, for any Interest Period, the rate per annum (rounded upwards,
if necessary, to the next higher one hundred-thousandth of a percentage point)
for deposits in U.S. Dollars for a period equal to such Interest Period which
appears on the Telerate Page 3750 as of 11:00 a.m. (London, England time) on the
date 2 Business Days before the commencement of such Interest Period. "Telerate
Page 3750" means the display designated as "Page 3750" on the Telerate Service
(or such other page as may replace Page 3750 on that service or such other
service as may be nominated by the British Bankers" Association as the
information vendor for the purpose of displaying British Bankers Association
Interest Settlement Rates for U.S. Dollar deposits). Each determination of
LIBOR made by the Bank shall be conclusive and binding absent manifest error.
"Affiliate" means any Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, another Person.
A Person shall be deemed to
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control another Person for the purposes of this definition if such Person
possesses, directly or indirectly, the power to direct, or cause the direction
of, the management and policies of the other Person, whether through the
ownership of voting securities, common directors, trustees or officers, by
contract or otherwise; provided that, in any event for purposes of this
definition, any Person that owns, directly or indirectly, 10% or more of the
securities having the ordinary voting power for the election of directors or
governing body of a corporation or 10% or more of the partnership or other
ownership interests of any other Person (other than as a limited partner of such
other Person) will be deemed to control such corporation or other Person.
Notwithstanding anything herein to the contrary, any employee defined
contribution plan sponsored by the Company shall in no event be deemed an
Affiliate of the Company
"Agreement" means this Credit Agreement, as the same may be amended,
modified or restated from time to time in accordance with the terms hereof.
The "Applicable Margin" with respect to the LIBOR Portions of the Loans,
shall mean the rate specified for such Obligations below, subject to monthly
adjustment as hereinafter provided:
When Following Applicable
Status Exists For Margin For
any LIBOR Portions
Determination Of Each Note
Date Is:
Level I Status 0.75%
Level II Status 1.00%
Level III Status 1.25%
Level IV Status 1.50%
provided, however, that all of the foregoing is subject to the following:
(i) the initial Applicable Margin in effect through the first
Determination Date shall be the Applicable Margin for Level IV Status;
(ii) on or before the date that is five (5) Business Days after the
latest date by which the Company is required to deliver pursuant to Section
8.5 hereof a compliance certificate to the Bank for a given quarterly
accounting period (such date that is five (5) Business Days after the
latest date by which the Company is required to deliver such compliance
certificate to the Bank being herein referred to as the "Determination
Date"), the Bank shall determine whether Level I Status, Level II Status,
Level III Status or Level IV Status exists as of the close of the
applicable quarterly accounting period, based upon the compliance
certificate and financial statements delivered to the Bank under Section
8.5 hereof for such accounting period, and shall promptly notify
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the Company of such determination and of any change in the Applicable
Margin resulting therefrom; and
(iii) any change in the Applicable Margin shall be effective from the
Determination Date for the relevant quarterly accounting period, with such
new Applicable Margin to continue in effect until the next Determination
Date in accordance with the foregoing. If the Company has not delivered a
compliance certificate by the date such compliance certificate is required
to be delivered under Section 8.5 hereof, until a compliance certificate is
delivered before the next Determination Date, the Applicable Margin shall
be the Applicable Margin for Level IV Status. If the Company subsequently
delivers a compliance certificate before the next Determination Date, the
Applicable Margin established by such compliance certificate shall take
effect from the date of delivery until next Determination Date in
accordance with the foregoing.
"Authorized Representative" means those persons shown on the list of
officers provided by the Company pursuant to Section 7.2(a) hereof or on any
update of any such list provided by the Company to the Bank, or any further or
different officer of the Company so named by any Authorized Representative of
the Company in a written notice to the Bank.
"Bank" is defined in the introductory paragraph hereof.
"Business Day" means any day other than a Saturday or Sunday on which the
Bank is not authorized or required to close in Chicago, Illinois and, when used
with respect to LIBOR Portions, a day on which the Bank is also dealing in
United States Dollar deposits in London, England and Nassau, Bahamas.
"Capital Expenditures" for any period shall mean capital expenditures of
the Company and its Subsidiaries during such period as defined and classified in
accordance with GAAP.
"Capital Lease" means any lease of Property which in accordance with GAAP
is required to be capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligation" means the amount of the liability shown on
the balance sheet of any Person in respect of a Capital Lease determined in
accordance with GAAP.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.
"Company" is defined in the introductory paragraph hereof.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Company or any of its Subsidiaries, are treated as a
single employer under Section 414 of the Code.
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"Debt to Earnings Ratio" means, as of any time the same is to be
determined, the ratio of (x) Funded Debt then outstanding to (y) EBITDA for the
most recently completed four fiscal quarters of the Company.
"Default" means any event or condition the occurrence of which would, with
the passage of time or the giving of notice, or both, constitute an Event of
Default.
"Domestic Rate" means, for any day, the greater of (i) the rate of interest
announced by the Bank from time to time as its prime commercial rate, as in
effect on such day (it being understood and agreed that such rate may not be the
Bank's best or lowest rate); and (ii) the rate determined by the Bank to be the
average (rounded upwards, if necessary, to the next higher 1/100 of 1%) of the
rates per annum quoted to the Bank at approximately 10:00 a.m. (Chicago time)
(or as soon thereafter as is practicable) on such day (or, if such day is not a
Business Day, on the immediately preceding Business Day) by two or more Federal
funds brokers selected by the Bank for the sale to the Bank at face value of
Federal funds in an amount equal or comparable to the principal amount owed to
the Bank for which such rate is being determined.
"Domestic Rate Portion" is defined in Section 2.1(a) hereof.
"EBITDA" means, with reference to any period, Net Income for such period
plus all amounts deducted in arriving at such Net Income amount in respect of
(i) Interest Expense for such period, plus (ii) federal, state and local income
taxes for such period, plus (iii) all amounts properly charged for depreciation
of fixed assets and amortization of intangible assets during such period on the
books of the Company and its Subsidiaries.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute thereto.
"Event of Default" means any event or condition identified as such in
Section 9.1 hereof.
"Fixed Rate Portions" means the LIBOR Portions and the Offered Rate
Portion, unless the context in which such term is used shall otherwise require.
"Funded Debt" means, at any time the same is to be determined, the
aggregate of all Indebtedness for Borrowed Money of the Company and its
Subsidiaries at such time, plus all Indebtedness for Borrowed Money of any other
Person which is directly or indirectly guaranteed by the Company or any of its
Subsidiaries or which the Company or any of its Subsidiaries has agreed
(contingently or otherwise) to purchase or otherwise acquire or in respect of
which the Company or any of its Subsidiaries has otherwise assured a creditor
against loss.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied by the Company and its Subsidiaries on a basis consistent
with the preparation
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of the Company's most recent financial statements furnished to the Bank pursuant
to Section 6.4 hereof.
"Indebtedness for Borrowed Money" means for any Person (without
duplication) (i) all indebtedness created, assumed or incurred in any manner by
such Person representing money borrowed (including by the issuance of debt
securities), (ii) all indebtedness for the deferred purchase price of property
or services (other than trade accounts payable arising in the ordinary course of
business), (iii) all indebtedness secured by any Lien upon Property of such
Person, whether or not such Person has assumed or become liable for the payment
of such indebtedness, (iv) all Capitalized Lease Obligations of such Person and
(v) all obligations of such Person on or with respect to letters of credit,
bankers' acceptances and other extensions of credit whether or not representing
obligations for borrowed money.
"Interest Expense" means, with reference to any period, the sum of all
interest charges (including imputed interest charges with respect to Capitalized
Lease Obligations and all amortization of debt discount and expense) of the
Company and its Subsidiaries for such period determined in accordance with GAAP.
"Interest Period" means, with respect to any LIBOR Portion, the period
commencing on, as the case may be, the creation, continuation or conversion date
with respect to such LIBOR Portion and ending 1, 2, 3, 4 or 6 months thereafter
as selected by the Company in its notice as provided herein; provided that all
of the foregoing provisions relating to Interest Periods are subject to the
following:
(i) if any Interest Period would otherwise end on a day which is
not a Business Day, that Interest Period shall be extended to the next
succeeding Business Day, unless in the case of an Interest Period for a
LIBOR Portion the result of such extension would be to carry such Interest
Period into another calendar month in which event such Interest Period
shall end on the immediately preceding Business Day;
(ii) no Interest Period may extend beyond the final maturity date of
the relevant Note;
(iii) the interest rate to be applicable to each Portion for each
Interest Period shall apply from and including the first day of such
Interest Period to but excluding the last day thereof; and
(iv) no Interest Period may be selected if after giving effect
thereto the Company will be unable to make a principal payment scheduled to
be made on the relevant Note during such Interest Period without paying
part of a LIBOR Portion on a date other than the last day of the Interest
Period applicable thereto.
For purposes of determining an Interest Period, a month means a period starting
on one day in a calendar month and ending on a numerically corresponding day in
the next calendar month, provided, however, if an Interest Period begins on the
last day of a month or if there
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is no numerically corresponding day in the month in which an Interest Period is
to end, then such Interest Period shall end on the last Business Day of such
month.
"Investment Agreement" means that certain Investment Agreement dated as of
June 6, 1996 by and between the Company, MFI Associates and MFI Investors.
"Level I Status" means for any Determination Date, that as of the close of
the accounting period with reference to which such Determination Date was set,
the Debt to Earnings Ratio is less than 1.00 to 1.00.
"Level II Status" means for any Determination Date, that as of the close of
the accounting period with reference to which such Determination Date was set,
the Debt to Earnings Ratio is less than 1.75 to 1.00 but greater than or equal
to 1.00 to 1.00.
"Level III Status" means for any Determination Date, that as of the close
of the accounting period with reference to which such Determination Date was
set, the Debt to Earnings Ratio is less than 2.25 to 1.00 but greater than or
equal to 1.75 to 1.00.
"Level IV Status" means for any Determination Date, that as of the close of
the accounting period with reference to which such Determination Date was set,
the Debt to Earnings Ratio is greater than or equal to 2.25 to 1.00.
"LIBOR Portions" is defined in Section 2.1(a) hereof.
"Lien" means any mortgage, lien, security interest, pledge, charge or
encumbrance of any kind in respect of any Property, including the interests of a
vendor or lessor under any conditional sale, Capital Lease or other title
retention arrangement.
"Loan Documents" means this Agreement, the Notes and each other instrument
or document to be delivered hereunder or thereunder or otherwise in connection
therewith.
"Loans" means the Term Loan and the Revolving Loans, unless the context in
which such term is used shall otherwise require.
"MFI Associates" means MFI Associates, Inc., a Delaware corporation.
"MFI Investors" means MFI Investors L.P., a Delaware limited partnership.
"MFI Investors Debt" means the indebtedness evidenced by that certain
Convertible Subordinated Promissory Note of the Company dated June 6, 1996
payable to the order of MFI Investors in the face principal amount of
$8,250,000.
"Net Income" means, with reference to any period, the net income (or net
loss) of the Company and its Subsidiaries for such period as computed on a
consolidated basis in accordance with GAAP, and, without limiting the foregoing,
after deduction from gross income of all expenses and reserves, including
reserves for all taxes on or measured by
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income, but excluding any extraordinary profits and also excluding any taxes on
such profits.
"Notes" means the Revolving Credit Note and the Term Note, unless the
context in which such term is used shall otherwise require.
"Obligations" means all obligations of the Company to pay principal and
interest on the Loans, all fees and charges payable hereunder, and all other
payment obligations of the Company arising under or in relation to any Loan
Document, in each case whether now existing or hereafter arising, due or to
become due, direct or indirect, absolute or contingent, and howsoever evidenced,
held or acquired.
"Offered Rate" is defined in Section 2.1 hereof.
"Offered Rate Portion" is defined in Section 2.1 hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to any or all of its functions under ERISA.
"Permitted Refinancing" means indebtedness that refunds, refinances or
extends any Indebtedness for Borrowed Money of the Company permitted to be
incurred by the Company pursuant to Section 8.10(d) of this Agreement (the
"Mortgage Debt"), but only to the extent that (i) the Permitted Refinancing is
scheduled to mature no earlier than the Mortgage Debt being refunded, refinanced
or extended, (ii) the Permitted Refinancing has a weighted average life to
maturity at the time such Permitted Refinancing is incurred that is equal to or
greater than the weighted average life to maturity of the portion of the
Mortgage Debt being refunded, refinanced or extended, (iii) such Permitted
Refinancing is in an aggregate principal amount that is equal to or less than
the greater of (a) the orderly liquidation value as per a current third party
appraisal of the real estate securing the Mortgage Debt or (b) the sum of
(1) the aggregate principal amount then outstanding under the Mortgage Debt
being refunded, refinanced or extended, (2) the amount of accrued and unpaid
interest, if any, on the Mortgage Debt being refunded, refinanced or extended
and (3) the amount of customary fees, expenses and costs related to the
incurrence of such Permitted Refinancing, and (iv) the Permitted Refinancing is
governed by terms and conditions which on the whole are no more burdensome in
any material respect on the Company and its Subsidiaries than the terms and
conditions originally applicable to the Mortgage Debt being refunded, refinanced
or extended.
"Person" means an individual, partnership, corporation, association, trust,
unincorporated organization or any other entity or organization, including a
government or agency or political subdivision thereof.
"Plan" means any employee pension benefit plan covered by Title IV of ERISA
or subject to the minimum funding standards under Section 412 of the Code that
either (i) is maintained by a member of the Controlled Group for employees of a
member of the Controlled Group or (ii) is maintained pursuant to a collective
bargaining agreement or any
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other arrangement under which more than one employer makes contributions and to
which a member of the Controlled Group is then making or accruing an obligation
to make contributions or has within the preceding five plan years made
contributions.
"Portion" is defined in Section 2.1(a) hereof.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Revolving Credit" is defined in Section 1.1 hereof.
"Revolving Credit Commitment" is defined in Section 1.1 hereof.
"Revolving Credit Termination Date" means June 30, 1998, or such later date
to which the Revolving Credit Termination Date is extended pursuant to
Section 3.4 hereof, or such earlier date on which the Revolving Credit
Commitment is terminated in whole pursuant to Section 3.3, 9.2 or 9.3 hereof.
"Revolving Loan" is defined in Section 1.2 hereof.
"SEC" means the Securities and Exchange Commission.
"Senior Funded Debt" means, at any time the same is to be determined,
Funded Debt owing to the Bank.
"Subordinated Debt" means any Indebtedness for Borrowed Money which is
subordinated in right of payment to the prior payment of the Loans and the other
Obligations, pursuant to subordination provisions approved in writing by the
Bank and is otherwise pursuant to documentation, is an amount, and containing
interest rates, payment terms, maturities, amortization schedules, covenants,
defaults, remedies and other material terms in form and substance satisfactory
to the Bank. The Bank acknowledges and agrees that the MFI Investors Debt on
its current terms and conditions constitutes Subordinated Debt.
"Subsidiary" means any corporation or other Person more than 50% of the
outstanding ordinary voting shares or other equity interests of which is at the
time directly or indirectly owned by the Company, by one or more of its
Subsidiaries, or by the Company and one or more of its Subsidiaries.
"Tangible Net Worth" means, at any time the same is to be determined, the
total shareholders' equity (including capital stock, additional paid-in capital
and retained earnings after deducting treasury stock, but excluding minority
interests in Subsidiaries) which would appear on the balance sheet of the
Company and its Subsidiaries determined on a consolidated basis in accordance
with GAAP, less the sum of (i) the aggregate book value of all assets which
would be classified as intangible assets under GAAP, including, without
limitation, goodwill, patents, trademarks, trade names, copyrights, franchises
and deferred
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charges (including, without limitation, unamortized debt discount and expense,
organization costs and deferred research and development expense) and similar
assets and (ii) the write-up of assets above cost.
"Tender Offer" means the Company's offer to repurchase of up to 900,000
shares of its common capital stock at a price not in excess of $14.50 per share
pursuant to the Tender Offer Materials.
"Tender Offer Materials" means the Issuer Tender Offer Statement on
Schedule 13E-4 to be filed by the Company with the SEC on or about June 11,
1996.
"Term Loan" is defined in Section 1.4 hereof.
"Term Loan Maturity Date" is defined in Section 1.3 hereof.
"Total Liabilities" means, at any time the same is to be determined, the
aggregate of all indebtedness, obligations, liabilities, reserves and any other
items which would be listed as a liability on a balance sheet of the Company and
its Subsidiaries determined on a consolidated basis in accordance with GAAP.
"Unfunded Vested Liabilities" means, for any Plan at any time, the amount
(if any) by which the present value of all vested nonforfeitable accrued
benefits under such Plan exceeds the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess represents a
potential liability of a member of the Controlled Group to the PBGC or the Plan
under Title IV of ERISA.
"Welfare Plan" means a "welfare plan" as defined in Section 3(1) of ERISA.
"Wholly-Owned Subsidiary" means a Subsidiary of which all of the issued and
outstanding shares of capital stock (other than directors' qualifying shares as
required by law) or other equity interests are owned by the Company and/or one
or more Wholly-Owned Subsidiaries within the meaning of this definition.
Section 5.2. Interpretation. The foregoing definitions are equally
applicable to both the singular and plural forms of the terms defined. The words
"hereof", "herein", and "hereunder" and words of like import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. All references to time of day herein are references
to Chicago, Illinois time unless otherwise specifically provided. Where the
character or amount of any asset or liability or item of income or expense is
required to be determined or any consolidation or other accounting computation
is required to be made for the purposes of this Agreement, it shall be done in
accordance with GAAP except where such principles are inconsistent with the
specific provisions of this Agreement. The foregoing to the contrary
notwithstanding, the Company may submit financial reports under Section 8.5
hereof prepared on the basis of generally accepted accounting principles as in
effect on the date thereof and for the periods covered thereby if it
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accompanies each such financial report with a statement in reasonable detail
reconciling the impact of any changes in generally accepting accounting
principles on such financial reports.
Section 5.3. Change in Accounting Principles. If, after the date of this
Agreement, there shall occur any change in generally accepted accounting
principles from those used in the preparation of the financial statements
referred to in Section 6.5 hereof and such change shall result in a change in
the method of calculation of any financial covenants, standard or term found in
this Agreement, either the Company or the Bank may by notice to the Bank and the
Company, respectively, require that the Bank and the Company negotiate in good
faith to amend such covenant, standard and term so as equitably to reflect such
change in accounting principles, with the desired result being that the criteria
for evaluating the financial condition of the Company and its Subsidiaries shall
be the same as if such change had not been made; provided, however, that until
such time as the parties agree upon such amendment, such covenant, standard and
term shall be construed and calculated as though no such change had taken place.
No delay by the Company or the Bank in requiring such negotiation shall limit
their right to so require such a negotiation at any time after such a change in
accounting principles. Without limiting the generality of the foregoing, the
Company shall neither be deemed to be in compliance with any financial covenant
hereunder nor out of compliance with any financial covenant hereunder if such
state of compliance or noncompliance, as the case may be, would not exist but
for the occurrence of a change in accounting principles after the date hereof.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to the Bank as follows:
Section 6.1. Organization and Qualification. The Company is duly
organized, validly existing and in good standing as a corporation under the laws
of the State of Delaware, has full and adequate corporate power to own its
Property and conduct its business as now conducted, and is duly licensed or
qualified and in good standing in each jurisdiction in which the nature of the
business conducted by it or the nature of the Property owned or leased by it
requires such licensing or qualifying, except where the failure to be so
qualified or in good standing, in the aggregate, would have a material adverse
effect on the business or financial condition of the Company.
Section 6.2. Subsidiaries. Each Subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated or organized, as the case may be, has full and adequate power to
own its Property and conduct its business as now conducted, and is duly licensed
or qualified and in good standing in each jurisdiction in which the nature of
the business conducted by it or the nature of the Property owned or leased by it
required such licensing or qualifying, except where the failure to be so
qualified or in good standing, in the aggregate, would not have a material
adverse effect on the business or financial condition of such Subsidiary.
Schedule 6.2 hereto identifies each Subsidiary, the Jurisdiction of its
incorporation or organization, as the case may be, the percentage of issued and
outstanding shares of each class of its capital stock or other equity interests
owned by the Company and the Subsidiaries and, if such percentage is not 100%
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(excluding directors' qualifying shares as required by law), a description of
each class of its authorized capital stock and other equity interests and the
number of shares of each class issued and outstanding. All of the outstanding
shares of capital stock and other equity interests of each Subsidiary are
validly issued and outstanding and fully paid and nonassessable and all such
shares and other equity interests indicated on Schedule 6.2 as owned by the
Company or a Subsidiary are owned, beneficially and of record, by the Company or
such Subsidiary free and clear of all Liens. There are no outstanding
commitments or other obligations of any Subsidiary to issue, and no options,
warrants or other rights of any Person to acquire, any shares of any class of
capital stock or other equity interests of any Subsidiary.
Section 6.3. Corporate Authority and Validity of Obligations. The Company
has full right and authority to enter into this Agreement and the other Loan
Documents, to make the borrowings herein provided for, to issue its Notes in
evidence thereof and to perform all of its obligations hereunder and under the
other Loan Documents. The Loan Documents delivered by the Company have been duly
authorized, executed and delivered by the Company and constitute valid and
binding obligations of the Company enforceable in accordance with their terms
except as enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law); and this Agreement and the
other Loan Documents do not, nor does the performance or observance by the
Company of any of the matters and things herein or therein provided for,
contravene or constitute a default under any provision of law or any judgment,
injunction, order or decree binding upon the Company or any provision of the
charter, articles of incorporation or by-laws of the Company or any covenant,
indenture or agreement of or affecting the Company or any of its Properties,
which would have a material adverse effect on the financial condition,
Properties, business or operations of the Company or result in the creation or
imposition of any Lien (other than Liens permitted by Section 8.11 hereof) on
any Property of the Company.
Section 6.4. Use of Proceeds; Margin Stock. The Company shall use the
proceeds of the Loans and other extensions of credit made available hereunder
solely (i) to fund the Company's repurchase of its common capital stock as part
of the Tender Offer, (ii) for its general working capital purposes and (iii) for
such other legal and proper purposes as are consistent with all applicable laws.
Neither the Company nor any Subsidiary is engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Loan or any other extension of
credit made hereunder will be used to purchase or carry any such margin stock or
to extend credit to others for the purpose of purchasing or carrying any such
margin stock.
Section 6.5. Financial Reports. The consolidated balance sheet of the
Company and its Subsidiaries as at December 31, 1995, and the related
consolidated statements of income, retained earnings and cash flows of the
Company and its Subsidiaries for the fiscal year then ended, and the Company
notes thereto, which financial statements are accompanied by the
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audit report of KPMG Peat Marwick LLP, its independent public accountants,
fairly present in all material respects the consolidated financial condition of
the Company and its Subsidiaries as at December 31, 1995 and the consolidated
results of their operations and cash flows for the periods then ended in
conformity with GAAP. The consolidated interim balance sheet of the Company and
its Subsidiaries as at March 31, 1996, and the related consolidated pro forma
statements of income, retained earnings and cash flows of the Company and its
Subsidiaries for the 3 monthly accounting periods of the Company then ended,
fairly present in all material respects the consolidated financial condition of
the Company and its Subsidiaries as at March 31, 1996 and the consolidated
results of their operations and cash flows for the periods then ended in
conformity with GAAP. Neither the Company nor any Subsidiary has contingent
liabilities which are material to the Company and its Subsidiaries, taken as a
whole, other than as indicated on such financial statements or, with respect to
future periods, on the financial statements furnished pursuant to Section 8.5
hereof.
Section 6.6. No Material Adverse Change. Since December 31, 1995, there
has been no change in the condition (financial or otherwise) or business
prospects of the Company and its Subsidiaries taken as a whole except those
occurring in the ordinary course of business, none of which individually or in
the aggregate have been materially adverse.
Section 6.7. Good Title. The Company and its Subsidiaries each have good
and defensible title to their assets as reflected on the most recent
consolidated pro forma balance sheet of the Company and its Subsidiaries
furnished to the Bank (except for sales of assets by the Company and its
Subsidiaries in the ordinary course of business), subject to no Liens other than
such thereof as are permitted by Section 8.11 hereof.
Section 6.8. Litigation and Other Controversies. Except as described on
Schedule 6.8 hereto, there is no litigation or governmental proceeding or labor
controversy pending, nor to the knowledge of the Company threatened, against
the Company or any Subsidiary which if adversely determined would (a) impair the
validity or enforceability of, or impair the ability of the Company to perform
its obligations under, this Agreement or any other Loan Document or (b) result
in any material adverse change in the financial condition, Properties, business
or operations of the Company and its Subsidiaries taken as a whole.
Section 6.9. Taxes. All tax returns required to be filed by the Company
or any Subsidiary in any jurisdiction have, in fact, been filed, and all taxes,
assessments, fees and other governmental charges upon the Company or any
Subsidiary or upon any of their respective Properties, income or franchises,
which are shown to be due and payable in such returns, have been paid. The
Company does not know of any proposed additional tax assessment against it or
its Subsidiaries for which adequate provision in accordance with GAAP has not
been made on its accounts. Adequate provisions in accordance with GAAP for taxes
on the books of the Company and each Subsidiary have been made for all open
years, and for its current fiscal period.
Section 6.10. Approvals. No authorization, consent, license, or exemption
from, or filing or registration with, any court or governmental department,
agency or
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instrumentality, nor any approval or consent of the stockholders of the Company
or any other Person, is or will be necessary to the valid execution, delivery
or performance by the Company of this Agreement or any other Loan Document.
Section 6.11. Affiliate Transactions. Neither the Company nor any
Subsidiary is a party to any contracts or agreements with any of its Affiliates
(other than with Wholly-Owned Subsidiaries) on terms and conditions which are
less favorable to the Company or such Subsidiary than would be usual and
customary in similar contracts or agreements between Persons not affiliated with
each other.
Section 6.12. Investment Company; Public Utility Holding Company. Neither
the Company nor any Subsidiary is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "public utility holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 6.13. ERISA. The Company and each other member of its Controlled
Group has fulfilled its obligations under the obligations under the minimum
funding standards of and is in compliance in all material respects with ERISA
and the Code to the extent applicable to it and has not incurred any liability
to the PBGC or a Plan under Title IV of ERISA other than a liability to the PBGC
for premiums under Section 4007 of ERISA. Neither the Company nor any Subsidiary
has any contingent liabilities with respect to any post-retirement benefits
under a Welfare Plan, other than liability for continuation coverage described
in article 6 of Title I of ERISA.
Section 6.14. Compliance with Laws. The Company and each of its
Subsidiaries are in material compliance with the requirements of all federal,
state and local laws, rules and regulations applicable to or pertaining to their
Properties or business operations (including, without limitation, the
Occupational Safety and Health Act of 1970, the Americans with Disabilities Act
of 1990, and laws and regulations establishing quality criteria and standards
for air, water, land and toxic or hazardous wastes and substances), non-
compliance with which could have a material adverse effect on the financial
condition, Properties, business or operations of the Company and its
Subsidiaries taken as a whole. Neither the Company nor any Subsidiary has
received notice to the effect that its operations are not in compliance with any
of the requirements of applicable federal, state or local environmental, health
and safety statutes and regulations or are the subject of any governmental
investigation evaluating whether any remedial action is needed to respond to a
release of any toxic or hazardous waste or substance into the environment, which
non-compliance or remedial action could have a material adverse effect on the
financial condition, Properties, business or operations of the Company and its
Subsidiaries taken as a whole.
Section 6.15. Other Agreements. Neither the Company nor any Subsidiary is
in default under the terms of any covenants, indenture or agreement of or
affecting the Company, any Subsidiary or any of their Properties, which default
if incurred would have a material adverse effect on the financial condition,
Properties, business or operations of the Company and its Subsidiaries taken as
a whole.
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Section 6.16. No Default. No Default or Event of Default has occurred and
is continuing.
SECTION 7. CONDITIONS PRECEDENT.
The obligation of the Bank to make any Loan under this Agreement, or to
effect the Term Loan Conversion, is subject to the following conditions
precedent:
Section 7.1. All Advances. As of the time of the making of each extension
of credit (including the initial extension of credit) hereunder and the Term
Loan Conversion:
(a) each of the representations and warranties set forth in
Section 6 hereof and in the other Loan Documents shall be true and correct
as of such time, except to the extent the same expressly relate to an
earlier date;
(b) the Company shall be in full compliance with all of the terms
and conditions of this Agreement and of the other Loan Documents, and no
Default or Event of Default shall have occurred and be continuing or would
occur as a result of making such extension of credit;
(c) in the case of each Revolving Loan, after giving effect to such
extension of credit the aggregate principal amount of all Revolving Loans
shall not exceed the Revolving Credit Commitment; and
(d) such extension of credit shall not violate any order, judgment
or decree of any court or other authority or any provision of law or
regulation applicable to the Bank (including, without limitation,
Regulation U of the Board of Governors of the Federal Reserve System) as
then in effect.
The Company's request for any Loan shall constitute its warranty as to the facts
specified in subsections (a) through (d), both inclusive, above.
Section 7.2. Initial Advance. At or prior to the making of the initial
extension of credit hereunder, the following conditions precedent shall also
have been satisfied:
(a) the Bank shall have received the following (each to be properly
executed and completed) and the same shall be reasonably acceptable to the
Bank in form and substance:
(i) the Notes;
(ii) a copy of the Tender Offer Materials;
(iii) a copy of the Investment Agreement;
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(iv) a copy of the instruments and documents evidencing or
governing the MFI Investors Debt;
(v) copies (executed or certified, as may be appropriate) of
all other legal documents or proceedings taken in connection with the
execution and delivery of this Agreement and the other Loan Documents
to the extent the Bank or its counsel may reasonably request;
(vi) an incumbency certificate containing the name, title and
genuine signatures of each of the Company's Authorized
Representatives; and
(vii) evidence of insurance required by Section 8.4 hereof.
(b) legal matters incident to the execution and delivery of this
Agreement and the other Loan Documents and to the transactions contemplated
hereby shall be reasonably satisfactory to the Bank and its counsel; and
the Bank shall have received the favorable written opinion of counsel for
the Company in form attached hereto as Exhibit D;
(c) the Bank shall have received a good standing certificate for the
Company (dated as of the date no earlier than 10 days prior to the date
hereof) from the office of the secretary of state of the state of its
incorporation and each state in which it is qualified to do business as a
foreign corporation; and
(d) the Bank shall have received such other agreements, instruments,
documents, certificates and opinions as the Bank may reasonably request.
SECTION 8. COVENANTS.
The Company agrees that, so long as any credit is available to or in use by
the Company hereunder, except to the extent compliance in any case or cases is
waived in writing by the Bank:
Section 8.1. Maintenance of Business. The Company shall preserve and
maintain its existence; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the corporate existence of any Subsidiary
if continuance of such Subsidiary is desirable in the conduct of the Company's
business or the business of any Subsidiary and such discontinuance not
disadvantageous in any material respect to the Bank. The Company shall, and
shall cause each Subsidiary to, preserve and keep in force and effect all
licenses, permits and franchises necessary to the proper conduct if its
business; provided, however, that the Company shall not be required to preserve
any such right or franchise if the preservation thereof is no longer desirable
in the conduct of the business of the Company or any Subsidiary and the loss
thereof is not disadvantageous in any material respect to the Bank.
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Section 8.2. Maintenance of Properties. The Company shall maintain,
preserve and keep its property, plant and equipment in good repair, working
order and condition (ordinary wear and tear excepted) and shall from time to
time make all needful and proper repairs, renewals, replacements, additions and
betterments thereto so that at all times the efficiency thereof shall be fully
preserved and maintained, and shall cause each Subsidiary to do so in respect of
Property owned or used by it.
Section 8.3. Taxes and Assessments. The Company shall duly pay and
discharge, and shall cause each Subsidiary to duly pay and discharge, all
material taxes, rates, assessments, fees and governmental charges upon or
against it or its Properties, in each case before the same become delinquent and
before penalties accrue thereon, unless and to the extent that the same are
being contested in good faith and by appropriate proceedings which prevent
enforcement of the matter under contest and adequate reserves are provided
therefor.
Section 8.4. Insurance. The Company shall insure and keep insured, and
shall cause each Subsidiary to insure and keep insured, with good and
responsible insurance companies, all insurable Property owned by it which is of
a character usually insured by Persons similarly situated and operating like
Properties against loss or damage from such hazards and risks, and in such
amounts, as are insured by Persons similarly situated and operating like
Properties; and the Company shall insure, and shall cause each Subsidiary to
insure, such other hazards and risks (including employers' and public liability
risks) with good and responsible insurance companies as and to the extent
usually insured by Persons similarly situated and conducting similar businesses.
The Company shall upon request furnish to the Bank a certificate setting forth
in summary form the nature and extent of the insurance maintained pursuant to
this Section.
Section 8.5. Financial Reports. The Company shall, and shall cause each
Subsidiary to, maintain a standard system of accounting in accordance with GAAP
and shall furnish to the Bank and its duly authorized representatives such
information respecting the business and financial condition of the Company and
its Subsidiaries as the Bank may reasonably request; and without any request,
shall furnish to the Bank:
(a) within 60 days after the end of each of the first three quarterly
fiscal periods of the Company, a copy of the Company's Form 10-Q Report
filed with the SEC;
(b) within 120 days after the end of each fiscal year of the Company,
a copy of the Company's Form 10-K Report filed with the SEC, prepared by
the Company and containing as an exhibit thereto a copy of the annual audit
report of the Company and its Subsidiaries for such year with the
accompanying financial statements for such fiscal year as certified by KPMG
Peat Marwick LLP or other independent public accountants of recognized
national standing selected by the Company, with such accountants'
unqualified opinion to the effect that the financial statements have been
prepared in accordance with GAAP and present fairly in all material
respects in accordance with GAAP the consolidated financial position of the
Company and its Subsidiaries as of the close of such fiscal year and
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the results of their operations and cash flows for the fiscal year then
ended and that an examination of such accounts in connection with such
financial statements has been made in accordance with generally accepted
auditing standards and, accordingly, such examination included such tests
of the accounting records and such other auditing procedures as were
considered necessary in the circumstances;
(c) within the period provided in subsection (b) above, the written
statement of the accountants who certified the audit report thereby
required that in the course of their audit they have obtained no knowledge
of any Default or Event of Default, or, if such accountants have obtained
knowledge of any such Default or Event of Default, they shall disclose in
such statement the nature and period of the existence thereof;
(d) together with each of the financial statements required under
Section 8.5(a) and 8.5(b) hereof, a certificate signed by the President,
Executive Vice President or Treasurer of the Company reconciling in
reasonable detail the differences (if any) between the accounting
principles under which such statements were prepared and GAAP;
(e) promptly after receipt thereof, any additional written reports,
management letters or other detailed information contained in writing
concerning significant aspects of the Company's or any Subsidiary's
operations and financial affairs given to it by its independent public
accountants;
(f) promptly after the sending or filing thereof, copies of all proxy
statements, financial statements and reports which the Company sends to its
shareholders, and copies of all other regular, periodic and special reports
and all registration statements which the Company files with the SEC or any
successor thereto, or with any national securities exchange;
(g) as soon as available, and in any event within 90 days after the
commencement of each fiscal year of the Company, a copy of the Company's
consolidated and consolidating business plan for such fiscal year, such
business plan to show the Company's projected consolidated and
consolidating revenues, expenses, and balance sheet on a month-by-month
basis; and
(h) promptly after knowledge thereof shall have come to the attention
of any responsible officer of the Company, written notice of any threatened
or pending litigation or governmental proceeding or controversy against the
Company or any Subsidiary challenging the validity or propriety of the
Tender Offer or which, if adversely determined, would materially adversely
effect the financial condition, Properties, business or operations of the
Company and its Subsidiaries taken as a whole or of the occurrence of any
Default or Event of Default hereunder.
Each of the financial statements furnished to the Bank pursuant to subsections
(a) and (b) of this Section for the close of a calendar quarter or fiscal year
shall be accompanied by a written certificate in the form attached hereto as
Exhibit C signed by the President,
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Executive Vice President or Treasurer of the Company to the effect that to the
best of such officer's knowledge and belief no Default or Event of Default has
occurred during such fiscal period covered by such statements or, if any such
Default or Event of Default has occurred during such period, setting forth a
description of such Default or Event of Default and specifying the action, if
any, taken by the Company to remedy the same. Such certificate shall also set
forth the calculations supporting such statements in respect of Sections 8.7,
8.8 and 8.9 of this Agreement. In the event the Company is no longer required to
file Form 10-Q and 10-K Reports with the SEC, the Company will nevertheless
furnish to the Banks at the time hereinabove set forth all the financial and
other information that would have comprised such filings.
Section 8.6. Inspection. The Company shall, and shall cause each
Subsidiary to, permit the Bank and its duly authorized representatives and
agents to visit and inspect any of the Properties, corporate books and financial
records of the Company and each Subsidiary, to examine and make copies of the
books of accounts and other financial records of the Company and each
Subsidiary, and to discuss the affairs, finances and accounts of the Company and
each Subsidiary with, and to be advised as to the same by, its officers,
employees and independent public accountants (and by this provision the Company
hereby authorizes such accountants to discuss with the Bank the finances and
affairs of the Company and of each Subsidiary) at such reasonable times and
reasonable intervals as the Bank may designate.
Section 8.7. Senior Funded Debt to Capitalization Ratio. The Company
shall not, as of the last day of each fiscal quarter, permit the ratio of (x)
Senior Funded Debt to (y) the sum of (i) Tangible Net Worth and (ii) Total
Liabilities to be more than 0.55 to 1.
Section 8.8. Debt to Earnings Ratio. The Company shall not, as of the
last day of each fiscal quarter of the Company ending during a period specified
below (commencing with the fiscal quarter ending September 30, 1996), permit
the ratio of Funded Debt as of such day to EBITDA for the four fiscal quarters
of the Company then ended quarters then ended (the "Debt to Earnings Ratio") to
be more than:
Debt to Earnings
From and To and Ratio shall not be
including including More than:
September 30, 1996 March 31, 1997 3.0 to 1
April 1, 1997 At all times thereafter 2.5 to 1
Section 8.9. Tangible Net Worth. The Company shall not, as of the last
day (the "test date") of each fiscal quarter, permit its Tangible Net Worth to
be less than the Minimum Required Amount. For purposes hereof, the term "Minimum
Required Amount" shall mean $7,000,000 through September 30, 1996 and shall
increase (but never decrease) as of October 1, 1996 and each January 1, April 1,
July 1 and October 1 thereafter by an amount (only if positive) equal to fifty
percent (50%) of the aggregate of the Net Income for
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each fiscal quarter in which Net Income is positive (commencing with the fiscal
quarter beginning July 1, 1996) ending on or before such test date (with each
such quarter taken separately and only if such quarter is positive).
Section 8.10. Indebtedness for Borrowed Money. The Company shall not, nor
shall it permit any Subsidiary to, issue, incur, assume, create or have
outstanding any Indebtedness for Borrowed Money; provided, however, that the
foregoing shall not restrict nor operate to prevent:
(a) the Obligations of the Company owing to the Bank and other
indebtedness and obligations of the Company or any Subsidiary from time to
time owing to the Bank;
(b) purchase money indebtedness and Capitalized Lease Obligations
secured by Liens permitted by Section 8.11(d);
(c) the MFI Investors Debt if and so long as the same constitutes
Subordinated Indebtedness;
(d) currently outstanding indebtedness of the Company to Manulife
Mortgage aggregating not more than $10,800,000 and Permitted Refinancings
thereof;
(e) intercompany indebtedness permitted by Section 8.12 hereof and
(f) other indebtedness not otherwise permitted by this Section
aggregating not more than $3,500,000 at any one time outstanding.
Section 8.11. Liens. The Company shall not, nor shall it permit any
Subsidiary to, create, incur or permit to exist any Lien of any kind on any
Property owned by the Company or any Subsidiary; provided, however, that the
foregoing shall not apply to nor operate to prevent:
(a) Liens arising by statute in connection with worker's
compensation, unemployment insurance, old age benefits, social security
obligations, taxes, assessments, statutory obligations or other similar
charges, good faith cash deposits in connection with tenders, contracts or
leases to which the Company or any Subsidiary is a party or other cash
deposits required to be made in the ordinary course of business, provided
in each case that the obligation is not for borrowed money and that the
obligation secured is not overdue or, if overdue, is being contested in
good faith by appropriate proceedings which prevent enforcement of the
matter under contest and adequate reserves have been established therefor;
(b) mechanics', workmen's, materialmen's, landlords', carriers', or
other similar Liens arising in the ordinary course of business with respect
to obligations which are not due or which are being contested in good faith
by appropriate proceedings which prevent enforcement of the matter under
contest;
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(c) the pledge of assets for the purpose of securing an appeal, stay
or discharge in the course of any legal proceeding, provided that the
aggregate amount of liabilities of the Company and its Subsidiaries secured
by a pledge of assets permitted under this subsection, including interest
and penalties thereon, if any, shall not be in excess of $250,000 at any
one time outstanding;
(d) Liens on property of the Company or any of its Subsidiaries
created solely for the purpose of securing indebtedness permitted by
Section 8.10(b) hereof, representing or incurred to finance, refinance or
refund the purchase price of Property, provided that no such Lien shall
extend to or cover other Property of the Company or such Subsidiary other
than the respective Property so acquired, and the principal amount of
indebtedness secured by any such Lien shall at no time exceed the original
purchase price of such Property;
(e) mortgage lien on the Company's real estate in Arlington Heights,
Illinois and any building and related fixtures thereon securing the
indebtedness permitted by Section 8.10(d) hereof;
(f) survey exceptions or encumbrances, easements or reservations, or
rights of others for rights-of-way, utilities and other similar purposes,
or zoning or other restrictions as to the use of real properties which are
necessary for the conduct of the activities of the Company and any
Subsidiary or which customarily exist on properties of corporations engaged
in similar activities and similarly situated and which do not in any event
materially impair their use in the operation of the business of the Company
or any Subsidiary; and
(g) the Liens (if any) described on Schedule 8.11 hereto.
Section 8.12. Advances and Guaranties. The Company shall not, nor shall it
permit any Subsidiary to, directly or indirectly, or have outstanding any loans
or advances (other than for travel advances and other similar cash advances made
to employees in the ordinary course of business) to any other Person, or be or
become liable as endorser, guarantor, surety or otherwise for any debt,
obligation or undertaking of any other Person, or otherwise agree to provide
funds for payment of the obligations of another, or supply funds thereto or
otherwise assure a creditor of another against loss, or apply for or become
liable to the issuer of a letter of credit which supports an obligation of
another, or subordinate any claim or demand it may have to the claim or demand
of any other Person; provided, however, that the foregoing shall not apply to
nor operate to prevent:
(a) intercompany loans and advances by the Company and its
Subsidiaries to the Company and its Subsidiaries for Acquisitions permitted
by this Agreement and working capital purposes in the ordinary course of
business;
(b) trade credit extended on ordinary trade terms in the ordinary
course of business;
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(c) endorsement of items for deposit or collection of commercial
paper received in the ordinary course of business;
(d) guaranties by the Company of indebtedness of Subsidiaries; and
(e) loans, advances and guaranties not otherwise permitted by this
Section aggregating not more than $1,500,000 at any one time outstanding.
In determining the amount of investments, loans, advances and guarantees
permitted under this Section, loans and advances shall be taken at the principal
amount thereof then remaining unpaid, and guarantees shall be taken at the
amount of obligations guaranteed thereby.
Section 8.13. Acquisitions. The Company will not, nor will it permit any
Subsidiary to, make or commit to make any Acquisition; provided, however, that
the Company may make one or more Acquisitions of any Person engaged principally
in the same or similar line of business if:
(a) the Company promptly informs the Bank of all principal terms and
conditions applicable to the Acquisition and furnishes the Bank such other
information regarding the Acquisition as the Bank shall reasonably request;
(b) the Company demonstrates that on a pro forma basis after giving
effect to the subject Acquisition, the Company will continue to comply with
all the terms and conditions of the Loan Documents;
(c) the Company shall have delivered to the Bank an updated Schedule
6.2 to reflect any new Subsidiary resulting from such Acquisition; and
(d) after giving effect to such Acquisition, the aggregate
consideration paid by the Company and its Subsidiaries for such Acquisition
and all other Acquisitions closed on and at any time after the date hereof
on a cumulative basis (including as such consideration, the assumption by
the Company or any Subsidiary of any Indebtedness for Borrowed Money of
each Person acquired, but in any event excluding as such consideration, any
capital stock or evidence of unsecured indebtedness in each case issued by
the Company to the seller as consideration for an Acquisition) will not
exceed $5,000,000;
(e) the Board of Directors or other governing body of the Person
whose assets or capital stock is being so acquired has approved the terms
of the Acquisition; and
(f) at the time of such Acquisition and immediately giving effect
thereto, no Default or Event of Default shall have occurred or be
continuing.
Section 8.14. Mergers, Consolidations and Sales. The Company shall not,
nor shall it permit any Subsidiary to, be a party to any merger or
consolidation, or sell, transfer, lease
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or otherwise dispose of all or any substantial part of its Property, including
any disposition of Property as part of a sale and leaseback transaction, or in
any event sell or discount (with or without recourse) any of its notes or
accounts receivable; provided, however, that this Section shall not apply to nor
operate to prevent the Company or any Subsidiary from (i) selling its inventory
in the ordinary course of its business, (ii) making any Acquisition otherwise
permitted by Section 8.13 hereof, or (iii) consummating the bona fide sale,
lease or other transfer of the Company's real estate in Arlington Heights,
Illinois (including any of the building and related fixtures thereon) at arm's
length to an unaffiliated third party for consideration deemed adequate by
Company acting in good faith. The term "substantial" as used herein shall mean
the sale, transfer, lease or other disposition of ten percent (10%) of the total
assets of the Company and its Subsidiaries, taken as a whole.
Section 8.15. Maintenance of Subsidiaries. The Company shall not assign,
sell or transfer, or permit any Subsidiary to issue, assign, sell or transfer,
any shares of capital stock of a Subsidiary; provided that the foregoing shall
not operate to prevent the issuance, sale and transfer to any person of any
shares of capital stock of a Subsidiary solely for the purpose of qualifying,
and to the extent legally necessary to qualify, such person as a director of
such Subsidiary.
Section 8.16. Subordinated Debt. The Company will not, and will not permit
any Subsidiary to, amend or modify the terms and conditions applicable to any
Subordinated Debt, except that the Company may agree to a decrease in the
interest rate or premium applicable thereto or to a deferral of repayment of any
of principal of or interest or premium on any Subordinated Debt beyond the due
date applicable thereto as of the date such indebtedness is initially approved
by the Bank. The Company will not, and will not permit any Subsidiary to, (x)
make any payment of principal, interest or premium, if any, on or other
distribution in respect of any Subordinated Debt or (y) otherwise acquire,
prepay or retire any Subordinated Debt (such payments, distributions,
acquisitions, prepayments and retirements described in the foregoing clauses (x)
and (y) being hereinafter referred to collectively as "Restricted Sub Debt
Payments") if (i) the terms of any instrument subordinating such Subordinated
Debt to the prior payment of any Obligations prohibit such Restricted Sub Debt
Payment or (ii) such Restricted Sub Debt Payment would, if made, be prior to the
maturity of the relevant Subordinated Debt or prior to any other relevant time
required for payment thereof as is in force and effect as of the date such
indebtedness is initially approved by the Bank.
Section 8.17. Prohibition on Prepayment or Modification of Mortgage
Indebtedness. The Company will not make any payment of principal, interest or
premium, if any, on or other distribution in respect of the indebtedness
permitted by Section 8.10(d) hereof, or otherwise acquire, prepay or retire any
such indebtedness, in each case prior to the maturity of such indebtedness or
prior to any other relevant time required for payment thereof as is in force and
effect as of the date hereof, if at the time of such payment, distribution,
acquisition, prepayment or retirement or immediately after giving effect
thereto, any Default or Event of Default would occur or be continuing. The
Company will not agree to any amendment or other modification of the
indebtedness permitted by Section 8.10(d) hereof which would increase the
interest rate applicable thereto or otherwise modify the
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terms and conditions applicable to such indebtedness such that those terms and
conditions on the whole are materially more burdensome on the Company and its
Subsidiaries taken as a whole than was the case prior to such modification.
Section 8.18. ERISA. The Company shall, and shall cause each Subsidiary
to, promptly pay and discharge all obligations and liabilities arising under
ERISA of a character which if unpaid or unperformed might result in the
imposition of a Lien against any of its Properties. The Company shall, and
shall cause each Subsidiary to, promptly notify the Bank of (i) the occurrence
of any reportable event (as defined in ERISA) with respect to a Plan, (ii)
receipt of any notice from the PBGC of its intention to seek termination of any
Plan or appointment of a trustee therefor, (iii) its intention to terminate or
withdraw from any Plan, and (iv) the occurrence of any event with respect to any
Plan which would result in the incurrence by the Company or any Subsidiary of
any material liability, fine or penalty, or any material increase in the
contingent liability of the Company or any Subsidiary with respect to any post-
retirement Welfare Plan benefit.
Section 8.19. Compliance with Laws. The Company shall, and shall cause
each Subsidiary to, comply in all material respects with the requirements of all
federal, state and local laws, rules, regulations, ordinances and orders
applicable to or pertaining to their Properties or business operations,
non-compliance with which could have a material adverse effect on the financial
condition, Properties, business or operations of the Company and its
Subsidiaries taken as a whole or could result in a Lien not otherwise permitted
by Section 8.11 hereof upon any of their Property.
Section 8.20. Contracts with Affiliates. The Company shall not, nor shall
it permit any Subsidiary to, enter into any contract, agreement or business
arrangement with any of its Affiliates (other than with Wholly-Owned
Subsidiaries) on terms and conditions which are less favorable to the Company or
such Subsidiary than would be usual and customary in similar contracts,
agreements or business arrangements between Persons not affiliated with each
other.
Section 8.21. No Changes in Fiscal Year. Neither the Company nor any
Subsidiary shall change its fiscal year from its present basis without the prior
written consent of the Bank.
Section 8.22. Change in the Nature of Business. The Company shall not,
and shall not permit any Subsidiary to, engage in any business or activity if as
a result the general nature of the business of the Company and its Subsidiaries
taken as a whole would be changed in any material respect from the general
nature of the business engaged in by the Company and its Subsidiaries on the
date of this Agreement.
SECTION 9. EVENTS OF DEFAULT AND REMEDIES.
Section 9.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" hereunder:
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(a) default in the payment when due of all or any part of the
principal of any Note, or default for a period of 5 days in the payment when due
(whether at the stated maturity thereof or at any other time provided for in
this Agreement) of all or any part of the interest on any Note or any other
Obligation payable by the Company hereunder or under any other Loan Document, or
default shall occur in the payment when due of any other indebtedness or
obligation (whether direct, contingent or otherwise) of the Company owing to the
Bank; or
(b) default in the observance or performance of any covenant set
forth in Sections 8.7, 8.8, 8.9, 8.11, 8.12, 8.14 or 8.16 hereof or default
which is not remedied within 10 days after written notice thereof is given to
the Company by the Bank in the observance or compliance of any covenant set
forth in Section 8.5 hereof; or
(c) default in the observance or performance of any other provision
hereof or of any other Loan Document which is not remedied within 30 days after
the earlier of (i) the date on which such failure shall first become known to
any responsible officer of the Company or (ii) written notice thereof is given
to the Company by the Bank; or
(d) any representation or warranty made by the Company herein or in
any other Loan Document, or in any statement or certificate furnished by it
pursuant hereto or thereto, or in connection with any extension of credit
made hereunder, proves untrue in any material respect as of the date of the
issuance or making thereof; which is not remedied within 30 days after the
earlier of (i) the date on which such failure shall first become known to any
responsible officer of the Company or (ii) written notice thereof is given to
the Company by the Bank; or
(e) default shall occur under any Indebtedness for Borrowed Money having
an aggregate principal amount of at least $250,000 issued, assumed or guaranteed
by the Company or any Subsidiary, or under any indenture, agreement or other
instrument under which the same may be issued, and such default shall continue
for a period of time sufficient to permit the acceleration of the maturity of
any such Indebtedness for Borrowed Money (whether or not such maturity is in
fact accelerated), or any such Indebtedness for Borrowed Money shall not be paid
when due (whether by lapse of time, acceleration or otherwise); or
(f) any judgment or judgments, writ or writs, or warrant or warrants
of attachment, or any similar process or processes in an aggregate amount in
excess of $250,000 shall be entered or filed against the Company or any
Subsidiary or against any of their Property and which remains unvacated,
unbonded, unstayed or unsatisfied for a period of 30 days; or
(g) any agreement purporting to subordinate payment of any
Subordinated Debt to the prior payment of any Loan or any other Obligations
shall be terminated or shall cease to have any force or effect; or
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(h) the Company or any member of its Controlled Group shall fail to
pay when due an amount or amounts aggregating in excess of $250,000 which it
shall have become liable to pay to the PBGC or to a Plan under Title IV of
ERISA; or notice of intent to terminate a Plan or Plans having aggregate
Unfunded Vested Liabilities in excess of $250,000 (collectively, a "Material
Plan") shall be filed under Title IV of ERISA by the Company or any other member
of its Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer any Material Plan
or a proceeding shall be instituted by a fiduciary of any Material Plan against
the Company or any member of its Controlled Group to enforce Section 515 or
4219(c)(5) of ERISA and such proceeding shall not have been dismissed within
30 days thereafter; or a condition shall exist by reason of which the PBGC would
be entitled to obtain a decree adjudicating that any Material Plan must be
terminated; or
(i) dissolution or termination of the existence of the Company or
(except as permitted by Section 8.1 hereof) any Subsidiary; or
(j) the Company or any Subsidiary shall (i) have entered
involuntarily against it an order for relief under the United States Bankruptcy
Code, as amended, (ii) not pay, or admit in writing its inability to pay, its
debts generally as they become due, (iii) make an assignment for the benefit of
creditors, (iv) apply for, seek, consent to, or acquiesce in, the appointment of
a receiver, custodian, trustee, examiner, liquidator or similar official for it
or any substantial part of its Property, (v) institute any proceeding seeking to
have entered against it an order for relief under the United States Bankruptcy
Code, as amended, to adjudicate it insolvent, or seeking dissolution, winding
up, liquidation, reorganization, arrangement, adjustment or composition of it or
its debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fail to file an answer or other pleading denying the
material allegations of any such proceeding filed against it, (vi) take any
corporate action in furtherance of any matter described in parts (i) through (v)
above, or (vii) fail to contest in good faith any appointment or proceeding
described in Section 9.1(k) hereof; or
(k) a custodian, receiver, trustee, examiner, liquidator or similar
official shall be appointed for the Company or any Subsidiary or any substantial
part of any of their Property, or a proceeding described in Section 9.1(j)(v)
shall be instituted against the Company or any Subsidiary, and such appointment
continues undischarged or such proceeding continues undismissed or unstayed for
a period of 60 days.
Section 9.2. Non-Bankruptcy Defaults. When any Event of Default described
in subsection (a) through (i), both inclusive, of Section 9.1 has occurred and
is continuing, the Bank may, by notice to the Company, take one or more of the
following actions:
(a) terminate the obligation of the Bank to extend any further credit
hereunder on the date (which may be the date thereof) stated in such notice;
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(b) declare the principal of and the accrued interest on the Notes
to be forthwith due and payable and thereupon the Notes, including both
principal and interest and all fees, charges and other Obligations payable
hereunder and under the other Loan Documents, shall be and become immediately
due and payable without further demand, presentment, protest or notice of any
kind; and
(c) enforce any and all rights and remedies available to it under the
Loan Documents or applicable law.
Section 9.3. Bankruptcy Defaults. When any Event of Default described in
subsection (j) or (k) of Section 9.1 has occurred and is continuing, then the
Notes, including both principal and interest, and all fees, charges and other
Obligations payable hereunder and under the other Loan Documents, shall
immediately become due and payable without presentment, demand, protest or
notice of any kind, and the obligation of the Bank to extend further credit
pursuant to any of the terms hereof shall immediately terminate. In addition,
the Bank may exercise any and all remedies available to it under the Loan
Documents or applicable law.
SECTION 10. MISCELLANEOUS.
Section 10.1. Non-Business Day. If any payment hereunder becomes due and
payable on a day which is not a Business Day, the due date of such payment shall
be extended to the next succeeding Business Day on which date such payment shall
be due and payable. In the case of any payment of principal failing due on a day
which is not a Business Day, interest on such principal amount shall continue to
accrue during such extension at the rate per annum then in effect, which accrued
amount shall be due and payable on the next scheduled date for the payment of
interest, except as provided in the definition of Interest Period.
Section 10.2. No Waiver, Cumulative Remedies. No delay or failure on the
part of the Bank or on the part of the holder of the Obligations in the exercise
of any power or right shall operate as a waiver thereof or as an acquiescence in
any default, nor shall any single or partial exercise of any power or right
preclude any other or further exercise thereof or the exercise of any other
power or right. The rights and remedies hereunder of the Bank and of the holder
of the Obligations are cumulative to, and not exclusive of, any rights or
remedies which any of them would otherwise have.
Section 10.3. Amendments, Etc. No amendment, modification, termination or
waiver of any provision of this Agreement or of any other Loan Document, nor
consent to any departure by the Company therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Bank and the
Company. No notice to or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances.
Section 10.4. Costs and Expenses. The Company agrees to pay on demand the
reasonable out-of-pocket costs and expenses of the Bank in connection with the
negotiation, preparation, execution and delivery of this Agreement, the other
Loan Documents and the
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other instruments and documents to be delivered hereunder or thereunder, and in
connection with the recording or filing of any of the foregoing, and in
connection with the transactions contemplated hereby or thereby, and in
connection with any consents hereunder or waivers or amendments hereto or
thereto, including the reasonable fees and expenses of Messrs. Chapman and
Cutler, counsel for the Bank, with respect to all of the foregoing (whether or
not the transactions contemplated hereby are consummated). In addition, at the
time of requesting any amendment hereof or consent or waiver hereunder, the
Company may be required by the Bank to pay a reasonable fee to the Bank for
engaging in and documenting any such action. The Company further agrees to pay
to the Bank or any other holder of the Obligations all reasonable out-of-pocket
costs and expenses (including court costs and attorneys' fees), if any, incurred
or paid by the Bank or any other holder of the Obligations in connection with
any Default or Event of Default or in connection with the enforcement of this
Agreement or any of the other Loan Documents or any other instrument or document
delivered hereunder or thereunder. The Company further agrees to indemnify the
Bank, and its directors, officers and employees, against all losses, claims,
damages, penalties, judgments, liabilities and reasonable out-of-pocket expenses
(including, without limitation, all expenses of litigation or preparation
therefor, whether or not the indemnified Person is a party thereto) which any of
them may pay or incur arising out of or relating to any Loan Document or any of
the transactions contemplated thereby or the direct or indirect application or
proposed application of the proceeds of any extension of credit made available
hereunder, other than those which arise from the gross negligence or willful
misconduct of the party claiming indemnification. The Company, upon demand by
the Bank at any time, shall reimburse the Bank for any reasonable out-of-pocket
legal or other expenses incurred in connection with investigating or defending
against any of the foregoing except if the same is directly due to the gross
negligence or willful misconduct of the party to be indemnified. The obligations
of the Company under this Section shall survive the termination of this
Agreement.
Section 10.5. Participants and Note Assignees. The Bank shall have the
right at its own cost to grant participations (to be evidenced by one or more
agreements or certificates of participation) in the Loans and/or Revolving
Credit Commitment, at any time and from time to time, and to assign its rights
under the Loans or the Notes to one or more other financial institutions;
provided that no such participation or assignment of a Note shall relieve the
Bank of any of its obligations under this Agreement, and provided further that
no such assignee or participant shall have any rights under this Agreement
except as provided in this Section 10.5, except that nothing herein provided is
intended to affect the rights of an assignee of a Note to enforce the Note
assigned. Any party to which such a participation or assignment has been granted
shall have the benefits of Section 2.7, Section 2.8 and Section 2.9 hereof but
shall not be entitled to receive any greater payment under either such Section
than the Bank would have been entitled to receive with respect to the rights
transferred.
Section 10.6. Documentary Taxes. The Company agrees to pay on demand any
documentary, stamp or similar taxes payable in respect of this Agreement or any
other Loan Document, including interest and penalties, in the event any such
taxes are assessed,
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irrespective of when such assessment is made and whether or not any credit is
then in use or available hereunder.
Section 10.7. Survival of Representations. All representations and
warranties made herein or in any of the other Loan Documents or in certificates
given pursuant hereto or thereto shall survive the execution and delivery of
this Agreement and the other Loan Documents, and shall continue in full force
and effect with respect to the date as of which they were made as long as any
credit is in use or available hereunder.
Section 10.8. Survival of Indemnities. All indemnities and other
provisions relative to reimbursement to the Bank of amounts sufficient to
protect the yield of the Bank with respect to the Loans, including, but not
limited to, Sections 2.7 and 2.9 hereof, shall survive the termination of this
Agreement and the payment of the Notes.
Section 10.9. Notices. Except as otherwise specified herein, all notices
hereunder shall be in writing (including, without limitation, notice by
telecopy) and shall be given to the relevant party at its address or telecopier
number set forth below, or such other address or telecopier number as such
party may hereafter specify by notice to the other given by United States
certified or registered mail, by telecopy or by other telecommunication device
capable of creating a written record of such notice and its receipt. Notices
hereunder shall be addressed:
<TABLE>
<CAPTION>
<S> <C>
to the Company at: to the Bank at:
Market Facts, Inc. Harris Trust and Savings Bank
3040 West Salt Creek Drive P.O. Box 755
Arlington Heights, Illinois 60005 111 West Monroe Street
Attention: Mr. Timothy J. Sullivan Chicago, Illinois 60690
Senior Vice President Attention: Emerging Majors/Illinois
Telephone: (847) 590-7170 Telephone: (312) 461-2800
Telecopy : (847) 590-7294 Telecopy: (312) 461-2591
</TABLE>
Each such notice, request or other communication shall be effective (i) if given
by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section and a confirmation of such telecopy has been received
by the sender, (ii) if given by mail, five (5) days after such communication is
deposited in the mail, certified or registered with return receipt requested,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the addresses specified in this Section; provided that any notice given pursuant
to Section 1 or Section 2 hereof shall be effective only upon receipt.
Section 10.10. Construction. The provisions of this Agreement relating to
Subsidiaries shall only apply during such times as the Company has one or more
Subsidiaries. Nothing contained herein shall be deemed or construed to permit
any act or omission which is prohibited by the terms of any of the other Loan
Documents, the convenants and agreements contained herein being in addition to
and not in substitution for the covenants and agreements contained in the other
Loan Documents.
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Section 10.11. Heading. Section headings used in this Agreement are for
convenience of reference only and are not a part of this Agreement for any other
purpose.
Section 10.12. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 10.13. Counterparts. This Agreement may be executed in any number
of counterparts, and by different parties hereto on separate counterpart
signature pages, and all such counterparts taken together shall be deemed to
constitute one and the same instrument.
Section 10.14. Binding Nature, Governing Law, Etc. This Agreement shall
be binding upon the Company and its successors and assigns, and shall inure to
the benefit of the Bank and the benefit of its successor and assigns, including
any subsequent holder of the Obligations. The Company may not assign its rights
hereunder without the written consent of the Bank. This Agreement constitutes
the entire understanding of the parties with respect to the subject matter
hereof and any prior agreements, whether written or oral, with respect thereto
are superseded hereby. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES
HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS
OF THE STATE OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Section 10.15. Submission to Jurisdiction; Waiver of Jury Trial. The
Company hereby submits to the nonexclusive jurisdiction of the United States
District Court for the Northern District of Illinois and of any Illinois State
court sitting in the City of Chicago for purposes of all legal proceedings
arising out of or relating to this Agreement, the other Loan Documents or the
transactions contemplated hereby or thereby. The Company irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum. THE COMPANY AND THE BANK EACH HEREBY IRREVOCABLY
WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.
-39-
<PAGE>
Upon your acceptance hereof in the manner hereinafter set forth, this
Agreement shall constitute a contract between us for the uses and purposes
hereinabove set forth.
Dated as of this 7th day of June, 1996.
Market Facts, Inc.
By /s/ Timothy J. Sullivan
-------------------------------------
Name: Timothy J. Sullivan
Title: Senior Vice President & Treasurer
Accepted and agreed to at Chicago, Illinois as of the day and year last
above written.
Harris Trust and Savings Bank
By /s/ Mr. Richard P. Bott
------------------------------------
Name: Mr. Richard P. Bott
Title: Vice President
-40-
<PAGE>
EXHIBIT A
MARKET FACTS, INC.
REVOLVING CREDIT NOTE
Chicago, Illinois
$7,000,000 ____________, 1996
On the Revolving Credit Termination Date, for value received, the
undersigned, Market Facts, Inc., a Delaware corporation (the "Company"), hereby
promises to pay to the order of Harris Trust And Savings Bank (the "Bank") at
its office at 111 West Monroe Street, Chicago, Illinois, the principal sum of
(i) Seven Million and no/100 Dollars ($7,000,000), or (ii) such lesser amount as
may at the time of the maturity hereof, whether by acceleration or otherwise, be
the aggregate unpaid principal amount of all Revolving Loans owing from the
Company to the Bank under the Revolving Credit provided for in the Credit
Agreement hereinafter mentioned.
This Note evidences Revolving Loans made and to be made to the Company by
the Bank under the Revolving Credit provided for under that certain Credit
Agreement dated as of June 7, 1996, between the Company and the Bank (said
Credit Agreement, as the same may be amended, modified or restated from time to
time, being referred to herein as the "Credit Agreement"), and the Company
hereby promises to pay interest at the office described above on such Revolving
Loans evidenced hereby at the rates and at the times and in the manner specified
therefor in the Credit Agreement.
Each Revolving Loan made under the Revolving Credit against this Note, any
repayment of principal hereon, the status of each such Revolving Loan from time
to time as part of the Domestic Rate Portion or a LIBOR Portion and, in the case
of any LIBOR Portion, the interest rate and Interest Period applicable thereto
shall be endorsed by the holder hereof on a schedule to this Note or recorded on
the books and records of the holder hereof (provided that such entries shall be
endorsed on a schedule to this Note prior to any negotiation hereof). The
Company agrees that in any action or proceeding instituted to collect or enforce
collection of this Note, the entries endorsed on a schedule to this Note or
recorded on the books and records of the holder hereof shall be prima facie
evidence of the unpaid principal balance of this Note, the status of each
Revolving Loan from time to time as part of the Domestic Rate Portion or a LIBOR
Portion and, in the case of any LIBOR Portion, the interest rate and Interest
Period applicable thereto absent manifest error.
This Note is issued by the Company under the terms and provisions of the
Credit Agreement, and this Note and the holder hereof are entitled to all of the
benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity and voluntary
prepayments may be made hereon, all in the events, on the terms and with the
effects provided in the Credit Agreement. All capitalized terms used herein
without definition shall have the same meanings herein as such terms are defined
in the Credit Agreement.
<PAGE>
The Company hereby promises to pay all reasonable out-of-pocket costs and
expenses (including attorneys' fees) suffered or incurred by the holder hereof
in collecting this Note or enforcing any rights in any collateral therefor. The
Company hereby waives presentment for payment and demand. THIS NOTE SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF
ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Market Facts, Inc.
By
-----------------------------------
Name:
--------------------------------
Title:
-------------------------------
A-2
<PAGE>
EXHIBIT B
MARKET FACTS, INC.
TERM LOAN NOTE
Chicago, Illinois
$______________ __________, ____
For Value Received, the undersigned, Market Facts, Inc., a Delaware
corporation (the "Company"), hereby promises to pay to the order of Harris Trust
and Savings Bank (the "Bank"), at the principal office of Harris Trust and
Savings Bank in Chicago, Illinois, the principal sum of ______________ Dollars
($_________), in twenty (20) consecutive equal quarterly installments due on the
last day of each calendar quarter (commencing on the first of such dates after
the date hereof and with the last such installment due on the Term Loan Maturity
Date), with each such installment to be in the amount of one-twentieth (1/20th)
of the face principal amount hereof.
This Note evidences the Term Loan made to the Company by the Bank under the
Loan Conversion provided for under that certain Credit Agreement dated as of
June 7, 1996 by and between the Company and the Bank (said Credit Agreement, as
the same may be amended, modified or restated from time to time, being referred
to herein as the "Credit Agreement"), and the Company hereby promises to pay
interest at the office described above on such Loan evidenced hereby at the
rates and at the times and in the manner specified therefor in the Credit
Agreement.
The Term Loan made under the Credit Agreement against this Note, any
repayment of principal hereon, the status of such Loan from time to time as part
of the Domestic Rate Portion or a Fixed Rate Portion and, in the case of any
LIBOR Portion, the interest rate and Interest Period applicable thereto and, in
the case of an Offered Rate Portion, the Offered Rate applicable thereto, in
each case shall be endorsed by the holder hereof on a schedule to this Note or
recorded on the books and records of the holder hereof (provided that such
entries shall be endorsed on a schedule to this Note prior to any negotiation
hereof). The Company agrees that in any action or proceeding instituted to
collect or enforce collection of this Note, the entries endorsed on a schedule
to this Note or recorded on the books and records of the holder hereof shall be
prima facie evidence of the unpaid principal balance of this Note, the status of
such Loan from time to time as part of the Domestic Rate Portion or a Fixed Rate
Portion and, in the case of any LIBOR Portion, the interest rate and Interest
Period applicable thereto and, in the case of an Offered Rate Portion, the
Offered Rate applicable thereto.
This Note is issued by the Company under the terms and provisions of the
Credit Agreement, and this Note and the holder hereof are entitled to all of the
benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its
<PAGE>
expressed maturity and voluntary prepayments may be made hereon, all in the
events, on the terms and with the effects provided in the Credit Agreement. All
capitalized terms used herein without definition shall have the same meanings
herein as such terms are defined in the Credit Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE
INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAWS.
The Company hereby promises to pay all reasonable out-of-pocket costs and
expenses (including attorneys' fees) suffered or incurred by the holder hereof
in collecting this Note or enforcing any rights in any collateral therefor. The
Company hereby waives presentment for payment and demand.
Market Facts, Inc.
By
------------------------------------
Name:
---------------------------------
Title:
--------------------------------
B-2
<PAGE>
Exhibit (c)(1)
================================================================================
INVESTMENT AGREEMENT
by and among
MARKET FACTS, INC.,
MFI ASSOCIATES, INC.
and
MFI INVESTORS L.P.
dated
June 6, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C> <C>
SECTION 1: DEFINITIONS....................................................................................... 1
1.1 Defined Terms..................................................................................... 1
1.2 Other Definitional Provisions..................................................................... 4
1.3 Beneficial Ownership.............................................................................. 5
SECTION 2: INVESTMENT BY THE PARTNERSHIP..................................................................... 5
2.1 Purchase and Sale of Convertible Note, Preferred Shares........................................... 5
2.2 Convertible Note.................................................................................. 5
(a) Maturity..................................................................................... 5
(b) Interest..................................................................................... 5
(c) Prepayment................................................................................... 5
(d) Subordination................................................................................ 5
(e) Conversion................................................................................... 5
2.3 Closing........................................................................................... 6
2.4 Closing Deliveries................................................................................ 6
SECTION 3: REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................................... 6
3.1 Organization and Standing......................................................................... 6
3.2 Authorization..................................................................................... 6
3.3 Capitalization.................................................................................... 7
3.4 No Conflict....................................................................................... 7
3.5 Litigation........................................................................................ 7
3.6 Government Approval............................................................................... 7
3.7 SEC Reports....................................................................................... 7
3.8 No Material Adverse Change........................................................................ 8
3.9 Absence of Violation.............................................................................. 8
3.10 Brokers........................................................................................... 8
3.11 Section 203 Approval; Rights Plan Amendment....................................................... 8
SECTION 4: REPRESENTATIONS AND WARRANIES OF THE GP AND THE PARTNERSHIP....................................... 8
4.1 Organization and Good Standing.................................................................... 8
4.2 Authorization..................................................................................... 8
4.3 No Conflict....................................................................................... 9
4.4 Litigation........................................................................................ 9
4.5 Government Approval............................................................................... 9
4.6 Stock Ownership................................................................................... 9
4.7 Broker............................................................................................ 9
4.8 Investment Representation......................................................................... 9
4.9 Schedule 13D......................................................................................10
SECTION 5: CERTAIN POST-CLOSING COVENANTS....................................................................10
5.1 Self-Tender Offer.................................................................................10
5.2 Compliance with SEC Rules.........................................................................10
5.3 Ability of GP and Partnership to Perform..........................................................11
5.4 Subordination.....................................................................................11
SECTION 6: BOARD OF DIRECTORS; VOTING OF SHARES..............................................................11
6.1 Board of Directors................................................................................11
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
(a) Issuance of Preferred Shares.................................................................11
(b) Transfer of Voting Securities; Change of Control.............................................11
(c) Alternative to Preferred Stock...............................................................11
6.2 Actions Subject to Approval.......................................................................12
6.3 Voting by Standstill Persons......................................................................12
(a) Obligation...................................................................................12
(b) Voting on Directors..........................................................................13
(c) Voting on Other Matters......................................................................13
(d) Procedure....................................................................................13
(e) Irrevocable Proxy............................................................................14
6.4 Business Combinations.............................................................................14
6.5 No 13D Groups.....................................................................................14
6.6 No Voting Trusts or Agreements....................................................................14
6.7 Proxy Contests....................................................................................14
(a) Restriction on Proxy Contests, Etc...........................................................14
(b) Termination of Restrictions..................................................................15
(c) Operating Income Targets.....................................................................15
(d) Management Voting............................................................................16
SECTION 7: RESTRICTIONS ON OWNERSHIP OF VOTING SECURITIES....................................................16
7.1 Standstill Percentage.............................................................................16
7.2 Protective Purchase Option........................................................................16
(a) Protective Option............................................................................16
(b) Option Period; Price.........................................................................17
(c) Exercise of Option...........................................................................17
(d) Termination..................................................................................17
SECTION 8: TRANSFERS BY STANDSTILL PERSONS...................................................................17
8.1 Tender Offers.....................................................................................17
8.2 Sales in the Market...............................................................................18
(a) Market Sales Option..........................................................................18
(b) Rule 144 Sales...............................................................................18
(c) Form 144.....................................................................................18
8.3 Private Sales.....................................................................................18
(a) General......................................................................................18
(b) Sales of Five Percent or Less................................................................19
(c) First Offer Option...........................................................................19
(d) First Refusal Rights.........................................................................19
(e) Transfers to Third Parties...................................................................20
8.4 Public Tag-Along Rights...........................................................................21
8.5 Sales Prohibited During Public Offerings..........................................................21
8.6 Board Determination...............................................................................21
8.7 Transfers of Convertible Note.....................................................................21
8.8 Limits on Partnership Distributions; Ownership....................................................22
8.9 No Transfer of Rights.............................................................................22
8.10 No Approval.......................................................................................22
8.11 Non-Conforming Transfers Void.....................................................................23
8.12 Legend Removal....................................................................................23
SECTION 9: REGISTRATION RIGHTS...............................................................................23
9.1 Registrable Securities; Registration Statement....................................................23
9.2 Demand Registrations..............................................................................23
9.3 Participation Registration........................................................................23
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C>
9.4 Obligations of the Company........................................................................24
(a) Underwritten Offerings Only..................................................................24
(b) Company Obligations..........................................................................24
9.5 Expenses..........................................................................................25
9.6 Indemnification...................................................................................25
SECTION 10: TERMINATION......................................................................................26
10.1 Termination Following the Closing.................................................................26
10.2 Application of Section 203 of the Delaware General Corporation Law
("Section 203")...................................................................................26
SECTION 11: MISCELLANEOUS....................................................................................27
11.1 Survival..........................................................................................27
11.2 Expenses..........................................................................................27
11.3 Amendment.........................................................................................27
11.4 Successor; Assignment.............................................................................27
11.5 Notices...........................................................................................28
11.6 Applicable Law....................................................................................28
11.7 Entire Agreement; Counterparts....................................................................28
11.8 Section Headings..................................................................................29
11.9 Public Announcement...............................................................................29
11.10 Injunctive Relief.................................................................................29
11.11 Remedies..........................................................................................29
11.12 Successor General Partners........................................................................29
</TABLE>
-iii-
<PAGE>
EXHIBITS
--------
Exhibit A Form of Convertible Note
Exhibit B Form of Financial Advisory Agreement
Exhibit C Form of Opinions of Keck, Mahin & Cate, and Morris, Nichols,
Arsht & Tunnell
Exhibit D Form of Opinion of Kirkland & Ellis
Exhibit E Certificate of Designation, Preferences and Rights of Preferred
Stock, Series B
Exhibit F Form of Irrevocable Proxy
-iv-
<PAGE>
INVESTMENT AGREEMENT
--------------------
This Investment Agreement ("Agreement") is entered into this 6th day of
June 1996, by and between Market Facts, Inc., a Delaware corporation (the
"Company"), MFI Associates, Inc., a Delaware corporation ("MFI"), and MFI
Investors L.P., a Delaware limited partnership.
WITNESSETH:
----------
WHEREAS, MFI is the sole general partner of the Partnership; and
WHEREAS, the Partnership desires to make a non-controlling investment in
the Company, initially in the form of an $8,250,000 subordinated convertible
note, and to purchase shares of preferred stock of the Company; and
WHEREAS, MFI has the expertise to provide financial advisory services to
the Company and, in connection with such investment, has offered to provide such
services to the Company; and
WHEREAS, the Company desires that the Partnership make such investment and
that MFI provide such financial advisory services to the Company; and
WHEREAS, it is the mutual intention of MFI, the Partnership and the Company
to enter into certain agreements contained herein governing the terms,
conditions, rights and restrictions of such investment;
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
and other good and valuable consideration, the parties hereto do hereby agree as
follows:
SECTION 1: DEFINITIONS
------------------------
1.1 Defined Terms. In addition to the words and terms defined elsewhere
in this Agreement, the following words and terms as used in this Agreement shall
have the following meanings:
"Affiliate" shall mean with respect to any person, (i) any other
person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the specified
person, and (ii) any "associate" of such person, as that term is defined in
SEC Rule 12b-2. For the purposes of this definition only, "control" when
used with respect to any person shall mean the possession, direct or
indirect, of the power to direct or cause the direction of the management
and policies of such person, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling,"
"controlled by" and "under common control with" shall have meanings
correlative to the foregoing.
"Board of Directors" shall mean the board of directors of the Company.
"Certificate of Designation" shall have the meaning given to it in
Section 6.1.
-1-
<PAGE>
"Change of Control" shall mean only the occurrence of any of the
following:
(i) MFI ceases to have the sole power and authority to direct or cause
the direction of the acquisition, disposition or voting of the Voting
Securities beneficially owned by the Partnership;
(ii) a Competitor becomes a general partner of the Partnership;
(iii) if at any time after (A) MFI ceases to have the sole power and
authority to direct or cause the direction of the acquisition, disposition
or voting of the Voting Securities beneficially owned by the Partnership or
(B) there is a change of control of MFI (as defined in clause iv below), in
either case, pursuant to a Change of Control that was approved in writing
in advance by the Company, there is a change in control of the GP or other
person or persons then having the power and authority to direct or cause
the direction of the acquisition, disposition or voting of such Voting
Securities (which for purposes of this clause (iii) shall mean the GP or
other person or persons who have the power to direct or cause the direction
of the management and policies of such person shall cease to have such
power); or
(iv) a change of control of MFI. For purposes of this clause (iv), a
change of control of MFI shall mean only the occurrence of any of the
following: (A) a Competitor becomes a director, officer or stockholder of
MFI, (B) the persons who are the directors of MFI on the date hereof and
any Acceptable Directors do not represent a majority of the board of
directors of MFI, or (C) the persons who are the stockholders of MFI on the
date hereof (or their estates, spouses, children, grandchildren or any
trusts established for the benefit of any of such persons of which such
stockholder or his spouse is the trustee or such stockholder's children,
grandchildren or spouse are the sole beneficiaries) and any Acceptable
Stockholders do not collectively have the right to vote 51% or more of the
outstanding capital stock of MFI. A person shall be an "Acceptable
Director" or an "Acceptable Stockholder" for purposes of this definition
if, and only if, MFI has given the Company written notice that MFI intends
to make such person a director or stockholder of MFI, as the case may be,
and the Board of Directors has not notified MFI in writing within thirty
(30) days after receiving such notice that such individual is not
acceptable to the Board of Directors; provided, however, that the Company
agrees that any person who is a stockholder of MFI on the date hereof shall
be an Acceptable Director. The aforesaid notice shall not constitute the
notice of a Change of Control required by Section 6.1(b), Section 8.3(c),
Section 8.3(d) or Section 8.4.
"Closing" and "Closing Date" shall have the meanings given to them in
Section 2.3.
"Common Stock" shall mean the common stock, par value $1.00 per share,
of the Company.
"Company" shall mean Market Facts, Inc., a Delaware corporation.
"Competitor" shall mean any person who is an officer, director or
employee of any person listed on the Jack Honomichl list of the 50 largest
-2-
<PAGE>
market research firms in the United States as published annually in
Marketing News.
"Convertible Note" shall mean the convertible subordinated promissory
note of the Company, in the principal amount of $8,250,000, to be issued
and sold to the Partnership hereunder at the Closing. The form of the
Convertible Note is attached hereto as Exhibit A.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor statute.
"Executive Officers" shall mean Management Stockholders and, to the
extent not included within the group of Management Stockholders, the "Named
Executive Officers" of the Company, as defined in Item 402(a)(3)(i) and
(ii) of SEC Regulation S-K, but the term "Named Executive Officers" shall
not include any persons described in Item 402(a)(3)(iii) of such
regulation.
"Fair Market Value" shall have the meaning given to it in Section 8.2.
"Financial Advisory Agreement" shall mean the financial advisory
agreement between the Company and MFI to be entered into at the Closing.
The form of the Financial Advisory Agreement is attached hereto as Exhibit
B.
"GP" shall mean the general partner of the Partnership (which on the
date of this Agreement is MFI), any additional general partner and any
successor, replacement or substitute general partner of the Partnership.
"Independent Director" shall mean a director of the Company who is not
any of the following: (i) an employee or former employee of the Company or
any of its subsidiaries, (ii) a Standstill Person, (iii) a stockholder,
partner, director, officer or employee of any Standstill Person, or (iv)
excluding any person who is a member of the Board of Directors on the date
of this Agreement, an agent, contractor or other person (including any
provider of financial, accounting, legal or other services to the Company
or to a Standstill Person) who has, within the past year, engaged in any
transaction or series of transactions with the Company or a Standstill
Person in which the amount involved exceeded $60,000 annually or who has a
material interest in any person who has engaged in any such transaction or
series of transactions.
"Management Stockholders" shall mean those employees of the Company
who are, at the time in question, members of the Board of Directors.
"MFI" shall mean MFI Associates, Inc., a Delaware corporation.
"Partnership" shall mean MFI Investors L.P., a Delaware limited
partnership, and any successor thereto.
"Preferred Shares" shall have the meaning given to it in Section
6.1(a).
"Public Stockholders" shall mean all stockholders of the Company
holding Voting Securities other than Standstill Persons and Executive
Officers.
-3-
<PAGE>
"Rights Plan" shall mean the Rights Agreement between the Company and
First Chicago Trust Company of New York, dated as of July 26, 1989, as
amended by the First Amendment to Rights Plan between the Company and First
Chicago Trust Company of New York, dated as of June 5, 1996 (the "Rights
Plan Amendment"), as the same may be amended or modified from time to time,
and any rights plan adopted by the Company in replacement of or
substitution therefor.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor statute.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"Self-Tender Offer" shall have the meaning given to it in Section 5.1
hereof.
"Standstill Percentage" shall mean thirty-seven and one-half percent
(37.5%) of the total combined voting power of all Voting Securities then
outstanding.
"Standstill Persons" shall mean and include any person who is, at the
time in question, any of the following: (i) the Partnership, (ii) the GP,
(iii) an officer, director or stockholder of the GP (and their respective
spouses and children), or (iv) any person for whom any of the foregoing
persons has the power to direct or cause the direction of the acquisition,
disposition or voting of securities.
"13D Group" shall mean any group of persons formed for the purpose of
acquiring, holding, voting or disposing of Voting Securities which would be
required under Section 13(d) of the Exchange Act and the rules and
regulations thereunder to file a statement on Schedule 13D with the SEC as
a "person" within the meaning of Section 13(d)(3) of the Exchange Act
because such group beneficially owned Voting Securities representing more
than five percent (5%) of the total combined voting power of all Voting
Securities then outstanding.
"Voting Securities" shall mean shares of Common Stock and shares of
any other class of capital stock of the Company entitled to vote generally
in the election of members of the Board of Directors (but excludes the
Preferred Shares).
"Warrant" shall have the meaning given to it in Section 2.2(c).
1.2 Other Definitional Provisions.
(a) The words "Agreement," "hereof," "herein," and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Section, subsection and Exhibit references are to this Agreement unless
otherwise specified.
(b) All pronouns used in this Agreement shall be deemed to include the
masculine, feminine and neuter, and the plural shall be deemed to include the
singular, and the singular the plural, whenever necessary or appropriate to
effect the intent of this Agreement.
-4-
<PAGE>
(c) The word "including" when used in this Agreement shall mean
"including, without limitation."
(d) The word "person" when used in this Agreement shall mean and
include natural persons, corporations, partnerships, limited liability
companies, unincorporated associations, joint stock companies, joint ventures,
trusts, banks and other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.
1.3 Beneficial Ownership. All references in this Agreement to beneficial
ownership shall mean beneficial ownership determined in accordance with SEC Rule
13d-3. Without limiting the foregoing, any Voting Securities issuable, at the
time in question, pursuant to outstanding options, warrants, rights or other
conversion privileges (including the Convertible Note and/or the Warrant and any
Voting Securities that the Partnership has the right to purchase pursuant to
Section 7.2) shall be deemed to be owned by the beneficial owner of such
securities and shall be deemed to be outstanding for the purpose of computing
the beneficial ownership of Voting Securities of such person at any time when
such options, warrants, rights or other conversion privileges are exercisable by
such person but shall not be deemed to be outstanding for the purpose of
computing the percentage of the ownership of Voting Securities by any other
person.
SECTION 2: INVESTMENT BY THE PARTNERSHIP
-----------------------------------------
2.1 Purchase and Sale of Convertible Note, Preferred Shares. Subject to
the terms and conditions hereof, at the Closing, the Company will issue and sell
to the Partnership, and the Partnership will purchase from the Company, the
Convertible Note for a purchase price of $8,250,000 (the "Purchase Price"), and
the Preferred Shares in consideration of the payment of $100 and the agreement
of the Partnership to purchase the Convertible Note.
2.2 Convertible Note.
(a) Maturity. The Convertible Note will mature on the tenth (10th)
anniversary of the Closing Date (the "Maturity Date"), and on such date, or upon
any accelerated maturity, the full amount of principal then outstanding, and all
accrued and unpaid interest thereon, shall be due and payable.
(b) Interest. Interest on the Convertible Note shall be payable as
provided in the Convertible Note.
(c) Prepayment. The Company may not prepay all or any portion of the
outstanding principal amount of the Convertible Note at any time prior to the
Maturity Date without the prior written consent of the holder of the Convertible
Note, unless the Company shall issue at the time of any such prepayment a
warrant to purchase for the conversion price (as stated in the Convertible Note)
at any time before the Maturity Date that number of shares of Common Stock into
which that portion of the outstanding principal of the Convertible Note sought
to be prepaid is then convertible ("Warrant").
(d) Subordination. The Convertible Note shall be subordinated to
other indebtedness of the Company on the terms set forth in the Convertible
Note.
(e) Conversion. The Convertible Note shall be convertible into shares
of Common Stock on the terms set forth in the Convertible Note.
-5-
<PAGE>
2.3 Closing. The closing of the purchase and sale of the Convertible
Note contemplated hereby (the "Closing") shall take place on the date hereof, at
the offices of Keck, Mahin & Cate, Chicago, Illinois at 10:00 a.m. local time,
or at such other date, time or place as may be mutually agreed upon by the
parties hereto. The date on which the Closing shall occur is referred to herein
as the "Closing Date".
2.4 Closing Deliveries. At the Closing, the parties shall make the
deliveries described in this Section 2.4.
(a) The Company shall deliver:
(i) to the Partnership, the Convertible Note, duly executed by
the Company, and the Preferred Shares;
(ii) to the GP and the Partnership, the written opinions, dated
the Closing Date, of Keck, Mahin & Cate and Morris, Nichols, Arsht &
Tunnel, counsel to the Company in the form attached as Exhibit C; and
(iii) to MFI, the Financial Advisory Agreement, duly executed by
the Company.
(b) The Partnership and the GP shall deliver to the Company:
(i) the Purchase Price, plus the sum of $100, in immediately
available funds by wire transfer to an account designated by the Company;
(ii) the written opinion, dated the Closing Date, of Kirkland &
Ellis, counsel to the GP and the Partnership in the form attached as
Exhibit D;
(iii) the Financial Advisory Agreement, duly executed by MFI; and
(iv) the irrevocable proxy described in Section 6.3(e).
SECTION 3: REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------------------
The Company hereby represents and warrants to the GP and the Partnership as
follows:
3.1 Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware. Complete and correct copies of the certificate of incorporation and
bylaws of the Company, each as amended to date, the Rights Plan and the Rights
Plan Amendment have been delivered to the Partnership.
3.2 Authorization. The Company has all necessary corporate power and
authority to enter into and perform its obligations under each of this
Agreement, the Convertible Note and the Financial Advisory Agreement. Each of
this Agreement, the Convertible Note and the Financial Advisory Agreement has
been duly authorized, executed and delivered by the Company pursuant to all
necessary corporate authorization and is the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except as enforcement may be limited by equitable principles limiting the right
to obtain specific performance or other equitable remedies, or by applicable
bankruptcy or insolvency laws and related decisions affecting creditors' rights
generally. The Preferred Shares have been duly authorized and are validly
issued, fully-paid and nonassessable and are entitled to the rights as set forth
in the Certificate of Designation. The Voting Securities issuable to the
Partnership
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upon conversion of the Convertible Note will be validly issued, fully-paid and
nonassessable when issued in accordance with the provisions thereof. If any
Warrant is issued by the Company, any shares of Voting Securities issuable
thereunder will, upon issuance, be validly issued, fully-paid and nonassessable.
3.3 Capitalization. The authorized capital stock of the Company consists
of 500,000 shares of preferred stock, no par value, of which no shares are
outstanding (other than the Preferred Shares being issued on the date hereof),
and 5,000,000 shares of Common Stock, of which 2,000,769 shares are issued and
outstanding on the date hereof. All of the outstanding shares of Common Stock
have been validly issued and are fully paid and nonassessable. Except for the
Rights Plan and such number of shares of Common Stock as may be issuable
pursuant to the conversion of the Convertible Note, and except as provided in
this Agreement, the Company does not have any outstanding subscriptions,
options, warrants, rights (pre-emptive or otherwise) or other agreements or
commitments of any character obligating the Company to issue or sell shares of
its capital stock or securities or obligations convertible into, or exchangeable
for, any shares of its capital stock.
3.4 No Conflict. The execution and delivery of this Agreement, the
Convertible Note and the Financial Advisory Agreement by the Company do not, and
the performance by the Company of its obligations hereunder (including the
issuance of the Preferred Shares) and thereunder will not, conflict with, result
in a breach of, or constitute a default under, the certificate of incorporation
or bylaws of the Company, each as amended to the date hereof, or the terms of
any material agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it is bound, or any material order, decree,
statute, rule or regulation applicable to the Company or any of its
subsidiaries.
3.5 Litigation. There is no pending or threatened action, suit or
proceeding before any court or governmental agency, authority or body involving
the Company or any of its subsidiaries which would have a material adverse
effect on the Company, its financial condition or results of operations or which
would adversely affect the ability of the Company to perform its obligations
under this Agreement or which questions the validity of this Agreement.
3.6 Government Approval. The execution and delivery of this Agreement,
the Convertible Note and the Financial Advisory Agreement by the Company do not,
and the performance by the Company of its obligations hereunder (including the
issuance of the Preferred Shares) and thereunder will not, require the Company
to obtain any authorization, consent, approval, exemption or action of, or make
any material filing with or give any notice to, any court or administrative or
governmental body or any other person pursuant to the certificate of
incorporation or bylaws of the Company or any law, statute, rule, regulation,
judgment or decree, or any material agreement, permit, license or instrument, to
which the Company is subject, except for the requisite Exchange Act filings with
the SEC in connection with the Self-Tender Offer.
3.7 SEC Reports. The Company has previously delivered to the Partnership
true and complete copies of Company's Annual Reports on SEC Form 10-K for the
fiscal years ended December 31, 1994 and 1995, the Company's Quarterly Report on
SEC Form 10-Q for the quarterly period ended March 31, 1996, and the Company's
Notice of Annual Meeting and Proxy Statement relating to the annual meeting of
stockholders held April 24, 1996 (the "SEC Reports"). All reports required to
be filed by the Company with the SEC for such periods and to the present have
been timely and properly filed. None of the SEC Reports, including the
financial statements therein, contain as of their respective dates any untrue
statement of a material fact or omission to state a material fact required to be
stated therein or necessary in
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order to make the statements contained therein, in light of circumstances under
which they were made, not misleading.
3.8 No Material Adverse Change. There has been no material adverse
change in the financial condition, results of operations or business prospects
of the Company since March 31, 1996.
3.9 Absence of Violation. The Company is not in violation in any
material respect of its certificate of incorporation or bylaws.
3.10 Brokers. The Company has not employed any investment banker,
consultant, broker or finder or incurred any liability for any brokerage fees,
commissions or finder's fees in connection with the transactions contemplated by
this Agreement, except for Schroder Wertheim & Co., Inc., whose fees will be
paid by the Company.
3.11 Section 203 Approval; Rights Plan Amendment. The Board of
Directors has (i) "approved" (as that term is used in Section 203 of the
Delaware General Corporation Law) the issuance of the Convertible Note and the
Preferred Shares to the Partnership, the shares of Common Stock issuable to
Standstill Persons upon conversion of the Convertible Note, the acquisition by
Standstill Persons of additional shares of Common Stock up to the Standstill
Percentage and all other transactions contemplated hereby pursuant to which
Standstill Persons become an "interested stockholder" (subject to the provisions
of Section 10.2), and (ii) adopted the Rights Plan Amendment, which permits the
Standstill Persons in the aggregate to become the beneficial owners of up to
37.5% of the Common Stock then outstanding, subject to reduction as provided in
the definition of MFI Investors' Percentage set forth in the Rights Plan
Amendment, without becoming an Acquiring Person (as defined in the Rights Plan).
SECTION 4: REPRESENTATIONS AND WARRANTIES OF THE GP AND
--------------------------------------------------------
THE PARTNERSHIP
---------------
The GP and the Partnership, jointly and severally, hereby represent and
warrant to the Company as follows:
4.1 Organization and Good Standing. The GP is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware and the Partnership is a limited partnership duly organized, validly
existing and in good standing under the laws of the state of Delaware. MFI is
the sole general partner of the Partnership as of the date hereof. The GP has
and will at all times hereunder have all power and authority to direct or cause
the direction of the acquisition, disposition and voting of the shares of Voting
Securities beneficially owned by the Partnership, and the limited partners do
not and will not at any time hereunder have or share such power. The GP has
furnished to the Company (i) true and complete copies of the certificate of
incorporation and bylaws of the GP and the partnership agreement of the
Partnership, each as amended to date, and (ii) a list of persons who, as of the
date hereof, are (A) the limited partners of the Partnership, and (B) the
officers, directors and stockholders (and their percentage stockholdings) of the
GP.
4.2 Authorization. Each of the GP and the Partnership has all necessary
corporate or partnership (as applicable) power and authority to enter into this
Agreement, and in the case of the GP, the Financial Advisory Agreement, and to
perform its respective obligations hereunder and thereunder. This Agreement has
been duly authorized, executed and delivered by each of the GP and the
Partnership, and the Financial Advisory Agreement has been duly authorized,
executed and delivered by the GP, in each case pursuant to all necessary
corporate or partnership authorization. This Agreement is the legal, valid and
binding obligation of the
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GP and the Partnership, and the Financial Advisory Agreement is the legal, valid
and binding obligation of the GP, enforceable against them in accordance with
their respective terms, except as enforcement may be limited by equitable
principles limiting the right to obtain specific performance or other equitable
remedies, or by applicable bankruptcy or insolvency laws and related decisions
affecting creditors' rights generally.
4.3 No Conflict. The execution and delivery of this Agreement by each of
the GP and the Partnership does not, and the execution and delivery of the
Financial Advisory Agreement by the GP does not, and the performance by each of
them of their respective obligations hereunder and thereunder will not, conflict
with, result in a breach of, or constitute a default under, the certificate of
incorporation, bylaws, partnership agreement or other organizational instrument,
each as amended to the date hereof, of either of them, or the terms of any
material agreement or instrument to which either the GP or the Partnership, is a
party or by which either of them is bound, or any material order, decree,
statute, rule or regulation applicable to either of the GP or the Partnership.
4.4 Litigation. There is no pending or threatened action, suit or
proceeding before any court or governmental agency, authority or body involving
the GP or the Partnership which would have a material adverse effect on the
financial condition or results of operations of either of them or which would
adversely affect the ability of either of them to perform their respective
obligations under this Agreement or the Financial Advisory Agreement or which
questions the validity of this Agreement or the Financial Advisory Agreement.
4.5 Government Approval. The execution and delivery of this Agreement by
each of the GP and the Partnership does not, and the execution and delivery of
the Financial Advisory Agreement by the GP does not, and the performance by each
of them of their respective obligations hereunder and thereunder will not,
require either of the GP or the Partnership to obtain any authorization,
consent, approval, exemption or action of, or make any material filing with or
give any notice to, any court or administrative or governmental body or any
other person pursuant to the certificate of incorporation or bylaws of the GP,
the partnership agreement of the Partnership, or any law, statute, rule,
regulation, judgment or decree, or any material agreement, permit, license or
instrument, to which either of them is subject, except a Schedule 13D filing
with the SEC.
4.6 Stock Ownership. As of immediately prior to the Closing, none of the
Standstill Persons beneficially owns any shares of capital stock of the Company.
4.7 Broker. Neither the GP nor the Partnership nor any of their
respective Affiliates, officers, directors, employees or agents has employed any
investment banker, consultant, broker or finder or incurred any liability for
any brokerage fees, commissions or finder's fees in connection with the
transactions contemplated by this Agreement.
4.8 Investment Representation. Each of the officers and directors of the
GP and each person who is a limited partner of the Partnership on the date
hereof has, and each person who is admitted to the Partnership as a partner in
the future will have, such knowledge and experience in financial and business
matters that such person is capable of evaluating the merits and risks of the
purchase of the Convertible Note, the shares of Common Stock into which the
Convertible Note is convertible and the Preferred Shares. The Partnership
acknowledges that (i) none of the Convertible Note, the shares of Common Stock
into which the Convertible Note is convertible or the Preferred Shares have been
or will be registered under the Securities Act or any state securities laws and
all of such securities will be issued to the Partnership in reliance upon
exemptions from registration, (ii) the Preferred Shares shall bear a restrictive
legend to such effect, and (iii) the shares of Common Stock into which the
Convertible Note is
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convertible, if and when issued, shall bear the restrictive legend set forth in
the Convertible Note. The Partnership is acquiring the Convertible Note and the
Preferred Shares, and will acquire the shares of Common Stock into which the
Convertible Note is convertible, for its own account for investment purposes
only and not with a view toward the distribution thereof or with any intention
to distribute or resell the Convertible Note, the shares of Common Stock into
which the Convertible Note is convertible or the Preferred Shares. The
Partnership will not offer to sell, sell or otherwise transfer the Convertible
Note, any of the shares of Common Stock into which the Convertible Note is
convertible, the Preferred Shares or any interest in the Partnership in
violation of any applicable securities laws. The Partnership acknowledges that
during the course of the negotiation of this Agreement, it and its
representatives and advisors have had the opportunity to ask questions of and
receive answers from the Company to the extent that the Partnership has deemed
necessary, and have had access to or have received all written documentation and
other information deemed necessary by the Partnership for the purpose of
evaluating the Company, the purchase of the Convertible Note, the purchase of
the Preferred Shares and the transactions contemplated by this Agreement. In
entering into this Agreement, the Partnership has relied solely upon its own
investigation and analysis, its knowledge of the industry in which the Company
conducts its business and the representations and warranties of the Company
expressly set forth in this Agreement, and not upon any other representations,
warranties or statements of any kind. Each of the partners of the Partnership
is, and each person who is admitted to the Partnership as a partner in the
future will be, an "accredited investor" within the meaning given to that term
under SEC Regulation D. The Partnership will not take any actions that would
cause the Company's offer, sale or issuance of the Convertible Note, the shares
of Common Stock into which the Convertible Note is convertible or the Preferred
Shares to fail to qualify for any available exemption from the registration
requirements under any applicable securities laws.
4.9 Schedule 13D. The GP and the Partnership have furnished to the
Company a form of Schedule 13D, completed to reflect the transactions
contemplated hereby, which shall be filed with the SEC by the GP and the
Partnership at the time prescribed by applicable SEC rules and regulations in
substantially the form heretofore furnished to the Company.
SECTION 5: CERTAIN POST-CLOSING COVENANTS
------------------------------------------
5.1 Self-Tender Offer. As soon as practicable, but in any event not
later than five (5) business days, following the date hereof, the Company shall
commence an offer to purchase for its own account a minimum of 569,000 shares of
Common Stock for a purchase price of $14.50 per share (the "Self-Tender Offer").
In the Self-Tender Offer, the Company may, in its sole discretion, offer to
purchase and purchase for its own account more than 569,000 shares and, in such
event, the Self-Tender Offer for shares in excess of 569,000 may be conditioned
upon the receipt by the Company of bank or other institutional financing on
terms and in an amount satisfactory to the Company in its sole discretion.
Following consummation of the Self-Tender Offer, the Company shall be under no
obligation hereunder to offer to purchase any additional shares of Common Stock.
5.2 Compliance with SEC Rules. None of the Standstill Persons has taken
any action in violation of SEC Rule 14e-3 with respect to the Self-Tender Offer
(provided that the acquisition by the Partnership of the Convertible Note and
the shares of Common Stock issuable upon conversion thereof shall not be deemed
a violation of this Section 5.2), and from and after the date hereof through and
including the tenth (10th) business day following the expiration date (including
any extensions thereof) of the Self-Tender Offer, neither the GP nor the
Partnership will, and the GP and the Partnership shall cause the other
Standstill Persons not to, directly or indirectly, bid for or purchase, place
any order to sell or sell, or otherwise conduct or cause to be conducted any
trading or appearance of trading in any Common Stock or any right to
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acquire any Common Stock or any security convertible into or exchangeable for
any Common Stock, or make any arrangement with respect to any of the foregoing
with any person, or otherwise take any action in violation of the Exchange Act
or the applicable rules thereunder.
5.3 Ability of GP and Partnership to Perform. The GP and the Partnership
hereby represent to the Company that each of them has, and covenant with the
Company that each of them will have at all times during which any obligations of
Standstill Persons are in effect, all necessary corporate or partnership (as the
case may be) power, authority and ability to cause the other Standstill Persons
to perform the obligations of Standstill Persons set forth in this Agreement.
5.4 Subordination. The Partnership shall agree to the amendment of the
subordination terms of the Convertible Note to the extent reasonably required by
the provider of the Company's financing described in Section 5.1; provided that
the Company shall pay any fees and expenses reasonably incurred by the
Partnership or the GP in connection with such request (including all reasonable
attorneys' fees).
SECTION 6: BOARD OF DIRECTORS; VOTING OF SHARES
------------------------------------------------
6.1 Board of Directors.
(a) Issuance of Preferred Shares. At the Closing, in consideration of
the payment to the Company by the Partnership of the sum of One Hundred Dollars
($100.00) and the agreement of the Partnership to purchase the Convertible Note,
the Company shall issue and sell to the Partnership one hundred (100) shares of
preferred stock, no par value (the "Preferred Shares"), having the designations,
preferences, rights, qualifications and restrictions set forth in the
Certificate of Designation, Preferences and Rights of Preferred Stock, Series B,
in the form attached hereto as Exhibit E, and entitling the Partnership to elect
directors in accordance with the provisions thereof ("Certificate of
Designation").
(b) Transfer of Voting Securities; Change of Control. The rights of
the Partnership under the Preferred Shares shall inure only to the benefit of
the Partnership and may not be transferred without the prior written consent of
the Company. All of the Partnership's rights, and all of the Company's
obligations under, the Preferred Shares shall terminate upon the occurrence of a
Change of Control, unless otherwise agreed in writing by the Company in advance
of such Change of Control, as provided in the Certificate of Designation. The
Partnership shall give the Company prompt written notice of any change in the
number of shares of Voting Securities beneficially owned by it that would affect
the number of directors that the Partnership, as holder of the Preferred Shares,
is entitled to elect, and of any Change of Control.
(c) Alternative to Preferred Stock. In the event that the Preferred
Shares do not provide the Partnership with the voting rights set forth in the
Certificate of Designation, then the Board of Directors shall use reasonable
efforts, consistent with its fiduciary duties, to nominate as directors the
persons designated by the Partnership (so as to implement the Partnership's
rights to elect directors in accordance with and subject to all of the terms,
conditions and provisions set out in the Certificate of Designation). In such
event, Standstill Persons may vote all of their shares of Voting Securities for
such nominees designated by the Partnership and may solicit proxies in support
of their election, and the Company, subject to the exercise of the fiduciary
duties of the Board of Directors, will use reasonable efforts to have such
nominees elected to the Board of Directors. For the avoidance of doubt, so long
as the Partnership has the right to elect directors pursuant to and as provided
in the Certificate of Designation, the Company shall have no obligations under
this Section 6.1(c).
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6.2 Actions Subject to Approval. For so long as (i) the Partnership
shall not have at any time beneficially owned less than 285,000 shares of Voting
Securities (or an equivalent amount, in the event that the Company effects a
subdivision, combination or reclassification of the Voting Securities), (ii) the
Partnership shall have the right to elect, and shall have actually elected, at
least one (1) director, and (iii) a Change of Control has not occurred, the
Company shall not take any of the following actions unless at least one (1)
director elected by the Partnership shall have voted in favor of such action:
(i) the acquisition (including by merger, consolidation, purchase of
stock or assets or otherwise) by the Company of another company or a
business involving consideration, the fair market value of which,
determined in good faith by the Board of Directors, is $1,000,000 or more;
(ii) the incurrence of bank or other institutional indebtedness (other
than such indebtedness of the Company existing on the Closing Date or
contemplated hereby, and any amendments, modifications or extensions
thereof), unless, before entering into any commitment or agreement relating
thereto, the Company first gives the GP a reasonable opportunity to assist
the Company by identifying and arranging alternative sources of financing
on terms superior, in the judgment of the Company, to such indebtedness;
(iii) the sale or other disposition (whether in one transaction or a
series of related transactions) other than in the ordinary course of
business of any single Company tangible asset (or group of related tangible
assets) for consideration in excess of $100,000 (provided, however, that in
no event shall the approval provided for in this Section 6.2 be required
for a sale of all or substantially all of the assets of the Company
(including by merger, consolidation, purchase or sale of stock or assets or
otherwise));
(iv) any amendment of the certificate of incorporation or bylaws of
the Company, unless such amendment is necessitated by an action described
in this Section 6.2 and previously approved in accordance with this Section
6.2, if such amendment would adversely affect the rights of Standstill
Persons under this Agreement;
(v) the declaration by the Company of "extraordinary" dividends (i.e.,
dividends in excess of one hundred fifty percent (150%) of the prior year's
annual dividend) and dividends that have not been approved by a committee
of Independent Directors (excluding any (i) dividends on any securities
issued pursuant to any Rights Plans and (ii) any amendment to the Rights
Plan or the adoption of any substitution or replacement thereof, unless any
such amendment or substitute or replacement plan would lower the MFI
Investors' Percentage (as defined in the Rights Plan Amendment) or
otherwise repeal or modify the amendments to the Rights Plan adopted in the
Rights Plan Amendment); and
(vi) increases in the compensation of employees whose annual cash
compensation (treating restricted stock awards as cash compensation)
exceeds $150,000 (unless such increases have been approved by a
compensation committee of the Board of Directors consisting of Independent
Directors).
6.3 Voting by Standstill Persons.
(a) Obligation. The Partnership shall, and the GP and the Partnership
shall cause each other Standstill Person to, vote all Voting Securities entitled
to be voted by such persons in accordance with the provisions of this Section
6.3.
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(b) Voting on Directors. On the election (or removal) of directors
(other than directors elected by the Partnership as holder of the Preferred
Shares or pursuant to Section 6.1(c)), all Voting Securities entitled to be
voted by Standstill Persons shall be voted proportionally in accordance with the
total number of affirmative or negative votes cast by the Public Stockholders in
such election (or removal). On any stockholder vote on the removal of a
director elected by the Partnership pursuant to the Preferred Shares (or Section
6.1(c)), Standstill Persons shall be entitled to vote in their discretion all
Voting Securities entitled to be voted by them.
(c) Voting on Other Matters. On all matters submitted to a vote of
holders of Voting Securities (other than the election or removal of directors),
Standstill Persons shall (i) be entitled to vote in their discretion that number
of Voting Securities entitled to be voted by them equal to 19.9% of the total
combined voting power of all Voting Securities then outstanding, and (ii) vote
proportionally, in accordance with the total number of affirmative or negative
votes cast by the Public Stockholders on any such matter, that number of Voting
Securities entitled to be voted by Standstill Persons in excess of 19.9% of the
total combined voting power of all Voting Securities then outstanding.
(d) Procedure.
(i) To effectuate the voting requirements set forth in this
Section 6.3, the Partnership agrees that it shall, and the GP and the
Partnership shall cause all other Standstill Persons to:
(A) vote on all matters submitted to the vote of holders of
Voting Securities using a special form of proxy to be furnished by the
Company (if such form of proxy is timely furnished to the Partnership)
pursuant to which Standstill Persons shall give written instructions
as to the manner in which those shares permitted hereunder to be voted
in the discretion of Standstill Persons shall be voted, together with
instructions that all other shares entitled to be voted by Standstill
Persons shall be voted in accordance with the applicable provisions of
this Section 6.3; and
(B) not vote or permit to be voted any shares of Voting
Securities entitled to be voted by them in "street" or other nominee
name or on any proxy other than the special form of proxy referred to
in Section 6.3(d)(i)(A).
(ii) The Partnership shall deliver to the Company, prior to any
vote by the holders of Voting Securities, a list of all Standstill Persons,
the number of shares of Voting Securities beneficially owned by each
Standstill Person and the record holder of all such shares if the number of
shares beneficially owned by any Standstill Person has changed from the
amount reported in the Schedule 13D (as amended) filed by Standstill
Persons or such Schedule 13D does not name all of the record holders of
such shares.
(iii) The Company shall give to the Partnership written notice of
the votes cast by the Public Stockholders and the manner in which the votes
cast by Standstill Persons were calculated for purposes of the voting of
the special proxy referred to in this Section 6.3(d) in accordance with the
voting requirements of this Section 6.3.
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(e) Irrevocable Proxy. In order to secure the obligation of the
Partnership to vote in accordance with the provisions hereof, the Partnership is
delivering to the Company on the date hereof an irrevocable proxy in the form
attached hereto as Exhibit F.
6.4 Business Combinations. Neither the GP nor the Partnership shall, and
the GP and the Partnership shall cause the other Standstill Persons not to,
initiate, propose, encourage or otherwise solicit or participate in any form of
business combination or similar transaction involving the Company, including a
merger, consolidation, exchange offer or sale or liquidation of the Company's
assets, or any form of restructuring, recapitalization or similar transaction
with respect to the Company (a "Business Combination"), without the prior
approval of a majority of the Board of Directors; provided, that discussion by a
director of the Company elected by the Partnership with other directors of the
Company, all such directors acting in their fiduciary capacities as directors,
of a Business Combination presented to the Board of Directors shall not
constitute a violation of this Section 6.4. If a majority of the Board of
Directors shall approve a Business Combination, Standstill Persons may
participate therein on terms no less advantageous than those offered to any
other stockholder of the Company (in its capacity as a stockholder).
6.5 No 13D Groups. Neither the GP nor the Partnership shall, and the GP
and the Partnership shall cause the other Standstill Persons not to, directly or
indirectly, participate in, act in concert with or encourage the formation of
any 13D Group, or otherwise act in concert with any other persons, for the
purpose of acquiring, holding, voting or disposing of, or seeking or offering to
acquire, hold, vote or dispose of Voting Securities or rights to acquire Voting
Securities, or otherwise become a "person" within the meaning of Section
13(d)(3) of the Exchange Act, except as and to the extent specifically permitted
by Section 6.7(b). Notwithstanding the foregoing, the acquisition, disposition
and voting of Voting Securities by Standstill Persons to the extent specifically
permitted by this Agreement shall not constitute the formation of a 13D Group
for purposes of this Section 6.5.
6.6 No Voting Trusts or Agreements. Neither the GP nor the Partnership
shall, and the GP and the Partnership shall cause the other Standstill Persons
not to, deposit any Voting Securities in a voting trust or subject any Voting
Securities to any arrangement or agreement with respect to the voting of such
Voting Securities, except as provided for in Section 6.3 of this Agreement and
except for any agreement solely among the stockholders of MFI and/or among the
other Standstill Persons to the extent necessary to comply with their
obligations under this Agreement.
6.7 Proxy Contests.
(a) Restriction on Proxy Contests, Etc. Neither the GP nor the
Partnership shall, and the GP and the Partnership shall cause the other
Standstill Persons not to, (i) initiate, propose, encourage or participate in
any "solicitation" of "proxies" (as such terms are defined in SEC Regulation
14A) (other than for the nominees to the Board of Directors designated by the
Partnership in accordance with the provisions of Section 6.1(c)), including
action by written consent, (ii) become a "participant" in any "election contest"
(as such terms are defined or used in SEC Rule 14a-11) with respect to the
Company, nominate any person for election as a director (other than directors
nominated by the Partnership as holder of the Preferred Shares or nominated by
the Partnership pursuant to Section 6.1(c)), or seek to advise, encourage or
influence any person with respect to the voting of any Voting Securities of the
Company (provided that no Standstill Person shall be deemed to be a
"participant" by reason of being a Partnership designee to the Board of
Directors pursuant to Section 6.1(c)) or soliciting proxies for the election of
such person, or (iii) initiate, propose or otherwise solicit or participate in
the solicitation of any stockholder for the approval of one or more stockholder
proposals with
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respect to the Company (as described under SEC Rule 14a-8), or encourage any
other person to initiate any stockholder proposal relating to the Company.
(b) Termination of Restrictions. If the Company shall fail to meet an
Operating Income Target (as described in Section 6.7(c)), and if and for so long
as there has been no material breach of any provision of this Agreement that is
continuing by any Standstill Person, as the sole consequence of the Company's
failure to meet an Operating Income Target, the restrictions contained in
Section 6.7(a) shall cease to apply and Standstill Persons shall be entitled to
take any action described in Section 6.7(a) until such time as the Company shall
have met an Operating Income Target for a later year in the prescribed year;
provided, however, that all shares of Voting Securities entitled to be voted by
Standstill Persons in any such action submitted to a vote of holders of Voting
Securities (including an election or removal of directors) shall be voted in
accordance with the voting provisions set forth in Section 6.3(c). The
provisions of this Section 6.7(b) shall become effective from and after December
31, 1997.
(c) Operating Income Targets. For purposes of this Section 6.7, the
Company's annual operating income target for the year ending December 31, 1996
shall be $5,714,500 (calculated as 110% of the Company's 1995 operating income
of $5,195,000 (rounded)), and thereafter, for the duration of this Agreement,
shall be an amount equal to 110% of the prior year's Operating Income Target.
The amounts set forth below shall constitute the Operating Income Targets for
the years ending December 31, 1996 through 2005, and all Operating Income
Targets for years subsequent to the year 2005 shall be calculated in a manner
consistent with the calculation of the following Operating Income Targets:
Year Ending December 31, Operating Income Target
------------------------ -----------------------
1996 $ 5,714,500
1997 6,285,950
1998 6,914,545
1999 7,605,999
2000 8,366,599
2001 9,203,259
2002 10,123,585
2003 11,135,944
2004 12,249,538
2005 13,474,492
For purposes of calculating compliance with an annual Operating Income Target,
"operating income" shall mean the Company's "income from operations" reflected
in its audited consolidated statement of earnings for the relevant year (which
shall, in any case, be delivered at least forty-five (45) days prior to the
Company's annual meeting), and determined in a manner (and, if necessary,
adjusted to be) consistent with the presentation and accounting treatment for
such items of income and expense set forth in the Company's audited financial
statements for its 1995 fiscal year, plus or minus, for any such year, the
Company's proportionate share of any realized operating income or loss
attributable to any unconsolidated businesses or joint ventures of the Company
or any of its subsidiaries but (without double counting) only to the extent
otherwise reported or reflected in the Company's audited financial statements.
It shall not be a violation of this Agreement for Standstill Persons to give to
the Company notice of a proposed director nominee(s) prior to receipt of the
Company's audited financial statements so long as such nominee(s) shall be
withdrawn by such Standstill Persons promptly following issuance of the
Company's audited financial statements if the Company shall have met the
applicable Operating Income Target.
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(d) Management Voting. If, to the extent permitted by Section 6.7(b),
any of the actions described in Section 6.7(a) shall be taken by one or more
Standstill Persons, the Company shall require the Management Stockholders to
comply with the following voting requirements, including (i) by obtaining the
written agreement of the Management Stockholders to vote in accordance with this
Section 6.7(d) and, (ii) if and when the provisions of this Section 6.7(d) shall
come into effect, by instituting voting procedures for the Management
Stockholders comparable to those described in Section 6.3(d). In such event,
the Management Stockholders shall (i) be entitled to vote in their discretion
that number of Voting Securities entitled to be voted by them equal to 19.9% of
the total combined voting power of all Voting Securities then outstanding, and
(ii) vote proportionally, in accordance with the total number of affirmative or
negative votes cast by the Public Stockholders on any such matter, that number
of Voting Securities entitled to be voted by the Management Stockholders in
excess of 19.9% of the total combined voting power of all Voting Securities then
outstanding.
SECTION 7: RESTRICTIONS ON OWNERSHIP OF VOTING SECURITIES
----------------------------------------------------------
7.1 Standstill Percentage. The GP and the Partnership shall not, and
they shall cause the other Standstill Persons not to, permit the total
beneficial ownership of Voting Securities of all Standstill Persons collectively
to at any time exceed the Standstill Percentage; provided, however, that the GP
and the Partnership shall not be in violation of the provisions of this Section
7.1 solely as a result of a reduction in the number of shares of Voting
Securities then outstanding due to the repurchase of shares of Voting Securities
by the Company, unless and until such time as the Standstill Persons shall
purchase or otherwise become the beneficial owner of any additional shares of
Voting Securities; and, provided further, that the GP and the Partnership shall,
and the GP and the Partnership shall cause the other Standstill Persons to, at
all times vote any shares of Voting Securities held by Standstill Persons in
excess of the Standstill Percentage as a result of any such repurchases in
accordance with the provisions of Section 6.3. For the avoidance of doubt, for
purposes of this Section 7, beneficial ownership shall be calculated in
accordance with Section 1.3.
7.2 Protective Purchase Option.
(a) Protective Option. If at any time during the term of this
Agreement, the Company issues any equity securities (or any securities
convertible, exchangeable or exercisable for any equity security) including
shares of Voting Securities ("Equity Securities") for any reason to any person
(an "Issuance"), the Company shall promptly give notice of such Issuance to the
Partnership. With respect to each such Issuance, the Partnership shall have the
right (the "Protective Option") to purchase from the Company an amount of such
Equity Securities so that, after exercising its Protective Option, the number of
shares of Equity Securities purchased by the Partnership pursuant to its
Protective Option is equal to (i) the Protected Percentage, multiplied by (ii)
the sum of (x) the number of shares issued in such Issuance, plus (y) the number
of shares issued with respect to the Protective Option. "Protected Percentage"
is equal to the lesser of (A) the Standstill Percentage, and (B) the percentage
of the total number of shares of Voting Securities beneficially owned by the
Partnership immediately prior to such Issuance (ignoring for purposes of this
calculation any beneficial ownership attributable solely to the Partnership's
Protective Option with respect to such Issuance). For the avoidance of doubt,
the calculation of the Protective Option may also be expressed by the following
formula: Protective Option = Protected Percentage X (Issuance + Protective
Option). For example, if the number of shares of Equity Securities issued by
the Company is 1,000,000 and the Protected Percentage is 37.5%, the number of
shares of Equity Securities which may be purchased by the Partnership pursuant
to the Protective Option is 600,000, calculated as follows (600,000 = .375 X
(1,000,000 + 600,000). Notwithstanding the above, the Partnership's right to
purchase Equity Securities pursuant to this Section 7.2 shall be limited (and
not exercisable) to the extent
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that such purchase would cause the total beneficial ownership of Voting
Securities of all of the Standstill Persons collectively to exceed the
Standstill Percentage. For purposes of this Section 7.2, an Issuance shall not
include (i) a registered public offering of securities in which the Partnership
is a selling securityholder, (ii) any transaction in which Equity Securities are
issued pro rata to all stockholders of any class of outstanding Equity
Securities of the Company (including any stock dividend) to the extent that the
Partnership participates in such distribution on the basis of its beneficial
ownership of Equity Securities, (iii) any Equity Securities issued pursuant to
the Rights Plan, (iv) the issuance by the Company of any options or other rights
to acquire Equity Securities, but shall include the issuance by the Company of
such Equity Securities upon the actual exercise of such options or other rights,
(v) the issuance by the Company of any convertible securities, options or other
rights to acquire Common Stock, but shall include the issuance by the Company of
such Common Stock upon the actual conversion or exercise of such convertible
securities, options or other rights, or (vi) the issuance by the Company of
Common Stock upon the conversion of the Convertible Note.
(b) Option Period; Price. Each Protective Option shall be in effect
for a period of ninety (90) days following receipt by the Partnership of written
notice of the consummation of such Issuance, which notice shall be sent by the
Company to the Partnership not later than ten (10) business days following
consummation of the Issuance. The price per share for the shares of Equity
Securities to be issued and sold pursuant to the exercise of a Protective Option
shall be the issuance price for such shares of Equity Securities issued and sold
by the Company in the Issuance, which in the case of the issuance of shares of
Equity Securities for a consideration other than cash shall be the fair market
value of such consideration as determined in good faith by the Board of
Directors of the Company and, in the case of transactions involving total non-
cash consideration in excess of Five Million Dollars ($5,000,000), such value
shall, at the request of the Partnership, be confirmed by an investment banker
acceptable to the parties acting reasonably.
(c) Exercise of Option. The Partnership may exercise a Protective
Option by giving written notice thereof to the Company within the ninety (90)
day period in which the Protective Option is in effect. The Protective Option
may be exercised for all or a part of the shares of Equity Securities
represented by the Protective Option. The purchase price payable upon exercise
of a Protective Option shall be paid to the Company within five (5) business
days following notice of exercise of the Protective Option, at which time the
Company shall deliver to the Partnership certificates or other instruments
evidencing the Equity Securities.
(d) Termination. The obligations of the Company under this Section
7.2 shall terminate upon the first to occur of (i) a Change of Control, unless
otherwise agreed in writing by the Company in advance of such Change of Control
and, (ii) the date on which the Partnership shall beneficially own less than
five percent (5%) of the total combined voting power of all Voting Securities
then outstanding.
SECTION 8: TRANSFERS BY STANDSTILL PERSONS
-------------------------------------------
8.1 Tender Offers. Neither the GP nor the Partnership shall, and the GP
and the Partnership shall cause the other Standstill Persons not to, (i)
initiate, participate in or encourage any third party tender offers to purchase
or exchange ("Tender Offer") shares of Voting Securities without the prior
approval of the Board of Directors of the Company (except that the Partnership
may initiate and encourage Tender Offers on its own behalf so long as the
consummation thereof would not violate the provisions of Section 7.1), or (ii)
tender any shares of Voting Securities beneficially owned by such Standstill
Person into any Tender Offer which the Board of Directors has recommended be
rejected by the Company's stockholders unless, in connection with such Tender
Offer, the Board of Directors has voted to redeem rights issued
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by the Company pursuant to the Rights Plan or the Management Stockholders refuse
to agree not to tender any shares of Voting Securities beneficially owned by
them into such Tender Offer.
8.2 Sales in the Market.
(a) Market Sales Option. Neither the GP nor the Partnership shall,
and the GP and the Partnership shall cause the other Standstill Persons not to,
transfer shares of Voting Securities pursuant to the provisions of SEC Rule 144
without having first given to the Company five (5) days' prior notice before
each initial filing by a selling Standstill Person of a Form 144, specifying an
aggregate number of shares proposed to be sold under SEC Rule 144 (the "Rule 144
Shares"). The Company shall have the option to purchase the Rule 144 Shares (a
"Market Sales Option") within five (5) days following receipt of such notice at
a purchase price equal to the average daily closing price for the class of
Voting Securities proposed to be sold during the twenty (20) day period prior to
the delivery of such notice ("Fair Market Value"). The Company may exercise a
Market Sales Option by giving written notice thereof to the selling Standstill
Person within the five (5) day period in which the Market Sales Option is in
effect. The Market Sales Option may be exercised for all or a part of the Rule
144 Shares. The purchase price payable upon exercise of a Market Sales Option
shall be paid by the Company within three (3) days following delivery of the
Company's notice of exercise of the Market Sales Option, against delivery to the
Company of certificates evidencing the shares to be so purchased, appropriately
endorsed for transfer.
(b) Rule 144 Sales. If the Company shall fail to exercise a Market
Sales Option as to any of the Rule 144 Shares, the selling Standstill Person
shall be free to sell such shares pursuant to the terms and conditions of SEC
Rule 144 so long as such sales occur not later than six (6) months following the
expiration of the Market Sales Option. If the Rule 144 Shares are not sold
pursuant to this Section 8.2 within such six (6) month period, any proposed sale
of such shares shall again be subject to the provisions of this Section 8.2.
(c) Form 144. The selling Standstill Person shall promptly deliver to
the Company an executed copy of any notice on Form 144 required to be filed with
the SEC.
8.3 Private Sales.
(a) General. Neither the GP nor the Partnership shall, and the GP and
the Partnership shall cause each other Standstill Person not to, transfer shares
of Voting Securities to any person (other than to a person, and in a
transaction, that has been approved in writing in advance by the Board of
Directors of the Company) unless the transferring Standstill Person has complied
with all of the provisions of this Section 8.3 (provided, however, that in the
case of a transfer permitted under Section 8.8, the GP and the Partnership shall
only be required to comply with the provisions of Section 8.3(e)). The
provisions of this Section 8.3 shall not, however, apply to transfers of Voting
Securities permitted pursuant to the provisions of Section 8.1 or Section 8.2.
As used in this Section 8, (i) the terms "transfer," "transferring,
"transferred" and variations thereof, shall mean and refer to any sale, gift,
pledge, encumbrance, hypothecation, distribution, transfer or other act or
action, whether voluntary or involuntary, by operation of law or otherwise,
whereby or as a result of which, a person's ownership, interest or rights in any
Voting Securities or the Convertible Note are transferred, disposed of or
encumbered in any way, and shall include a Change of Control, but shall not
include the transfer or issuance of any capital stock in the GP that does not
result in a Change of Control or a transfer, issuance or re-arrangement of any
limited partnership interests in the Partnership, and (ii) references to
transfers of Voting Securities shall include transfers of any Warrants.
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<PAGE>
(b) Sales of Five Percent or Less. If the number of shares of Voting
Securities proposed to be transferred by one or more Standstill Persons to any
single purchaser and/or its Affiliates in any single transaction or series of
transactions (or, in the case of a Change of Control, the number of shares of
Voting Securities then beneficially owned by the Partnership) shall be five
percent (5%) or less of the total combined voting power of all Voting Securities
then outstanding, such Standstill Persons may transfer such Voting Securities
(or a Change of Control of the Partnership may be effected) without regard to
any other provision of this Section 8.3 so long as, prior to any such transfer,
the Company shall have received an opinion of counsel, reasonably satisfactory
to the Company in form and substance, that the transfer is exempt from
registration under the Securities Act and applicable state securities laws.
(c) First Offer Option. If the number of shares of Voting Securities
proposed to be transferred by one or more Standstill Persons to a single
transferee and/or its Affiliates in any single transaction or series of
transactions or, in the case of a Change of Control, the number of shares of
Voting Securities then beneficially owned by the Partnership (in either case,
the "First Offer Shares"), shall be greater than five percent (5%), but less
than ten percent (10%), of the total combined voting power of all Voting
Securities then outstanding, the Company shall have a right of first offer to
purchase the First Offer Shares on the terms set forth herein.
(i) Prior to any transfer of First Offer Shares (or prior to any
Change of Control), the transferring Standstill Persons (which, in the case
of a Change of Control, shall be the Partnership) shall give to the Company
written notice (the "First Offer Notice") stating the number of First Offer
Shares and, in the case of a Change of Control, the anticipated results of
the Change of Control (i.e., identity of the person to whom control is
proposed to be transferred). The Company may offer to purchase all (but not
part) of the First Offer Shares at the purchase price specified in a
written offer given to the transferring Standstill Persons within twenty
(20) days after receipt by the Company of the First Offer Notice (the
"First Offer"). The transferring Standstill Persons may accept the First
Offer by giving written notice of such acceptance to the Company within
fifteen (15) days after the date of receipt of the First Offer. The
purchase price payable upon acceptance of a First Offer shall be paid by
the Company within five (5) days following acceptance of the First Offer,
against delivery to the Company of certificates evidencing the shares to be
so purchased, appropriately endorsed for transfer.
(ii) If the First Offer is not accepted by the transferring
Standstill Persons, the First Offer Shares may be transferred by the
transferring Standstill Persons for a purchase price equal to or greater
than the purchase price set forth in the Company's First Offer (or the
Change of Control may be effected), subject to the provisions of Section
8.3(e), so long as any such transfer occurs not later than six (6) months
following the delivery of the First Offer. If the First Offer Shares are
not transferred (or the Change of Control effected) pursuant to this
Section 8.3(c)(ii) within such six (6) month period, any proposed transfer
of such shares shall again be subject to the provisions of this Section
8.3(c).
(d) First Refusal Rights. If the number of shares of Voting
Securities proposed to be transferred by one or more Standstill Persons to a
single purchaser and/or its Affiliates in any single transaction or series of
transactions or, in the case of a Change of Control, the number of shares of
Voting Securities then beneficially owned by the Partnership (in either case,
the "First Refusal Shares"), shall be ten percent (10%) or more of the total
combined voting power of all Voting Securities then outstanding, the Company
shall have a right of first refusal to purchase the First Refusal Shares on the
terms set forth herein.
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(i) Prior to any transfer of First Refusal Shares (or prior to
any Change of Control), the transferring Standstill Persons (which, in the
case of a Change of Control, shall be the Partnership) shall give to the
Company written notice (the "First Refusal Notice") stating, in the case of
a Change of Control, the anticipated results of the Change of Control, and
in the case of a proposed transfer of shares, the identity of the proposed
transferee, that the proposed transferee is a bona fide purchaser whom the
Standstill Persons reasonably believe is financially able to purchase the
First Refusal Shares on the terms offered, and the price, terms and
conditions upon which the transferring Standstill Persons desires to
transfer the First Refusal Shares to the proposed transferee. The Company
shall have the right to purchase all (but not part) of the First Refusal
Shares upon the terms and conditions contained in the First Refusal Notice,
or at the Fair Market Value of the First Refusal Shares in the case of a
Change of Control (the "First Refusal Right"). The First Refusal Right
shall be exercised by the Company giving written notice thereof to the
transferring Standstill Persons within thirty (30) days (or, in the event
of a Change in Control within ninety (90) days) after the date of receipt
by the Company of the First Refusal Notice. The purchase price payable upon
exercise of a First Refusal Right shall be paid by the Company within five
(5) days following delivery of the Company's notice of exercise of the
First Refusal Right, against delivery to the Company of certificates
evidencing the shares to be so purchased, appropriately endorsed for
transfer.
(ii) If the First Refusal Right is not exercised by the Company
as to all of the First Refusal Shares, the First Refusal Shares may be sold
by the transferring Standstill Persons to the proposed purchaser, for the
same purchase price and on the same terms and conditions set forth in the
First Refusal Notice (or the Change of Control may be effected), subject to
the provisions of Section 8.3(e), so long as any such sale occurs not later
than sixty (60) days following the expiration of the First Refusal Right.
If the First Refusal Shares are not sold (or the Change of Control
effected) pursuant to this Section 8.3(d)(ii) within such sixty (60) day
period, any proposed transfer of such shares shall again be subject to the
provisions of this Section 8.3(d).
(e) Transfers to Third Parties. If the Company shall not have
purchased shares under either Section 8.3(c) or 8.3(d), as applicable, within
the time period provided therefor the transferring Standstill Persons shall not
be prohibited under this Agreement from transferring such First Offer Shares or
First Refusal Shares, as the case may be, to the proposed third party
transferee, so long as (subject to such proposed transferee obtaining any
requisite consents, approvals or exemptions described in Section 8.10):
(i) the proposed transferee, together with its Affiliates and any
13D Group of which it may be a member, shall not, as of the date of
purchase, after giving effect to the proposed transfer, beneficially own a
number of shares of Voting Securities in excess of the Standstill
Percentage;
(ii) if the proposed transferee, together with its Affiliates and
any 13D Group of which it is a member, shall, as of the date of purchase,
beneficially own, after giving effect to the proposed purchase, fifteen
percent (15%) or more of the total combined voting power of all Voting
Securities then outstanding, such proposed transferee, together with its
Affiliates and the members of any 13D Group of which the proposed
transferee is a member, shall first agree in writing to be bound by, comply
with, and be subject to, the provisions of Sections 6.3, 6.4, 6.5, 6.6,
6.7, and Section 8 (other than Section 8.12) of this Agreement); and
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(iii) in the case of a transfer of First Refusal Shares, the
Company shall have received an opinion of counsel, reasonably satisfactory
to the Company in form and substance, that the transfer is exempt from
registration under the Securities Act and applicable state securities laws.
8.4 Public Tag-Along Rights. Neither the GP nor the Partnership shall,
and the GP and the Partnership shall cause the other Standstill Persons not to,
transfer any Voting Securities representing in the aggregate twenty percent
(20%) or more of the total combined voting power of all Voting Securities then
outstanding ("Tag-Along Shares") to a single transferee and/or its Affiliates
and/or any member of any 13D Group of which such transferee is a member in a
single transaction or series of transactions (a "Tag-Along Sale") unless the
proposed transferee agrees (if so required by the Company) to offer to purchase
all of the outstanding Voting Securities for the same per share purchase price
offered to be paid for the Tag-Along Shares. The Partnership shall give written
notice to the Company of any Tag-Along Sale proposed to be accepted by a
Standstill Person not later than ninety (90) days prior to the date on which a
transfer pursuant to a Tag-Along Sale is proposed to be consummated. The
Company shall have thirty (30) days following receipt of such notice to require,
by delivery of written notice to the Partnership, that the proposed transferee
offer to purchase all of the outstanding Voting Securities pursuant to this
Section 8.4. Absent compliance by the proposed transferee with such
requirement, no Standstill Person shall sell any Tag-Along Shares.
8.5 Sales Prohibited During Public Offerings. Each of the GP and the
Partnership agrees, and the GP and the Partnership shall cause each other
Standstill Person to agree, that if any shares of Voting Securities of the
Company are offered to the public in an underwritten public offering pursuant to
an effective registration statement under the Securities Act, such Standstill
Person will not effect any public sale or distribution of any shares of such
class of Voting Securities (other than shares registered for sale pursuant to
such registration statement) within the 14 days prior to, and within the 120
days after, the effective date of such registration statement (or such shorter
period that the underwriter requires of the Management Stockholders).
8.6 Board Determination. The Company's determination as to whether it
shall exercise a Market Sales Option, a First Offer Option or a First Refusal
Right or shall require a transferee to offer to purchase shares of Voting
Securities pursuant to Section 8.4 shall be made by the Board of Directors of
the Company, except that any director who is elected by the Partnership (other
than an Independent Director) shall not be entitled to vote on any such
decision.
8.7 Transfers of Convertible Note.
(a) The Partnership may transfer all or any portion of the Convertible
Note in accordance with and subject to the provisions of this Section 8.7, but
only if the Partnership shall have first given to the Company notice of the
proposed transfer indicating the identity of the proposed transferee and the
outstanding principal amount represented by the portion of the Convertible Note
proposed to be transferred by the Partnership. If the Company desires to prepay
such portion of the Convertible Note, it shall so notify the Partnership in
writing not later than ten (10) days following receipt by the Company of notice
from the Partnership of its intention to transfer the Convertible Note. Upon
exercise of such option, the Company shall have twenty (20) days in which to pay
to the Partnership such outstanding principal amount, plus all accrued and
unpaid interest thereon, and to deliver to the Partnership a Warrant.
(b) If the Company shall not have exercised its rights under Section
8.7(a) within the time period provided therefor, the Partnership may transfer
that portion of the
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Convertible Note designated in its notice given pursuant to Section 8.7(a) to a
third party transferee, so long as (subject to such proposed transferee
obtaining any requisite consents, approvals or exemptions described in Section
8.10):
(i) the proposed transferee, together with its Affiliates and any 13D
Group of which it may be a member, shall not, as of the date of transfer,
beneficially own a number of shares of Voting Securities in excess of the
Standstill Percentage;
(ii) if the proposed transferee, together with its Affiliates and any
13D Group of which it is a member, shall, as of the date of transfer,
beneficially own fifteen percent (15%) or more of the total combined voting
power of all Voting Securities then outstanding, such proposed transferee,
together with its Affiliates and the members of any 13D Group of which the
proposed transferee is a member, shall first agree in writing to be bound
by, comply with, and be subject to, the provisions of Sections 6.3, 6.4,
6.5, 6.6, 6.7 and Section 8 (other than Section 8.12) of this Agreement);
and
(iii) the Company shall have received an opinion of counsel,
reasonably satisfactory to the Company in form and substance, that the
transfer is exempt from registration under the Securities Act and
applicable state securities laws.
8.8 Limits on Partnership Distributions; Ownership. Notwithstanding any
other provisions of this Agreement, without the prior written consent of the
Board of Directors, the GP and the Partnership hereby agree that prior to the
fifth (5th) anniversary of the date of this Agreement, the Partnership shall not
make any transfers of Voting Securities or the Convertible Note to partners of
the Partnership. On and after the fifth (5th) anniversary of the date of this
Agreement, the Partnership may make any such transfers to partners of the
Partnership so long as any transfers of Voting Securities or the Convertible
Note shall be made in accordance with the provisions of Sections 8.3(e) and
8.7(b), as applicable, except that the Company shall not then be entitled to any
First Offer or First Refusal Rights as a result of any transfer of Voting
Securities to partners of the Partnership. Until any termination of the
Standstill Provisions in accordance with the provisions of Section 10.1, the
Partnership shall own at least 80% of all of the shares of Voting Securities
beneficially owned by all Standstill Persons.
8.9 No Transfer of Rights. Unless otherwise agreed in writing by the
Company in advance of a transfer of Voting Securities, the Preferred Shares or
the Convertible Note or the occurrence of a Change of Control, the rights and
benefits accruing to the Partnership under the Preferred Shares, Section 6.2,
Section 7.2 and Section 9 shall not under any circumstances be transferred to
any transferee of Voting Securities, the Preferred Shares or the Convertible
Note (except that a transferee pursuant to Section 8.3(e)(ii) shall be entitled
to the registration rights described in Section 9.3, but not to the registration
rights described in Section 9.2), and, for the avoidance of doubt, upon the
occurrence of a Change of Control, the Partnership shall no longer be entitled
to the benefits of the Preferred Shares, Section 6.2 or Section 7.2, but shall
be entitled to the benefits of Section 9.
8.10 No Approval. Nothing contained in this Agreement shall be
construed as an approval, or as a commitment by the Company to approve, for
purposes of Section 203 of the Delaware General Corporation Law any acquisition
of or ownership by a transferee of Voting Securities or the Convertible Note
(including a transferee permitted by Section 8.3, Section 8.4 (to the extent
that the Board of Directors has not required such transferee to offer to
purchase all outstanding Voting Securities) or Section 8.8) or as a commitment
by the Company to amend the Rights Plan to permit any such acquisition or
ownership.
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8.11 Non-Conforming Transfers Void. Any transfer or attempted transfer
of shares of Voting Securities or the Convertible Note in violation of any
provision of this Section 8 shall be void ab initio and the Company shall not be
required to, and the Company's transfer agent shall be instructed not to,
recognize any such transfer or attempted transfer on the books and records of
the Company. The certificates evidencing any shares of Voting Securities shall
bear a legend to such effect. The GP and the Partnership shall, and shall cause
any other Standstill Person to, promptly submit to the Company and shares of
Voting Securities acquired by any of them (other than certificates issued by the
Company upon conversion of the Convertible Note) so that such certificates may
be legended in accordance with the foregoing provision.
8.12 Legend Removal. Upon the occurrence of any transfer made in
accordance with the terms of this Section 8, if the shares of Voting Securities
are no longer subject to the restrictions set forth in this Agreement, the
Company shall, and shall cause its transfer agent to, remove all restrictive
legends referencing this Agreement (other than securities laws legends that may
still be applicable) that are set forth on the certificate representing such
transferred Voting Securities.
SECTION 9: REGISTRATION RIGHTS
-------------------------------
9.1 Registrable Securities; Registration Statement. As used in this
Section 9, (i) the term "registration statement" shall mean a "registration
statement" as that term is defined and used in the Securities Act, but shall not
mean a registration statement on Form S-8, S-4 or similar form for a limited
purpose, and (ii) the term "registrable securities" shall mean shares of Common
Stock owned by the Partnership, except that shares of Common Stock shall cease
to be registrable securities when a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such shares shall have been disposed of in accordance with such registration
statement, such shares have been sold pursuant to SEC Rule 144 (or any successor
provision), or such shares shall have ceased to be outstanding.
9.2 Demand Registrations. Upon receipt by the Company of a written
request from the Partnership, the Company shall, with reasonable promptness,
file a registration statement to register under the Securities Act for sale or
distribution to the public the number of shares of registrable securities owned
by the Partnership specified in such request; to thereafter file such amendment
or amendments to such registration statement as shall be necessary to cause the
same be effective; and to cooperate with underwriters reasonably selected by the
Partnership for purposes of the distribution of such securities; provided,
however, that the Company shall not be obligated to honor any such request made
prior to eighteen (18) months following the date hereof or made more frequently
than once every twelve (12) months thereafter. The Company shall not be
obligated under this Section 9.2 to effect more than three (3) demand
registrations.
9.3 Participation Registration. In addition to the demand registrations
set forth in Section 9.2, the Company agrees that, if the Company shall at any
time propose to file a registration statement covering the sale of Common Stock
by the Company, and the Partnership then beneficially owns not less than one
percent (1%) of the total number of shares of Common Stock then outstanding, the
Company shall give to the Partnership written notice of such intention at least
thirty (30) days prior to the proposed filing date and shall include in such
registration statement the number of registrable securities that the Partnership
shall request be so included; provided, however, that the inclusion of such
securities may be conditioned or restricted if, in the opinion of the managing
underwriter or underwriters of the offering, such inclusion would have a
material adverse effect on the successful distribution of shares by the Company.
If the number of shares of registrable securities requested by the Partnership
to be
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included in a registration statement pursuant to this Section 9.3 shall be
reduced as the result of the opinion of the managing underwriter or
underwriters, such reduction shall be made pro rata among all persons (other
than the Company) who have requested that their shares of registrable securities
be included in such registration statement.
9.4 Obligations of the Company.
(a) Underwritten Offerings Only. The obligations of the Company to
file registration statements pursuant to Section 9.2 and to include securities
owned by the Partnership on registration statements pursuant to Section 9.3
shall, in each case, apply only to underwritten offerings and shall not apply to
"shelf" registrations.
(b) Company Obligations. As to each registration statement referred
to in Sections 9.2 and 9.3, the Company shall:
(i) use its best efforts to have such registration statement
declared effective as promptly as reasonably practicable and to notify the
Partnership in writing, (A) when such registration statement has become
effective, (B) when any post-effective amendment to any such registration
statement has become effective, and (C) of any request by the SEC for any
amendment or supplement to such registration statement or any prospectus
relating thereto or for additional information;
(ii) furnish to the Partnership such number of copies of any
prospectus (including any preliminary prospectus) as the Partnership may
reasonably request in order to effect the offering and sale of registrable
securities offered and sold by the Partnership, but only while the Company
is required under the provisions hereof to cause the registration statement
to remain current;
(iii) use its best efforts to register or qualify, not later than
the effective date of such registration statement, registrable securities
of the Partnership registered thereunder under the "blue sky" laws of such
states as the Partnership or the underwriters of such offering may
reasonably request; provided, however, that the Company shall not be
obligated to qualify as a foreign corporation or as a dealer in securities
or to execute or file any general consent to service of process under the
laws of any such state where it is not at such time so qualified or
subject;
(iv) from the effective date of the registration statement, keep
such registration statement in effect and current and from time to time
amend or supplement the registration statement and the prospectus in
connection therewith to the extent necessary to permit the completion of
the sale for which such registration statement shall have become effective
for such period as is necessary to complete the distribution contemplated
by such registration statement. If at any time the SEC should institute or
threaten to institute any proceedings for the purpose of issuing, or should
issue, a stop order suspending the effectiveness of any such registration
statement, the Company will promptly notify the Partnership and will use
its best efforts to prevent the issuance of any such stop order or to
obtain the withdrawal thereof as soon as possible. The Company will advise
the Partnership promptly of any order or communication of any public board
or body addressed to the Company suspending or threatening to suspend the
qualification of any of the shares for sale in any jurisdiction.
(v) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions (including
exerting reasonable efforts to market such offering) as the Partnership or
the underwriters
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reasonably request in order to expedite or facilitate the disposition of
such registrable securities (including effecting a stock split or a
combination of shares);
(vi) not effect any public sale or distribution of its equity
securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during
the 120-day period beginning on the effective date of any registration
pursuant to Section 9.2 or 9.3 (except pursuant to registrations on Form S-
8 or any successor form), unless the underwriters managing the registered
public offering otherwise agree, and shall cause each Management
Stockholder to agree not to effect any public sale or distribution
(including sales pursuant to Rule 144) of any such securities during such
period (except as part of such underwritten registration, if otherwise
permitted), unless the underwriters managing the registered public offering
otherwise agree; and
(vii) make available for inspection by the Partnership, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors, employees and independent accountants to supply all information
reasonably requested by the Partnership, or any such underwriter, attorney,
accountant or agent in connection with such registration statement.
9.5 Expenses. Except as hereinafter stated, the entire cost and expense
of the registrations pursuant to Sections 9.2 and 9.3 shall be borne by the
Company. The costs and expenses of any such registrations shall include the
fees and expenses of the Company's counsel and its accountants and all other
out-of-pocket costs and expenses of the Company incident to the preparation,
printing and filing under the Securities Act of the registration statement and
all amendments and supplements thereto and the cost of furnishing copies of each
preliminary prospectus, each final prospectus and each amendment or supplement
thereto to underwriters, dealers and other purchasers of the securities so
registered, the costs and expenses incurred in connection with the qualification
of such securities so registered under the "blue sky" laws of various
jurisdictions and all other costs and expenses of complying with the foregoing
provisions of this Section 9; provided, however, that under no circumstances
shall the Company be liable or responsible for the fees and expenses of the
Partnership's counsel or for underwriting discounts and commissions payable in
connection with any sale of registrable securities of the Partnership included
in a registration statement.
9.6 Indemnification. The Company hereby indemnifies and agrees to hold
harmless the Partnership, any underwriter (as defined in the Securities Act) for
the Partnership, any broker or dealer to or through whom the Partnership sells
registrable securities that may be deemed to be an underwriter and each person,
if any, that controls the Partnership, including all officers, directors and
stockholders of the GP, or any such underwriter, broker or dealer against
claims, damages or liabilities, joint or several, to which any such persons may
be subject, under the Securities Act or otherwise, and to reimburse any of such
persons for any legal or other expenses incurred in connection with
investigating or defending against any such losses, claims, damages or
liabilities, insofar as such losses, claims, damages or liabilities arise out of
or are based upon any untrue statement or alleged untrue statement of a material
fact contained in any registration statement under which such registrable
securities were registered under the Securities Act pursuant to this Section,
any prospectus contained therein, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities arise out of or are based upon information furnished to
the Company in writing by the
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Partnership or any underwriter for the Partnership specifically for use therein.
By requesting registration under Section 9.2 or Section 9.3, the Partnership
will be deemed thereby to indemnify and to have agreed to hold harmless the
Company and its directors and officers and each person, if any, who controls
Company within the meaning of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, to which any of such persons may be
subject under the Securities Act or otherwise, and to reimburse any of such
persons for any legal or other expenses incurred in connection with the
investigation of or defense against any such losses, claims, damages or
liabilities, but only to the extent caused by an untrue statement or alleged
untrue statement or omission or alleged omission of a material fact in any
registration statement pursuant to Section 9.2 or Section 9.3, any prospectus
contained therein, or any amendment or supplement thereto, which was based upon
and in conformity with information furnished to the Company by the Partnership
expressly for use therein.
SECTION 10: TERMINATION
------------------------
10.1 Termination Following the Closing. The provisions of Sections 6.3,
6.4, 6.5, 6.6, 6.7, Section 7.1 and Section 8 (other than Section 8.10 and
Section 8.12) (the "Standstill Provisions") of this Agreement shall terminate,
and Standstill Persons shall have no further obligations thereunder, upon notice
of such an election to so terminate delivered by the Partnership to the Company
at anytime following the date on which Standstill Persons shall collectively
beneficially own less than fifteen percent (15%) of the total combined voting
power of all Voting Securities then outstanding. Effective with such
termination, the Partnership's right to elect directors pursuant to the
Preferred Shares and the provisions of Sections 6.1, 6.2 and 7.2 of this
Agreement shall also terminate and the Partnership shall have no further rights
thereunder.
10.2 Application of Section 203 of the Delaware General Corporation Law
("Section 203").
(a) Notwithstanding any provision contained herein to the contrary, the
parties agree and acknowledge that (i) the approval of the Board of Directors
referred to in Section 3.11 was not intended to and did not constitute approval
of the ownership (as defined in Section 203) or of any transaction that would
result in the ownership (as defined by Section 203) by any Standstill Person of
fifteen percent (15%) or more of the outstanding Voting Stock (as defined in
Section 203) of the Company at any time after the Standstill Persons shall
beneficially own less than fifteen percent (15%) of the total combined voting
power of all Voting Securities then outstanding and (ii) no Standstill Person
shall, by reason of the approvals referred to in Section 3.11, be exempt from
the requirements imposed upon an "interested stockholder" (as defined in Section
203) in the event such Standstill Person shall become the owner (as that term is
defined in Section 203) of fifteen percent (15%) or more of the outstanding
Voting Stock (as defined in Section 203) of the Company after the Standstill
Persons shall have so ceased to beneficially own at least such percentage of
Voting Securities.
(b) If, at the time the Standstill Persons shall have ceased beneficially
to own at least fifteen percent (15%) of the combined voting power of all Voting
Securities then outstanding, any Standstill Person shall not have ceased to be
an "interested stockholder" (as defined in Section 203) by reason of clause (ii)
of Subsection 5 of Section (c) of Section 203 and, therefore, is, or could be,
notwithstanding Section 10.2(a), exempt from the requirements imposed upon such
an "interested stockholder" by reason of the approvals referred to in Section
3.11, such Standstill Person, if it is the Partnership or GP, hereby agrees
that, and, if it is not the Partnership or the GP, the Partnership and the GP
agree to cause such Standstill Person to, execute a written agreement with the
Company stating that, such person shall not engage in any business combination
(as defined in Section 203) for a period of three (3) years following the
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time that such Standstill Person becomes, after the date the Standstill Persons
cease to beneficially own at least such percentage of Voting Securities, the
beneficial owner (as defined in Section 203) of fifteen percent (15%) of the
Voting Stock (as defined in Section 203) of the Company unless: (1) prior to
the time such Standstill Person becomes such a beneficial owner the Board of
Directors of the Company shall have approved either the business combination or
the transaction which results in the Standstill Person becoming such a
beneficial owner; (2) upon consummation of the transaction which results in the
Standstill Person becoming such a beneficial owner, the Standstill Person shall
own at least eighty-five percent (85%) of the Voting Stock (as defined in
Section 203) of the Company outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares outstanding those
shares owned (as defined in Section 203) (i) by persons who are directors and
also officers of the Company and (ii) employee stock plans of the Company in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer; or (3) at or subsequent to the time such person becomes such a beneficial
owner, the business combination is approved by the Board of Directors and
authorized at an annual or special meeting of the stockholders, not by written
consent, by the affirmative vote of at least sixty-six and two-thirds percent
(66 2/3%) of the outstanding Voting Stock (as defined in Section 203) which is
not owned by such Standstill Person.
SECTION 11: MISCELLANEOUS
--------------------------
11.1 Survival. The representations and warranties contained in Sections
3.1, 3.2 (except as otherwise provided herein), 3.3, 3.7, 3.8, 4.1 (except as
otherwise provided herein), 4.2, 4.6 and 4.8 shall survive for a period of one
(1) year following the Closing Date. The warranty contained in the last two
sentences of Section 3.2 and the third sentence of Section 4.1 shall survive
until the termination of the Standstill Provisions pursuant to Section 10.1. All
other representations and warranties contained in Section 3 and Section 4 shall
not survive the Closing, but shall terminate with, and be of no further force or
effect following, the Closing.
11.2 Expenses. The Company shall pay its own expenses incurred in
connection with the negotiation, preparation and execution of this Agreement and
the GP and the Partnership shall pay their own expenses incurred in connection
with the negotiation, preparation and execution of this Agreement, except that
Company shall reimburse the GP and the Partnership for all reasonable fees and
expenses actually incurred by them in connection with the negotiation,
preparation and execution of this Agreement, up to the maximum amount of
$125,000, such reimbursement to be made following the delivery to the Company by
the Partnership of the Purchase Price and invoices reasonably necessary to
document such fees and expenses.
11.3 Amendment. This Agreement may not be modified, amended, altered or
supplemented except by a written agreement signed by the Company, the GP and
the Partnership. If any term or provision of this Agreement is held by a court
of competent jurisdiction to be invalid, void, unenforceable or against public
policy, the remainder of terms, provisions, and covenants of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
11.4 Successor; Assignment. Except as otherwise provided herein, this
Agreement shall be binding upon and shall inure to the benefit of the successors
to, and permitted assigns of, the parties hereto; provided, however, that this
Agreement shall not be binding upon or inure to the benefit of any successor to
the Company in a merger in which the Company is not the surviving corporation or
the Preferred Shares cease to exist. This Agreement shall not be assignable by
any of the parties hereto without prior written consent of the other parties.
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11.5 Notices. All notices, consents, requests, instructions, approvals
and other communications provided for herein shall be validly given, made or
served, in writing and delivered personally, or telecopied or mailed by
certified U.S. mail, return receipt requested, postage pre-paid, or sent by
Federal Express or other overnight courier service, addressed as follows:
If to the Company: Market Facts, Inc.
3040 West Salt Creek Lane
Arlington Heights, Illinois 60005
Attention: President
Telephone No.: (847) 590-7200
Telecopier No.: (847) 590-7010
With a copy to: Keck, Mahin & Cate
77 West Wacker Drive, Suite 4900
Chicago, Illinois 60601-1693
Attention: Wesley S. Walton
Telephone No.: 312-634-5104
Telecopier No.: 312-634-5000
If to the GP MFI Associates, Inc.
or the Partnership: 54 Morris Lane
Scarsdale, New York 10583
Attention: Ned L. Sherwood
Telephone No.: 914-725-8124
Telecopier No.: 914-725-8124
With a copy to: Kirkland & Ellis
153 East 53rd Street
New York, New York 10022
Attention: Glen E. Hess, P.C.
Telephone No.: 212-446-4808
Telecopier No.: 212-446-4900
or, in each case, at such other address as may be substituted by notice given as
herein provided, but no such change shall be deemed to have been given until it
is actually received by the parties sought to be charged with its contents. Any
notice or other communication required or permitted to be given under this
Agreement shall be deemed to have been duly given on the date personally
delivered, if delivered by hand with receipt acknowledged, or the date of the
telecopier transmission upon transmission thereof by the sender and issuance by
the transmitting machine of a confirmation slip that the number of pages
constituting the notice has been transmitted without error, or five (5) days
after the same shall have deposited in the United States mail or one (1)
business day after sent by Federal Express or other overnight courier service.
11.6 Applicable Law. This Agreement shall be governed by and construed
in accordance with the substantive laws of the State of Delaware without giving
effect to principles of conflict of law thereof.
11.7 Entire Agreement; Counterparts. This Agreement, including the
Exhibits hereto and the certificates and instruments to be delivered at the
Closing pursuant to this Agreement, contains all of the terms, conditions,
representations and warranties agreed upon by parties relating to the subject
matter of this Agreement and supersedes all other prior and
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<PAGE>
contemporaneous agreements, negotiations, correspondence, undertakings and
communications of the parties, oral or written, respecting such subject matter.
This Agreement may executed in any number of counterparts, each of which shall
be deemed an original, and all of which, together, shall constitute one and the
same instrument.
11.8 Section Headings. The section and subsection headings contained in
this Agreement are solely for the purposes of reference and shall not affect the
meaning or interpretation of this Agreement.
11.9 Public Announcement. To the extent consistent with their respective
obligations under applicable law, the Company on one hand, and the GP and the
Partnership on the other hand, shall make available for review in advance by the
other party any public announcement intended to be issued by such party with
respect to this Agreement or the transactions contemplated hereby.
11.10 Injunctive Relief. The parties acknowledge and agree that each
party would be irreparably damaged in the event any of the provisions of
Sections 6, 7, 8, 9 or 10.2 are not performed by the parties in accordance with
their specific terms or are otherwise breached, the remedies at law for any such
breach are inadequate and the non-breaching party will suffer direct and
continuing injury as a result of any such breach. Accordingly, it is agreed
that the parties shall be entitled, without necessity of furnishing a bond, to
injunctive relief (including a temporary restraining order or a preliminary
injunction) to prevent breaches of any of such Sections and to specifically
enforce any of such Sections and the terms and provisions thereof in any action
instituted in any court of the United States or any state thereof having subject
matter jurisdiction, in addition to, and not in limitation of, any other remedy
to which the parties may be entitled, at law or in equity.
11.11 Remedies. The parties agree that the sole and exclusive remedies
for a breach of any of the provisions of this Agreement shall be an award of
damages or injunctive relief, as determined by a court of competent
jurisdiction, and that no breach of any provision of this Agreement by any party
hereto shall give rise to a right of the non-breaching party or parties to
terminate this Agreement nor shall any such breach excuse the non-breaching
party or parties from the obligation to perform any of its or their obligations
hereunder. For the avoidance of doubt, under no circumstances shall any of the
Standstill Provisions be terminated as a result of any breach by the Company of
any of its obligations under this Agreement or the Preferred Shares.
11.12 Successor General Partners. The Partnership agrees that, from
and after the date hereof, any additional or successor general partner of the
Partnership shall, as a condition to its admission to the Partnership, agree in
writing to be bound by the provisions of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
MFI ASSOCIATES, INC.
By: /s/Ned. L. Sherwood
Its: President
MFI INVESTORS L.P., a Delaware limited
partnership
By: MFI ASSOCIATES, INC.,
its sole general partner
By: /s/Ned. L. Sherwood
Its: President
MARKET FACTS, INC.
By: /s/ Glenn W. Schmidt
Its: Executive Vice President
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Exhibit (c)(2)
FINANCIAL ADVISORY AGREEMENT
FINANCIAL ADVISORY AGREEMENT (the "Agreement") dated as of June 6 , 1996,
by and between MFI ASSOCIATES, INC., a Delaware corporation with offices at 120
West 45th Street, Suite 2600, New York, New York 10036 (the "Advisor"), and
MARKET FACTS, INC., a Delaware corporation with offices at 3040 West Salt Creek
Lane, Arlington Heights, Illinois ("MFI").
Recitals
--------
The Advisor has formed MFI Investors L.P., a Delaware limited partnership
(the "Partnership") for the purposes of purchasing a $8,250,000 convertible note
(the "Note") from MFI pursuant to the terms of that certain Investment Agreement
dated as of the date hereof by and among MFI, the Advisor and the Partnership
(the "Investment Agreement"). This Agreement is being executed in connection
with the closing of the transactions contemplated by the Investment Agreement.
After consummation of the transactions contemplated by the Investment Agreement,
the Advisor will provide financial advisory services to MFI on a non-exclusive
basis with respect to its future acquisitions in accordance with the terms of
this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties agree as follows:
1. Responsibility of the Advisor
The Advisor shall make available to MFI and its affiliates on a non-
exclusive basis certain financial advisory services related to MFI's business
and affairs as MFI may from time to time specifically and reasonably request.
Such services shall include, without limitation, evaluation and interpretation
of financial data and reports concerning financial and structuring strategies
and alternatives related to acquisition opportunities and acquisition and other
financing sources and opportunities.
2. Compensation
In consideration of the benefits and services MFI shall receive hereunder,
MFI shall pay to the Advisor an annual financial advisory fee (the "Fee"),
payable in arrears in equal quarterly installments on the last day of each
calendar quarter during the term hereof, commencing with June 30, 1996. From
the date hereof and thereafter until such time as the Partnership owns less than
15% of the issued and outstanding common stock of MFI (or has the right to
convert the principal due under the Note into such amount of MFI's common
stock), the Fee shall be $125,000 per annum. If at any time the Partnership
owns less than 15% but more than 5% of the issued and outstanding common stock
of MFI (or has the
<PAGE>
right to convert the principal due under the Note into such amount of MFI's
common stock), the Fee shall be reduced to $62,500 per annum. If at any time the
Partnership owns 5% or less of the issued and outstanding common stock of MFI
(or has the right to convert the principal due under the Note into such amount
of MFI's common stock), no Fee is payable and this Agreement shall terminate in
accordance with Section 4. The first quarterly payment shall be pro-rated
according to the number of days elapsed from the date hereof until June 30, 1996
as compared to the total number of days in that calendar quarter. The Fee shall
be reduced by the amount of any fees paid to any director of MFI designated by
the Partnership who is not an Independent Director (as defined in the Investment
Agreement).
The Advisor will not be paid any finder's fees, "success" fees, or other
contingent fees based on the services provided to MFI hereunder other than as
specifically negotiated by the parties hereto and agreed to in writing in
connection with a specific transaction or other business opportunity. Nothing
in this Agreement shall be deemed to require, nor prohibit, the payment of such
fees when and as specifically negotiated by the parties hereto from time to
time.
3. Indemnification and Contribution
3.1. Indemnification. MFI agrees to indemnify and hold harmless each of
the Advisor, and its officers, directors, employees, shareholders and agents
(each such person being referred to herein as an "Indemnified Person") from and
against any and all losses, claims, damages or liabilities related in any way
to, arising out of or in connection with the services provided by the Advisor
hereunder ("Indemnified Claims"), and will reimburse each Indemnified Person for
all reasonable expenses (including reasonable fees and expenses of counsel) as
they are incurred in connection with investigating, preparing, pursuing or
defending any action, claim, suit, investigation or proceeding related in any
way to, arising out of or in connection with the Indemnified Claims, whether or
not pending or threatened and whether or not any Indemnified Party is a party.
MFI will not, however, be responsible for any losses, claims, damages or
liabilities (or expenses relating thereto) that are finally judicially
determined to have resulted from the bad faith, willful misconduct or gross
negligence of any Indemnified Person or to have been beyond the scope of such
person's authority under this Agreement. MFI also agrees that no Indemnified
Person shall have any liability (whether direct or indirect, in contract or tort
or otherwise) to MFI for or in connection with the Indemnified Claims except for
any such liability for losses, claims, damages or liabilities incurred by MFI
that are finally judicially determined to have resulted from the bad faith,
willful misconduct or gross negligence of such Indemnified Person.
MFI will not, without each Indemnified Person's prior written consent,
settle, compromise, consent to the entry of any judgment in or otherwise seek to
terminate any action, claim, suit or proceeding (whether or not such Indemnified
Person is a party thereto) in respect of which indemnification may be sought
hereunder unless such settlement, compromise, consent or termination includes a
full and unconditional release of such Indemnified Person from any and all
liabilities arising out of such action, claim, suit or
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<PAGE>
proceeding, except that a settlement, compromise, consent or termination need
not include a full and unconditional release of such Indemnified Person if MFI
has (i) given the Advisor reasonable prior notice of such settlement,
compromise, consent or termination, (ii) consulted in good faith with the
Advisor regarding the failure to include therein a full and unconditional
release of such Indemnified Person and (iii) confirmed in writing that the
indemnification provided for in this Section 3.1 shall continue to its full
extent with respect to the action, claim, suit or proceeding which has been
settled, compromised, consented to or terminated and any other actions, claims,
suits or proceeding arising out of the facts and circumstances which gave rise
to the action, claim, suit or proceeding which has been settled, compromised,
consented to or terminated to which such Indemnified Person would have otherwise
been entitled to indemnification under this Section 3.1. No Indemnified Person
seeking indemnification, reimbursement or contribution under this Agreement
will, without MFI's prior written consent, settle, compromise, consent to the
entry of any judgment in or otherwise seek to terminate any action, claim, suit
investigation or proceeding referred to in the preceding paragraph.
3.2. Contribution. If the indemnification provided for in Section 3.1 is
judicially determined to be unavailable (other than in accordance with the
second sentence of the first paragraph of Section 3.1) to an Indemnified Person
in respect of any losses, claims, damages or liabilities referred to herein,
then, in lieu of indemnifying such Indemnified Person hereunder, MFI shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages or liabilities (and expenses relating thereto)
in such proportion as is appropriate to reflect not only the relative benefits
to the Advisor and its affiliates, on the one hand, and MFI, on the other hand,
in connection with the services heretofore provided to MFI by the Advisor but
also the relative fault of each of the Advisor and its affiliates and MFI, as
well as any other relevant equitable considerations.
3.3. Survival. All the provisions of this Section 3 shall remain in full
force and effect with respect to actions taken by the Advisor prior to any
termination or completion of the Advisor's services under this Agreement or the
termination of this Agreement, regardless of such termination or completion.
4. Term
This Agreement shall commence on the date first above written and shall
terminate on the earliest to occur of (i) the fifth anniversary of the date
hereof, (ii) the first day on which the Partnership owns five percent or less of
the issued and outstanding common stock of MFI (or has the right to convert the
principal due under the Note into such amount of MFI's common stock) and (iii) a
Change in Control of the Partnership (as defined in the Investment Agreement),
without MFI's prior written consent; provided, however, that such termination
shall not relieve MFI of its obligation to make payment of any fees which shall
have accrued and become payable prior to the effective date of such termination.
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<PAGE>
5. Notices
Notice to be given to the parties hereunder shall be mailed, postage
prepaid, by United States certified mail (or its foreign equivalent), return
receipt requested to the address of the respective parties set forth on the
first page hereof. Either party hereto may designate a new address at any time
by notifying the other party in the manner set forth above.
6. Modification
This Agreement and the Investment Agreement contain the entire agreement of
the parties with respect to the subject matter hereof. Any change,
modification, amendment or alteration to this Agreement shall be effected only
in writing and signed by the party or parties against whom enforcement of any
such change, modification, amendment or alteration is sought.
7. Nonwaiver
The failure of any party hereto, at any time to require performance by any
party hereto of any provision hereof, shall in no way affect the right of such
failing party hereafter to enforce such provision nor shall any waiver by any
part of any breach of any provisions hereof be taken or held to be a waiver of
any succeeding breach of such provision or as a waiver of the provision itself.
8. Severability
If any provision or provisions of this Agreement is held to be invalid or
unenforceable, such provision shall be automatically reformed and construed so
as to be valid, operative and enforceable to the maximum extent permitted by law
or equity while most nearly preserving its original intent. The invalidity of
any party of this Agreement shall not render invalid the remaining provisions of
this Agreement and, to that extent, the provisions of this Agreement shall be
deemed to be severable.
9. Headings
The headings of this Agreement are inserted for convenience only and shall
not be considered in construction of the provisions hereof.
10. Assignment and Successors; Binding Effect, etc.
The rights and obligations of the Advisor and of MFI under this Agreement
shall inure to the benefit of and shall be binding upon the successors of the
Advisor and of MFI and may not be assigned without the written consent of the
other party hereto, and any such purported assignment shall be null and void;
provided, however, that the Advisor shall
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<PAGE>
have the right to assign this Agreement to ZS Fund L.P. or any of its affiliates
without the consent of MFI.
11. Governing Law
The terms of this Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois without regard to principles
of conflicts of law.
[Next Page is Signature Page]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
MFI ASSOCIATES, INC.
By:/s/ Henrik Falktoft
Name: Henrik Falktoft
Title: Vice President
MARKET FACTS, INC.
By:/s/ Glenn W. Schmidt
Glenn W. Schmidt
Executive Vice President
<PAGE>
Exhibit (c)(3)
THE SECURITY REPRESENTED BY THIS INSTRUMENT WAS ORIGINALLY ISSUED ON JUNE
6, 1996, AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAW. THE TRANSFER OF SUCH SECURITY IS
SUBJECT TO THE CONDITIONS SPECIFIED IN THE INVESTMENT AGREEMENT, DATED AS
OF JUNE 6, 1996, AS AMENDED AND MODIFIED FROM TIME TO TIME, BETWEEN, INTER
ALIA, THE ISSUER (THE "COMPANY") AND THE ORIGINAL HOLDER HEREOF, AND THE
COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITY UNTIL
SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. UPON
WRITTEN REQUEST, A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY THE
COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE.
MARKET FACTS, INC.
CONVERTIBLE SUBORDINATED
PROMISSORY NOTE
---------------
JUNE 6, 1996 $8,250,000.00
Market Facts, Inc., a Delaware corporation (the "Company"), hereby
promises to pay to the order of MFI Investors L.P. the principal amount of
$8,250,000.00, or such lesser principal amount as may be outstanding under this
Note from time to time, together with interest thereon calculated from the date
hereof in accordance with the provisions of this Note (this "Note").
This Note was issued pursuant to the Investment Agreement, dated as of
June 6, 1996 (as the same may be amended and modified from time to time, the
"Purchase Agreement"), between the Company and the original holder hereof, and
this Note is the "Convertible Note" referred to in the Purchase Agreement. The
Purchase Agreement contains terms governing the rights of the holder of this
Note. Except as defined in paragraph 8 hereof or unless otherwise indicated
herein, capitalized terms used in this Note have the same meanings set forth in
the Purchase Agreement.
1. Payment of Interest. Except as otherwise expressly provided in
paragraph 5(b) hereof, interest shall accrue at the rate of seven percent (7%)
per annum (computed on the basis of a 365-day year and the actual number of days
elapsed in any year) on the principal amount of this Note outstanding from time
to time, or (if less) at the highest rate then permitted under applicable law.
The Company shall pay to the holder of this Note all accrued interest on the
last day of each March, June, September and December, beginning June 30, 1996
(each, a "Quarterly Payment Date"), except that, on the date of any Conversion
(as defined
<PAGE>
below), the Company shall pay to the holder of this Note interest accrued
through such date on the principal amount then being Converted as provided in
paragraph 6(c)(iii)(B) hereof. Unless prohibited under applicable law, any
accrued interest which is not paid on the date on which it is due and payable
shall bear interest at the same rate at which interest is then accruing on the
principal amount of this Note until such interest is paid. Any accrued interest
which for any reason has not theretofore been paid shall be paid in full on the
date on which the final principal payment on this Note is made or the date on
which the final Conversion hereunder is made. Interest shall accrue on any
principal payment due under this Note and, to the extent permitted by applicable
law, on any interest which has not been paid on the date on which it is due and
payable until such time as payment therefor is actually delivered to the holder
of this Note.
2. Payment of Principal on Note.
(a) Scheduled Payment. The Company shall pay the principal amount of
$8,250,000 (or such lesser principal amount as may be outstanding at such time)
to the holder of this Note on the tenth anniversary of the date of issuance (the
"Maturity Date"), together with all accrued and unpaid interest then
outstanding.
(b) No Prepayments. The Company may not prepay all or any portion of
the outstanding principal amount of this Note at any time prior to the Maturity
Date without the prior written consent of the holder of this Note, unless the
Company shall issue, at the time of any such prepayment, a warrant to purchase
for the Conversion Price (as defined below) at any time before the Maturity Date
that number of shares of Common Stock into which that portion of the outstanding
principal of the Note sought to be prepaid is then convertible, such warrant to
be in form reasonably acceptable to the holder hereof.
(c) Conversion. Notwithstanding any provision contained in this
paragraph 2, the holder of this Note may convert ("Convert") all or any portion
of the outstanding principal amount of this Note into Common Stock (a
"Conversion") until such time as the entire principal amount of this Note has
been paid or Converted.
3. Transfer; Pro Rata Payment. The holder of this Note may not
transfer all or any portion of this Note to any third party other than as
permitted by the Purchase Agreement. To the extent any holder has transferred a
portion of this Note as so permitted such that multiple persons each hold a
portion of this Note, except as otherwise provided in the Purchase Agreement,
all rights granted to the holder of this Note and all obligations of the holder
of this Note shall accrue to such persons pro rata based upon the aggregate
unpaid principal amount of this Note held by such persons, and all references to
the holder of this Note herein shall include all such holders on such pro rata
basis. Except as otherwise expressly provided in this Note, all payments to
multiple
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<PAGE>
holders of this Note (whether for principal, interest or otherwise) shall be
made pro rata among such holders based upon the aggregate unpaid principal
amount of this Note held by each such holder. If any holder of this Note
obtains any payment (whether voluntary, involuntary, by application of offset or
otherwise) of principal, interest or other amount with respect to this Note in
excess of such holder's pro rata share of such payments obtained by all holders
of this Note (other than as expressly provided herein), by acceptance of a
portion of this Note each such holder agrees to purchase from the other holders
of this Note a participation in the Note held by them as is necessary to cause
such holders to share the excess payment ratably among each of them as provided
in this paragraph.
4. Subordination. The indebtedness evidenced by this Note is hereby
expressly subordinated, to the extent and in the manner hereinafter set forth,
in right of payment to the prior payment in full of all the Company's Senior
Indebtedness, as hereinafter defined.
(a) Senior Indebtedness. As used in this Note, the term "Senior
Indebtedness" shall mean the principal of and unpaid accrued interest on: (i)
all indebtedness of the Company existing from time to time to banks, insurance
companies or other financial institutions regularly engaged in the business of
lending money, which is for money borrowed by the Company (whether or not
secured and in any event including liabilities in respect of letters of credit
and bankers' acceptances), and (ii) any such indebtedness or any debentures,
notes or other evidence of indebtedness issued in exchange for such Senior
Indebtedness, or any indebtedness arising from the satisfaction of such Senior
Indebtedness by a guarantor.
(b) Default on Senior Indebtedness. If there should occur any
receivership, insolvency, assignment for the benefit of creditors, bankruptcy,
reorganization or arrangements with creditors (whether or not pursuant to
bankruptcy or other insolvency laws), sale of all or substantially all of the
assets, dissolution, liquidation or any other marshaling of the assets and
liabilities of the Company, or if this Note shall be declared due and payable
upon the occurrence of an event of default with respect to any Senior
Indebtedness, then (i) no amount shall be paid by the Company in respect of the
principal of or interest on this Note at the time outstanding, unless and until
the principal of and interest on the Senior Indebtedness then outstanding shall
be paid in full, (ii) any payment made in respect of this Note shall be paid
over to the holders of the Senior Indebtedness, pro rata, for application in
payment thereof unless and until such Senior Indebtedness shall have been paid
or satisfied in full and (iii) no claim or proof of claim shall be filed with
the Company or on behalf of the holder of this Note that shall assert any right
to receive any payments in respect of the principal of and interest on this
Note, except subject to the payment in full of the principal of and interest on
all of the Senior Indebtedness then outstanding. If there occurs (i) an event of
default that has been declared in
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<PAGE>
writing with respect to any Senior Indebtedness, or in the instrument under
which any Senior Indebtedness is outstanding, permitting the holder of such
Senior Indebtedness to accelerate the maturity thereof or (ii) an acceleration
of any principal of or interest on this Note, then, unless and until such event
of default shall have been cured or waived or shall have ceased to exist or such
acceleration shall have been rescinded so as to have no further force or effect,
or all Senior Indebtedness shall have been paid in full, no payment shall be
made in respect of the principal of or interest on this Note until three (3)
months after the declaration of such event of default or notice from the holder
of this Note of an acceleration thereof, as the case may be, or for such longer
period of time as the Senior Indebtedness shall remain unpaid if the maturity of
such Senior Indebtedness shall have been accelerated prior to the end of such
three month period.
(c) Subrogation. Subject to the payment in full of all Senior
Indebtedness and until this Note shall be paid in full, the holder shall be
subrogated to the rights of the holders of Senior Indebtedness (to the extent of
payments or distributions previously made to such holders of Senior Indebtedness
pursuant to the provisions of paragraph 4(b) above) to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness.
No such payments or distributions applicable to the Senior Indebtedness shall,
as between the Company and its creditors, other than the holders of Senior
Indebtedness and the holder of this Note, be deemed to be a payment by the
Company to or on account of this Note; and for the purposes of such subrogation,
no payments of distributions to the holders of Senior Indebtedness to which the
holder of this Note would be entitled except for the provisions of this
paragraph 4 shall, as between the Company and its creditors, other than the
holders of Senior Indebtedness and the holder of this Note, be deemed to be a
payment by the Company to or on account of the Senior Indebtedness.
(d) Undertaking. By its acceptance of this Note, the holder agrees to
execute and deliver such documents as may be reasonably requested from time to
time by the Company or the lender of any Senior Indebtedness in order to
implement (but only to the extent consistent with) the foregoing provisions of
this paragraph 4.
(e) Turnover of Improper Payments. If any payment shall be received
by the holder of this Note in contravention of any of the terms hereof, such
payment shall be held in trust for the benefit of the holder of the Senior
Indebtedness and shall be paid over and delivered to the holder of the Senior
Indebtedness, pro rata, for application in payment thereof unless and until such
Senior Indebtedness shall have been paid or satisfied in full.
(f) Rights not Subordinated. The provisions of this paragraph 4 are
for the purpose of defining the relative rights of the holders of Senior
Indebtedness on the one hand and the holder of this Note on the other hand.
Nothing herein shall impair the
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<PAGE>
Company's obligation to the holder of this Note to pay to such holders both
principal and interest in accordance with the terms of this Note. No provision
of this paragraph 4 shall be construed to prevent the holder of this Note from
exercising all rights and remedies otherwise available under this Note or under
applicable law upon the occurrence of an Event of Default, subject to the rights
of the holder or holders of the Senior Indebtedness as set forth above including
but not limited to such rights to receive cash, assets, stock or obligations
otherwise payable or deliverable to the holder of this Note. No provision of
this paragraph 4 shall be construed to effect or limit in any way the right of
the holder of this Note to Convert this Note at any time and from time to time
prior to the payment of this Note in full. No provision of paragraph 4(a) shall
be deemed to subordinate, to any extent, any claim or right of any holder of
this Note to any claim against the Company by any creditor or any other Person
except to the extent expressly provided in such paragraph.
5. Events of Default.
(a) Definition. For purposes of this Note, an event of default (an
"Event of Default") shall be deemed to have occurred if:
(i) the Company fails to pay when due and payable (whether on a
Quarterly Payment Date, the date of any Conversion, the Maturity Date or
otherwise) the full amount of interest then accrued on this Note or the full
amount of any principal payment on this Note;
(ii) the Company fails to perform or observe in any material respect
any other provision contained in this Note or in the Purchase Agreement;
(iii) any representation or warranty contained in the Purchase
Agreement which survived the Closing and has not otherwise been terminated
pursuant to Section 11.1 of the Purchase Agreement is false or misleading in any
material respect on the date made or furnished;
(iv) the Company or any Significant Subsidiary makes an assignment for
the benefit of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Company or any Significant Subsidiary bankrupt or insolvent; or
any order for relief with respect to the Company or any Significant Subsidiary
is entered under the Federal Bankruptcy Code; or the Company or any Significant
Subsidiary petitions or applies to any tribunal for the appointment of a
custodian, trustee, receiver or liquidator of the Company or any Significant
Subsidiary, or of any substantial part of the assets of the Company or any
Significant Subsidiary, or commences any proceeding (other than a proceeding for
the voluntary liquidation and dissolution of any Significant Subsidiary)
relating to the Company or any Significant Subsidiary under any bankruptcy
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<PAGE>
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction; or any such petition or application is
filed, or any such proceeding is commenced, against the Company or any
Significant Subsidiary and either (A) the Company or any such Significant
Subsidiary, consent thereto or (B) such petition, application or proceeding is
not dismissed within 60 days;
(v) a judgment in excess of $250,000 is rendered against the Company
or any Significant Subsidiary and, within 60 days after entry thereof, such
judgment is not discharged in full or execution thereof stayed pending appeal,
or within 60 days after the expiration of any such stay, such judgment is not
discharged in full; or
(vi) the Company or any Significant Subsidiary defaults in the
performance of any obligation if the effect of such default is to cause an
amount exceeding $250,000 to become due prior to its stated maturity or to
permit the holder or holders of such obligation to cause an amount exceeding
$250,000 to become due prior to its stated maturity.
The foregoing shall constitute Events of Default whatever the reason
or cause for any such Event of Default and whether it is voluntary or
involuntary or is effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body.
(b) Consequences of Events of Default.
(i) If any Event of Default of the type described in subparagraph
5(a)(i) has occurred and is not cured within 15 days, or if any Event of Default
of the type described in 5(a)(ii) has occurred and is not cured within 30 days,
or any other Event of Default has occurred and is continuing, the interest rate
on this Note shall increase immediately to a rate equal to 10% per annum. Any
increase of the interest rate resulting from the operation of this subparagraph
shall terminate as of the close of business on the date on which no Events of
Default exist (subject to subsequent increases pursuant to this subparagraph).
(ii) If an Event of Default of the type described in subparagraph
5(a)(iv) has occurred, the aggregate principal amount of this Note (together
with all accrued interest thereon and all other amounts due and payable with
respect thereto) shall become immediately due and payable without any action on
the part of the holder of this Note, and the Company shall immediately pay to
the holder of this Note all amounts due and payable with respect to this Note
subject to the provisions of paragraph 4 hereof.
(iii) If any Event of Default of the type described in subparagraphs
5(a)(i) or (ii) has occurred and continued for 15 days or 30 days, respectively,
or any other Event
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<PAGE>
of Default (other than under subparagraph 5(a)(iv)) has occurred and is
continuing, the holders of this Note representing a majority of the aggregate
principal amount of this Note then outstanding may declare all or any portion of
the outstanding principal amount of this Note (together with all accrued
interest thereon and all other amounts due and payable with respect thereto) to
be immediately due and payable subject to the provisions of paragraph 4 hereof
and may demand immediate payment of all or any portion of the outstanding
principal amount of this Note (together with all such other amounts then due and
payable) owned by such holders. The Company shall give prompt written notice of
any such demand to the other holders of this Note, each of which may demand
immediate payment of all or any portion of such holder's Note. If any holder or
holders of this Note demand immediate payment of all or any portion of this
Note, the Company shall immediately pay to such holder or holders all amounts
due and payable with respect to such portion of this Note subject to the
provisions of paragraph 4 hereof.
(iv) Subject to the terms of the Purchase Agreement, each holder of
this Note shall also have any other rights which such holder may have been
afforded under any contract or agreement at any time and any other rights which
such holder may have pursuant to applicable law.
(v) The Company hereby waives diligence, presentment, protest and
demand and notice of protest and demand, dishonor and nonpayment of this Note,
and expressly agrees that this Note, or any payment hereunder, may be extended
from time to time and that the holder hereof may accept security for this Note
or release security for this Note, all without in any way affecting the
liability of the Company hereunder.
6. Conversion.
(a) Optional Conversion. At any time and from time to time prior to
the payment of this Note in full, the holder of this Note may Convert all or any
portion of the outstanding principal amount of this Note into a number of shares
of Conversion Stock (excluding any fractional share) determined by dividing the
principal amount designated by the holder of this Note for Conversion by the
Conversion Price then in effect. The holder of this Note shall send written
notice to the Company of its intention to make an optional conversion of all or
any portion of the outstanding principal amount of this Note at least five (5)
days in advance of the date the holder intends to make such optional Conversion,
which notice shall specify the portion of the outstanding principal amount of
the Note to be converted and the effective date of such optional Conversion (the
"Optional Conversion Date").
(b) Mandatory Conversion. Effective immediately prior to the
consummation of the Self-Tender Offer, that portion of the outstanding principal
amount of this Note equal to the Mandatory Conversion Amount (as defined below)
shall automatically be
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<PAGE>
Converted, without further action by the holder hereof, into a number of shares
of Conversion Stock (excluding any fractional shares) determined by dividing the
Mandatory Conversion Amount by the Conversion Price then in effect. If the
Mandatory Conversion Amount at such time is less than the outstanding principal
amount of this Note, on the last day of each March, June, September and December
following the consummation of the Self-Tender Offer (each, a "Mandatory
Conversion Date"), the holder of this Note shall Convert all or a portion of the
outstanding principal amount of this Note equal to the Mandatory Conversion
Amount as of such Mandatory Conversion Date into a number of shares of
Conversion Stock (excluding any fractional shares) determined by dividing the
Mandatory Conversion Amount as of such Mandatory Conversion Date by the
Conversion Price then in effect, until the entire outstanding principal amount
of this Note thereon has been paid or Converted. "Mandatory Conversion Amount"
means, as of any date, an amount equal to (i) the number of shares repurchased
by the Company in connection with the Self-Tender Offer plus any subsequent
repurchases of Common Stock by the Company, multiplied by the Conversion Price
in effect at the time of the consummation of the Self-Tender Offer or such
repurchase, as the case may be, less (ii) the sum of all principal amounts
previously Converted, provided that in no event shall such amount, as of any
date, exceed the outstanding principal amount of the Note as of such date.
(c) Conversion Procedure.
(i) Except as otherwise expressly provided herein, each Conversion of
this Note shall be deemed to have been effected immediately prior to the
consummation of the Self-Tender Offer or as of the close of business on an
Optional Conversion Date or a Mandatory Conversion Date, as the case may be. At
such time as such Conversion has been effected, the rights of the holder of this
Note as such holder to the extent of the Conversion shall cease, and the Person
or Persons in whose name or names any certificate or certificates for shares of
Conversion Stock are to be issued upon such Conversion shall be deemed to have
become the holder or holders of record of the shares of Conversion Stock
represented thereby.
(ii) If a Conversion of any portion of this Note is to be made in
connection with a sale of the Company, the Conversion of any portion of this
Note may, at the election of the holder hereof, be conditioned upon the
consummation of the such sale of the Company, in which case such Conversion
shall not be deemed to be effective until the consummation of such transaction.
(iii) As soon as possible after a Conversion has been effected (but
in any event within three (3) business days in the case of clause (A) below),
the Company shall deliver, or shall cause its transfer agent to deliver, to the
converting holder:
(A) a certificate or certificates representing the number of
shares of Conversion Stock (excluding any fractional
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share) issuable by reason of such Conversion in the name of the converting
holder and in such denomination or denominations as the converting holder
has specified, which certificate or certificates shall bear the following
legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"),
or the securities laws of any state and may not be sold or transferred
unless and until they are registered under the Securities Act and all
applicable state securities laws or unless exemptions from such
registration are available at the time. In addition, the voting and
transfer of such shares are subject to the terms of that certain
Investment Agreement, dated as of June 6, 1996 among, inter alia, the
Company and MFI Investors L.P. (the "Agreement"), including, without
limitation, an irrevocable proxy granted to the Company pursuant to
Section 6.3(e) of the Agreement in certain circumstances, and no
voting or transfer of such shares shall be valid or effective if made
in violation of the terms thereof. A copy of the Agreement will be
furnished by the Company to the holder hereof upon written request and
without charge."
(B) subject to paragraph 4(b) hereof, payment in an amount equal
to the sum of all accrued interest with respect to the principal amount
Converted, which has not been paid prior thereto, plus any amount payable
under subparagraph (iv) below.
(iv) If any fractional share of Conversion Stock would, except for the
provisions hereof, be deliverable upon Conversion of this Note, the Company, in
lieu of delivering such fractional share, shall pay an amount equal to the
Conversion Price of such fractional share as of the date of such Conversion.
(v) The issuance of certificates for shares of Conversion Stock upon
Conversion of this Note shall be made without charge to the holder hereof for
any issuance tax in respect thereof or other cost incurred by the Company in
connection with such Conversion and the related issuance of shares of Conversion
Stock. Upon Conversion of this Note, the Company shall take all such actions as
are necessary in order to insure that the Conversion Stock issuable with respect
to such Conversion shall be validly issued, fully paid and nonassessable.
(vi) Except as permitted by the Purchase Agreement, the Company shall
not close its books against the transfer of Conversion Stock issued or issuable
upon Conversion of this Note in
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<PAGE>
any manner which interferes with the timely Conversion of this Note. The
Company shall assist and cooperate with any holder of this Note required to make
any governmental filings or obtain any governmental approval prior to or in
connection with the Conversion of this Note (including, without limitation,
making any filings required to be made by the Company).
(vii) The Company shall at all times reserve and keep available out of
its authorized but unissued shares of Conversion Stock (which can include
treasury stock), solely for the purpose of issuance upon the Conversion of the
Note, such number of shares of Conversion Stock issuable upon the Conversion of
this Note. All shares of Conversion Stock which are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges. The Company shall take all such actions as may be
necessary to assure that all such shares of Conversion Stock may be so issued
without violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares of Conversion
Stock may be listed (except for official notice of issuance which shall be
immediately delivered by the Company upon each such issuance).
(d) Conversion Price. The Conversion Price shall be $14.50 subject to
adjustment as provided in subsection (e).
(e) Subdivision or Combination of Common Stock. If the Company at any
time subdivides (by any stock split, stock dividend or otherwise) its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision shall be
proportionately reduced so that the number of shares of Common Stock issuable
upon conversion of this Note shall be increased in proportion to such increase
in the number of shares of Common Stock outstanding and if the Company at any
time combines (by reverse stock split or otherwise) its outstanding shares of
Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination shall be proportionately increased so that
the number of shares of Common Stock issuable upon conversion of this Note shall
be decreased in proportion to such decrease in the number of shares of Common
Stock outstanding.
(f) Reorganization, Reclassification, Consolidation, Merger or Sale.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets or other transaction,
which in each case is effected in such a manner that holders of Common Stock are
entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets (including cash) with respect to or in exchange for Common
Stock is referred to herein as an "Organic Change." Prior to the consummation
of any Organic Change, the Company shall make lawful and adequate provision (in
form and substance reasonably acceptable to the holders of a majority of the
principal amount of this Note then
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outstanding) to insure that each of the holders of this Note shall thereafter
have the right to acquire and receive, in lieu of or addition to (as the case
may be) shares of Conversion Stock immediately theretofore acquirable and
receivable upon the Conversion of such holder's Note, such shares of stock,
securities or assets (including cash) as may be issued or payable with respect
to or in exchange for the number of shares of Conversion Stock immediately
theretofore acquirable and receivable upon conversion of such holder's Note had
such Organic Change not taken place. In any such case, appropriate provision
(in form and substance reasonably acceptable to the holders of a majority of the
principal amount of this Note then outstanding) shall be made with respect to
such holder's rights and interests to insure that the provisions of this
paragraph 6 shall thereafter be applicable in relation to any shares of stock,
securities or assets (including cash) thereafter deliverable upon the Conversion
of this Note (including, in the case of any such consolidation, merger or sale
in which the successor entity or purchasing entity is other than the Company, an
immediate adjustment of the Conversion Price to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, and a
corresponding immediate adjustment in the number of shares of Conversion Stock
acquirable and receivable upon Conversion of this Note, if the value so
reflected is less than the Conversion Price in effect immediately prior to such
consolidation, merger or sale). The Company shall not effect any such
consolidation, merger or sale, unless prior to the consummation thereof, the
successor entity (if other than the Company) resulting from consolidation or
merger or the entity purchasing such assets assumes by written instrument (in
form and substance reasonably acceptable to the holders of a majority of the
principal amount of this Note then outstanding), the obligation to deliver to
each such holder such shares of stock, securities or assets (including cash) as,
in accordance with the foregoing provisions, such holder may be entitled to
acquire.
(g) Notices.
(i) Immediately upon any adjustment of the Conversion Price, the
Company shall send written notice thereof to the holder of this Note, setting
forth in reasonable detail and certifying the calculation of such adjustment.
(ii) The Company shall send written notice to the holder of this Note
at least 20 days prior to the date on which the Company closes its books or
declares a record date (A) with respect to any extraordinary dividend or
distribution (other than regular quarterly cash dividends) upon the Common
Stock, (B) with respect to any pro rata subscription offer to holders of Common
Stock or (C) for determining rights to vote with respect to any Organic Change,
dissolution or liquidation.
(iii) The Company shall use reasonable efforts to give at least 20
days prior written notice of the date on which any Organic Change, dissolution
or liquidation shall take place.
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7. Amendment and Waiver. Except as otherwise expressly provided
herein, the provisions of this Note may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of at least a majority of the outstanding principal amount of this Note;
provided that no such action shall change (i) the rate at which or the manner in
which interest accrues on this Note or the times at which such interest becomes
payable, (ii) any provision relating to the scheduled payments or prepayments of
principal on this Note or (iii) the Conversion Price of this Note or the number
of shares or the class of stock into which this Note is convertible, without the
written consent of the holders at least 75% of the outstanding principal amount
of this Note.
8. Definitions. For purposes of this Note, the following
capitalized terms have the following meaning.
"Common Stock" means, collectively the Company's Common Stock, par
value $1.00 per share, and any capital stock of any class of the Company
hereafter authorized which is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Company.
"Conversion Stock" means shares of the Company's authorized but
unissued Common Stock; provided that if there is a change such that the
securities issuable upon Conversion of this Note are issued by an entity other
than the Company or there is a change in the class of securities so issuable,
then the term "Conversion Stock" shall mean one share of the security issuable
upon Conversion of this Note if such security is issuable in shares, or shall
mean the smallest unit in which such security is issuable if such security is
not issuable in shares.
"Person" means an individual, a partnership, a corpora tion, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Significant Subsidiary" means, with respect to any Person, a
Subsidiary, including its Subsidiaries, which meets any of the following: (a) a
Person's and its other Subsidiaries' investments in and advances to the
Subsidiary exceed 10 percent of the total assets of such Person and its
Subsidiaries consolidated as of the end of the most recently completed fiscal
year, (b) a Person's and its other Subsidiaries' proportionate share of the
total assets (after intercompany eliminations) of the Subsidiary exceeds 10
percent of the total assets of such Person and its Subsidiaries consolidated as
of the end of the most recently completed fiscal year, or (c) a persons's and
its other Subsidiaries' equity in the income from continuing operations
-12-
<PAGE>
before income taxes, extraordinary items and the effect of a change in
accounting principle of the Subsidiary exceeds 10 percent of the income of such
Person and its Subsidiaries consolidated for the most recently completed fiscal
year.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, part nership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
9. Cancellation. After all principal and accrued interest at any
time owed on this Note has been paid in full, this Note shall be surrendered to
the Company for cancellation and shall not be reissued.
10. Payments. All payments to be made to the holders of this Note
shall be made in the lawful money of the United States of America in immediately
available funds.
11. Place of Payment. Payments of principal and interest shall be
delivered to the holder of this Note at the following address:
MFI Investors L.P.
54 Morris Lane
Scarsdale, NY 10583
or to such other address or to the attention of such other person as specified
by prior written notice to the Company.
12. Business Days. If any payment is due, or any time period for
giving notice or taking action expires, on a day which is a Saturday, Sunday or
legal holiday in the State of New York, the payment shall be due and payable on,
and the time period shall automatically be extended to, the next business day
immediately following such Saturday, Sunday or legal holiday, and interest
-13-
<PAGE>
shall continue to accrue at the required rate hereunder until any such payment
is made.
13. Usury Laws. It is the intention of the Company and the holder of
this Note to conform strictly to all applicable usury laws now or hereafter in
force, and any interest payable under this Note shall be subject to reduction to
the amount not in excess of the maximum legal amount allowed under the
applicable usury laws as now or hereafter construed by the courts having
jurisdiction over such matters. If the Maturity Date of this Note is
accelerated by reason of an election by the holder hereof resulting from an
Event of Default or otherwise, then earned interest may never include more than
the maximum amount permitted by law, computed from the date hereof until
payment, and any interest in excess of the maximum amount permitted by law shall
be canceled automatically and, if theretofore paid, shall at the option of the
holder hereof either be rebated to the Company or credited on the principal
amount of this Note, or if this Note has been paid, then the excess shall be
rebated to the Company. The aggregate of all interest (whether designated as
interest, service charges, points or otherwise) contracted for, chargeable, or
receivable under this Note shall under no circumstances exceed the maximum legal
rate upon the unpaid principal balance of this Note remaining unpaid from time
to time. If such interest does exceed the maximum legal rate, it shall be
deemed a mistake and such excess shall be canceled automatically and, if
theretofore paid, rebated to the Company or credited on the principal amount of
this Note, or if this Note has been repaid, then such excess shall be rebated to
the Company.
14. No Stockholder Rights. Without limiting the rights granted to
MFI Investors, L.P. pursuant to the Purchase Agreement, this Note shall not
confer upon the holder of this Note or any other person the right to vote or to
consent or to receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of the Company or any other matters
or any rights whatsoever as a stockholder of the Company; and no dividends shall
be payable or accrued in respect of this Note or the interest represented hereby
or the Conversion Stock obtainable hereunder until, and only to the extent that,
this Note shall have been converted.
* * * * *
-14-
<PAGE>
IN WITNESS WHEREOF, the Company has executed and deliv ered this Note
on June 6, 1996.
------------
MARKET FACTS, INC.
By: /s/ Glenn W. Schmidt
Glenn W. Schmidt
Executive Vice President
<PAGE>
Exhibit (c)(4)
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES B PREFERRED STOCK
OF
MARKET FACTS, INC.
Pursuant to Section 151 of the Corporation Law
of the State of Delaware
Market Facts, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 151 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Restated Certificate of Incorporation of the Corporation, the Board of Directors
on June 5, 1996, adopted the following resolution creating a series of 100
shares of Preferred Stock designated as Series B Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board by ARTICLE IV
of the Certificate of Incorporation, a series of Preferred Stock of the
Corporation shall be, and it hereby is, created, and that the designation and
amount thereof and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as follows:
Section 1. Definitions. Capitalized terms used herein shall, unless
otherwise specified, have the meanings provided for in the Investment Agreement
by and among the Corporation, MFI Associates, Inc. and MFI Investors L.P. (the
"Investment Agreement"). In addition, all references herein to "beneficial
ownership" shall mean beneficial ownership as defined in Section 1.3 of the
Investment Agreement.
Section 2. Designation and Amount. The shares of such series shall be
designated as the "Series B Preferred Stock" and the number of shares
constituting such series shall be 100.
Section 3. Issuance to Partnership; No Transfers By Partnership. The
Series B Preferred Stock shall be issued only to the Partnership pursuant to the
Investment Agreement. The Partnership shall not be permitted to transfer (as
that term is defined in Section 8.3(a) of the Investment Agreement) any shares
of Series B Preferred Stock without the approval of the Board of Directors. The
certificates evidencing the Series B Preferred Stock shall contain a conspicuous
legend setting forth such transfer restriction.
Section 4. Dividends and Distributions. The holders of the Series B
Preferred Stock shall not be entitled to receive dividends.
<PAGE>
Section 5. Voting Rights. The holder or holders of the outstanding
shares of Series B Preferred Stock shall not be entitled to vote on any matter
except as required by law; provided, however, that for so long as and only for
so long as (1) the Partnership beneficially owns all of the outstanding shares
of the Series B Preferred Stock, (2) there has not been a Change of Control, and
(3) the Investment Agreement shall not have been terminated pursuant to Section
10.1, the holder of such shares shall be entitled to vote with respect to the
following matters and to have the following related rights:
(A) Election of Directors.
(i) As of the Closing, the Partnership, as the holder of the
outstanding shares of Series B Preferred Stock, shall be entitled to elect
one (1) director in the class of directors whose present terms of office
expire in 1999 (the "1999 Class") and two (2) directors in the class of
directors whose present terms of office expire in 1998 (the "1998 Class")
(collectively, the "Series B Directors" and the "Series B Directorships").
There after, the Partnership, as the holder of the outstanding shares of
the Series B Preferred Stock, shall, subject to the limitations provided
for in this Subsection (A), be entitled to elect the Series B Directors
with and as the holders of Common Stock of the Corporation are entitled to
elect directors in each class of directors that shall include a Series B
Director. Subject to the limitations provided for in this Subsection (A),
such directors shall hold office until the terms of the directors of the
class to which they are elected expire or until their successors are
elected and qualified.
(ii) The number of directors which the Partnership, as the holder of
outstanding shares of the Series B Preferred Stock, shall be entitled to
elect shall decrease as follows:
(a) if at any time the Partnership shall, for any reason,
beneficially own for a period of 90 consecutive days less than twenty
percent (20%), but at least ten percent (10%), of the total combined
voting power of all Voting Securities then outstanding, the number of
directors that the Partnership shall be entitled to elect shall be
reduced to two (2), effective on the 91st consecutive day following
the first date on which the Partnership shall beneficially own less
than twenty percent (20%) of the total combined voting power of all
Voting Securities then outstanding and the term of office of one of
the two Series B Directors in the 1998 Class shall terminate on such
2
<PAGE>
91st consecutive day. The director in such class whose term of office
shall so terminate shall be designated in writing by the Partnership
prior to the expiration of such 90 day period; provided that, if no
such designation shall have been made prior to such expiration, the
term of office of the Independent Director elected by the Partnership,
as the holder of the Series B Preferred Stock, shall terminate or, if
no Independent Director shall have been elected by the Partnership,
the board of directors shall determine the director whose term shall
so terminate;
(b) if at any time the Partnership shall, for any reason,
beneficially own less than ten percent (10%), but at least five
percent (5%), of the total combined voting power of all Voting
Securities then outstanding, the number of directors that the
Partnership shall be entitled to elect shall be reduced to one (1) and
the term of office of a Series B Director designated by the
Partnership, as the holder of the outstanding shares of the Series B
Preferred Stock (or if the Partnership shall not have so designated a
Series B Director, a Series B Director designated by the Board of
Directors), shall terminate, effective immediately upon such
occurrence; and
(c) if at any time the Partnership shall, for any reason,
beneficially own less than five percent (5%) of the total combined
voting power of all Voting Securities then outstanding, the
Partnership shall, effective immediately upon such occurrence, no
longer be entitled to elect any directors of the Corporation and the
term of office of the remaining Series B Director shall terminate.
(iii) For so long as the Partnership beneficially owns in excess of
fifteen percent (15%) of the total combined voting power of all Voting
Securities then outstanding, the Corporation shall not, without the
affirmative vote of the Partnership, as the holder of the outstanding
shares of the Series B Preferred Stock, appoint an audit or compensation
committee of the Board of Directors unless in either case one (1) Series B
Director shall be a member of such committee of the Board of Directors.
(iv) Notwithstanding the other provisions of this subsection (A) of
this Section 5, the term of office of any and all Series B Directors shall
terminate immediately upon a Change of Control or the termination
3
<PAGE>
of the Investment Agreement pursuant to Section 10.1 thereof.
(v) As of the Closing, the Corporation shall cause there to be three
(3) vacancies on the Board of Directors, one (1) in the 1999 Class and two
(2) in the 1998 Class.
(vi) No director elected by the Partnership may be a Competitor. So
long as at least three (3) members of the Board of Directors (other than
the directors elected by the Partnership) are Independent Directors and the
Partnership is entitled to elect three (3) directors, one (1) of the
directors elected by the Partnership to the 1998 Class shall be an
Independent Director.
(vii) So long as any Series B Preferred Stock is outstanding, the
Corporation shall not, without the affirmative vote of the Partnership, as
the holder of the outstanding shares of Series B Preferred Stock, expand
the Board of Directors to consist of more than eleven (11) directors.
(viii) Without the affirmative vote of the Partnership, as the holder
of the outstanding shares of Series B Preferred Stock, the Corporation
shall not take any action at a Board of Directors' meeting unless (i) at
least one (1) Series B Director is present (in person or telephonically) at
such meeting, or (ii) written notice of such meeting has been provided to
directors at least (5) days in advance of such meeting.
(ix) The right of the holders of Series B Preferred Stock to elect
directors may be exercised initially by the written consent of the
Partnership, as the holder of the outstanding shares of Series B Preferred
Stock, at any time following the Closing, and thereafter at each annual
meeting of stockholders or by written consent in lieu of action at any
annual meeting. The absence of a quorum of the holders of Common Stock at
any annual meeting of stockholders shall not affect the exercise by the
holders of Series B Preferred Stock of such voting right.
(x) Any vacancy in a Series B Directorship may be filled only by the
vote of a majority of the remaining Series B Directors, or by the sole such
remaining Series B Director, or, if not so filled, by the Partnership, as
the holder of the outstanding shares of Series B Preferred Stock.
4
<PAGE>
(B) Amendments. The Certificate of Incorporation of the Corporation shall
not be amended in any manner that would materially alter or change the powers,
preferences or special rights of the Partnership, as the holder of the
outstanding shares of Series B Preferred Stock, so as to affect such rights
adversely without the affirmative vote of the Partnership, as the holder of the
outstanding shares of Series B Preferred Stock.
(C) Mergers, Consolidations, Etc. Without the affirmative vote of the
Partnership, as the holder of the outstanding shares of Series B Preferred
Stock, the Corporation shall not enter into any consolidation, merger,
combination or other transaction the consummation of which would (1) cause the
Partnership to cease to be the owner of any shares of Series B Preferred Stock
or (2) adversely affect the rights of the Partnership, as the holder of the
outstanding shares of Series B Preferred Stock, set forth herein, unless, in
either case, all of the holders of Voting Securities at the time of such
consummation shall, pursuant to such transaction, cease to be holders of any
shares of Voting Securities and such holders are not, in the aggregate, as a
result of such consummation, entitled to receive all or substantially all of the
equity interests in an entity that owns, directly or indirectly, substantially
all of the assets owned by the Corporation immediately prior to such
consummation, including a merger with a direct or indirect wholly-owned
subsidiary of the Corporation.
Section 6. Reacquired Shares. Any shares of Series B Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired, and the certificate or certificates representing such shares
shall be canceled, promptly after the acquisition thereof. All such shares
shall, upon such retirement and cancellation, and upon the taking of any action
required under applicable law, become authorized but unissued shares of
Preferred Stock and may not be reissued as shares of Series B Preferred Stock,
but may reissued as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors.
Section 7. Redemption. The shares of Series B Preferred Stock shall be
redeemed, at the redemption price of $1.00 per share (the "Redemption Price"),
at any time the holders of the Series B Preferred Stock shall not be entitled to
elect any directors pursuant to subsection A of Section 5 hereof. Notice of
such redemption shall be given no less than five (5) business days prior to the
redemption (the "Redemption Date"). From and after the Redemption Date, unless
the Corporation shall fail to make available sufficient funds to effect the
redemption of all of the outstanding shares of the Series B Preferred Stock,
such shares shall no longer be deemed to be outstanding shares for any purpose
and shall be deemed to have been reacquired by the Corporation, and the holder
or holders of such shares shall not have any rights with respect to such shares
except the right to receive the Redemption
5
<PAGE>
Price for each share upon the surrender to the Corporation of the certificates
therefor.
Section 8. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, the holder or holders of the
outstanding shares of Series B Preferred Stock shall be entitled to receive one
dollar ($1.00) for each share so held (the "Liquidation Amount") before the
payment of any amounts to the holders of Common Stock of the Corporation.
IN WITNESS WHEREOF, Market Facts, Inc. has caused this Certificate to be
executed by Wesley S. Walton, its Secretary, this 5th day of June, 1996.
MARKET FACTS, INC.
By:/s/ Wesley S. Walton
Wesley S. Walton
Secretary
6
<PAGE>
Exhibit (c)(5)
IRREVOCABLE PROXY
By its execution hereof and in order to secure the obligations of the
undersigned set forth in the Investment Agreement ("Agreement"), dated June ___,
1996, by and among Market Facts, Inc., a Delaware corporation (the "Company"),
MFI Investors L.P., a Delaware limited partnership, and MFI Associates, Inc., a
Delaware corporation, the undersigned hereby irrevocably constitutes and
appoints the President of the Company and his successors and assigns as its true
and lawful attorney-in-fact, to: (1) vote, in accordance with the Agreement,
all shares of voting securities of Company (including shares of Common Stock)
which the undersigned may be entitled to vote at any annual or special meeting
of the stockholders of the Company but which the undersigned has at any time
failed to vote in accordance with the terms of the Agreement; (2) to execute a
written consent in lieu of voting with respect to the matters set forth in
clause (1); and (3) to execute, acknowledge, swear to and file in the
undersigned's name, place and stead any consent, approval, or other documents to
be executed by the stockholders in connection with the items in clauses (1) and
(2). The Proxy hereby granted is irrevocable and is acknowledged by the
undersigned to be coupled with the interest of the Company in the fulfillment of
the obligations of the undersigned pursuant to the Agreement until terminated in
accordance with Section 10 of the Agreement and it shall survive the
undersigned's insolvency.
The Proxy hereby granted does not apply or extend to the shares of Series B
Preferred Stock, no par value, of the Company held by the undersigned.
IN WITNESS WHEREOF, the undersigned has executed this Irrevocable Proxy
this 6th day of June, 1996.
---
MFI INVESTORS L.P., a Delaware limited
partnership
By: MFI ASSOCIATES, INC., its sole general
partner
By:/s/ Ned. L. Sherwood
Its: President
<PAGE>
Exhibit (c)(6)
[Market Facts Letterhead]
June 6, 1996
To: All Employee Directors
of Market Facts, Inc.
Re: Investment Agreement dated June 6, 1996 by and among the Company, MFI
Associates, Inc. and MFI Investors L.P. (the "Agreement")
Gentlemen:
As you are aware, Section 6.7(d) of the Agreement requires the
Management Stockholders (defined as Company employees who are members of the
Board of Directors) to vote their shares of the Company's common stock and any
other voting securities of the Company held by them in accordance with the
requirements of Section 6.7(d) of the Agreement in the event that the Standstill
Persons (as defined in the Agreement) are permitted to take the actions
specified in Section 6.7(a) of the Agreement pursuant to Section 6.7(b) of the
Agreement.
The purpose of this letter is to confirm your agreement during any
period of time in which you fall within the definition of a Management
Stockholder to vote the shares of the Company's common stock and any other
voting securities held by you in any manner reasonably requested by the Company
to insure the Company's compliance with Section 6.7(d) of the Agreement. Please
acknowledge your agreement to the foregoing by signing this letter in the space
indicated below and returning it to the undersigned.
MARKET FACTS, INC.
By:___________________________
Acknowledged and Agreed:
By:____________________________
<PAGE>
================================================================================
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,530,157 $ 911,209
Bank certificate of deposit 50,000 50,000
Accounts receivable:
Trade, less allowance for doubtful accounts of
$838,203 and $668,805 in 1995 and 1994, respectively 9,547,035 9,433,470
Other 6,200 128,232
Notes receivable 79,214 59,037
Revenue earned on contracts in progress in excess of billings 2,889,027 2,394,591
Current portion of deferred income taxes 747,314 624,578
Prepaid expenses and other assets 309,954 435,723
- - - -------------------------------------------------------------------------------------------
Total Current Assets $17,158,901 $14,036,840
- - - -------------------------------------------------------------------------------------------
OTHER ASSETS:
Goodwill, net of accumulated amortization $ 557,568 $ 599,386
Mail panel acquired, net of accumulated amortization 101,587 182,857
- - - -------------------------------------------------------------------------------------------
Total Other Assets $ 659,155 $ 782,243
- - - -------------------------------------------------------------------------------------------
PROPERTY, AT COST:
Land $ 1,221,459 $ 1,221,459
Building and building improvements 12,544,681 12,436,819
Computer and office equipment 7,777,869 6,641,992
Furniture and fixtures 2,906,981 2,539,410
Leasehold improvements 1,318,176 1,264,567
Vehicles 313,881 435,115
- - - -------------------------------------------------------------------------------------------
$26,083,047 $24,539,362
Less accumulated depreciation and amortization (9,524,466) (7,676,462)
- - - -------------------------------------------------------------------------------------------
Net Property $16,558,581 $16,862,900
- - - -------------------------------------------------------------------------------------------
Total Assets $34,376,637 $31,681,983
===========================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
6
<PAGE>
Market Facts, Inc. and Subsidiaries as of December 31, 1995 and 1994
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accrued expenses $ 5,515,608 $ 4,393,196
Billings in excess of revenues earned on contracts in progress 3,328,937 3,712,487
Accounts payable 1,253,922 995,644
Income taxes 387,742 684,950
Current portion of note payable for acquisition of MFCL 339,126 339,127
Current portion of obligations under capital leases 225,903 185,026
Current portion of long-term debt 112,555 102,190
- - - ------------------------------------------------------------------------------------------------------------
Total Current Liabilities $11,163,793 $10,412,620
- - - ------------------------------------------------------------------------------------------------------------
LONG-TERM LIABILITIES:
Long-term debt $10,419,628 $10,532,183
Obligations under capital leases, noncurrent portion 536,242 581,710
Note payable for acquisition of MFCL, noncurrent portion -- 339,126
Deferred income taxes 205,545 39,122
Other long-term liabilities 1,622 31,037
- - - ------------------------------------------------------------------------------------------------------------
Total Long-Term Liabilities $11,163,037 $11,523,178
- - - ------------------------------------------------------------------------------------------------------------
Total Liabilities $22,326,830 $21,935,798
- - - ------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Preferred stock, no par value; 500,000 shares authorized; none issued $ -- $ --
Common stock, $1 par value; 5,000,000 shares authorized;
2,106,237 and 1,973,241 shares issued in 1995 and 1994, respectively 2,106,237 1,973,241
Capital in excess of par value 2,328,137 1,765,776
Cumulative foreign currency translation (69,144) (100,391)
Retained earnings 9,525,401 8,021,066
- - - ------------------------------------------------------------------------------------------------------------
$13,890,631 $11,659,692
Less 167,468 and 184,402 shares of treasury common stock, at cost,
in 1995 and 1994, respectively (1,189,029) (1,310,134)
Less other transactions involving common stock (651,795) (603,373)
- - - ------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity $12,049,807 $ 9,746,185
- - - ------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $34,376,637 $31,681,983
============================================================================================================
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Market Facts, Inc. and Subsidiaries for the years ended December 31, 1995, 1994 and 1993
========================================================================================
CONSOLIDATED STATEMENTS OF EARNINGS
1995 1994 1993
---------------------------------------
<S> <C> <C> <C>
REVENUE $64,608,724 $55,483,032 $45,609,073
- - - --------------------------------------------------------------------------------------------------------------
DIRECT COSTS:
Payroll $13,853,642 $12,166,287 $10,015,925
Other expenses 22,459,675 18,082,064 14,308,515
- - - --------------------------------------------------------------------------------------------------------------
Total $36,313,317 $30,248,351 $24,324,440
- - - --------------------------------------------------------------------------------------------------------------
Gross Margin $28,295,407 $25,234,681 $21,284,633
- - - --------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Selling $ 2,292,190 $ 2,076,829 $ 1,666,226
General and administrative 20,005,436 19,285,376 16,480,926
Contributions to profit sharing and employee stock ownership plans 803,002 577,740 475,000
- - - --------------------------------------------------------------------------------------------------------------
Total $23,100,628 $21,939,945 $18,622,152
- - - --------------------------------------------------------------------------------------------------------------
Income From Operations $ 5,194,779 $ 3,294,736 $ 2,662,481
- - - --------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest expense $(1,137,728) $(1,259,887) $(1,174,199)
Interest income 77,636 47,718 61,718
Equity in income of MFCL -- 33,668 131,493
Other income, net 85,432 39,932 36,859
- - - --------------------------------------------------------------------------------------------------------------
Total $ (974,660) $(1,138,569) $ (944,129)
- - - --------------------------------------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES $ 4,220,119 $ 2,156,167 $ 1,718,352
PROVISION FOR INCOME TAXES 1,994,000 722,000 644,000
- - - --------------------------------------------------------------------------------------------------------------
NET INCOME $ 2,226,119 $ 1,434,167 $ 1,074,352
==============================================================================================================
EARNINGS PER SHARE $1.15 $.76 $.61
==============================================================================================================
COMMON AND COMMON EQUIVALENT SHARES 1,942,206 1,892,825 1,752,173
==============================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
8
<PAGE>
<TABLE>
<CAPTION>
Market Facts, Inc. and Subsidiaries for the years ended December 31, 1995, 1994 and 1993
========================================================================================
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
1995 1994 1993
----------- ----------- ------------
<S> <C> <C> <C>
PREFERRED STOCK:
BALANCE at beginning and end of year $ -- $ -- $ --
===============================================================================================================
COMMON STOCK:
BALANCE at beginning of year $ 1,973,241 $ 1,965,741 $ 1,965,741
COMMON stock issued during the year 132,996 7,500 --
- - - ---------------------------------------------------------------------------------------------------------------
BALANCE at end of year $ 2,106,237 $ 1,973,241 $ 1,965,741
===============================================================================================================
CAPITAL IN EXCESS OF PAR VALUE:
BALANCE at beginning of year $ 1,765,776 $ 1,735,214 $ 1,735,214
COMMON stock issued during the year 562,361 30,562 --
- - - ---------------------------------------------------------------------------------------------------------------
BALANCE at end of year $ 2,328,137 $ 1,765,776 $ 1,735,214
===============================================================================================================
ADJUSTMENT FROM FOREIGN CURRENCY TRANSLATION:
BALANCE at beginning of year $ (100,391) $ (56,526) $ (29,965)
CURRENT year adjustment 31,247 (43,865) (26,561)
- - - ---------------------------------------------------------------------------------------------------------------
BALANCE at end of year $ (69,144) $ (100,391) $ (56,526)
===============================================================================================================
RETAINED EARNINGS:
BALANCE at beginning of year $ 8,021,066 $ 7,104,997 $ 6,415,208
NET income 2,226,119 1,434,167 1,074,352
LESS dividends declared--common, $.38 per share in 1995,
$.29 in 1994 and $.22 in 1993 (721,784) (518,098) (384,563)
- - - ---------------------------------------------------------------------------------------------------------------
BALANCE at end of year $ 9,525,401 $ 8,021,066 $ 7,104,997
===============================================================================================================
TREASURY COMMON STOCK:
BALANCE at beginning of year $(1,310,134) $(1,310,134) $(1,510,132)
TREASURY stock issued 121,105 -- 199,998
- - - ---------------------------------------------------------------------------------------------------------------
BALANCE at end of year $(1,189,029) $(1,310,134) $(1,310,134)
===============================================================================================================
OTHER TRANSACTIONS INVOLVING COMMON STOCK:
BALANCE at beginning of year $ (603,373) $ (616,232) $ (746,356)
ISSUANCE of demand notes receivable (159,750) (115,500) (45,000)
PAYMENTS received on demand notes receivable 55,896 75,571 127,624
VESTING of restricted stock and demand notes receivable 55,432 52,788 47,500
- - - ---------------------------------------------------------------------------------------------------------------
BALANCE at end of year $ (651,795) $ (603,373) $ (616,232)
===============================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
9
<PAGE>
<TABLE>
<CAPTION>
Market Facts, Inc. and Subsidiaries for the years ended December 31, 1995, 1994 and 1993
========================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,226,119 $ 1,434,167 $ 1,074,352
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,164,114 2,055,792 1,715,005
Vesting of restricted stock and demand notes receivable 55,432 52,788 47,500
Deferred income taxes 43,783 (185,534) (104,000)
Net gain on disposal of property (39,297) (46,630) (28,591)
Undistributed earnings of MFCL -- (15,972) (21,393)
Contribution of treasury stock to employee stock ownership plan -- -- 199,998
Change in assets and liabilities:
Accounts receivable 31,518 (960,335) 56,556
Prepaid expenses and other assets 126,853 (269,800) 115,414
Revenues earned in excess of billings on contracts in progress (875,035) (168,847) (95,465)
Accounts payable and accrued expenses 1,364,902 665,682 319,918
Income taxes (297,918) 613,280 93,266
- - - --------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 4,800,471 $ 3,174,591 $ 3,372,560
- - - --------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property $(1,570,259) $(1,331,484) $(2,036,263)
Payment for acquisition of MFCL, net of acquired cash (339,127) (134,964) --
Investment in notes receivable (238,945) (182,668) (150,529)
Proceeds from notes receivable 114,914 165,831 476,980
Proceeds from the sale of property 65,559 132,760 67,882
Proceeds from bank certificates of deposit -- -- 26,462
- - - --------------------------------------------------------------------------------------------------------------
Net cash used in investing activities $(1,967,858) $(1,350,525) $(1,615,468)
- - - --------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of short-term borrowings $(2,000,000) $(7,500,000) $(3,190,000)
Proceeds from short-term borrowings 2,000,000 6,600,000 2,380,000
Dividends paid (721,784) (518,098) (384,563)
Proceeds from exercise of stock options 676,605 38,062 --
Reduction of obligations under capital leases and long-term debt (323,719) (319,159) (218,205)
Proceeds from the sale of treasury stock 139,857 -- --
- - - --------------------------------------------------------------------------------------------------------------
Net cash used in financing activities $ (229,041) $(1,699,195) $(1,412,768)
- - - --------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH $ 15,376 $ 13,352 $ --
- - - --------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 2,618,948 $ 138,223 $ 344,324
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 911,209 772,986 428,662
- - - --------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,530,157 $ 911,209 $ 772,986
==============================================================================================================
CASH PAID DURING THE YEAR FOR:
Interest $ 1,140,464 $ 1,227,800 $ 1,172,714
Income taxes $ 2,215,411 $ 321,499 $ 654,732
==============================================================================================================
SUPPLEMENTAL SCHEDULE OF NON CASH ACTIVITIES:
Capital lease obligations incurred on lease of equipment $ 208,465 $ 189,948 $ 238,229
Issuance of note payable $ -- $ 1,017,380 $ --
==============================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
10
<PAGE>
Market Facts, Inc. and Subsidiaries for the years ended December 31, 1995, 1994
and 1993
===============================================================================
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Principles of Consolidation and Line of Business:
The accompanying consolidated financial statements include the accounts of
Market Facts, Inc. and its subsidiaries (Company). All significant intercompany
transactions have been eliminated.
The Company is engaged in marketing research services as its dominant line of
business. One client accounted for approximately 12% of total 1995 revenue and
10% of total 1994 revenue.
b. Revenue Recognition:
The Company recognizes revenue under the percentage of completion method of
accounting. Revenue on client projects is recognized as services are performed.
Losses expected to be incurred on jobs in progress are charged to income as soon
as such losses are known. Revenue earned on contracts in progress in excess of
billings is classified as a current asset. Amounts billed in excess of revenue
earned are classified as a current liability. Client projects are expected to be
completed within a twelve month period.
c. Cash and Cash Equivalents:
For purposes of the consolidated statements of cash flows, the Company considers
all highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
d. Mail Panel Acquired:
Total capitalized costs of a purchased mail panel are amortized using the
straight-line method over the panel's estimated life of five years.
e. Property:
Maintenance and repairs are expensed and renewals and betterments are
capitalized. Upon retirement or disposition of property, the applicable cost and
accumulated depreciation and amortization are removed from the accounts and the
resulting gains or losses are included in income.
Depreciation is provided on the straight-line method at rates considered
adequate to depreciate the costs of property over their estimated useful lives.
The useful life of the building is 31 1/2 years, while all other owned assets
have estimated useful lives of three to ten years. Property under capital leases
is recorded at the lower of the fair market value of the leased property or the
present value of the minimum lease payments. Amortization of the leased property
is computed using the straight-line method over the lease term.
f. Income Taxes:
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires an
asset and liability method of accounting for income taxes. Under the asset and
liability method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases.
g. Earnings Per Share:
Earnings per share are based on the weighted average number of common shares and
common share equivalents (resulting from options granted under the Company's
1982 Incentive Stock Option Plan) outstanding during the year.
h. Foreign Currency Translation:
The financial statements of the Company's foreign operations have been
translated in accordance with Statement of Financial Accounting Standards No.
52. Accordingly, assets and liabilities have been translated using the exchange
rate in effect at the balance sheet date. Results of operations are translated
using the average exchange rate prevailing throughout the period. Resulting
translation gains and losses are reported as a component of stockholders'
equity.
i. Disclosure of Certain Significant Risks and Uncertainties:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
j. Financial Instruments:
The carrying amounts of the Company's financial instruments approximate their
fair values.
2. NOTES RECEIVABLE:
Notes receivable consist of amounts due from officers and employees. The notes
bear interest at the prime lending rate (8.5% at December 31, 1995).
11
<PAGE>
Market Facts, Inc. and Subsidiaries for the years ended December 31, 1995, 1994
and 1993
================================================================================
Notes to Consolidated Financial Statements (continued)
3. BANK BORROWINGS:
The Company maintains established bank lines of credit which are renewed
annually. The lines of credit increased from $4,000,000 to $7,000,000 during
1995. No amounts were outstanding under these agreements at December 31, 1995 or
1994. The borrowings bear interest at the prime lending rate which was 8.5% at
December 31, 1995 and 1994. The weighted average interest rate outstanding
during 1995 and 1994 was 9.0% and 7.4%, respectively.
4. ACCRUED EXPENSES:
Accrued expenses consist of the following at December 31:
1995 1994
---------- ----------
Compensation $2,043,189 $1,656,335
Real estate taxes 858,037 842,000
Contributions to employee
benefit plans 636,786 376,568
Other 1,977,596 1,518,293
- - - ---------------------------------------------------
Total $5,515,608 $4,393,196
===================================================
5. LONG-TERM DEBT:
Long-term debt relates to the mortgage loan on the office building used by the
Company as its corporate and operations headquarters. The loan bears interest at
a fixed rate of 9.7% per annum. Principal payments due under the terms of the
mortgage with the final principal amount due May 1, 2000 are as follows:
In 1996................ $ 112,555
In 1997................ $ 123,972
In 1998................ $ 136,546
In 1999................ $ 150,396
In 2000................ $10,008,714
6. STOCKHOLDERS' EQUITY:
In April 1986, the stockholders approved an amendment to the Certificate of
Incorporation creating a new class of 500,000 shares of preferred stock, without
par value. No shares have been issued to date.
On July 26, 1989, the Board of Directors of the Company approved a stockholder
rights agreement which provides for a dividend distribution of one preferred
share purchase right for each outstanding share of common stock. Each right
initially entitles stockholders, upon occurrence of certain events, to purchase
one one-hundredth of a share of Series A preferred stock (25,000 shares of the
preferred stock authorized in April 1986 have been designated as Series A
preferred stock), at an exercise price of $20 per one one-hundredth of a
preferred share, subject to adjustment.
The rights become exercisable ten days after a person, group or company acquires
20% or more of Company common stock or announces a tender offer which would
result in ownership of 20% or more of the common stock. The Company is entitled
to redeem the rights at one cent per right at any time before a 20% or greater
position has been acquired.
If the Company is acquired in a merger or other business combination transaction
or 50% or more of its consolidated assets or earning power are sold, 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 at that
time of twice the right's exercise price. In addition, in the event a person or
group acquires 20% or more of the Company's common stock, each right (other than
those held by the acquiring person or group) will entitle its holder to purchase
a number of shares of the acquiring company's common stock having a market value
of two times the exercise price of the right.
At any time after a person or group acquires 20% or more (but less than 50%) of
the Company's outstanding common stock, the Board of Directors may exchange the
rights at an exchange ratio of one share of common stock for one one-hundredth
of a share of Series A preferred stock per right. The rights will expire on
August 7, 1999.
During 1995, the Company sold 16,934 shares of its common stock, previously held
in treasury, to its employee benefit plans. In 1993, the Company contributed
33,333 shares of its common stock, previously held in treasury, to its Employee
Stock Ownership Plan.
Other transactions involving common stock consist of demand notes receivable due
from officers and employees and unearned restricted stock. Monies received by
officers and employees under the demand notes receivable were used to purchase
Company common stock. These demand notes receivable, classified as a reduction
of stockholders' equity, amounted to $366,795, $270,873 and $236,232 as of
December 31, 1995, 1994 and 1993, respectively. Some of the notes, which are due
in ten equal annual installments through 2004, provide for the forgiveness of
every other principal payment, contingent upon the borrower's employment with
the Company on the date such payment is due. The Company recognized $7,932 and
$5,288 of compensation expense in 1995 and 1994, respectively, relating to the
forgiveness of debt. All other notes are due in varying installments through
2001.
12
<PAGE>
Market Facts, Inc. and Subsidiaries for the years ended December 31, 1995, 1994
and 1993
================================================================================
Notes to Consolidated Financial Statements (continued)
Unearned restricted stock amounted to $285,000, $332,500 and $380,000 as of
December 31, 1995, 1994 and 1993, respectively, and relates to a 1992 restricted
stock grant of 100,000 shares of common stock to a Company executive which vests
at a rate of 10% per year, subject to his continued employment with the Company.
The aggregate fair market value of the shares at date of grant is unearned
compensation and the amount is amortized to compensation expense over the
periods the restrictions lapse. Amortization of this compensation expense
amounted to $47,500 in 1995, 1994 and 1993.
7. EMPLOYEE STOCK OPTION PLAN:
Under terms of the noncompensatory 1982 Incentive Stock Option Plan (1982 Plan)
which expired as of May 1, 1992, options to purchase shares of the Company's
common stock have been granted at a price equal to the market price at the date
of grant.
Options from the 1982 Plan are exercisable on or after the first anniversary of
the date of the grant and expire four years after the date of the grant. 421,441
shares of the Company's common stock have been reserved for stock option grants
under the 1982 Plan. Shares under option relating to the plan are summarized as
follows:
1982 Plan
---------------------------
1995 1994 1993
-------- -------- --------
Options outstanding
at beginning of year 293,500 347,900 372,400
Options exercised (132,996) (7,500) --
Options canceled (78,504) (46,900) (24,500)
- - - -----------------------------------------------------------
Options outstanding
and exercisable
at end of year 82,000 293,500 347,900
===========================================================
Average price of options:
Exercised during year $5.09 $5.08 $--
Outstanding at end of year $5.08 $5.10 $5.13
===========================================================
8. EMPLOYEE BENEFIT PLANS:
In July 1985, the Company adopted an Employee Stock Ownership Plan (ESOP), which
covers substantially all employees. Under the ESOP, the Company may make
contributions at its discretion, within defined limits, in the form of cash or
common stock of the Company. Cash contributions must be used to purchase shares
of common stock of the Company. The Company made a $50,000 cash contribution in
1995, no contribution in 1994, and a $200,000 contribution in the form of cash
and common stock in 1993.
The Company maintains separate defined-contribution profit sharing plans for its
U.S. and Canadian operations which cover substantially all employees.
Contributions to the plans, subject to certain limitations, are at the
discretion of the Company and were $753,002 in 1995, $577,740 in 1994 and
$275,000 in 1993.
9. COMMITMENTS AND CONTINGENT LIABILITIES:
The Company leases office facilities, along with some of its computer and office
equipment and vehicles, under operating lease agreements. Total rental expense
was approximately $1,331,000, $1,193,000 and $1,232,000 in 1995, 1994 and 1993,
respectively. Some of the Company's leases provide for escalations based on
increases in the lessors' taxes, maintenance and other operating expenses.
Computer and office equipment include $1,444,868 and $1,351,517 in 1995 and
1994, respectively, of computer and other equipment acquired under capital
leases. Accumulated depreciation and amortization include $667,956 and $514,617
in 1995 and 1994, respectively, of accumulated amortization on capital leases.
The leases provide for the payment of certain insurance and maintenance expenses
and contain renewal options. The leases also provide for upgrading the equipment
under lease and the purchase of equipment. The amortization expense for these
capital leases was $274,704, $188,457 and $116,551 in 1995, 1994 and 1993,
respectively.
The minimum future rentals under capital and operating leases with an initial
term of one year or more as of December 31, 1995 are as follows:
Operating Leases
------------------------
Capital Office Equipment
Year Leases Facilities & Vehicles
- - - ------------------------------- ---------- ----------
1996 $273,381 $1,204,968 $ 95,052
1997 233,264 1,205,983 25,238
1998 205,619 1,233,119 16,329
1999 74,881 933,163 492
2000 59,072 746,205 --
2001 and thereafter 29,536 1,507,190 --
- - - -----------------------------------------------------------
Total minimum
lease payments $875,753 $6,830,628 $137,111
========== ========
Less amounts
representing
interest 113,608
--------
Present value
of minimum
lease payments 762,145
Current portion 225,903
--------
Long-term portion $536,242
===========================================================
13
<PAGE>
Market Facts, Inc. and Subsidiaries for the years ended December 31, 1995, 1994
and 1993
================================================================================
Notes to Consolidated Financial Statements (continued)
10. PROVISION FOR INCOME TAXES:
The provision for income taxes consists of the following:
1995 1994 1993
---------- --------- --------
Currently payable:
Federal $1,422,900 $ 637,100 $616,000
State and local 349,000 137,000 132,000
Foreign 178,700 133,900 --
Deferred:
Federal (44,000) (8,000) (74,000)
State and local 110,000 (178,000) (30,000)
Foreign (22,600) -- --
- - - -------------------------------------------------------
Total $1,994,000 $ 722,000 $644,000
=======================================================
The following is a reconciliation between the statutory Federal income tax rate
and the Company's effective income tax rate:
1995 1994 1993
---------- --------- --------
Statutory Federal
income tax rate 34.0% 34.0% 34.0%
State and local income
taxes, net of Federal
income tax benefits 8.0 7.7 5.2
Foreign income taxes 1.3 1.8 --
Foreign tax credit -- (1.2) (3.4)
Distribution of earnings
of MFCL -- 0.7 0.8
Change in the valuation
allowance for deferred
tax assets -- (11.8) (1.2)
Other 3.9 2.3 2.1
- - - ------------------------------------------------------------------
Effective income tax rate 47.2% 33.5% 37.5%
==================================================================
The significant components of the deferred income tax
expense (benefit) are as follows:
1995 1994 1993
-------- --------- ---------
Deferred tax expense
(benefit) (exclusive of
change in valuation
allowance) $43,400 $ 68,000 $ (83,000)
Change in beginning-
of-the-year valuation
allowance for
deferred tax assets -- (254,000) (21,000)
- - - ----------------------------------------------------------------
Total $43,400 $(186,000) $(104,000)
================================================================
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1995 and
1994 are presented below:
Significant deferred
tax assets (liabilities): 1995 1994
-------- --------
Doubtful accounts $329,689 $235,915
Vacation 144,102 131,255
Rent abatement 100,206 89,434
Net operating loss carryforwards 53,297 175,122
Other 120,020 116,910
Depreciation (205,545) (163,180)
-------- --------
Net deferred tax asset $541,769 $585,456
======== ========
The valuation allowance related to state deferred tax assets which were
primarily generated by net operating loss carryforwards. Prior to 1994,
management was unable to conclude whether all state deferred tax assets would be
utilized. In 1994, a subsidiary of the Company completed another profitable year
and management reassessed the likelihood of realizing the benefit of the state
net operating loss carryforwards. Principally as a result of the reassessment,
which included the consideration of expected future taxable income and available
tax planning strategies, the valuation allowance at January 1, 1994 of $254,000
was eliminated. Of that amount, approximately $79,000 was realized in 1994. The
Company has net operating loss carryforwards at December 31, 1995 of
approximately $600,000 which are available to offset certain future state income
through 2006. At December 31, 1995, all deferred tax assets are considered
realizable in view of past, current and the expectation of future taxable
income.
Federal income taxes and foreign withholding taxes have not been provided on the
Company's share of the undistributed earnings ($1,260,538 at December 31, 1995)
of MFCL since these earnings are considered to be permanently reinvested. The
net Federal income taxes and foreign withholding taxes which would be payable if
these earnings were distributed would be insignificant to the financial position
and results of operations of the Company.
14
<PAGE>
Market Facts, Inc. and Subsidiaries for the years ended December 31, 1995, 1994
and 1993
================================================================================
Notes to Consolidated Financial Statements (continued)
11. MARKET FACTS OF CANADA, LTD. (MFCL):
Prior to April 30, 1994, the Company owned 50% of the stock of MFCL and
accounted for its investment using the equity method of accounting. The
remaining 50% interest was owned jointly by Roberta Robertson and John C.
Robertson, a director of the Company and President of MFCL (collectively, the
"Selling Stockholders").
Pursuant to a Stock Purchase Agreement between the Selling Stockholders and the
Company, the Company acquired the remaining 50% of the issued and outstanding
shares of common stock of MFCL effective April 29, 1994. The purchase price for
the common stock and the covenants not to compete was $1,017,380 and is payable
in three equal installments, as evidenced by a note issued by the Company to the
Selling Stockholders. The first two installments plus interest at 6% were paid
April 29, 1994 and December 29, 1995. The remaining installment plus accrued and
unpaid interest at 6% is due December 31, 1996. The acquisition has been
accounted for under the purchase method of accounting. The excess of the
purchase price over the fair market value of the net assets acquired has been
recorded as goodwill and is being amortized using the straight-line method over
15 years. The fair value of assets acquired was $1,058,989 and liabilities
assumed was $668,873.
The Company's consolidated financial statements report MFCL's results of
operations and cash flow activity for the periods subsequent to April 30, 1994
under the consolidated method of accounting.
MFCL maintains offices in Toronto and Montreal and provides Canadian and
American firms with marketing research information on Canadian consumers. MFCL
utilizes the same general methods of marketing research as the Company and
maintains its own survey staff and mail panel. This is the Company's only
foreign subsidiary.
12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
The following is a summary of the unaudited quarterly results of operations for
1995 and 1994 (in thousands, except for earnings per share):
1995 First Second Third Fourth
- - - --------------------------------------------------------
Revenue $15,333 $16,332 $15,880 $17,064
Gross margin $ 6,583 $ 7,332 $ 6,979 $ 7,401
Net income $ 417 $ 514 $ 549 $ 746
Earnings per share $ .23 $ .26 $ .28 $ .38
========================================================
1994 First Second Third Fourth
- - - --------------------------------------------------------
Revenue $11,118 $12,687 $16,203 $15,475
Gross margin $ 4,951 $ 5,842 $ 7,257 $ 7,185
Net income $ 153 $ 71 $ 516 $ 694
Earnings per share $ .08 $ .04 $ .27 $ .37
========================================================
15
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Market Facts, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
As of March 31, 1996 and December 31, 1995
Assets
------
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 646,420 $ 3,530,157
Certificate of deposit 50,000 50,000
Accounts receivable:
Trade, less allowance for doubtful accounts of
$887,882 in 1996 and $838,203 in 1995 10,884,247 9,547,035
Other 62,092 6,200
Notes receivable 64,674 79,214
Revenue earned on contracts in progress
in excess of billings 3,393,667 2,889,027
Current portion of deferred income taxes 747,434 747,314
Prepaid expenses and other assets 353,639 309,954
- - - ----------------------------------------------------------------------------------------
Total Current Assets $ 16,202,173 $17,158,901
- - - ----------------------------------------------------------------------------------------
Other Assets:
Goodwill, net of accumulated amortization 547,114 557,568
Mail panel acquired, net of accumulated amortization 81,270 101,587
- - - ----------------------------------------------------------------------------------------
Total Other Assets $ 628,384 $ 659,155
- - - ----------------------------------------------------------------------------------------
Property, at cost 26,969,457 26,083,047
Less accumulated depreciation and amortization (10,012,651) (9,524,466)
- - - ----------------------------------------------------------------------------------------
Net Property $ 16,956,806 $16,558,581
- - - ----------------------------------------------------------------------------------------
Total Assets $ 33,787,363 $34,376,637
========================================================================================
</TABLE>
Page 1
<PAGE>
Market Facts, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
As of March 31, 1996 and December 31, 1995
Liabilities and Stockholders' Equity
------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ -----------
<S> <C> <C>
Current Liabilities:
Accrued expenses $ 5,115,152 $ 5,515,608
Billings in excess of revenues earned
on contracts in progress 2,843,927 3,328,937
Accounts payable 1,178,956 1,253,922
Income taxes 530,739 387,742
Current portion of note payable for acquisition of MFCL 339,126 339,126
Current portion of obligations under capital leases 223,693 225,903
Current portion of long-term debt 112,555 112,555
- - - ------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities $10,344,148 $11,163,793
- - - ------------------------------------------------------------------------------------------------------------------------
Long-Term Liabilities:
Long-term debt 10,392,500 10,419,628
Obligations under capital leases, noncurrent portion 482,910 536,242
Deferred income taxes 205,578 205,545
Other long-term liabilities --- 1,622
- - - ------------------------------------------------------------------------------------------------------------------------
Total Long-Term Liabilities $11,080,988 $11,163,037
- - - ------------------------------------------------------------------------------------------------------------------------
Total Liabilities $21,425,136 $22,326,830
- - - ------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock, no par value;
500,000 shares authorized; none issued $ --- $ ---
Common stock, $1 par value; 5,000,000 shares authorized;
2,183,237 and 2,106,237 shares issued in 1996 and 1995, respectively 2,183,237 2,106,237
Capital in excess of par value 2,637,387 2,328,137
Cumulative foreign currency translation (64,165) (69,144)
Retained earnings 9,860,671 9,525,401
- - - ------------------------------------------------------------------------------------------------------------------------
$14,617,130 $13,890,631
- - - ------------------------------------------------------------------------------------------------------------------------
Less 182,468 and 167,468 shares of treasury stock,
at cost, in 1996 and 1995, respectively (1,374,654) (1,189,029)
Less other transactions involving common stock (880,249) (651,795)
- - - ------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity $12,362,227 $12,049,807
- - - ------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $33,787,363 $34,376,637
========================================================================================================================
</TABLE>
Page 2
<PAGE>
<TABLE>
<CAPTION>
Market Facts, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
For The Three Months Ended March 31, 1996 and 1995
Three Months Ended March 31,
----------------------------
1996 1995
----------- -----------
<S> <C> <C>
Revenue $18,658,743 $15,333,400
- - - ------------------------------------------------------------------------------------------------------
Direct Costs:
Payroll $ 3,884,583 $ 3,402,759
Other expenses 6,817,951 5,347,866
- - - ------------------------------------------------------------------------------------------------------
Total $10,702,534 $ 8,750,625
- - - ------------------------------------------------------------------------------------------------------
Gross Margin $ 7,956,209 $ 6,582,775
- - - ------------------------------------------------------------------------------------------------------
Operating Expenses:
Selling $ 624,137 $ 588,749
General and administrative 5,963,264 4,821,450
Contributions to profit sharing and employee stock ownership plans 213,753 114,038
- - - ------------------------------------------------------------------------------------------------------
Total $ 6,801,154 $ 5,524,237
- - - ------------------------------------------------------------------------------------------------------
Income from operations $ 1,155,055 $ 1,058,538
- - - ------------------------------------------------------------------------------------------------------
Other Income (Expense):
Interest expense $ (273,368) $ (285,757)
Interest income 34,507 12,442
Other income, net 47,819 22,911
- - - ------------------------------------------------------------------------------------------------------
Total $ (191,042) $ (250,404)
- - - ------------------------------------------------------------------------------------------------------
Income Before Provision For Income Taxes $ 964,013 $ 808,134
Provision For Income Taxes 436,066 390,820
- - - ------------------------------------------------------------------------------------------------------
Net Income $ 527,947 $ 417,314
======================================================================================================
Earnings Per Share $ .27 $ .23
======================================================================================================
Common and Common Equivalent Shares 1,940,102 1,847,671
======================================================================================================
Cash Dividends Declared $ .10 $ .08
======================================================================================================
</TABLE>
Page 3
<PAGE>
Market Facts, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For The Three Months Ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
------------ -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 527,947 $ 417,314
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 611,961 576,271
Vesting of restricted stock and demand notes receivable 16,546 13,858
Net gain on disposal of property (30,297) (8,262)
Change in assets and liabilities:
Accounts receivable (1,391,172) 221,035
Prepaid expenses and other assets (43,417) 171,458
Revenues earned in excess of billings on contracts in progress (988,437) (904,212)
Accounts payable and accrued expenses (470,053) (930,272)
Income taxes 143,122 (319,094)
- - - ----------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities $(1,623,800) $ (761,904)
- - - ----------------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Purchases of property (984,286) (419,627)
Investment in notes receivable (245,000) (200,250)
Proceeds from notes receivable 14,540 40,588
Proceeds from the sale of property 30,297 15,517
- - - ----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities $(1,184,449) $ (563,772)
- - - ----------------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Proceeds from exercise of stock options $ 386,250 $ 605,355
Dividends paid (192,677) (144,347)
Purchases of treasury stock (185,625) ---
Reduction in obligations under capital leases and long-term debt (83,619) (81,838)
Proceeds from short-term borrowings --- 600,000
Repayment of short-term borrowings --- (200,000)
- - - ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities $ (75,671) $ 779,170
- - - ----------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash $ 183 $ 1,363
- - - ----------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents $(2,883,737) $ (545,143)
Cash and cash equivalents at beginning of period 3,530,157 911,209
- - - ----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 646,420 $ 366,066
============================================================================================================================
Cash Paid During The Period For:
Interest $ 268,417 $ 282,093
Income taxes $ 292,945 $ 709,915
============================================================================================================================
Supplemental Schedule of Noncash Activity:
Capital lease obligations incurred on lease of equipment $ --- $ 105,297
============================================================================================================================
</TABLE>
Page 4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
- - - ------------------------------
The accompanying unaudited condensed consolidated financial statements of Market
Facts, Inc. and Subsidiaries (the Company) have been prepared in accordance with
instructions to Form 10-Q. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the entire year. For
further information regarding the Company's most recent completed fiscal years,
refer to the consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
Note 2 - Adjustments
- - - --------------------
The information furnished herein includes all adjustments, consisting of normal
recurring adjustments, which are, in the opinion of management, necessary for a
fair presentation of the interim financial statements.
Note 3 - Foreign Currency Translation
- - - -------------------------------------
Assets and liabilities of Market Facts of Canada, Ltd. (MFCL), the Company's
only foreign subsidiary, have been translated using the exchange rate in effect
at the balance sheet date. MFCL's results of operations are translated using the
average exchange rate prevailing throughout the period. Resulting translation
gains and losses are reported as a component of stockholders' equity.
Note 4 - Revenue Recognition
- - - ----------------------------
The Company recognizes revenue under the percentage of completion method of
accounting. Revenue on client projects is recognized as services are performed.
Losses expected to be incurred on jobs in progress are charged to income as soon
as such losses are known. Revenue earned on contracts in progress in excess of
billings is classified as a current asset. Amounts billed in excess of revenue
earned are classified as a current liability. Client projects are expected to be
completed within a twelve month period.
Page 5
