<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
SCHEDULE 13D
____________
Under the Securities Exchange Act of 1934
MARKET FACTS, INC.
(Name of Issuer)
COMMON STOCK, PAR VALUE $1.00
(Title of Class of Securities)
570559-10-4
(CUSIP Number)
WITH A COPY TO:
Ned L. Sherwood Glen E. Hess, P.C.
MFI INVESTORS L.P. KIRKLAND & ELLIS
54 Morris Lane 153 East 53rd Street
Scarsdale, New York 10583 New York, New York 10022-4675
(212) 398-6200 (212) 446-4800
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
JUNE 6, 1996
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
Check the following box if a fee is being paid with the statement [X]. (A
fee is not required only if the reporting person: (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
(Continued on following page(s))
Page 1 of __ Pages
Exhibit Index is on page ___.
<PAGE>
SCHEDULE 13D
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CUSIP NO. 570559-10-4 PAGE 2 OF __ PAGES
- ------------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1
MFI Investors L.P.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 13-3890531
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) or 2(e) [_]
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 568,965
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
0
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 568,965
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
568,965
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
22.1%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
PN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
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CUSIP NO. 570559-10-4 PAGE 3 OF __ PAGES
- ------------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1
MFI Associates, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 13-3890532
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 568,965
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
0
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 568,965
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
568,965
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
22.1%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
CO
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
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CUSIP NO. 570559-10-4 PAGE 4 OF __ PAGES
- ------------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1
Ned L. Sherwood
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 568,965
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
0
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 568,965
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
568,965
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
22.1%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
IN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
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CUSIP NO. 570559-10-4 PAGE 5 OF __ PAGES
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ITEM 1. SECURITY AND ISSUER.
-------------------
This statement relates to a Convertible Subordinated Promissory Note,
issued June 6, 1996 (the "Convertible Note"), by Market Facts, Inc., a Delaware
corporation (the "Issuer"), which is convertible into an aggregate of 568,965
shares of the Issuer's Common Stock, par value $1.00 per share (the "Common
Stock"). The Issuer's principal executive offices are located at 3040 West Salt
Creek Lane, Arlington Heights, Illinois 60005.
ITEM 2. IDENTITY AND BACKGROUND.
-----------------------
(a) This statement is being jointly filed by each of the following persons
pursuant to Rule 13d-(1)(f) under the Securities Exchange Act of 1934, as
amended (the "Act"): (i) MFI Investors L.P., a Delaware limited partnership (the
"Partnership"), by virtue of its direct beneficial ownership of the Convertible
Note; (ii) MFI Associates, Inc., a Delaware corporation (the "GP"), by virtue of
its position as general partner of the Partnership; and (iii) Ned L. Sherwood,
an individual, by virtue of his position as controlling stockholder of the GP.
Mr. Sherwood is also an officer and director of the GP. The General Partner, the
Partnership and Mr. Sherwood are collectively referred to herein as the
"Reporting Persons." Certain information required by this Item 2 concerning the
directors and executive officers of the GP and each person ultimately in control
of each Reporting Person is set forth on Annex A attached hereto, which is
incorporated herein by reference.
The Reporting Persons may be deemed to constitute a "group" for purposes of
Section 13(d)(3) of the Act. The Reporting Persons expressly disclaim that they
have agreed to act as a group other than as described in this Statement.
(b) The address of the principal business and principal office of each
Reporting Person is 54 Morris Lane, Scarsdale, New York 10583.
(c) The principal business of the Partnership and the GP is acquiring,
holding, monitoring the performance of, and ultimately disposing of, an
investment in the Issuer. Mr. Sherwood is president of Zaleski, Sherwood & Co.,
Inc., general partner of The ZS Fund L.P., a Delaware limited partnership, a
private investment firm.
(d) During the last five years, none of the Reporting Persons and, to the
best knowledge of the Reporting Persons, none of the persons named in Annex A to
this Statement, have been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) During the last five years, none of the Reporting Persons and, to the
best knowledge of the Reporting Persons, none of the persons named in Annex A to
this Statement, were a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result
<PAGE>
SCHEDULE 13D
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CUSIP NO. 570559-10-4 PAGE 6 OF __ PAGES
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of which any such person was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
(f) Except as otherwise indicated on Annex A, all persons named in Annex A
to this Statement are citizens of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
-------------------------------------------------
The aggregate consideration paid by the Partnership for the Convertible
Note was $8,250,000. The source of funds for the Partnership's acquisition of
the Convertible Note was capital contributions made by the GP and by the
Partnership's two initial limited partners, Ned L. Sherwood and Madison Dearborn
Capital Partners, L.P. Within 60 days from the date of the acquisition of the
Convertible Note, the Partnership expects to admit additional limited partners,
whose capital contributions are expected to be used to return a portion of the
capital contributed by the initial limited partners. Also the Partnership may
have approximately $3,750,000 available to purchase additional securities of the
Issuer after admitting additional limited partners.
ITEM 4. PURPOSE OF TRANSACTION.
----------------------
The following is a summary of the principal terms of the transaction. This
summary is qualified in its entirety by reference to the definitive agreements
referred to herein and attached hereto as exhibits 7.2 through 7.5.
On June 6, 1996 (the "Investment Closing"), the Partnership and the GP
entered into an Investment Agreement (the "Investment Agreement") with the
Issuer (see Exhibit 7.2 hereto), whereby the Partnership purchased from the
Issuer a ten-year, 7% subordinated note in the principal amount of $8,250,000,
convertible into 568,965 Shares (the "Convertible Note") at $14.50 per share
(the "Note Conversion Price") (see Exhibit 7.3 hereto).
The GP also entered into a Financial Advisory Agreement (see Exhibit 7.5
hereto) with the Issuer under which the GP will make available to the Issuer
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 Issuer 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 Exhibit 7.4 hereto).
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 Common Stock and any other class of securities of the Issuer entitled to
vote generally in the election of directors then outstanding ("Voting
Securities"), the Partnership has the right to elect three directors to the
Issuer'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 Issuer 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.
<PAGE>
SCHEDULE 13D
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CUSIP NO. 570559-10-4 PAGE 7 OF __ PAGES
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The terms of the Series B Shares further provide that no director elected
by the Partnership may be a competitor of the Issuer, and so long as at least 3
members of the Board (other than those elected by the 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 Issuer, and all of the Issuer'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 Issuer 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 Issuer of the certificates
therefor. 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 Issuer.
The Investment Agreement provides that the Issuer 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 GP. Such actions include business acquisitions of
$1,000,000 or more, the incurrence of certain indebtedness (unless the Issuer
has given the GP 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
Issuer'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 Issuer 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" (defined as the
Partnership, the GP, its officers, directors, and stockholders and certain other
persons or entities under their control) 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 Issuer).
With respect to matters other than the election or removal of directors
submitted to a vote of Issuer 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%.
<PAGE>
SCHEDULE 13D
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CUSIP NO. 570559-10-4 PAGE 8 OF __ PAGES
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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 outstanding due to the repurchase of Common Stock by the
Issuer, unless and until the Standstill Persons shall become the beneficial
owners of additional shares of Common Stock. 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 Partnership in the future, depending on market conditions and other
factors (including without limitation, the GP's assessment of the Issuer's
prospects) may (but it is not obligated to) purchase additional shares of Common
Stock (or other securities of the Issuer) on the open market or in privately
negotiated transactions, at such times, in such amounts and at such prices as
determined in the sole discretion of the GP. The Partnership may have
approximately $3,750,000 available to purchase additional securities of the
Issuer after admitting additional limited partners. To the extent that the
Partnership has not fully invested its capital in securities of the Issuer by
December 31, 1998, the GP may cause the Partnership to return to certain of its
partners a portion of the uninvested Partnership capital.
The Investment Agreement contains certain other restrictions which are
intended to have the effect of preventing the Partnership from taking control of
the Issuer 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 Issuer,
soliciting proxies and participating in any election contest involving the
Issuer. The restrictions against proxy solicitations and election contests do
not apply for any period in which the Issuer does not meet predetermined
operating income targets.
If the Issuer 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 Issuer 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 Issuer 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 of Common Stock 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 Issuer
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 of Common Stock 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 Issuer will have a right of first offer to purchase all (but
not part) of such shares at a price offered by the Issuer. If the Issuer'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 Issuer
or at a greater price.
<PAGE>
SCHEDULE 13D
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CUSIP NO. 570559-10-4 PAGE 9 OF __ PAGES
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If one or more Standstill Persons proposes to sell shares of Common Stock 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
Issuer 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 Issuer. 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 Issuer 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.
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 Issuer) 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 of Common Stock
benefically 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 Issuer or the protective option to maintain its percentage
ownership interest in the Issuer, 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 Issuer 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 Issuer and to maintain their
percentage ownership interest in the Issuer. 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 Issuer'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 not more than three
times in total) to cause the Issuer to file a registration statement for the
registration of its shares of Voting Securities and to cooperate with
underwriters reasonably selected by the Partnership for the sale and
distribution of such shares. In addition, if the Issuer 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 Issuer.
<PAGE>
SCHEDULE 13D
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CUSIP NO. 570559-10-4 PAGE 10 OF __ PAGES
- ------------------------- ---------------------
The Partnership must give notice of any proposed transfer of all or any
portion of the Convertible Note to the Issuer, and the Issuer will have 10
days after receipt of such notice to notify the Partnership of the Issuer'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 Issuer 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 Issuer 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 the Partnership's shares of Voting Securities 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 Issuer's Rights Plan would also be in
effect as to any such transferee.
In connection with the Investment Agreement, the Issuer has entered into a
Financial Advisory Agreement whereby the GP will make available to the Issuer
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 Issuer will pay the GP a fee of $125,000 per annum until such
time as the Partnership owns less than 15% of the outstanding shares of the
Issuer, and $62,500 per annum if at any time the Partnership owns less than 15%
of the outstanding shares of Voting Securities, but more 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
Issuer's prior written consent.
<PAGE>
SCHEDULE 13D
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CUSIP NO. 570559-10-4 PAGE 11 OF __ PAGES
- ------------------------- ---------------------
Except as described in this Item 4, none of the Reporting Persons, and to
the best knowledge of the Reporting Persons, none of the persons named in Annex
A to this Statement, have formulated any plans or proposals which relate to or
would result in: (a) the acquisition by any person of additional securities of
the Issuer, or the disposition of securities of the Issuer; (b) an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Issuer or any of its subsidiaries; (c) a sale or transfer of a
material amount of assets of the Issuer or any of its subsidiaries; (d) any
change in the present Board of Directors or management of the Issuer, including
any plans or proposals to change the number or term of directors or to fill any
existing vacancies on the Board; (e) any material change in the present
capitalization or distribution policy of the Issuer; (f) any other material
change in the Issuer's business or corporate structure; (g) any changes in the
Issuer's Certificate of Incorporation or other actions which may impede the
acquisition of control of the Issuer by any person; (h) causing a class of
securities of the Issuer to be delisted from a national securities exchange or
to cease to be authorized to be quoted in an interdealer quotation system of a
registered national securities association; (i) causing a class of equity
securities of the Issuer to become eligible for termination of registration
pursuant to Section 12(g)(4) of the Act; or (j) any action similar to those
enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
------------------------------------
(a) The Partnership is the beneficial owner of 568,965 shares of Common
Stock, which in the aggregate represents approximately 22.1% of the outstanding
Common Stock (assuming conversion of the Convertible Note). The percentage
calculated in this Item 5 is based upon 2,000,769 shares of Common Stock
outstanding as of May 21, 1996, as disclosed in the Issuer's Schedule 13E-4,
filed with the Commission on June 11, 1996, relating to the Self-Tender Offer.
Assuming the purchase of 569,000 shares or 900,000 shares of Common Stock by the
Issuer pursuant
<PAGE>
SCHEDULE 13D
- ------------------------- ---------------------
CUSIP NO. 570559-10-4 PAGE 12 OF __ PAGES
- ------------------------- ---------------------
to the Self-Tender Offer, the Partnership would be the beneficial owner of
approximately 28.4% or 34.1%, respectively, of the outstanding Common Stock. By
virtue of its position as general partner of the Partnership, the GP may be
deemed to possess indirect beneficial ownership of the Common Stock beneficially
owned by the Partnership. By virtue of his position as the controlling
stockholder of the GP, Mr. Sherwood may be deemed to possess indirect beneficial
ownership of the Common Stock beneficially owned by the Partnership. The filing
of this Statement shall not be construed as an admission by any Reporting Person
that, for the purpose of Section 13(d) or 13(g) of the Act, such Reporting
Person is the beneficial owner of any securities covered by this Statement other
than securities owned of record by such Reporting Person.
Except as indicated in this Item 5 or as set forth below, neither the
Reporting Persons and, to the best knowledge of the Reporting Persons, none of
the persons named in Annex A to this Statement own beneficially, or have any
right to acquire, directly or indirectly, any Common Stock.
(b) Reference is made to the disclosure in Item 4 regarding the voting
power held by the Partnership pursuant to the Convertible Note and the Common
Stock which may be acquired upon the conversion thereof. By virtue of its
position as general partner of the Partnership, the GP may be deemed to possess
the power to vote or direct the vote and the power to dispose of or direct the
disposition of the Convertible Note or the Common Stock beneficially owned by
the Partnership. By virtue of his position as the controlling shareholder of the
GP, Mr. Sherwood may be deemed to possess the power to vote or direct the vote
and the power to dispose of or direct the disposition of the Convertible Note or
the Common Stock beneficially owned by the Partnership.
(c) Except as indicated in Item 3 above, neither the Reporting Persons and,
to the best knowledge of the Reporting Persons, none of the persons named in
Annex A to this Statement, have effected a transaction in Common Stock during
the past 60 days.
(d) No person other than the Reporting Persons, the limited partners of
the Partnership and the stockholders of the General Partner has the right to
receive or the power to direct the receipt of distributions from, or the
proceeds from the sale of, the Common Stock beneficially owned by the
Partnership.
(e) Not applicable
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
---------------------------------------------------------------------
TO SECURITIES OF THE ISSUER.
---------------------------
Except as otherwise set forth in Items 2, 3, 4, 5 and Annex A hereto, to
the best knowledge of the Reporting Persons, no contracts, arrangements,
understandings or relationships (legal or otherwise) exist among the persons
named in Item 2 or between such persons and any other person with respect to any
securities of the Issuer, including but not limited to transfer or voting of any
of the securities, finder's fees, joint ventures, loan or option arrangements,
puts or calls, guarantees of profits, division of profits or loss, or the giving
or withholding of proxies.
<PAGE>
SCHEDULE 13D
- ------------------------- ---------------------
CUSIP NO. 570559-10-4 PAGE 13 OF __ PAGES
- ------------------------- ---------------------
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
--------------------------------
Exhibit 7.1 -- Agreement Re Joint Filing of Schedule 13D.
Exhibit 7.2 -- Investment Agreement.
Exhibit 7.3 -- Convertible Subordinated Promissory Note.
Exhibit 7.4 -- Certificate of Designations, Series B Preferred.
Exhibit 7.5 -- Financial Advisory Agreement.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of our knowledge and belief, the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
Date: June 12, 1996
MFI Investors L.P.
By: MFI Associates, Inc.
Its: General Partner
By /s/ Ned L. Sherwood
---------------------------------
Its President
--------------------------------
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of our knowledge and belief, the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
Date: June 12, 1996
MFI Associates, Inc.
By /s/ Ned L. Sherwood
---------------------------------
Its President
--------------------------------
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of our knowledge and belief, the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
Date: June 12, 1996
/s/ Ned L. Sherwood
---------------------------------
Ned L. Sherwood
<PAGE>
ANNEX A
-------
OFFICERS, DIRECTORS AND CONTROLLING PARTIES
OF REPORTING PERSONS
The following table sets forth certain information concerning each of the
directors and officers and stockholders of the GP:
<TABLE>
<CAPTION>
<S> <C>
Name: Ned L. Sherwood
----------------
Title: President, Director
Shares Held: 16.65 shares (30.3% of the Class A Common Stock)
Citizenship: United States of America
Business Address: 54 Morris Lane, Scarsdale, New York 10583
Principal Occupation: President of the general partner of The ZS Fund L.P., a private investment firm
Name: Henrik Falktoft
---------------
Title: Vice President, Secretary and Treasurer, Director
Shares Held: 16.67 shares (30.3% of the Class A Common Stock)
Citizenship: Denmark
Business Address: 54 Morris Lane, Scarsdale, New York 10583
Principal Occupation: An employee of The ZS Fund L.P., a private investment firm
Name: Jeffery Oyster
--------------
Title: Vice President
Shares Held: 5 shares (9.1% of the Class A Common Stock)
Citizenship: United States of America
Business Address: 54 Morris Lane, Scarsdale, New York 10583
Principal Occupation: An employee of The ZS Fund L.P., a private investment firm
Name: Robert Horne
------------
Shares Held: 16.67 shares (30.3% of the Class A Common Stock)
Citizenship: United States of America
Business Address: 54 Morris Lane, Scarsdale, New York 10583
Principal Occupation: An employee of The ZS Fund L.P., a private investment firm
</TABLE>
The GP is in control of the day to day management of the Partnership and
has sole voting and dispositive power over the Common Stock held by the
Partnership. The Partnership currently has two limited partners, including Mr.
Sherwood. Within 60 days from the date of the acquisition of the Convertible
Note, the Partnership expects to admit additional limited partners. The GP has
two classes of capital stock: Class A Common Stock and Class B Common Stock.
The two classes of Common Stock have the same rights and privileges, except
that the Class B Common Stock has no voting rights (except (i) with respect
to any amendment to the GP's certificate of incorporation which would change
the voting rights of the Class B Common Stock and (ii) as required by law).
Four individuals who are associates of Mr. Sherwood each own 4.17 shares of
Class B Common Stock. Mr. Sherwood currently owns 30.3% of the Class A Common
Stock of the GP. The remaining stockholders have granted Mr. Sherwood an
irrevocable proxy to vote one-half of their shares, giving Mr. Sherwood voting
control over 65.14% of the Class A Common Stock of the GP.
<PAGE>
AGREEMENT CONCERNING JOINT FILING
OF SCHEDULE 13D
The undersigned agree as follows:
(i) each of them is individually eligible to use the Schedule 13D to which
this Exhibit is attached, and such Schedule 13D is filed on behalf of each of
them; and
(ii) each of them is responsible for the timely filing of such Schedule
13D and any amendments thereto, and for the completeness and accuracy of the
information concerning such person contained therein; but none of them is
responsible for the completeness or accuracy of the information concerning the
other persons making the filing, unless such person knows or has reason to
believe that such information is inaccurate.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which, taken together, shall
constitute one and the same instrument.
Dated: June 6, 1996
MFI Investors L.P.
By: MFI Associates, Inc.
Its: General Partner
By /s/ Ned L. Sherwood
----------------------------------
Its President
---------------------------------
MFI Associates, Inc.
By /s/ Ned L. Sherwood
----------------------------------
Its President
---------------------------------
/s/ Ned L. Sherwood
------------------------------------
Ned L. Sherwood
<PAGE>
Exhibit 7.2
================================================================================
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
Exhibit 7.3
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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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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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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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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<PAGE>
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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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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<PAGE>
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
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<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
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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.
* * * * *
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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 7.4
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
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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.
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(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
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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
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Exhibit 7.5
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
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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
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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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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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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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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.
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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
