<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)*
MARKET FACTS, INC.
(NAME OF ISSUER)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(TITLE OF CLASS OF SECURITIES)
570559 10 4
(CUSIP NUMBER)
DANIEL M. FREEDMAN
MITCHELL SILBERBERG & KNUPP LLP
11377 WEST OLYMPIC BOULEVARD
LOS ANGELES, CALIFORNIA 90064
(310) 312-2000
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
MAY 4, 1999
(Date of Event Which Rquires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), Rule 13d-1(f) or Rule 13d-1(g), check the
following box.[ ]
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
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).
<PAGE>
CUSIP No. 570559 10 4
- -------------------------------------------------------------------------------
(1) Name of Reporting Person: Aegis Acquisition Corp.
S.S. or I.R.S. Identification No. of Above Person:
- -------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member (a) /X/
of a Group (b) / /
- -------------------------------------------------------------------------------
(3) SEC Use Only
- -------------------------------------------------------------------------------
(4) Source of Funds
BK AF
- -------------------------------------------------------------------------------
(5) Check if disclosure of legal proceedings is required pursuant to
items 2(d) or 2(e)
/ /
- -------------------------------------------------------------------------------
(6) Citizenship or place of organization
Delaware
- -------------------------------------------------------------------------------
Number of Shares (7) Sole Voting
Beneficially Owned Power 2,760,484*
by Each Reporting --------------------------------------------------
Person With (8) Shared Voting
Power -0-
--------------------------------------------------
(9) Sole Dispositive
Power 2,760,484*
--------------------------------------------------
(10) Shared Dispositive
Power -0-
- -------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
2,760,484*
- -------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) / /
- -------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
30.07%
- -------------------------------------------------------------------------------
(14) Type of Reporting Person
CO
- -------------------------------------------------------------------------------
* Beneficial ownership is based solely on the provisions of the Option and
Voting Agreement hereinafter described, pursuant to which, among other
things, Aegis Group plc has an option to purchase these shares from certain
persons, as described below.
<PAGE>
CUSIP No. 570559 10 4
- -------------------------------------------------------------------------------
(1) Name of reporting person: Aegis Group plc
S.S. or I.R.S. Identification No. of Above Person:
- -------------------------------------------------------------------------------
(2) Check the appropriate box if a member (a) /X/
of a group (b) / /
- -------------------------------------------------------------------------------
(3) SEC use only
- -------------------------------------------------------------------------------
(4) Source of funds
BK OO WC
- -------------------------------------------------------------------------------
(5) Check if disclosure of legal proceedings is required pursuant to
items 2(d) or 2(e)
/ /
- -------------------------------------------------------------------------------
(6) Citizenship or place of organization
United Kingdom
- -------------------------------------------------------------------------------
Number of Shares (7) Sole Voting
Beneficially Owned Power 2,760,484*
by Each Reporting --------------------------------------------------
Person With (8) Shared Voting
Power -0-
--------------------------------------------------
(9) Sole Dispositive
Power 2,760,484*
--------------------------------------------------
(10) Shared Dispositive
Power -0-
- -------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
2,760,484*
- -------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) / /
- -------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
30.07%
- -------------------------------------------------------------------------------
(14) Type of Reporting Person
CO
- -------------------------------------------------------------------------------
* Beneficial ownership is based solely on the provisions of the Option and
Voting Agreement hereinafter described, pursuant to which, among other
things, Aegis Group plc has an option to purchase these shares from certain
persons, as described below.
<PAGE>
ITEM 1. SECURITY AND ISSUER
This Statement on Schedule 13D (the "Statement") relates to the acquisition
by Aegis Group plc, a corporation incorporated under the laws of England and
Wales ("Parent"), of beneficial ownership of certain shares of common stock,
par value $1.00 per share (the "Shares"), of Market Facts, Inc., a Delaware
corporation (the "Company"), pursuant to an Option and Voting Agreement,
dated April 29, 1999 (the "Option Agreement"), between Parent and Verne B.
Churchill, Lawrence W. Labash, Jeffery A. Oyster, Thomas H. Payne, Sanford M.
Schwartz, Ned L. Sherwood, Timothy J. Sullivan and MFI Investors, L.P.
The Option Agreement was executed in connection with the offer by Aegis
Acquisition Corp., a Delaware corporation ("Purchaser") and an indirect
wholly owned subsidiary of Parent, to purchase all outstanding Shares at a
purchase price of $31.00 per Share, net to the seller in cash, on the terms
and subject to the conditions set forth in the Offer to Purchase dated May 4,
1999, as amended May 28, 1999 (the "Offer to Purchase"), a copy of which is
attached hereto as Exhibit (a)(9) (which, as amended or supplemented from
time to time, constitutes the "Offer").
The item numbers and responses thereto below are in accordance with the
requirements of Schedule 13D. Unless the context requires, all references
herein to Shares shall be deemed to refer also to the associated preferred
stock purchase rights issued pursuant to the Rights Agreement dated as of
July 26, 1989 between the Company and First Chicago Trust Company of New
York, as amended by a First Amendment to Rights Agreement dated as of June 5,
1996 and by a Second Amendment to the Rights Agreement dated as of April 29,
1999. The address of the Company's principal executive offices is 3040 West
Salt Creek Lane, Arlington Heights, Illinois 60005.
ITEM 2. IDENTITY AND BACKGROUND
(a)-(c), (f) This Statement is filed by Purchaser and Parent. The
information set forth in the Introduction, in Section 8 ("Certain Information
Concerning Parent and Purchaser") and in Schedule I of the Offer to Purchase is
incorporated herein by reference.
(d)-(e) During the last five years, neither Parent nor Purchaser nor, to
their knowledge, any of the persons listed in Schedule I of the Offer to
Purchase, (i) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), or (ii) was a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction and as a result
of such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, federal or
state securities laws or finding any violation of such laws.
<PAGE>
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The information set forth in Section 9 ("Sources and Amounts of Funds")
of the Offer to Purchase is incorporated herein by reference.
ITEM 4. PURPOSE OF THE TRANSACTION
(a)-(j) The information set forth in the Introduction, in Section 11
("The Offer and Merger; Merger Agreement; Other Agreements"), in Section 12
("Purpose of the Offer and the Merger; Plans for the Company; Rights
Agreement") and in Section 13 ("Effect of the Offer on the Market for the
Shares; Exchange Act Registration; Margin Regulations; Voting") of the Offer
to Purchase is incorporated herein by reference.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a)-(c) The information set forth in the Introduction and Section 11
("The Offer and Merger; Merger Agreement; Other Agreements") of the Offer to
Purchase is incorporated herein by reference. Except as set forth in the
Introduction and Section 11 of the Offer to Purchase, (i) neither Parent,
Purchaser, nor, to the knowledge of Parent and Purchaser, any of the persons
listed in Schedule I to the Offer to Purchase or any associate or
majority-owned subsidiary of Parent or Purchaser or any of the persons so
listed beneficially owns or has any right to acquire, directly or indirectly,
any Shares, and (ii) neither Parent, Purchaser, nor, to the knowledge of
Parent and Purchaser, any of the persons or entities referred to in Item 5(b)
or any executive officer, director or subsidiary of any thereof has effected
any transactions in the Shares during the past sixty days.
(d)-(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER
The information set forth in the Introduction, in Section 8 ("Certain
Information Concerning Parent and Purchaser"), in Section 9 ("Sources and
Amounts of Funds"), in Section 10 ("Background of the Offer; Contacts with the
Company"), in Section 11 ("The Offer and Merger; Merger Agreement; Other
Agreements"), in Section 12 ("Purpose of the Offer and the Merger; Plans for the
Company; Rights Agreement") and in Section 17 ("Fees and Expenses") of the Offer
to Purchase is incorporated herein by reference. Except as set forth in the
Introduction and Sections 8, 9, 10, 11, 12 and 17 of the Offer to Purchase, none
of Purchaser, Parent, nor, to the knowledge of Parent or Purchaser, any of the
persons listed on Schedule I, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including but not limited to contracts, arrangements, understandings or
relationships concerning the transfer or voting of such securities, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies.
<PAGE>
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
(a)(1) Offer to Purchase, dated May 4, 1999.*
(a)(2) Letter of Transmittal.*
(a)(3) Notice of Guaranteed Delivery.*
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.*
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.*
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.*
(a)(7) Letter dated May 7, 1999 to Participants in the Market Facts, Inc.
Profit Sharing and Retirement Plan.**
(a)(8) Letter dated May 7, 1999 to Participants in the Market Facts, Inc.
Employee Stock Ownership Plan.**
(a)(9) Offer to Purchase, as amended as of May 28, 1999.
(b)(1) Revolving Credit and Term Loan Facility, dated April 29, 1999, among
Parent, Purchaser and National Westminster Bank plc.*
(c)(1) Agreement and Plan of Merger, dated as of April 29, 1999, by and
among Parent, Purchaser and the Company.*
(c)(2) Option and Voting Agreement, dated April 29, 1999, between Parent
and Verne B. Churchill, Lawrence W. Labash, Jeffery A. Oyster,
Thomas H. Payne, Sanford M. Schwartz, Ned L. Sherwood, Timothy J.
Sullivan and MFI Investors, L.P.*
(c)(3) Form of Certificate of Incorporation of Surviving Corporation,
Exhibit A to Agreement and Plan of Merger, dated as of April 29,
1999, as amended, by and among Parent, Purchaser and the
Company.***
(c)(4) Form of By-laws of Surviving Corporation, Exhibit B to Agreement and
Plan of Merger, dated as of April 29, 1999, as amended, by and among
Parent, Purchaser and the Company.***
(c)(5) First Amendment to Agreement and Plan of Merger, dated as of
May 26, 1999, by and among Parent, Purchaser and the Company.***
(d)(1) Joint Filing Agreement dated May 27, 1999, between Parent and
Purchaser.
* Incorporated by reference to the Schedule 14D-1 of Parent and
Purchaser filed on May 4, 1999 (file #5-20859).
** Incorporated by reference to Amendment No. 1 to the Schedule 14D-1 of
Parent and Purchaser filed on May 14, 1999 (file #5-20859).
*** Incorporated by reference to Amendment No. 2 to the Schedule 14D-1 of
Parent and Purchaser filed on June 1, 1999 (file #5-20859).
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete
and correct.
Dated: May 28, 1999 AEGIS GROUP PLC
By: /s/ ELEONORE SAUERWEIN
-------------------------
Name: Eleonore Sauerwein
Title: Group Legal Director
AEGIS ACQUISITION CORP.
By: /s/ ELEONORE SAUERWEIN
-------------------------
Name: Eleonore Sauerwein
Title: Vice President
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
(a)(1) Offer to Purchase, dated May 4, 1999.*
(a)(2) Letter of Transmittal.*
(a)(3) Notice of Guaranteed Delivery.*
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.*
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.*
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.*
(a)(7) Letter dated May 7, 1999 to Participants in the Market Facts, Inc.
Profit Sharing and Retirement Plan.**
(a)(8) Letter dated May 7, 1999 to Participants in the Market Facts, Inc.
Employee Stock Ownership Plan.**
(a)(9) Offer to Purchase, as amended as of May 28, 1999.
(b)(1) Revolving Credit and Term Loan Facility, dated April 29, 1999, among
Parent, Purchaser and National Westminster Bank plc.*
(c)(1) Agreement and Plan of Merger, dated as of April 29, 1999, by and
among Parent, Purchaser and the Company.*
(c)(2) Option and Voting Agreement, dated April 29, 1999, between Parent
and Verne B. Churchill, Lawrence W. Labash, Jeffery A. Oyster,
Thomas H. Payne, Sanford M. Schwartz, Ned L. Sherwood, Timothy J.
Sullivan and MFI Investors, L.P.*
(c)(3) Form of Certificate of Incorporation of Surviving Corporation,
Exhibit A to Agreement and Plan of Merger, dated as of April 29,
1999, as amended, by and among Parent, Purchaser and the
Company.***
(c)(4) Form of By-laws of Surviving Corporation, Exhibit B to Agreement and
Plan of Merger, dated as of April 29, 1999, as amended, by and among
Parent, Purchaser and the Company.***
(c)(5) First Amendment to Agreement and Plan of Merger, dated as of
May 26, 1999, by and among Parent, Purchaser and the Company.***
(d)(1) Joint Filing Agreement dated May 27, 1999, between Parent and
Purchaser.
* Incorporated by reference to the Schedule 14D-1 of Parent and
Purchaser filed on May 4, 1999 (file #5-20859).
** Incorporated by reference to Amendment No. 1 to the Schedule 14D-1 of
Parent and Purchaser filed on May 14, 1999 (file #5-20859).
*** Incorporated by reference to Amendment No. 2 to the Schedule 14D-1 of
Parent and Purchaser filed on June 1, 1999 (file #5-20859).
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MARKET FACTS, INC.
AT
$31.00 NET PER SHARE
BY
AEGIS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
AEGIS GROUP PLC
--------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JUNE 1, 1999, UNLESS THE OFFER IS EXTENDED.
---------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OR TERMINATION OF THE OFFER A
NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $1.00 PER SHARE, OF THE COMPANY (THE
"SHARES") WHICH WILL CONSTITUTE A MAJORITY OF THE TOTAL NUMBER OF SHARES
OUTSTANDING ON A FULLY DILUTED BASIS, LESS THE NUMBER OF SHARES AEGIS
ACQUISITION CORP. ("PURCHASER") CAN ACQUIRE UNDER AN OPTION AND VOTING AGREEMENT
(THE "OPTION AGREEMENT"), DATED AS OF APRIL 29, 1999, BETWEEN AEGIS GROUP PLC
("PARENT") AND THE STOCKHOLDERS OF MARKET FACTS, INC. (THE "COMPANY") WHO ARE
PARTIES THERETO (THE "MINIMUM CONDITION"), AND (II) THE EXPIRATION OR
TERMINATION OF ANY APPLICABLE WAITING PERIODS IMPOSED BY THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED. STOCKHOLDERS OF THE COMPANY HAVE
GRANTED PARENT THE RIGHT TO ACQUIRE APPROXIMATELY 30.07% OF THE TOTAL NUMBER OF
OUTSTANDING SHARES ON A FULLY DILUTED BASIS PURSUANT TO THE OPTION AGREEMENT.
SEE SECTION 11. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE
SECTION 11.
------------------------
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED
AS OF APRIL 29, 1999 (THE "MERGER AGREEMENT"), BY AND AMONG THE COMPANY, PARENT
AND PURCHASER. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED
THAT EACH OF THE MERGER AGREEMENT, THE OFFER AND THE MERGER ARE FAIR TO AND IN
THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY, APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE
MERGER, AND RECOMMENDED ACCEPTANCE OF THE OFFER, APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND APPROVAL OF THE MERGER BY THE STOCKHOLDERS OF THE COMPANY.
------------------------
IMPORTANT
ANY STOCKHOLDER DESIRING TO TENDER ALL OR ANY PORTION OF SUCH HOLDER'S
SHARES SHOULD EITHER (a) COMPLETE AND SIGN THE LETTER OF TRANSMITTAL (OR A
MANUALLY SIGNED FACSIMILE COPY THEREOF) IN ACCORDANCE WITH THE INSTRUCTIONS IN
THE LETTER OF TRANSMITTAL AND MAIL OR DELIVER IT TOGETHER WITH THE
CERTIFICATE(S) EVIDENCING THE TENDERED SHARES AND ALL OTHER REQUIRED DOCUMENTS
TO THE DEPOSITARY, OR TENDER SUCH SHARES PURSUANT TO THE PROCEDURE FOR
BOOK-ENTRY TRANSFER DESCRIBED IN SECTION 3 OF THIS OFFER TO PURCHASE, OR (b)
REQUEST SUCH STOCKHOLDER'S BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR
OTHER NOMINEE TO EFFECT THE TRANSACTION FOR SUCH STOCKHOLDER. A STOCKHOLDER
WHOSE SHARES ARE REGISTERED IN THE NAME OF A BROKER, DEALER, COMMERCIAL BANK,
TRUST COMPANY OR OTHER NOMINEE MUST CONTACT SUCH BROKER, DEALER, COMMERCIAL
BANK, TRUST COMPANY OR OTHER NOMINEE IF THE STOCKHOLDER DESIRES TO TENDER THE
SHARES.
ANY STOCKHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATES
EVIDENCING SUCH SHARES ARE NOT IMMEDIATELY AVAILABLE OR WHO CANNOT COMPLY WITH
THE PROCEDURES FOR BOOK-ENTRY TRANSFER ON A TIMELY BASIS MAY TENDER SUCH SHARES
BY FOLLOWING THE PROCEDURES FOR GUARANTEED DELIVERY SET FORTH IN SECTION 3 OF
THIS OFFER TO PURCHASE.
QUESTIONS AND REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO MORGAN STANLEY &
CO. INCORPORATED, THE DEALER MANAGER, OR TO D.F. KING & CO., INC., THE
INFORMATION AGENT, AT THEIR RESPECTIVE ADDRESSES AND TELEPHONE NUMBERS SET FORTH
ON THE BACK COVER OF THIS OFFER TO PURCHASE. ADDITIONAL COPIES OF THIS OFFER TO
PURCHASE, THE LETTER OF TRANSMITTAL, THE NOTICE OF GUARANTEED DELIVERY AND THE
OTHER TENDER OFFER MATERIALS MAY ALSO BE OBTAINED FROM THE INFORMATION AGENT,
BROKERS, DEALERS, COMMERCIAL BANKS OR TRUST COMPANIES.
---------------------------
THE DEALER MANAGER FOR THE OFFER IS:
MORGAN STANLEY DEAN WITTER
MAY 4, 1999, AS AMENDED MAY 28, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
INTRODUCTION............................................................................................... 1
1. Terms of the Offer..................................................................................... 3
2. Acceptance for Payment and Payment..................................................................... 5
3. Procedures for Tendering Shares........................................................................ 6
4. Withdrawal Rights...................................................................................... 8
5. Certain Tax Considerations............................................................................. 9
6. Price Range of Shares; Dividends....................................................................... 10
7. Certain Information Concerning the Company............................................................. 11
8. Certain Information Concerning Parent and Purchaser.................................................... 13
9. Sources and Amounts of Funds........................................................................... 15
10. Background of the Offer; Contacts with the Company..................................................... 17
11. The Offer and Merger; Merger Agreement; Option and Voting Agreement.................................... 19
12. Purpose of the Offer and the Merger; Plans for the Company; Rights Agreement........................... 27
13. Effect of the Offer on the Market for the Shares; Exchange Act Registration; Margin Regulations........ 33
14. Dividends and Distributions............................................................................ 34
15. Conditions to the Offer................................................................................ 34
16. Certain Legal Matters; Regulatory Approvals............................................................ 36
17. Fees and Expenses...................................................................................... 38
18. Miscellaneous.......................................................................................... 38
Schedule I--Directors and Executive Officers of Aegis Acquisition Corp. and Aegis Group plc................ S-1
</TABLE>
<PAGE>
To the Holders of Common Stock of
Market Facts, Inc.:
INTRODUCTION
Aegis Acquisition Corp., a Delaware corporation ("Purchaser") and an
indirect wholly owned subsidiary of Aegis Group plc, a corporation incorporated
under the laws of England and Wales ("Parent"), hereby offers to purchase all of
the outstanding shares of Common Stock, par value $1.00 per share (the
"Shares"), of Market Facts, Inc., a Delaware corporation (the "Company"), at
$31.00 per Share, net to the seller in cash (the "Offer Price"), upon the terms
and subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which, as amended or supplemented from time to
time, together constitute the "Offer"). For purposes of this Offer to Purchase,
references to "Section" are references to a section of this Offer to Purchase,
unless the context otherwise requires. Unless the context requires otherwise,
all references to Shares in this Offer to Purchase shall be deemed to refer also
to the associated preferred stock purchase rights (the "Rights") issued pursuant
to the Rights Agreement dated as of July 26, 1989 between the Company and First
Chicago Trust Company of New York, as amended by a First Amendment to Rights
Agreement dated as of June 5, 1996 and by a Second Amendment to the Rights
Agreement dated as of April 29, 1999 (the "Rights Agreement"), and all
references to Rights shall be deemed to include all benefits that may inure to
the stockholders of the Company or to holders of the Rights pursuant to the
Rights Agreement. In connection with the Merger Agreement (as defined below),
the Company has amended the Rights Agreement so that the execution and delivery
of the Merger Agreement and the Option Agreement (as defined below), and the
consummation of the transactions contemplated thereby, including the Offer and
the purchase of Shares pursuant thereto, will not result in (i) Parent,
Purchaser or any of their affiliates becoming an Acquiring Person (as defined in
the Rights Agreement), or (ii) the occurrence of a Distribution Date or a Shares
Acquisition Date (each as defined in the Rights Agreement). Unless and until the
Distribution Date occurs, the Rights will be transferred with and only with the
Shares and, therefore, the surrender for transfer of any of the certificates
representing Shares (the "Stock Certificates"), including upon acceptance for
payment of such Shares pursuant to the Offer, will also constitute the surrender
for transfer of the Rights associated with the Shares represented by such Share
Certificates. See Section 12.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by Purchaser
pursuant to the Offer. Purchaser or Parent will pay all charges and expenses of
Morgan Stanley & Co. Incorporated ("Morgan Stanley"), which is acting as the
Dealer Manager (in such capacity, the "Dealer Manager"), First Chicago Trust
Company of New York (the "Depositary"), and D.F. King & Co., Inc. (the
"Information Agent"), incurred in connection with the Offer in accordance with
the terms of agreements entered into between Purchaser and/or Parent and such
persons. See Section 17.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OR TERMINATION OF THE OFFER A
NUMBER OF SHARES WHICH WILL CONSTITUTE A MAJORITY OF THE TOTAL NUMBER OF SHARES
OUTSTANDING ON A FULLY DILUTED BASIS, LESS THE NUMBER OF SHARES PURCHASER CAN
ACQUIRE UNDER THE OPTION AGREEMENT, AS DEFINED BELOW (THE "MINIMUM CONDITION"),
AND (II) EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR
CONDITION"). SEE SECTION 15.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of April 29, 1999 (the "Merger Agreement"), by and among the Company, Parent
and Purchaser. The Merger Agreement provides, among other things, for the
commencement of the Offer by Purchaser and further provides that, as promptly as
practicable following the purchase of Shares pursuant to the Offer (the
"consummation" of the Offer) and the approval and adoption of the Merger
Agreement by the stockholders of the Company,
1
<PAGE>
if required by applicable law, and the satisfaction or waiver of certain other
conditions set forth therein, Purchaser will be merged with and into the Company
(the "Merger"), with the Company continuing as the surviving corporation (the
"Surviving Corporation") and becoming an indirect wholly owned subsidiary of
Parent. Pursuant to the Merger, each issued and outstanding Share (other than
(i) Shares held by Purchaser, Parent or the Company or any direct or indirect
subsidiary of Purchaser, Parent or the Company and (ii) Dissenting Shares (as
hereinafter defined)) will be converted into the right to receive $31.00 in cash
or any higher price that may be paid per Share in the Offer, without interest
thereon, less any required withholding of taxes (the "Merger Price"). The Merger
is more fully described in Section 11.
Simultaneously with entering into the Merger Agreement, MFI Investors, L.P.
(the "Partnership"), and certain of its affiliates and certain senior executives
of the Company (the "Selling Stockholders"), entered into an Option and Voting
Agreement, dated as of April 29, 1999, with Parent (the "Option Agreement").
Pursuant to the Option Agreement, the Selling Stockholders have agreed, among
other things, (i) to sell to Parent or its permitted assign 2,760,484 Shares
(30.07% of the Shares, on a fully diluted basis, after giving effect to the
exercise of vested employee stock options) at a price of $31.00 per Share, (ii)
not to tender such Shares into the Offer without Parent's consent, and (iii) to
vote such Shares and all shares of Series B Preferred Stock, no par value (the
"Series B Shares") held by the Selling Stockholders in favor of the Merger, in
each case upon the terms and subject to conditions and limitations set forth in
the Option Agreement. The Option Agreement is more fully described in Section
11.
The Company has advised Purchaser and Parent that as of April 30, 1999 there
were (i) 8,944,701 Shares issued and outstanding, (ii) 1,965,357 Shares held in
the treasury of the Company, (iii) 932,900 Shares reserved for issuance pursuant
to outstanding employee stock options granted under the Company's stock option
plan (of which approximately 234,400 have vested), (iv) 100,000 Shares reserved
for issuance in connection with possible future purchase price payments in
connection with a past acquisition by the Company and (v) 100 Series B Shares.
As of April 30, 1999, Purchaser believes that the Minimum Condition will be
satisfied if Purchaser acquires 1,829,067 Shares pursuant to the Offer (which,
together with the 2,760,484 Shares covered by the Option Agreement, will total
4,589,551 Shares). If the Minimum Condition is satisfied and Purchaser accepts
for payment Shares tendered pursuant to the Offer and purchases the Shares
subject to the Option Agreement, Purchaser will have the right to select a
majority of the Company's Board of Directors (as more fully described in Section
11) and to approve the Merger without the affirmative vote of any other
stockholder of the Company. See Section 12.
The Board of Directors of the Company (the "Board" or "Board of Directors")
has received the opinion dated April 28, 1999 and affirmed April 29, 1999 of
Schroder & Co. Inc. ("Schroder"), financial advisor to the Company, to the
effect that, as of such dates and based upon and subject to certain assumptions
stated therein, the $31.00 per Share cash consideration to be received by
holders of Shares (other than Parent, the Company, their respective direct or
indirect subsidiaries and holders who exercise their appraisal rights in
accordance with applicable law) pursuant to the Merger Agreement was fair from a
financial point of view to such holders. A copy of the opinion of Schroder is
attached to the Company's Solicitation/Recommendation Statement on Schedule
14D-9, which is being distributed to the stockholders of the Company, and
stockholders are urged to read the opinion carefully in its entirety for the
assumptions made, matters considered and limitations on the review undertaken by
Schroder.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT EACH
OF THE MERGER AGREEMENT, THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST
INTERESTS OF THE STOCKHOLDERS OF THE COMPANY, APPROVED THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND
RECOMMENDED ACCEPTANCE OF THE OFFER, APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND APPROVAL OF THE MERGER BY THE STOCKHOLDERS OF THE COMPANY.
ADDITIONALLY, THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE
OPTION AGREEMENT FOR PURPOSES OF SECTION 203 OF THE DELAWARE GENERAL CORPORATION
2
<PAGE>
LAW (THE "DGCL"). ACCORDINGLY, SECTION 203 OF THE DGCL (WHICH RESTRICTS AN
"INTERESTED STOCKHOLDER" FROM ENGAGING IN A "BUSINESS COMBINATION" WITH A
DELAWARE CORPORATION FOR A PERIOD OF THREE YEARS FOLLOWING THE DATE ON WHICH
SUCH STOCKHOLDER BECAME AN "INTERESTED STOCKHOLDER") IS INAPPLICABLE TO THE
OFFER, THE MERGER AND THE PURCHASE OF SHARES PURSUANT TO THE OPTION AGREEMENT.
SEE SECTION 16.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of such extension or
amendment), Purchaser will accept for payment and pay for all Shares which are
validly tendered on or prior to the Expiration Date and not properly withdrawn
in accordance with Section 4. The term "Expiration Date" means 12:00 midnight,
New York City time, on Tuesday, June 1, 1999, unless and until Purchaser, in its
sole discretion, but subject to the terms of the Merger Agreement, shall have
extended the period of time during which the Offer is open, in which event the
term "Expiration Date" shall refer to the latest time and date at which the
Offer, as so extended by Purchaser, shall expire.
The Offer is subject to certain conditions described in Section 15,
including satisfaction of the Minimum Condition and the HSR Condition. Subject
to the provisions of the Merger Agreement and the applicable rules and
regulations of the Securities and Exchange Commission (the "Commission"),
Purchaser reserves the right, in its sole discretion, to waive any or all
conditions to the Offer and otherwise to modify the terms of the Offer in any
respect. Without limiting the preceding sentence, if any condition to the Offer
is not satisfied prior to the expiration of the Offer, Purchaser reserves the
right, in its sole discretion, subject to the terms of the Merger Agreement and
such rules and regulations, to (i) terminate the Offer and return all tendered
Shares to tendering stockholders, (ii) extend the Offer and, subject to
withdrawal rights as set forth in Section 4, retain all such Shares until the
expiration of the Offer as so extended, or (iii) waive such condition and,
subject to any requirement to extend the period of time during which the Offer
is open, purchase all Shares validly tendered and not withdrawn by the
Expiration Date. Any extension, amendment or termination will be followed as
promptly as practicable by public announcement thereof, the announcement in the
case of an extension to be issued no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date in
accordance with Rules 14d-4(c), 14d-6(d) and 14e-1(d) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Without limiting the
obligation of Purchaser under such rules or the manner in which Purchaser may
choose to make any public announcement, Purchaser currently intends to make
announcements by issuing a release to the Dow Jones News Service.
The Merger Agreement provides that, subject only to the Minimum Condition
and the other conditions provided in the Merger Agreement, Purchaser shall
consummate the Offer as soon as legally permissible. The Merger Agreement also
provides that the Offer shall be made by means of an offer to purchase
containing the Minimum Condition, and no other conditions except those set forth
in the Merger Agreement, and shall not be amended with respect to any such
condition or the Minimum Condition, with respect to a reduction in the price or
change in the form of consideration to be paid in the Offer, or with respect to
an extension of the Offer (except as provided below) without the consent of the
Company; provided, however, that Purchaser may extend the expiration date (x) in
its sole discretion from time to time, if on the initial scheduled or any
extended expiration date of the Offer the Minimum Condition has not been
satisfied, or any of the other conditions set forth in the Merger Agreement
shall not have been satisfied or waived (provided, however, that unless agreed
to by the Company any extended expiration date pursuant to this clause (x) may
not be later than 90 days from the date of commencement of the Offer or
3
<PAGE>
120 days from such date if within such 90 day period a tender offer for at least
20% of the outstanding Shares is commenced by any person who is not an affiliate
(as defined under the rules promulgated pursuant to the Securities Act of 1933
as amended (the "Securities Act")) of Parent or Purchaser (an "Intervening
Tender Offer")), or (y) for a period not to exceed ten business days,
notwithstanding that all conditions to the Offer are satisfied as of such
expiration date of the Offer, if, immediately prior to the expiration date of
the Offer (as it may be extended), the Shares tendered and not withdrawn
pursuant to the Offer, together with the Shares subject to the Option Agreement,
without duplication, equal less than 90% of the outstanding Shares and Purchaser
expressly irrevocably waives any condition (other than the Minimum Condition)
that subsequently may not be satisfied during such extension of the Offer; or
(z) for any period required by any rule, regulation, interpretation or position
of the Commission or the staff thereof applicable to the Offer. Without limiting
the right of Purchaser to extend the Offer pursuant to the provisions of the
Merger Agreement, in the event that (i) the Minimum Condition shall not have
been satisfied or (ii) the other conditions set forth in the Merger Agreement
shall not have been satisfied or waived at the scheduled or any extended
expiration date of the Offer, at the request of the Company, the Purchaser has
agreed that it will extend the expiration date of the Offer in increments of
five business days each until the earliest to occur of (x) the satisfaction or
waiver of the Minimum Condition or such other condition, (y) the termination of
this Agreement in accordance with its terms, and (z) 90 days from commencement
of the Offer or 120 days from such date in the event of an Intervening Tender
Offer (unless extended by agreement of Parent, Purchaser and the Company).
Subject to the applicable rules and regulations of the Commission and the
provisions of the Merger Agreement described above, Purchaser expressly reserves
the right, in its sole discretion, at any time and from time to time, and
regardless of whether or not any of the events set forth in Section 15 shall
have occurred, to (i) extend the period of time during which the Offer is open
and thereby delay acceptance for payment of, and the payment for, any Shares, by
giving oral or written notice of such extension to the Depositary or (ii) amend
the Offer in any respect by giving oral or written notice of such amendment to
the Depositary. During any such extension, all Shares previously tendered and
not properly withdrawn will remain subject to the Offer, subject to the right of
a tendering stockholder to withdraw such stockholder's Shares.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
Purchaser will disseminate additional tender offer materials and extend the
Offer if and to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1(c)
under the Exchange Act. The minimum period during which the Offer must remain
open following material changes in the terms of the Offer or information
concerning the Offer, other than a change in the Offer Price or a change in
percentage of securities sought, will depend upon the facts and circumstances,
including the materiality of the terms or information. With respect to a change
in the Offer Price or, subject to certain limitations, a change in percentage of
securities sought, a minimum ten business day period is generally required to
allow for adequate dissemination to stockholders. If, prior to the Expiration
Date, Purchaser should decide to increase the Offer Price, such increase will be
applicable to all stockholders whose Shares are accepted for payment pursuant to
the Offer. The Selling Stockholders and Parent have agreed, however, that the
exercise price to be paid for Shares purchased under the Option Agreement will
remain at $31.00 per share. As used in this Offer to Purchase, "business day"
means any day other than a Saturday, Sunday or a federal holiday and consists of
the time period from 12:01 a.m. through 12:00 midnight, New York City time, as
computed in accordance with Rule 14d-1 under the Exchange Act.
The Company has agreed to provide Purchaser with the Company's stockholder
list and security position listings for the purpose of disseminating the Offer
to holders of Shares. This Offer to Purchase, the related Letter of Transmittal
and other relevant materials will be mailed to record holders of Shares and will
be furnished to brokers, banks and similar persons whose names, or the names of
whose nominees,
4
<PAGE>
appear on the stockholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT
Upon the terms and subject to the conditions of the Merger Agreement
and the Offer (including, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), Purchaser, promptly after the
Expiration Date, will accept for payment and pay for all Shares validly
tendered and not properly withdrawn on or prior to the Expiration Date. In
addition, subject to applicable rules of the Commission, Purchaser expressly
reserves the right to delay acceptance for payment of or payment for Shares
pending receipt of any other regulatory approvals specified in Section 16.
Any such delays will be effected in compliance with Rule 14e-1(c) under the
Exchange Act (relating to a bidder's obligation to pay for or return tendered
securities promptly after the termination or withdrawal of such bidder's
offer). For a description of Purchaser's right to terminate the Offer and not
accept for payment or pay for Shares or to delay acceptance for payment of,
or payment for, Shares, see Section 1.
For purposes of the Offer, Purchaser will be deemed to have accepted
tendered Shares for payment if, as and when Purchaser gives oral followed by
written notice to the Depositary of its acceptance of the tenders of such
Shares. Payment for Shares purchased pursuant to the Offer will be made by
deposit of the Offer Price with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from Purchaser and
transmitting such payments to tendering stockholders. In all cases, payment for
Shares accepted for payment pursuant to the Offer will be made only after the
expiration of the Offer and timely receipt by the Depositary of (i) Stock
Certificates or confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Shares into the Depositary's account at a Book-Entry
Transfer Facility (as defined in Section 3), (ii) a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile copy thereof),
with any required signature guarantees, or in the case of a book-entry transfer,
an Agent's Message (as defined in Section 3), and (iii) any other documents
required by the Letter of Transmittal. For a description of the procedure for
tendering Shares pursuant to the Offer, see Section 3.
IN NO CIRCUMSTANCES WILL INTEREST BE PAID BY PURCHASER ON THE CONSIDERATION
PAID FOR SHARES PURSUANT TO THE OFFER, REGARDLESS OF ANY EXTENSION OF THE OFFER
OR ANY DELAY IN MAKING PAYMENT.
If, for any reason whatsoever, acceptance for payment of or payment for any
Shares tendered pursuant to the Offer is delayed or Purchaser is unable to
accept for payment or pay for Shares tendered pursuant to the Offer, then
without prejudice to Purchaser's rights set forth herein, the Depositary may
nevertheless, on behalf of Purchaser and subject to Rule 14e-1(c) under the
Exchange Act, retain tendered Shares and such Shares may not be withdrawn except
to the extent that the tendering stockholder is entitled to and duly exercises
withdrawal rights as described in Section 4.
PRIOR TO A DISTRIBUTION DATE, A VALID TENDER OF SHARES WILL ALSO CONSTITUTE
A TENDER OF THE ASSOCIATED RIGHTS.
If Purchaser increases the consideration to be paid for Shares pursuant to
the Offer, Purchaser will pay such increased consideration for all Shares
purchased pursuant to the Offer (but not Shares of the Selling Stockholders
purchased under the Option Agreement).
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates the right to purchase Shares
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve Purchaser of its obligations under the Offer or prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment.
5
<PAGE>
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if Stock Certificates are submitted for more Shares than are
tendered, Stock Certificates for Shares not purchased or not tendered will be
returned (or, in the case of Shares tendered by book-entry transfer, such Shares
will be credited to an account maintained at the Book-Entry Transfer Facility),
without expense to the tendering stockholder, as promptly as practicable after
the expiration or termination of the Offer.
3. PROCEDURES FOR TENDERING SHARES
VALID TENDER. In order for Shares to be validly tendered pursuant to the
Offer, either (a) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), with any required signature guarantees, or an Agent's
Message (in the case of any book-entry transfer), and any other documents
required by the Letter of Transmittal, must be received by the Depositary at one
of its addresses set forth on the back cover of this Offer to Purchase prior to
the Expiration Date, and either (i) the Stock Certificates evidencing such
Shares to be tendered must be received by the Depositary at such address, or
(ii) such Shares must be delivered to the Depositary pursuant to the procedures
for book-entry transfer described below and a Book-Entry Confirmation (including
an Agent's Message) must be received by the Depositary, in each case prior to
the Expiration Date, or (b) the tendering stockholder must comply with the
guaranteed delivery procedures described below. The term "Agent's Message" means
a message transmitted by the Book-Entry Transfer Facility to, and received by,
the Depositary and forming a part of a Book-Entry Confirmation, which states
that the Book-Entry Transfer Facility has received an express acknowledgment
from the participant in the Book-Entry Transfer Facility tendering the Shares
which are the subject of such Book-Entry Confirmation that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that Purchaser may enforce such agreement against such participant.
BOOK-ENTRY TRANSFER. The Depositary will make a request to establish an
account with respect to the Shares at The Depository Trust Company (the
"Book-Entry Transfer Facility") for purposes of the Offer within two business
days after the date of this Offer to Purchase, and any financial institution
that is a participant in the system of the Book-Entry Transfer Facility may make
book-entry delivery of Shares by causing the Book-Entry Transfer Facility to
transfer such Shares into the Depositary's account at the Book-Entry Transfer
Facility in accordance with the procedures of the Book-Entry Transfer Facility.
However, although delivery of Shares may be effected through book-entry
transfer, either the Letter of Transmittal (or a manually signed facsimile copy
thereof), properly completed and duly executed, together with any required
signature guarantees, or an Agent's Message, and any other documents required by
the Letter of Transmittal must, in any case, be received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase prior
to the Expiration Date, or the guaranteed delivery procedures described below
must be complied with.
DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO
THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEES. Generally, signatures on all Letters of Transmittal
must be guaranteed by a member firm of a registered national securities exchange
(registered under Section 6 of the Exchange Act) or by a member firm of the
National Association of Securities Dealers, Inc., by a commercial bank or trust
company having an office or correspondent in the United States or by any other
"Eligible Guarantor Institution" as defined in Rule 17Ad-15 under the Exchange
Act that is a participant in the Medallion Signature Guarantee Program (each of
the foregoing constituting an "Eligible Institution"). However, signatures on a
Letter of Transmittal need not be guaranteed (a) if the Letter of Transmittal is
signed by the registered holder of the Shares tendered therewith and such holder
has not completed the box entitled "Special Payment Instructions" on the Letter
of Transmittal, or (b) if such Shares are tendered for the account of an
Eligible Institution.
6
<PAGE>
If a Stock Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Stock
Certificate not accepted for payment or evidencing Shares not tendered is to be
returned, to a person other than the registered holder(s), then the Stock
Certificate must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name(s) of the registered holder(s) appear
thereon, with the signature(s) guaranteed as described above. See Instructions 1
and 5 of the Letter of Transmittal.
If Stock Certificates are forwarded separately to the Depositary, a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile copy thereof) must accompany each such delivery.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Stock Certificates are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all the
following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, is received by
the Depositary prior to the Expiration Date; and
(iii) Stock Certificates in proper form for transfer, or a Book-Entry
Confirmation, together with a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile copy thereof), with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message) and any other documents required by the Letter of Transmittal, are
received by the Depositary within three trading days after the date of
execution of the Notice of Guaranteed Delivery. A "trading day" is any day
on which the Nasdaq National Market is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mailed to the Depositary and must include a guarantee
by an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery.
THE METHOD OF DELIVERY OF STOCK CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND DELIVERY
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN
THE CASE OF BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
BACK-UP FEDERAL INCOME TAX WITHHOLDING. Under the federal income tax laws,
the Depositary will be required to withhold 31% of the amount of any payments
made to certain stockholders pursuant to the Offer. In order to avoid such
back-up withholding, each tendering stockholder must provide the Depositary with
such stockholder's correct taxpayer identification number and certify that such
stockholder is not subject to back-up federal income tax withholding by
completing the Substitute Form W-9 included in the Letter of Transmittal (see
Instruction 10 of the Letter of Transmittal) or by filing a Form W-9 with the
Depositary prior to any such payments. If the stockholder is a nonresident alien
or foreign entity not subject to back-up withholding, the stockholder must give
the Depositary a completed Form W-8 Certificate of Foreign Status prior to
receipt of any payments.
7
<PAGE>
OTHER REQUIREMENTS. By executing a Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of Purchaser as
the stockholder's attorneys-in-fact and proxies, in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of the stockholder's rights with respect to the Shares tendered by the
stockholder and accepted for payment by Purchaser (and any and all other Shares
or other securities or property issued or issuable in respect of such Shares on
or after April 29, 1999). All such proxies and powers of attorney shall be
irrevocable and coupled with an interest in the tendered Shares. Such
appointment is effective only upon acceptance for payment of the Shares by
Purchaser. Upon such acceptance for payment, all prior powers of attorney,
proxies and consents given by the stockholder with respect to such Shares (and
such other Shares and other securities or property) will, without further
action, be revoked, and no subsequent powers of attorney and proxies may be
given nor any subsequent written consent executed by such stockholder with
respect thereto (and, if given or executed, will not be deemed to be effective).
The designees of Purchaser will, with respect to all such Shares and other
securities, be empowered to exercise all voting and other rights of such
stockholder as they in their sole discretion may deem proper at any annual,
special or adjourned meeting of the Company's stockholders, by written consent,
or otherwise. Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon Purchaser's acceptance for
payment of such Shares, Purchaser is able to exercise full voting and other
rights with respect to all such Shares and other securities (including voting at
any meeting of stockholders or acting by written consent without a meeting).
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer, as well as the tendering stockholder's representation
and warranty that (a) such stockholder has the full power and authority to
tender and assign the Shares tendered, as specified in the Letter of
Transmittal, (b) such stockholder has a net long position in the Shares being
tendered within the meaning of Rule 14e-4 under the Exchange Act and (c) the
tender of such Shares complies with Rule 14e-4. Purchaser's acceptance for
payment of Shares tendered pursuant to the Offer will constitute a binding
agreement between the tendering stockholder and Purchaser upon the terms and
subject to the conditions of the Offer.
DETERMINATION OF VALIDITY. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by Purchaser in its sole discretion,
which determination shall be final and binding. Purchaser reserves the absolute
right to reject any or all tenders determined by it not to be in proper form or
the acceptance for payment of which, or payment for which, may, in the opinion
of Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right
to waive any defect or irregularity in any tender of Shares. No tender of Shares
will be deemed to have been validly made until all defects and irregularities
relating thereto have been cured or waived. Purchaser's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
Instructions thereto) will be final and binding. None of Purchaser, Parent, any
of their affiliates or assigns, the Depositary, the Dealer Manager, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or will incur any
liability for failure to give any such notification.
4. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time on or prior
to the Expiration Date and, unless theretofore accepted for payment by Purchaser
pursuant to the Offer, may also be withdrawn at any time after July 2, 1999. If
Purchaser extends the Offer, is delayed in its acceptance for payment of Shares
or is unable to purchase Shares validly tendered pursuant to the Offer for any
reason, then without prejudice to Purchaser's rights under the Offer, the
Depositary may nevertheless, on behalf of Purchaser, retain tendered Shares and
such Shares may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as described in this Section 4,
subject to Rule 14e-1(c) under the Exchange
8
<PAGE>
Act which provides that no person who makes a tender offer shall fail to pay the
consideration offered or return the securities deposited by or on behalf of
security holders promptly after the termination or withdrawal of the Offer. Any
such delay in acceptance for payment will be accompanied by an extension of the
Offer to the extent required by law or by the Merger Agreement.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If Stock Certificates evidencing Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, a signed notice of
withdrawal with signatures guaranteed by an Eligible Institution (except in the
case of Shares tendered by an Eligible Institution) must be submitted prior to
the release of such certificates. In addition, such notice must specify, in the
case of Shares tendered by delivery of Stock Certificates, the name of the
registered holder (if different from that of the tendering stockholder) and the
serial numbers shown on the particular Stock Certificates evidencing the Shares
to be withdrawn, or, in the case of Shares tendered by book-entry transfer, the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Shares.
Withdrawals of tendered Shares may not be rescinded, and Shares withdrawn
will thereafter be deemed not validly tendered for purposes of the Offer.
However, withdrawn Shares may be retendered again by following one of the
procedures described in Section 3 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding. None of Purchaser, Parent, any of
their affiliates or assigns, the Depositary, the Dealer Manager, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification.
5. CERTAIN TAX CONSIDERATIONS
The summary of tax consequences set forth below is for general information
only and is based on the U.S. federal income tax law as currently in effect. The
summary does not address all aspects of U.S. federal income taxation that may be
relevant to particular holders of Shares and thus, for example, may not be
applicable to holders of Shares who are not citizens or residents of the United
States, who are employees and who acquired their Shares pursuant to the exercise
of compensatory stock options, or who are entities that are otherwise subject to
special tax treatment (such as insurance companies, tax-exempt entities and
regulated investment companies) under the Internal Revenue Code of 1986, as
amended (the "Code"); nor does this summary address the effect of any applicable
state, local, foreign or other tax laws. The discussion assumes that each holder
of Shares holds such Shares as a capital asset within the meaning of Section
1221 of the Code. The precise tax consequences of the Offer or the Merger will
depend on the particular circumstances of the holder. STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN
AND OTHER TAX CONSEQUENCES TO THEM OF THE PROPOSED TRANSACTION.
The receipt of cash for Shares pursuant to the Offer, the Option Agreement
or the Merger will be a taxable transaction for U.S. federal income tax purposes
and may also be a taxable transaction under applicable state, local or foreign
tax laws. In general, a stockholder who receives cash for Shares pursuant to the
Offer, the Option Agreement or the Merger will recognize gain or loss for U.S.
federal income tax purposes equal to the difference between the amount of cash
received and such stockholder's adjusted tax basis in the Shares sold. Such gain
or loss will be capital gain or loss, and will be long-term capital gain or loss
if the holder has held the Shares for more than one year at the time of sale.
Gain or loss will be calculated separately for each Share tendered pursuant to
the Offer, sold pursuant to the Option Agreement or canceled pursuant to the
Merger.
9
<PAGE>
Capital gains recognized on marketable securities such as the Shares will be
taxable at a maximum U.S. federal rate of 20% for individuals if the
individual's holding period is more than one year. Capital gains for individuals
whose holding period is one year or less is taxed at the same rate as ordinary
income or, a maximum rate of 39.6%. Corporations are taxed at a maximum rate of
35% on both ordinary income and capital gain.
WITHHOLDING. Unless a stockholder complies with certain reporting and/or
certification procedures, or is an exempt recipient under applicable provisions
of the Code (and regulations thereunder), such stockholder may be subject to a
"backup" withholding tax of 31% with respect to any payments received pursuant
to the Offer, the Option Agreement or the Merger. Stockholders should contact
their brokers to ensure compliance with such procedures. Foreign stockholders
should consult with their tax advisors regarding U.S. withholding taxes in
general. See Section 3.
6. PRICE RANGE OF SHARES; DIVIDENDS
The Common Stock is traded on the Nasdaq National Market under the symbol
"MFAC." The following table sets forth, for the periods indicated, the high and
low sale prices per Share for the Common Stock, as reported in the Company's
1998 Annual Report to Stockholders incorporated by reference into the Company's
Annual Report on Form 10-K for the year ending December 31, 1998 (the "Company
10-K"), and as reported in published financial sources thereafter. The
information set forth in the table has been adjusted retroactively to reflect a
two-for-one stock split in May 1997.
<TABLE>
<CAPTION>
COMMON STOCK
--------------------
LOW HIGH
------- ---------
<S> <C> <C>
1997
First Quarter............................................................. $ 7 $10 5/8
Second Quarter............................................................ $ 9 1/8 $14
Third Quarter............................................................. $10 1/4 $31 5/8
Fourth Quarter............................................................ $16 3/4 $24 3/4
1998
First Quarter............................................................. $15 1/4 $20 15/16
Second Quarter............................................................ $19 $24 1/4
Third Quarter............................................................. $18 1/2 $28 1/2
Fourth Quarter............................................................ $17 5/8 $28 1/2
1999
First Quarter............................................................. $20 $26 1/4
Second Quarter (through April 28, 1999)................................... $18 3/4 $26 1/4
</TABLE>
On April 29, 1999, the last full day of trading prior to the public
announcement of the execution of the Merger Agreement, the reported closing sale
price per Share of Common Stock (as reported in The Wall Street Journal) was
$25 7/8. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
SHARES.
The Rights are currently attached to the outstanding Shares and may not be
traded separately. If a Distribution Date occurs, the Rights could begin trading
separately from the Shares. See Section 12.
DIVIDENDS. The Purchaser has been advised by the Company that the Company
has paid no dividends on its Common Stock subsequent to December 13, 1996. The
Merger Agreement prohibits the Company from declaring or paying any dividends
until the effectiveness of the Merger.
10
<PAGE>
7. CERTAIN INFORMATION CONCERNING THE COMPANY
The following information concerning the Company has been taken from or
based upon publicly available documents on file with the Commission, other
publicly available information and information provided by the Company. Although
neither Purchaser nor Parent has any knowledge that would indicate that such
information is untrue, neither Purchaser nor Parent takes any responsibility
for, or makes any representation with respect to, the accuracy or completeness
of such information or for any failure by the Company to disclose events that
may have occurred and may affect the significance or accuracy of any such
information but which are unknown to Purchaser or Parent.
GENERAL. The Company is a Delaware corporation with its headquarters
located at 3040 West Salt Creek Lane, Arlington Heights, Illinois 60005. The
Company is a leading provider of custom market research services. It provides
quantitative and qualitative marketing research both domestically and
internationally. Through its network of 21 offices and its international
affiliations, the Company engages in the design, execution and interpretation of
market research conducted on behalf of its clients.
AVAILABLE INFORMATION. The Company is subject to the information
requirements of the Exchange Act, and is required to file reports and other
information with the Commission relating to its business, financial condition
and other matters. Information, as of particular dates, concerning the Company's
directors and officers, their remuneration, options granted to them, the
principal holders of the Company's securities and any material interest of such
persons in transactions with the Company is required to be described in filings
with the Commission. These filings, including the Company 10-K and the Company's
Schedule 14D-9 to be filed in connection with this Offer, are or, when filed,
will be available for inspection at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and should also be
available for inspection and copying at prescribed rates at the regional offices
of the Commission located at Seven World Trade Center, Suite 1300, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of this material may also be obtained by mail, upon
payment of the Commission's customary fees, from the Commission's principal
office. The Commission also maintains a site on the World Wide Web at
http://www.sec.gov that contains such filings and other information. Such
material should also be available for inspection at the library of the Nasdaq
Stock Market, 1735 K Street, N.W., Washington, D.C. 20006.
11
<PAGE>
CERTAIN CONSOLIDATED FINANCIAL INFORMATION FOR THE COMPANY. Set forth below
are certain selected consolidated financial data for the Company's last five
fiscal years which were derived from the Company 10-K. More comprehensive
financial information is included in the reports (including management's
discussion and analysis of financial condition and results of operations) and
other documents filed by the Company with the Commission, and the following
financial data are qualified in their entirety by reference to such reports and
other documents, including the financial information and related notes contained
therein. Such reports and other documents may be examined and copies thereof may
be obtained in the manner set forth above. Neither Parent nor Purchaser assumes
any responsibility for the accuracy of the financial information set forth
below.
MARKET FACTS, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
------------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenue........................... $ 55,483,032 $ 64,608,724 $ 83,795,562 $ 100,064,294 $ 136,532,924
------------- ------------- ------------- -------------- --------------
Income from operations............ 3,294,736 5,194,779 8,397,948 10,281,163 14,559,481
------------- ------------- ------------- -------------- --------------
Net income........................ 1,434,167 2,226,119 4,277,656 5,822,098 9,009,949
Basic earnings per share.......... .20 .29 .57 .80 1.02
------------- ------------- ------------- -------------- --------------
Diluted earnings per share........ .19 .29 .55 .77 .98
------------- ------------- ------------- -------------- --------------
Cash and cash equivalents......... $ 911,209 $ 3,530,157 $ 129,428 $ 36,444,256 $ 28,475,066
------------- ------------- ------------- -------------- --------------
Working capital................... 3,624,220 5,993,486 3,104,192 40,160,854 25,859,308
------------- ------------- ------------- -------------- --------------
Total assets...................... 31,681,983 34,376,637 38,385,227 86,891,747 105,454,474
Long-term obligations............. 11,453,019 10,955,870 10,742,988 10,409,088 11,197,130
Total Stockholders' equity........ 9,746,185 12,049,807 10,525,210 53,545,253 64,313,967
------------- ------------- ------------- -------------- --------------
Cash dividends declared........... .0725 .095 .10 -- --
------------- ------------- ------------- -------------- --------------
</TABLE>
PROJECTED FINANCIAL INFORMATION. In connection with Parent's review of the
Company and during the course of negotiations between Parent and the Company and
their respective advisors described in Section 10 of this Offer to Purchase, the
Company provided Parent with certain business and financial information which
was not publicly available. Such information included, among other things,
projections of future operating performance of the Company.
The inclusion herein of the summary of projections should not be regarded as
an indication that the Company, Parent, Purchaser or any other person considers
such information to be an accurate prediction of future events and should not be
relied on as such. While presented with numerical specificity, such projections
are based upon a variety of assumptions relating to the business of the Company,
industry performance, general business and economic conditions and other matters
and are subject to significant uncertainties and contingencies, many of which
are beyond Parent's, Purchaser's or the Company's control. Therefore, such
projections are inherently imprecise, subjective, and susceptible to various
interpretations and there can be no assurances, and no representation or
warranty is made, that any such projections will be realized or that actual
results will not differ significantly from those set forth below. None of
Parent, Purchaser, the Company, their respective officers, directors or advisors
accepts any responsibility for such projections or the bases or assumptions on
which they were prepared. The Company has informed Purchaser that as a matter of
course, the Company does not make public projections or forecasts of its
anticipated financial position or results of operations. Such projections have
not been updated by the Company, were not intended to be a forecast of financial
results by the Company and were not prepared with a view to public disclosure or
compliance with published guidelines of the Commission or with the guidelines
established by the American Institute of Certified Public Accountants regarding
projections and
12
<PAGE>
forecasts. None of the Company, Purchaser or Parent intends to update, revise or
correct such projections if it becomes aware that such projections are
inaccurate (even in the short term).
Such projections for the Company's fiscal years 1999, 2000 and 2001 are
being summarized below and included herein solely because they were furnished to
Parent by the Company, and the summary below should not be interpreted as
suggesting that Parent relied on such projections in evaluating a transaction
with the Company. The Company stated that it believed that the projections for
2000 and 2001 were more aggressive than the 1999 projection, and represented a
best case scenario. In light of the foregoing factors and the uncertainties
inherent in the forecasts, holders of Shares are cautioned not to place undue or
significant reliance thereon.
COMPANY FINANCIAL PROJECTIONS
($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1999 2000 2001
--------- --------- ---------
<S> <C> <C> <C>
Revenues......................................................... $ 162.6 $ 184.8 $ 212.5
Gross margin..................................................... 74.2 84.4 97.2
Operating expenses (excluding goodwill).......................... (53.1) (56.5) (64.0)
Operating profit................................................. 21.1 27.9 33.2
Other income including interest.................................. (0.3) (0.4) (0.2)
Profit before tax and before goodwill............................ 20.8 27.5 33.0
Goodwill......................................................... (1.5) (1.8) (2.0)
Profit before tax................................................ 19.3 25.7 31.0
Diluted earnings per share....................................... $ 1.23 $ 1.68 $ 2.02
</TABLE>
The principal assumptions underlying the projections are as follows:
(i) Revenue growth in the U.S. business, excluding 1997 and 1998
acquisitions, will be 15%.
(ii) Operating margin will increase from 11.3% in 1998 to 15.6% in 2001.
(iii) No revenues or profits from the Company's acquisition in April 1999 or
from future acquisitions are included.
In reaching its decision to acquire the Company, Parent made certain
assumptions of its own with regard to revenues, operations and costs of the
Company's businesses as a wholly owned subsidiary of Parent.
8. CERTAIN INFORMATION CONCERNING PARENT AND PURCHASER
GENERAL. Parent is the holding company for Carat, the leading group of
media communications specialists, with 1998 world-wide billings of over $9
billion, of which the United States represents over $1 billion. Carat's services
span the provision of media strategy, planning and buying of communication in
traditional media, TV, press, radio, cinema and outdoor, including programming
and media or event sponsorship. Response media such as direct mail, direct
response advertising, digital TV and the internet increase Carat's competitive
edge. Carat has offices in 31 countries and has the largest market share in
Europe with market share of over 12%. Parent's principal executive office is
located at 11A West Halkin Street, London SW1X 8JL.
Purchaser, a Delaware corporation, was recently incorporated for the purpose
of acquiring the Company. Purchaser has not conducted any other business. The
principal executive office of Purchaser is located at 3 Park Avenue, New York,
New York 10016. All outstanding shares of common stock of Purchaser are
indirectly owned by Parent.
13
<PAGE>
The name, business address, present principal occupation or employment,
five-year employment history and citizenship of each of the directors and
executive officers of Purchaser and Parent as well as the name, principal
business and address of the corporation or other organization in which such
present occupation or employment is carried on are set forth in Schedule I
hereto.
SUMMARY CONSOLIDATED FINANCIAL INFORMATION FOR PARENT. Set forth below is
certain summary selected financial information with respect to Parent for the
years ended December 31, 1998, 1997 and 1996. The selected consolidated
financial data are stated in pounds sterling. On May 2, 1999, The New York Times
reported that, as of April 30, 1999, one pound sterling equaled 1.6090 U.S.
dollars. The summary below is qualified in its entirety by reference to Parent's
Report and Accounts 1998 filed as an exhibit to the Tender Offer Statement on
Schedule 14D-1 with respect to the Offer filed by Purchaser and Parent (the
"Schedule 14D-1"), which may be inspected and copies obtained at the offices of
the Commission as set forth in Section 7 (except that they will not be available
at the regional offices of the Commission), and such financial information and
related notes are incorporated herein by reference. Stockholders of the Company
may also obtain copies of Parent's Report and Accounts 1998 by contacting the
Company Secretary of Parent at Parent's principal executive office in the United
Kingdom set forth above.
AEGIS GROUP PLC
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(POUNDS STERLING IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
CONSOLIDATED PROFIT AND LOSS ACCOUNT DATA
Turnover.................................................................... L4,130.0 L3,652.5 L3,452.5
Profit on ordinary activities before taxation............................... 50.6 45.6 39.6
Taxation on ordinary activities............................................. (14.5) (12.2) (10.7)
Profit on ordinary activities after taxation................................ 36.1 33.4 28.9
Minority interests.......................................................... (0.6) (0.6) (0.9)
Profit attributable to members of the parent company........................ 35.5 32.8 28.0
Dividends...................................................................
Preference.................................................................. 0.2 (0.8) (0.8)
Ordinary.................................................................... (8.0) (5.8) (5.0)
--------- --------- ---------
Retained profit for the financial year...................................... L27.7 L26.2 L22.2
--------- --------- ---------
--------- --------- ---------
CONSOLIDATED BALANCE SHEET DATA
(At End Of Period)
Cash at bank and in hand.................................................... L114.0 L61.6 L49.1
Current assets excluding cash............................................... 670.0 578.8 513.0
Fixed assets................................................................ 34.8 15.6 15.4
Current liabilities......................................................... (859.3) (733.7) (641.7)
Other liabilities........................................................... (21.1) (28.0) (30.8)
--------- --------- ---------
BALANCE SHEET TOTAL......................................................... L(61.6) L(105.7) L(95.0)
--------- --------- ---------
--------- --------- ---------
Capital and reserves........................................................ L(63.1) L(107.5) L(95.8)
Minority interests.......................................................... 1.5 1.8 0.8
--------- --------- ---------
BALANCE SHEET TOTAL......................................................... L(61.6) L(105.7) L(95.0)
--------- --------- ---------
--------- --------- ---------
</TABLE>
14
<PAGE>
Parent's selected consolidated financial data included herein have been
prepared in accordance with applicable United Kingdom ("U.K.") accounting
standards, including the Companies Act of 1985, which represent generally
accepted accounting principles in the U.K. ("U.K. GAAP"). U.K. GAAP differs in
certain significant respects from United States generally accepted accounting
principles ("U.S. GAAP"). Parent has not determined its financial position or
results of operations for any period under U.S. GAAP. A general summary of the
significant differences between U.K. GAAP and U.S. GAAP is set forth below.
However, Parent believes that the differences between U.K. GAAP and U.S. GAAP
are not material to a decision by a holder of Shares whether to sell, tender or
hold any Shares.
SUMMARY OF CERTAIN SIGNIFICANT DIFFERENCES BETWEEN U.K. GAAP AND U.S. GAAP
GOODWILL. For acquisitions before January 1, 1998, the excess of the cost
of shares in subsidiaries and associates over the fair value of underlying
separable net assets at the date of acquisition is deducted from Parent's
consolidated stockholders' equity. For acquisitions on or after January 1, 1998,
goodwill is capitalized. The estimated useful life of the goodwill is examined
for each acquisition on a case by case basis to determine the appropriate
accounting treatment. There is a rebuttable presumption that goodwill has an
estimated useful life of not more than 20 years although U.K. GAAP permits no
amortization under certain circumstances. Under U.S. GAAP, goodwill is
capitalized and amortized over its estimated useful life, but not more than 40
years.
CONTINGENT PAYMENTS ON ACQUISITIONS. Where the consideration for an
acquisition includes payments which are contingent on certain events, a
provision is included based on an estimate of the likely payment to be made.
Under U.S. GAAP, no provision is made for contingent consideration until the
amount is determined.
DISPOSAL OF BUSINESSES. Profits and losses on disposal of a subsidiary or
associate under U.K. GAAP are calculated as the net of the proceeds over (i)
carrying value plus (ii) on acquisitions prior to January 1, 1998, amounts with
respect to goodwill previously charged to stockholders' equity and on
acquisitions on or after January 1, 1998, the unamortized element of goodwill.
U.S. GAAP reflects the unamortized element of goodwill in the calculation.
DIVIDENDS. Ordinary share dividends are provided in the financial year in
respect of which they are recommended by the board of directors for approval by
the shareholders. Under U.S. GAAP, such dividends are not provided for until the
date declared.
DEFERRED TAXATION. Deferred taxation is provided where it is probable that
a taxation liability will crystallize. Under U.S. GAAP, as provided by Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes," full
provision must generally be made for all potential taxation liabilities and
assets (where likelihood of realization is greater than 50%).
PENSIONS. Pension costs, based on actuarial assumptions and methods, are
charged in the accounts so as to allocate the cost of providing benefits over
the service lives of employees in a consistent manner approved by the actuary.
U.S. GAAP prescribes the method of actuarial valuation and also requires assets
to be assessed at fair value and the assessment of liabilities to be based on
current interest rates.
9. SOURCES AND AMOUNTS OF FUNDS
Purchaser will require approximately $310 million to acquire all of the
Shares pursuant to the Option Agreement, the Offer and the Merger, pay cash to
holders of the Company's employee stock options and pay the fees and expenses
incurred in connection with the Offer, the Option Agreement and the Merger.
Purchaser expects to obtain the necessary funds by way of debt financing under
the loan facility agreement described below and a capital contribution from
Parent.
15
<PAGE>
Purchaser and Parent have entered into a Revolving Credit and Term Loan
Facility (the "Loan Agreement") dated April 29, 1999 under which, subject to
certain conditions, National Westminster Bank PLC (the "Bank") will make
available a L250 million facility comprising (a) a term loan facility (the "Term
Loan Facility") of L200 million the principal purpose of which is to fund the
Offer, the Option Agreement, the Merger and related fees and expenses and (b) a
revolving credit facility (the "Revolving Credit Facility" and together with the
Term Loan Facility, the "Facility") of L50 million the purpose of which is to
refinance an existing credit facility of Parent. The borrowers under the Term
Loan Facility are Purchaser and Parent and Parent is the borrower under the
Revolving Credit Facility. Parent has guaranteed the obligations of Purchaser
under the Loan Agreement. The Facility is unsecured.
The Loan Agreement contains customary representations and warranties,
financial and restrictive covenants, including limitations on creation of
security over assets, disposals and employee benefit plans, and conditions
precedent which must be satisfied before any loan under the Facility may be
drawn down. In addition, there are conditions precedent which must also be
satisfied before any loan can be drawn down under the Term Loan Facility. In
respect of term loans to be used to purchase Shares pursuant to the Option
Agreement, an additional condition precedent to draw down is that all such
options shall have been exercised by Parent. In respect of term loans to be used
to purchase Shares under the Offer or the Merger, draw downs are conditional on
the Placing Agreement described below having become wholly unconditional (except
as to the shares to be issued pursuant to such agreement having been admitted to
listing by the London Stock Exchange) and such agreement not having been
terminated.
The final maturity date in respect of the Term Loan Facility is six months
from the date of the Loan Agreement. The Term Loan Facility is available for
drawing until the final maturity date of the Facility and is repayable in full
on that date.
The loans under the Facility will bear interest at the rate which the Bank
quotes on the relevant rate fixing day to leading banks in the London interbank
market for the offering of deposits in the currency of the relevant loan for a
period comparable to the interest period of the relevant loan plus a margin of
0.65% per annum for the first three months from the date of the Loan Agreement
and 0.80% per annum for the remaining three months together with certain
mandatory costs. The Facility must be prepaid in full in the event of a change
of control (as defined in the Loan Agreement) of Parent.
Purchaser and Parent have agreed to pay certain fees and the reasonable
costs and expenses of the Bank arising in connection with the Loan Agreement.
Purchaser and Parent have also agreed to indemnify the Bank and its directors,
officers and employees from certain liabilities except such as may result from
the wilful default or gross negligence of any such person.
In addition to the debt financing described above, L114 million is expected
to be made available as a capital contribution to Purchaser from Parent,
directly or indirectly via other subsidiaries of Parent. Purchaser has
undertaken to use such contribution to prepay amounts it has drawn down under
the Term Loan Facility.
Parent expects such funds to be made available for the capital contribution
to Purchaser through an issue of its shares pursuant to a Placing Agreement
dated as of April 30, 1999 (the "Placing Agreement"), between Parent and Hoare
Govett Limited ("HG"). Under the Placing Agreement, subject to certain
conditions, HG has agreed to procure persons to accept the allotment of those
shares, failing which itself to accept the allotment of those shares. Parent has
agreed to pay certain commissions, costs and expenses of HG and has also agreed
to indemnify HG, its directors, employees and officers against certain
liabilities arising in connection with the placing.
THE OFFER DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO PURCHASE ANY SHARES OR OTHER SECURITIES OF PARENT. The shares of Parent to be
issued under the Placing Agreement have not been and will not be registered
under the Securities Act, and they may not, as part of their distribution, be
offered, sold, taken up, renounced or delivered, directly
16
<PAGE>
or indirectly, in the United States, except pursuant to an exemption from, or in
transactions not subject to, the registration requirements of the Securities
Act.
It is expected that amounts outstanding under the Facility on the final
maturity date will be refinanced through a new syndicated loan facility but,
other than appointing the Bank as the arranger, no specific plans with respect
thereto have yet been made.
THE OFFER IS NOT CONDITIONED UPON PURCHASER OBTAINING FINANCING.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY
The Company has informed Parent that, on January 8, 1999, the Company
engaged Schroder & Co. Inc. ("Schroders") to assist it in reviewing its
strategic alternatives. On January 12, 1999, Schroders met with Company
management and together identified a list of six companies that they considered
possible candidates for a strategic alliance or transaction based upon apparent
business synergies or previously expressed interest in acquiring the Company. At
this meeting, it was decided that Schroders would contact Parent, along with
certain other companies.
On March 15, 1999, Crispin Davis, Parent's Chief Executive Officer, and Pat
Doble of Parent met with Verne Churchill, Thomas Payne, Lawrence Labash and
Timothy Sullivan of the Company in Arlington Heights, Illinois, at which meeting
each company gave a presentation to the other regarding its business, and the
parties discussed potential business opportunities.
On March 23, 1999, Parent and the Company executed a
confidentiality/standstill agreement. A proposed form of merger agreement was
sent to Parent's legal counsel on March 25, 1999, and on or about that date,
Schroders orally advised Parent that final proposals were due by April 9, 1999.
On March 26, 1999, a second meeting was held between Crispin Davis of Parent
and Thomas Payne, Sanford Schwartz, Lawrence Labash and Timothy Sullivan of the
Company in Arlington Heights, Illinois, at which meeting Parent discussed its
business and the parties further discussed potential business opportunities.
On March 30 and 31, 1999, Pat Doble and Sunil Garga of Parent met with
Michael Freehill, Stephen Weber and Peter LaSalle of the Company primarily to
discuss the types of products and services offered by the Company. On March 30
and 31, Parent's financial staff and legal counsel also conducted due diligence
meetings with Company representatives in Arlington Heights, Illinois.
By letter dated April 8, 1999, Parent submitted a non-binding offer to
acquire 100% of the Company's capital stock for $31.00 per Share in cash. The
offer was conditioned upon Parent receiving an irrevocable "lock-up" agreement
from the Company's major stockholder and the Company's five management directors
and completion of its due diligence investigation, and was not subject to
financing. The offer also sought a two-week exclusivity period to negotiate and
sign a definitive merger agreement.
On April 14, 1999, the Company and Parent entered into an exclusivity
agreement (the "Exclusivity Letter") pursuant to which the parties agreed to
commence negotiation of a definitive merger agreement for Parent's proposed
acquisition of the Company on the terms set forth in Parent's preliminary
proposal dated April 8, 1999, and, thereafter, the parties and their counsel
negotiated the Merger Agreement and the Option Agreement. Under the terms of the
Exclusivity Letter, the Company agreed until 12:00 midnight on April 27, 1999 to
negotiate exclusively with Parent and to not solicit any offer or engage in any
negotiations other than with Parent for the merger or sale of the business or
assets of the Company or any material part thereof or for any tender or exchange
offer for the Company's capital stock. Subject to certain conditions, the
Exclusivity Letter provided that the Company had the right to terminate
negotiations with Parent in the event that the Company received an unsolicited
proposal for the acquisition of the Company from another party which in the
opinion of the Company's financial advisors was, or was
17
<PAGE>
reasonably likely to lead to, a proposal that was more favorable to the
Company's stockholders than Parent's proposal (a "Superior Bid"). The
Exclusivity Letter required the Company to promptly notify Parent of its
receipt of any Superior Bid, and the terms thereof, and Parent thereafter had
two business days within which to amend its proposal to cause such third
party proposal to no longer be a Superior Bid or the exclusivity provisions
of the Exclusivity Letter would cease to apply. In the event the Company
terminated or abandoned negotiations with Parent due to its receipt of a
Superior Bid prior to the end of the exclusivity period, the Company agreed
to reimburse Parent within five days of termination an amount up to $150,000
for its reasonable out-of-pocket expenses and fees. In addition, if the
Company became obligated to make the $150,000 reimbursement and entered into
a definitive agreement with the party submitting such Superior Bid within six
months and consummated such transaction within 12 months of the termination
of the Exclusivity Letter, the Company would be required to pay Parent a
$9,000,000 termination fee and to reimburse it for up to $750,000 of its
expenses and fees. On April 27, the exclusivity period under the Exclusivity
Letter was extended until April 30, 1999.
Commencing shortly after the Exclusivity Letter was executed and continuing
to the date of the execution of the Merger Agreement, Parent and Purchaser
conducted additional due diligence reviews of the Company, both financial and
legal.
On April 16, 1999, Crispin Davis and Frank Law, the Chief Executive Officer
and Non-Executive Chairman of Parent, respectively, met with Verne Churchill,
Thomas Payne, Sanford Schwartz, Lawrence Labash and Timothy Sullivan of the
Company in Arlington Heights, Illinois to discuss the Company's business and its
business plans and strategies.
On April 20, 1999, Thomas Payne, Sanford Schwartz and Lawrence Labash of the
Company met with Crispin Davis at Parent's offices in London, England to discuss
Parent's business and the operation of its subsidiaries.
The Company has informed Parent that, on April 28, 1999, the Company's Board
met to review and discuss Parent's proposed acquisition of the Company. At the
meeting, Schroders delivered its written opinion to the Board that, as of such
date and based upon and subject to certain matters stated therein, the
consideration to be received by the holders of the Shares pursuant to the Merger
Agreement with Parent was fair, from a financial point of view, to such holders.
The Company's legal counsel gave a presentation to the Board on the terms of the
Merger Agreement and related documents, the structure of the Offer and the
Merger and the Board's fiduciary duties to its stockholders. The Board discussed
the terms of the proposed acquisition and asked questions of Schroders and the
Company's legal counsel. Following this discussion, the Board (i) determined
that each of the Merger Agreement, the Offer and the Merger are fair to and in
the best interests of the Company's stockholders, (ii) approved the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
Merger, and (iii) recommended acceptance of the Offer, approval and adoption of
the Merger Agreement and approval of the Merger by the Company's stockholders.
The Board also approved the Option Agreement for purposes of Section 203 of the
DGCL.
On April 29, 1999, Schroders contacted Parent to inform it of the existence
of a proposal from another party to acquire the Company. Parent advised
Schroders that it was not willing to raise its offer to a price above $31.00 per
Share or delay the execution of the Merger Agreement, which was scheduled for
later that day, and indicated that if the Merger Agreement was not executed as
scheduled that it would withdraw its offer. The Company's Board of Directors, at
a meeting convened on that day, reaffirmed its approval of the Merger Agreement
with Parent and Purchaser and Schroders reaffirmed its written opinion of April
28, 1999.
On April 29, 1999, the Company, Parent and Purchaser executed the Merger
Agreement, and, simultaneously therewith, Parent and certain of the Company's
stockholders executed the Option Agreement. The transaction was publicly
announced in the U.S. prior to the opening of the Nasdaq National Market on
April 30, 1999.
18
<PAGE>
11. THE OFFER AND MERGER; MERGER AGREEMENT; OPTION AND VOTING AGREEMENT
THE MERGER AGREEMENT.
The following summary of certain provisions of the Merger Agreement is
presented only as a summary and is qualified in its entirety by reference to the
Merger Agreement, a copy of which has been filed as an exhibit to Purchaser's
and Parent's Schedule 14D-1.
THE OFFER. The Merger Agreement provides that as soon as practicable after
the date of execution of the Merger Agreement, but in no event later than five
business days after the day on which Purchaser's intention to make the Offer is
announced, Purchaser will commence the Offer for all of the outstanding Shares
at a price of not less than $31.00 per Share in cash, net to the seller, subject
to the satisfaction of the conditions set forth in Section 15 and, subject only
to the terms and conditions of the Offer, will consummate the Offer as soon as
legally permissible. Purchaser may waive any condition to the Offer, increase
the price per Share payable in the Offer and make any other changes in the terms
and conditions of the Offer. However, no change may be made which decreases the
price per Share or changes the form of consideration payable in the Offer, or
which amends any of the conditions described in Section 15 or which imposes
conditions to the Offer other than those described in Section 15 or which
extends the Offer (except as set forth in the following sentence), without the
consent of the Company. Purchaser may, without the consent of the Company, (i)
extend the Offer beyond the scheduled expiration date (the initial scheduled
expiration date being 20 business days following the commencement of the Offer)
in its sole discretion from time to time, if on the initial scheduled or any
extended expiration date of the Offer, any of the conditions to Purchaser's
obligation to accept for payment, and to pay for, the Shares, shall not be
satisfied or waived, or (ii) extend the Offer for a period not to exceed 10
business days, notwithstanding that all conditions to the Offer are satisfied as
of such expiration date of the Offer, if, immediately prior to the expiration
date of the Offer (as it may be extended), the Shares tendered and not withdrawn
pursuant to the Offer, together with the Shares subject to the Option Agreement,
without duplication, equal less than 90% of the outstanding Shares and Purchaser
expressly irrevocably waives any condition (other than the Minimum Condition)
that subsequently may not be satisfied during such extension of the Offer, or
(iii) extend the Offer for any period required by any rule, regulation or
interpretation of the Commission or the staff thereof applicable to the Offer;
provided that, unless agreed to by the Company, any extended expiration date
pursuant to the immediately preceding clause (i) may not be later than 90 days
from the date of commencement of the Offer, or 120 days from such date if within
such 90 day period a tender offer for at least 20% of the outstanding Shares is
commenced by any person who is not an affiliate (as defined under the rules
promulgated pursuant to the Securities Act of 1933) of Parent or Purchaser (an
"Intervening Tender Offer").
In the event that (i) the Minimum Condition shall not have been satisfied or
(ii) the other conditions described in Section 15 shall not have been satisfied
or waived at the scheduled or any extended expiration date of the Offer, at the
request of the Company, Purchaser has agreed to extend the expiration date of
the Offer in increments of five (5) business days each until the earliest to
occur of (x) the satisfaction or waiver of the Minimum Condition or such other
condition, (y) the termination of the Merger Agreement in accordance with its
terms, and (z) 90 days from commencement of the Offer or 120 days from such date
in the event of an Intervening Tender Offer (unless extended by agreement of
Parent, Purchaser and the Company).
THE MERGER. The Merger Agreement provides that, subject to the terms and
conditions thereof, at the effective time of the Merger (the "Effective Time"),
Purchaser will be merged with and into the Company and the separate corporate
existence of Purchaser will cease. At the election of Parent exercised prior to
the filing of any proxy statement pursuant to the Merger Agreement, the Company
will be merged with and into Purchaser and the separate corporate existence of
the Company will cease. At the Effective Time, by virtue of the Merger and
without any action on the part of Purchaser, the Company, the surviving
corporation or the holder of shares, (i) each Share issued and outstanding
immediately prior to the
19
<PAGE>
Effective Time (other than Shares owned by Purchaser, Parent or any direct or
indirect subsidiary of Parent or owned by the Company or any direct or indirect
subsidiary of the Company and Shares that are outstanding immediately prior to
the Effective Time and which are held by stockholders who shall have not voted
in favor of the Merger or consented thereto in writing and who shall have
demanded properly in writing appraisal for such Shares in accordance with
Section 262 of the DGCL) will be converted into the right to receive the Merger
Price, and (ii) each Series B Share which is issued and outstanding immediately
prior to the Effective Time shall be canceled and retired, and no payment shall
be made with respect thereto. Pursuant to the Merger Agreement, all shares of
common stock of Purchaser issued and outstanding immediately prior to the
Effective Time will be converted into and exchanged for a sole validly issued,
fully paid and nonassessable share of common stock of the surviving corporation
(the "Surviving Corporation").
STOCKHOLDERS MEETING. The Merger Agreement provides that the Company will
take all action necessary, in accordance with the DGCL and its Certificate of
Incorporation and By-Laws to convene a meeting of its stockholders to consider
and vote upon the approval of the Merger Agreement and the Merger, if necessary
to comply with applicable law, as promptly as practicable after the consummation
of the Offer. The Merger Agreement provides that, if Company stockholder
approval is required by law in order to consummate the Merger, the Company and
Parent shall prepare and file with the Commission as soon as is reasonably
practicable a preliminary proxy or information statement relating to the Merger
and the Merger Agreement and, as promptly as practicable thereafter, subject to
compliance with the rules and regulations of the Commission, shall mail a
definitive proxy statement or information statement to stockholders of the
Company. The Board will recommend such approval and the Company will use its
best efforts to solicit such approval; provided, however, that the Board at any
time prior to the Effective Time, may withdraw, modify or change any such
recommendation or refrain from soliciting proxies in favor of the Merger to the
extent that the Board determines in good faith after consultation with and based
upon the advice of outside legal counsel that the failure to so withdraw, modify
or change its recommendation or refrain from soliciting proxies would cause the
Board to breach its fiduciary duties to the Company's stockholders under
applicable law. In any event, the Board is obligated under the Merger Agreement
to submit the Merger Agreement to the stockholders of the Company.
Parent and its affiliates will vote all Shares over which they exercise
voting control in favor of the Merger Agreement and the Merger. Under the DGCL,
if Purchaser acquires at least 90% of the outstanding Shares, Purchaser will be
able to approve the Merger without a vote of the Company's stockholders. See
Section 12 for a further discussion of certain provisions of the DGCL applicable
to the Merger.
CONDUCT OF BUSINESS. Pursuant to the Merger Agreement, prior to the
Effective Time, except to the extent that Purchaser shall otherwise consent, the
Company and its subsidiaries shall conduct their businesses in the ordinary
course of business and will not take any material action except in the ordinary
course of business and consistent with past practice. The Company and its
subsidiaries will use their respective best efforts to maintain and preserve
their respective business organizations, assets and advantageous business
relationships.
Without Parent's prior written consent, neither the Company nor any of its
subsidiaries will directly or indirectly do any of the following:
(a) amend its charter or by-laws (or comparable charter documents);
(b) except for Shares the Company may be obligated to issue in
connection with a prior acquisition, authorize for issuance, issue, sell,
deliver or agree or commit to issue, sell or deliver (whether through the
issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any stock of any class or any other
securities, except in the case of Shares of the Company, as required by
employee options outstanding on the date of the execution of the Merger
Agreement or Company employee benefit plans as in effect on the date of the
execution of
20
<PAGE>
the Merger Agreement, or amend any of the terms of any such securities or
agreements outstanding on the date of the execution of the Merger Agreement;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, or redeem or otherwise acquire any securities of the Company
or any of the subsidiaries;
(d) (i) incur or assume any long-term debt, except in the ordinary
course of business under existing facilities or required refinancings or
replacements thereof, or incur or assume any short-term debt, except in the
ordinary course of business, or issue or sell any debt securities or rights
to acquire any debt securities of the Company or any subsidiary; (ii)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person except wholly owned subsidiaries of the Company in the ordinary
course of business and consistent with past practice; or (iii) make any
loans, advances or capital contributions to, or investments in, any person
other than a wholly owned subsidiary of the Company in the ordinary course
of business (except for customary loans or advances to directors, officers
or employees in accordance with past practice or as required by existing
contractual arrangements or agreements);
(e) other than as required by ERISA enter into, adopt or amend any
bonus, profit sharing, compensation, severance, termination, stock option,
stock appreciation right, restricted stock, performance unit, pension,
retirement, deferred compensation, employment, severance or other employee
benefit agreements, trusts, plans, funds or other arrangements for the
benefit or welfare of any director, officer or employee, or (except (i) in
the case of persons whose compensation has been established by the
Compensation Committee of the Board of Directors, for increases in amounts
previously approved by such Committee, and (ii) in the case of all other
directors, officers or employees, for normal increases in the ordinary
course of business that are consistent with past practices and that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to the Company), increase in any manner the compensation or fringe
benefits of any director, officer or employee or pay any benefit or make any
distribution or award not required by any existing plan or arrangement
(including, without limitation, the granting of stock options, stock
appreciation rights, shares of restricted stock or performance units) or
enter into any contract, agreement, commitment or arrangement to do any of
the foregoing;
(f) except pursuant to existing contractual arrangements or agreements
disclosed pursuant to the Merger Agreement, acquire, sell, lease, license,
dispose of, mortgage or otherwise encumber any assets outside the ordinary
course of business or any assets which are material, in the aggregate, to
the Company and its subsidiaries, taken as a whole, or enter into any
material commitment or transaction outside the ordinary course of business;
(g) except as may be required by law, take any action to terminate or
amend or accelerate the vesting of any benefits under any of its employee
benefit plans;
(h) waive or release any rights material to the Company and its
subsidiaries, taken as a whole, or make any payment, direct or indirect, of
any material liability of the Company or any of its subsidiaries before the
same comes due in accordance with its terms;
(i) acquire or agree to acquire, including, without limitation, by
merging or consolidating with, or by purchasing a substantial equity
interest in or substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof without Parent's prior written consent;
(j) except as set forth on a schedule to the Merger Agreement, make any
capital expenditure or expenditures which exceed $250,000 in the aggregate;
and
21
<PAGE>
(k) take, or agree in writing or otherwise to take, any of the foregoing
actions or any action which would make any representation or warranty of the
Company contained in this Agreement untrue or incorrect as of the date when
made or as of a future date.
NO SOLICITATION. Pursuant to the Merger Agreement, the Company agreed to
immediately cease and cause to be terminated all existing discussions or
negotiations relating to a Competing Transaction (as defined below) with any
parties conducted prior thereto. The Company has agreed not to, directly or
indirectly, and to instruct its representatives not to, directly or indirectly,
(i) initiate, solicit or encourage (including by way of furnishing information
or assistance), or take any other action to facilitate, any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Competing Transaction or (ii) enter into or maintain discussions or
negotiate with any person in furtherance of or relating to such inquiries or to
obtain a Competing Transaction or (iii) agree to or endorse any Competing
Transaction or (iv) authorize or permit any representative of the Company or any
of its subsidiaries to take any such action. The Company also agreed to promptly
notify Parent if any such inquiries or proposals are made regarding a Competing
Transaction and inform Purchaser in reasonable detail of any such inquiry or
proposal. The Company also agreed to keep Parent informed, on a current basis,
of the significant developments and changes in status of any such proposals;
provided, however, that prior to consummation of the Offer, the Merger Agreement
will not prohibit the Board from (i) furnishing information to, or entering into
discussions or negotiations with, any person that after the date of the Merger
Agreement makes an unsolicited proposal regarding a Competing Transaction or
agreeing to or endorsing any Competing Transaction, if, and only to the extent
that, (A) the Board, after consultation with and based upon the advice of
independent legal counsel, determines in good faith that such action is required
for the Board to comply with its fiduciary duties to the Company's stockholders
imposed by Delaware law, (B) prior to furnishing such information to, or
entering into discussions or negotiations with such person or agreeing to or
endorsing any Competing Transaction, the Board determines in good faith, after
consultation with and based upon the advice of a financial advisor of nationally
recognized reputation, that such Competing Transaction is a Superior Proposal
(as defined below), (C) prior to furnishing such information to, or entering
into discussions or negotiations with, such person, the Company provides written
notice to Purchaser to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such person, and (D) such
information to be so furnished has been previously delivered to Purchaser; or
(ii) complying with Rule 14e-2 promulgated under the Exchange Act with regard to
a Competing Transaction. The Company further agreed that if it determines that a
Competing Transaction is a Superior Proposal, it will immediately notify
Purchaser of such determination, and will not take any action with respect to
such Competing Transaction or the Merger Agreement for at least 48 hours after
such notification.
For purposes of the Merger Agreement, "Competing Transaction" means any of
the following involving the Company or any of its subsidiaries: (a) any merger,
consolidation, share exchange, business combination, or other similar
transaction; (b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 20% or more of the assets of the Company and its subsidiaries,
taken as a whole, in a single transaction or series of transactions; (c) any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 20% or more of the outstanding shares of capital stock of
the Company or the filing of a registration statement under the Securities Act,
in connection therewith; (d) any solicitation of proxies in opposition to
approval by the Company's stockholders of the Merger; (e) the adoption by the
Company of a plan of liquidation, the declaration or payment by the Company of
an extraordinary dividend on any of its shares of capital stock or the
effectuation by the Company of a recapitalization or other type of transaction
that would involve either a change in the Company's outstanding capital stock or
a distribution of assets of any kind to the holders of such capital stock; (f)
the repurchase by the Company or any subsidiary of the Company of 20% or more of
the outstanding shares of Company common stock; or (g) any agreement to, or
public announcement by the Company or any other person, entity or group of a
proposal, plan or intention to do any of the foregoing.
22
<PAGE>
For purposes of the Merger Agreement, a "Superior Proposal" means any
proposal relating to a Competing Transaction made by a third party on terms
which if consummated the Board determines in its good faith judgment (based upon
the advice of a financial advisor of nationally recognized reputation) to be
more financially favorable to the Company's stockholders than the Offer and the
Merger and for which financing, to the extent required, is then committed or
which, in the good faith judgment (based upon the advice of a financial advisor
of nationally recognized reputation) of the Board, is reasonably capable of
being financed by such third party.
THE COMPANY'S BOARD OF DIRECTORS. The Merger Agreement provides that
promptly upon the acceptance for payment and purchase by Purchaser pursuant to
the Offer and the Option Agreement of such number of Shares which represents at
least a majority of the outstanding Shares (on a fully diluted basis), and from
time to time thereafter, Parent shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Board of Directors as
will give the Purchaser, subject to compliance with Section 14(f) of the
Exchange Act, representation on the Board of Directors equal to at least that
number of directors which equals the product of the total number of directors on
the Board of Directors (giving effect to the directors designated by Parent)
multiplied by the percentage that such number of Shares so accepted for payment
and paid for by the Purchaser bears to the number of Shares outstanding. The
Company shall, at such time, cause the Purchaser's designees to be so elected,
provided that (i) until the Effective Time the Board of Directors will have at
least two directors who are directors as of the date of execution of the Merger
Agreement who are not employees of the Company and who have not been designated
as directors of the Company by Parent and its affiliates (the "Independent
Directors") and (ii) if the number of Independent Directors is reduced below two
because of disability or resignation, the remaining Independent Director will be
entitled to designate one person to fill such vacancy who will be deemed to be
an Independent Director for purposes of the Merger Agreement.
Subject to applicable law, the Company agreed to take all action necessary
to effect any such election, including mailing to its stockholders the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, and the Company agreed to include in the Schedule 14D-9
mailed to stockholders such information. The Merger Agreement also provides that
prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors shall be required to (i) amend or terminate the Merger
Agreement on behalf of the Company, (ii) exercise or waive any of the Company's
rights or remedies under the Merger Agreement, (iii) extend the time for
performance of the Purchaser's obligations under the Merger Agreement, or (iv)
take any other action by the Company in connection with the Merger Agreement
required to be taken by the Board of Directors.
DIRECTORS' AND OFFICERS' INDEMNIFICATION. The Merger Agreement requires
that for a period of six years after the Effective Time, the Surviving
Corporation will maintain, without modification or amendment that would
adversely affect the rights thereunder of any current or former director or
officer of the Company or any of its subsidiaries (an "Indemnified Party"), the
provisions of the Company's certificate of incorporation and bylaws with respect
to indemnification and liability of officers, directors and employees. In
addition, the Merger Agreement provides that the Surviving Corporation will
honor the Company's existing indemnification agreements that have been executed
by certain of the Company's present and former directors.
The Merger Agreement further provides that from and after the Effective
Time, the Surviving Corporation shall indemnify, defend and hold harmless the
Indemnified Parties against all losses, expenses, claims, damages, liabilities,
judgments or amounts that are paid in settlement of (with approval of Parent and
the Surviving Corporation) in connection with, any claim, action, suit,
proceeding or investigation, based in whole or in part on the fact that such
person is or was such a director or officer and arising out of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by the Merger Agreement), in each case
to the fullest extent permitted under the DGCL (and shall pay expenses in
advance of the final disposition of any such action or proceeding to
23
<PAGE>
each Indemnified Party to the fullest extent permitted under the DGCL, upon
receipt from the Indemnified Party to whom expenses are advanced of the
undertaking to repay such advances contemplated by Section 145(e) of the DGCL).
The Surviving Corporation has agreed to maintain in effect for not less than
six years after the Effective Time officers' and directors' liability insurance
covering the Indemnified Parties who are currently covered by the Company's
officers' and directors' liability insurance policy on terms no less favorable
than those of such policy in terms of coverage and amounts; provided, however,
that the Surviving Corporation is not required to pay for such insurance in
excess of 200% of the rates paid at the date of the Merger Agreement but in such
case shall purchase as much coverage as possible for such amount.
COMPANY OPTIONS. The Merger Agreement provides that, at the Effective Time,
each holder of an employee stock option granted under the Company's stock option
plan (an "Employee Option"), whether or not then vested or exercisable shall, in
settlement thereof, receive for each Share subject to such Employee Option an
amount (subject to any applicable withholding tax) in cash equal to the
difference between the Offer Consideration and the per Share exercise price of
such Employee Option to the extent such difference is a positive number (such
amount being hereinafter referred to as, the "Option Consideration"). Upon
receipt of the Option Consideration, the Employee Option shall be canceled.
Prior to the Effective Time, the Company will obtain all necessary consents or
releases from holders of Employee Options under the Company's stock option plan
and will take all such other lawful action as may be necessary to effectuate the
foregoing. Except as otherwise agreed to between the Company and the Parent, (i)
all stock option plans of the Company will terminate as of the Effective Time
and the provisions in any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any subsidiary thereof, will be canceled as of the Effective Time,
and (ii) the Company shall ensure that following the Effective Time no
participant in any stock option plan or other plans, programs, arrangements or
agreements will have any right thereunder to acquire equity securities of the
Company, the Surviving Corporation or any subsidiary thereof and to terminate
all such plans. Prior to the Effective Time, the Company will not take any
action to accelerate the vesting of any unvested stock options as a result of
the Offer or the Merger.
EMPLOYEE STOCK OWNERSHIP PLAN. The Merger Agreement provides that all
accounts in the Company's Employee Stock Ownership Plan (the "ESOP") will become
100% vested as of the Effective Time. The Company will take all steps necessary
to terminate, as of or as promptly as practicable after the Effective Time, the
ESOP, and the balance of each participant's account in the ESOP will be
delivered to such participant on or as promptly as practicable after the
termination of the ESOP.
EMPLOYEES. Following the Effective Time, the Surviving Corporation has
agreed to pay all benefits due under the terms of all contracts, agreements,
arrangements, policies and commitments of the Company and its subsidiaries with
or with respect to its current or former employees, officers and directors which
benefits are vested on or prior to the Effective Time or which become vested
thereafter or as a result of the transactions contemplated hereby. Parent has
agreed to provide, for a period ending on the first anniversary of the Effective
Time, or cause the Surviving Corporation to provide, employees of the Company
and its subsidiaries with employee benefits (other than stock options and other
equity-based benefits) in the aggregate substantially no less favorable than
those benefits provided at the Effective Time.
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The Merger Agreement provides
that the respective obligations of each party to consummate the Merger are
subject to the satisfaction of a number of conditions, including, but not
limited to, (i) the approval and adoption of the Merger Agreement by the
stockholders of the Company (if required), (ii) the expiration of any waiting
period applicable to the consummation of the Merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and any required
approvals in connection with any premerger notification
24
<PAGE>
filing with any relevant non-US antitrust authority shall have been obtained and
shall remain in full force and effect, (iii) no preliminary or permanent
injunction or other order, decree or official action issued by any United States
Federal or state or foreign court or regulatory or administrative agency or
commission of competent jurisdiction, nor any statute, rule, regulation or
executive order promulgated or enacted by any United States Federal or state or
foreign governmental authority of competent jurisdiction, shall be in effect,
which would (A) make the acquisition or holding by Parent or its subsidiaries or
affiliates of the shares of Common Stock of the Surviving Corporation illegal or
otherwise prevent the consummation of the Merger, or (B) impose any limitations
on the ability of Parent effectively to control, directly or indirectly through
its subsidiaries, in any material respect the business and operations of the
Company, and (iv) the Purchaser shall have accepted for payment and paid for
Shares tendered pursuant to the Offer; provided that this condition shall be
deemed waived by Purchaser and Parent if the failure to accept for payment and
purchase Shares pursuant to the Offer is for any reason other than the failure
to satisfy the conditions to the Offer set forth in the Merger Agreement.
CONDITIONS TO THE OBLIGATIONS OF PARENT AND PURCHASER. The Merger Agreement
provides that the obligations of Parent and Purchaser to consummate the Merger
are subject to the satisfaction of a number of further conditions, including but
not limited to, (i) the accuracy of representations and warranties of the
Company as of the times, and subject to the qualifications, specified in the
Merger Agreement, (ii) the performance by the Company of its agreements and
covenants contained in the Merger Agreement unless such failures would not, in
the aggregate, have a material adverse effect on the financial condition,
business, operations or results of operations of the Company and its
subsidiaries, taken as a whole and will not prevent the consummation of the
transactions contemplated by the Merger Agreement (collectively, "Material
Adverse Effect") and (iii) all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and other
third parties as are necessary in accordance with the transactions contemplated
by the Merger Agreement shall have been obtained and be in full force and
effect, except such licenses, permits, consents, approvals, authorizations,
qualifications and orders, the failure to deliver which would not have a
Material Adverse Effect with respect to the Company.
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The Merger Agreement provides
that the obligations of the Company to effect the Merger are subject to the
satisfaction of the following further conditions: (i) the accuracy of
representations and warranties of Parent and Purchaser as of the times, and
subject to the qualifications, specified in the Merger Agreement, and (ii) the
performance by Parent and Purchaser of their agreements and covenants contained
in the Merger Agreement.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto including, but
not limited to, representations by the Company as to corporate organization and
qualification, subsidiaries, capitalization, authority to enter into the Merger
Agreement, filings with the Commission and other governmental authorities, the
absence of certain changes or events, intellectual property, material contracts,
compliance with law, environmental matters, employee benefit matters, the
opinion of the Company's financial advisor, labor relations, the Rights
Agreement, the application of Delaware law, tax returns, audits, brokers and
litigation.
EXPENSES. The Merger Agreement provides that, if (i) Purchaser terminates
the Merger Agreement because, prior to the consummation of the Offer, (A) the
Board of Directors of the Company withdraws, modifies or changes in a manner
adverse to Purchaser, its approval or recommendation of the Offer, the Merger
Agreement or Merger or presents to the stockholders of the Company a Competing
Transaction or resolves to do so or (B) the Company deliberately fails to
perform in any material respect any of its material obligations under the Merger
Agreement; (ii) the Company terminates the Merger Agreement because, prior to
the consummation of the Offer, (A) the Board of Directors of the Company
withdraws, modifies or changes in a manner adverse to Purchaser its approval or
recommendation of the Offer, the Merger Agreement or the Merger or (B) the Board
of Directors recommends a Superior Proposal or resolves to do so; (iii)
Purchaser terminates the Offer because the Minimum Condition is not satisfied
and
25
<PAGE>
at or prior to such time the Company has received one or more proposals for a
Competing Transaction which at the time of such occurrence has not been
absolutely and unconditionally withdrawn or abandoned and within six months
after the date of termination of the Merger Agreement a Competing Transaction is
entered into by the Company, and within twelve months of such termination a
Competing Transaction is consummated, then promptly after such termination (or,
with respect to item (iii), upon the consummation of such Competing Transaction)
by Parent or the Company, the Company shall pay to Purchaser or its designee an
amount equal to $9,000,000 (the "Break-up Fee") and shall reimburse Purchaser or
its designee for all of its out-of-pocket costs and expenses up to an amount
equal to $1,500,000.
The Merger Agreement further provides that if the Company terminates the
Merger Agreement because Purchaser shall have failed to commence this Offer
within five business days of the day on which Purchaser's intention to make this
Offer is announced or, prior to the purchase of any Shares pursuant to the
Offer, Purchaser deliberately fails to perform in any material respect any of
its obligations under the Merger Agreement, Purchaser shall pay to the Company
$4,500,000.
Except as set forth in the preceding two paragraphs, all expenses incurred
in connection with the Merger Agreement and the transactions contemplated by the
Merger Agreement will be paid by the party incurring such expenses, whether or
not the Offer or the Merger is consummated.
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated
at any time prior to the Effective Time, whether prior to or after approval by
the stockholders of the Company, as follows:
(i) by mutual written consent duly authorized by the Boards of Directors
of each of Parent and the Company;
(ii) by Purchaser if, due to an occurrence which would result in the
failure to satisfy the Minimum Condition or any of the other conditions set
forth in Section 15 of this Offer to Purchase, Purchaser shall have (A)
failed to commence the Offer within five business days after the day on
which Purchaser's intention to make the Offer is announced or (B) terminated
the Offer after compliance with the terms of the Merger Agreement without
any purchase of Shares thereunder;
(iii) by Purchaser, if the Effective Time shall not have occurred on or
before October 31, 1999, unless prior thereto Parent, Purchaser and their
affiliates have acquired beneficial ownership of at least a majority of the
then outstanding Shares;
(iv) by Purchaser, if prior to the consummation of the Offer, the
Company deliberately fails to perform in any material respects any of its
material obligations under the Merger Agreement;
(v) by Purchaser, if prior to the consummation of the Offer, the Board
(A) withdraws, modifies or changes, in a manner adverse to Parent or
Purchaser, its approval or recommendation of the Offer, the Merger Agreement
or the Merger, (B) presents to the stockholders of the Company any Competing
Transaction or (C) resolves to do any of the foregoing;
(vi) by the Company, if Purchaser shall have failed to commence the
Offer within five business days after the day on which Purchaser's intention
to make the Offer is announced;
(vii) by the Company, if the Offer is terminated in accordance with its
terms without the purchase of any Shares thereunder;
(viii) by the Company, if the Offer has not been consummated within the
time period set forth in the Merger Agreement;
(ix) by the Company, if prior to the purchase of any Shares by Purchaser
pursuant to the Offer, Purchaser deliberately fails to perform in any
material respect any of its obligations under the Merger Agreement; and
26
<PAGE>
(x) by the Company, if prior to the purchase of any Shares by Purchaser
pursuant to the Offer, the Board of Directors of the Company (A) withdraws,
modifies or changes in a manner adverse to Purchaser its approval or
recommendation of the Offer, the Merger Agreement or the Merger or (B)
recommends to the stockholders of the Company any Superior Proposal, which
is then pending, or resolved to do so; provided that any termination of the
Merger Agreement by the Company pursuant to this provision shall not be
effective until the close of business on the second full business day after
notice of such termination has been given to Purchaser.
OPTION AND VOTING AGREEMENT.
Parent and Verne B. Churchill, Lawrence W. Labash, Jeffery A. Oyster, Thomas
H. Payne, Sanford M. Schwartz, Ned L. Sherwood, Timothy J. Sullivan and MFI
Investors, L.P. have entered into the Option and Voting Agreement, dated April
29, 1999, pursuant to which, among other things, each such stockholder (the
"Selling Stockholders") has agreed (i) to vote the Shares and the Series B
Shares then owned by such Selling Stockholder for the Merger and in favor of the
approval and adoption of the transactions contemplated by the Merger Agreement
and against (A) any action or agreement that could reasonably be expected to
impede, interfere with or otherwise materially adversely affect the Merger or
inhibit the timely consummation of the Merger, (B) any action or agreement that
could reasonably be expected to result in a breach of any covenant,
representation or warranty or any other obligation of the Company under the
Merger Agreement, and (C) except for the Merger, against any merger,
consolidation, business combination, reorganization, recapitalization,
liquidation or sale or transfer of any material assets of the Company or its
subsidiaries; (ii) to grant Parent an irrevocable proxy to vote such Shares and
(iii) not to tender any Shares then owned by such Selling Stockholder into the
Offer, without the consent of Parent.
Additionally, under the Option Agreement, (i) each Selling Stockholder has
granted to Parent, or its permitted assign, an irrevocable option to purchase
all Shares then owned by such Selling Stockholder at a price of $31.00 per Share
at any time on or prior to the expiration date of the Option if after the date
of the Option Agreement a proposal or an offer for a Competing Transaction is
made (which Shares, in the aggregate, represent 30.07% of the Shares on a fully
diluted basis, after giving effect to the exercise of vested employee stock
options); and (ii) Parent has agreed to purchase at a price of $31.00 per Share
all Shares held by each Selling Stockholder by 11:59 p.m. on the first business
day immediately following the consummation of the Offer. The Option Agreement
terminates upon the earliest to occur of (i) the closing of the Merger, (ii)
11:59 p.m. on the first business day immediately following the expiration or
consummation of the Offer, (iii) in the event that the Merger Agreement is
terminated prior to any offer or proposal for a Competing Transaction having
been made, the termination date of the Merger Agreement, (iv) the date specified
in a written agreement executed by Parent and each of the Selling Stockholders,
and (v) November 2, 1999; provided that if Parent has exercised the Option on or
before the date that the Option Agreement would otherwise have terminated, the
Option Agreement will terminate on the date of the purchase by Parent of the
Shares of the Selling Stockholders.
The foregoing is a summary of certain provisions of the Option Agreement, is
presented only as a summary and is qualified in its entirety by reference to the
Option Agreement, a copy of which has been filed as an exhibit to Purchaser's
and Parent's Schedule 14D-1.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; RIGHTS AGREEMENT
PURPOSE. The purpose of the Offer and the Option Agreement is for Parent to
acquire control of all outstanding Shares of the Company. The purpose of the
Merger is for Parent to acquire all Shares, Series B Shares, and other equity
interests not purchased pursuant to the Offer or the Option Agreement. Upon
consummation of the Merger, the Company will become a wholly owned indirect
subsidiary of Parent. The Offer is being made pursuant to the Merger Agreement.
27
<PAGE>
APPROVAL. Under the DGCL, the approval of the Board of Directors of the
Company and the affirmative vote of the holders of a majority of the outstanding
Shares are required to approve and adopt the Merger Agreement. The Board of
Directors of the Company has unanimously approved the Merger Agreement and the
transactions contemplated thereby and, unless the Merger is consummated pursuant
to the short-form merger provisions under the DGCL described below, the only
remaining required corporate action of the Company is the approval and adoption
of the Merger Agreement and the transactions contemplated thereby by the
affirmative vote of the holders of a majority of the Shares. Under the Option
Agreement, Parent has obtained from MFI Investors L.P. (the "Partnership"), the
holder of all outstanding Series B Shares its agreement and irrevocable proxy to
vote such Series B Shares for the Merger and in favor of the approval and
adoption of the transactions contemplated by the Merger Agreement. Accordingly,
if the Minimum Condition is satisfied, Parent will have sufficient voting power
to cause the approval and adoption of the Merger Agreement and the transactions
contemplated thereby without the affirmative vote of any other stockholders.
STOCKHOLDER MEETINGS. In the Merger Agreement, the Company has agreed to
take all action necessary to convene a meeting of its stockholders as soon as
practicable after the consummation of the Offer for the purpose of considering
and taking action on the Merger Agreement, if such meeting is required by the
DGCL. Parent has agreed that all Shares owned by it or any of its subsidiaries
(including Purchaser) will be voted in favor of the Merger Agreement.
BOARD REPRESENTATION; SERIES B SHARES. If Parent purchases a majority of
the outstanding Shares pursuant to the Offer and the Option Agreement, the
Merger Agreement provides that Parent will be entitled to designate
representatives to serve on the Board in the same proportion as the proportion
of Shares beneficially owned by Parent, subject to the obligation to retain at
least two independent directors until the Merger has taken place. See Section
11. Parent currently intends to designate not less than a majority of the
directors of the Company following consummation of the Offer. It is currently
anticipated that Parent will designate Crispin Davis, Colin Day, Eleonore
Sauerwein, David Verklin, Pat Doble and Stig Karlsen, or such other persons
listed on Schedule I as Parent shall determine, to serve as directors of the
Company following consummation of the Offer. While Parent has no plans to
designate any persons other than those listed on Schedule I, it may do so from
time to time. Parent expects that such representation will permit Parent to
exert substantial influence over the Company's conduct of its business and
operations.
The Partnership owns all 100 Series B Shares that are issued and
outstanding. The terms of the Series B Shares provide that as long as the
Partnership continues to beneficially own at least 20% of the total combined
voting power of all Shares and any other class of securities of the Company
entitled to vote generally in the election of directors then outstanding
("Voting Securities"), the Partnership will be
entitled to elect three directors to the Company's Board of Directors. The
number of directors which the Partnership is entitled to elect decreases to two
if the Partnership's 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 will also be entitled to have one
of its directors appointed to each of the audit and compensation committees of
the Board. In addition, as long as any Series B Shares are outstanding, the
Company will not, without the vote of the Partnership as the holder of the
outstanding Series B Shares, expand the Board of Directors to more than 11
directors.
The terms of the Series B Shares provide that the Series B Shares will be
redeemed, at a redemption price of $1.00 per share, at any time that the holders
thereof are not entitled to elect any directors as described above. From and
after the date set by the Company for such redemption, unless the Company fails
to make available sufficient funds to effect the redemption, such shares will no
longer be deemed to be outstanding shares for any purpose, and the holders of
such shares will not have any rights with respect
28
<PAGE>
thereto, except the right to receive the redemption price upon surrender to the
Company of the certificates therefor. Accordingly, upon the purchase by Parent
or its permitted assign of the shares held by the Partnership pursuant to the
terms of the Option Agreement, the Partnership, as the holder of the Series B
Shares, will no longer be entitled to elect any directors, and the Series B
Shares will be redeemed.
SHORT FORM MERGER. Under the DGCL, if Purchaser acquires at least 90% of
the outstanding Shares, Purchaser will be able to approve the Merger without a
vote of the Company's stockholders. In such event, Parent and Purchaser
anticipate that they will take all necessary and appropriate action to cause the
Merger to become effective as soon as reasonably practicable after such
acquisition, without a meeting of the Company's stockholders. If, however,
Purchaser does not acquire at least 90% of the outstanding Shares pursuant to
the Offer, the Option Agreement or otherwise and a vote of the Company's
stockholders is required under the DGCL, a significantly longer period of time
will be required to effect the Merger.
APPRAISAL RIGHTS. The holders of Shares do not have appraisal rights as a
result of the Offer. However, if the Merger is consummated, holders of Shares at
the Effective Time of the Merger will have certain rights pursuant to the
provisions of Section 262 of the DGCL ("Section 262") to dissent and demand
appraisal of their Shares. Under Section 262, dissenting stockholders who comply
with the applicable statutory procedures will be entitled to receive a judicial
determination of the fair value of their Shares (exclusive of any element of
value arising from the accomplishment or expectation of the Merger) and to
receive payment of such fair value in cash, together with a fair rate of
interest, if any. Any such judicial determination of the fair value of Shares
could be based upon factors other than, or in addition to, the price per Share
to be paid in the Merger or the market value of the Shares. In Weinberger v.
UOP, Inc., the Delaware Supreme Court stated, among other things, that "proof of
value by any techniques or methods which are generally considered acceptable in
the financial community and otherwise admissible in court" should be considered
in an appraisal proceeding. Therefore, the value so determined could be more or
less than the price per Share to be paid in the Merger.
THE FOREGOING SUMMARY OF THE RIGHTS OF STOCKHOLDERS DOES NOT PURPORT TO BE A
COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING TO
EXERCISE ANY AVAILABLE APPRAISAL RIGHTS. THE EXERCISE OF APPRAISAL RIGHTS
REQUIRES STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL.
RULE 13E-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger or another business
combination following the purchase of Shares pursuant to the Offer or otherwise
in which Parent seeks to acquire the remaining Shares not held by it. Parent
believes, however, that Rule 13e-3 will not be applicable to the Merger if the
Merger is consummated within one year after the Expiration Date at the same per
Share price as paid in the Offer. If applicable, Rule 13e-3 requires, among
other things, that certain financial information concerning the Company and
certain information relating to the fairness of the proposed transaction and the
consideration offered to minority stockholders in such transaction be filed with
the Commission and disclosed to stockholders prior to consummation of the
transaction.
PLANS FOR THE COMPANY. Except as otherwise set forth in this Offer to
Purchase, it is expected that, initially following the Merger, the business and
operations of the Company will be continued by the Company substantially as they
are currently being conducted. Parent will continue to evaluate the business and
operations of the Company during the pendency of the Offer and after the
consummation of the Offer and the Merger, and will take such actions as it deems
appropriate under the circumstances then existing. Parent intends to seek
additional information about the Company during this period, and to review such
information as part of a comprehensive review of the Company's business,
operations, capitalization and
29
<PAGE>
management with a view to optimizing exploitation of the Company's potential in
conjunction with Parent's businesses.
Except as described in this Offer to Purchase, neither Parent nor Purchaser
has any present plans or proposals that would relate to or result in an
extraordinary corporate transaction such as a merger, reorganization or
liquidation involving the Company or any of its subsidiaries, or a sale or other
transfer of a material amount of assets of the Company or any of its
subsidiaries, any material change in the capitalization or dividend policy of
the Company, or any other material change in the Company's corporate structure
or business or the composition of its Board of Directors or management.
RIGHTS AGREEMENT. The following discussion, including the summary of
certain aspects of the Rights, is based in part on information contained in the
Company's Registration Statement on Form 8-A dated July 3, 1996 (including, as
an Exhibit thereto, a copy of the Rights Agreement, as then amended), and is
qualified by reference to such information. Although Purchaser and Parent do not
have any knowledge that would indicate that any statements contained herein
based upon such information are untrue, neither Purchaser nor Parent assumes any
responsibility for the accuracy or completeness of such information, or for any
failure by the Company to disclose events that may have occurred and may affect
the significance or accuracy of any such information but which are unknown to
Purchaser and Parent.
On July 26, 1989, the Board of Directors of the Company declared a dividend
of one Right for each share of common stock outstanding on August 7, 1989 (the
"Record Date"). The holders of any additional shares of common stock issued
subsequent to the Record Date and before the earliest of the Distribution Date,
the redemption of the Rights, the exchange of the Rights or the expiration of
the Rights will also be entitled to one Right for each additional share. Each
Right currently entitles the registered holder to purchase from the Company one
four-hundredth of a share of Series A Preferred Stock, without par value (the
"Series A Shares") of the Company at a price of $5.00 per one four-hundredth of
a Series A Share (the "Purchase Price"), subject to any future adjustments.
The Rights are not exercisable until the earlier to occur of (i) 10 days
following a public announcement that a person or group of affiliated or
associated persons have acquired beneficial ownership of 20% or more of the
outstanding common stock (thereby becoming an "Acquiring Person") or (ii) 10
business days (or such later date as may be determined by action of the Board of
Directors prior to such time as any person becomes an Acquiring Person)
following the commencement of, or announcement of an intention to make, a tender
offer or exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 20% or more of such outstanding common stock
(the earlier of such dates being called the "Distribution Date"). The Rights
will expire on August 7, 1999 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
The number of outstanding Rights and the number of one four-hundredths of a
Series A Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the common stock or a stock dividend
on the common stock payable in common stock or subdivisions, consolidations or
combinations of the common stock occurring, in any such case, prior to the
Distribution Date. The Purchase Price payable, and the number of Series A Shares
or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Series A Shares, (ii) upon the grant to holders of the Series A Shares of
certain rights or warrants to subscribe for or purchase Series A Shares at a
price, or securities convertible into Series A Shares with a conversion price,
less than the then current market price of the Series A Shares, or (iii) upon
the distribution to holders of the Series A Shares of evidence of indebtedness
or assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Series A Shares) or of subscription
rights or warrants (other than those referred to above).
30
<PAGE>
Series A Shares purchasable upon exercise of the Rights will not be
redeemable for a period of 20 years. Currently, each Series A Share will be
entitled to a minimum preferential quarterly dividend payment of $1 per share,
but will be entitled to an aggregate dividend of 400 times the dividend declared
per share of common stock. In the event of liquidation, the holders of the
Series A Shares will be entitled to a minimum preferential liquidation payment
of $100 per share, but will be entitled to an aggregate payment of 400 times the
payment made per share of common stock. Each Series A Share will have 400 votes,
voting together with the Common Stock. In the event of any merger, consolidation
or other transaction in which Common Stock is exchanged, each Series A Share
will be entitled to receive 400 times the amount received per share of Common
Stock.
Because of the nature of the Series A Shares' dividend, liquidation and
voting rights, the value of the fractional interest in a Series A Share
purchasable upon exercise of each Right should approximate the value of one
share of common stock.
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold, proper provision will be made so that each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction will have a market
value of two times the exercise price of the Right. In the event that (i) any
person becomes an Acquiring Person (unless such person first acquires 20% or
more of the outstanding common stock by a purchase pursuant to a tender offer
for all of the common stock for cash, which purchase increases such person's
beneficial ownership to 85% or more of the outstanding common stock) or (ii)
during such time as there is an Acquiring Person, there shall be a
reclassification of securities or a recapitalization or reorganization of the
Company or other transaction or series of transactions involving the Company
which has the effect of increasing by more than the proportionate share of the
outstanding shares of any class of equity securities of the Company or any of
its subsidiaries beneficially owned by the Acquiring Person, proper provision
shall be made so that each holder of a Right, other than Rights beneficially
owned by the Acquiring Person (which will thereafter be void), will thereafter
have the right to receive upon exercise that number of shares of common stock
having a market value of two times the exercise price of the Right.
At any time after any person becomes an Acquiring Person and prior to the
acquisition by such person or group of 50% or more of the outstanding common
stock, the Board of Directors may exchange the Rights (other than Rights owned
by such person or group which have become void), in whole or in part, at an
exchange ratio of one share of common stock, or one four-hundredth of a Series A
Share (or of a share of a class or series of the Company's preferred stock
having equivalent rights, preferences and privileges), per Right (subject to any
future adjustments).
At any time prior to any person becoming an Acquiring Person, the Board of
Directors may redeem the Rights in whole, but not in part, at a price of $.0025
per Right (the "Redemption Price"). The redemption of the Rights may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish. In addition, if a bidder who
does not beneficially own more than 1% of the common stock who has not within
the past year owned in excess of 1% of the common stock and, at a time he held
such greater than 1% stake, disclosed, or caused the disclosure of, an intention
which relates to or would result in the acquisition or influence of control of
the Company, proposes to acquire all of the common stock (and all other shares
of capital stock of the Company entitled to vote with the common stock in the
election of directors or on mergers, consolidations, sales of all or
substantially all of the Company's assets, liquidations, dissolutions or
windings up) for cash at a price which a nationally recognized investment banker
selected by such bidder states in writing is fair, and such bidder has obtained
written financing commitments (or otherwise has financing) and complies with
certain procedural requirements, then the Company, upon the request of the
bidder, will hold a special stockholders meeting to vote on a resolution
requesting the Board of Directors to accept the bidder's proposal. If a majority
of the outstanding shares entitled to vote on the proposal vote in favor of such
resolution, then for
31
<PAGE>
a period of 60 days after such meeting the Rights will be automatically redeemed
at the Redemption Price immediately prior to the consummation of any tender
offer for all of such shares at a price per share in cash equal to or greater
than the price offered by such bidder; provided, however, that no redemption
will be permitted or required after any person becomes an Acquiring Person.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price. Bidders owning in excess of 1% of the common stock on the
date of the adoption of the Rights Agreement are "grandfathered" with respect to
such percentage of common stock.
The terms of the Rights may be amended by the Board of Directors without the
consent of the holders of the Rights, except that from and after such time as
any person becomes an Acquiring Person no such amendment may adversely affect
the interests of the holders of the Rights. Until a Right is exercised, the
holder thereof, as such, will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends.
On June 5, 1996, the Rights Agreement was amended to, among other things,
permit the Partnership and certain affiliated persons to purchase up to a
certain percentage of the common stock without becoming an Acquiring Person.
In connection with execution of the Merger Agreement, the Rights Agreement
was further amended to provide that the execution and delivery of the Merger
Agreement and the Option Agreement, and the consummation of the transactions
contemplated thereby, including the Offer and the purchase of the Shares
pursuant thereto, will not result in (i) Parent, Purchaser or any of their
affiliates becoming an Acquiring Person, or (ii) the occurrence of a
Distribution Date or a Shares Acquisition Date. In addition, the Rights
Agreement was amended to provide that the Rights will expire on the earliest of
(i) August 7, 1999, (ii) the acceptance by Parent (or a wholly owned subsidiary
of Parent) of the Shares pursuant to the Offer, or (iii) the redemption or
exchange of the Rights as provided in the Rights Agreement.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Board of Directors, except pursuant to an offer
conditioned on a substantial number of Rights being acquired. The Rights should
not interfere with any merger or other business combination approved by the
Board of Directors at a time when the Rights are redeemable.
32
<PAGE>
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE ACT REGISTRATION;
MARGIN REGULATIONS
The purchase of Shares pursuant to the Offer and the Option Agreement will
reduce the number of Shares that might otherwise trade publicly and may reduce
the number of holders of Shares, which could adversely affect the liquidity and
market value of the remaining Shares held by stockholders other than Purchaser.
Purchaser cannot predict whether the reduction in the number of Shares that
might otherwise trade publicly will have an adverse or beneficial effect on the
market price for or marketability of the Shares or whether it will cause future
market prices to be greater or less than the Offer Price.
Depending upon the aggregate market value and per Share price of any Shares
not purchased pursuant to the Offer or the Option Agreement, following the Offer
the Shares may no longer meet the standards for continued listing on the Nasdaq
National Market, which requires an issuer to have at least 400 holders of record
of 100 shares or more and, among other things, either (i) at least 750,000
publicly held Shares with a market value of at least $5 million, or (ii) at
least 1,100,000 publicly held Shares with a market value of at least $15 million
and a market capitalization, or total assets and total revenue, of at least $50
million. Shares held directly or indirectly by directors and officers of the
Company and concentrated holdings of 10% or more of the Shares outstanding
generally will not be considered to be publicly held for the purpose of the
foregoing standards. If, as a result of the purchase of Shares pursuant to the
Offer and the Option Agreement, the Shares no longer meet the requirements of
the Nasdaq National Market for continued listing and the listing of Shares is
discontinued, the market for the Shares could be adversely affected. If the
Shares were no longer quoted on the Nasdaq National Market, it is possible that
the Shares could continue to trade in the over-the-counter market and that
quotations could continue to be reported through other sources. The extent of
the public market for the Shares and the availability of such quotations would,
however, depend upon the number of stockholders remaining at such time, the
interest in maintaining a market in the Shares on the part of securities firms,
the possible termination of registration of the Shares under the Exchange Act,
as described below, and other factors.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of the Shares. Depending upon factors similar to those
described above regarding listing and market quotations, it is possible that,
following the Offer, the Shares will no longer constitute "margin securities"
and therefore could no longer be used as collateral for loans made by brokers.
The Shares are currently registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon application of the
Company to the Commission if the Shares are neither listed on a national
securities exchange nor held by 300 or more holders of record. Termination of
registration of the Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to its stockholders and to
the Commission and would make certain provisions of the Exchange Act no longer
applicable to the Company, such as the short-swing profit recovery provisions of
Section 16(b) of the Exchange Act, the requirement of furnishing a proxy
statement pursuant to Section 14(a) of the Exchange Act in connection with
stockholders' meetings and the related requirement of furnishing an annual
report to stockholders, and the requirements of Rule 13e-3 under the Exchange
Act with respect to "going private" transactions. Furthermore, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 or 144A under the
Securities Act may be impaired or eliminated. It is the current intention of
Parent to seek to cause the Company to deregister the Shares after consummation
of the Offer if the requirements for termination of registration are met.
33
<PAGE>
14. DIVIDENDS AND DISTRIBUTIONS
As described above, the Merger Agreement provides that, prior to the earlier
of the date on which the persons designated by Parent become directors of the
Company or the Effective Time, without Parent's prior written consent, neither
the Company nor any of its Subsidiaries will, among other things, (a) except for
Shares the Company may be obligated to issue in connection with a prior
acquisition, authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities, except in the case of Shares of the
Company, as required by employee options outstanding on the date of the
execution of the Merger Agreement or Company employee benefit plans as in effect
on the date of the execution of the Merger Agreement, or amend any of the terms
of any such securities or agreements outstanding on the date of the execution of
the Merger Agreement; (b) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock, or redeem or otherwise acquire any securities of the Company or any of
the Subsidiaries; (c) issue or sell any debt securities or rights to acquire any
debt securities of the Company or any Subsidiary; or (d) other than expressly
provided for in the Merger Agreement or as required by applicable law, as now or
hereafter in effect, enter into, adopt or amend any stock option, stock
appreciation right, restricted stock, performance unit, or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing.
15. CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Parent or Purchaser
shall not be required to accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange
Act (relating to Purchaser's obligation to pay for or return tendered Shares
promptly after expiration or termination of the Offer), to pay for any Shares
tendered, and may postpone the acceptance for payment or, subject to the
restriction referred to above, payment for any Shares tendered, and may amend
or terminate the Offer, if prior to the time the Offer shall otherwise
expire: (i) the Minimum Condition shall not have been satisfied; (ii) all
material regulatory and related approvals have not been obtained or made on
terms reasonably satisfactory to Purchaser; (iii) any applicable waiting
periods under the HSR Act shall not have expired or been terminated; or (iv)
at any time on or after the date of the Merger Agreement and prior to the
time the Offer shall otherwise expire, any of the following events shall
occur:
(A) any governmental entity or federal, state or foreign court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction
or other order which is in effect (or pending) and which (1) restricts,
prevents or prohibits the making or consummation of the Offer, the Merger or
any transaction contemplated by the Merger Agreement, (2) prohibits or
limits materially the ownership or operation by the Company, Parent or any
of their subsidiaries of all or any material portion of the business or
assets of the Company and its subsidiaries taken as a whole, or compels the
Company, Parent, or any of their subsidiaries to dispose of or hold separate
all or any material portion of the business or assets of the Company and its
subsidiaries taken as a whole, (3) imposes limitations on the ability of
Parent, Purchaser or any other subsidiary of Parent to exercise effectively
full rights of ownership of any Shares, including, without limitation, the
right to vote any Shares acquired by Purchaser pursuant to the Offer or
otherwise on all matters properly presented to the Company's stockholders,
including, without limitation, the approval and adoption of the Merger
Agreement and the transactions contemplated thereby, or (4) requires
divestitures by Parent, Purchaser or any other affiliate of Parent of any
Shares; provided that Parent shall have used all commercially reasonable
efforts to cause any such decree, judgment, injunction or other order to be
vacated or lifted;
34
<PAGE>
(B) the representations and warranties of the Company contained in the
Merger Agreement (without giving effect to any materiality or similar
qualifications contained therein) shall not be true and correct as of the
date the Offer shall otherwise expire, as though made on and as of such date
except (1) for changes specifically permitted by the Merger Agreement, (2)
that those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date, (3) in any
case where such failure to be true and correct would not, in the aggregate,
have a Material Adverse Effect, and (4) notwithstanding anything in the
Merger Agreement to the contrary, in the event that any of the
representations and warranties of the Company with respect to any of its
subsidiaries are determined to be inaccurate, and all such inaccuracies
capable of measurement in dollar amounts, in the aggregate, exceed
$3,000,000, then only the amounts in excess of $3,000,000 will be taken into
account in determining whether such inaccuracies, taken together with all
other breaches of representations and warranties generally, result in a
Material Adverse Effect;
(C) the Company shall not have performed or complied with any of its
obligations, covenants and agreements under the Merger Agreement to be
performed or complied with by it unless all such failures together in their
entirety would not have a Material Adverse Effect;
(D) the Merger Agreement shall have been terminated in accordance with
its terms;
(E) the Company shall have received any other offer for the purchase of
Shares, the purchase of substantially all of the Company's assets, the
merger of the Company or any other transaction which would require the
withdrawal or material modification of the Offer, the Merger Agreement or
the Merger and the Board shall have withdrawn or materially modified or
changed (including by amendment of the Schedule 14D-9) in a manner adverse
to Purchaser its recommendation of the Offer, the Merger Agreement or the
Merger;
(F) (1) any person or group shall have entered into a definitive
agreement or agreement in principle with the Company with respect to a
merger, consolidation, sale of a material portion of the assets of the
Company, or other business combination with the Company; or (2) (A) the
Board of Directors of the Company or any committee thereof shall have
withdrawn, modified or changed in a manner adverse to Parent or Purchaser
its approval or recommendation of the Offer, the Merger Agreement or Merger
or approved or recommended any Competing Transaction, or (B) the Board of
Directors of the Company or any committee thereof shall have resolved to do
any of the foregoing;
(G) there shall have occurred any change, condition, event or
development that has a Material Adverse Effect (excluding any change,
condition, event or development arising out of or attributable to general
economic conditions);
(H) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the New York Stock
Exchange, the NASDAQ\NMS or the London Stock Exchange for a period in excess
of 24 hours (excluding any coordinated trading halt triggered solely as a
result of a specified decrease in a market index and suspensions or
limitations resulting solely from physical damage or interference with such
exchange or association not related to market conditions), (ii) a
declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States or the United Kingdom or (iii) any material
limitation (whether or not mandatory) by any government or governmental
authority of the United States or the United Kingdom on the extension of
credit by banks or other lending institutions; or
(I) the Selling Stockholders shall have failed to comply in any
material respect with their obligations pursuant to the Option Agreement;
which, in the reasonable judgment of Purchaser in any such case, and regardless
of the circumstances giving rise to any such condition, makes it inadvisable to
proceed with such acceptance for payment or payments.
35
<PAGE>
16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
GENERAL. Except as described in this Section 16, neither Parent nor
Purchaser is aware of any license or regulatory permit that appears to be
material to the business of the Company and its subsidiaries, taken as a whole,
that might be adversely affected by the acquisition of Shares by Purchaser or
Parent pursuant to the Offer, the Option Agreement, the Merger or otherwise or,
except as set forth below, of any filing, approval or other action by or with
any governmental, administrative or regulatory agency or authority, domestic or
foreign, that would be required prior to the acquisition of Shares by Purchaser
or Parent pursuant to the Offer, the Merger or otherwise. Should any such
approval or other action be required, Purchaser and Parent currently contemplate
that it will be sought, except as described below under "State Takeover
Statutes." There can be no assurance that any such approval or other action, if
needed, would be obtained, or would be obtained without substantial conditions,
or that adverse consequences might not result to the Company's business, or that
certain parts of the business of the Company or Parent might not have to be
disposed of or held separate, or other material conditions complied with, in
order to obtain such approvals or other actions or, in the event that such
approvals were not obtained or any other actions were not taken, any of which
could cause Purchaser to elect (subject to the terms of the Merger Agreement) to
terminate the Offer without the purchase of Shares thereunder. Purchaser's
obligation under the Offer to accept for payment and pay for Shares is subject
to certain conditions, including conditions relating to certain of the legal
matters discussed in this Section 16. See Section 15.
STATE TAKEOVER STATUTES. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of DGCL prevents an "interested
stockholder" (generally a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock, or an affiliate or associate
thereof) from engaging in a "business combination" (defined to include mergers
and certain other transactions) with a Delaware corporation for a period of
three years following the date such person became an interested stockholder
unless, among other things, prior to such date the Board of Directors of the
corporation approved either the business combination or the transaction in which
the interested stockholder became an interested stockholder. In connection with
the review of the proposed transaction, the Company's Board of Directors prior
to the execution of the Merger Agreement or the Option Agreement (i) unanimously
determined that each of the Merger Agreement, the Offer and the Merger are fair
to and in the best interests of the stockholders of the Company, (ii) approved
the Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger, and (iii) recommended that the stockholders of the Company
accept the Offer, approve and adopt the Merger Agreement and approve the Merger.
Additionally, the Board of Directors of the Company has unanimously approved the
Option Agreement for purposes of Section 203 of the DGCL. Accordingly, Purchaser
and Parent believe that Section 203 of Delaware Law is inapplicable to the
Merger Agreement, the Offer, the Merger or the Option Agreement because its
provisions have been satisfied.
A number of other states have also adopted takeover laws and regulations
which purport to varying degrees to be applicable to attempts to acquire
securities of corporations which are incorporated in such states or which have
or whose business operations have substantial economic effects in such states,
or which have substantial assets, security holders, principal executive offices
or principal places of business therein. In 1982, the Supreme Court of the
United States, in Edgar v. MITE Corp., invalidated on constitutional grounds the
Illinois Business Takeovers Act which, as a matter of state securities law, made
takeovers of corporations meeting certain requirements more difficult. However,
in 1987, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court of the
United States held that the State of Indiana could, as a matter of corporate law
and in particular those aspects of corporate law concerning corporate
governance, constitutionally disqualify a potential acquiror from voting on the
affairs of a target corporation without the prior approval of the remaining
stockholders, provided that such laws were applicable only under certain
conditions. Subsequently, a number of federal courts have ruled that various
state takeover statutes were unconstitutional insofar as they apply to
corporations incorporated outside the state of enactment.
36
<PAGE>
The Company has its headquarters in Illinois and, directly or through
subsidiaries, conducts business in a number of states throughout the United
States, some of which have enacted takeover laws. Purchaser does not know
whether any of these laws will, by their terms, apply to the Option Agreement,
the Offer or the Merger and, except as described herein, has not taken any
action to comply with any such laws. Should any person seek to apply any state
takeover law, Purchaser may resist such application, which may include
challenging the validity or applicability of any such statute in appropriate
court proceedings. In the event it is asserted that one or more state takeover
laws is applicable to the Option Agreement, the Offer or the Merger, and an
appropriate court does not determine that it is inapplicable or invalid,
Purchaser or Parent might be required to file certain information with, or
receive approvals from, the relevant state authorities, and might be unable to
accept for payment or pay for any Shares tendered pursuant to the Offer, or sold
to Purchaser pursuant to the Option Agreement, or be delayed in continuing or
consummating the Offer, the Option Agreement, and the Merger. In such case,
Purchaser may not be obligated to accept for payment, or pay for, any Shares
tendered. See Section 15.
ANTITRUST. Under the provisions of the HSR Act applicable to the Offer, the
acquisition of Shares under the Offer may be consummated following the
expiration of a 15-calendar day waiting period following the filing by Parent of
a Notification and Report Form with respect to the Offer, unless Parent receives
a request for additional information or documentary material from the Antitrust
Division of the Department of Justice (the "Antitrust Division") or the Federal
Trade Commission (the "FTC") or unless early termination of the waiting period
is granted. If, within the initial 15-calendar day waiting period, either the
Antitrust Division or the FTC requests additional information or material from
Parent concerning the Offer, the waiting period will be extended and would
expire at 11:59 p.m., New York City time, on the tenth calendar day after the
date of substantial compliance by Parent with such request. Only one extension
of the waiting period pursuant to a request for additional information is
authorized by the HSR Act. Thereafter, such waiting period may be extended only
by court order or with the consent of Parent. In practice, complying with a
request for additional information or material can take a significant amount of
time.
The Merger would not require an additional filing under the HSR Act if the
Purchaser owns 50% or more of the outstanding Shares at the time of the Merger
or if the Merger occurs within one year after the HSR Act waiting period
applicable to the Offer expires or is terminated.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as Purchaser's acquisition of the Shares
pursuant to the Offer and the Merger Agreement. At any time before or after
Purchaser's acquisition of Shares, the Antitrust Division or the FTC could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the acquisition of Shares pursuant
to the Offer or otherwise or seeking divestiture of Shares acquired by Purchaser
or divestiture of substantial assets of Parent or its subsidiaries. Private
parties and state attorneys general may also bring legal action under the
antitrust laws in certain circumstances. There can be no assurance that a
challenge to the Offer or other acquisition of Shares by Purchaser or Parent on
antitrust grounds will not be made or, if such challenge is made, of the result.
See Section 15 for certain conditions to the Offer, including conditions with
respect to litigation and certain governmental actions.
FEDERAL RESERVE BOARD REGULATIONS. Federal Reserve Board regulations T, U
and X restrict the extension or maintenance of credit for the purpose of buying
or carrying margin stock, including the Shares, if the credit is secured
directly or indirectly thereby. Such secured credit may not be extended or
maintained in an amount that exceeds the maximum loan value of the margin stock.
Under such regulations, the Shares are presently margin stock and the maximum
loan value thereof is generally 50% of their current market value. The
definition of "indirectly secured" contained in such regulations provides that
the term does not include an arrangement with a customer if the lender in good
faith has not relied upon margin stock as collateral in extending or maintaining
the particular credit. Purchaser and Parent believe that the financing of the
acquisition of the Shares will not be subject to the margin regulations.
37
<PAGE>
FOREIGN LAWS. The Company's 1998 Annual Report to Stockholders indicates
that the Company and certain of its subsidiaries conduct business in certain
foreign countries where regulatory filings or approvals may be required in
connection with the consummation of the Offer. Certain of such filings, if
required, may not be completed and certain of such approvals, if required, may
not be obtained, prior to the expiration of the Offer. However, there is no
present intention to delay the acceptance for payment of or the payment for
Shares pursuant to the Offer pending the completion of such filings and the
obtaining of such approvals. There is no assurance that any such approvals would
be obtained or that adverse consequences to Parent's or the Company's business
might not result from a failure to obtain such approvals or conditions that
might be imposed in connection therewith.
17. FEES AND EXPENSES
Purchaser and Parent have retained Morgan Stanley to act as the Dealer
Manager and to provide certain financial advisory services in connection with
the proposed acquisition of the Company. In connection with such services Parent
has agreed to pay Morgan Stanley (i) a monthly retainer of $75,000, (ii) a fee
of $750,000 upon Parent's announcement of an agreement to acquire the Company
(against which the monthly retainer will be credited), and (iii) a transaction
fee of $2,750,000 (against which the monthly retainer and the announcement fee
will be credited) if an acquisition of all or part of the Company is concluded.
The transaction fee will become payable in the event Purchaser acquires a
majority of the outstanding Shares. In addition, Parent has agreed to reimburse
Morgan Stanley for all reasonable expenses incurred by Morgan Stanley, including
the reasonable fees and disbursements of its legal counsel, and to indemnify
Morgan Stanley and certain related persons against certain liabilities and
expenses, including, without limitation, certain liabilities under the federal
securities laws.
Purchaser and Parent have retained D.F. King & Co., Inc. to act as the
Information Agent and First Chicago Trust Company of New York to serve as the
Depositary in connection with the Offer. The Information Agent and the
Depositary each will receive reasonable and customary compensation for their
services, be reimbursed for certain reasonable out-of-pocket expenses and be
indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities and expenses under the federal securities laws.
Neither Purchaser nor Parent will pay any fees or commissions to any broker
or dealer or other person or entity (other than the Dealer Manager and as
described in the preceding paragraph) in connection with the solicitation of
tenders of Shares pursuant to the Offer. Brokers, dealers, banks and trust
companies will be reimbursed by Purchaser upon request for customary mailing and
handling expenses incurred by them in forwarding material to their customers.
18. MISCELLANEOUS
The Offer is being made solely by this Offer to Purchase and the related
Letter of Transmittal, and is being made to all holders of Shares. Purchaser is
not aware of any jurisdiction in which the making of the Offer is not in
compliance with applicable law. If Purchaser becomes aware of any jurisdiction
in which the making of the Offer would not be in compliance with applicable law,
Purchaser will make a good faith effort to comply with any such law. If, after
such good faith effort, Purchaser cannot comply with any such law, the Offer
will not be made to (nor will tenders be accepted from or on behalf of) the
holders of Shares residing in such jurisdiction. In those jurisdictions whose
securities or blue sky laws require the Offer to be made by a licensed broker or
dealer, the Offer is being made on behalf of Purchaser by one or more registered
brokers or dealers which are licensed under the laws of such jurisdiction.
38
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE OR
THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Purchaser and Parent have filed with the Commission a Tender Offer Statement
on Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act, together with
exhibits, furnishing certain additional information with respect to the Offer,
and may file amendments thereto. Such Tender Offer Statement and any amendments
thereto, including exhibits, should be available for inspection and copies
should be obtainable in the manner set forth in Section 7 (except that such
material will not be available at the regional offices of the Commission).
Aegis Acquisition Corp.
May 4, 1999, as amended May 28, 1999
39
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
AEGIS ACQUISITION CORP.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL
OCCUPATION
OR EMPLOYMENT AND
FIVE-YEAR EMPLOYMENT
NAME AND BUSINESS ADDRESS OFFICE(S) HISTORY CITIZENSHIP
- ----------------------------- ------------------------ ------------------------------------- -----------------
<S> <C> <C> <C>
Crispin Davis ............... Director/President Director/Chief Executive Officer of United Kingdom
11A West Halkin Street Aegis Group plc since 1994. Director
London, SWIX 8JL of United Distillers to April 1993.
England From 1992 to 1993 Group Managing
Director of United Distillers and a
member of the Guinness plc Board.
Colin Day ................... Director/Vice President Group Finance Director of Aegis Group United Kingdom
11A West Halkin Street (Finance) plc since February 1995. Finance
London, SWIX 8JL Director of ABB Instrumentation Group
England prior to February 1995. Non-Executive
Director of Bell Security Limited
from January 1999. Former Non-
Executive Director of Vero plc.
Eleonore Sauerwein .......... Director/Vice President Group Legal Director of Aegis/Carat France
c/o Aegis/Carat Group (Legal)/ Group since 1993.
4, Place de Saverne Secretary
Courbevoie
92971-Paris-La Defense
France
Andrew Parnes ............... Director/Treasurer Group Treasurer of Aegis Group plc United Kingdom
11A West Halkin Street since May 1995. Treasury Consultant
London, SWIX 8JL February 1994 to April 1995.
England
</TABLE>
AEGIS GROUP PLC
<TABLE>
<CAPTION>
PRESENT PRINCIPAL
OCCUPATION
OR EMPLOYMENT AND
FIVE-YEAR EMPLOYMENT
NAME AND BUSINESS ADDRESS OFFICE(S) HISTORY CITIZENSHIP
- ----------------------------- ------------------------ ------------------------------------- -----------------
<S> <C> <C> <C>
Francis Stephen Law, CBE Non-Executive Chairman Non-Executive Chairman of Aegis Group United Kingdom
11A West Halkin Street of the Board plc since November 1, 1987.
London SWIW 8JL Non-Executive Director Milupa Ltd.
England from 1978 until May 1997. Non-
Executive Chairman of Siemens plc
from 1984 until November 1997.
Non-Executive Chairman of Varta Group
UK from 1971 until the present.
President of Rubis & Co. from 1990
until the present and a Director for
Celab Ltd. Governor of the Royal
Shakespeare Company.
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL
OCCUPATION
OR EMPLOYMENT AND
FIVE-YEAR EMPLOYMENT
NAME AND BUSINESS ADDRESS OFFICE(S) HISTORY CITIZENSHIP
- ----------------------------- ------------------------ ------------------------------------- -----------------
<S> <C> <C> <C>
Crispin Davis ............... Chief Executive Director/Chief Executive of Aegis United Kingdom
11A West Halkin Street Officer/Director Group plc since 1994. Director of
London SWIW 8JL United Distillers to April 1993. From
England 1992 to 1993 Group Managing Director
of United Distillers and a member of
the Guinness plc Board.
Colin Day ................... Group Finance Director Group Finance Director of Aegis Group United Kingdom
11A West Halkin Street plc since February 1995. Finance
London SWIX 8JL Director of ABB Instrumentation Group
England prior to February 1995. Non-Executive
Director of Bell Security Limited
from January 1999. Former Non-
Executive Director of Vero plc.
Kai Hiemstra ................ Board Member Board member of Aegis Group plc since Germany
HMS Carat Group, Germany July 1994. Chairman of HMS Carat
Kreuzberger Ring 19 Group since 1994.
65205 Wiesbaclen
Germany
Ray Kelly ................... Board Member Chairman & CEO of Carat Group UK Ltd United Kingdom
Carat Group UK Ltd. since July 1992. Board member of
Parker Tower Aegis Group plc since September 1992.
43-49 Parker Street
London WC2B SPS
England
Bruno Kemoun ................ Board Member Joint Chairman and CEO of Carat France
Carat France France since 1995. Appointed to Aegis
4, Place de Saverne Group plc Board in September 1992.
Courbevoie
92971 Paris-La Defense
France
Eryck Rebbouh ............... Board Member Joint Chairman and CEO of Carat France
Carat France France since 1995. Appointed to Aegis
4, Place de Saverne Group plc Board in September 1992.
Courbevoie
92971 Paris-La Defense
France
John Amerman ................ Non-Executive Director Non-Executive Director of Aegis Group United States
2101 Rosecrans Avenue plc since December 1997. Chairman and
Suite 6280 CEO of Mattel Inc. from February 1987
El Segundo, CA 90245 to December 1996, and advisor to
Mattel Inc. until October 1997.
Douglas Flynn ............... Non-Executive Director Managing Director of News Australia
News International plc International plc since January 1994.
1 Virginia Street
London, E19BD
England
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL
OCCUPATION
OR EMPLOYMENT AND
FIVE-YEAR EMPLOYMENT
NAME AND BUSINESS ADDRESS OFFICE(S) HISTORY CITIZENSHIP
- ----------------------------- ------------------------ ------------------------------------- -----------------
<S> <C> <C> <C>
Sir Kit McMahon ............. Non-Executive Director Non-Executive Director of Aegis Group United Kingdom
The Old House plc since May 1993. Director of
Burleigh Taylor Woodraw plc since 1991 and of
Stroud FI Group plc since 1994.
Glos GLS 2PQ
England
Sir Peter Thompson .......... Non-Executive Director Non-Executive Director of Aegis Group United Kingdom
The Mill House plc since May 1993. Chairman of FI
Mill Street Group plc and Child Base Ltd.
Newport Pagnell
Bucks, England
Philippe Villin ............. Non-Executive Director Non-Executive Director of Aegis Group France
Lehman Brother plc since October 1995. Chairman of
21 rue Balzac PH. Villin Conseil since 1994.
75406 Paris Managing director of Lehman Brothers.
Managing partner of Eurofin during
1995. Chairman BZW France from
September-December 1997.
*Andrew Parnes .............. Group Treasurer Group Treasurer of Aegis plc since United Kingdom
11A West Halkin Street May 1995. Treasury Consultant
London SWIX 8JL February 1994 to April 1995.
England
*Eleonore Sauerwein ......... Group Legal Director Group Legal Director of Aegis Carat France
c/o Aegis/Carat Group Group since 1993.
4 Place de Saverne
Courbevoie
92971 Paris-La Defense
France
*William Skerrett ........... Group Human Resources Group Human Resources Director of United Kingdom
11A West Halkin Street Director Aegis Group plc since November 1995.
London SWIX 8JL Group Personnel Director of Scholl
England plc from January 1984 until November
1995.
</TABLE>
- --------------------------
* Executive officer; not a member of the Board of Directors.
S-3
<PAGE>
The Letter of Transmittal, certificates for Shares and any other required
documents should be sent or delivered by each stockholder of the Company or his
broker, dealer, commercial bank or other nominee to the Depositary at one of its
addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
<S> <C> <C>
BY MAIL: BY OVERNIGHT DELIVERY: BY HAND:
First Chicago Trust Company of New York First Chicago Trust Company of New York First Chicago Trust Company of New York
Corporate Actions Corporate Actions, Suite 4680 c/o Securities Transfer and Reporting
Suite 4660 14 Wall Street, 8th Floor Services Inc.
P.O. Box 2569 New York, NY 10005 Attn: Corporate Actions
Jersey City, NJ 07303-2569 100 William Street, Galleria
New York, NY 10038
</TABLE>
Any questions or requests for assistance or additional copies of this Offer to
Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be
directed to the Information Agent at its telephone numbers and location listed
below. You may also contact your broker, dealer, commercial bank or trust
company or nominee for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Stockholders call toll-free: (800) 994-3227
Brokers and Banks call collect: (212) 269-5550
THE DEALER MANAGER FOR THE OFFER IS:
MORGAN STANLEY DEAN WITTER
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
(212) 761-7449
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MARKET FACTS, INC.
AT
$31.00 NET PER SHARE
BY
AEGIS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
AEGIS GROUP PLC
--------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JUNE 1, 1999, UNLESS THE OFFER IS EXTENDED.
---------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OR TERMINATION OF THE OFFER A
NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $1.00 PER SHARE, OF THE COMPANY (THE
"SHARES") WHICH WILL CONSTITUTE A MAJORITY OF THE TOTAL NUMBER OF SHARES
OUTSTANDING ON A FULLY DILUTED BASIS, LESS THE NUMBER OF SHARES AEGIS
ACQUISITION CORP. ("PURCHASER") CAN ACQUIRE UNDER AN OPTION AND VOTING AGREEMENT
(THE "OPTION AGREEMENT"), DATED AS OF APRIL 29, 1999, BETWEEN AEGIS GROUP PLC
("PARENT") AND THE STOCKHOLDERS OF MARKET FACTS, INC. (THE "COMPANY") WHO ARE
PARTIES THERETO (THE "MINIMUM CONDITION"), AND (II) THE EXPIRATION OR
TERMINATION OF ANY APPLICABLE WAITING PERIODS IMPOSED BY THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED. STOCKHOLDERS OF THE COMPANY HAVE
GRANTED PARENT THE RIGHT TO ACQUIRE APPROXIMATELY 30.07% OF THE TOTAL NUMBER OF
OUTSTANDING SHARES ON A FULLY DILUTED BASIS PURSUANT TO THE OPTION AGREEMENT.
SEE SECTION 11. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE
SECTION 11.
------------------------
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED
AS OF APRIL 29, 1999 (THE "MERGER AGREEMENT"), BY AND AMONG THE COMPANY, PARENT
AND PURCHASER. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED
THAT EACH OF THE MERGER AGREEMENT, THE OFFER AND THE MERGER ARE FAIR TO AND IN
THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY, APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE
MERGER, AND RECOMMENDED ACCEPTANCE OF THE OFFER, APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND APPROVAL OF THE MERGER BY THE STOCKHOLDERS OF THE COMPANY.
------------------------
IMPORTANT
ANY STOCKHOLDER DESIRING TO TENDER ALL OR ANY PORTION OF SUCH HOLDER'S
SHARES SHOULD EITHER (a) COMPLETE AND SIGN THE LETTER OF TRANSMITTAL (OR A
MANUALLY SIGNED FACSIMILE COPY THEREOF) IN ACCORDANCE WITH THE INSTRUCTIONS IN
THE LETTER OF TRANSMITTAL AND MAIL OR DELIVER IT TOGETHER WITH THE
CERTIFICATE(S) EVIDENCING THE TENDERED SHARES AND ALL OTHER REQUIRED DOCUMENTS
TO THE DEPOSITARY, OR TENDER SUCH SHARES PURSUANT TO THE PROCEDURE FOR
BOOK-ENTRY TRANSFER DESCRIBED IN SECTION 3 OF THIS OFFER TO PURCHASE, OR (b)
REQUEST SUCH STOCKHOLDER'S BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR
OTHER NOMINEE TO EFFECT THE TRANSACTION FOR SUCH STOCKHOLDER. A STOCKHOLDER
WHOSE SHARES ARE REGISTERED IN THE NAME OF A BROKER, DEALER, COMMERCIAL BANK,
TRUST COMPANY OR OTHER NOMINEE MUST CONTACT SUCH BROKER, DEALER, COMMERCIAL
BANK, TRUST COMPANY OR OTHER NOMINEE IF THE STOCKHOLDER DESIRES TO TENDER THE
SHARES.
ANY STOCKHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATES
EVIDENCING SUCH SHARES ARE NOT IMMEDIATELY AVAILABLE OR WHO CANNOT COMPLY WITH
THE PROCEDURES FOR BOOK-ENTRY TRANSFER ON A TIMELY BASIS MAY TENDER SUCH SHARES
BY FOLLOWING THE PROCEDURES FOR GUARANTEED DELIVERY SET FORTH IN SECTION 3 OF
THIS OFFER TO PURCHASE.
QUESTIONS AND REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO MORGAN STANLEY &
CO. INCORPORATED, THE DEALER MANAGER, OR TO D.F. KING & CO., INC., THE
INFORMATION AGENT, AT THEIR RESPECTIVE ADDRESSES AND TELEPHONE NUMBERS SET FORTH
ON THE BACK COVER OF THIS OFFER TO PURCHASE. ADDITIONAL COPIES OF THIS OFFER TO
PURCHASE, THE LETTER OF TRANSMITTAL, THE NOTICE OF GUARANTEED DELIVERY AND THE
OTHER TENDER OFFER MATERIALS MAY ALSO BE OBTAINED FROM THE INFORMATION AGENT,
BROKERS, DEALERS, COMMERCIAL BANKS OR TRUST COMPANIES.
---------------------------
THE DEALER MANAGER FOR THE OFFER IS:
MORGAN STANLEY DEAN WITTER
MAY 4, 1999, AS AMENDED MAY 28, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
INTRODUCTION............................................................................................... 1
1. Terms of the Offer..................................................................................... 3
2. Acceptance for Payment and Payment..................................................................... 5
3. Procedures for Tendering Shares........................................................................ 6
4. Withdrawal Rights...................................................................................... 8
5. Certain Tax Considerations............................................................................. 9
6. Price Range of Shares; Dividends....................................................................... 10
7. Certain Information Concerning the Company............................................................. 11
8. Certain Information Concerning Parent and Purchaser.................................................... 13
9. Sources and Amounts of Funds........................................................................... 15
10. Background of the Offer; Contacts with the Company..................................................... 17
11. The Offer and Merger; Merger Agreement; Option and Voting Agreement.................................... 19
12. Purpose of the Offer and the Merger; Plans for the Company; Rights Agreement........................... 27
13. Effect of the Offer on the Market for the Shares; Exchange Act Registration; Margin Regulations........ 33
14. Dividends and Distributions............................................................................ 34
15. Conditions to the Offer................................................................................ 34
16. Certain Legal Matters; Regulatory Approvals............................................................ 36
17. Fees and Expenses...................................................................................... 38
18. Miscellaneous.......................................................................................... 38
Schedule I--Directors and Executive Officers of Aegis Acquisition Corp. and Aegis Group plc................ S-1
</TABLE>
<PAGE>
To the Holders of Common Stock of
Market Facts, Inc.:
INTRODUCTION
Aegis Acquisition Corp., a Delaware corporation ("Purchaser") and an
indirect wholly owned subsidiary of Aegis Group plc, a corporation incorporated
under the laws of England and Wales ("Parent"), hereby offers to purchase all of
the outstanding shares of Common Stock, par value $1.00 per share (the
"Shares"), of Market Facts, Inc., a Delaware corporation (the "Company"), at
$31.00 per Share, net to the seller in cash (the "Offer Price"), upon the terms
and subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which, as amended or supplemented from time to
time, together constitute the "Offer"). For purposes of this Offer to Purchase,
references to "Section" are references to a section of this Offer to Purchase,
unless the context otherwise requires. Unless the context requires otherwise,
all references to Shares in this Offer to Purchase shall be deemed to refer also
to the associated preferred stock purchase rights (the "Rights") issued pursuant
to the Rights Agreement dated as of July 26, 1989 between the Company and First
Chicago Trust Company of New York, as amended by a First Amendment to Rights
Agreement dated as of June 5, 1996 and by a Second Amendment to the Rights
Agreement dated as of April 29, 1999 (the "Rights Agreement"), and all
references to Rights shall be deemed to include all benefits that may inure to
the stockholders of the Company or to holders of the Rights pursuant to the
Rights Agreement. In connection with the Merger Agreement (as defined below),
the Company has amended the Rights Agreement so that the execution and delivery
of the Merger Agreement and the Option Agreement (as defined below), and the
consummation of the transactions contemplated thereby, including the Offer and
the purchase of Shares pursuant thereto, will not result in (i) Parent,
Purchaser or any of their affiliates becoming an Acquiring Person (as defined in
the Rights Agreement), or (ii) the occurrence of a Distribution Date or a Shares
Acquisition Date (each as defined in the Rights Agreement). Unless and until the
Distribution Date occurs, the Rights will be transferred with and only with the
Shares and, therefore, the surrender for transfer of any of the certificates
representing Shares (the "Stock Certificates"), including upon acceptance for
payment of such Shares pursuant to the Offer, will also constitute the surrender
for transfer of the Rights associated with the Shares represented by such Share
Certificates. See Section 12.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by Purchaser
pursuant to the Offer. Purchaser or Parent will pay all charges and expenses of
Morgan Stanley & Co. Incorporated ("Morgan Stanley"), which is acting as the
Dealer Manager (in such capacity, the "Dealer Manager"), First Chicago Trust
Company of New York (the "Depositary"), and D.F. King & Co., Inc. (the
"Information Agent"), incurred in connection with the Offer in accordance with
the terms of agreements entered into between Purchaser and/or Parent and such
persons. See Section 17.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OR TERMINATION OF THE OFFER A
NUMBER OF SHARES WHICH WILL CONSTITUTE A MAJORITY OF THE TOTAL NUMBER OF SHARES
OUTSTANDING ON A FULLY DILUTED BASIS, LESS THE NUMBER OF SHARES PURCHASER CAN
ACQUIRE UNDER THE OPTION AGREEMENT, AS DEFINED BELOW (THE "MINIMUM CONDITION"),
AND (II) EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR
CONDITION"). SEE SECTION 15.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of April 29, 1999 (the "Merger Agreement"), by and among the Company, Parent
and Purchaser. The Merger Agreement provides, among other things, for the
commencement of the Offer by Purchaser and further provides that, as promptly as
practicable following the purchase of Shares pursuant to the Offer (the
"consummation" of the Offer) and the approval and adoption of the Merger
Agreement by the stockholders of the Company,
1
<PAGE>
if required by applicable law, and the satisfaction or waiver of certain other
conditions set forth therein, Purchaser will be merged with and into the Company
(the "Merger"), with the Company continuing as the surviving corporation (the
"Surviving Corporation") and becoming an indirect wholly owned subsidiary of
Parent. Pursuant to the Merger, each issued and outstanding Share (other than
(i) Shares held by Purchaser, Parent or the Company or any direct or indirect
subsidiary of Purchaser, Parent or the Company and (ii) Dissenting Shares (as
hereinafter defined)) will be converted into the right to receive $31.00 in cash
or any higher price that may be paid per Share in the Offer, without interest
thereon, less any required withholding of taxes (the "Merger Price"). The Merger
is more fully described in Section 11.
Simultaneously with entering into the Merger Agreement, MFI Investors, L.P.
(the "Partnership"), and certain of its affiliates and certain senior executives
of the Company (the "Selling Stockholders"), entered into an Option and Voting
Agreement, dated as of April 29, 1999, with Parent (the "Option Agreement").
Pursuant to the Option Agreement, the Selling Stockholders have agreed, among
other things, (i) to sell to Parent or its permitted assign 2,760,484 Shares
(30.07% of the Shares, on a fully diluted basis, after giving effect to the
exercise of vested employee stock options) at a price of $31.00 per Share, (ii)
not to tender such Shares into the Offer without Parent's consent, and (iii) to
vote such Shares and all shares of Series B Preferred Stock, no par value (the
"Series B Shares") held by the Selling Stockholders in favor of the Merger, in
each case upon the terms and subject to conditions and limitations set forth in
the Option Agreement. The Option Agreement is more fully described in Section
11.
The Company has advised Purchaser and Parent that as of April 30, 1999 there
were (i) 8,944,701 Shares issued and outstanding, (ii) 1,965,357 Shares held in
the treasury of the Company, (iii) 932,900 Shares reserved for issuance pursuant
to outstanding employee stock options granted under the Company's stock option
plan (of which approximately 234,400 have vested), (iv) 100,000 Shares reserved
for issuance in connection with possible future purchase price payments in
connection with a past acquisition by the Company and (v) 100 Series B Shares.
As of April 30, 1999, Purchaser believes that the Minimum Condition will be
satisfied if Purchaser acquires 1,829,067 Shares pursuant to the Offer (which,
together with the 2,760,484 Shares covered by the Option Agreement, will total
4,589,551 Shares). If the Minimum Condition is satisfied and Purchaser accepts
for payment Shares tendered pursuant to the Offer and purchases the Shares
subject to the Option Agreement, Purchaser will have the right to select a
majority of the Company's Board of Directors (as more fully described in Section
11) and to approve the Merger without the affirmative vote of any other
stockholder of the Company. See Section 12.
The Board of Directors of the Company (the "Board" or "Board of Directors")
has received the opinion dated April 28, 1999 and affirmed April 29, 1999 of
Schroder & Co. Inc. ("Schroder"), financial advisor to the Company, to the
effect that, as of such dates and based upon and subject to certain assumptions
stated therein, the $31.00 per Share cash consideration to be received by
holders of Shares (other than Parent, the Company, their respective direct or
indirect subsidiaries and holders who exercise their appraisal rights in
accordance with applicable law) pursuant to the Merger Agreement was fair from a
financial point of view to such holders. A copy of the opinion of Schroder is
attached to the Company's Solicitation/Recommendation Statement on Schedule
14D-9, which is being distributed to the stockholders of the Company, and
stockholders are urged to read the opinion carefully in its entirety for the
assumptions made, matters considered and limitations on the review undertaken by
Schroder.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT EACH
OF THE MERGER AGREEMENT, THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST
INTERESTS OF THE STOCKHOLDERS OF THE COMPANY, APPROVED THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND
RECOMMENDED ACCEPTANCE OF THE OFFER, APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND APPROVAL OF THE MERGER BY THE STOCKHOLDERS OF THE COMPANY.
ADDITIONALLY, THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE
OPTION AGREEMENT FOR PURPOSES OF SECTION 203 OF THE DELAWARE GENERAL CORPORATION
2
<PAGE>
LAW (THE "DGCL"). ACCORDINGLY, SECTION 203 OF THE DGCL (WHICH RESTRICTS AN
"INTERESTED STOCKHOLDER" FROM ENGAGING IN A "BUSINESS COMBINATION" WITH A
DELAWARE CORPORATION FOR A PERIOD OF THREE YEARS FOLLOWING THE DATE ON WHICH
SUCH STOCKHOLDER BECAME AN "INTERESTED STOCKHOLDER") IS INAPPLICABLE TO THE
OFFER, THE MERGER AND THE PURCHASE OF SHARES PURSUANT TO THE OPTION AGREEMENT.
SEE SECTION 16.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of such extension or
amendment), Purchaser will accept for payment and pay for all Shares which are
validly tendered on or prior to the Expiration Date and not properly withdrawn
in accordance with Section 4. The term "Expiration Date" means 12:00 midnight,
New York City time, on Tuesday, June 1, 1999, unless and until Purchaser, in its
sole discretion, but subject to the terms of the Merger Agreement, shall have
extended the period of time during which the Offer is open, in which event the
term "Expiration Date" shall refer to the latest time and date at which the
Offer, as so extended by Purchaser, shall expire.
The Offer is subject to certain conditions described in Section 15,
including satisfaction of the Minimum Condition and the HSR Condition. Subject
to the provisions of the Merger Agreement and the applicable rules and
regulations of the Securities and Exchange Commission (the "Commission"),
Purchaser reserves the right, in its sole discretion, to waive any or all
conditions to the Offer and otherwise to modify the terms of the Offer in any
respect. Without limiting the preceding sentence, if any condition to the Offer
is not satisfied prior to the expiration of the Offer, Purchaser reserves the
right, in its sole discretion, subject to the terms of the Merger Agreement and
such rules and regulations, to (i) terminate the Offer and return all tendered
Shares to tendering stockholders, (ii) extend the Offer and, subject to
withdrawal rights as set forth in Section 4, retain all such Shares until the
expiration of the Offer as so extended, or (iii) waive such condition and,
subject to any requirement to extend the period of time during which the Offer
is open, purchase all Shares validly tendered and not withdrawn by the
Expiration Date. Any extension, amendment or termination will be followed as
promptly as practicable by public announcement thereof, the announcement in the
case of an extension to be issued no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date in
accordance with Rules 14d-4(c), 14d-6(d) and 14e-1(d) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Without limiting the
obligation of Purchaser under such rules or the manner in which Purchaser may
choose to make any public announcement, Purchaser currently intends to make
announcements by issuing a release to the Dow Jones News Service.
The Merger Agreement provides that, subject only to the Minimum Condition
and the other conditions provided in the Merger Agreement, Purchaser shall
consummate the Offer as soon as legally permissible. The Merger Agreement also
provides that the Offer shall be made by means of an offer to purchase
containing the Minimum Condition, and no other conditions except those set forth
in the Merger Agreement, and shall not be amended with respect to any such
condition or the Minimum Condition, with respect to a reduction in the price or
change in the form of consideration to be paid in the Offer, or with respect to
an extension of the Offer (except as provided below) without the consent of the
Company; provided, however, that Purchaser may extend the expiration date (x) in
its sole discretion from time to time, if on the initial scheduled or any
extended expiration date of the Offer the Minimum Condition has not been
satisfied, or any of the other conditions set forth in the Merger Agreement
shall not have been satisfied or waived (provided, however, that unless agreed
to by the Company any extended expiration date pursuant to this clause (x) may
not be later than 90 days from the date of commencement of the Offer or
3
<PAGE>
120 days from such date if within such 90 day period a tender offer for at least
20% of the outstanding Shares is commenced by any person who is not an affiliate
(as defined under the rules promulgated pursuant to the Securities Act of 1933
as amended (the "Securities Act")) of Parent or Purchaser (an "Intervening
Tender Offer")), or (y) for a period not to exceed ten business days,
notwithstanding that all conditions to the Offer are satisfied as of such
expiration date of the Offer, if, immediately prior to the expiration date of
the Offer (as it may be extended), the Shares tendered and not withdrawn
pursuant to the Offer, together with the Shares subject to the Option Agreement,
without duplication, equal less than 90% of the outstanding Shares and Purchaser
expressly irrevocably waives any condition (other than the Minimum Condition)
that subsequently may not be satisfied during such extension of the Offer; or
(z) for any period required by any rule, regulation, interpretation or position
of the Commission or the staff thereof applicable to the Offer. Without limiting
the right of Purchaser to extend the Offer pursuant to the provisions of the
Merger Agreement, in the event that (i) the Minimum Condition shall not have
been satisfied or (ii) the other conditions set forth in the Merger Agreement
shall not have been satisfied or waived at the scheduled or any extended
expiration date of the Offer, at the request of the Company, the Purchaser has
agreed that it will extend the expiration date of the Offer in increments of
five business days each until the earliest to occur of (x) the satisfaction or
waiver of the Minimum Condition or such other condition, (y) the termination of
this Agreement in accordance with its terms, and (z) 90 days from commencement
of the Offer or 120 days from such date in the event of an Intervening Tender
Offer (unless extended by agreement of Parent, Purchaser and the Company).
Subject to the applicable rules and regulations of the Commission and the
provisions of the Merger Agreement described above, Purchaser expressly reserves
the right, in its sole discretion, at any time and from time to time, and
regardless of whether or not any of the events set forth in Section 15 shall
have occurred, to (i) extend the period of time during which the Offer is open
and thereby delay acceptance for payment of, and the payment for, any Shares, by
giving oral or written notice of such extension to the Depositary or (ii) amend
the Offer in any respect by giving oral or written notice of such amendment to
the Depositary. During any such extension, all Shares previously tendered and
not properly withdrawn will remain subject to the Offer, subject to the right of
a tendering stockholder to withdraw such stockholder's Shares.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
Purchaser will disseminate additional tender offer materials and extend the
Offer if and to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1(c)
under the Exchange Act. The minimum period during which the Offer must remain
open following material changes in the terms of the Offer or information
concerning the Offer, other than a change in the Offer Price or a change in
percentage of securities sought, will depend upon the facts and circumstances,
including the materiality of the terms or information. With respect to a change
in the Offer Price or, subject to certain limitations, a change in percentage of
securities sought, a minimum ten business day period is generally required to
allow for adequate dissemination to stockholders. If, prior to the Expiration
Date, Purchaser should decide to increase the Offer Price, such increase will be
applicable to all stockholders whose Shares are accepted for payment pursuant to
the Offer. The Selling Stockholders and Parent have agreed, however, that the
exercise price to be paid for Shares purchased under the Option Agreement will
remain at $31.00 per share. As used in this Offer to Purchase, "business day"
means any day other than a Saturday, Sunday or a federal holiday and consists of
the time period from 12:01 a.m. through 12:00 midnight, New York City time, as
computed in accordance with Rule 14d-1 under the Exchange Act.
The Company has agreed to provide Purchaser with the Company's stockholder
list and security position listings for the purpose of disseminating the Offer
to holders of Shares. This Offer to Purchase, the related Letter of Transmittal
and other relevant materials will be mailed to record holders of Shares and will
be furnished to brokers, banks and similar persons whose names, or the names of
whose nominees,
4
<PAGE>
appear on the stockholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT
Upon the terms and subject to the conditions of the Merger Agreement
and the Offer (including, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), Purchaser, promptly after the
Expiration Date, will accept for payment and pay for all Shares validly
tendered and not properly withdrawn on or prior to the Expiration Date. In
addition, subject to applicable rules of the Commission, Purchaser expressly
reserves the right to delay acceptance for payment of or payment for Shares
pending receipt of any other regulatory approvals specified in Section 16.
Any such delays will be effected in compliance with Rule 14e-1(c) under the
Exchange Act (relating to a bidder's obligation to pay for or return tendered
securities promptly after the termination or withdrawal of such bidder's
offer). For a description of Purchaser's right to terminate the Offer and not
accept for payment or pay for Shares or to delay acceptance for payment of,
or payment for, Shares, see Section 1.
For purposes of the Offer, Purchaser will be deemed to have accepted
tendered Shares for payment if, as and when Purchaser gives oral followed by
written notice to the Depositary of its acceptance of the tenders of such
Shares. Payment for Shares purchased pursuant to the Offer will be made by
deposit of the Offer Price with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from Purchaser and
transmitting such payments to tendering stockholders. In all cases, payment for
Shares accepted for payment pursuant to the Offer will be made only after the
expiration of the Offer and timely receipt by the Depositary of (i) Stock
Certificates or confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Shares into the Depositary's account at a Book-Entry
Transfer Facility (as defined in Section 3), (ii) a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile copy thereof),
with any required signature guarantees, or in the case of a book-entry transfer,
an Agent's Message (as defined in Section 3), and (iii) any other documents
required by the Letter of Transmittal. For a description of the procedure for
tendering Shares pursuant to the Offer, see Section 3.
IN NO CIRCUMSTANCES WILL INTEREST BE PAID BY PURCHASER ON THE CONSIDERATION
PAID FOR SHARES PURSUANT TO THE OFFER, REGARDLESS OF ANY EXTENSION OF THE OFFER
OR ANY DELAY IN MAKING PAYMENT.
If, for any reason whatsoever, acceptance for payment of or payment for any
Shares tendered pursuant to the Offer is delayed or Purchaser is unable to
accept for payment or pay for Shares tendered pursuant to the Offer, then
without prejudice to Purchaser's rights set forth herein, the Depositary may
nevertheless, on behalf of Purchaser and subject to Rule 14e-1(c) under the
Exchange Act, retain tendered Shares and such Shares may not be withdrawn except
to the extent that the tendering stockholder is entitled to and duly exercises
withdrawal rights as described in Section 4.
PRIOR TO A DISTRIBUTION DATE, A VALID TENDER OF SHARES WILL ALSO CONSTITUTE
A TENDER OF THE ASSOCIATED RIGHTS.
If Purchaser increases the consideration to be paid for Shares pursuant to
the Offer, Purchaser will pay such increased consideration for all Shares
purchased pursuant to the Offer (but not Shares of the Selling Stockholders
purchased under the Option Agreement).
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates the right to purchase Shares
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve Purchaser of its obligations under the Offer or prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment.
5
<PAGE>
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if Stock Certificates are submitted for more Shares than are
tendered, Stock Certificates for Shares not purchased or not tendered will be
returned (or, in the case of Shares tendered by book-entry transfer, such Shares
will be credited to an account maintained at the Book-Entry Transfer Facility),
without expense to the tendering stockholder, as promptly as practicable after
the expiration or termination of the Offer.
3. PROCEDURES FOR TENDERING SHARES
VALID TENDER. In order for Shares to be validly tendered pursuant to the
Offer, either (a) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), with any required signature guarantees, or an Agent's
Message (in the case of any book-entry transfer), and any other documents
required by the Letter of Transmittal, must be received by the Depositary at one
of its addresses set forth on the back cover of this Offer to Purchase prior to
the Expiration Date, and either (i) the Stock Certificates evidencing such
Shares to be tendered must be received by the Depositary at such address, or
(ii) such Shares must be delivered to the Depositary pursuant to the procedures
for book-entry transfer described below and a Book-Entry Confirmation (including
an Agent's Message) must be received by the Depositary, in each case prior to
the Expiration Date, or (b) the tendering stockholder must comply with the
guaranteed delivery procedures described below. The term "Agent's Message" means
a message transmitted by the Book-Entry Transfer Facility to, and received by,
the Depositary and forming a part of a Book-Entry Confirmation, which states
that the Book-Entry Transfer Facility has received an express acknowledgment
from the participant in the Book-Entry Transfer Facility tendering the Shares
which are the subject of such Book-Entry Confirmation that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that Purchaser may enforce such agreement against such participant.
BOOK-ENTRY TRANSFER. The Depositary will make a request to establish an
account with respect to the Shares at The Depository Trust Company (the
"Book-Entry Transfer Facility") for purposes of the Offer within two business
days after the date of this Offer to Purchase, and any financial institution
that is a participant in the system of the Book-Entry Transfer Facility may make
book-entry delivery of Shares by causing the Book-Entry Transfer Facility to
transfer such Shares into the Depositary's account at the Book-Entry Transfer
Facility in accordance with the procedures of the Book-Entry Transfer Facility.
However, although delivery of Shares may be effected through book-entry
transfer, either the Letter of Transmittal (or a manually signed facsimile copy
thereof), properly completed and duly executed, together with any required
signature guarantees, or an Agent's Message, and any other documents required by
the Letter of Transmittal must, in any case, be received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase prior
to the Expiration Date, or the guaranteed delivery procedures described below
must be complied with.
DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO
THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEES. Generally, signatures on all Letters of Transmittal
must be guaranteed by a member firm of a registered national securities exchange
(registered under Section 6 of the Exchange Act) or by a member firm of the
National Association of Securities Dealers, Inc., by a commercial bank or trust
company having an office or correspondent in the United States or by any other
"Eligible Guarantor Institution" as defined in Rule 17Ad-15 under the Exchange
Act that is a participant in the Medallion Signature Guarantee Program (each of
the foregoing constituting an "Eligible Institution"). However, signatures on a
Letter of Transmittal need not be guaranteed (a) if the Letter of Transmittal is
signed by the registered holder of the Shares tendered therewith and such holder
has not completed the box entitled "Special Payment Instructions" on the Letter
of Transmittal, or (b) if such Shares are tendered for the account of an
Eligible Institution.
6
<PAGE>
If a Stock Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Stock
Certificate not accepted for payment or evidencing Shares not tendered is to be
returned, to a person other than the registered holder(s), then the Stock
Certificate must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name(s) of the registered holder(s) appear
thereon, with the signature(s) guaranteed as described above. See Instructions 1
and 5 of the Letter of Transmittal.
If Stock Certificates are forwarded separately to the Depositary, a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile copy thereof) must accompany each such delivery.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Stock Certificates are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all the
following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, is received by
the Depositary prior to the Expiration Date; and
(iii) Stock Certificates in proper form for transfer, or a Book-Entry
Confirmation, together with a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile copy thereof), with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message) and any other documents required by the Letter of Transmittal, are
received by the Depositary within three trading days after the date of
execution of the Notice of Guaranteed Delivery. A "trading day" is any day
on which the Nasdaq National Market is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mailed to the Depositary and must include a guarantee
by an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery.
THE METHOD OF DELIVERY OF STOCK CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND DELIVERY
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN
THE CASE OF BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
BACK-UP FEDERAL INCOME TAX WITHHOLDING. Under the federal income tax laws,
the Depositary will be required to withhold 31% of the amount of any payments
made to certain stockholders pursuant to the Offer. In order to avoid such
back-up withholding, each tendering stockholder must provide the Depositary with
such stockholder's correct taxpayer identification number and certify that such
stockholder is not subject to back-up federal income tax withholding by
completing the Substitute Form W-9 included in the Letter of Transmittal (see
Instruction 10 of the Letter of Transmittal) or by filing a Form W-9 with the
Depositary prior to any such payments. If the stockholder is a nonresident alien
or foreign entity not subject to back-up withholding, the stockholder must give
the Depositary a completed Form W-8 Certificate of Foreign Status prior to
receipt of any payments.
7
<PAGE>
OTHER REQUIREMENTS. By executing a Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of Purchaser as
the stockholder's attorneys-in-fact and proxies, in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of the stockholder's rights with respect to the Shares tendered by the
stockholder and accepted for payment by Purchaser (and any and all other Shares
or other securities or property issued or issuable in respect of such Shares on
or after April 29, 1999). All such proxies and powers of attorney shall be
irrevocable and coupled with an interest in the tendered Shares. Such
appointment is effective only upon acceptance for payment of the Shares by
Purchaser. Upon such acceptance for payment, all prior powers of attorney,
proxies and consents given by the stockholder with respect to such Shares (and
such other Shares and other securities or property) will, without further
action, be revoked, and no subsequent powers of attorney and proxies may be
given nor any subsequent written consent executed by such stockholder with
respect thereto (and, if given or executed, will not be deemed to be effective).
The designees of Purchaser will, with respect to all such Shares and other
securities, be empowered to exercise all voting and other rights of such
stockholder as they in their sole discretion may deem proper at any annual,
special or adjourned meeting of the Company's stockholders, by written consent,
or otherwise. Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon Purchaser's acceptance for
payment of such Shares, Purchaser is able to exercise full voting and other
rights with respect to all such Shares and other securities (including voting at
any meeting of stockholders or acting by written consent without a meeting).
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer, as well as the tendering stockholder's representation
and warranty that (a) such stockholder has the full power and authority to
tender and assign the Shares tendered, as specified in the Letter of
Transmittal, (b) such stockholder has a net long position in the Shares being
tendered within the meaning of Rule 14e-4 under the Exchange Act and (c) the
tender of such Shares complies with Rule 14e-4. Purchaser's acceptance for
payment of Shares tendered pursuant to the Offer will constitute a binding
agreement between the tendering stockholder and Purchaser upon the terms and
subject to the conditions of the Offer.
DETERMINATION OF VALIDITY. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by Purchaser in its sole discretion,
which determination shall be final and binding. Purchaser reserves the absolute
right to reject any or all tenders determined by it not to be in proper form or
the acceptance for payment of which, or payment for which, may, in the opinion
of Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right
to waive any defect or irregularity in any tender of Shares. No tender of Shares
will be deemed to have been validly made until all defects and irregularities
relating thereto have been cured or waived. Purchaser's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
Instructions thereto) will be final and binding. None of Purchaser, Parent, any
of their affiliates or assigns, the Depositary, the Dealer Manager, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or will incur any
liability for failure to give any such notification.
4. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time on or prior
to the Expiration Date and, unless theretofore accepted for payment by Purchaser
pursuant to the Offer, may also be withdrawn at any time after July 2, 1999. If
Purchaser extends the Offer, is delayed in its acceptance for payment of Shares
or is unable to purchase Shares validly tendered pursuant to the Offer for any
reason, then without prejudice to Purchaser's rights under the Offer, the
Depositary may nevertheless, on behalf of Purchaser, retain tendered Shares and
such Shares may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as described in this Section 4,
subject to Rule 14e-1(c) under the Exchange
8
<PAGE>
Act which provides that no person who makes a tender offer shall fail to pay the
consideration offered or return the securities deposited by or on behalf of
security holders promptly after the termination or withdrawal of the Offer. Any
such delay in acceptance for payment will be accompanied by an extension of the
Offer to the extent required by law or by the Merger Agreement.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If Stock Certificates evidencing Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, a signed notice of
withdrawal with signatures guaranteed by an Eligible Institution (except in the
case of Shares tendered by an Eligible Institution) must be submitted prior to
the release of such certificates. In addition, such notice must specify, in the
case of Shares tendered by delivery of Stock Certificates, the name of the
registered holder (if different from that of the tendering stockholder) and the
serial numbers shown on the particular Stock Certificates evidencing the Shares
to be withdrawn, or, in the case of Shares tendered by book-entry transfer, the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Shares.
Withdrawals of tendered Shares may not be rescinded, and Shares withdrawn
will thereafter be deemed not validly tendered for purposes of the Offer.
However, withdrawn Shares may be retendered again by following one of the
procedures described in Section 3 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding. None of Purchaser, Parent, any of
their affiliates or assigns, the Depositary, the Dealer Manager, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification.
5. CERTAIN TAX CONSIDERATIONS
The summary of tax consequences set forth below is for general information
only and is based on the U.S. federal income tax law as currently in effect. The
summary does not address all aspects of U.S. federal income taxation that may be
relevant to particular holders of Shares and thus, for example, may not be
applicable to holders of Shares who are not citizens or residents of the United
States, who are employees and who acquired their Shares pursuant to the exercise
of compensatory stock options, or who are entities that are otherwise subject to
special tax treatment (such as insurance companies, tax-exempt entities and
regulated investment companies) under the Internal Revenue Code of 1986, as
amended (the "Code"); nor does this summary address the effect of any applicable
state, local, foreign or other tax laws. The discussion assumes that each holder
of Shares holds such Shares as a capital asset within the meaning of Section
1221 of the Code. The precise tax consequences of the Offer or the Merger will
depend on the particular circumstances of the holder. STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN
AND OTHER TAX CONSEQUENCES TO THEM OF THE PROPOSED TRANSACTION.
The receipt of cash for Shares pursuant to the Offer, the Option Agreement
or the Merger will be a taxable transaction for U.S. federal income tax purposes
and may also be a taxable transaction under applicable state, local or foreign
tax laws. In general, a stockholder who receives cash for Shares pursuant to the
Offer, the Option Agreement or the Merger will recognize gain or loss for U.S.
federal income tax purposes equal to the difference between the amount of cash
received and such stockholder's adjusted tax basis in the Shares sold. Such gain
or loss will be capital gain or loss, and will be long-term capital gain or loss
if the holder has held the Shares for more than one year at the time of sale.
Gain or loss will be calculated separately for each Share tendered pursuant to
the Offer, sold pursuant to the Option Agreement or canceled pursuant to the
Merger.
9
<PAGE>
Capital gains recognized on marketable securities such as the Shares will be
taxable at a maximum U.S. federal rate of 20% for individuals if the
individual's holding period is more than one year. Capital gains for individuals
whose holding period is one year or less is taxed at the same rate as ordinary
income or, a maximum rate of 39.6%. Corporations are taxed at a maximum rate of
35% on both ordinary income and capital gain.
WITHHOLDING. Unless a stockholder complies with certain reporting and/or
certification procedures, or is an exempt recipient under applicable provisions
of the Code (and regulations thereunder), such stockholder may be subject to a
"backup" withholding tax of 31% with respect to any payments received pursuant
to the Offer, the Option Agreement or the Merger. Stockholders should contact
their brokers to ensure compliance with such procedures. Foreign stockholders
should consult with their tax advisors regarding U.S. withholding taxes in
general. See Section 3.
6. PRICE RANGE OF SHARES; DIVIDENDS
The Common Stock is traded on the Nasdaq National Market under the symbol
"MFAC." The following table sets forth, for the periods indicated, the high and
low sale prices per Share for the Common Stock, as reported in the Company's
1998 Annual Report to Stockholders incorporated by reference into the Company's
Annual Report on Form 10-K for the year ending December 31, 1998 (the "Company
10-K"), and as reported in published financial sources thereafter. The
information set forth in the table has been adjusted retroactively to reflect a
two-for-one stock split in May 1997.
<TABLE>
<CAPTION>
COMMON STOCK
--------------------
LOW HIGH
------- ---------
<S> <C> <C>
1997
First Quarter............................................................. $ 7 $10 5/8
Second Quarter............................................................ $ 9 1/8 $14
Third Quarter............................................................. $10 1/4 $31 5/8
Fourth Quarter............................................................ $16 3/4 $24 3/4
1998
First Quarter............................................................. $15 1/4 $20 15/16
Second Quarter............................................................ $19 $24 1/4
Third Quarter............................................................. $18 1/2 $28 1/2
Fourth Quarter............................................................ $17 5/8 $28 1/2
1999
First Quarter............................................................. $20 $26 1/4
Second Quarter (through April 28, 1999)................................... $18 3/4 $26 1/4
</TABLE>
On April 29, 1999, the last full day of trading prior to the public
announcement of the execution of the Merger Agreement, the reported closing sale
price per Share of Common Stock (as reported in The Wall Street Journal) was
$25 7/8. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
SHARES.
The Rights are currently attached to the outstanding Shares and may not be
traded separately. If a Distribution Date occurs, the Rights could begin trading
separately from the Shares. See Section 12.
DIVIDENDS. The Purchaser has been advised by the Company that the Company
has paid no dividends on its Common Stock subsequent to December 13, 1996. The
Merger Agreement prohibits the Company from declaring or paying any dividends
until the effectiveness of the Merger.
10
<PAGE>
7. CERTAIN INFORMATION CONCERNING THE COMPANY
The following information concerning the Company has been taken from or
based upon publicly available documents on file with the Commission, other
publicly available information and information provided by the Company. Although
neither Purchaser nor Parent has any knowledge that would indicate that such
information is untrue, neither Purchaser nor Parent takes any responsibility
for, or makes any representation with respect to, the accuracy or completeness
of such information or for any failure by the Company to disclose events that
may have occurred and may affect the significance or accuracy of any such
information but which are unknown to Purchaser or Parent.
GENERAL. The Company is a Delaware corporation with its headquarters
located at 3040 West Salt Creek Lane, Arlington Heights, Illinois 60005. The
Company is a leading provider of custom market research services. It provides
quantitative and qualitative marketing research both domestically and
internationally. Through its network of 21 offices and its international
affiliations, the Company engages in the design, execution and interpretation of
market research conducted on behalf of its clients.
AVAILABLE INFORMATION. The Company is subject to the information
requirements of the Exchange Act, and is required to file reports and other
information with the Commission relating to its business, financial condition
and other matters. Information, as of particular dates, concerning the Company's
directors and officers, their remuneration, options granted to them, the
principal holders of the Company's securities and any material interest of such
persons in transactions with the Company is required to be described in filings
with the Commission. These filings, including the Company 10-K and the Company's
Schedule 14D-9 to be filed in connection with this Offer, are or, when filed,
will be available for inspection at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and should also be
available for inspection and copying at prescribed rates at the regional offices
of the Commission located at Seven World Trade Center, Suite 1300, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of this material may also be obtained by mail, upon
payment of the Commission's customary fees, from the Commission's principal
office. The Commission also maintains a site on the World Wide Web at
http://www.sec.gov that contains such filings and other information. Such
material should also be available for inspection at the library of the Nasdaq
Stock Market, 1735 K Street, N.W., Washington, D.C. 20006.
11
<PAGE>
CERTAIN CONSOLIDATED FINANCIAL INFORMATION FOR THE COMPANY. Set forth below
are certain selected consolidated financial data for the Company's last five
fiscal years which were derived from the Company 10-K. More comprehensive
financial information is included in the reports (including management's
discussion and analysis of financial condition and results of operations) and
other documents filed by the Company with the Commission, and the following
financial data are qualified in their entirety by reference to such reports and
other documents, including the financial information and related notes contained
therein. Such reports and other documents may be examined and copies thereof may
be obtained in the manner set forth above. Neither Parent nor Purchaser assumes
any responsibility for the accuracy of the financial information set forth
below.
MARKET FACTS, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
------------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenue........................... $ 55,483,032 $ 64,608,724 $ 83,795,562 $ 100,064,294 $ 136,532,924
------------- ------------- ------------- -------------- --------------
Income from operations............ 3,294,736 5,194,779 8,397,948 10,281,163 14,559,481
------------- ------------- ------------- -------------- --------------
Net income........................ 1,434,167 2,226,119 4,277,656 5,822,098 9,009,949
Basic earnings per share.......... .20 .29 .57 .80 1.02
------------- ------------- ------------- -------------- --------------
Diluted earnings per share........ .19 .29 .55 .77 .98
------------- ------------- ------------- -------------- --------------
Cash and cash equivalents......... $ 911,209 $ 3,530,157 $ 129,428 $ 36,444,256 $ 28,475,066
------------- ------------- ------------- -------------- --------------
Working capital................... 3,624,220 5,993,486 3,104,192 40,160,854 25,859,308
------------- ------------- ------------- -------------- --------------
Total assets...................... 31,681,983 34,376,637 38,385,227 86,891,747 105,454,474
Long-term obligations............. 11,453,019 10,955,870 10,742,988 10,409,088 11,197,130
Total Stockholders' equity........ 9,746,185 12,049,807 10,525,210 53,545,253 64,313,967
------------- ------------- ------------- -------------- --------------
Cash dividends declared........... .0725 .095 .10 -- --
------------- ------------- ------------- -------------- --------------
</TABLE>
PROJECTED FINANCIAL INFORMATION. In connection with Parent's review of the
Company and during the course of negotiations between Parent and the Company and
their respective advisors described in Section 10 of this Offer to Purchase, the
Company provided Parent with certain business and financial information which
was not publicly available. Such information included, among other things,
projections of future operating performance of the Company.
The inclusion herein of the summary of projections should not be regarded as
an indication that the Company, Parent, Purchaser or any other person considers
such information to be an accurate prediction of future events and should not be
relied on as such. While presented with numerical specificity, such projections
are based upon a variety of assumptions relating to the business of the Company,
industry performance, general business and economic conditions and other matters
and are subject to significant uncertainties and contingencies, many of which
are beyond Parent's, Purchaser's or the Company's control. Therefore, such
projections are inherently imprecise, subjective, and susceptible to various
interpretations and there can be no assurances, and no representation or
warranty is made, that any such projections will be realized or that actual
results will not differ significantly from those set forth below. None of
Parent, Purchaser, the Company, their respective officers, directors or advisors
accepts any responsibility for such projections or the bases or assumptions on
which they were prepared. The Company has informed Purchaser that as a matter of
course, the Company does not make public projections or forecasts of its
anticipated financial position or results of operations. Such projections have
not been updated by the Company, were not intended to be a forecast of financial
results by the Company and were not prepared with a view to public disclosure or
compliance with published guidelines of the Commission or with the guidelines
established by the American Institute of Certified Public Accountants regarding
projections and
12
<PAGE>
forecasts. None of the Company, Purchaser or Parent intends to update, revise or
correct such projections if it becomes aware that such projections are
inaccurate (even in the short term).
Such projections for the Company's fiscal years 1999, 2000 and 2001 are
being summarized below and included herein solely because they were furnished to
Parent by the Company, and the summary below should not be interpreted as
suggesting that Parent relied on such projections in evaluating a transaction
with the Company. The Company stated that it believed that the projections for
2000 and 2001 were more aggressive than the 1999 projection, and represented a
best case scenario. In light of the foregoing factors and the uncertainties
inherent in the forecasts, holders of Shares are cautioned not to place undue or
significant reliance thereon.
COMPANY FINANCIAL PROJECTIONS
($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1999 2000 2001
--------- --------- ---------
<S> <C> <C> <C>
Revenues......................................................... $ 162.6 $ 184.8 $ 212.5
Gross margin..................................................... 74.2 84.4 97.2
Operating expenses (excluding goodwill).......................... (53.1) (56.5) (64.0)
Operating profit................................................. 21.1 27.9 33.2
Other income including interest.................................. (0.3) (0.4) (0.2)
Profit before tax and before goodwill............................ 20.8 27.5 33.0
Goodwill......................................................... (1.5) (1.8) (2.0)
Profit before tax................................................ 19.3 25.7 31.0
Diluted earnings per share....................................... $ 1.23 $ 1.68 $ 2.02
</TABLE>
The principal assumptions underlying the projections are as follows:
(i) Revenue growth in the U.S. business, excluding 1997 and 1998
acquisitions, will be 15%.
(ii) Operating margin will increase from 11.3% in 1998 to 15.6% in 2001.
(iii) No revenues or profits from the Company's acquisition in April 1999 or
from future acquisitions are included.
In reaching its decision to acquire the Company, Parent made certain
assumptions of its own with regard to revenues, operations and costs of the
Company's businesses as a wholly owned subsidiary of Parent.
8. CERTAIN INFORMATION CONCERNING PARENT AND PURCHASER
GENERAL. Parent is the holding company for Carat, the leading group of
media communications specialists, with 1998 world-wide billings of over $9
billion, of which the United States represents over $1 billion. Carat's services
span the provision of media strategy, planning and buying of communication in
traditional media, TV, press, radio, cinema and outdoor, including programming
and media or event sponsorship. Response media such as direct mail, direct
response advertising, digital TV and the internet increase Carat's competitive
edge. Carat has offices in 31 countries and has the largest market share in
Europe with market share of over 12%. Parent's principal executive office is
located at 11A West Halkin Street, London SW1X 8JL.
Purchaser, a Delaware corporation, was recently incorporated for the purpose
of acquiring the Company. Purchaser has not conducted any other business. The
principal executive office of Purchaser is located at 3 Park Avenue, New York,
New York 10016. All outstanding shares of common stock of Purchaser are
indirectly owned by Parent.
13
<PAGE>
The name, business address, present principal occupation or employment,
five-year employment history and citizenship of each of the directors and
executive officers of Purchaser and Parent as well as the name, principal
business and address of the corporation or other organization in which such
present occupation or employment is carried on are set forth in Schedule I
hereto.
SUMMARY CONSOLIDATED FINANCIAL INFORMATION FOR PARENT. Set forth below is
certain summary selected financial information with respect to Parent for the
years ended December 31, 1998, 1997 and 1996. The selected consolidated
financial data are stated in pounds sterling. On May 2, 1999, The New York Times
reported that, as of April 30, 1999, one pound sterling equaled 1.6090 U.S.
dollars. The summary below is qualified in its entirety by reference to Parent's
Report and Accounts 1998 filed as an exhibit to the Tender Offer Statement on
Schedule 14D-1 with respect to the Offer filed by Purchaser and Parent (the
"Schedule 14D-1"), which may be inspected and copies obtained at the offices of
the Commission as set forth in Section 7 (except that they will not be available
at the regional offices of the Commission), and such financial information and
related notes are incorporated herein by reference. Stockholders of the Company
may also obtain copies of Parent's Report and Accounts 1998 by contacting the
Company Secretary of Parent at Parent's principal executive office in the United
Kingdom set forth above.
AEGIS GROUP PLC
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(POUNDS STERLING IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
CONSOLIDATED PROFIT AND LOSS ACCOUNT DATA
Turnover.................................................................... L4,130.0 L3,652.5 L3,452.5
Profit on ordinary activities before taxation............................... 50.6 45.6 39.6
Taxation on ordinary activities............................................. (14.5) (12.2) (10.7)
Profit on ordinary activities after taxation................................ 36.1 33.4 28.9
Minority interests.......................................................... (0.6) (0.6) (0.9)
Profit attributable to members of the parent company........................ 35.5 32.8 28.0
Dividends...................................................................
Preference.................................................................. 0.2 (0.8) (0.8)
Ordinary.................................................................... (8.0) (5.8) (5.0)
--------- --------- ---------
Retained profit for the financial year...................................... L27.7 L26.2 L22.2
--------- --------- ---------
--------- --------- ---------
CONSOLIDATED BALANCE SHEET DATA
(At End Of Period)
Cash at bank and in hand.................................................... L114.0 L61.6 L49.1
Current assets excluding cash............................................... 670.0 578.8 513.0
Fixed assets................................................................ 34.8 15.6 15.4
Current liabilities......................................................... (859.3) (733.7) (641.7)
Other liabilities........................................................... (21.1) (28.0) (30.8)
--------- --------- ---------
BALANCE SHEET TOTAL......................................................... L(61.6) L(105.7) L(95.0)
--------- --------- ---------
--------- --------- ---------
Capital and reserves........................................................ L(63.1) L(107.5) L(95.8)
Minority interests.......................................................... 1.5 1.8 0.8
--------- --------- ---------
BALANCE SHEET TOTAL......................................................... L(61.6) L(105.7) L(95.0)
--------- --------- ---------
--------- --------- ---------
</TABLE>
14
<PAGE>
Parent's selected consolidated financial data included herein have been
prepared in accordance with applicable United Kingdom ("U.K.") accounting
standards, including the Companies Act of 1985, which represent generally
accepted accounting principles in the U.K. ("U.K. GAAP"). U.K. GAAP differs in
certain significant respects from United States generally accepted accounting
principles ("U.S. GAAP"). Parent has not determined its financial position or
results of operations for any period under U.S. GAAP. A general summary of the
significant differences between U.K. GAAP and U.S. GAAP is set forth below.
However, Parent believes that the differences between U.K. GAAP and U.S. GAAP
are not material to a decision by a holder of Shares whether to sell, tender or
hold any Shares.
SUMMARY OF CERTAIN SIGNIFICANT DIFFERENCES BETWEEN U.K. GAAP AND U.S. GAAP
GOODWILL. For acquisitions before January 1, 1998, the excess of the cost
of shares in subsidiaries and associates over the fair value of underlying
separable net assets at the date of acquisition is deducted from Parent's
consolidated stockholders' equity. For acquisitions on or after January 1, 1998,
goodwill is capitalized. The estimated useful life of the goodwill is examined
for each acquisition on a case by case basis to determine the appropriate
accounting treatment. There is a rebuttable presumption that goodwill has an
estimated useful life of not more than 20 years although U.K. GAAP permits no
amortization under certain circumstances. Under U.S. GAAP, goodwill is
capitalized and amortized over its estimated useful life, but not more than 40
years.
CONTINGENT PAYMENTS ON ACQUISITIONS. Where the consideration for an
acquisition includes payments which are contingent on certain events, a
provision is included based on an estimate of the likely payment to be made.
Under U.S. GAAP, no provision is made for contingent consideration until the
amount is determined.
DISPOSAL OF BUSINESSES. Profits and losses on disposal of a subsidiary or
associate under U.K. GAAP are calculated as the net of the proceeds over (i)
carrying value plus (ii) on acquisitions prior to January 1, 1998, amounts with
respect to goodwill previously charged to stockholders' equity and on
acquisitions on or after January 1, 1998, the unamortized element of goodwill.
U.S. GAAP reflects the unamortized element of goodwill in the calculation.
DIVIDENDS. Ordinary share dividends are provided in the financial year in
respect of which they are recommended by the board of directors for approval by
the shareholders. Under U.S. GAAP, such dividends are not provided for until the
date declared.
DEFERRED TAXATION. Deferred taxation is provided where it is probable that
a taxation liability will crystallize. Under U.S. GAAP, as provided by Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes," full
provision must generally be made for all potential taxation liabilities and
assets (where likelihood of realization is greater than 50%).
PENSIONS. Pension costs, based on actuarial assumptions and methods, are
charged in the accounts so as to allocate the cost of providing benefits over
the service lives of employees in a consistent manner approved by the actuary.
U.S. GAAP prescribes the method of actuarial valuation and also requires assets
to be assessed at fair value and the assessment of liabilities to be based on
current interest rates.
9. SOURCES AND AMOUNTS OF FUNDS
Purchaser will require approximately $310 million to acquire all of the
Shares pursuant to the Option Agreement, the Offer and the Merger, pay cash to
holders of the Company's employee stock options and pay the fees and expenses
incurred in connection with the Offer, the Option Agreement and the Merger.
Purchaser expects to obtain the necessary funds by way of debt financing under
the loan facility agreement described below and a capital contribution from
Parent.
15
<PAGE>
Purchaser and Parent have entered into a Revolving Credit and Term Loan
Facility (the "Loan Agreement") dated April 29, 1999 under which, subject to
certain conditions, National Westminster Bank PLC (the "Bank") will make
available a L250 million facility comprising (a) a term loan facility (the "Term
Loan Facility") of L200 million the principal purpose of which is to fund the
Offer, the Option Agreement, the Merger and related fees and expenses and (b) a
revolving credit facility (the "Revolving Credit Facility" and together with the
Term Loan Facility, the "Facility") of L50 million the purpose of which is to
refinance an existing credit facility of Parent. The borrowers under the Term
Loan Facility are Purchaser and Parent and Parent is the borrower under the
Revolving Credit Facility. Parent has guaranteed the obligations of Purchaser
under the Loan Agreement. The Facility is unsecured.
The Loan Agreement contains customary representations and warranties,
financial and restrictive covenants, including limitations on creation of
security over assets, disposals and employee benefit plans, and conditions
precedent which must be satisfied before any loan under the Facility may be
drawn down. In addition, there are conditions precedent which must also be
satisfied before any loan can be drawn down under the Term Loan Facility. In
respect of term loans to be used to purchase Shares pursuant to the Option
Agreement, an additional condition precedent to draw down is that all such
options shall have been exercised by Parent. In respect of term loans to be used
to purchase Shares under the Offer or the Merger, draw downs are conditional on
the Placing Agreement described below having become wholly unconditional (except
as to the shares to be issued pursuant to such agreement having been admitted to
listing by the London Stock Exchange) and such agreement not having been
terminated.
The final maturity date in respect of the Term Loan Facility is six months
from the date of the Loan Agreement. The Term Loan Facility is available for
drawing until the final maturity date of the Facility and is repayable in full
on that date.
The loans under the Facility will bear interest at the rate which the Bank
quotes on the relevant rate fixing day to leading banks in the London interbank
market for the offering of deposits in the currency of the relevant loan for a
period comparable to the interest period of the relevant loan plus a margin of
0.65% per annum for the first three months from the date of the Loan Agreement
and 0.80% per annum for the remaining three months together with certain
mandatory costs. The Facility must be prepaid in full in the event of a change
of control (as defined in the Loan Agreement) of Parent.
Purchaser and Parent have agreed to pay certain fees and the reasonable
costs and expenses of the Bank arising in connection with the Loan Agreement.
Purchaser and Parent have also agreed to indemnify the Bank and its directors,
officers and employees from certain liabilities except such as may result from
the wilful default or gross negligence of any such person.
In addition to the debt financing described above, L114 million is expected
to be made available as a capital contribution to Purchaser from Parent,
directly or indirectly via other subsidiaries of Parent. Purchaser has
undertaken to use such contribution to prepay amounts it has drawn down under
the Term Loan Facility.
Parent expects such funds to be made available for the capital contribution
to Purchaser through an issue of its shares pursuant to a Placing Agreement
dated as of April 30, 1999 (the "Placing Agreement"), between Parent and Hoare
Govett Limited ("HG"). Under the Placing Agreement, subject to certain
conditions, HG has agreed to procure persons to accept the allotment of those
shares, failing which itself to accept the allotment of those shares. Parent has
agreed to pay certain commissions, costs and expenses of HG and has also agreed
to indemnify HG, its directors, employees and officers against certain
liabilities arising in connection with the placing.
THE OFFER DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO PURCHASE ANY SHARES OR OTHER SECURITIES OF PARENT. The shares of Parent to be
issued under the Placing Agreement have not been and will not be registered
under the Securities Act, and they may not, as part of their distribution, be
offered, sold, taken up, renounced or delivered, directly
16
<PAGE>
or indirectly, in the United States, except pursuant to an exemption from, or in
transactions not subject to, the registration requirements of the Securities
Act.
It is expected that amounts outstanding under the Facility on the final
maturity date will be refinanced through a new syndicated loan facility but,
other than appointing the Bank as the arranger, no specific plans with respect
thereto have yet been made.
THE OFFER IS NOT CONDITIONED UPON PURCHASER OBTAINING FINANCING.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY
The Company has informed Parent that, on January 8, 1999, the Company
engaged Schroder & Co. Inc. ("Schroders") to assist it in reviewing its
strategic alternatives. On January 12, 1999, Schroders met with Company
management and together identified a list of six companies that they considered
possible candidates for a strategic alliance or transaction based upon apparent
business synergies or previously expressed interest in acquiring the Company. At
this meeting, it was decided that Schroders would contact Parent, along with
certain other companies.
On March 15, 1999, Crispin Davis, Parent's Chief Executive Officer, and Pat
Doble of Parent met with Verne Churchill, Thomas Payne, Lawrence Labash and
Timothy Sullivan of the Company in Arlington Heights, Illinois, at which meeting
each company gave a presentation to the other regarding its business, and the
parties discussed potential business opportunities.
On March 23, 1999, Parent and the Company executed a
confidentiality/standstill agreement. A proposed form of merger agreement was
sent to Parent's legal counsel on March 25, 1999, and on or about that date,
Schroders orally advised Parent that final proposals were due by April 9, 1999.
On March 26, 1999, a second meeting was held between Crispin Davis of Parent
and Thomas Payne, Sanford Schwartz, Lawrence Labash and Timothy Sullivan of the
Company in Arlington Heights, Illinois, at which meeting Parent discussed its
business and the parties further discussed potential business opportunities.
On March 30 and 31, 1999, Pat Doble and Sunil Garga of Parent met with
Michael Freehill, Stephen Weber and Peter LaSalle of the Company primarily to
discuss the types of products and services offered by the Company. On March 30
and 31, Parent's financial staff and legal counsel also conducted due diligence
meetings with Company representatives in Arlington Heights, Illinois.
By letter dated April 8, 1999, Parent submitted a non-binding offer to
acquire 100% of the Company's capital stock for $31.00 per Share in cash. The
offer was conditioned upon Parent receiving an irrevocable "lock-up" agreement
from the Company's major stockholder and the Company's five management directors
and completion of its due diligence investigation, and was not subject to
financing. The offer also sought a two-week exclusivity period to negotiate and
sign a definitive merger agreement.
On April 14, 1999, the Company and Parent entered into an exclusivity
agreement (the "Exclusivity Letter") pursuant to which the parties agreed to
commence negotiation of a definitive merger agreement for Parent's proposed
acquisition of the Company on the terms set forth in Parent's preliminary
proposal dated April 8, 1999, and, thereafter, the parties and their counsel
negotiated the Merger Agreement and the Option Agreement. Under the terms of the
Exclusivity Letter, the Company agreed until 12:00 midnight on April 27, 1999 to
negotiate exclusively with Parent and to not solicit any offer or engage in any
negotiations other than with Parent for the merger or sale of the business or
assets of the Company or any material part thereof or for any tender or exchange
offer for the Company's capital stock. Subject to certain conditions, the
Exclusivity Letter provided that the Company had the right to terminate
negotiations with Parent in the event that the Company received an unsolicited
proposal for the acquisition of the Company from another party which in the
opinion of the Company's financial advisors was, or was
17
<PAGE>
reasonably likely to lead to, a proposal that was more favorable to the
Company's stockholders than Parent's proposal (a "Superior Bid"). The
Exclusivity Letter required the Company to promptly notify Parent of its receipt
of any Superior Bid, and the terms thereof, and Parent thereafter had two
business days within which to amend its proposal to cause such third party
proposal to no longer be a Superior Bid or the exclusivity provisions of the
Exclusivity Letter would cease to apply. In the event the Company terminated or
abandoned negotiations with Parent due to its receipt of a Superior Bid prior to
the end of the exclusivity period, the Company agreed to reimburse Parent within
five days of termination an amount up to $150,000 for its reasonable
out-of-pocket expenses and fees. In addition, if the Company became obligated to
make the $150,000 reimbursement and entered into a definitive agreement with the
party submitting such Superior Bid within six months and consummated such
transaction within 12 months of the termination of the Exclusivity Letter, the
Company would be required to pay Parent a $9,000,000 termination fee and to
reimburse it for up to $750,000 of its expenses and fees. On April 27, the
exclusivity period under the Exclusivity Letter was extended until April 30,
1999.
Commencing shortly after the Exclusivity Letter was executed and continuing
to the date of the execution of the Merger Agreement, Parent and Purchaser
conducted additional due diligence reviews of the Company, both financial and
legal.
On April 16, 1999, Crispin Davis and Frank Law, the Chief Executive Officer
and Non-Executive Chairman of Parent, respectively, met with Verne Churchill,
Thomas Payne, Sanford Schwartz, Lawrence Labash and Timothy Sullivan of the
Company in Arlington Heights, Illinois to discuss the Company's business and its
business plans and strategies.
On April 20, 1999, Thomas Payne, Sanford Schwartz and Lawrence Labash of the
Company met with Crispin Davis at Parent's offices in London, England to discuss
Parent's business and the operation of its subsidiaries.
The Company has informed Parent that, on April 28, 1999, the Company's Board
met to review and discuss Parent's proposed acquisition of the Company. At the
meeting, Schroders delivered its written opinion to the Board that, as of such
date and based upon and subject to certain matters stated therein, the
consideration to be received by the holders of the Shares pursuant to the Merger
Agreement with Parent was fair, from a financial point of view, to such holders.
The Company's legal counsel gave a presentation to the Board on the terms of the
Merger Agreement and related documents, the structure of the Offer and the
Merger and the Board's fiduciary duties to its stockholders. The Board discussed
the terms of the proposed acquisition and asked questions of Schroders and the
Company's legal counsel. Following this discussion, the Board (i) determined
that each of the Merger Agreement, the Offer and the Merger are fair to and in
the best interests of the Company's stockholders, (ii) approved the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
Merger, and (iii) recommended acceptance of the Offer, approval and adoption of
the Merger Agreement and approval of the Merger by the Company's stockholders.
The Board also approved the Option Agreement for purposes of Section 203 of the
DGCL.
On April 29, 1999, Schroders contacted Parent to inform it of the existence
of a proposal from another party to acquire the Company. Parent advised
Schroders that it was not willing to raise its offer to a price above $31.00 per
Share or delay the execution of the Merger Agreement, which was scheduled for
later that day, and indicated that if the Merger Agreement was not executed as
scheduled that it would withdraw its offer. The Company's Board of Directors, at
a meeting convened on that day, reaffirmed its approval of the Merger Agreement
with Parent and Purchaser and Schroders reaffirmed its written opinion of April
28, 1999.
On April 29, 1999, the Company, Parent and Purchaser executed the Merger
Agreement, and, simultaneously therewith, Parent and certain of the Company's
stockholders executed the Option Agreement. The transaction was publicly
announced in the U.S. prior to the opening of the Nasdaq National Market on
April 30, 1999.
18
<PAGE>
11. THE OFFER AND MERGER; MERGER AGREEMENT; OPTION AND VOTING AGREEMENT
THE MERGER AGREEMENT.
The following summary of certain provisions of the Merger Agreement is
presented only as a summary and is qualified in its entirety by reference to the
Merger Agreement, a copy of which has been filed as an exhibit to Purchaser's
and Parent's Schedule 14D-1.
THE OFFER. The Merger Agreement provides that as soon as practicable after
the date of execution of the Merger Agreement, but in no event later than five
business days after the day on which Purchaser's intention to make the Offer is
announced, Purchaser will commence the Offer for all of the outstanding Shares
at a price of not less than $31.00 per Share in cash, net to the seller, subject
to the satisfaction of the conditions set forth in Section 15 and, subject only
to the terms and conditions of the Offer, will consummate the Offer as soon as
legally permissible. Purchaser may waive any condition to the Offer, increase
the price per Share payable in the Offer and make any other changes in the terms
and conditions of the Offer. However, no change may be made which decreases the
price per Share or changes the form of consideration payable in the Offer, or
which amends any of the conditions described in Section 15 or which imposes
conditions to the Offer other than those described in Section 15 or which
extends the Offer (except as set forth in the following sentence), without the
consent of the Company. Purchaser may, without the consent of the Company, (i)
extend the Offer beyond the scheduled expiration date (the initial scheduled
expiration date being 20 business days following the commencement of the Offer)
in its sole discretion from time to time, if on the initial scheduled or any
extended expiration date of the Offer, any of the conditions to Purchaser's
obligation to accept for payment, and to pay for, the Shares, shall not be
satisfied or waived, or (ii) extend the Offer for a period not to exceed 10
business days, notwithstanding that all conditions to the Offer are satisfied as
of such expiration date of the Offer, if, immediately prior to the expiration
date of the Offer (as it may be extended), the Shares tendered and not withdrawn
pursuant to the Offer, together with the Shares subject to the Option Agreement,
without duplication, equal less than 90% of the outstanding Shares and Purchaser
expressly irrevocably waives any condition (other than the Minimum Condition)
that subsequently may not be satisfied during such extension of the Offer, or
(iii) extend the Offer for any period required by any rule, regulation or
interpretation of the Commission or the staff thereof applicable to the Offer;
provided that, unless agreed to by the Company, any extended expiration date
pursuant to the immediately preceding clause (i) may not be later than 90 days
from the date of commencement of the Offer, or 120 days from such date if within
such 90 day period a tender offer for at least 20% of the outstanding Shares is
commenced by any person who is not an affiliate (as defined under the rules
promulgated pursuant to the Securities Act of 1933) of Parent or Purchaser (an
"Intervening Tender Offer").
In the event that (i) the Minimum Condition shall not have been satisfied or
(ii) the other conditions described in Section 15 shall not have been satisfied
or waived at the scheduled or any extended expiration date of the Offer, at the
request of the Company, Purchaser has agreed to extend the expiration date of
the Offer in increments of five (5) business days each until the earliest to
occur of (x) the satisfaction or waiver of the Minimum Condition or such other
condition, (y) the termination of the Merger Agreement in accordance with its
terms, and (z) 90 days from commencement of the Offer or 120 days from such date
in the event of an Intervening Tender Offer (unless extended by agreement of
Parent, Purchaser and the Company).
THE MERGER. The Merger Agreement provides that, subject to the terms and
conditions thereof, at the effective time of the Merger (the "Effective Time"),
Purchaser will be merged with and into the Company and the separate corporate
existence of Purchaser will cease. At the election of Parent exercised prior to
the filing of any proxy statement pursuant to the Merger Agreement, the Company
will be merged with and into Purchaser and the separate corporate existence of
the Company will cease. At the Effective Time, by virtue of the Merger and
without any action on the part of Purchaser, the Company, the surviving
corporation or the holder of shares, (i) each Share issued and outstanding
immediately prior to the
19
<PAGE>
Effective Time (other than Shares owned by Purchaser, Parent or any direct or
indirect subsidiary of Parent or owned by the Company or any direct or indirect
subsidiary of the Company and Shares that are outstanding immediately prior to
the Effective Time and which are held by stockholders who shall have not voted
in favor of the Merger or consented thereto in writing and who shall have
demanded properly in writing appraisal for such Shares in accordance with
Section 262 of the DGCL) will be converted into the right to receive the Merger
Price, and (ii) each Series B Share which is issued and outstanding immediately
prior to the Effective Time shall be canceled and retired, and no payment shall
be made with respect thereto. Pursuant to the Merger Agreement, all shares of
common stock of Purchaser issued and outstanding immediately prior to the
Effective Time will be converted into and exchanged for a sole validly issued,
fully paid and nonassessable share of common stock of the surviving corporation
(the "Surviving Corporation").
STOCKHOLDERS MEETING. The Merger Agreement provides that the Company will
take all action necessary, in accordance with the DGCL and its Certificate of
Incorporation and By-Laws to convene a meeting of its stockholders to consider
and vote upon the approval of the Merger Agreement and the Merger, if necessary
to comply with applicable law, as promptly as practicable after the consummation
of the Offer. The Merger Agreement provides that, if Company stockholder
approval is required by law in order to consummate the Merger, the Company and
Parent shall prepare and file with the Commission as soon as is reasonably
practicable a preliminary proxy or information statement relating to the Merger
and the Merger Agreement and, as promptly as practicable thereafter, subject to
compliance with the rules and regulations of the Commission, shall mail a
definitive proxy statement or information statement to stockholders of the
Company. The Board will recommend such approval and the Company will use its
best efforts to solicit such approval; provided, however, that the Board at any
time prior to the Effective Time, may withdraw, modify or change any such
recommendation or refrain from soliciting proxies in favor of the Merger to the
extent that the Board determines in good faith after consultation with and based
upon the advice of outside legal counsel that the failure to so withdraw, modify
or change its recommendation or refrain from soliciting proxies would cause the
Board to breach its fiduciary duties to the Company's stockholders under
applicable law. In any event, the Board is obligated under the Merger Agreement
to submit the Merger Agreement to the stockholders of the Company.
Parent and its affiliates will vote all Shares over which they exercise
voting control in favor of the Merger Agreement and the Merger. Under the DGCL,
if Purchaser acquires at least 90% of the outstanding Shares, Purchaser will be
able to approve the Merger without a vote of the Company's stockholders. See
Section 12 for a further discussion of certain provisions of the DGCL applicable
to the Merger.
CONDUCT OF BUSINESS. Pursuant to the Merger Agreement, prior to the
Effective Time, except to the extent that Purchaser shall otherwise consent, the
Company and its subsidiaries shall conduct their businesses in the ordinary
course of business and will not take any material action except in the ordinary
course of business and consistent with past practice. The Company and its
subsidiaries will use their respective best efforts to maintain and preserve
their respective business organizations, assets and advantageous business
relationships.
Without Parent's prior written consent, neither the Company nor any of its
subsidiaries will directly or indirectly do any of the following:
(a) amend its charter or by-laws (or comparable charter documents);
(b) except for Shares the Company may be obligated to issue in
connection with a prior acquisition, authorize for issuance, issue, sell,
deliver or agree or commit to issue, sell or deliver (whether through the
issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any stock of any class or any other
securities, except in the case of Shares of the Company, as required by
employee options outstanding on the date of the execution of the Merger
Agreement or Company employee benefit plans as in effect on the date of the
execution of
20
<PAGE>
the Merger Agreement, or amend any of the terms of any such securities or
agreements outstanding on the date of the execution of the Merger Agreement;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, or redeem or otherwise acquire any securities of the Company
or any of the subsidiaries;
(d) (i) incur or assume any long-term debt, except in the ordinary
course of business under existing facilities or required refinancings or
replacements thereof, or incur or assume any short-term debt, except in the
ordinary course of business, or issue or sell any debt securities or rights
to acquire any debt securities of the Company or any subsidiary; (ii)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person except wholly owned subsidiaries of the Company in the ordinary
course of business and consistent with past practice; or (iii) make any
loans, advances or capital contributions to, or investments in, any person
other than a wholly owned subsidiary of the Company in the ordinary course
of business (except for customary loans or advances to directors, officers
or employees in accordance with past practice or as required by existing
contractual arrangements or agreements);
(e) other than as required by ERISA enter into, adopt or amend any
bonus, profit sharing, compensation, severance, termination, stock option,
stock appreciation right, restricted stock, performance unit, pension,
retirement, deferred compensation, employment, severance or other employee
benefit agreements, trusts, plans, funds or other arrangements for the
benefit or welfare of any director, officer or employee, or (except (i) in
the case of persons whose compensation has been established by the
Compensation Committee of the Board of Directors, for increases in amounts
previously approved by such Committee, and (ii) in the case of all other
directors, officers or employees, for normal increases in the ordinary
course of business that are consistent with past practices and that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to the Company), increase in any manner the compensation or fringe
benefits of any director, officer or employee or pay any benefit or make any
distribution or award not required by any existing plan or arrangement
(including, without limitation, the granting of stock options, stock
appreciation rights, shares of restricted stock or performance units) or
enter into any contract, agreement, commitment or arrangement to do any of
the foregoing;
(f) except pursuant to existing contractual arrangements or agreements
disclosed pursuant to the Merger Agreement, acquire, sell, lease, license,
dispose of, mortgage or otherwise encumber any assets outside the ordinary
course of business or any assets which are material, in the aggregate, to
the Company and its subsidiaries, taken as a whole, or enter into any
material commitment or transaction outside the ordinary course of business;
(g) except as may be required by law, take any action to terminate or
amend or accelerate the vesting of any benefits under any of its employee
benefit plans;
(h) waive or release any rights material to the Company and its
subsidiaries, taken as a whole, or make any payment, direct or indirect, of
any material liability of the Company or any of its subsidiaries before the
same comes due in accordance with its terms;
(i) acquire or agree to acquire, including, without limitation, by
merging or consolidating with, or by purchasing a substantial equity
interest in or substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof without Parent's prior written consent;
(j) except as set forth on a schedule to the Merger Agreement, make any
capital expenditure or expenditures which exceed $250,000 in the aggregate;
and
21
<PAGE>
(k) take, or agree in writing or otherwise to take, any of the foregoing
actions or any action which would make any representation or warranty of the
Company contained in this Agreement untrue or incorrect as of the date when
made or as of a future date.
NO SOLICITATION. Pursuant to the Merger Agreement, the Company agreed to
immediately cease and cause to be terminated all existing discussions or
negotiations relating to a Competing Transaction (as defined below) with any
parties conducted prior thereto. The Company has agreed not to, directly or
indirectly, and to instruct its representatives not to, directly or indirectly,
(i) initiate, solicit or encourage (including by way of furnishing information
or assistance), or take any other action to facilitate, any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Competing Transaction or (ii) enter into or maintain discussions or
negotiate with any person in furtherance of or relating to such inquiries or to
obtain a Competing Transaction or (iii) agree to or endorse any Competing
Transaction or (iv) authorize or permit any representative of the Company or any
of its subsidiaries to take any such action. The Company also agreed to promptly
notify Parent if any such inquiries or proposals are made regarding a Competing
Transaction and inform Purchaser in reasonable detail of any such inquiry or
proposal. The Company also agreed to keep Parent informed, on a current basis,
of the significant developments and changes in status of any such proposals;
provided, however, that prior to consummation of the Offer, the Merger Agreement
will not prohibit the Board from (i) furnishing information to, or entering into
discussions or negotiations with, any person that after the date of the Merger
Agreement makes an unsolicited proposal regarding a Competing Transaction or
agreeing to or endorsing any Competing Transaction, if, and only to the extent
that, (A) the Board, after consultation with and based upon the advice of
independent legal counsel, determines in good faith that such action is required
for the Board to comply with its fiduciary duties to the Company's stockholders
imposed by Delaware law, (B) prior to furnishing such information to, or
entering into discussions or negotiations with such person or agreeing to or
endorsing any Competing Transaction, the Board determines in good faith, after
consultation with and based upon the advice of a financial advisor of nationally
recognized reputation, that such Competing Transaction is a Superior Proposal
(as defined below), (C) prior to furnishing such information to, or entering
into discussions or negotiations with, such person, the Company provides written
notice to Purchaser to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such person, and (D) such
information to be so furnished has been previously delivered to Purchaser; or
(ii) complying with Rule 14e-2 promulgated under the Exchange Act with regard to
a Competing Transaction. The Company further agreed that if it determines that a
Competing Transaction is a Superior Proposal, it will immediately notify
Purchaser of such determination, and will not take any action with respect to
such Competing Transaction or the Merger Agreement for at least 48 hours after
such notification.
For purposes of the Merger Agreement, "Competing Transaction" means any of
the following involving the Company or any of its subsidiaries: (a) any merger,
consolidation, share exchange, business combination, or other similar
transaction; (b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 20% or more of the assets of the Company and its subsidiaries,
taken as a whole, in a single transaction or series of transactions; (c) any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 20% or more of the outstanding shares of capital stock of
the Company or the filing of a registration statement under the Securities Act,
in connection therewith; (d) any solicitation of proxies in opposition to
approval by the Company's stockholders of the Merger; (e) the adoption by the
Company of a plan of liquidation, the declaration or payment by the Company of
an extraordinary dividend on any of its shares of capital stock or the
effectuation by the Company of a recapitalization or other type of transaction
that would involve either a change in the Company's outstanding capital stock or
a distribution of assets of any kind to the holders of such capital stock; (f)
the repurchase by the Company or any subsidiary of the Company of 20% or more of
the outstanding shares of Company common stock; or (g) any agreement to, or
public announcement by the Company or any other person, entity or group of a
proposal, plan or intention to do any of the foregoing.
22
<PAGE>
For purposes of the Merger Agreement, a "Superior Proposal" means any
proposal relating to a Competing Transaction made by a third party on terms
which if consummated the Board determines in its good faith judgment (based upon
the advice of a financial advisor of nationally recognized reputation) to be
more financially favorable to the Company's stockholders than the Offer and the
Merger and for which financing, to the extent required, is then committed or
which, in the good faith judgment (based upon the advice of a financial advisor
of nationally recognized reputation) of the Board, is reasonably capable of
being financed by such third party.
THE COMPANY'S BOARD OF DIRECTORS. The Merger Agreement provides that
promptly upon the acceptance for payment and purchase by Purchaser pursuant to
the Offer and the Option Agreement of such number of Shares which represents at
least a majority of the outstanding Shares (on a fully diluted basis), and from
time to time thereafter, Parent shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Board of Directors as
will give the Purchaser, subject to compliance with Section 14(f) of the
Exchange Act, representation on the Board of Directors equal to at least that
number of directors which equals the product of the total number of directors on
the Board of Directors (giving effect to the directors designated by Parent)
multiplied by the percentage that such number of Shares so accepted for payment
and paid for by the Purchaser bears to the number of Shares outstanding. The
Company shall, at such time, cause the Purchaser's designees to be so elected,
provided that (i) until the Effective Time the Board of Directors will have at
least two directors who are directors as of the date of execution of the Merger
Agreement who are not employees of the Company and who have not been designated
as directors of the Company by Parent and its affiliates (the "Independent
Directors") and (ii) if the number of Independent Directors is reduced below two
because of disability or resignation, the remaining Independent Director will be
entitled to designate one person to fill such vacancy who will be deemed to be
an Independent Director for purposes of the Merger Agreement.
Subject to applicable law, the Company agreed to take all action necessary
to effect any such election, including mailing to its stockholders the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, and the Company agreed to include in the Schedule 14D-9
mailed to stockholders such information. The Merger Agreement also provides that
prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors shall be required to (i) amend or terminate the Merger
Agreement on behalf of the Company, (ii) exercise or waive any of the Company's
rights or remedies under the Merger Agreement, (iii) extend the time for
performance of the Purchaser's obligations under the Merger Agreement, or (iv)
take any other action by the Company in connection with the Merger Agreement
required to be taken by the Board of Directors.
DIRECTORS' AND OFFICERS' INDEMNIFICATION. The Merger Agreement requires
that for a period of six years after the Effective Time, the Surviving
Corporation will maintain, without modification or amendment that would
adversely affect the rights thereunder of any current or former director or
officer of the Company or any of its subsidiaries (an "Indemnified Party"), the
provisions of the Company's certificate of incorporation and bylaws with respect
to indemnification and liability of officers, directors and employees. In
addition, the Merger Agreement provides that the Surviving Corporation will
honor the Company's existing indemnification agreements that have been executed
by certain of the Company's present and former directors.
The Merger Agreement further provides that from and after the Effective
Time, the Surviving Corporation shall indemnify, defend and hold harmless the
Indemnified Parties against all losses, expenses, claims, damages, liabilities,
judgments or amounts that are paid in settlement of (with approval of Parent and
the Surviving Corporation) in connection with, any claim, action, suit,
proceeding or investigation, based in whole or in part on the fact that such
person is or was such a director or officer and arising out of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by the Merger Agreement), in each case
to the fullest extent permitted under the DGCL (and shall pay expenses in
advance of the final disposition of any such action or proceeding to
23
<PAGE>
each Indemnified Party to the fullest extent permitted under the DGCL, upon
receipt from the Indemnified Party to whom expenses are advanced of the
undertaking to repay such advances contemplated by Section 145(e) of the DGCL).
The Surviving Corporation has agreed to maintain in effect for not less than
six years after the Effective Time officers' and directors' liability insurance
covering the Indemnified Parties who are currently covered by the Company's
officers' and directors' liability insurance policy on terms no less favorable
than those of such policy in terms of coverage and amounts; provided, however,
that the Surviving Corporation is not required to pay for such insurance in
excess of 200% of the rates paid at the date of the Merger Agreement but in such
case shall purchase as much coverage as possible for such amount.
COMPANY OPTIONS. The Merger Agreement provides that, at the Effective Time,
each holder of an employee stock option granted under the Company's stock option
plan (an "Employee Option"), whether or not then vested or exercisable shall, in
settlement thereof, receive for each Share subject to such Employee Option an
amount (subject to any applicable withholding tax) in cash equal to the
difference between the Offer Consideration and the per Share exercise price of
such Employee Option to the extent such difference is a positive number (such
amount being hereinafter referred to as, the "Option Consideration"). Upon
receipt of the Option Consideration, the Employee Option shall be canceled.
Prior to the Effective Time, the Company will obtain all necessary consents or
releases from holders of Employee Options under the Company's stock option plan
and will take all such other lawful action as may be necessary to effectuate the
foregoing. Except as otherwise agreed to between the Company and the Parent, (i)
all stock option plans of the Company will terminate as of the Effective Time
and the provisions in any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any subsidiary thereof, will be canceled as of the Effective Time,
and (ii) the Company shall ensure that following the Effective Time no
participant in any stock option plan or other plans, programs, arrangements or
agreements will have any right thereunder to acquire equity securities of the
Company, the Surviving Corporation or any subsidiary thereof and to terminate
all such plans. Prior to the Effective Time, the Company will not take any
action to accelerate the vesting of any unvested stock options as a result of
the Offer or the Merger.
EMPLOYEE STOCK OWNERSHIP PLAN. The Merger Agreement provides that all
accounts in the Company's Employee Stock Ownership Plan (the "ESOP") will become
100% vested as of the Effective Time. The Company will take all steps necessary
to terminate, as of or as promptly as practicable after the Effective Time, the
ESOP, and the balance of each participant's account in the ESOP will be
delivered to such participant on or as promptly as practicable after the
termination of the ESOP.
EMPLOYEES. Following the Effective Time, the Surviving Corporation has
agreed to pay all benefits due under the terms of all contracts, agreements,
arrangements, policies and commitments of the Company and its subsidiaries with
or with respect to its current or former employees, officers and directors which
benefits are vested on or prior to the Effective Time or which become vested
thereafter or as a result of the transactions contemplated hereby. Parent has
agreed to provide, for a period ending on the first anniversary of the Effective
Time, or cause the Surviving Corporation to provide, employees of the Company
and its subsidiaries with employee benefits (other than stock options and other
equity-based benefits) in the aggregate substantially no less favorable than
those benefits provided at the Effective Time.
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The Merger Agreement provides
that the respective obligations of each party to consummate the Merger are
subject to the satisfaction of a number of conditions, including, but not
limited to, (i) the approval and adoption of the Merger Agreement by the
stockholders of the Company (if required), (ii) the expiration of any waiting
period applicable to the consummation of the Merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and any required
approvals in connection with any premerger notification
24
<PAGE>
filing with any relevant non-US antitrust authority shall have been obtained and
shall remain in full force and effect, (iii) no preliminary or permanent
injunction or other order, decree or official action issued by any United States
Federal or state or foreign court or regulatory or administrative agency or
commission of competent jurisdiction, nor any statute, rule, regulation or
executive order promulgated or enacted by any United States Federal or state or
foreign governmental authority of competent jurisdiction, shall be in effect,
which would (A) make the acquisition or holding by Parent or its subsidiaries or
affiliates of the shares of Common Stock of the Surviving Corporation illegal or
otherwise prevent the consummation of the Merger, or (B) impose any limitations
on the ability of Parent effectively to control, directly or indirectly through
its subsidiaries, in any material respect the business and operations of the
Company, and (iv) the Purchaser shall have accepted for payment and paid for
Shares tendered pursuant to the Offer; provided that this condition shall be
deemed waived by Purchaser and Parent if the failure to accept for payment and
purchase Shares pursuant to the Offer is for any reason other than the failure
to satisfy the conditions to the Offer set forth in the Merger Agreement.
CONDITIONS TO THE OBLIGATIONS OF PARENT AND PURCHASER. The Merger Agreement
provides that the obligations of Parent and Purchaser to consummate the Merger
are subject to the satisfaction of a number of further conditions, including but
not limited to, (i) the accuracy of representations and warranties of the
Company as of the times, and subject to the qualifications, specified in the
Merger Agreement, (ii) the performance by the Company of its agreements and
covenants contained in the Merger Agreement unless such failures would not, in
the aggregate, have a material adverse effect on the financial condition,
business, operations or results of operations of the Company and its
subsidiaries, taken as a whole and will not prevent the consummation of the
transactions contemplated by the Merger Agreement (collectively, "Material
Adverse Effect") and (iii) all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and other
third parties as are necessary in accordance with the transactions contemplated
by the Merger Agreement shall have been obtained and be in full force and
effect, except such licenses, permits, consents, approvals, authorizations,
qualifications and orders, the failure to deliver which would not have a
Material Adverse Effect with respect to the Company.
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The Merger Agreement provides
that the obligations of the Company to effect the Merger are subject to the
satisfaction of the following further conditions: (i) the accuracy of
representations and warranties of Parent and Purchaser as of the times, and
subject to the qualifications, specified in the Merger Agreement, and (ii) the
performance by Parent and Purchaser of their agreements and covenants contained
in the Merger Agreement.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto including, but
not limited to, representations by the Company as to corporate organization and
qualification, subsidiaries, capitalization, authority to enter into the Merger
Agreement, filings with the Commission and other governmental authorities, the
absence of certain changes or events, intellectual property, material contracts,
compliance with law, environmental matters, employee benefit matters, the
opinion of the Company's financial advisor, labor relations, the Rights
Agreement, the application of Delaware law, tax returns, audits, brokers and
litigation.
EXPENSES. The Merger Agreement provides that, if (i) Purchaser terminates
the Merger Agreement because, prior to the consummation of the Offer, (A) the
Board of Directors of the Company withdraws, modifies or changes in a manner
adverse to Purchaser, its approval or recommendation of the Offer, the Merger
Agreement or Merger or presents to the stockholders of the Company a Competing
Transaction or resolves to do so or (B) the Company deliberately fails to
perform in any material respect any of its material obligations under the Merger
Agreement; (ii) the Company terminates the Merger Agreement because, prior to
the consummation of the Offer, (A) the Board of Directors of the Company
withdraws, modifies or changes in a manner adverse to Purchaser its approval or
recommendation of the Offer, the Merger Agreement or the Merger or (B) the Board
of Directors recommends a Superior Proposal or resolves to do so; (iii)
Purchaser terminates the Offer because the Minimum Condition is not satisfied
and
25
<PAGE>
at or prior to such time the Company has received one or more proposals for a
Competing Transaction which at the time of such occurrence has not been
absolutely and unconditionally withdrawn or abandoned and within six months
after the date of termination of the Merger Agreement a Competing Transaction is
entered into by the Company, and within twelve months of such termination a
Competing Transaction is consummated, then promptly after such termination (or,
with respect to item (iii), upon the consummation of such Competing Transaction)
by Parent or the Company, the Company shall pay to Purchaser or its designee an
amount equal to $9,000,000 (the "Break-up Fee") and shall reimburse Purchaser or
its designee for all of its out-of-pocket costs and expenses up to an amount
equal to $1,500,000.
The Merger Agreement further provides that if the Company terminates the
Merger Agreement because Purchaser shall have failed to commence this Offer
within five business days of the day on which Purchaser's intention to make this
Offer is announced or, prior to the purchase of any Shares pursuant to the
Offer, Purchaser deliberately fails to perform in any material respect any of
its obligations under the Merger Agreement, Purchaser shall pay to the Company
$4,500,000.
Except as set forth in the preceding two paragraphs, all expenses incurred
in connection with the Merger Agreement and the transactions contemplated by the
Merger Agreement will be paid by the party incurring such expenses, whether or
not the Offer or the Merger is consummated.
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated
at any time prior to the Effective Time, whether prior to or after approval by
the stockholders of the Company, as follows:
(i) by mutual written consent duly authorized by the Boards of Directors
of each of Parent and the Company;
(ii) by Purchaser if, due to an occurrence which would result in the
failure to satisfy the Minimum Condition or any of the other conditions set
forth in Section 15 of this Offer to Purchase, Purchaser shall have (A)
failed to commence the Offer within five business days after the day on
which Purchaser's intention to make the Offer is announced or (B) terminated
the Offer after compliance with the terms of the Merger Agreement without
any purchase of Shares thereunder;
(iii) by Purchaser, if the Effective Time shall not have occurred on or
before October 31, 1999, unless prior thereto Parent, Purchaser and their
affiliates have acquired beneficial ownership of at least a majority of the
then outstanding Shares;
(iv) by Purchaser, if prior to the consummation of the Offer, the
Company deliberately fails to perform in any material respects any of its
material obligations under the Merger Agreement;
(v) by Purchaser, if prior to the consummation of the Offer, the Board
(A) withdraws, modifies or changes, in a manner adverse to Parent or
Purchaser, its approval or recommendation of the Offer, the Merger Agreement
or the Merger, (B) presents to the stockholders of the Company any Competing
Transaction or (C) resolves to do any of the foregoing;
(vi) by the Company, if Purchaser shall have failed to commence the
Offer within five business days after the day on which Purchaser's intention
to make the Offer is announced;
(vii) by the Company, if the Offer is terminated in accordance with its
terms without the purchase of any Shares thereunder;
(viii) by the Company, if the Offer has not been consummated within the
time period set forth in the Merger Agreement;
(ix) by the Company, if prior to the purchase of any Shares by Purchaser
pursuant to the Offer, Purchaser deliberately fails to perform in any
material respect any of its obligations under the Merger Agreement; and
26
<PAGE>
(x) by the Company, if prior to the purchase of any Shares by Purchaser
pursuant to the Offer, the Board of Directors of the Company (A) withdraws,
modifies or changes in a manner adverse to Purchaser its approval or
recommendation of the Offer, the Merger Agreement or the Merger or (B)
recommends to the stockholders of the Company any Superior Proposal, which
is then pending, or resolved to do so; provided that any termination of the
Merger Agreement by the Company pursuant to this provision shall not be
effective until the close of business on the second full business day after
notice of such termination has been given to Purchaser.
OPTION AND VOTING AGREEMENT.
Parent and Verne B. Churchill, Lawrence W. Labash, Jeffery A. Oyster, Thomas
H. Payne, Sanford M. Schwartz, Ned L. Sherwood, Timothy J. Sullivan and MFI
Investors, L.P. have entered into the Option and Voting Agreement, dated April
29, 1999, pursuant to which, among other things, each such stockholder (the
"Selling Stockholders") has agreed (i) to vote the Shares and the Series B
Shares then owned by such Selling Stockholder for the Merger and in favor of the
approval and adoption of the transactions contemplated by the Merger Agreement
and against (A) any action or agreement that could reasonably be expected to
impede, interfere with or otherwise materially adversely affect the Merger or
inhibit the timely consummation of the Merger, (B) any action or agreement that
could reasonably be expected to result in a breach of any covenant,
representation or warranty or any other obligation of the Company under the
Merger Agreement, and (C) except for the Merger, against any merger,
consolidation, business combination, reorganization, recapitalization,
liquidation or sale or transfer of any material assets of the Company or its
subsidiaries; (ii) to grant Parent an irrevocable proxy to vote such Shares and
(iii) not to tender any Shares then owned by such Selling Stockholder into the
Offer, without the consent of Parent.
Additionally, under the Option Agreement, (i) each Selling Stockholder has
granted to Parent, or its permitted assign, an irrevocable option to purchase
all Shares then owned by such Selling Stockholder at a price of $31.00 per Share
at any time on or prior to the expiration date of the Option if after the date
of the Option Agreement a proposal or an offer for a Competing Transaction is
made (which Shares, in the aggregate, represent 30.07% of the Shares on a fully
diluted basis, after giving effect to the exercise of vested employee stock
options); and (ii) Parent has agreed to purchase at a price of $31.00 per Share
all Shares held by each Selling Stockholder by 11:59 p.m. on the first business
day immediately following the consummation of the Offer. The Option Agreement
terminates upon the earliest to occur of (i) the closing of the Merger, (ii)
11:59 p.m. on the first business day immediately following the expiration or
consummation of the Offer, (iii) in the event that the Merger Agreement is
terminated prior to any offer or proposal for a Competing Transaction having
been made, the termination date of the Merger Agreement, (iv) the date specified
in a written agreement executed by Parent and each of the Selling Stockholders,
and (v) November 2, 1999; provided that if Parent has exercised the Option on or
before the date that the Option Agreement would otherwise have terminated, the
Option Agreement will terminate on the date of the purchase by Parent of the
Shares of the Selling Stockholders.
The foregoing is a summary of certain provisions of the Option Agreement, is
presented only as a summary and is qualified in its entirety by reference to the
Option Agreement, a copy of which has been filed as an exhibit to Purchaser's
and Parent's Schedule 14D-1.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; RIGHTS AGREEMENT
PURPOSE. The purpose of the Offer and the Option Agreement is for Parent to
acquire control of all outstanding Shares of the Company. The purpose of the
Merger is for Parent to acquire all Shares, Series B Shares, and other equity
interests not purchased pursuant to the Offer or the Option Agreement. Upon
consummation of the Merger, the Company will become a wholly owned indirect
subsidiary of Parent. The Offer is being made pursuant to the Merger Agreement.
27
<PAGE>
APPROVAL. Under the DGCL, the approval of the Board of Directors of the
Company and the affirmative vote of the holders of a majority of the outstanding
Shares are required to approve and adopt the Merger Agreement. The Board of
Directors of the Company has unanimously approved the Merger Agreement and the
transactions contemplated thereby and, unless the Merger is consummated pursuant
to the short-form merger provisions under the DGCL described below, the only
remaining required corporate action of the Company is the approval and adoption
of the Merger Agreement and the transactions contemplated thereby by the
affirmative vote of the holders of a majority of the Shares. Under the Option
Agreement, Parent has obtained from MFI Investors L.P. (the "Partnership"), the
holder of all outstanding Series B Shares its agreement and irrevocable proxy to
vote such Series B Shares for the Merger and in favor of the approval and
adoption of the transactions contemplated by the Merger Agreement. Accordingly,
if the Minimum Condition is satisfied, Parent will have sufficient voting power
to cause the approval and adoption of the Merger Agreement and the transactions
contemplated thereby without the affirmative vote of any other stockholders.
STOCKHOLDER MEETINGS. In the Merger Agreement, the Company has agreed to
take all action necessary to convene a meeting of its stockholders as soon as
practicable after the consummation of the Offer for the purpose of considering
and taking action on the Merger Agreement, if such meeting is required by the
DGCL. Parent has agreed that all Shares owned by it or any of its subsidiaries
(including Purchaser) will be voted in favor of the Merger Agreement.
BOARD REPRESENTATION; SERIES B SHARES. If Parent purchases a majority of
the outstanding Shares pursuant to the Offer and the Option Agreement, the
Merger Agreement provides that Parent will be entitled to designate
representatives to serve on the Board in the same proportion as the proportion
of Shares beneficially owned by Parent, subject to the obligation to retain at
least two independent directors until the Merger has taken place. See Section
11. Parent currently intends to designate not less than a majority of the
directors of the Company following consummation of the Offer. It is currently
anticipated that Parent will designate Crispin Davis, Colin Day, Eleonore
Sauerwein, David Verklin, Pat Doble and Stig Karlsen, or such other persons
listed on Schedule I as Parent shall determine, to serve as directors of the
Company following consummation of the Offer. While Parent has no plans to
designate any persons other than those listed on Schedule I, it may do so from
time to time. Parent expects that such representation will permit Parent to
exert substantial influence over the Company's conduct of its business and
operations.
The Partnership owns all 100 Series B Shares that are issued and
outstanding. The terms of the Series B Shares provide that as long as the
Partnership continues to beneficially own at least 20% of the total combined
voting power of all Shares and any other class of securities of the Company
entitled to vote generally in the election of directors then outstanding
("Voting Securities"), the Partnership will be
entitled to elect three directors to the Company's Board of Directors. The
number of directors which the Partnership is entitled to elect decreases to two
if the Partnership's 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 will also be entitled to have one
of its directors appointed to each of the audit and compensation committees of
the Board. In addition, as long as any Series B Shares are outstanding, the
Company will not, without the vote of the Partnership as the holder of the
outstanding Series B Shares, expand the Board of Directors to more than 11
directors.
The terms of the Series B Shares provide that the Series B Shares will be
redeemed, at a redemption price of $1.00 per share, at any time that the holders
thereof are not entitled to elect any directors as described above. From and
after the date set by the Company for such redemption, unless the Company fails
to make available sufficient funds to effect the redemption, such shares will no
longer be deemed to be outstanding shares for any purpose, and the holders of
such shares will not have any rights with respect
28
<PAGE>
thereto, except the right to receive the redemption price upon surrender to the
Company of the certificates therefor. Accordingly, upon the purchase by Parent
or its permitted assign of the shares held by the Partnership pursuant to the
terms of the Option Agreement, the Partnership, as the holder of the Series B
Shares, will no longer be entitled to elect any directors, and the Series B
Shares will be redeemed.
SHORT FORM MERGER. Under the DGCL, if Purchaser acquires at least 90% of
the outstanding Shares, Purchaser will be able to approve the Merger without a
vote of the Company's stockholders. In such event, Parent and Purchaser
anticipate that they will take all necessary and appropriate action to cause the
Merger to become effective as soon as reasonably practicable after such
acquisition, without a meeting of the Company's stockholders. If, however,
Purchaser does not acquire at least 90% of the outstanding Shares pursuant to
the Offer, the Option Agreement or otherwise and a vote of the Company's
stockholders is required under the DGCL, a significantly longer period of time
will be required to effect the Merger.
APPRAISAL RIGHTS. The holders of Shares do not have appraisal rights as a
result of the Offer. However, if the Merger is consummated, holders of Shares at
the Effective Time of the Merger will have certain rights pursuant to the
provisions of Section 262 of the DGCL ("Section 262") to dissent and demand
appraisal of their Shares. Under Section 262, dissenting stockholders who comply
with the applicable statutory procedures will be entitled to receive a judicial
determination of the fair value of their Shares (exclusive of any element of
value arising from the accomplishment or expectation of the Merger) and to
receive payment of such fair value in cash, together with a fair rate of
interest, if any. Any such judicial determination of the fair value of Shares
could be based upon factors other than, or in addition to, the price per Share
to be paid in the Merger or the market value of the Shares. In Weinberger v.
UOP, Inc., the Delaware Supreme Court stated, among other things, that "proof of
value by any techniques or methods which are generally considered acceptable in
the financial community and otherwise admissible in court" should be considered
in an appraisal proceeding. Therefore, the value so determined could be more or
less than the price per Share to be paid in the Merger.
THE FOREGOING SUMMARY OF THE RIGHTS OF STOCKHOLDERS DOES NOT PURPORT TO BE A
COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING TO
EXERCISE ANY AVAILABLE APPRAISAL RIGHTS. THE EXERCISE OF APPRAISAL RIGHTS
REQUIRES STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL.
RULE 13E-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger or another business
combination following the purchase of Shares pursuant to the Offer or otherwise
in which Parent seeks to acquire the remaining Shares not held by it. Parent
believes, however, that Rule 13e-3 will not be applicable to the Merger if the
Merger is consummated within one year after the Expiration Date at the same per
Share price as paid in the Offer. If applicable, Rule 13e-3 requires, among
other things, that certain financial information concerning the Company and
certain information relating to the fairness of the proposed transaction and the
consideration offered to minority stockholders in such transaction be filed with
the Commission and disclosed to stockholders prior to consummation of the
transaction.
PLANS FOR THE COMPANY. Except as otherwise set forth in this Offer to
Purchase, it is expected that, initially following the Merger, the business and
operations of the Company will be continued by the Company substantially as they
are currently being conducted. Parent will continue to evaluate the business and
operations of the Company during the pendency of the Offer and after the
consummation of the Offer and the Merger, and will take such actions as it deems
appropriate under the circumstances then existing. Parent intends to seek
additional information about the Company during this period, and to review such
information as part of a comprehensive review of the Company's business,
operations, capitalization and
29
<PAGE>
management with a view to optimizing exploitation of the Company's potential in
conjunction with Parent's businesses.
Except as described in this Offer to Purchase, neither Parent nor Purchaser
has any present plans or proposals that would relate to or result in an
extraordinary corporate transaction such as a merger, reorganization or
liquidation involving the Company or any of its subsidiaries, or a sale or other
transfer of a material amount of assets of the Company or any of its
subsidiaries, any material change in the capitalization or dividend policy of
the Company, or any other material change in the Company's corporate structure
or business or the composition of its Board of Directors or management.
RIGHTS AGREEMENT. The following discussion, including the summary of
certain aspects of the Rights, is based in part on information contained in the
Company's Registration Statement on Form 8-A dated July 3, 1996 (including, as
an Exhibit thereto, a copy of the Rights Agreement, as then amended), and is
qualified by reference to such information. Although Purchaser and Parent do not
have any knowledge that would indicate that any statements contained herein
based upon such information are untrue, neither Purchaser nor Parent assumes any
responsibility for the accuracy or completeness of such information, or for any
failure by the Company to disclose events that may have occurred and may affect
the significance or accuracy of any such information but which are unknown to
Purchaser and Parent.
On July 26, 1989, the Board of Directors of the Company declared a dividend
of one Right for each share of common stock outstanding on August 7, 1989 (the
"Record Date"). The holders of any additional shares of common stock issued
subsequent to the Record Date and before the earliest of the Distribution Date,
the redemption of the Rights, the exchange of the Rights or the expiration of
the Rights will also be entitled to one Right for each additional share. Each
Right currently entitles the registered holder to purchase from the Company one
four-hundredth of a share of Series A Preferred Stock, without par value (the
"Series A Shares") of the Company at a price of $5.00 per one four-hundredth of
a Series A Share (the "Purchase Price"), subject to any future adjustments.
The Rights are not exercisable until the earlier to occur of (i) 10 days
following a public announcement that a person or group of affiliated or
associated persons have acquired beneficial ownership of 20% or more of the
outstanding common stock (thereby becoming an "Acquiring Person") or (ii) 10
business days (or such later date as may be determined by action of the Board of
Directors prior to such time as any person becomes an Acquiring Person)
following the commencement of, or announcement of an intention to make, a tender
offer or exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 20% or more of such outstanding common stock
(the earlier of such dates being called the "Distribution Date"). The Rights
will expire on August 7, 1999 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
The number of outstanding Rights and the number of one four-hundredths of a
Series A Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the common stock or a stock dividend
on the common stock payable in common stock or subdivisions, consolidations or
combinations of the common stock occurring, in any such case, prior to the
Distribution Date. The Purchase Price payable, and the number of Series A Shares
or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Series A Shares, (ii) upon the grant to holders of the Series A Shares of
certain rights or warrants to subscribe for or purchase Series A Shares at a
price, or securities convertible into Series A Shares with a conversion price,
less than the then current market price of the Series A Shares, or (iii) upon
the distribution to holders of the Series A Shares of evidence of indebtedness
or assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Series A Shares) or of subscription
rights or warrants (other than those referred to above).
30
<PAGE>
Series A Shares purchasable upon exercise of the Rights will not be
redeemable for a period of 20 years. Currently, each Series A Share will be
entitled to a minimum preferential quarterly dividend payment of $1 per share,
but will be entitled to an aggregate dividend of 400 times the dividend declared
per share of common stock. In the event of liquidation, the holders of the
Series A Shares will be entitled to a minimum preferential liquidation payment
of $100 per share, but will be entitled to an aggregate payment of 400 times the
payment made per share of common stock. Each Series A Share will have 400 votes,
voting together with the Common Stock. In the event of any merger, consolidation
or other transaction in which Common Stock is exchanged, each Series A Share
will be entitled to receive 400 times the amount received per share of Common
Stock.
Because of the nature of the Series A Shares' dividend, liquidation and
voting rights, the value of the fractional interest in a Series A Share
purchasable upon exercise of each Right should approximate the value of one
share of common stock.
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold, proper provision will be made so that each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction will have a market
value of two times the exercise price of the Right. In the event that (i) any
person becomes an Acquiring Person (unless such person first acquires 20% or
more of the outstanding common stock by a purchase pursuant to a tender offer
for all of the common stock for cash, which purchase increases such person's
beneficial ownership to 85% or more of the outstanding common stock) or (ii)
during such time as there is an Acquiring Person, there shall be a
reclassification of securities or a recapitalization or reorganization of the
Company or other transaction or series of transactions involving the Company
which has the effect of increasing by more than the proportionate share of the
outstanding shares of any class of equity securities of the Company or any of
its subsidiaries beneficially owned by the Acquiring Person, proper provision
shall be made so that each holder of a Right, other than Rights beneficially
owned by the Acquiring Person (which will thereafter be void), will thereafter
have the right to receive upon exercise that number of shares of common stock
having a market value of two times the exercise price of the Right.
At any time after any person becomes an Acquiring Person and prior to the
acquisition by such person or group of 50% or more of the outstanding common
stock, the Board of Directors may exchange the Rights (other than Rights owned
by such person or group which have become void), in whole or in part, at an
exchange ratio of one share of common stock, or one four-hundredth of a Series A
Share (or of a share of a class or series of the Company's preferred stock
having equivalent rights, preferences and privileges), per Right (subject to any
future adjustments).
At any time prior to any person becoming an Acquiring Person, the Board of
Directors may redeem the Rights in whole, but not in part, at a price of $.0025
per Right (the "Redemption Price"). The redemption of the Rights may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish. In addition, if a bidder who
does not beneficially own more than 1% of the common stock who has not within
the past year owned in excess of 1% of the common stock and, at a time he held
such greater than 1% stake, disclosed, or caused the disclosure of, an intention
which relates to or would result in the acquisition or influence of control of
the Company, proposes to acquire all of the common stock (and all other shares
of capital stock of the Company entitled to vote with the common stock in the
election of directors or on mergers, consolidations, sales of all or
substantially all of the Company's assets, liquidations, dissolutions or
windings up) for cash at a price which a nationally recognized investment banker
selected by such bidder states in writing is fair, and such bidder has obtained
written financing commitments (or otherwise has financing) and complies with
certain procedural requirements, then the Company, upon the request of the
bidder, will hold a special stockholders meeting to vote on a resolution
requesting the Board of Directors to accept the bidder's proposal. If a majority
of the outstanding shares entitled to vote on the proposal vote in favor of such
resolution, then for
31
<PAGE>
a period of 60 days after such meeting the Rights will be automatically redeemed
at the Redemption Price immediately prior to the consummation of any tender
offer for all of such shares at a price per share in cash equal to or greater
than the price offered by such bidder; provided, however, that no redemption
will be permitted or required after any person becomes an Acquiring Person.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price. Bidders owning in excess of 1% of the common stock on the
date of the adoption of the Rights Agreement are "grandfathered" with respect to
such percentage of common stock.
The terms of the Rights may be amended by the Board of Directors without the
consent of the holders of the Rights, except that from and after such time as
any person becomes an Acquiring Person no such amendment may adversely affect
the interests of the holders of the Rights. Until a Right is exercised, the
holder thereof, as such, will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends.
On June 5, 1996, the Rights Agreement was amended to, among other things,
permit the Partnership and certain affiliated persons to purchase up to a
certain percentage of the common stock without becoming an Acquiring Person.
In connection with execution of the Merger Agreement, the Rights Agreement
was further amended to provide that the execution and delivery of the Merger
Agreement and the Option Agreement, and the consummation of the transactions
contemplated thereby, including the Offer and the purchase of the Shares
pursuant thereto, will not result in (i) Parent, Purchaser or any of their
affiliates becoming an Acquiring Person, or (ii) the occurrence of a
Distribution Date or a Shares Acquisition Date. In addition, the Rights
Agreement was amended to provide that the Rights will expire on the earliest of
(i) August 7, 1999, (ii) the acceptance by Parent (or a wholly owned subsidiary
of Parent) of the Shares pursuant to the Offer, or (iii) the redemption or
exchange of the Rights as provided in the Rights Agreement.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Board of Directors, except pursuant to an offer
conditioned on a substantial number of Rights being acquired. The Rights should
not interfere with any merger or other business combination approved by the
Board of Directors at a time when the Rights are redeemable.
32
<PAGE>
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE ACT REGISTRATION;
MARGIN REGULATIONS
The purchase of Shares pursuant to the Offer and the Option Agreement will
reduce the number of Shares that might otherwise trade publicly and may reduce
the number of holders of Shares, which could adversely affect the liquidity and
market value of the remaining Shares held by stockholders other than Purchaser.
Purchaser cannot predict whether the reduction in the number of Shares that
might otherwise trade publicly will have an adverse or beneficial effect on the
market price for or marketability of the Shares or whether it will cause future
market prices to be greater or less than the Offer Price.
Depending upon the aggregate market value and per Share price of any Shares
not purchased pursuant to the Offer or the Option Agreement, following the Offer
the Shares may no longer meet the standards for continued listing on the Nasdaq
National Market, which requires an issuer to have at least 400 holders of record
of 100 shares or more and, among other things, either (i) at least 750,000
publicly held Shares with a market value of at least $5 million, or (ii) at
least 1,100,000 publicly held Shares with a market value of at least $15 million
and a market capitalization, or total assets and total revenue, of at least $50
million. Shares held directly or indirectly by directors and officers of the
Company and concentrated holdings of 10% or more of the Shares outstanding
generally will not be considered to be publicly held for the purpose of the
foregoing standards. If, as a result of the purchase of Shares pursuant to the
Offer and the Option Agreement, the Shares no longer meet the requirements of
the Nasdaq National Market for continued listing and the listing of Shares is
discontinued, the market for the Shares could be adversely affected. If the
Shares were no longer quoted on the Nasdaq National Market, it is possible that
the Shares could continue to trade in the over-the-counter market and that
quotations could continue to be reported through other sources. The extent of
the public market for the Shares and the availability of such quotations would,
however, depend upon the number of stockholders remaining at such time, the
interest in maintaining a market in the Shares on the part of securities firms,
the possible termination of registration of the Shares under the Exchange Act,
as described below, and other factors.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of the Shares. Depending upon factors similar to those
described above regarding listing and market quotations, it is possible that,
following the Offer, the Shares will no longer constitute "margin securities"
and therefore could no longer be used as collateral for loans made by brokers.
The Shares are currently registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon application of the
Company to the Commission if the Shares are neither listed on a national
securities exchange nor held by 300 or more holders of record. Termination of
registration of the Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to its stockholders and to
the Commission and would make certain provisions of the Exchange Act no longer
applicable to the Company, such as the short-swing profit recovery provisions of
Section 16(b) of the Exchange Act, the requirement of furnishing a proxy
statement pursuant to Section 14(a) of the Exchange Act in connection with
stockholders' meetings and the related requirement of furnishing an annual
report to stockholders, and the requirements of Rule 13e-3 under the Exchange
Act with respect to "going private" transactions. Furthermore, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 or 144A under the
Securities Act may be impaired or eliminated. It is the current intention of
Parent to seek to cause the Company to deregister the Shares after consummation
of the Offer if the requirements for termination of registration are met.
33
<PAGE>
14. DIVIDENDS AND DISTRIBUTIONS
As described above, the Merger Agreement provides that, prior to the earlier
of the date on which the persons designated by Parent become directors of the
Company or the Effective Time, without Parent's prior written consent, neither
the Company nor any of its Subsidiaries will, among other things, (a) except for
Shares the Company may be obligated to issue in connection with a prior
acquisition, authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities, except in the case of Shares of the
Company, as required by employee options outstanding on the date of the
execution of the Merger Agreement or Company employee benefit plans as in effect
on the date of the execution of the Merger Agreement, or amend any of the terms
of any such securities or agreements outstanding on the date of the execution of
the Merger Agreement; (b) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock, or redeem or otherwise acquire any securities of the Company or any of
the Subsidiaries; (c) issue or sell any debt securities or rights to acquire any
debt securities of the Company or any Subsidiary; or (d) other than expressly
provided for in the Merger Agreement or as required by applicable law, as now or
hereafter in effect, enter into, adopt or amend any stock option, stock
appreciation right, restricted stock, performance unit, or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing.
15. CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Parent or Purchaser
shall not be required to accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange
Act (relating to Purchaser's obligation to pay for or return tendered Shares
promptly after expiration or termination of the Offer), to pay for any Shares
tendered, and may postpone the acceptance for payment or, subject to the
restriction referred to above, payment for any Shares tendered, and may amend
or terminate the Offer, if prior to the time the Offer shall otherwise
expire: (i) the Minimum Condition shall not have been satisfied; (ii) all
material regulatory and related approvals have not been obtained or made on
terms reasonably satisfactory to Purchaser; (iii) any applicable waiting
periods under the HSR Act shall not have expired or been terminated; or (iv)
at any time on or after the date of the Merger Agreement and prior to the
time the Offer shall otherwise expire, any of the following events shall
occur:
(A) any governmental entity or federal, state or foreign court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction
or other order which is in effect (or pending) and which (1) restricts,
prevents or prohibits the making or consummation of the Offer, the Merger or
any transaction contemplated by the Merger Agreement, (2) prohibits or
limits materially the ownership or operation by the Company, Parent or any
of their subsidiaries of all or any material portion of the business or
assets of the Company and its subsidiaries taken as a whole, or compels the
Company, Parent, or any of their subsidiaries to dispose of or hold separate
all or any material portion of the business or assets of the Company and its
subsidiaries taken as a whole, (3) imposes limitations on the ability of
Parent, Purchaser or any other subsidiary of Parent to exercise effectively
full rights of ownership of any Shares, including, without limitation, the
right to vote any Shares acquired by Purchaser pursuant to the Offer or
otherwise on all matters properly presented to the Company's stockholders,
including, without limitation, the approval and adoption of the Merger
Agreement and the transactions contemplated thereby, or (4) requires
divestitures by Parent, Purchaser or any other affiliate of Parent of any
Shares; provided that Parent shall have used all commercially reasonable
efforts to cause any such decree, judgment, injunction or other order to be
vacated or lifted;
34
<PAGE>
(B) the representations and warranties of the Company contained in the
Merger Agreement (without giving effect to any materiality or similar
qualifications contained therein) shall not be true and correct as of the
date the Offer shall otherwise expire, as though made on and as of such date
except (1) for changes specifically permitted by the Merger Agreement, (2)
that those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date, (3) in any
case where such failure to be true and correct would not, in the aggregate,
have a Material Adverse Effect, and (4) notwithstanding anything in the
Merger Agreement to the contrary, in the event that any of the
representations and warranties of the Company with respect to any of its
subsidiaries are determined to be inaccurate, and all such inaccuracies
capable of measurement in dollar amounts, in the aggregate, exceed
$3,000,000, then only the amounts in excess of $3,000,000 will be taken into
account in determining whether such inaccuracies, taken together with all
other breaches of representations and warranties generally, result in a
Material Adverse Effect;
(C) the Company shall not have performed or complied with any of its
obligations, covenants and agreements under the Merger Agreement to be
performed or complied with by it unless all such failures together in their
entirety would not have a Material Adverse Effect;
(D) the Merger Agreement shall have been terminated in accordance with
its terms;
(E) the Company shall have received any other offer for the purchase of
Shares, the purchase of substantially all of the Company's assets, the
merger of the Company or any other transaction which would require the
withdrawal or material modification of the Offer, the Merger Agreement or
the Merger and the Board shall have withdrawn or materially modified or
changed (including by amendment of the Schedule 14D-9) in a manner adverse
to Purchaser its recommendation of the Offer, the Merger Agreement or the
Merger;
(F) (1) any person or group shall have entered into a definitive
agreement or agreement in principle with the Company with respect to a
merger, consolidation, sale of a material portion of the assets of the
Company, or other business combination with the Company; or (2) (A) the
Board of Directors of the Company or any committee thereof shall have
withdrawn, modified or changed in a manner adverse to Parent or Purchaser
its approval or recommendation of the Offer, the Merger Agreement or Merger
or approved or recommended any Competing Transaction, or (B) the Board of
Directors of the Company or any committee thereof shall have resolved to do
any of the foregoing;
(G) there shall have occurred any change, condition, event or
development that has a Material Adverse Effect (excluding any change,
condition, event or development arising out of or attributable to general
economic conditions);
(H) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the New York Stock
Exchange, the NASDAQ\NMS or the London Stock Exchange for a period in excess
of 24 hours (excluding any coordinated trading halt triggered solely as a
result of a specified decrease in a market index and suspensions or
limitations resulting solely from physical damage or interference with such
exchange or association not related to market conditions), (ii) a
declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States or the United Kingdom or (iii) any material
limitation (whether or not mandatory) by any government or governmental
authority of the United States or the United Kingdom on the extension of
credit by banks or other lending institutions; or
(I) the Selling Stockholders shall have failed to comply in any
material respect with their obligations pursuant to the Option Agreement;
which, in the reasonable judgment of Purchaser in any such case, and regardless
of the circumstances giving rise to any such condition, makes it inadvisable to
proceed with such acceptance for payment or payments.
35
<PAGE>
16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
GENERAL. Except as described in this Section 16, neither Parent nor
Purchaser is aware of any license or regulatory permit that appears to be
material to the business of the Company and its subsidiaries, taken as a whole,
that might be adversely affected by the acquisition of Shares by Purchaser or
Parent pursuant to the Offer, the Option Agreement, the Merger or otherwise or,
except as set forth below, of any filing, approval or other action by or with
any governmental, administrative or regulatory agency or authority, domestic or
foreign, that would be required prior to the acquisition of Shares by Purchaser
or Parent pursuant to the Offer, the Merger or otherwise. Should any such
approval or other action be required, Purchaser and Parent currently contemplate
that it will be sought, except as described below under "State Takeover
Statutes." There can be no assurance that any such approval or other action, if
needed, would be obtained, or would be obtained without substantial conditions,
or that adverse consequences might not result to the Company's business, or that
certain parts of the business of the Company or Parent might not have to be
disposed of or held separate, or other material conditions complied with, in
order to obtain such approvals or other actions or, in the event that such
approvals were not obtained or any other actions were not taken, any of which
could cause Purchaser to elect (subject to the terms of the Merger Agreement) to
terminate the Offer without the purchase of Shares thereunder. Purchaser's
obligation under the Offer to accept for payment and pay for Shares is subject
to certain conditions, including conditions relating to certain of the legal
matters discussed in this Section 16. See Section 15.
STATE TAKEOVER STATUTES. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of DGCL prevents an "interested
stockholder" (generally a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock, or an affiliate or associate
thereof) from engaging in a "business combination" (defined to include mergers
and certain other transactions) with a Delaware corporation for a period of
three years following the date such person became an interested stockholder
unless, among other things, prior to such date the Board of Directors of the
corporation approved either the business combination or the transaction in which
the interested stockholder became an interested stockholder. In connection with
the review of the proposed transaction, the Company's Board of Directors prior
to the execution of the Merger Agreement or the Option Agreement (i) unanimously
determined that each of the Merger Agreement, the Offer and the Merger are fair
to and in the best interests of the stockholders of the Company, (ii) approved
the Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger, and (iii) recommended that the stockholders of the Company
accept the Offer, approve and adopt the Merger Agreement and approve the Merger.
Additionally, the Board of Directors of the Company has unanimously approved the
Option Agreement for purposes of Section 203 of the DGCL. Accordingly, Purchaser
and Parent believe that Section 203 of Delaware Law is inapplicable to the
Merger Agreement, the Offer, the Merger or the Option Agreement because its
provisions have been satisfied.
A number of other states have also adopted takeover laws and regulations
which purport to varying degrees to be applicable to attempts to acquire
securities of corporations which are incorporated in such states or which have
or whose business operations have substantial economic effects in such states,
or which have substantial assets, security holders, principal executive offices
or principal places of business therein. In 1982, the Supreme Court of the
United States, in Edgar v. MITE Corp., invalidated on constitutional grounds the
Illinois Business Takeovers Act which, as a matter of state securities law, made
takeovers of corporations meeting certain requirements more difficult. However,
in 1987, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court of the
United States held that the State of Indiana could, as a matter of corporate law
and in particular those aspects of corporate law concerning corporate
governance, constitutionally disqualify a potential acquiror from voting on the
affairs of a target corporation without the prior approval of the remaining
stockholders, provided that such laws were applicable only under certain
conditions. Subsequently, a number of federal courts have ruled that various
state takeover statutes were unconstitutional insofar as they apply to
corporations incorporated outside the state of enactment.
36
<PAGE>
The Company has its headquarters in Illinois and, directly or through
subsidiaries, conducts business in a number of states throughout the United
States, some of which have enacted takeover laws. Purchaser does not know
whether any of these laws will, by their terms, apply to the Option Agreement,
the Offer or the Merger and, except as described herein, has not taken any
action to comply with any such laws. Should any person seek to apply any state
takeover law, Purchaser may resist such application, which may include
challenging the validity or applicability of any such statute in appropriate
court proceedings. In the event it is asserted that one or more state takeover
laws is applicable to the Option Agreement, the Offer or the Merger, and an
appropriate court does not determine that it is inapplicable or invalid,
Purchaser or Parent might be required to file certain information with, or
receive approvals from, the relevant state authorities, and might be unable to
accept for payment or pay for any Shares tendered pursuant to the Offer, or sold
to Purchaser pursuant to the Option Agreement, or be delayed in continuing or
consummating the Offer, the Option Agreement, and the Merger. In such case,
Purchaser may not be obligated to accept for payment, or pay for, any Shares
tendered. See Section 15.
ANTITRUST. Under the provisions of the HSR Act applicable to the Offer, the
acquisition of Shares under the Offer may be consummated following the
expiration of a 15-calendar day waiting period following the filing by Parent of
a Notification and Report Form with respect to the Offer, unless Parent receives
a request for additional information or documentary material from the Antitrust
Division of the Department of Justice (the "Antitrust Division") or the Federal
Trade Commission (the "FTC") or unless early termination of the waiting period
is granted. If, within the initial 15-calendar day waiting period, either the
Antitrust Division or the FTC requests additional information or material from
Parent concerning the Offer, the waiting period will be extended and would
expire at 11:59 p.m., New York City time, on the tenth calendar day after the
date of substantial compliance by Parent with such request. Only one extension
of the waiting period pursuant to a request for additional information is
authorized by the HSR Act. Thereafter, such waiting period may be extended only
by court order or with the consent of Parent. In practice, complying with a
request for additional information or material can take a significant amount of
time.
The Merger would not require an additional filing under the HSR Act if the
Purchaser owns 50% or more of the outstanding Shares at the time of the Merger
or if the Merger occurs within one year after the HSR Act waiting period
applicable to the Offer expires or is terminated.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as Purchaser's acquisition of the Shares
pursuant to the Offer and the Merger Agreement. At any time before or after
Purchaser's acquisition of Shares, the Antitrust Division or the FTC could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the acquisition of Shares pursuant
to the Offer or otherwise or seeking divestiture of Shares acquired by Purchaser
or divestiture of substantial assets of Parent or its subsidiaries. Private
parties and state attorneys general may also bring legal action under the
antitrust laws in certain circumstances. There can be no assurance that a
challenge to the Offer or other acquisition of Shares by Purchaser or Parent on
antitrust grounds will not be made or, if such challenge is made, of the result.
See Section 15 for certain conditions to the Offer, including conditions with
respect to litigation and certain governmental actions.
FEDERAL RESERVE BOARD REGULATIONS. Federal Reserve Board regulations T, U
and X restrict the extension or maintenance of credit for the purpose of buying
or carrying margin stock, including the Shares, if the credit is secured
directly or indirectly thereby. Such secured credit may not be extended or
maintained in an amount that exceeds the maximum loan value of the margin stock.
Under such regulations, the Shares are presently margin stock and the maximum
loan value thereof is generally 50% of their current market value. The
definition of "indirectly secured" contained in such regulations provides that
the term does not include an arrangement with a customer if the lender in good
faith has not relied upon margin stock as collateral in extending or maintaining
the particular credit. Purchaser and Parent believe that the financing of the
acquisition of the Shares will not be subject to the margin regulations.
37
<PAGE>
FOREIGN LAWS. The Company's 1998 Annual Report to Stockholders indicates
that the Company and certain of its subsidiaries conduct business in certain
foreign countries where regulatory filings or approvals may be required in
connection with the consummation of the Offer. Certain of such filings, if
required, may not be completed and certain of such approvals, if required, may
not be obtained, prior to the expiration of the Offer. However, there is no
present intention to delay the acceptance for payment of or the payment for
Shares pursuant to the Offer pending the completion of such filings and the
obtaining of such approvals. There is no assurance that any such approvals would
be obtained or that adverse consequences to Parent's or the Company's business
might not result from a failure to obtain such approvals or conditions that
might be imposed in connection therewith.
17. FEES AND EXPENSES
Purchaser and Parent have retained Morgan Stanley to act as the Dealer
Manager and to provide certain financial advisory services in connection with
the proposed acquisition of the Company. In connection with such services Parent
has agreed to pay Morgan Stanley (i) a monthly retainer of $75,000, (ii) a fee
of $750,000 upon Parent's announcement of an agreement to acquire the Company
(against which the monthly retainer will be credited), and (iii) a transaction
fee of $2,750,000 (against which the monthly retainer and the announcement fee
will be credited) if an acquisition of all or part of the Company is concluded.
The transaction fee will become payable in the event Purchaser acquires a
majority of the outstanding Shares. In addition, Parent has agreed to reimburse
Morgan Stanley for all reasonable expenses incurred by Morgan Stanley, including
the reasonable fees and disbursements of its legal counsel, and to indemnify
Morgan Stanley and certain related persons against certain liabilities and
expenses, including, without limitation, certain liabilities under the federal
securities laws.
Purchaser and Parent have retained D.F. King & Co., Inc. to act as the
Information Agent and First Chicago Trust Company of New York to serve as the
Depositary in connection with the Offer. The Information Agent and the
Depositary each will receive reasonable and customary compensation for their
services, be reimbursed for certain reasonable out-of-pocket expenses and be
indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities and expenses under the federal securities laws.
Neither Purchaser nor Parent will pay any fees or commissions to any broker
or dealer or other person or entity (other than the Dealer Manager and as
described in the preceding paragraph) in connection with the solicitation of
tenders of Shares pursuant to the Offer. Brokers, dealers, banks and trust
companies will be reimbursed by Purchaser upon request for customary mailing and
handling expenses incurred by them in forwarding material to their customers.
18. MISCELLANEOUS
The Offer is being made solely by this Offer to Purchase and the related
Letter of Transmittal, and is being made to all holders of Shares. Purchaser is
not aware of any jurisdiction in which the making of the Offer is not in
compliance with applicable law. If Purchaser becomes aware of any jurisdiction
in which the making of the Offer would not be in compliance with applicable law,
Purchaser will make a good faith effort to comply with any such law. If, after
such good faith effort, Purchaser cannot comply with any such law, the Offer
will not be made to (nor will tenders be accepted from or on behalf of) the
holders of Shares residing in such jurisdiction. In those jurisdictions whose
securities or blue sky laws require the Offer to be made by a licensed broker or
dealer, the Offer is being made on behalf of Purchaser by one or more registered
brokers or dealers which are licensed under the laws of such jurisdiction.
38
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE OR
THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Purchaser and Parent have filed with the Commission a Tender Offer Statement
on Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act, together with
exhibits, furnishing certain additional information with respect to the Offer,
and may file amendments thereto. Such Tender Offer Statement and any amendments
thereto, including exhibits, should be available for inspection and copies
should be obtainable in the manner set forth in Section 7 (except that such
material will not be available at the regional offices of the Commission).
Aegis Acquisition Corp.
May 4, 1999, as amended May 28, 1999
39
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
AEGIS ACQUISITION CORP.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL
OCCUPATION
OR EMPLOYMENT AND
FIVE-YEAR EMPLOYMENT
NAME AND BUSINESS ADDRESS OFFICE(S) HISTORY CITIZENSHIP
- ----------------------------- ------------------------ ------------------------------------- -----------------
<S> <C> <C> <C>
Crispin Davis ............... Director/President Director/Chief Executive Officer of United Kingdom
11A West Halkin Street Aegis Group plc since 1994. Director
London, SWIX 8JL of United Distillers to April 1993.
England From 1992 to 1993 Group Managing
Director of United Distillers and a
member of the Guinness plc Board.
Colin Day ................... Director/Vice President Group Finance Director of Aegis Group United Kingdom
11A West Halkin Street (Finance) plc since February 1995. Finance
London, SWIX 8JL Director of ABB Instrumentation Group
England prior to February 1995. Non-Executive
Director of Bell Security Limited
from January 1999. Former Non-
Executive Director of Vero plc.
Eleonore Sauerwein .......... Director/Vice President Group Legal Director of Aegis/Carat France
c/o Aegis/Carat Group (Legal)/ Group since 1993.
4, Place de Saverne Secretary
Courbevoie
92971-Paris-La Defense
France
Andrew Parnes ............... Director/Treasurer Group Treasurer of Aegis Group plc United Kingdom
11A West Halkin Street since May 1995. Treasury Consultant
London, SWIX 8JL February 1994 to April 1995.
England
</TABLE>
AEGIS GROUP PLC
<TABLE>
<CAPTION>
PRESENT PRINCIPAL
OCCUPATION
OR EMPLOYMENT AND
FIVE-YEAR EMPLOYMENT
NAME AND BUSINESS ADDRESS OFFICE(S) HISTORY CITIZENSHIP
- ----------------------------- ------------------------ ------------------------------------- -----------------
<S> <C> <C> <C>
Francis Stephen Law, CBE Non-Executive Chairman Non-Executive Chairman of Aegis Group United Kingdom
11A West Halkin Street of the Board plc since November 1, 1987.
London SWIW 8JL Non-Executive Director Milupa Ltd.
England from 1978 until May 1997. Non-
Executive Chairman of Siemens plc
from 1984 until November 1997.
Non-Executive Chairman of Varta Group
UK from 1971 until the present.
President of Rubis & Co. from 1990
until the present and a Director for
Celab Ltd. Governor of the Royal
Shakespeare Company.
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL
OCCUPATION
OR EMPLOYMENT AND
FIVE-YEAR EMPLOYMENT
NAME AND BUSINESS ADDRESS OFFICE(S) HISTORY CITIZENSHIP
- ----------------------------- ------------------------ ------------------------------------- -----------------
<S> <C> <C> <C>
Crispin Davis ............... Chief Executive Director/Chief Executive of Aegis United Kingdom
11A West Halkin Street Officer/Director Group plc since 1994. Director of
London SWIW 8JL United Distillers to April 1993. From
England 1992 to 1993 Group Managing Director
of United Distillers and a member of
the Guinness plc Board.
Colin Day ................... Group Finance Director Group Finance Director of Aegis Group United Kingdom
11A West Halkin Street plc since February 1995. Finance
London SWIX 8JL Director of ABB Instrumentation Group
England prior to February 1995. Non-Executive
Director of Bell Security Limited
from January 1999. Former Non-
Executive Director of Vero plc.
Kai Hiemstra ................ Board Member Board member of Aegis Group plc since Germany
HMS Carat Group, Germany July 1994. Chairman of HMS Carat
Kreuzberger Ring 19 Group since 1994.
65205 Wiesbaclen
Germany
Ray Kelly ................... Board Member Chairman & CEO of Carat Group UK Ltd United Kingdom
Carat Group UK Ltd. since July 1992. Board member of
Parker Tower Aegis Group plc since September 1992.
43-49 Parker Street
London WC2B SPS
England
Bruno Kemoun ................ Board Member Joint Chairman and CEO of Carat France
Carat France France since 1995. Appointed to Aegis
4, Place de Saverne Group plc Board in September 1992.
Courbevoie
92971 Paris-La Defense
France
Eryck Rebbouh ............... Board Member Joint Chairman and CEO of Carat France
Carat France France since 1995. Appointed to Aegis
4, Place de Saverne Group plc Board in September 1992.
Courbevoie
92971 Paris-La Defense
France
John Amerman ................ Non-Executive Director Non-Executive Director of Aegis Group United States
2101 Rosecrans Avenue plc since December 1997. Chairman and
Suite 6280 CEO of Mattel Inc. from February 1987
El Segundo, CA 90245 to December 1996, and advisor to
Mattel Inc. until October 1997.
Douglas Flynn ............... Non-Executive Director Managing Director of News Australia
News International plc International plc since January 1994.
1 Virginia Street
London, E19BD
England
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL
OCCUPATION
OR EMPLOYMENT AND
FIVE-YEAR EMPLOYMENT
NAME AND BUSINESS ADDRESS OFFICE(S) HISTORY CITIZENSHIP
- ----------------------------- ------------------------ ------------------------------------- -----------------
<S> <C> <C> <C>
Sir Kit McMahon ............. Non-Executive Director Non-Executive Director of Aegis Group United Kingdom
The Old House plc since May 1993. Director of
Burleigh Taylor Woodraw plc since 1991 and of
Stroud FI Group plc since 1994.
Glos GLS 2PQ
England
Sir Peter Thompson .......... Non-Executive Director Non-Executive Director of Aegis Group United Kingdom
The Mill House plc since May 1993. Chairman of FI
Mill Street Group plc and Child Base Ltd.
Newport Pagnell
Bucks, England
Philippe Villin ............. Non-Executive Director Non-Executive Director of Aegis Group France
Lehman Brother plc since October 1995. Chairman of
21 rue Balzac PH. Villin Conseil since 1994.
75406 Paris Managing director of Lehman Brothers.
Managing partner of Eurofin during
1995. Chairman BZW France from
September-December 1997.
*Andrew Parnes .............. Group Treasurer Group Treasurer of Aegis plc since United Kingdom
11A West Halkin Street May 1995. Treasury Consultant
London SWIX 8JL February 1994 to April 1995.
England
*Eleonore Sauerwein ......... Group Legal Director Group Legal Director of Aegis Carat France
c/o Aegis/Carat Group Group since 1993.
4 Place de Saverne
Courbevoie
92971 Paris-La Defense
France
*William Skerrett ........... Group Human Resources Group Human Resources Director of United Kingdom
11A West Halkin Street Director Aegis Group plc since November 1995.
London SWIX 8JL Group Personnel Director of Scholl
England plc from January 1984 until November
1995.
</TABLE>
- --------------------------
* Executive officer; not a member of the Board of Directors.
S-3
<PAGE>
The Letter of Transmittal, certificates for Shares and any other required
documents should be sent or delivered by each stockholder of the Company or his
broker, dealer, commercial bank or other nominee to the Depositary at one of its
addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
<S> <C> <C>
BY MAIL: BY OVERNIGHT DELIVERY: BY HAND:
First Chicago Trust Company of New York First Chicago Trust Company of New York First Chicago Trust Company of New York
Corporate Actions Corporate Actions, Suite 4680 c/o Securities Transfer and Reporting
Suite 4660 14 Wall Street, 8th Floor Services Inc.
P.O. Box 2569 New York, NY 10005 Attn: Corporate Actions
Jersey City, NJ 07303-2569 100 William Street, Galleria
New York, NY 10038
</TABLE>
Any questions or requests for assistance or additional copies of this Offer to
Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be
directed to the Information Agent at its telephone numbers and location listed
below. You may also contact your broker, dealer, commercial bank or trust
company or nominee for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Stockholders call toll-free: (800) 994-3227
Brokers and Banks call collect: (212) 269-5550
THE DEALER MANAGER FOR THE OFFER IS:
MORGAN STANLEY DEAN WITTER
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
(212) 761-7449
<PAGE>
EXHIBIT 99(d)(1)
JOINT FILING AGREEMENT
In accordance with Rule 13d-l(f) under the Securities Exchange Act of
1934, as amended, the persons named below agree to the joint filing on behalf
of each of them of a statement on Schedule 13D (including amendments thereto)
with respect to the common stock, par value $1.00 per share, of Market Facts,
Inc., and further agree that this Joint Filing Agreement be included as an
Exhibit to such joint filing. In evidence thereof, the undersigned, hereby
execute this Agreement this 27th day of May, 1999.
AEGIS GROUP PLC
By: /s/ ELEONORE SAUERWEIN
-----------------------
Name: Eleonore Sauerwein
Title: Group Legal Director
AEGIS ACQUISITION CORP.
By: /s/ ELEONORE SAUERWEIN
-----------------------
Name: Eleonore Sauerwein
Title: Vice President
