UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)*
THE LESLIE FAY COMPANY, INC.
(Name of Issuer)
Common Stock, par value $.01
(Title of Class of Securities)
527016109
(CUSIP Number)
-----------------------
Robert M. Hirsh, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Tel. No.: (212) 373-3000
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
-----------------------
July 26, 1999
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
statement because of Rule 13d-1(b)(3) or (4), check the following box [ ].
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
* The 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).
================================================================================
Exhibit Index at Page 14
Page 1 of 16 Pages
<PAGE>
SCHEDULE 13D
CUSIP No. 527016109
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Three Cities Fund II, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO - Partner Contributions
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 1,044,478
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
801,880
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,400,598
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38.3%
14 TYPE OF REPORTING PERSON
PN
Page 2 of 16 Pages
<PAGE>
SCHEDULE 13D
CUSIP No. 527016109
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
TCR Associates, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 1,044,478
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
801,880
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,400,598
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38.3%
14 TYPE OF REPORTING PERSON
PN
Page 3 of 16 Pages
<PAGE>
SCHEDULE 13D
CUSIP No. 527016109
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Three Cities Research, Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 2,400,598
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
2,158,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,400,598
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38.3%
14 TYPE OF REPORTING PERSON
CO
Page 4 of 16 Pages
<PAGE>
SCHEDULE 13D
CUSIP No. 527016109
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Three Cities Offshore II C.V.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO - Partner Contributions
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Netherlands Antilles
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 1,598,718
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
1,356,120
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,400,598
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38.3%
14 TYPE OF REPORTING PERSON
PN
Page 5 of 16 Pages
<PAGE>
SCHEDULE 13D
CUSIP No. 527016109
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
TCR Offshore Associates, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Netherlands Antilles
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 1,598,718
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
1,356,120
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,400,598
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38.3%
14 TYPE OF REPORTING PERSON
PN
Page 6 of 16 Pages
<PAGE>
SCHEDULE 13D
CUSIP No. 527016109
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Three Cities Associates, N.V.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Netherlands Antilles
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 1,598,718
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
1,356,120
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,400,598
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38.3%
14 TYPE OF REPORTING PERSON
CO
Page 7 of 16 Pages
<PAGE>
SCHEDULE 13D
CUSIP No. 527016109
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
J. William Uhrig
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 1,598,718
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
1,356,120
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,400,598
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38.3%
14 TYPE OF REPORTING PERSON
IN
Page 8 of 16 Pages
<PAGE>
AMENDMENT NO. 1 TO SCHEDULE 13D
This Amendment No. 1 supplements the Schedule 13D ("Schedule 13D"),
filed on May 24, 1999, in the following respects only (capitalized terms used
herein shall have the meanings ascribed to such terms in the Schedule 13D):
Item 4. Purpose of Transaction.
The last paragraph of Item 4 is amended and restated in its entirety as
follows:
Except as described above and as set forth in Item 6, the Reporting
Persons have no plans or proposals which relate to or would result in:
(a) The acquisition by any person of additional securities of the
Company, or the disposition of securities of the Company;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its subsidiaries;
(c) A sale or transfer of a material amount of assets of the Company or
any of its subsidiaries;
(d) Any change in the present board of directors or management of the
Company, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or dividend
policy of the Company;
(f) Any other material change in the Company's business or corporate
structure;
(g) Changes in the Company's charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Company by any person;
(h) Causing a class of securities of the Company to be delisted from a
national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(i) A class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); or
Page 9 of 16 Pages
<PAGE>
(j) Any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
Item 5 is amended and restated in its entirety as follows:
(a) Fund II
Fund II may, pursuant to Rules 13d-3 and 13d-5 under the
Exchange Act, be deemed to be the beneficial owner of 2,400,598 shares of Common
Stock, which constitute approximately 38.3% of the outstanding 1/ shares of
Common Stock. The 2,400,598 shares of Common Stock consist of 801,880 shares
directly owned by Fund II, 1,356,120 shares directly owned by Offshore II and
242,598 2/ shares beneficially owned by John J. Pomerantz ("Pomerantz"),
Chairman of the Board and Chief Executive Officer of the Company, with respect
to which the Three Cities Funds share voting power with respect to voting shares
for board nominees, as described in Item 6. Of the 242,598 shares of Common
Stock beneficially owned by Pomerantz, 10,000 shares are directly owned and
232,598 shares are issuable upon exercise of presently exercisable stock
options.
TCR Associates
In its capacity as the sole general partner of Fund II, TCR
Associates may, pursuant to Rules 13d-3 and 13d-5 under the Exchange Act, be
deemed to be the beneficial owner of 2,400,598 shares of Common Stock, which
constitute approximately 38.3% of the outstanding shares of Common Stock.
Research
As the investment advisor to Fund II and Offshore II, with the
power to direct voting by both Fund II and Offshore II and to direct the
disposition of assets by both Fund II and Offshore II, Research may, pursuant to
Rule 13d-3 under the Exchange Act, be deemed to be the beneficial owner of
2,400,598 shares of
- --------
1/ Percentages and number of outstanding shares of Common Stock are based
upon the 6,041,138 shares of Common Stock reported outstanding as of
July 23, 1999 in the Company's proxy statement dated July 30, 1999 and
the 232,598 shares of Common Stock that are issuable upon exercise of
the 232,598 options presently exercisable by John J. Pomerantz which
may be deemed to be beneficially owned by the Reporting Persons as a
result of the agreement described in Item 6.
2/ Reflects beneficial ownership as of July 23, 1999 as reported in the
Company's proxy statement dated July 30, 1999.
Page 10 of 16 Pages
<PAGE>
Common Stock, which constitute approximately 38.3% of the outstanding shares of
Common Stock.
Offshore II
Offshore II may, pursuant to Rules 13d-3 and 13d-5 under the
Exchange Act, be deemed to be the beneficial owner of 2,400,598 shares of Common
Stock, which constitute approximately 38.3% of the outstanding shares of Common
Stock. The 2,400,598 shares of Common Stock consist of 1,356,120 shares directly
owned by Offshore II, 801,880 shares directly owned by Fund II and 242,598
shares beneficially owned by Pomerantz, with respect to which the Three Cities
Funds share voting power with respect to voting shares for board nominees, as
described in Item 6. Of the 242,598 shares of Common Stock beneficially owned by
Pomerantz, 10,000 shares are directly owned and 232,598 shares are issuable upon
exercise of presently exercisable stock options.
TCR Offshore
In its capacity as the sole general partner of Offshore II,
TCR Offshore may, pursuant to Rules 13d-3 and 13d-5 under the Exchange Act, be
deemed to be the beneficial owner of 2,400,598 shares of Common Stock, which
constitute approximately 38.3% of the outstanding shares of Common Stock.
TCA, N.V.
In its capacity as the sole general partner of TCR Offshore,
TCA N.V. may, pursuant to Rules 13d-3 and 13d-5 under the Exchange Act, be
deemed to be the beneficial owner of 2,400,598 shares of Common Stock, which
constitute approximately 38.3% of the outstanding shares of Common Stock.
Uhrig
As the sole stockholder and the only director of TCA, N.V.,
which is the sole general partner of TCR Offshore, which in turn is the sole
general partner of Offshore II, Uhrig may, pursuant to Rules 13d-3 and 13d-5
under the Exchange Act, be deemed to be the beneficial owner of 2,400,598 shares
of Common Stock, which constitute approximately 38.3% of the outstanding shares
of Common Stock.
(b) Fund II and TCR Associates may be deemed to share the
power to vote or direct the vote of 1,044,478 shares of Common Stock, and may be
deemed to share the power to dispose of or direct the disposition of 801,880
shares of Common Stock.
Page 11 of 16 Pages
<PAGE>
Offshore II, TCR Offshore, TCA, N.V. and Uhrig may be deemed
to share the power to vote or direct the vote of 1,598,718 shares of Common
Stock, and may be deemed to share the power to dispose of or direct the
disposition of 1,356,120 shares of Common Stock.
Research may be deemed to share the power to vote or direct
the vote of 2,400,598 shares of Common Stock, and may be deemed to share the
power to dispose of or direct the disposition of 2,158,000 shares of Common
Stock.
POMERANTZ 3/
John J. Pomerantz is an individual who, to the best of the Reporting
Persons' knowledge, is a citizen of the United States. The name, residence or
business address, and present principal occupation or employment of Mr.
Pomerantz is as follows:
<TABLE>
<CAPTION>
Residence or Principal Occupation
Name Business Address or Employment
---- ---------------- -------------
<S> <C> <C>
John J. Pomerantz c/o The Leslie Fay Company, Inc. Chairman and Chief Executive Officer of
1412 Broadway The Leslie Fay Company, Inc.
New York, NY 10018
</TABLE>
To the best of the Reporting Persons' knowledge, Mr. Pomerantz has not,
during the last five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors).
To the best of the Reporting Persons' knowledge, Mr. Pomerantz has not,
during the last five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
been subject to, and is not currently subject to, a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws.
(c) The only transactions in shares of Common Stock effected by the
Reporting Persons since the filing of the Schedule 13D is the signing of a
letter agreement dated July 26, 1999 among the Three Cities Funds and Pomerantz,
pursuant to which the parties to the agreement have agreed to share voting power
over
- --------
3/ All information provided with respect to Mr. Pomerantz is based on the
information reported in the Company's proxy statement dated July 30,
1999.
Page 12 of 16 Pages
<PAGE>
shares of Common Stock held by them with respect to voting shares for board
nominees, as described in Item 6.
(d) To the best of the Reporting Persons' knowledge, except as set
forth herein, no other person has the right to receive or the power to direct
the receipt of dividends from, or the proceeds from the sale of, any shares of
Common Stock that the Reporting Persons may be deemed to own beneficially.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer.
Item 6 is amended and restated in its entirety as follows:
The Three Cities Funds and Mr. Pomerantz have entered into a letter
agreement dated as of July 26, 1999 (the "Pomerantz Letter Agreement"), pursuant
to which they have agreed to vote their shares of Common Stock in favor of each
of the nominees for the directors listed in the Company's proxy statement dated
July 30, 1999, and not to take any actions to change the size or composition of
the Board before the next annual meeting of stockholders of the Company
following the annual meeting scheduled for August 24, 1999, if at all. The Three
Cities Funds and Mr. Pomerantz have also agreed that, for so long as Mr.
Pomerantz has the contractual right to designate at least one nominee to the
Board, (1) the Three Cities Funds and Mr. Pomerantz will agree on the identity
of all nominees for director (other than any nominee of someone else who has a
contractual right to designate such nominee) and (2) the Three Cities Funds and
Mr. Pomerantz will vote their shares of Common Stock for their agreed-upon
nominees and against any nominees competing against the agreed-upon nominees. If
the Three Cities Funds and Mr. Pomerantz do not agree upon the identity of all
of the nominees for directors, then (x) Mr. Pomerantz has the right to designate
a number of nominees equal to at least 28% of the nominees to the Board and the
Three Cities Funds have the right to designate a number of nominees equal to at
least a percentage of the Board equal to the percentage of outstanding shares of
Common Stock then owned in the aggregate by the Three Cities Funds, who must be
reasonably satisfactory to Mr. Pomerantz (all officers of Research are deemed to
be satisfactory to Mr. Pomerantz), and (y) the Three Cities Funds and Mr.
Pomerantz will vote in favor of the other's nominees.
Except as described in the paragraph above and under Items 4 and 5,
there exist no contracts, arrangements, understandings or relationships (legal
or otherwise) between any of the Reporting Persons and any other persons with
respect to any securities of the Issuer, including but not limited to transfer
or voting of any
Page 13 of 16 Pages
<PAGE>
such securities, finder's fees, joint ventures, loan or option arrangements,
puts or calls, guarantees of profits, division of profits or loss, or the giving
or withholding of proxies.
Item 7. Material to be Filed as Exhibits.
Item 7 is amended by the addition of the following:
Exhibit 4 Pomerantz Letter Agreement
Page 14 of 16 Pages
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of the knowledge and belief of
the undersigned, the undersigned certifies that the information set forth in
this statement is true, complete and correct.
Dated: August 5, 1999
THREE CITIES FUND II, L.P.
By: TCR Associates, L.P.,
its General Partner
By: Three Cities Research, Inc.,
its General Partner
By: /s/ Thomas G. Weld
------------------
Thomas G. Weld
Treasurer
TCR ASSOCIATES, L.P.
By: Three Cities Research, Inc.,
its General Partner
By: /s/ Thomas G. Weld
------------------
Thomas G. Weld
Treasurer
THREE CITIES RESEARCH, INC.
By: /s/ Thomas G. Weld
------------------
Thomas G. Weld
Treasurer
Page 15 of 16 Pages
<PAGE>
THREE CITIES OFFSHORE II C.V.
By: TCR Offshore Associates, L.P.,
its General Partner
By: Three Cities Associates, N.V.,
its General Partner
By: /s/ J. William Uhrig
--------------------
J. William Uhrig
President
TCR OFFSHORE ASSOCIATES, L.P.
By: Three Cities Associates, N.V.,
its General Partner
By: /s/ J. William Uhrig
--------------------
J. William Uhrig
President
THREE CITIES ASSOCIATES, N.V.
By: /s/ J. William Uhrig
--------------------
J. William Uhrig
President
/s/ J. William Uhrig
--------------------
J. William Uhrig
Page 16 of 16 Pages
Three Cities Offshore II C.V.
Three Cities Fund II, L.P.
c/o Three Cities Research, Inc.
650 Madison Avenue
New York, New York 10022
July 26, 1999
Mr. John J. Pomerantz
President and Chief Executive Officer
The Leslie Fay Company, Inc.
1412 Broadway
New York, NY 10018
Directors
---------
Dear Mr. Pomerantz:
The New Stockholders (as defined below) have agreed to acquire up to
approximately 65% of the outstanding capital stock through a stock purchase and
subsequent merger of The Leslie Fay Company, Inc., a Delaware corporation (the
"Company"). You and the Company are parties to an employment agreement, dated as
of January 4, 1998 (the "Executive Employment Agreement").
Capitalized terms used and not otherwise defined shall have the
meanings set forth in the Registration Rights Agreement, dated as of May 12,
1999, among the Company and Three Cities Fund II, L.P., a Delaware limited
partnership ("TCF II"), and Three Cities Offshore II C.V., a Netherlands
Antilles limited partnership (together with TCF II, the "New Stockholders").
The New Stockholders and you agree (i) to vote the respective shares of
Common Stock owned by the New Stockholders and you in favor of the nominees for
the Board of Directors at the next annual meeting of stockholders of the Company
scheduled for August 24, 1999 (the "Upcoming Meeting") who will be the directors
of the Company who were directors of the Company at the time of the public
announcement of the Merger and (ii) not to take any actions to change the size
or composition of the Board of Directors until at least the next annual meeting
of stockholders of the Company following the Upcoming Meeting.
With respect to nominees for the Board of Directors at Subsequent
Annual Meetings, for so long as you have the contractual right to designate at
least one nominee to the Board of Directors of the Company, the New Stockholders
and you shall mutually agree on the identity of all of the nominees to serve as
directors (the "Joint Slate") of the Company (other than any nominee of other
persons who
<PAGE>
2
have a contractual right to designate such nominee). If the New Stockholders and
you do not agree on the Joint Slate within a reasonable period of time prior to
the date regularly set for the mailing of the proxy statement for a Subsequent
Annual Meeting, you shall have the right to designate at least 28% of the
nominees to the Board of Directors of the Company in accordance with the
Executive Employment Agreement (the "Pomerantz Nominees"), and the New
Stockholders shall have the right to designate at least their Proportionate
Percentage of the Board of Directors of the Company (the "New Stockholder
Nominees"); provided, that before the New Stockholders shall designate any
individual, you shall have a reasonable opportunity to meet with such individual
and such individual must be reasonably satisfactory to you. You acknowledge that
any officer of Three Cities Research, Inc. is deemed to be reasonably
satisfactory as a nominee to serve as a director of the Company.
Notwithstanding any of the foregoing, the New Stockholders and you
acknowledge that any of the nominees designated in accordance with this letter
shall be subject to the approval of a majority of the Board of Directors of the
Company voting on the matter in accordance with the Company's By-laws; provided,
however, that if the Joint Slate or such other nominees are not so approved, the
New Stockholders and you shall take such reasonable further action in their
capacity as stockholders of the Company as may be reasonably necessary to effect
a stockholder election of the Joint Slate or such other nominees at such
Subsequent Annual Meeting; provided, further, that notwithstanding anything to
the contrary contained herein, neither the New Stockholders nor you shall be
obligated or otherwise required to effect a proxy contest to have any or all of
the Joint Slate or such nominees elected as directors of the Company.
The New Stockholders and you each agree as follows:
(A) to appear, or cause the holder of record (the "Record
Holder") of any shares of Common Stock beneficially owned by the New
Stockholders and you, as the case may be, on any applicable record date to
appear, for the purpose of obtaining a quorum at any annual or special meeting
of stockholders of the Company and at any adjournment thereof, at which matters
relating to the nomination of directors are considered; and
(B) at any meeting of the stockholders of the Company, however
called, and in any action by consent of the stockholders of the Company, to
vote, or cause to be voted by the Record Holder, any shares of Common Stock then
owned by the New Stockholders and you, as the case may be, (i) (x) if the New
Stockholders and you agree on the Joint Slate and the Joint Slate is put to a
vote of stockholders of the Company, in favor of the adoption of the Joint Slate
or (y) if a Joint Slate is not agreed or put to such a vote, in favor of the
election of the Pomerantz Nominees and the New Stockholder Nominees to the
extent such Nominees are put to a vote of stockholders of the Company and (ii)
against any competing slate of directors.
<PAGE>
3
This letter shall be governed by and construed in accordance with the
laws of the State of Delaware.
If the foregoing accurately sets forth your understanding with regard
to the matter specified herein, please so indicate your agreement by signing a
copy of this letter and returning an original to us at the address set forth
above.
Sincerely,
THREE CITIES OFFSHORE II C.V.
By: THREE CITIES ASSOCIATES N.V.,
its general partner
By: /s/ J. William Uhrig
--------------------
J. William Uhrig
Managing Director
THREE CITIES FUND II, L.P.
By: TCR ASSOCIATES, L.P.,
its general partner
By: /s/ Thomas G. Weld
------------------
Thomas G. Weld
Treasurer
ACCEPTED AND AGREED as of the date first written above:
/s/ John J. Pomerantz
- ---------------------
John J. Pomerantz
