UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number: 0 - 21460
NFO WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1327424
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2 PICKWICK PLAZA, GREENWICH, CT. 06830
(Address of principle executive offices) (Zip Code)
(203) 629-8888
(Registrant's telephone number, including area code)
Common Stock, par value $.01 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by checkmark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of the
Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 26, 1999, was approximately $160,431,671.
As of March 26, 1999, there were 21,435,826 shares of the registrant's Common
Stock outstanding.
DOCUMENT INCORPORATED BY REFERENCE
Selected portions of NFO Worldwide, Inc.'s 1999 Proxy Statement are
incorporated by reference into Part III of this report on Form 10-K.
<PAGE>
This Amendment No. 1 on Form 10-K/A to the Annual Report on Form 10-K of NFO
Worldwide, Inc. (the "Company") for the year ended December 31, 1998, amends
Part III Items 10, 11, 12 and 13 in their entirety. No other Items of the
Company's Annual Report on Form 10-K for the year ended December 31, 1998, are
amended.
PART III
Item 10. Directors and Executive Officers of the Registrant
NOMINEES FOR ELECTION AS DIRECTORS
The Board of Directors currently consists of five members. It is intended that
the proxies in the accompanying form will be voted at the meeting for the
election to the Board of Directors of the named nominees, William E. Lipner,
Steven J. Gilbert, Walter A. Forbes, Edmund A. Hajim and John Sculley, all of
whom currently serve as directors.
The Board of Directors has no reason to believe that any of such nominees will
be unable or unwilling to serve as a director if elected, but if any nominee
should be unable or for good cause unwilling to serve, the shares represented by
proxies solicited by the Board of Directors will be voted for the election of
such other person for the office of director as the Board of Directors may
recommend in place of such nominee.
Set forth below are each nominee's name, age, principal occupation, position
with the Company, period of service as a director of the Company, membership on
committees of the Board of Directors, and other directorships held.
<TABLE>
<CAPTION>
Name Age Position Director Since
---- --- -------- --------------
<S> <C> <C> <C>
William E. Lipner(l)...............51 Chairman of the Board, President,
Chief Executive Officer and Director 1991
Steven J. Gilbert(l)(2)(3).........52 Director 1991
Walter A. Forbes(l)(3)(4)..........56 Director 1991
Edmund A. Hajim(2)(3)(4)...........62 Director 1992
John Sculley(2)(4).................60 Director 1994
</TABLE>
- ------------------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
(4) Member of the Nominating Committee
Mr. Lipner has been with the Company or its predecessor, National Family
Opinion, Inc. (the "Predecessor") for over 25 years, serving as its President
and Chief Executive Officer since July 1982 and as Chairman of the Board of
Directors since February 1993. Mr. Lipner has been a director of the Company
since its organization in September 1991. Mr. Lipner is also a director of Crane
Co., a diversified aerospace engineering and manufacturing company.
2
<PAGE>
Mr. Gilbert has been a director of the Company since its organization in
September 1991 and served as the Chairman of the Board of Directors from
September 1991 to February 1993 and as Vice Chairman of the Board of Directors
from February 1993 to March 1998. Mr. Gilbert is Chairman of the Board of
Gilbert Global Equity Partners, L.P., a private equity fund. Mr. Gilbert was the
Managing General Partner of Soros Capital L.P., an investment firm, from 1992 to
1997. Mr. Gilbert is also a director of Veritas, Inc., a marine seismic company,
ESAT Telecom Holdings, an Irish telecommunications company, Terra Nova (Bermuda)
Holdings, Limited, a Bermuda based reinsurer, Colep Holding, Ltd., a Portuguese
packaging company, LLC International, Inc., a wireless telephone engineering
firm, the Asian Infrastructure Fund, and Star City Casino Holdings Pty. Ltd., an
Australian gaming concern.
Mr. Forbes has been a director of the Company since its organization in
September 1991. Mr. Forbes was the Chairman and Chief Executive Officer of CUC
International Inc. (now Cendant Corporation), an interactive electronic consumer
services company, from 1988 through December 1997. From December 1997 through
July 1998, Mr. Forbes was the Chairman of Cendant Corporation. In July 1998, Mr.
Forbes resigned as an officer and director of Cendant corporation. Since July
1998, Mr. Forbes has been an independent investor.
Mr. Hajim has been a director of the Company since February 1992. Mr. Hajim is
co-chairman, Americas Region, of ING Barings, the corporate and investment
banking unit of ING Group, N.V. He is also chairman and chief executive officer
of ING Furman Selz Asset Management, a division of ING Asset Management, the
asset management unit of ING Group. From 1983 to 1998, Mr. Hajim was the
Chairman and Chief Executive Officer of Furman Selz LLC, an investment banking,
brokerage and money management firm. Mr. Hajim is also a director of Tosco
Corporation, a refiner and marketer of petroleum products and a manufacturer and
distributor of fertilizer products.
Mr. Sculley joined the Board of Directors in October 1994. From 1983 to 1993,
Mr. Sculley was the Chairman and Chief Executive Officer of Apple Computer, Inc.
For five months (from October 1993 to February 1994), Mr. Sculley was the
Chairman and Chief Executive Officer of Spectrum Information Technologies, Inc.
("Spectrum"). On January 26, 1995, Spectrum, together with three of its four
operating subsidiaries, filed voluntary petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the Eastern District of New York. John Sculley is a partner with his
brothers Arthur and David in Sculley Brothers, a family investment capital firm,
which focuses on media enabling technologies; Internet services; and consumer
businesses. The Sculleys are active in about 20 companies in Silicon Valley, New
York, Bermuda and Israel. Their multimedia investments include: NetObjects; Live
Picture; Zapa Digital Arts; Veon; SoftVideo; Cambridge Display Technologies; and
Sirius Thinking. Their Internet service investments include Intralinks; Talk
City; PeopleScape; GreenTree and Buy.Com. Their consumer companies include
Wolfgang Puck Foods; Select Comfort; Ranch 1 and Frame King. Sculley Brothers is
based in New York City.
BOARD OF DIRECTORS AND COMMITTEES
The business of the Company is managed under the direction of the Board of
Directors. The Board of Directors has established four principal committees
whose primary functions are briefly described below. During 1998, the Board of
Directors met or acted by written consent ten times. Each director attended at
least 75% of the total number of meetings held during 1998 while he was a member
of the Board of Directors, including meetings of committees of which the
director is a member.
3
<PAGE>
The Audit Committee is presently composed of Messrs. Gilbert, Hajim and Sculley.
The Audit Committee's functions include recommending to the Board of Directors
the appointment of independent public accountants for the Company, subject to
the approval of the stockholders, discussing and reviewing the scope and the
fees of the prospective annual audit and reviewing the results thereof with the
independent accountants, reviewing compliance with existing major accounting and
financial policies of the Company, reviewing the adequacy of the financial
organization of the Company, and considering comments by the independent
accountants regarding internal controls and accounting procedures and
management's response to those comments. In 1998, the committee held one
meeting.
The Compensation Committee is composed of Messrs. Forbes, Gilbert and Hajim. The
functions of the Compensation Committee include reviewing and making
recommendations to the Board of Directors regarding salaries, compensation and
benefits of executive officers and key employees of the company. In 1998, the
committee held one meeting and acted by written consent seven times. A
subcommittee of the Compensation Committee, the Stock Option Committee, has been
established by the Board of Directors. The Stock Option Committee is presently
composed of Messrs. Forbes and Hajim and is responsible for administering the
NFO Worldwide, Inc. Stock Option Plan.
The Nominating Committee is composed of Messrs. Forbes, Hajim and Sculley. Its
principal function is to consider and nominate persons for election to the Board
of Directors. The committee acted by written consent once in 1998. The
Nominating Committee may consider nominees recommended by stockholders. In order
for the Nominating Committee to do so, written notice must be given and received
by the Secretary of the Company at the principal executive office of the Company
no later than 60 days prior to the anniversary date of the immediately preceding
annual meeting. Such notice shall set forth (i) the name and address of the
nominee; (ii) any arrangements or understandings between the stockholder and the
nominee or any third party with respect to the nomination; (iii) any other
information required to be included in a proxy statement pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); and (iv) the
consent of the nominee to serve as a director if so selected.
The Executive Committee is composed of Messrs. Lipner, Forbes and Gilbert. The
principal functions of the Executive Committee include exercising the powers of
the Board of Directors during intervals between Board meetings and acting as an
advisory body to the Board of Directors by reviewing various matters prior to
their submission to the Board of Directors. The Executive Committee did not meet
in 1998.
EXECUTIVE OFFICERS
In addition to Mr. Lipner, the Company's executive officers are as follows:
Name Age Position
---- --- --------
Charles B. Hamlin..........52 President - Interactive/High Technology
and Telecommunications
Patrick G. Healy...........43 President - Australasia and the Middle East
and Chief Financial Officer
Dr. Hartmut Kiock..........55 President - European Operations
Joseph M. Migliara.........54 President - North American Operations
4
<PAGE>
Mr. Hamlin joined the Company as its Executive Vice President - Interactive
Business Development in February 1996 and assumed his current position in
September 1997. From 1994 to 1996, he was Vice President of Marketing for Lotus
Development Corporation, a computer software company. From 1992 to 1994, Mr.
Hamlin was Corporate Vice President of the Harvard Business School Publishing
Company. Prior to that he served in various capacities with Mercer Management
Consulting (formerly Temple Barker and Sloane/Strategic Planning Associates)
from 1978 to 1992, most recently as Senior Partner.
Mr. Healy joined the Company as its Executive Vice President - Finance and Chief
Financial Officer in November 1993 and was named President - Australasia and the
Middle East, in January 1999. Mr. Healy remains the Company's Chief Financial
Officer. Prior to this, Mr. Healy was the President - Corporate Products/Systems
Development of the Company. He was Executive Vice President and Chief Financial
Officer of The Interep Radio Store, a national radio advertising sales firm, for
the previous nine years. From 1983 to 1984, Mr. Healy was Assistant Controller
of Scali, McCabe, Sloves, Inc., and from 1977 to 1983, Mr. Healy served in
various capacities with Arthur Andersen LLP, an independent public accounting
firm, lastly as an Audit Manager. Mr. Healy is a certified public accountant.
Mr. Healy has served as the Company's Chief Financial Officer since November
1993, as the Company's Secretary since March 1998, and as President -
Australasia and the Middle East since January 1999.
Dr. Kiock was named the Company's President - European Operations in January
1999. Dr. Kiock is also the Chairman of the Board of Management of Infratest
Burke Aktiengesellschaft Holding ("Infratest Burke"), a position which he has
held since 1989, and has been a member of Infratest Burke's Board since 1970.
Infratest Burke was acquired by the Company in November 1998. Dr. Kiock has
thirty years experience in market research and consultancy throughout the whole
of the European Community.
Mr. Migliara became the Company's President - North American Operations in
January 1999. Prior to that, Mr. Migliara had been the Company's President -
Healthcare and Consumer Packaged Goods since September 1997. Mr. Migliara joined
the Company upon the acquisition of Migliara/Kaplan Associates, Inc. ("M/K") in
January 1996. In 1980, Mr. Migliara co-founded M/K and was President and Chief
Executive Officer from 1980 through 1995. Prior to starting M/K he was employed
at Becton-Dickinson, most recently as Director of Marketing. Mr. Migliara is
also a director of Digene Corp.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and directors,
and persons who may be deemed to own beneficially more than ten percent of the
Common Stock of the Company, to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission
("SEC") and the New York Stock Exchange. Officers, directors and greater than
ten percent beneficial owners are required by SEC regulation to furnish the
Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such Forms it has
received, the Company believes that all its officers, directors, and greater
than ten percent beneficial owners complied with all filing requirements
applicable to them with respect to transactions during 1998.
5
<PAGE>
Item 11. Executive Compensation
Shown below is information concerning the annual compensation for services in
all capacities to the Company for the years ended December 31, 1998, December
31, 1997 and December 31, 1996, of those persons who were, during the calendar
year of 1998 (i) the chief executive officer and (ii) the other four executive
officers of the Company for calendar year 1998 (collectively, the "Named
Executive Officers"):
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------- Number of
Other Annual Securities
Compensation Underlying All Other
Name and Principal Position Year Salary Bonus (3) Options Compensation (4)
- --------------------------- ---- ------ ----- --- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
William E. Lipner 1998 $370,000 $325,000 0 225,000 $378,453
Chairman of the Board, 1997 360,000 362,008 (2) 0 125,000 15,716
President and Chief 1996 350,000 330,399 (2) 0 135,000 13,950
Executive Officer
Allen R. DeCotiis(1) 1998 280,000 0 0 25,000 12,221
President - Financial Services, 1997 237,250 30,000 0 25,000 9,875
Travel & Leisure and 1996 210,000 0 0 18,000 5,975
International Operations
Charles B. Hamlin 1998 280,000 120,000 0 75,000 12,514
President - Interactive/ 1997 249,000 80,000 0 20,000 4,790
High Technology and 1996 186,058 101,250 0 127,500 70,169
Telecommunications
Patrick G. Healy 1998 280,000 200,000 0 125,000 11,467
President - Australasia 1997 249,000 220,000 0 40,000 10,313
and the Middle East 1996 227,077 112,500 0 60,000 10,175
and Chief Financial Officer
Joseph M. Migliara 1998 280,000 100,000 0 75,000 367
President - North American 1997 221,696 100,000 0 25,000 240
Operations 1996 198,354 56,558 0 21,177 240
</TABLE>
- -----------
(1) From September 1997 until January 1999, Allen R. DeCotiis was the
Company's President - Financial Services, Travel & Leisure and
International Operations. Subsequently, Mr. Decotiis was named Director
of Business Development - NFO Worldwide in January 1999.
(2) Portions of Mr. Lipner's annual bonus amounts included in the table
were deferred pursuant to a Deferred Compensation Agreement between Mr.
Lipner and the Company in the following amounts: $62,008 in 1997 and
$60,399 in 1996.
(3) Personal benefits for each executive officer named in the table did not
exceed $50,000 or 10% of such executive officer's total annual salary
and bonus in 1998, 1997 or 1996.
6
<PAGE>
(4) Includes contributions made by the Company pursuant to the NFO
Research, Inc. Profit Sharing Plan on behalf of Messrs. Lipner, Healy
and Hamlin in 1998 in the amounts of $9,576 each and on behalf of Mr.
DeCotiis in the amount of $2,321, on behalf of Messrs. Lipner and Healy
in 1997 in the amount of $8,739 and on behalf of Mr. DeCotiis and Mr.
Hamlin in the amount of $2,375, and on behalf of Messrs. Lipner and
Healy in 1996 in the amount of $8,669 and on behalf of Mr. DeCotiis in
the amount of $2,375. Also includes life insurance premiums paid on
behalf of Messrs. Lipner, Healy, Migliara, Hamlin and DeCotiis in 1998
in the amounts of $9,128, $1,891, $367, $2,938 and $9,900 respectively.
Also includes life insurance premiums paid on behalf of Messrs. Lipner,
Healy, Migliara, Hamlin and DeCotiis in 1997 in the amounts of $6,977,
$1,574, $240, $2,415 and $7,500 respectively, and in 1996 in the
amounts of $5,281, $1,506, $240, $1,124 and $3,600, respectively. The
amount set forth for Mr. Lipner in 1998 also includes the present
dollar value, determined in accordance with SEC regulations, and based
on actuarial computations, as of December 31, 1998, of the benefit to
Mr. Lipner of the remainder of the premium payments made by the Company
pursuant to a "split dollar" life insurance policy in respect of Mr.
Lipner in Fiscal Year 1998. The present dollar value of such payments
as of December 31, 1998 is $359,749. The amount set forth for Mr.
Hamlin in 1996 includes disbursements made by the Company in the
amounts of $29,045 for relocation expenses and a sign-on payment of
$40,000.
OPTION GRANTS
The Company's executive officers and certain other employees participate in the
Employees' Stock Option Plan. The table below sets forth the stock options
granted to the Named Executive Officers and to Hartmut Kiock (who became an
executive officer in January 1999) during 1998. The Company did not grant SARs
to any employees during 1998.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
-----------------
% of Total Potential Realizable
Number of Options Value at Assumed Annual
Securities Granted to Exercise Rates of Stock Price
Underlying Employees or Base Appreciation for Option
Options During Price Expiration Term
Granted 1998 $ / Sh Date 5% ($) 10% ($)
------- ---- ------ ---- ------- --------
<S> <C> <C> <C> <C> <C> <C>
William E. Lipner 125,000 (1) 18.43% $17.56 2008 $1,380,933 $3,499,075
100,000 (1) 14.75% 21.07 2008 753,746 2,448,260
Allen R. DeCotiis 25,000 (2) 3.69% 13.00 2008 186,575 489,597
Charles B. Hamlin 75,000 (2) 11.06% 13.00 2008 559,724 1,468,792
Patrick G. Healy 125,000 (2) 18.43% 13.00 2008 932,874 2,447,986
Hartmut Kiock 29,500 (3) 4.35% 7.25 2008 134,505 340,862
Joseph M. Migliara 75,000 (2) 11.06% 13.00 2008 559,724 1,468,792
</TABLE>
- -----------
(1) These options were granted on June 23, 1998. Options with respect to
one-third of the shares subject thereto became exercisable on January
1, 1999, options with respect to the second one-third of the shares
will become exercisable on January 1, 2000, and options with respect to
the last one-third of the shares will become exercisable on January 1,
2001.
7
<PAGE>
(2) These options were granted on December 2, 1998. Options with respect to
one-third of the shares subject thereto will become exercisable on June
30, 1999, options with respect to the second one-third of the shares
will become exercisable on January 1, 2000, and options with respect to
the last one-third of the shares will become exercisable on January 1,
2001.
(3) These options were granted on November 20, 1998. Options with respect
to one-third of the shares subject thereto will become exercisable on
November 20, 2001, options with respond to the second one- third of the
shares will become exercisable on November 20, 2002, and options with
respect to the last one-third of the shares will become exercisable on
November 20, 2003.
FISCAL YEAR END OPTION VALUES
The table below presents information with respect to both exercisable and
unexercisable options to purchase the Company's Common Stock held by the Named
Executive Officers and Hartmut Kiock at December 31, 1998, and the value of such
options at December 31, 1998. The Named Executive Officers and Dr. Kiock did not
exercise any options during 1998.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
Shares December 31, 1998 December 31, 1998 (1)
Acquired Value ----------------------------- ------------------------------
on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William E. Lipner - - 559,959 191,666 $ 959,141 $ 0
Allen R. DeCotiis - - 34,667 33,333 0 0
Charles B. Hamlin - - 140,833 84,167 0 0
Patrick G. Healy - - 255,417 138,333 693,225 0
Hartmut Kiock - - 0 29,500 0 125,375
Joseph M. Migliara - - 37,844 83,333 0 0
</TABLE>
- -----------
(1) Based on the closing price on the New York Stock Exchange of the
Company's Common Stock on Thursday, December 31, 1998 ($11.50).
EMPLOYMENT CONTRACTS
On March 15, 1995, the Company and Mr. Lipner entered into an employment
agreement. The agreement provides for Mr. Lipner's employment as the Chairman,
President and Chief Executive Officer of the Company through March 15, 1997,
with an unlimited number of two-year extensions unless either party provides 13
months' advance notice not to extend the period of employment. The agreement
provides for a minimum annual base salary of $350,000 (currently $390,000),
subject to annual discretionary increases by the Board of Directors. Mr. Lipner
is also entitled to certain fringe benefits and incentive compensation as
determined by the Board of Directors.
Under his employment agreement, Mr. Lipner's employment may be terminated by the
Company for cause (as defined in the agreement) or without cause. If the Company
terminates Mr. Lipner's employment without cause, or if Mr. Lipner resigns for
good reason (as defined in the agreement) after the occurrence of a change in
control (as defined in the agreement), Mr. Lipner is entitled to receive his
base salary and annual bonus payments through the second anniversary of the
termination. If the Company elects not to extend the term of Mr. Lipner's
employment, Mr. Lipner is entitled to receive his base salary and bonus payments
8
<PAGE>
for one year following the end of the term. Mr. Lipner's agreement also provides
that Mr. Lipner's stock options granted under the Employees' Stock Option Plan
shall become immediately exercisable in the event of a change in control of the
Company or in the event Mr. Lipner's employment is terminated without cause. Mr.
Lipner's stock options will remain exercisable for a period of two years after
termination of his employment in the event of termination by the Company without
cause or resignation by Mr. Lipner for good reason following a change of
control. Under the agreement, Mr. Lipner has agreed not to own, or engage in any
manner in, a business competing with the Company for a period of two years
following his termination for cause or resignation (other than resignation for
good reason following a change in control).
On September 12, 1995, the Company entered into an employment agreement with Mr.
Hamlin, on December 1, 1997, the Company entered into an employment agreement
with Mr. Healy and Mr. DeCotiis, and on March 1, 1999, the Company entered into
an employment agreement with Mr. Migliara. The employment agreement for Mr.
Hamlin provides for employment until December 12, 1999, in the case of Mr. Healy
and Mr. DeCotiis, until December 1, 2000, and in the case of Mr. Migliara, until
March 1, 2002. The agreements provide for a minimum base salary in 1999 of
$280,000 for Mr. DeCotiis, $300,000 for Mr. Hamlin, Mr. Healy and Mr. Migliara,
in each case subject to annual discretionary increases by the Board of
Directors. The agreements also provide for certain specified fringe benefits,
incentive compensation as determined by the Board of Directors, and certain
stock option grants under the Employees' Stock Option Plan. Mr. Migliara's
agreement provides for a retirement benefit of $150,000 to be paid annually from
2004 through 2013. Under each of the employment agreements, the executive's
employment may be terminated by the Company for cause (as defined in each
agreement) or without cause. If the Company terminates the executive's
employment without cause, the executive is entitled to receive his base salary
and benefits, in the case of Mr. Hamlin, through December 12, 1999, and in the
case of Mr. Healy and Mr. DeCotiis, through December 1, 2000, and in the case of
Mr. Migliara, through March 1, 2002. If the executive resigns for good reason
(as defined in each agreement) after the occurrence of a change in control (as
defined in each agreement), he is entitled to receive: (i) his base salary and
benefits until the later of (a) in the case of Mr. Hamlin, December 12, 1999, in
the case of Mr. Healy and Mr. DeCotiis, December 1, 2000, and in the case of Mr.
Migliara, through March 1, 2002, or (b) in the cases of Messrs. DeCotiis, Hamlin
and Migliara, the first anniversary of the resignation, and in the case of Mr.
Healy, the second anniversary of the resignation, and (ii) in the cases of
Messrs. DeCotiis, Hamlin and Migliara, a pro-rated portion of his bonus for the
year in which the termination occurs, and in the case of Mr. Healy, an amount
equal to the most recent annual bonus he received. The employment agreements
also provide that the executive's stock options granted under the Employees'
Stock Option Plan shall become immediately exercisable in the event that the
executive's employment is terminated without cause or in the event of a change
in control of the Company. The stock options will remain exercisable for a
period of 12 months after termination of employment in the event of termination
by the Company without cause or resignation by the executive for good reason
following a change in control. Each of Messrs. DeCotiis Hamlin, Healy and
Migliara has entered into customary non-compete and non-solicitation agreements
with the Company. In addition, the Company and Mr. DeCotiis are currently
negotiating a new employment agreement to provide for his employment as the
Director of Business Operations of the Company, which is expected to be
concluded shortly.
On November 20, 1998 Infratest Burke was acquired by the Company and, in
connection therewith, Dr. Kiock entered into a new employment agreement. The
agreement provides for Dr. Kiock's employment as member and Chairman of
Infratest Burke's Board of Management until November 20, 2003, and may be
extended with the agreement of Dr. Kiock and Infratest Burke's Supervisory
Board. Dr. Kiock was appointed to the additional position of President of the
Company's European Operations by the Company's Board of Directors in January
1999.
9
<PAGE>
The agreement provides for a fixed annual salary of DM 500,000, subject to
annual discretionary increases by Infratest Burke's Supervisory Board, in
addition to certain fringe benefits and a performance-based bonus of up to 66
2/3% of the base salary, to be determined in accordance with the performance
targets which are established annually.
Under the agreement, Dr. Kiock may be dismissed as a member of and/or Chairman
of Infratest Burke's Board of Management at any time, within the framework of
the applicable German statutory provisions. Dr. Kiock may terminate the
agreement by giving three months' notice upon a change of control of NFO (as
defined in the agreement), and will be entitled to continue to receive his fixed
annual salary, in addition to a bonus in the amount of the average of the
preceding two business years (or, in the case of termination before the
expiration of two business years, in the amount of the average received bonus
payments), for the two years following such termination. Dr. Kiock has agreed
not to own or in any manner engage in any business competing with Infratest
Burke or any of its affiliated companies in the area of the European Union, the
U.S.A. and Canada for a period of two years following the expiration of the term
of his employment. During this period, Infratest Burke has agreed to pay Dr.
Kiock compensation equal to 50% of his last average monthly compensation,
including bonus, unless such term of employment is terminated by Dr. Kiock
following a change of control of NFO or within a period of four years after the
signing of the agreement.
PENSION PLAN AND EXECUTIVE DEFERRED BENEFIT PLAN
NFO Research, Inc. Pension Plan
The Company maintains the NFO Research, Inc. Pension Plan (the "Pension Plan"),
which it assumed in connection with the acquisition of substantially all the
assets of its Predecessor in 1991 (the "Acquisition"). The Pension Plan is a
noncontributory trusteed plan that provides for fixed benefits to employees and
their survivors in the event of normal (age 65) or early (age 55 and 10 years of
credited service) retirement. Participants become 20% vested in their benefits
after two years of service and vest thereafter at a rate of 20% per year of
service, becoming fully vested after six years of service. Early retirement
benefits are subject to reduction to reflect early commencement.
<TABLE>
<CAPTION>
Years of Credited Service
-------------------------
Compensation 15 20 25 30 35
------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 160,000 $ 26,157 $ 31,405 $ 35,517 $ 38,739 $ 41,263
$ 200,000 32,696 39,256 44,396 48,423 51,579
</TABLE>
The Pension Table set forth above illustrates the estimated annual pension
payable as a single life annuity upon retirement pursuant to the current Pension
Plan formula for various levels of compensation and years of service, assuming
retirement after attainment of age 65. The benefits set forth above are not
subject to any reduction for Social Security or other offsets.
Compensation taken into account for the purposes of calculating benefits under
the Pension Plan for 1998 is limited to $160,000, which limit is subject to
adjustment in accordance with the Internal Revenue Code. Compensation for
purposes of the Pension Plan includes salary and bonus as set forth in the
Summary Compensation Table.
The 1998 compensation taken into account for Pension Plan purposes was $160,000
for each of Messrs. Lipner, Healy and Hamlin, who had 25, 4 and 2 years,
respectively, of credited service under the Pension Plan as of December 31,
1998.
10
<PAGE>
NFO Worldwide, Inc. Executive Deferred Benefit Plan
The Company also maintains the Executive Deferred Benefit Plan (the
"Supplemental Plan"), which it assumed in connection with the Acquisition. The
Compensation Committee of the Company's Board of Directors determines which
executives are eligible to participate. Currently, four of the Named Executive
Officers, Messrs. Lipner, Hamlin, Healy and Migliara participate in the
Supplemental Plan. The Supplemental Plan entitles an eligible executive to a
benefit that, when added to his benefit under the Pension Plan, the Profit
Sharing Plan (to the extent attributable to Company contributions) and Social
Security, equals 40% of his highest five-year average annual compensation
(prorated if the executive has fewer than 15 years of service). Vesting under
the Supplemental Plan is the same as under the Pension Plan but is accelerated
if a participant is terminated within two years after a change of control of the
Company. Benefits payable under the Supplemental Plan are reduced if payment
commences before age 60.
Compensation taken into account under the Supplemental Plan includes base salary
and bonus as described in the Summary Compensation Table. The 1998 compensation
taken into account for purposes of the Supplemental Plan was $695,000 for
Lipner, $329,000 for Mr. Hamlin and $469,000 for Mr. Healy.
The Supplemental Plan only recognizes service after December 31, 1991 for
benefit accrual purposes. Mr. Lipner had 7 years, Mr. Healy had 4 years and Mr.
Hamlin had 2 years of service under the Supplemental Plan as of December 31,
1998 for benefit accrual purposes.
Life Insurance Arrangements
The Company provides life insurance coverage to each of its executive officers.
In 1998, Mr. Lipner was provided with $1,206,175 of term life insurance
coverage. The Company also provided Mr. Lipner with a "split dollar" insurance
policy in Fiscal Year 1998. The present dollar value of the remainder of the
"split dollar" life insurance policy premium payments was $359,749 at December
31, 1998. Mr. Healy was provided with $400,000 in term life insurance coverage.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The three-member Compensation Committee of the Board of Directors makes
compensation decisions regarding compensation of the Company's executives. Each
member of the Compensation Committee is a non-employee Director. The Board of
Directors reviews all decisions by the Compensation Committee relating to such
compensation except for decisions about awards under the Employees' Stock Option
Plan, which have been made solely by the Compensation Committee. This is a
report of the Compensation Committee addressing the Company's policies governing
the compensation of the executive officers of the Company for the Company's
fiscal year ending December 31, 1998 ("Fiscal Year 1998").
Compensation Policies and Components of Compensation
Generally, the Compensation Committee's executive compensation policies are
designed to base pay on the Company's annual and long-term performance goals by
rewarding above-average corporate performance and recognizing individual
initiative and achievements; furthermore, these policies assist the Company in
attracting and retaining qualified executives. The Compensation Committee
believes that stock ownership by management is beneficial in aligning
management's and shareholders' interests in increasing the value of the Common
Stock; therefore, the Compensation Committee includes a stock-based element in
the Company's compensation packages for its executive officers, although the
Compensation Committee does not have target ownership levels for equity holdings
by executives.
11
<PAGE>
The three primary components of executive compensation are base salary, annual
bonus and stock options. The Compensation Committee believes that the cumulative
effect of these three elements is to provide the Company's executive officers
with levels of total compensation consistent with the Compensation Committee's
executive compensation policies set forth above.
The Compensation Committee attempts to keep the Company's executive base salary
increases as low as possible, thus limiting the Company's exposure if
performance targets are not met. Executive salary levels are subjectively
determined by the Compensation Committee based on the experience of each of its
members and are intended to be consistent with competitive practices and levels
of responsibility (with salary increases reflecting competitive and economic
trends, the overall financial performance of the Company and the performance of
the individual executive).
The Compensation Committee subjectively determines annual bonus amounts paid to
each of the Company's executives in respect of each fiscal year. Generally,
bonuses are set within a specified percentage range of base salary and do not
exceed 100% of the base salary. For the executive officers named in the Summary
Compensation Table, bonuses averaged approximately 50% of Fiscal Year 1998 total
salary. Factors taken into account in awarding annual bonuses are described
below under "Relationship of Corporate Performance to Executive Compensation."
Before March 1996, stock options were periodically granted to the Company's
executives under the Employees' Stock Option Plan based upon the subjective
determination of the Compensation Committee. Effective March 1996, all authority
to administer the Employees' Stock Option Plan has been vested in the Stock
Option Committee, a subcommittee of the Compensation Committee. No specific
formulas or executive stock ownership targets are employed in determining stock
option grants. The number of options previously awarded to and held by executive
officers is considered in determining the size of each option grant. Factors
taken into account in awarding stock options are described below under
"Relationship of Corporate Performance to Executive Compensation."
An additional factor the Compensation Committee focuses on in its consideration
of compensation matters is the tax implications of various payments and benefits
to the Company and to the individual executive officers. Certain types of
compensation payments and their deductibility depend upon the timing of vesting
or exercise of awards granted. In addition, interpretations of and changes in
the tax laws and other factors beyond the Compensation Committee's control also
affect the deductibility of compensation. The Compensation Committee will not in
all circumstances limit executive compensation to that deductible under section
162(m) of the Internal Revenue Code. The Compensation Committee will consider
the various alternatives to preserving the deductibility of compensation
payments and benefits to the extent consistent with its other compensation
objectives and to the extent reasonably practicable.
Relationship of Corporate Performance to Executive Compensation
The factors that the Compensation Committee considered in awarding annual
bonuses and options under the Employees' Stock Option Plan were based on the
performance of both the Company and the individual executive. With respect to
the Company, the Compensation Committee considered targeted versus actual annual
operating performance, after-tax earnings-per-share growth over the last fiscal
year and the increase in operating income over the last fiscal year. With
respect to the individual executive, the Compensation Committee considered
the individual's ability to undertake special projects, to facilitate strategic
acquisitions and alliances, to execute the Company's strategic business plan and
to develop new custom research methods and concepts. While the Compensation
Committee considered
12
<PAGE>
all of the foregoing factors, the Compensation Committee subjectively made its
determinations and recommendations based on the experience of each of its
members.
Targeted versus actual operating performance was a major factor considered in
determining the extent to which annual bonuses were paid and awards made under
the Employees' Stock Option Plan to the Company's executive officers. The
performance of individual executives was reviewed either as to the Company as a
whole, or, for those executive officers in charge of an operating unit, as to
such officer's particular operating unit. Performance targets were based on
business plans developed by the Company's management and approved by the Board
of Directors at the start of Fiscal Year 1998. In developing the business plans,
consideration was given to integrating the business of any recently acquired
subsidiaries, divisions or businesses and expanding the Company's mix of
services and clients.
The Compensation Committee also took into account the executives' performance in
special projects undertaken during the past fiscal year, contribution to
strategic acquisitions and alliances (e.g., joint ventures) and development of
new custom research methods and concepts. In addition, the Compensation
Committee considered the growth in after-tax earnings per share of Common Stock
over the last fiscal year in determining executive compensation. Another
consideration in determining executive compensation was the improvement in the
Company's operating income over the last fiscal year. Also, the executives'
satisfaction of certain subjective performance criteria (including initiative,
contribution to overall corporate performance and managerial ability) was
evaluated after informal discussions with other members of the Board of
Directors and, for all of the executives other than Mr. Lipner, after
discussions with Mr. Lipner.
Compensation of Chief Executive Officer for Fiscal Year 1998
In addition to the factors mentioned above, the Compensation Committee's general
approach in setting Mr. Lipner's annual compensation took into consideration the
Company's earnings and sought to reward Mr. Lipner's strategic management
abilities in the Company's expansion efforts. The Compensation Committee also
considered Mr. Lipner's role in the development and implementation of strategic
business plans for building the Company, identifying niche markets, and
developing new proprietary custom research methods and concepts.
The annual bonus paid to Mr. Lipner for Fiscal Year 1998 was based on the
Compensation Committee's subjective evaluation of Mr. Lipner's performance in
that year. Specifically, the Compensation Committee considered Mr. Lipner's
roles in pursuing and completing selected acquisitions and joint ventures,
further developing and improving the Company's management team, developing
relationships with stockholders and analysts, developing and executing the
Company's strategic business plan, encouraging the development of new research
technologies, increasing operating income and increasing after-tax earnings per
share. In assessing the Company's overall performance, to determine Mr. Lipner's
annual salary and bonus, the Compensation Committee considered all of the
factors above but did not use any formula with respect to the factors.
The grant of options to Mr. Lipner in Fiscal Year 1998 under the Employees'
Stock Option Plan was based upon the Compensation Committee's compensation
policy of promoting management retention while further aligning management's and
stockholders' interests in increasing the value of the Company's Common Stock.
Walter A. Forbes
Steven J. Gilbert
Edmund A. Hajim
13
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company is composed of Walter A. Forbes,
Steven J. Gilbert and Edmund A. Hajim. Mr. Gilbert served as the Company's
Chairman of the Board in 1992 and served as Secretary from 1993 to March 1998.
Mr. Gilbert has never been an employee of the Company, and Messrs. Forbes and
Hajim have never been officers or employees of the Company.
COMPENSATION OF DIRECTORS
The Company does not pay any additional remuneration to officers of the Company
for serving as directors. Directors who are not employees of the Company are
paid an annual fee of $24,000, and a fee of $1,000 for each committee meeting of
the Board of Directors they attend. Additionally, non-employee directors are
reimbursed for out-of-pocket expenses associated with attending meetings of the
Board of Directors and committees. Mr. Sculley's annual director fee is included
in his fee under his consulting agreement with the Company described below. See
"Certain Relationships and Related Transactions."
Non-employee directors also receive annual stock options under the NFO
Worldwide, Inc. Directors' Stock Option Plan (the "Directors' Stock Option
Plan"). Under the Directors' Stock Option Plan, each new non-employee director
receives an option for 22,500 shares upon his initial election to the Board of
Directors, and each non-employee director receives an option for an additional
15,000 shares upon each re-election to the Board of Directors. The exercise
price of each option granted under the Directors' Stock Option Plan is equal to
the market price of the Common Stock on the date of grant. Each option is
exercisable, either in whole or in part, at any time after the six-month
anniversary of the date the option was granted and each option will expire on
the fifth anniversary date of the date on which the option is granted. The
Directors' Stock Option Plan is designed to be self-governing in order to comply
with certain requirements of Rule 16b-3 of the Exchange Act.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the beneficial ownership, both direct and
indirect, reported to the Company as of March 26, 1999, of Common Stock of the
Company including shares as to which a right to acquire ownership exists (for
example, through the exercise of certain stock options). The information is
presented for beneficial owners of more than five percent (5%) of the Company's
Common Stock, for each director and nominee, for each Named Executive Officer
and for the group comprised of all directors, nominees and Named Executive
Officers. Management knows of no persons other than those identified herein who
owned beneficially more than five percent (5%) of the outstanding shares of
Common Stock as of March 26, 1999.
14
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
<TABLE>
<CAPTION>
Number of
Shares of
Common Stock Percentage of
Beneficially Common
Name and Address of Beneficial Owner (1) Owned Stock
- ---------------------------------------- ----- -----
<S> <C> <C>
William Blair & Company, L.L.C.(2).......................................... 2,949,195 13.8%
222 W. Adams Street
Chicago, IL 60606
John R. Goodyear and Mary J. Goodyear....................................... 1,521,362 9.8%
4-5 Bonhill Street
London EC2A 4BX
T. Rowe Price Associates, Inc.(3)........................................... 2,329,200 10.9%
100 E. Pratt Street
Baltimore, MD 21202
Allen R. DeCotiis(4)........................................................ 66,968 *
2 Pickwick Plaza
Greenwich, CT 06830
Walter A. Forbes(5)......................................................... 113,262 *
707 Summer Street
Stamford, CT 06901
Steven J. Gilbert(6)........................................................ 90,666 *
590 Madison Avenue, 40th Floor
New York, NY 10022
Edmund A. Hajim(7).......................................................... 154,250 *
230 Park Avenue
New York, NY 10167
Charles B. Hamlin(8)........................................................ 90,666 *
2 Pickwick Plaza
Greenwich, CT 06830
Patrick G. Healy(9)......................................................... 255,417 1.2%
2 Pickwick Plaza
Greenwich, CT 06830
William E. Lipner(10)....................................................... 1,062,081 5.0%
2 Pickwick Plaza
Greenwich, CT 06830
Joseph M. Migliara(11)...................................................... 499,527 2.3%
4 Park Center Court
Owings Mills, MD 21117
John Sculley(12)............................................................ 127,500 *
90 Park Avenue, 32nd Floor
New York, NY 10017
All executive officers and directors as a group (9 persons)(13)............. 2,443,536 11.4%
</TABLE>
- -----------
* Represents less than 1% of the outstanding shares of the Common Stock.
(1) Except as indicated in the notes to this table, the persons named in
this table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them.
15
<PAGE>
(2) According to a statement on Schedule 13G dated March 17, 1999 filed
with the Securities and Exchange Commission by William Blair & Co.
William Blair & Co. is an Investment Advisor that owns 2,949,195 shares
of Common Stock of the Company on behalf of its clients.
(3) According to a statement on Schedule 13G dated January 28, 1999 and
filed with the Securities and Exchange Commission by T. Rowe Price
Associates, Inc. and T. Rowe Price New Horizons Fund, Inc. T. Rowe
Price Associates, Inc. and T. Rowe New Horizons Fund, Inc. are
Investment Advisors that together own 2,329,200 shares of Common Stock
of the Company on behalf of its clients. These securities are owned by
various individual and institutional investors including T. Rowe Price
New Horizons Fund, Inc. (which owns 1,800,000 shares, representing 8.4%
of the shares outstanding), which T. Rowe Price Associates, Inc. (Price
Associates) serves as investment adviser with power to direct
investments and/or sole power to vote the securities. For purposes of
the reporting requirements of the Securities Exchange Act of 1934,
Price Associates is deemed to be a beneficial owner of such securities;
however, Price Associates expressly disclaims that it is, in fact, the
beneficial owner of such securities.
(4) Includes 34,667 shares issuable upon the exercise of options granted to
Mr. DeCotiis pursuant to the Employees' Stock Option Plan which have
already vested.
(5) Includes 6,750 shares held by his spouse in custodial accounts for his
children, for which Mr. Forbes may be deemed to share voting and
investment power and thus may be deemed to own beneficially. Also
includes 75,750 shares issuable upon the exercise of options granted to
Mr. Forbes pursuant to the Directors' Stock Option Plan.
(6) Includes 75,750 shares issuable upon exercise of options granted to Mr.
Gilbert pursuant to the Directors' Stock Option Plan.
(7) Includes 48,750 shares issuable upon exercise of options granted to Mr.
Hajim pursuant to the Directors' Stock Option Plan. Also includes 8,500
shares indirectly owned by Mr. Hajim through his wife, Barbara Hajim,
and 10,000 shares owned by The Hajim Family Foundation, of which Mr.
Hajim is trustee, and thus he may be deemed to beneficially own these
shares.
(8) Includes 140,833 shares issuable upon exercise of options granted to
Mr. Hamlin pursuant to the Employees' Stock Option Plan which have
already vested.
(9) Includes 254,742 shares issuable upon exercise of options granted to
Mr. Healy pursuant to the Employees' Stock Option Plan which have
already vested.
(10) Includes 559,959 shares issuable upon exercise of options granted to
Mr. Lipner pursuant to the Employees' Stock Option Plan which have
already vested. Also includes 236,548 shares indirectly owned by him,
151,500 of which are owned directly by his wife, Deborah Lipner; and
85,048 of which are held in custodial accounts and trusts for their
sons Justin Drew Lipner and Wesley Edwin Lipner. A trust holds 5,063
shares of Common Stock of the Company for the benefit of Deborah
Lipner; however, since the trustee of the trust has sole voting and
investment power with respect to the shares, Mr. Lipner does not
beneficially own such shares.
(11) Includes 37,844 shares issuable upon the exercise of options granted to
Mr. Migliara pursuant to the Employees' Stock Option Plan which have
already vested.
16
<PAGE>
(12) Includes 56,250 shares issuable upon the exercise of options granted to
Mr. Sculley which are exercisable in whole or in part at any time
before October 25, 1999. Also includes 71,250 shares issuable upon the
exercise of options granted to Mr. Sculley pursuant to the Directors'
Stock Option Plan.
(13) Includes 271,500 shares issuable upon exercise of options granted
pursuant to the Directors' Stock Option Plan, 56,250 shares issuable
upon exercise of options granted to Mr. Sculley and 1,028,720 shares
issuable upon exercise of options granted pursuant to the Employees'
Stock Option Plan which have already vested.
Item 13. Certain Relationships and Related Transactions
On October 25, 1994, John Sculley joined the Company's Board of Directors and
entered into a consulting agreement with the Company. The agreement provides
that Mr. Sculley will serve as a consultant, particularly in the areas of
technology, idea development for new services and ventures, and international
expansion. Under the agreement, as consideration for his services to the Company
as consultant and as director, Mr. Sculley will receive an annual fee of $50,000
so long as he is a director of the Company, plus out-of-pocket expenses. In
addition, pursuant to the agreement, the Company granted Mr. Sculley an option
to purchase 56,250 shares of the Company's Common Stock, with an exercise price
of $7.45 per share, the exercise price being equal to the market price on the
date of grant. The option is exercisable in whole or in part at any time before
October 25, 1999. Pursuant to the agreement, the Company filed a registration
statement with the Securities and Exchange Commission to register the issuance
by the Company of the shares subject to the option. Moreover, as a director of
the Company, Mr. Sculley received options to purchase 56,250 shares of the
Company's Common Stock pursuant to the NFO Worldwide, Inc. Directors' Stock
Option Plan, which is described above.
Messrs. Lipner and Sculley are each minority shareholders of LiveWorld and, in
addition, Mr. Sculley is a director of LiveWorld and Chairman of LivePicture. On
February 10, 1997, the Company and LiveWorld announced an agreement to jointly
provide online market research services that combine LiveWorld's Talk City
community/chat services with the Company's panel-based market research services.
Also on February 10, 1997, the Company and LivePicture announced a strategic
alliance to combine LivePicture's RealSpace and FlashPix technologies, which
provide three-dimensional, photographic quality images with the Company's
Internet-based market research offerings.
Mr. Migliara is a partial owner of two of the buildings in which a subsidiary of
the Company leases office space.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
NFO WORLDWIDE, INC.
Dated: August 30, 1999 /s/ Patrick G. Healy
--------------------
Patrick G. Healy,
President - Australasia and the Middle East,
and Chief Financial Officer
(Authorized Officer of Registrant and
Principal Financial Officer)
