<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 23, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
TMP WORLDWIDE INC.*
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7311 13-3906555
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
--------------------------
1633 BROADWAY
33RD FLOOR
NEW YORK, NEW YORK 10019
(212) 977-4200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------
ANDREW J. MCKELVEY
CHAIRMAN OF THE BOARD
AND PRESIDENT
TMP WORLDWIDE INC.
1633 BROADWAY
33RD FLOOR
NEW YORK, NEW YORK 10019
(212) 977-4200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
PAUL JACOBS, ESQ. J.J. MCCARTHY, ESQ.
FULBRIGHT & JAWORSKI L.L.P. DAVIS POLK & WARDWELL
666 FIFTH AVENUE 450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10103 NEW YORK, NEW YORK 10017
(212) 318-3000 (212) 450-4000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the offering. / /________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED PRICE (1) FEE
<S> <C> <C>
Common Stock, .001 par value per share............................................ $80,500,000 $27,758.62
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
*The current name of registrant is Telephone Marketing Programs Incorporated.
The registrant will change its name to TMP Worldwide Inc. prior to the closing
of this offering.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two separate prospectuses. The first
prospectus relates to a public offering in the United States and Canada of an
aggregate of [ ] shares of Common Stock (the "U.S. Offering"). The second
prospectus relates to a concurrent offering outside the United States and Canada
of an aggregate of [ ] shares of Common Stock (the "International
Offering"). The prospectuses for each of the U.S. Offering and the International
Offering will be identical with the exception of the alternate front cover page
for the International Offering. Such alternate page appears in the Registration
Statement immediately following the complete prospectus for the U.S. Offering.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED SEPTEMBER 23, 1996
[ ] SHARES
TMP WORLDWIDE INC.
COMMON STOCK
--------------
OF THE [ ] SHARES OF COMMON STOCK OFFERED HEREBY, [ ] SHARES ARE
BEING OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S.
UNDERWRITERS AND [ ] SHARES ARE BEING OFFERED INITIALLY
OUTSIDE THE UNITED STATES AND CANADA BY THE INTERNATIONAL
UNDERWRITERS. SEE "UNDERWRITERS."
OF THE [ ] SHARES OF COMMON STOCK OFFERED HEREBY, [ ] SHARES
ARE BEING OFFERED BY TMP WORLDWIDE INC. ("TMP" OR THE "COMPANY") AND
[ ] SHARES ARE BEING OFFERED BY CERTAIN STOCKHOLDERS OF THE
COMPANY (THE "SELLING STOCKHOLDERS"). THE COMPANY WILL NOT RECEIVE ANY
OF THE PROCEEDS FROM THE SALE OF THE COMMON STOCK BY THE SELLING
STOCKHOLDERS. SEE "PRINCIPAL AND SELLING STOCKHOLDERS." PRIOR TO
THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON
STOCK OF THE COMPANY. IT IS CURRENTLY ANTICIPATED THAT THE
INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN $ AND $
PER SHARE. SEE "UNDERWRITERS" FOR A DISCUSSION OF
THE FACTORS TO BE CONSIDERED IN DETERMINING THE
INITIAL PUBLIC OFFERING PRICE.
------------------------
APPLICATION HAS BEEN MADE FOR QUOTATION OF THE COMMON STOCK ON THE
NASDAQ NATIONAL MARKET UNDER THE SYMBOL "TMPW."
------------------------
AFTER GIVING EFFECT TO THIS OFFERING (ASSUMING THE OVER-ALLOTMENT OPTION IS NOT
EXERCISED), THE COMPANY WILL HAVE OUTSTANDING SHARES OF COMMON STOCK
WITH ONE VOTE PER SHARE (REPRESENTING % OF THE COMBINED VOTING POWER
OF THE COMPANY) AND SHARES OF CLASS B COMMON STOCK WITH TEN
VOTES PER SHARE (REPRESENTING % OF THE COMBINED VOTING POWER OF
THE COMPANY). CLASS B COMMON STOCK IS CONVERTIBLE, ON A
SHARE-FOR-SHARE BASIS, INTO COMMON STOCK. OTHER THAN VOTING
AND CONVERSION RIGHTS, THE TERMS OF THE COMMON STOCK AND
CLASS B COMMON STOCK ARE SUBSTANTIALLY SIMILAR.
SEE "DESCRIPTION OF CAPITAL STOCK."
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 OF THIS PROSPECTUS FOR INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------
PRICE $ A SHARE
-----------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
PER SHARE..................... $ $ $ $
TOTAL(3)...................... $ $ $ $
</TABLE>
- ------------
(1) THE COMPANY AND THE SELLING STOCKHOLDERS HAVE AGREED TO INDEMNIFY THE
UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SEE "UNDERWRITERS."
(2) BEFORE DEDUCTING ESTIMATED EXPENSES OF THE OFFERING PAYABLE BY THE COMPANY,
ESTIMATED AT $1,800,000.
(3) THE COMPANY HAS GRANTED THE U.S. UNDERWRITERS AN OPTION, EXERCISABLE WITHIN
30 DAYS OF THE DATE HEREOF, TO PURCHASE UP TO AN AGGREGATE OF [ ]
ADDITIONAL SHARES OF COMMON STOCK AT THE PRICE TO PUBLIC, LESS UNDERWRITING
DISCOUNTS AND COMMISSIONS, FOR THE PURPOSE OF COVERING OVER-ALLOTMENTS, IF
ANY. IF THE U.S. UNDERWRITERS EXERCISE SUCH OPTION IN FULL, THE TOTAL PRICE
TO PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS AND PROCEEDS TO COMPANY
WILL BE $ , $ AND $ , RESPECTIVELY. SEE
"UNDERWRITERS."
THE SHARES ARE OFFERED, SUBJECT TO PRIOR SALE WHEN, AS AND IF ACCEPTED BY
THE UNDERWRITERS NAMED HEREIN AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS
BY DAVIS POLK & WARDWELL, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT
DELIVERY OF THE SHARES WILL BE MADE ON OR ABOUT , 1996 AT THE OFFICE OF
MORGAN STANLEY & CO. INCORPORATED, NEW YORK, N.Y., AGAINST PAYMENT THEREOF IN
SAME DAY FUNDS.
-------------------
MORGAN STANLEY & CO.
INCORPORATED
DONALDSON LUFKIN & JENRETTE
SECURITIES CORPORATION
LADENBURG, THALMANN & CO. INC.
, 1996
<PAGE>
[Photo Page]
------------------------
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
No person is authorized in connection with any offering made hereby to give
any information or to make any representation not contained in this Prospectus,
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company, any Selling Stockholder or any
Underwriter. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any security other than the Common Stock offered
hereby to any person in any jurisdiction in which it is unlawful to make such an
offer or solicitation to such person. Neither the delivery of the Prospectus nor
any sale made hereby shall under any circumstance imply that the information
herein is correct as of any date subsequent to the date hereof.
2
<PAGE>
No action has been or will be taken in any jurisdiction by the Company, any
Selling Stockholder or any Underwriter that would permit a public offering of
the Common Stock or possession or distribution of this Prospectus in any
jurisdiction where action for that purpose is required, other than in the United
States. Persons into whose possession this Prospectus comes are required by the
Company, the Selling Stockholders and the Underwriters to inform themselves
about, and to observe any restrictions as to, the offering of the Common Stock
and the distribution of this Prospectus.
------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
IN THIS PROSPECTUS, REFERENCES TO "DOLLAR" AND "$" ARE TO UNITED STATES
DOLLARS, AND THE TERMS "UNITED STATES" AND "U.S." MEAN THE UNITED STATES OF
AMERICA, ITS STATES, ITS TERRITORIES, ITS POSSESSIONS, AND ALL AREAS SUBJECT TO
ITS JURISDICTION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 4
Risk Factors................................... 9
Use of Proceeds................................ 13
Dividend Policy................................ 13
Dilution....................................... 14
Capitalization................................. 15
Selected Consolidated Financial Information.... 16
Pro Forma Condensed Consolidated Financial
Information.................................. 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 23
Business....................................... 33
<CAPTION>
PAGE
-----
<S> <C>
Management..................................... 47
Certain Transactions........................... 52
Principal and Selling Stockholders............. 54
Description of Capital Stock................... 56
Certain United States Federal Tax Consequences
to Non-United States Holders of Common
Stock........................................ 60
Shares Eligible for Future Sale................ 63
Underwriters................................... 65
Legal Matters.................................. 68
Experts........................................ 68
Additional Information......................... 69
Index to Financial Statements.................. F-1
</TABLE>
------------------------
The Company intends to furnish to its stockholders annual reports containing
consolidated financial statements audited by an independent public accounting
firm and quarterly reports for the first three quarters of each fiscal year
containing interim unaudited financial information.
The Company has registered the following trademark: "The Monster
Board-Registered Trademark-". This Prospectus also includes product names and
other trade names and trademarks of the Company and of other organizations.
3
<PAGE>
PROSPECTUS SUMMARY
THE COMPANY WILL BE THE SUCCESSOR TO THE BUSINESSES CONDUCTED BY TMP
WORLDWIDE INC. AND SUBSIDIARIES ("OLD TMP"), WORLDWIDE CLASSIFIED INC. AND
SUBSIDIARIES ("WCI") AND MCKELVEY ENTERPRISES, INC. AND SUBSIDIARIES, THE CHIEF
EXECUTIVE OFFICER OF WHICH IS ANDREW J. MCKELVEY. IMMEDIATELY PRIOR TO THE
EFFECTIVENESS OF THIS OFFERING, OLD TMP WILL MERGE INTO MCKELVEY ENTERPRISES,
INC. THEREAFTER, WCI WILL MERGE INTO MCKELVEY ENTERPRISES, INC. MCKELVEY
ENTERPRISES, INC. WILL THEN MERGE INTO TELEPHONE MARKETING PROGRAMS
INCORPORATED. SUCH MERGERS ARE COLLECTIVELY REFERRED TO AS THE "MERGERS". IN
ADDITION, PRIOR TO THIS OFFERING, MR. MCKELVEY SOLD OR CONTRIBUTED HIS INTEREST
IN FIVE OTHER ENTITIES TO THE COMPANY. PURSUANT TO THE MERGERS, TELEPHONE
MARKETING PROGRAMS INCORPORATED WILL CHANGE ITS NAME TO TMP WORLDWIDE INC. ALL
HISTORICAL FINANCIAL DATA CONTAINED HEREIN REFLECTS THE HISTORICAL FINANCIAL
DATA OF OLD TMP, WCI, MCKELVEY ENTERPRISES, INC. AND THE OTHER ENTITIES.
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO,
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL
INFORMATION IN THIS PROSPECTUS (A) ASSUMES THAT THE U.S. UNDERWRITERS'
OVER-ALLOTMENT OPTION TO PURCHASE FROM THE COMPANY UP TO [ ] ADDITIONAL
SHARES OF COMMON STOCK WILL NOT BE EXERCISED, (B) IS ADJUSTED TO REFLECT SHARES
OF THE COMPANY TO BE ISSUED IN CONNECTION WITH THE MERGERS AND (C) ASSUMES THE
MERGERS HAVE BEEN CONSUMMATED. AS USED IN THIS PROSPECTUS, "GROSS BILLINGS"
REFER TO BILLINGS FOR ADVERTISING PLACED IN TELEPHONE DIRECTORIES, NEWSPAPERS,
NEW MEDIA AND OTHER MEDIA, AND ASSOCIATED FEES FOR RELATED SERVICES. WHILE GROSS
BILLINGS ARE NOT INCLUDED IN THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS,
THE TRENDS IN GROSS BILLINGS DIRECTLY IMPACT THE COMMISSIONS AND FEES EARNED BY
THE COMPANY. THE COMPANY OPERATES IN ONE BUSINESS SEGMENT AND EARNS COMMISSIONS
BASED ON A PERCENTAGE OF THE MEDIA ADVERTISING PURCHASED AT A RATE ESTABLISHED
BY THE RELATED PUBLISHER, AND ASSOCIATED FEES FOR RELATED SERVICES. IN ADDITION,
THE COMPANY EARNS FEES FOR THE PLACEMENT OF ADVERTISEMENTS ON THE INTERNET,
INCLUDING ITS CAREER WEB SITES. GROSS BILLINGS WITH RESPECT TO COMPANIES
ACQUIRED BY THE COMPANY REFER TO THE COMPANY'S ESTIMATE OF THE ACQUIRED
COMPANIES' ANNUAL GROSS BILLINGS.
THE COMPANY
TMP Worldwide Inc. ("TMP" or the "Company") is a marketing services,
communications and technology company that provides comprehensive, individually
tailored advertising services including development of creative content, media
planning, production and placement of corporate advertising, market research,
direct marketing and other ancillary services and products. The Company is the
world's largest yellow page advertising agency and, the Company believes, one of
the world's largest recruitment advertising agencies. In 1995, the Company began
marketing Internet-based services as extensions of its core business and has
become a growing provider of Internet content. The Company offers advertising
programs to more than 17,000 clients, including more than 70 of the Fortune 100
and more than 240 of the Fortune 500 companies. The Company's growth strategy is
to continue to actively pursue consolidation opportunities in its core
advertising business and to leverage its client base and its approximately 1,500
sales, marketing and customer service personnel to expand its Internet-based
business. For the year ended December 31, 1995, the Company's gross billings
were $596.1 million, commissions and fees were $123.9 million, net income was
$3.2 million and EBITDA was $25.0 million.
TMP is the world's largest yellow page advertising agency, generating
approximately $425 million in gross billings for the year ended December 31,
1995. TMP believes it is one of the world's largest recruitment advertising
agencies, generating approximately $165 million in gross billings for the same
period. With approximately 30% of the national accounts segment of the U.S.
yellow page advertising market, TMP is approximately three times larger than its
nearest competitor, based on gross billings. In the fragmented recruitment
advertising agency market, the Company believes that it has a 7% market share in
the U.S. and a 6% market share worldwide. A substantial part of the Company's
growth has been achieved through acquisitions. From January 1, 1993 through
December 31, 1995, TMP completed 26 acquisitions which have estimated annual
gross billings of $200 million. In 1996, through August, the Company completed
eight acquisitions with estimated annual gross billings of $172 million
including the acquisition
4
<PAGE>
in July 1996 of Neville Jeffress Australia Pty Limited ("Neville Jeffress"), the
largest recruitment advertising agency in Australia, which has estimated annual
gross billings of $140 million. The Company believes additional acquisition
opportunities exist, particularly in the recruitment advertising and Internet
markets, and intends to continue its strategy of making acquisitions which
relate to its core business.
TMP has created innovative solutions to assist its clients in capitalizing
on the growing awareness and acceptance of the Internet. For its recruitment
advertising clients, TMP has developed interactive career hubs which can be
accessed by individuals seeking employment via the Internet on a global basis.
The Company has several career hubs, including The Monster Board-Registered
Trademark-, Online Career Center-SM-, Be the Boss-SM- and MedSearch-SM-, which
collectively contain over 35,000 job listings. In 1996, the Company began
marketing its Dealer Locator service to yellow page clients. Dealer Locator
provides clients with the ability to offer World Wide Web ("Web") pages for
their local offices, franchisees or dealers. Potential customers can then access
these pages on the Internet by zip code or other key word searches.
YELLOW PAGE ADVERTISING. TMP develops yellow page marketing programs for
national accounts, clients which sell products or services in multiple markets.
The national segment of the yellow page advertising market was a $1.4 billion
market in the U.S. for the year ended December 31, 1995. The national yellow
page market has grown each year since 1981. During the period of 1990 through
1995, the market grew at a compound average rate of approximately 4.5%. Yellow
page advertising is a complex process involving the creation of effective
imagery and message and the development of media plans which evaluate
approximately 7,000 yellow page directories of which TMP's larger accounts
utilize over 2,000. Coordinating the placement of advertisements in this number
of directories requires an extensive effort at the local level, and TMP's sales,
marketing and customer service staff of over 1,500 people provides an important
competitive advantage in marketing and executing yellow page advertising
programs. TMP earns commissions from yellow page advertising paid by directory
publishers which result in an effective commission rate to the Company of
approximately 20% of yellow page gross billings.
TMP takes a proactive approach to yellow page advertising by undertaking
original research on the efficacy of the medium, in many cases quantifying the
effectiveness of a given advertising campaign. The Company also has a rigorous
quality assurance program designed to ensure client satisfaction. The Company
believes that this program has resulted in an increase in TMP's yellow page
client retention rate from 90% in 1991 to 96% in 1995.
RECRUITMENT ADVERTISING. While TMP estimates that the worldwide recruitment
advertising market is approximately $10 billion in size, for the year ended
December 31, 1995, total spending on advertisements in North America in the
recruitment classified advertisement section of newspapers was approximately
$4.5 billion. While the recruitment advertising market has historically been
cyclical, during the period of 1990 through 1995, the U.S. market grew at a
compound annual growth rate of approximately 11.5%. The Company receives
commissions generally equal to 15% of recruitment advertising gross billings.
The Company also earns fees from value-added services such as design, research
and other creative and administrative services which resulted in aggregate
commissions and fees equal to approximately 21% of recruitment advertising gross
billings.
The services provided by recruitment advertising agencies can be complex and
range from the design and placement of classifed advertisements to the creation
of comprehensive image campaigns which "brand" a client as a quality employer.
Further, shortages of qualified employees in many industries, particularly in
the technology area, have increased the need for recruitment advertising
agencies to expand the breadth of their service offerings to effect national and
sometimes global recruitment campaigns. For these reasons, the Company believes
that over time, the proportion of overall recruitment advertising placed through
recruitment advertising agencies will grow. Given the scale of its recruitment
advertising operations and the scope of its service offerings, the Company
believes it is well positioned to participate in this market growth.
5
<PAGE>
INTERNET SERVICES. The Company's Internet based services complement its
traditional advertising businesses. In recruitment, the Company has several
career hubs, including The Monster Board-Registered Trademark-, Online Career
Center-SM-, Be the Boss-SM- and MedSearch-SM- which provide continuously
available databases of job opportunities. Users of these hubs can search for
employment opportunities by location, type of job and other criteria. Resumes
can be sent to prospective employers electronically and submitted on-line or via
mail. Users can also access other value-added services such as discussion forums
and on-line career advice. Based on its experience with its clients, TMP
believes that only 20% to 30% of open job positions are advertised using
traditional print media and that on-line solutions, which are significantly less
expensive than traditional recruitment methods, will significantly expand the
recruitment advertising market. More than 55 of the Fortune 100 companies are
utilizing the Company's career hubs.
Dealer Locator, which is marketed to both existing and potential yellow page
accounts, allows clients to offer Web pages for local offices, dealers or
franchise locations which are linked to the client's corporate Web site. These
pages are designed to generate additional customer flow while reinforcing brand
imagery contained in other advertising programs. Dealer Locator home pages will
typically include address, directions, hours of operation and potentially other
information such as sale items. Over time, the Company intends to increase the
utility of Dealer Locator through the introduction of additional interactive
functions.
TMP believes its pre-existing relationships with yellow page and recruitment
advertising clients and its sales, marketing and customer service staff of over
1,500 people provide an important competitive advantage in pursuing the market
for Internet clients. Further, the Company believes its innovative Internet
products will provide an opportunity to enhance its ability to market both
traditional advertising and Internet services to non-TMP clients.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by:
The Company................................ [ ] shares
The Selling Stockholders................... [ ] shares
Total.................................. [ ] shares
Common Stock offered for sale in:
United States offering..................... [ ] shares
International offering..................... [ ] shares
Total.................................. [ ] shares
Common Stock to be outstanding after this
offering................................... [ ] shares(1)
Use of proceeds.............................. Repayment of certain indebtedness and to
redeem preferred stock. See "Use of
Proceeds."
Proposed Nasdaq National Market Symbol....... TMPW
</TABLE>
- ------------------------
(1) Includes shares of Common Stock, pursuant to the treasury stock method
for outstanding stock options, at an average exercise price of $ per
share. See "Management--Stock Options."
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------------------------ ---------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA, NUMBER OF EMPLOYEES AND OFFICES)
PRO FORMA PRO FORMA
AS ADJUSTED AS ADJUSTED
1991 1992(1) 1993 1994 1995 1995(2) 1995 1996 1996(2)
--------- --------- --------- --------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Commissions and fees..... $ 59,062 $ 59,729 $ 73,791 $ 86,165 $ 123,907 $ 161,597 $ 57,462 $ 70,663 $ 84,784
Salaries and related
costs.................. 27,799 32,093 37,747 45,758 58,329 77,837 27,086 35,561 42,898
Office and general
expenses............... 27,319 23,620 29,824 30,316 43,432 60,077 20,061 26,337 32,801
Amortization of
intangibles............ 1,688 1,800 2,471 3,264 3,237 4,303 1,518 2,013 2,389
Restructuring charges.... -- 14,095 1,318 -- -- -- -- -- --
Total operating
expenses............... 56,806 71,608 71,360 79,338 104,998 142,217 48,665 63,911 78,088
Operating income
(loss)................. 2,256 (11,879) 2,431 6,827 18,909 19,380 8,797 6,752 6,696
Interest expense, net.... (3,545) (3,869) (7,652) (9,178) (10,894) (8,778) (5,133) (5,833) (4,956)
Other income (expense),
net.................... (430) 180 (386) (146) 150 (3) 29 450 515
Income (loss) before
provision (benefit) for
income taxes, minority
interests and equity in
earnings (losses) of
affiliates............. (1,719) (15,568) (5,607) (2,497) 8,165 10,599 3,693 1,369 2,255
Provision (benefit) for
income taxes........... 954 (5,579) (1,322) (333) 4,222 5,710 1,772 930 1,424
Net income (loss)
applicable to common
and Class B common
stockholders........... (2,889) (10,537) (4,836) (2,677) 3,019 4,264 1,464 124 525
Net income (loss) per
common and Class B
common share........... $(.17) $(.61) $(.27) $(.14) $.15 [ ] $.08 $.01 [ ]
Weighted average number
of common, Class B
common and common
equivalent shares
outstanding............ 17,393 17,393 17,776 19,230 19,518 [ ] 19,518 19,638 [ ]
OTHER DATA:
Gross Billings:
Yellow page
advertising.......... $ 293,188 $ 299,089 $ 336,714 $ 363,656 $ 429,176 $ 429,176 $ 205,630 $ 214,510 $ 214,510
Recruitment
advertising.......... -- -- 8,338 54,872 166,508 393,105 78,112 119,492 207,352
Internet(3)............ -- -- -- -- 392 788 -- 2,315 2,315
--------- --------- --------- --------- --------- ----------- --------- --------- -----------
Total Gross Billings..... $ 293,188 $ 299,089 $ 345,052 $ 418,528 $ 596,076 $ 823,069 $ 283,742 $ 336,317 $ 424,177
--------- --------- --------- --------- --------- ----------- --------- --------- -----------
--------- --------- --------- --------- --------- ----------- --------- --------- -----------
EBITDA(4)................ $ 5,171 $ (8,666) $ 6,332 $ 12,582 $ 24,978 $ 26,379 $ 11,463 $ 11,041 $ 10,920
Total operating expenses
as a percentage of
commissions and fees... 96.2% 119.9% 96.7% 92.1% 84.7% 88.0% 84.7% 90.4% 92.1%
Number of employees...... 825 870 970 1,200 1,400 1,800 1,300 1,600 2,000
Number of offices........ 30 30 30 40 50 65 50 50 70
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------
PRO FORMA
AS ADJUSTED
ACTUAL (2)
--------- -------------
<S> <C> <C>
BALANCE SHEET DATA:
Current assets........................................................ $ 190,270 $ 221,408
Current liabilities................................................... 204,124 238,765
Total assets.......................................................... 278,651 339,025
Long-term liabilities................................................. 88,204 63,418
Minority interests.................................................... 3,174 182
Redeemable preferred stock............................................ 2,000 --
Redeemable common stock(5)............................................ 2,227 --
Total stockholders' equity (deficit).................................. (21,078) 36,660
</TABLE>
- ------------------------
(1) Operating results for the year ended December 31, 1992 include a
non-recurring charge of approximately $14.1 million principally related to
the write-off of development costs of a computerized data base system.
Excluding this charge, operating income, net loss (net of the related tax
effect of $5.6 million), EBITDA and operating expenses as a percentage of
commissions and fees would have been $2.2 million, $(1.9 million), $5.4
million and 96.3%.
(2) The pro forma as adjusted financial information gives effect to (i) the
acquisitions that are described in the "Pro Forma Condensed Consolidated
Financial Information" (collectively, the "Acquisitions"), (ii) borrowings
under the Company's financing agreement to finance the Acquisitions, as if
these transactions had occurred on January 1, 1995 for purposes of the
statement of operations data, and as if the offering had occurred on June
30, 1996 with respect to the balance sheet data, (iii) the sale of [ ]
shares of Common Stock by the Company hereby at an assumed initial public
offering price of $[ ] per share (the midpoint of the range of the
estimated initial public offering price) and the application of the
estimated net proceeds therefrom, after deducting the estimated underwriting
discounts and commissions and offering expenses payable by the Company to
repay debt (including debt used to finance the Acquisitions) as if the
offering had occurred on January 1, 1995 for purposes of the statement of
operations data, and as if this offering had occurred on June 30, 1996 with
respect to the balance sheet data, and (iv) goodwill of approximately $2
million and amortization thereon resulting from the exchange of Company
stock, in connection with the Mergers, with certain minority stockholders of
Old TMP who were considered to have made substantive investments for their
minority shares. The pro forma as adjusted financial information does not
reflect anticipated charges to fourth quarter 1996, the quarter in which
this offering is expected to be completed, earnings for (i) special
management compensation of approximately $54 million resulting from the
Company stock to be granted, in connection with the Mergers, to minority
stockholders of Old TMP, WCI and certain other subsidiaries who were not
considered to have made substantive investments for their minority shares
and (ii) additional interest expense of approximately $2.5 million upon the
exercise of a warrant, issued in connection with the Company's financing
agreement, to reflect the difference between the value of the stock issued
at the assumed initial public offering price of $ per share (the
midpoint of the range of the estimated initial public offering price) and
the valuation recorded for the warrant when it was originally issued. The
statement of operations for the fourth quarter of 1996 will also include a
pro forma presentation for net income and earnings per share to exclude such
non-recurring charges. See "Use of Proceeds," "Capitalization" and "Pro
Forma Condensed Consolidated Financial Information."
(3) Represents fees earned in connection with yellow page, recruitment and other
advertisements placed on the Internet.
(4) Earnings before interest, income taxes, depreciation and amortization.
EBITDA should not be considered as an alternative to net income, as an
indicator of operating performance or as an alternative to cash flows as a
measure of liquidity.
(5) Upon the consummation of this offering, the put option related to certain
shares of Common Stock will be eliminated and such Common Stock will be
reclassified to stockholders' equity.
8
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY SHOULD CONSIDER
CAREFULLY THE INFORMATION SET FORTH BELOW AS WELL AS THE OTHER INFORMATION SET
FORTH IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS, IN ADDITION TO HISTORICAL
INFORMATION, FORWARD LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.
THOSE STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS PROSPECTUS AND INCLUDE
STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY,
ITS DIRECTORS OR ITS OFFICERS WITH RESPECT TO (I) FUTURE GROSS BILLINGS LEVELS,
(II) FUTURE PERFORMANCE OF THE COMPANY'S INTERNET BUSINESS AND (III) FUTURE
PRODUCT OFFERINGS BY THE COMPANY. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THE FORWARD LOOKING STATEMENTS AS A RESULT
OF CERTAIN FACTORS, INCLUDING THOSE DISCUSSED BELOW AND ELSEWHERE IN THIS
PROSPECTUS.
UNCERTAIN ACCEPTANCE OF THE INTERNET
Use of the Internet by consumers is at a very early stage of development,
and market acceptance of the Internet as a medium for information,
entertainment, commerce and advertising is subject to a high level of
uncertainty. The Company's clients have only limited experience with the
Internet as an advertising medium and such clients have not devoted a
significant portion of their advertising budgets to Internet-based advertising
in the past. In addition, a significant portion of the Company's potential
clients have no experience with the Internet as an advertising medium and have
not devoted any portion of their advertising budgets to Internet-based
advertising in the past. Further, the recently enacted Communications Decency
Act could slow the growth of the Internet and decrease the acceptance of the
Internet as an advertising medium. There can be no assurance that advertisers
will be persuaded to allocate or continue to allocate portions of their budgets
to Internet-based advertising. If Internet-based advertising is not widely
accepted by advertisers and advertising agencies, the Company's business,
financial condition and operating results, including its expected rate of
commissions and fees growth, would be materially adversely affected. See
"Business--Government Regulation."
UNCERTAIN ACCEPTANCE OF THE COMPANY'S INTERNET CONTENT
The Company's future growth depends in part upon its ability to deliver
original and compelling services in order to attract users valuable to the
Company's advertising clients. There can be no assurance that the Company's
content will be attractive to a sufficient number of Internet users to generate
material advertising revenues. There also can be no assurance that the Company
will be able to anticipate, monitor and successfully respond to rapidly changing
consumer tastes and preferences so as to attract a sufficient number of users to
its Web sites. Internet users can freely navigate and instantly switch among a
large number of Web sites, many of which offer original content, making it
difficult for the Company to distinguish its content and attract users. In
addition, many other Web sites offer very specific, highly targeted content that
could have greater appeal than the Company's sites to particular subsets of the
Company's target audience.
MANAGEMENT OF GROWTH
The Company's business has grown rapidly in recent periods. The growth of
the Company's business has placed a significant strain on the Company's
management and operations. The Company's expansion has resulted, and is expected
in the future to result, in substantial growth in the number of its employees
and in increased responsibility for both existing and new management personnel
and strain on the Company's existing operations, financial and management
information systems. The Company's success depends to a significant extent on
the ability of its executive officers and other members of senior management to
operate effectively both independently and as a group. See
"Management--Executive Officers and Directors."
RISKS ASSOCIATED WITH ACQUISITIONS
The Company expects that it will continue to grow, in part, by acquiring
businesses. The success of this strategy depends upon several factors including
the continued availability of financing and the Company's
9
<PAGE>
ability to identify and acquire businesses on a cost-effective basis, as well as
its continued ability to integrate acquired personnel, operations, products and
technologies into its organization effectively, to retain and motivate key
personnel and to retain the clients of acquired firms. There can be no assurance
that financing will be available on terms acceptable to the Company, or that the
Company will be able to identify or consummate new acquisitions, or manage its
recent or future expansions successfully, and any inability to do so would have
a material adverse effect on the Company's business, financial condition and
operating results. There also can be no assurance that the Company will be able
to sustain the rates of growth that it has experienced in the past.
VIABILITY OF TRADITIONAL MEDIA
The Company derives a substantial portion of its commissions and fees from
placing advertising in yellow page directories. The Company also derives a
substantial portion of its commissions and fees from designing and placing
recruitment advertisements in traditional media such as newspapers and trade
publications. There can be no assurance that the commissions received by the
Company in the future will be equal to the commissions which it has historically
received. To the extent that new media, such as the Internet, cause yellow page
directories and other forms of traditional media to be less desirable forms of
advertising media without at least a proportionate fee increase generated from
advertising on the Internet, of which there can be no assurance, the Company's
business, financial condition and operating results will be materially adversely
affected.
COMPETITION; LOW BARRIERS TO ENTRY
The markets for the Company's services are highly competitive and are
characterized by pressures to reduce prices, incorporate new capabilities and
technologies and accelerate job completion schedules.
The Company faces competition from a number of sources. These sources
include national and regional advertising agencies, specialized and integrated
marketing communication firms and traditional media companies. In addition, with
respect to new media, many advertising agencies and publications have started to
either internally develop or acquire new media capabilities. Some established
companies that provide integrated specialized services (such as advertising
services or Web site design) and are technologically proficient, especially in
the new media arena, are also competing with the Company. Many of the Company's
competitors or potential competitors have long operating histories, and some may
have greater financial, management, technological development, sales, marketing
and other resources than the Company. In addition, the Company's ability to
maintain its existing clients and generate new clients depends to a significant
degree on the quality of its services and its reputation among its clients and
potential clients.
Although the Company believes that there are defensible barriers to entry
into its businesses, the Company has no significant proprietary technology that
would preclude or inhibit competitors from entering yellow page, recruitment or
on-line advertising markets. There can be no assurance that existing or future
competitors will not develop or offer services and products that provide
significant performance, price, creative or other advantages over those offered
by the Company, which could have a material adverse effect on the Company's
business, financial condition and operating results.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; SEASONALITY OF BUSINESS
The Company's quarterly operating results have fluctuated in the past and
may fluctuate in the future as a result of a variety of factors, including the
timing of acquisitions, the timing of yellow page directory closings, the
largest number of which currently occur in the third quarter, and the receipt of
commissions earned from yellow page publishers for achieving a specified volume
of advertising, which commissions are typically reported in the fourth quarter.
In addition, in the fourth quarter of fiscal 1996 when this offering is expected
to be completed, there will be: (i) a non-recurring charge of approximately $54
million for special management compensation resulting from Company stock to be
granted, in connection with the Mergers, to minority stockholders of Old TMP,
WCI and certain other subsidiaries who were not considered to have made
substantive investments for their minority shares and (ii) additional interest
10
<PAGE>
expense of approximately $2.5 million upon the exercise of a warrant, issued in
connection with the Company's financing agreement, to reflect the difference
between the value of the stock issued at the assumed initial public offering
price of $[ ] per share (the midpoint of the range of the estimated initial
public offering price) and the valuation recorded for the warrant when it was
originally issued. The statement of operations for such quarter will also
include a pro forma presentation for net income and earnings per share to
exclude such non-recurring charges. The Company also experiences some
seasonality in its business. The Company's commissions and fees from recruitment
advertising are also subject to fluctuation based upon general economic
conditions. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Quarterly Results."
RISKS OF TECHNOLOGICAL CHANGE
The market for Internet products and services is characterized by rapid
technological developments, frequent new product introductions and evolving
industry standards. The emerging character of these products and services and
their rapid evolution will require that the Company continually improve the
performance, features and reliability of its Internet content, particularly in
response to competitive offerings. There can be no assurance that the Company
will be successful in responding quickly, cost effectively and sufficiently to
these developments. In addition, the widespread adoption of new Internet
technologies or standards could require substantial expenditures by the Company
to modify or adapt its Web sites and services and could affect the Company's
financial condition or operating results. In addition, new Internet services or
enhancements which are or may be offered by the Company may contain design flaws
or other defects that could require costly modifications or result in a loss of
client confidence, either of which could have a material adverse effect on the
Company's business, financial condition or operating results.
DEPENDENCE ON KEY PERSONNEL
The Company's continued success will depend to a significant extent upon its
senior management, including Andrew J. McKelvey, the Company's Chairman of the
Board and President. The loss of the services of one or more key employees could
have a material adverse effect on the Company's business, financial condition or
operating results. In addition, if one or more key employees join a competitor
or form a competing company, the resulting loss of existing or potential clients
could have a material adverse effect of the Company's business, financial
condition or operating results. In the event of the loss of any such employee,
there can be no assurance that the Company would be able to prevent the
unauthorized disclosure or use of its procedures, practices, new product
development or client lists.
CONTROL BY PRINCIPAL STOCKHOLDER
Following completion of this offering, Andrew J. McKelvey will beneficially
own all of the outstanding Class B Common Stock, which will represent [ ]% of
the combined voting power of all classes of voting stock of the Company. As a
result, Mr. McKelvey will be able to direct the election of all of the members
of the Company's Board of Directors and exercise a controlling influence over
the business and affairs of the Company, including any determinations with
respect to mergers or other business combinations involving the Company, the
acquisition or disposition of assets of the Company, the incurrence of
indebtedness by the Company, the issuance of any additional Common Stock or
other equity securities and the payment of dividends with respect to the Common
Stock. Similarly, Mr. McKelvey will have the power to determine matters
submitted to a vote of the Company's stockholders without the consent of the
Company's other stockholders and will have the power to prevent a change of
control of the Company.
ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF CERTIFICATE OF INCORPORATION,
BYLAWS AND DELAWARE LAW
Upon completion of this offering, the Company's Board of Directors will have
the authority to issue up to 800,000 shares of undesignated preferred stock and
to determine the price, rights, preferences, privileges and restrictions,
including voting and conversion rights of such shares, without any further vote
11
<PAGE>
or action by the Company's stockholders. The rights of the holders of Common
Stock will be subject to, and may be adversely affected by, the rights of the
holders of any preferred stock that may be issued in the future. The issuance of
preferred stock could have the effect of making it more difficult for a third
party to acquire a majority of the outstanding voting stock of the Company. The
Company has no current plans to issue shares of preferred stock following this
offering. Further, certain provisions of the Company's Certificate of
Incorporation and Bylaws and of Delaware law could delay, prevent or make more
difficult a merger, tender offer or proxy contest involving the Company. Among
other things, these provisions specify advance notice requirements for
stockholder proposals and director nominations. In addition, upon consummation
of this offering, Mr. McKelvey will control [ ]% of the combined voting power
of all classes of voting stock of the Company. See "--Control by Principal
Stockholder" and "Description of Capital Stock."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock. There can be no assurance that an active trading market in the Common
Stock will develop or continue after this offering. The initial public offering
price will be determined through negotiations among the Company, the Selling
Stockholders and the Representatives of the Underwriters and may not be
indicative of the market price for the Common Stock after this offering. See
"Underwriters."
The stock market has, from time to time, experienced extreme price and
volume fluctuations. Factors such as announcements by the Company of variations
in its quarterly financial results and fluctuations in advertising commissions
and fees, including the percentage of the Company's commissions and fees derived
from Internet-based services and products could cause the market price of the
Common Stock to fluctuate significantly. Further, due to the volatility of the
stock market generally, the price of the Common Stock could fluctuate for
reasons unrelated to the operating performance of the Company.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market, or the
perception that such sales may occur, could adversely affect the prevailing
market price of the Common Stock and the ability of the Company to raise capital
through a public offering of its equity securities. The Company, all of the
Company's executive officers and directors and certain other stockholders of the
Company, including the Selling Stockholders, have agreed that, without the prior
written consent of Morgan Stanley & Co. Incorporated on behalf of the
Underwriters and subject to certain limited exceptions, they will not sell any
shares of Common Stock for a period of 180 days after the date of this
Prospectus. See "Underwriters." Following this 180 day period, approximately
14,787,540 shares of Common Stock held by an affiliate will be eligible for sale
in the public market without registration, subject to certain volume and other
limitations, pursuant to Rule 144 under the Securities Act of 1933, as amended
(the "Securities Act"). Certain of the Company's stockholders have the right to
cause the Company to include their shares in any future registration of
securities effected by the Company under the Securities Act. If the Company is
required to include in a Company-initiated registration shares held by such
holders pursuant to the exercise of their piggyback registration rights, such
sales may have an adverse effect on the Company's ability to raise needed
capital. See "Principal and Selling Stockholders" and "Shares Eligible for
Future Sale."
DILUTION
Investors in this offering will experience immediate and substantial
dilution in net tangible book value per share of their investment. See
"Dilution."
DIVIDEND POLICY
The Company currently intends to retain earnings, if any, to support its
growth strategy and does not anticipate paying dividends on its Common Stock and
Class B Common Stock in the foreseeable future. Payment of dividends on Common
Stock and Class B Common Stock is prohibited by the Company's financing
agreement. See "Dividend Policy."
12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the [ ] shares of
Common Stock offered by the Company hereby at an assumed initial public offering
price of $[ ] per share are estimated to be $54,000,000, after deducting the
estimated underwriting discounts and commissions and offering expenses payable
by the Company. The Company will not receive any proceeds from the sale of the
[ ] shares of Common Stock offered by the Selling Stockholders hereby.
TMP intends to use the net proceeds from this offering to repay a portion of
its outstanding indebtedness, which aggregated $114,300,000 at August 31, 1996.
The indebtedness to be repaid and other amounts to be paid consists of
approximately: $44,100,000 of borrowings outstanding under the Company's
financing agreement; notes in the aggregate amount of $4,347,000 payable to
Rogers & Associates Advertising, Inc. constituting the balance payable to that
company of the purchase price of assets of that company (collectively, the
"Rogers Note"); $3,163,000 to redeem the preferred stock of a subsidiary, YPMS
Acquisition, Inc.; and $2,105,000 to redeem the 10.5% Cumulative Preferred
Stock. See Certain Transactions" and "Description of Capital Stock--10.5%
Cumulative Preferred Stock." The Rogers Note bears interest at 8.5% per annum.
The financing agreement currently bears interest at 7.9% per annum. The interest
rate of the financing agreement is determined pursuant to a formula whereby the
interest rate is, at the Company's option, either (i) the prime rate or 1/2%
over the federal funds rate, whichever is higher, less 1% to plus 1% as
determined in the financing agreement or (ii) LIBOR plus 1 1/2% to 3 1/2% as
determined under the financing agreement. The financing agreement expires on
June 27, 2001, subject to automatic renewals for 1 year periods, thereafter.
Amounts repaid under the Company's financing agreement will be available for
reborrowing under the same terms and, as a result, following this offering the
Company will have approximately $54,400,000 available for borrowing under this
facility. After this offering, the Company may borrow up to $18,000,000 under
its financing agreement to repay certain vendor financing. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" for a description of the Company's
capital commitments for the year ending December 31, 1996. Pending such uses,
the net proceeds will be invested in short-term, investment grade,
interest-bearing securities.
DIVIDEND POLICY
TMP has never declared or paid any cash dividends on its Common Stock. The
Company has paid dividends in the amount of $210,000 annually on its 10.5%
Cumulative Preferred Stock. The 10.5% Cumulative Preferred Stock will be
redeemed with a portion of the proceeds from this offering. The Company
currently anticipates that all future earnings will be retained by the Company
to support its growth strategy. Accordingly, TMP does not anticipate paying cash
dividends on the Common Stock for the foreseeable future. The payment of any
future dividends will be at the discretion of the Company's Board of Directors
and will depend upon, among other things, future earnings, operations, capital
requirements, the general financial condition of the Company, contractual
restrictions and general business conditions. The Company's financing agreement
prohibits the payment of dividends on common stock. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations-- Liquidity and
Capital Resources."
13
<PAGE>
DILUTION
The net tangible pro forma book deficit of the Common Stock and Class B
Common Stock at June 30, 1996 was approximately $89.4 million, or $4.68 per
share of outstanding Common Stock and Class B Common Stock which reflects (i)
the Acquisitions, (ii) goodwill in the amount of approximately $2 million
resulting from the exchange of Company stock, in connection with the Mergers,
with certain minority stockholders of Old TMP who were considered to have made
substantive investments for their minority shares, and (iii) the inclusion in
stockholders' equity of the Redeemable Common Stock, which will no longer be
subject to repurchase upon the consummation of this offering. Net tangible pro
forma book deficit per share represents total pro forma tangible assets of the
Company less total pro forma liabilities, Minority Interests and Redeemable
Preferred Stock, divided by the number of shares of Common Stock and Class B
Common Stock outstanding. After giving effect to the receipt of the estimated
net proceeds from the Company's sale of [ ] shares of Common Stock at an
assumed initial public offering price of $[ ] per share (after deducting the
estimated underwriting discounts and commissions and the estimated offering
expenses payable by the Company), the adjusted pro forma net tangible book
deficit of the Company will be approximately $35.8 million, or $[ ] per
share of outstanding Common Stock and Class B Common Stock, at June 30, 1996.
This represents an immediate increase in net pro forma tangible book value of
$[ ] per share to existing stockholders and an immediate dilution of
$[ ] per share to investors purchasing shares at the assumed initial
public offering price. The following table illustrates dilution to new
investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................ $ [ ]
Net tangible book deficit per share at June 30, 1996 before this
offering............................................................... $ [ ]
Increase in net tangible book value per share attributable to new
investors.............................................................. [ ]
---------
Adjusted net tangible book deficit per share at June 30, 1996 after this
offering................................................................. [ ]
---------
Dilution of net tangible book value per share to new investors in this
offering................................................................. $ [ ]
---------
---------
</TABLE>
The Company will not receive any of the proceeds from the sale of Common
Stock being offered by the Selling Stockholders hereby and, accordingly, such
proceeds will not increase the net tangible book value per share after this
offering.
The following table sets forth at June 30, 1996 the number of shares of
Common Stock and Class B Common Stock purchased from the Company and the total
consideration and weighted average price per share paid by existing stockholders
of the Company and by new investors purchasing shares from the Company in this
offering, based upon an assumed initial public offering price of $[ ] per
share, before deducting the estimated underwriting discounts and commissions and
estimated offering expenses payable by the Company:
<TABLE>
<CAPTION>
TOTAL CONSIDERATION
SHARES PURCHASED AVERAGE
------------------------ ------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders....................... $ $
New public investors........................ $ $
Total....................................... 100% $ 100%
</TABLE>
The foregoing tables assume no exercise of outstanding options. At June
, 1996 shares of Common Stock were subject to outstanding options at
an average exercise price of $ per share. To the extent these options
are exercised and shares are issued, there will be further dilution to new
investors. See "Management--Stock Options." The foregoing tables also assume
that the 228,644 shares of Common Stock, issuable upon exercise of warrants
granted to the BNY Financial Corporation, were outstanding at June 30, 1996. See
"Principal and Selling Stockholders."
14
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996, (i) on an historical basis, (ii) on a pro forma basis giving effect to
the Acquisitions and (iii) on a pro forma basis, as adjusted to give effect to
(a) the sale by the Company of the [ ] shares of Common Stock offered by
the Company hereby and the application by the Company of the net proceeds
therefrom as described in "Use of Proceeds", (b) goodwill in the amount of
approximately $2 million resulting from the exchange of Company stock, in
connection with the Mergers, with certain minority stockholders of Old TMP who
were considered to have made substantive investments for their minority shares,
and (c) reclassification to stockholders' equity of Redeemable Common Stock
which, upon completion of this offering, will not be subject to repurchase. The
table set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
consolidated financial statements and notes thereto of the Company included
elsewhere in this Prospectus and "Unaudited Consolidated Pro Forma Financial
Data."
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
---------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt............................ $ 8,669 $ 11,534 $ 7,815
--------- --------- -----------
--------- --------- -----------
Long-term debt, less current portion......................... $ 88,204 $ 108,197 $ 63,418
--------- --------- -----------
Minority interests(1)........................................ 3,174 3,195 182
--------- --------- -----------
Redeemable preferred stock(2)................................ 2,000 2,000 --
--------- --------- -----------
Redeemable common stock, 283,521 shares outstanding(3)....... 2,227 2,227 --
--------- --------- -----------
Stockholders' equity (deficit):
Preferred Stock, $.001 par value.
Authorized--800,000 shares; issued and
outstanding--none........................................ -- -- --
Common Stock, $.001 par value.
Authorized--200,000,000 shares; issued and
outstanding--actual 4,023,735, pro forma -- 4,023,735 and
[ ] pro forma as adjusted............................ 4 4 []
Class B Common Stock, $.001 par value.
Authorized--39,000,000 shares; issued and outstanding--
14,787,540, actual, pro forma and pro forma as
adjusted................................................. 15 15 []
Additional paid-in capital................................. 675 675 []
Foreign currency translation adjustment.................... 81 81 []
Deficit.................................................... (21,853) (21,853) []
--------- --------- -----------
Total stockholders' equity (deficit)..................... (21,078) (21,078) 36,660
--------- --------- -----------
Total capitalization................................. $ 74,527 $ 94,541 $ 100,260
--------- --------- -----------
--------- --------- -----------
</TABLE>
(1) Includes the preferred stock of a subsidiary, YPMS Acquisition, Inc., which
the Company will redeem with a portion of the proceeds from this offering.
See "Use of Proceeds."
(2) Represents the 10.5% Cumulative Preferred Stock. The 10.5% Cumulative
Preferred Stock will be redeemed by the Company with a portion of the
proceeds from this offering. See "Use of Proceeds" and "Description of
Capital Stock -- 10.5% Cumulative Preferred Stock."
(3) The obligation to redeem certain shares of Common Stock, based on a formula
value, terminates upon the effectiveness of this offering. These shares have
been reclassified as Common Stock.
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected consolidated financial information with respect to
the Company's financial position as of December 31, 1994 and 1995 and its
results of operations for each of the years ended December 31, 1993, 1994 and
1995 has been derived from the audited consolidated financial statements of the
Company. The selected consolidated financial information with respect to the
Company's results of
operations for the years ended December 31, 1991 and 1992 and the six months
ended June 30, 1995 and 1996 and with respect to the Company's financial
position as of December 31, 1991, 1992 and 1993 and as of June 30, 1995 and 1996
have been derived from the unaudited consolidated financial statements of the
Company which, in the opinion of management of the Company, have been prepared
on the same basis as the audited financial statements and include all normal and
recurring adjustments necessary for a fair presentation of the information set
forth therein. The results for the six months ended June 30, 1996 are not
necessarily indicative of future results. The selected consolidated financial
information presented below should be read in conjunction with the consolidated
financial statements of the Company and notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus. The Other Data presented below has not
been audited.
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------ --------
(IN THOUSANDS, EXCEPT PER SHARE DATA, NUMBER OF EMPLOYEES
AND OFFICES)
1991 1992(1) 1993 1994 1995 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Commissions and fees.................................................. $ 59,062 $ 59,729 $ 73,791 $ 86,165 $123,907 $ 57,462
Operating expenses:
Salaries and related costs.......................................... 27,799 32,093 37,747 45,758 58,329 27,086
Office and general.................................................. 27,319 23,620 29,824 30,316 43,432 20,061
Amortization of intangibles......................................... 1,688 1,800 2,471 3,264 3,237 1,518
Restructuring charges............................................... -- 14,095 1,318 -- -- --
Total operating expenses.............................................. 56,806 71,608 71,360 79,338 104,998 48,665
Operating income (loss)............................................... 2,256 (11,879) 2,431 6,827 18,909 8,797
Other income (expense):
Interest expense, net............................................... (3,545) (3,869) (7,652) (9,178) (10,894) (5,133)
Other, net.......................................................... (430) 180 (386) (146) 150 29
Income (loss) before provision (benefit) for income taxes, minority
interests and equity in earnings (losses) of affiliates............. (1,719) (15,568) (5,607) (2,497) 8,165 3,693
Provision (benefit) for income taxes................................ 954 (5,579) (1,322) (333) 4,222 1,772
Net income (loss) applicable to common and Class B common
stockholders........................................................ (2,889) (10,537) (4,836) (2,677) 3,019 1,464
Net income (loss) per common and Class B common share................. $(.17) $(.61) $(.27) $(.14) $.15 $.08
Weighted average number of common, Class B common and common
equivalent shares outstanding....................................... 17,393 17,393 17,776 19,230 19,518 19,518
OTHER DATA:
Gross Billings:
Yellow page advertising............................................. $293,188 $299,089 $336,714 $363,656 $429,176 $205,630
Recruitment advertising............................................. -- -- 8,338 54,872 166,508 78,112
Internet (2)........................................................ -- -- -- -- 392 --
-------- -------- -------- -------- -------- --------
Total Gross Billings.................................................. $293,188 $299,089 $345,052 $418,528 $596,076 $283,742
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
EBITDA(3)............................................................. $ 5,171 $ (8,666) $ 6,332 $ 12,582 $ 24,978 $ 11,463
Total operating expenses as a percentage of commissions and fees...... 96.2% 119.9% 96.7% 92.1% 84.7% 84.7%
Number of employees................................................... 825 870 970 1,200 1,400 1,300
Number of offices..................................................... 30 30 30 40 50 50
<CAPTION>
1996
--------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Commissions and fees.................................................. $70,663
Operating expenses:
Salaries and related costs.......................................... 35,561
Office and general.................................................. 26,337
Amortization of intangibles......................................... 2,013
Restructuring charges............................................... --
Total operating expenses.............................................. 63,911
Operating income (loss)............................................... 6,752
Other income (expense):
Interest expense, net............................................... (5,833 )
Other, net.......................................................... 450
Income (loss) before provision (benefit) for income taxes, minority
interests and equity in earnings (losses) of affiliates............. 1,369
Provision (benefit) for income taxes................................ 930
Net income (loss) applicable to common and Class B common
stockholders........................................................ 124
Net income (loss) per common and Class B common share................. $.01
Weighted average number of common, Class B common and common
equivalent shares outstanding....................................... 19,638
OTHER DATA:
Gross Billings:
Yellow page advertising............................................. $214,510
Recruitment advertising............................................. 119,492
Internet (2)........................................................ 2,315
--------
Total Gross Billings.................................................. $336,317
--------
--------
EBITDA(3)............................................................. $11,041
Total operating expenses as a percentage of commissions and fees...... 90.4%
Number of employees................................................... 1,600
Number of offices..................................................... 50
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------ --------
(IN THOUSANDS)
1991 1992(1) 1993 1994 1995 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets........................................................ $ 91,503 $105,400 $122,168 $134,313 $180,516 $154,190
Current liabilities................................................... 108,524 115,224 135,033 146,124 186,247 161,162
Total assets.......................................................... 134,476 142,087 168,424 198,965 258,094 228,095
Long-term liabilities................................................. 26,255 38,112 49,694 72,008 88,070 84,600
Minority interests.................................................... 3,791 3,361 3,121 3,153 3,105 3,189
Redeemable preferred stock............................................ 2,000 2,000 2,000 2,000 2,000 2,000
Redeemable common stock(4)............................................ -- -- -- -- -- --
Total stockholders' deficit........................................... (6,094) (16,610) (21,424) (24,320) (21,328) (22,856)
<CAPTION>
1996
--------
<S> <C>
BALANCE SHEET DATA:
Current assets........................................................ $190,270
Current liabilities................................................... 204,124
Total assets.......................................................... 278,651
Long-term liabilities................................................. 88,204
Minority interests.................................................... 3,174
Redeemable preferred stock............................................ 2,000
Redeemable common stock(4)............................................ 2,227
Total stockholders' deficit........................................... (21,078 )
</TABLE>
- ------------------------
(1) Operating results for the year ended December 31, 1992, include a
non-recurring charge of approximately $14.1 million principally related to
the write-off of development costs of a computerized data base system.
Excluding this charge, operating income, net loss (net of the related tax
effect of $5.6 million), EBITDA and operating expenses as a percentage of
commissions and fees would have been $2.2 million, $(1.9 million), $5.4
million and 96.3%, respectively.
(2) Represents fees earned in connection with yellow page, recruitment and other
advertisements placed on the Internet.
(3) Earnings before interest, income taxes, depreciation and amortization.
EBITDA should not be considered as an alternative to net income, as an
indicator of operating performance or as an alternative to cash flows as a
measure of liquidity.
(4) Upon consummation of this offering, the put option related to certain shares
of Common Stock will be eliminated and such Common Stock will be
reclassified to stockholders' equity.
17
<PAGE>
TMP WORLDWIDE INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
TMP
WORLDWIDE 1995 1996 NEVILLE PENDING
INC. ACQUISITIONS(1) ACQUISITIONS(2) JEFFRESS ACQUISITIONS(3) ADJUSTMENTS
----------- -------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Commissions and fees......... $ 123,907 $ 4,613 $ 6,725 $ 22,320 $ 4,032 $ --
----------- -------------- -------------- -------------- -------------- -------------
Operating expenses:
Salaries and related
costs.................... 58,329 1,997 3,386 12,533 1,592 --
Office and general......... 43,432 2,050 2,961 9,967 1,667 --
Amortization of
intangibles.............. 3,237 -- -- -- -- 999(a)
----------- -------------- -------------- -------------- -------------- -------------
Total operating expenses... 104,998 4,047 6,347 22,500 3,259 999
----------- -------------- -------------- -------------- -------------- -------------
Operating income (loss)...... 18,909 566 378 (180) 773 (999)
Interest (expense), net...... (10,894) 1 (112) (15) (6) (2,674)(b)
Other income, net............ 150 (164) 1 -- 10 --
----------- -------------- -------------- -------------- -------------- -------------
Income (loss) before
provision (benefit) for
income taxes, minority
interests and equity in
earnings (losses) of
affiliates................. 8,165 403 267 (195) 777 (3,673)
Provision (benefit) for
income taxes............... 4,222 65 (3) 285 300 (1,199)(c)
Minority interests........... 435 -- -- (17) -- --
Equity in earnings (losses)
of affiliates.............. (279) -- -- -- -- --
----------- -------------- -------------- -------------- -------------- -------------
Net income (loss)............ 3,229 338 270 (463) 477 (2,474)(f)
Preferred dividends.......... (210) -- -- -- -- --
----------- -------------- -------------- -------------- -------------- -------------
Net income (loss) applicable
to common and Class B
common stockholders........ $ 3,019 $ 338 $ 270 $ (463) $ 477 $ (2,474)
----------- -------------- -------------- -------------- -------------- -------------
----------- -------------- -------------- -------------- -------------- -------------
Net income (loss) per common
and Class B common share... $ .15
-----------
-----------
Weighted average number of
common, Class B common and
common equivalent shares
outstanding................ 19,518
-----------
-----------
<CAPTION>
PRO FORMA
PRO FORMA AS
COMBINED(4) ADJUSTED(5)
------------ -------------
<S> <C> <C>
Commissions and fees......... $ 161,597 $ 161,597
------------ -------------
Operating expenses:
Salaries and related
costs.................... 77,837 77,837
Office and general......... 60,077 60,077
Amortization of
intangibles.............. 4,236 4,303
------------ -------------
Total operating expenses... 142,150 142,217
------------ -------------
Operating income (loss)...... 19,447 19,380
Interest (expense), net...... (13,700) (8,778)(d)
Other income, net............ (3) (3)
------------ -------------
Income (loss) before
provision (benefit) for
income taxes, minority
interests and equity in
earnings (losses) of
affiliates................. 5,744 10,599
Provision (benefit) for
income taxes............... 3,670 5,710(e)
Minority interests........... 418 241(d)(f)
Equity in earnings (losses)
of affiliates.............. (279) (279)
------------ -------------
Net income (loss)............ 1,377 4,369
Preferred dividends.......... (210) (105)(d)(g)
------------ -------------
Net income (loss) applicable
to common and Class B
common stockholders........ $ 1,167 $ 4,264
------------ -------------
------------ -------------
Net income (loss) per common
and Class B common share... $ .06 [ ]
------------
------------
Weighted average number of
common, Class B common and
common equivalent shares
outstanding................ 19,518 [ ]
------------
------------
</TABLE>
- ----------------------------------
(1) Reflects the results of operations of five companies acquired during 1995
for the portion of 1995 prior to acquisition.
(2) Reflects the results of operations of seven companies acquired during the
period January 1, 1996 through August 31, 1996 as if they were acquired on
January 1, 1995 but excludes the acquisition of Neville Jeffress.
(3) Reflects the results of operations of three companies, the acquisition of
which the Company deems to be probable.
(4) Reflects the acquisition of Neville Jeffress and the other completed and
pending acquisitions for 1995 and 1996.
(5) Adjusted for the sale by the Company of [ ] shares of Common Stock at
an assumed initial public offering price of [ ] per share (the midpoint
of the range of the estimated initial public offering price) and the
application of the net proceeds therefrom as described in "Use of Proceeds",
as if the transaction occurred on January 1, 1995, and records amortization
of goodwill resulting from the exchange of Company stock, in connection with
the Mergers, with certain minority stockholders of Old TMP who were
considered to have made a substantive investment in their shares.
(a) To record amortization of intangibles arising from the acquisition of
Neville Jeffress, the 1995 acquisitions, the 1996 acquisitions and the other
pending acquisitions.
(b) To record interest expense on borrowings under the Company's financing
agreement and seller financed notes issued in connection with the
acquisition of Neville Jeffress, the 1995 acquisitions, the 1996
acquisitions and the other pending acquisitions.
(c) To record the tax benefit on the of amortization of certain intangibles and
interest expense on borrowings in connection with the acquisition of Neville
Jeffress, the 1995 acquisitions, the 1996 acquisitions and other pending
acquisitions at an estimated combined tax rate of 40%. However the effective
tax rate of 32.8% reflects the nondeductible status of a portion of the
amortization expense.
(d) Reflects the use of proceeds from this offering as described in "Use of
Proceeds."
(e) Includes the tax expense resulting from the interest expense savings
realized from the reduction of debt through the use of proceeds.
(f) Reflects a charge for payment of a call premium of $150 thousand for the
redemption of the subsidiary preferred stock.
(g) Reflects a charge for payment of a call premium of $105 thousand for the
redemption of the preferred stock.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO, THE CONSOLIDATED FINANCIAL STATEMENTS OF THE
COMPANY APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS, IN
ADDITION TO HISTORICAL INFORMATION, FORWARD LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THE FORWARD LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE DISCUSSED BELOW AND ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
TMP is a marketing services, communications and technology company that
provides comprehensive, individually tailored advertising services including
development of creative content, media planning, production and placement of
corporate advertising, market research, direct marketing and other ancillary
services and products. The Company is the world's largest yellow page
advertising agency and, the Company believes, one of the world's largest
recruitment advertising agencies. In 1995, the Company began marketing
Internet-based services as extensions of its core business and has become a
growing provider of Internet content. The Company offers advertising programs to
more than 17,000 clients, including more than 70 of the Fortune 100 and more
than 240 of the Fortune 500 companies. For the year ended December 31, 1995, the
Company's gross billings were $596.1 million, commissions and fees were $123.9
million, net income was $3.2 million and EBITDA was $25.0 million.
A substantial part of the Company's growth has been achieved through
acquisitions. For the period January 1, 1993 through August 31, 1996, the
Company has completed 34 acquisitions with estimated annual gross billings of
approximately $375 million. Given the significant number of acquisitions in each
of the last three years, the results of operations from period to period are not
necessarily comparable.
Gross billings refer to billings for advertising placed in telephone
directories, newspapers, new media and other media, and associated fees for
related services. While gross billings are not included in the Company's
consolidated financial statements, the trends in gross billings directly impact
the commissions and fees earned by the Company. The Company earns commissions
based on a percentage of the media advertising purchased at a rate established
by the related publisher, and associated fees for related services. Publishers
typically bill the Company for the advertising purchased by the Company's
clients and the Company in turn bills its clients for this amount. Accordingly,
the Company is at risk in the event that its clients are unable to pay such
bills.
The Company designs and executes yellow page advertising programs, receiving
an effective commission rate from directory publishers of approximately 20% of
yellow page gross billings. In general, publishers consider orders renewed
unless actively canceled. In addition to base commissions, certain yellow pages
publishers pay increased commissions for volume placement by advertising
agencies. The Company typically recognizes this additional commission, if any,
in the fourth quarter when it is certain that such commission has been earned.
For recruitment advertising placements in the U.S., publisher commissions
average 15% of recruitment advertising gross billings. The Company also earns
fees from value-added services such as design, research and other creative and
administrative services resulting in aggregate commissions and fees equal to
approximately 21% of recruitment advertising gross billings. Outside of the
U.S., TMP's commission rates for recruitment advertising vary, ranging from
approximately 10% in Australia to 15% in Canada and the United Kingdom. Also,
outside the U.S., the Company earns fees for value-added services. The Company
also earns fees for the placement of advertisements on the Internet, including
its career Web sites.
In 1993, the Company completed three acquisitions for an aggregate purchase
price of $8.7 million, including the purchase of the assets of US West Marketing
Resources Group, Inc., a yellow page advertising agency. Leveraging its strength
in yellow page advertising, the Company entered recruitment advertising in the
fourth quarter of 1993 with the purchases of the assets of Bentley, Barnes &
Lynn, Inc. and Unger & Associates, Inc. Bentley, Barnes & Lynn was one of the
largest recruitment advertising agencies
23
<PAGE>
in the midwest and developer of Empower, a human resources public relation
service, focusing on minority recruitment issues.
In 1994, the Company completed nine acquisitions for an aggregate purchase
price of $12.2 million. Six of these acquisitions were in the business of
recruitment advertising and included Deutsch, Shea & Evans, Inc., an agency
based in New York, the second largest U.S. recruitment market. Two acquisitions
were yellow page advertising companies of which the largest was the yellow page
advertising agency business of GTE Directories Corporation, a Dallas based
agency specializing in serving general agencies which do not have their own
yellow page placement capabilities. The Company also acquired a 50% interest in
a real estate advertising company which is accounted for on the equity method.
In 1995, the Company completed fourteen acquisitions for an aggregate
purchase price of $26.7 million. These acquisitions consisted of eleven
recruitment advertising agencies, Adion Information Services, Inc., creator of
The Monster Board-Registered Trademark-, and two small yellow page agencies. The
largest acquisitions included acquisitions of the assets of Rogers & Associates
Advertising, Inc., Adion, Inc. (an affiliate of Adion Information Services,
Inc.), and The Haughey Group, Inc.. Rogers & Associates was based in Northern
California, the largest U.S. recruitment advertising market. Adion Inc. and The
Haughey Group, Inc. were based in Boston.
In 1996, through August, the Company has completed eight acquisitions, all
of which are in recruitment advertising, for an aggregate purchase price of
$17.3 million, making the Company one of the largest recruitment advertising
agencies in the world. These acquisitions have estimated annual gross billings
of $172 million. The largest acquisition was the purchase of Neville Jeffress,
which has estimated annual gross billings of $140 million. The Company also
purchased London-based Optima Direct Limited.
Primarily as a result of these acquisitions, the Company's commissions and
fees increased from $73.8 million in 1993 to $123.9 million in 1995. Assuming
that all of the acquisitions completed from January 1, 1995 through August 31,
1996 had been completed on January 1, 1995, the Company's commissions and fees,
on a pro forma basis, would have been approximately $161.6 million for the year
ended December 31, 1995. These acquisitions were funded primarily with debt
resulting in an increase in interest expense from approximately $7.9 million in
1993 to $11.2 million in 1995 and $13.7 million on a pro forma basis for 1995
for acquisitions completed in 1995 and through August 31, 1996. All of these
acquisitions were accounted for using the purchase method of accounting and are
included in the Company's consolidated financial statements from their
respective dates of acquisition. The Company is continuously monitoring the
marketplace for opportunities to expand its presence in both yellow page and
recruitment advertising which include Internet-related opportunities and intends
to continue its acquisition strategy to supplement its internal growth.
The Company's operating expenses have increased significantly since 1993
primarily due to headcount increases as a result of acquisitions and hiring to
support gross billings growth. Salaries and related costs increased $20.6
million from $37.7 million for the year ended December 31, 1993 to $58.3 million
for the year ended December 31, 1995, a 54.6% increase, supporting a 72.7% gross
billings increase over the same period. Salaries and related costs include total
payroll and associated benefits as well as payroll taxes, sales commissions,
recruitment and training costs.
Office and general expenses increased $13.6 million from $29.8 million for
the year ended December 31, 1993 to $43.4 million for the year ended December
31, 1995, a 45.6% increase, primarily due to increased costs needed to support
the increased billings and the expansion of recruitment offices through
acquisitions in new U.S and foreign markets. This cost category includes
expenses for office operations, business promotion, market research,
advertising, professional fees and fees paid to the Company's primary lending
institution for its services in the processing and collection of payments for
accounts receivable. Amortization of intangibles includes amortization of
acquisition related charges, including the costs in excess of fair market value
of net assets acquired and capitalized costs for consulting and non-compete
arrangements with the principals of acquired companies. This acquisition related
amortization
24
<PAGE>
was $2.5 million, $3.3 million and $3.2 million for the years ended December 31,
1993, 1994 and 1995, respectively.
Net interest expense includes interest payments made to the Company's
primary lender, to certain vendors and to the holders of seller financed notes.
During the fourth quarter of fiscal 1996, the quarter in which this offering
is expected to be completed, there will be: (i) a non-recurring charge of
approximately $54.0 million for special management compensation resulting from
Company stock to be granted, in connection with the Mergers, to minority
stockholders of Old TMP, WCI and certain other subsidiaries who were not
considered to have made substantive investments for their minority shares and
(ii) additional interest expense of approximately $2.5 million upon the exercise
of a warrant, issued in connection with the Company's financing agreement, to
reflect the difference between the value of the stock issued at the initial
public offering price of $ per share (the midpoint of the range of estimated
initial public offering price) and the valuation recorded for the warrant when
it was originally issued. The statement of operations for such quarter will also
include a pro forma presentation for net income and earnings per share to
exclude such non-recurring charges.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated gross billings,
commissions and fees and commissions and fees as a percentage of gross billings
for the Company's yellow page advertising, recruitment advertising and Internet
businesses and EBITDA for the Company.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- ----------------------
1993 1994 1995 1995 1996
--------- --------- --------- ----------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
GROSS BILLINGS:
Yellow page advertising................ $ 336,714 $ 363,656 $ 429,176 $ 205,630 $ 214,510
Recruitment advertising................ 8,338 54,872 166,508 78,112 119,492
Internet(1)............................ -- -- 392 -- 2,315
--------- --------- --------- ----------- ---------
Total.................................. $ 345,052 $ 418,528 $ 596,076 $ 283,742 $ 336,317
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
COMMISSIONS AND FEES:
Yellow page advertising................ $ 72,106 $ 74,463 $ 87,456 $ 40,921 $ 43,380
Recruitment advertising................ 1,685 11,702 36,059 16,541 24,968
Internet(1)............................ -- -- 392 -- 2,315
--------- --------- --------- ----------- ---------
Total.................................. $ 73,791 $ 86,165 $ 123,907 $ 57,462 $ 70,663
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
COMMISSIONS AND FEES AS A
PERCENTAGE OF GROSS
BILLINGS:
Yellow page advertising................ 21.4% 20.5% 20.4% 19.9% 20.2%
Recruitment advertising................ 20.2% 21.3% 21.7% 21.2% 20.9%
Internet(1)............................ -- -- 100.0% -- 100.0%
Total.................................. 21.4% 20.6% 20.8% 20.3% 21.0%
EBITDA(2)................................ $ 6,332 $ 12,582 $ 24,978 $ 11,463 $ 11,041
</TABLE>
- ------------------------
(1) Represents fees earned in connection with yellow page, recruitment and other
advertisements placed on the Internet.
(2) Earnings before interest, income taxes, depreciation and amortization.
EBITDA should not be considered as an alternative to net income as an
indicator of operating performance or as an alternative to cash flows as a
measure of liquidity.
25
<PAGE>
The following table sets forth, for the periods indicated, certain statement
of operations data and certain financial data expressed as a percentage of
commissions and fees.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Commissions and fees.............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Salaries and related costs........................ 51.2% 53.1% 47.1% 47.1% 50.3%
Office and general expenses....................... 40.4% 35.2% 35.0% 35.0% 37.3%
Amortization of intangibles....................... 3.3% 3.8% 2.6% 2.6% 2.8%
Restructuring charges............................. 1.8% -- -- -- --
Operating income.................................. 3.3% 7.9% 15.3% 15.3% 9.6%
Interest expense, net............................. (10.4% (10.7% (8.8% (8.9% (8.3%
Other, net........................................ (0.5% (0.2% 0.1% 0.1% 0.6%
Income (loss) before provision (benefit) for
income taxes, minority interests and equity in
earnings of affiliates.......................... (7.6% (2.9% 6.6% 6.4% 1.9%
Provision (benefit) for income taxes.............. (1.8% (0.4% 3.4% 3.1% 1.3%
Minority interests................................ 0.5% 0.4% 0.4% 0.4% 0.3%
Equity in earnings (losses) of affiliates......... -- -- (0.2% (0.2% --
Net income (loss)................................. (6.3% (2.9% 2.6% 2.7% 0.3%
Preferred stock dividends......................... (0.3% (0.2% (0.2% (0.2% (0.1%
Net income (loss) applicable to common
stockholders.................................... (6.6% (3.1% 2.4% 2.5% 0.2%
EBITDA(1)......................................... 8.6% 14.6% 20.2% 19.9% 15.6%
</TABLE>
- ------------------------
(1) Earnings before interest, income taxes, depreciation and amortization.
EBITDA should not be considered as an alternative to net income, as an
indicator of operating performance or as an alternative to cash flows as a
measure of liquidity.
SIX MONTHS ENDED JUNE 30, 1995 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Gross billings for the six months ended June 30, 1996 were $336.3 million, a
$52.6 million or 18.5% increase compared to the six months ended June 30, 1995.
More than half of this growth was attributable to acquisitions.
Commissions and fees increased from $57.5 million for the six months ended
June 30, 1995 to $70.7 million for the six months ended June 30, 1996, or 23.0%.
This increase was due to an increase of $8.4 million or 50.9% in commissions and
fees derived from recruitment advertising, $2.5 million or 6.0% in commissions
and fees derived from yellow page advertising and $2.3 million in fees derived
from Internet. A substantial portion of the increase in commissions and fees
derived from recruitment advertising was primarily due to acquisitions and the
remainder was due to higher client spending and new clients. The increase in
commissions and fees derived from yellow page advertising was due primarily to
increased rates by the yellow page publishers and higher client spending on new
services. Fees derived from Internet was generated from placements of internet
advertising as the Company's Internet products gained initial customer
acceptance both from the Company's existing clients as well as new clients.
Salaries and related costs increased $8.5 million to $35.6 million for the
six months ended June 30, 1996. As a percent of commissions and fees, salaries
and related costs increased from 47.1% for the six months ended June 30, 1995 to
50.3% for the six months ended June 30, 1996. This increase was primarily
26
<PAGE>
due to additional staff required to service increased gross billings, increased
Internet staffing ($1.1 million) and severance and temporary help expenses
related to the consolidation of the recruitment advertising acquisitions ($0.8
million).
Office and general expenses increased $6.3 million to $26.3 million for the
six months ended June 30, 1996. As a percent of commissions and fees, office and
general expenses increased from 35.0% for the period ended June 30, 1995 to
37.3% for the six months ended June 1996. This increase was primarily due to
increased advertising of approximately $2.0 million, primarily related to the
Company's introduction of The Monster Board-Registered Trademark-, increased bad
debt charges ($0.8 million related to two client bankruptcies) and general
expenses related to higher gross billings.
Amortization of intangibles was $1.5 million for the six months ended June
30, 1995 compared to $2.0 million for the six months ended June 30, 1996. As a
percentage of commissions and fees, amortization of intangibles was 2.6% and
2.8% for the six months ended June 30, 1995 and 1996, respectively.
Operating income declined $2.0 million to $6.8 million for the six months
ended June 30, 1996. The decline was primarily due to increased advertising
expenses of $2.0 million for the Company's Internet business. Excluding the fees
earned and direct operating expenses related to Company's introduction of its
Internet business, (i) operating income declined approximately $0.3 million to
$8.5 million for the six months ended June 30, 1996 and operating income as a
percent of commissions and fees declined from 15.3% for the six months ended
June 30, 1995 to 12.4% for the six months ended June 30, 1996. This decline in
operating income was primarily due to items related to the consolidation of the
recruitment advertising acquisitions and the increased bad debt charges
described above.
EBITDA declined $0.4 million to $11.0 million for the six months ended June
30, 1996. Excluding fees earned and direct operating expenses related to the
Company's introduction of its Internet business, EBITDA increased $1.3 million
to $12.7 million or 11.8% for the six months ended June 30, 1996. Further
adjusting for items related to increased bad debt charges for two client
bankruptcies and expenses associated with the consolidation of the recruitment
advertising acquisitions, EBITDA increased $2.1 million to $13.4 million or
18.3% for the six months ended June 30, 1996. Excluding the Company's Internet
business and the non-recurring bad debt charges described above, EBITDA as a
percent of commissions and fees remained consistent at 19.8% for the six months
ended June 30, 1995 and 19.9% for the six months ended June 30, 1996.
Net interest expense increased $0.7 million to $5.8 million for the six
months ended June 30, 1996 as compared to 1995. This increase in interest
expense is due primarily to higher debt balances for working capital needs and
acquisition financing. The Company's effective interest rate was 10.7% for the
six months ended June 30, 1995 and 1996.
Taxes on income decreased $0.9 million from $1.8 million for the six months
ended June 30, 1995 to $0.9 million for the six months ended June 30, 1996
primarily due to lower pre-tax income. The effective tax rate for the six months
ended June 30, 1996 of 67.9% was higher than the U.S. federal statutory rate
primarily due to nondeductible expenses of approximately $0.7 million and losses
for which there are no available tax benefits.
Net income applicable to common and Class B common stockholders was $1.5
million for the six months ended June 30, 1995 and $0.1 million for the six
months ended June 30, 1996, as a result of the above.
THE YEAR ENDED DECEMBER 31, 1994 COMPARED TO THE YEAR ENDED DECEMBER 31, 1995
Gross billings for the year ended December 31, 1995 were $596.1 million, a
$177.5 million or 42.4% increase over the year ended December 31, 1994.
Approximately half of this increase was attributable to acquisitions.
27
<PAGE>
Commissions and fees increased from $86.2 million in 1994 to $123.9 million
in 1995 or 43.7%. This increase was due to an increase of $24.4 million or
208.1% in commissions and fees derived from recruitment advertising and $13.0
million or 17.4% in commissions and fees derived from yellow page advertising.
The increase in commissions and fees derived from recruitment advertising was
substantially due to acquisitions and, to a lesser extent, new business and
higher client spending spurred by high demand for labor in the U.S. The increase
in commissions and fees derived from yellow page advertising was primarily due
to higher client spending and acquisitions. Commissions for volume placements
from yellow page publishers increased $2.1 million to $4.2 million in 1995
largely due to a new sales program for yellow page employees to increase yellow
page advertising volumes.
Salaries and related costs increased $12.6 million to $58.3 million in 1995.
As a percent of commissions and fees, salaries and related costs declined from
53.1% in 1994 to 47.1% in 1995 primarily due to increased staffing efficiencies
related to the leveraging of management and support services over a larger
client base.
Office and general expenses increased $13.1 million to $43.4 million in
1995. As a percent of commissions and fees, office and general expenses remained
consistent at 35.0%.
Amortization of intangibles was $3.2 million in 1995 compared to $3.3
million in 1994. As a percentage of commissions and fees, amortization of
intangibles was 2.6% in 1995 and 3.8% in 1994 as a result of higher commissions
and fees.
Operating income increased $12.1 million to $18.9 million in 1995. As a
percent of commissions and fees, operating income increased from 7.9% in 1994 to
15.3% in 1995 due to higher commissions and fees and improved staffing
efficiencies and utilization levels.
EBITDA increased $12.4 million to $25.0 million or 98.5% in 1995. As a
percent of commissions and fees, EBITDA increased from 14.6% in 1994 to 20.2% in
1995 primarily due to increased staffing efficiencies and utilization levels.
Net interest expense increased $1.7 million to $10.9 million in 1995. The
increase in net interest expense is due primarily to higher debt balances for
working capital needs and acquisition financing. The Company's effective
interest rate was 11.2% and 11.1% in 1994 and 1995, respectively.
Taxes on income increased $4.6 million in 1995 to an expense of $4.2 million
from a recovery of $0.3 million in 1994, primarily due to pre-tax income. The
effective tax rate for 1995 of 51.7% was greater than the U.S. federal statutory
rate primarily due to nondeductible expenses of approximately $1.2 million and
losses for which there were no available tax benefits of $1.5 million.
Net income applicable to common and Class B common stockholders was $3.0
million for the year ended December 31, 1995 compared to a $2.7 million net loss
for the year ended December 31, 1994, as a result of the above.
THE YEAR ENDED DECEMBER 31, 1993 COMPARED TO THE YEAR ENDED DECEMBER 31, 1994
Gross billings for the year ended December 31, 1994 were $418.5 million, a
$73.5 million increase from the year ended December 31, 1993. Acquisitions
accounted for a substantial portion of billings growth.
Commissions and fees increased from $73.8 million in 1993 to $86.2 million
in 1994 or 16.8%. This increase was due to an increase of $10.0 million in
commissions and fees derived from recruitment advertising and $2.4 million in
commissions and fees derived from yellow page advertising. The increase in
commissions and fees derived from recruitment advertising and yellow page
advertising was primarily due to acquisitions. The increase in commissions and
fees derived from yellow page advertising was also due to increased rates and
increased client spending.
28
<PAGE>
Salaries and related costs increased $8.0 million to $45.8 million in 1994.
As a percent of commissions and fees, salaries and related costs increased from
51.2% in 1993 to 53.1% in 1994 due primarily to higher salaries related to
additional staffing levels associated with acquisitions.
Office and general expenses increased $.5 million to $30.3 million in 1994.
As a percent of commissions and fees, office and general expenses declined from
40.4% in 1993 to 35.2% in 1994, due to lower administrative costs and increased
operating efficiencies resulting from the integration of six acquisitions into
existing TMP locations. In 1993, operating expenses included a restructuring
charge of $1.3 million for compensation related to the centralization of certain
support functions.
Amortization of intangibles was $3.3 million in 1994, compared to $2.5
million in 1993. As a percentage of commissions and fees, amortization of
intangibles was 3.8% in 1994 compared to 3.3% in 1993.
Operating income increased from $2.4 million in 1993 to $6.8 million in 1994
due primarily to growth in commissions and fees and increased operating
efficiency partially offset by higher salaries and related costs and
amortization of intangibles.
EBITDA increased $6.3 million to $12.6 million in 1994. Adjusting for the
non-recurring charge of $1.3 million in 1993, EBITDA as a percent of commissions
and fees increased from 10.4% in 1993 to 14.6% in 1994.
Net interest expense increased $1.5 million to $9.2 million in 1994. The
increase in net interest expense is primarily due to higher debt balances for
working capital needs and acquisition financing. The Company's effective
interest rate was 13.3% and 11.2% in 1993 and 1994, respectively.
The income tax benefit decreased $1.0 million in 1994 from a recovery of
$1.3 million in 1993, due to a smaller pre-tax loss. The effective tax benefit
rates for 1994 and 1993 were lower than the U.S. federal statutory rate
primarily due to nondeductible expenses of approximately $1.4 million and $1.0
million, respectively, and for 1993 losses for which there are no available tax
benefits of $0.9 million.
Net loss applicable to common and Class B common stockholders was $4.8
million in 1993 and $2.7 million in 1994 as a result of the above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements have been to fund (i)
acquisitions, (ii) working capital, (iii) capital expenditures and (iv)
advertising and development of its Internet business. The Company's working
capital requirements are generally higher in the quarters ending March 31 and
June 30 during which payments to the major yellow page directory publishers are
at their highest levels. The Company has met its liquidity needs over the last
three years through funds provided by long-term borrowings, vendor financing and
supplemented in 1995 by funds provided by operating activities.
Net cash provided by (used in) operating activities for the years ended
December 31, 1993, 1994, 1995, and the six months ended June 30, 1996 was ($2.3
million), ($10.9 million), $6.7 million and $18.5 million, respectively. Cash
used increased in 1994 as compared with 1993 primarily due to the acceleration
of payment of trade payables to publishers over the rate of collection of
receivables. The increase in cash from operating activities for 1995 over 1994
was primarily due to the $5.7 million improvement in net income combined with a
net increase of trade payables over trade receivables of $7.0 million. For the
six months ended June 30, 1996, cash provided by operations increased $13.7
million over the comparable 1995 period primarily as a result of a $12.1 million
reduction in the increase in accounts receivable.
Days sales outstanding in 1994, 1995 and for the first six months of 1996
were 66, 63 and 56, respectively, reflecting improvement in the Company's
collection procedures and client billing arrangements.
Net cash used in investing activities for the years ended December 31, 1993,
1994, 1995 and the six months ended June 30, 1996 was $1.1 million, $8.5
million, $15.4 million and $4.6 million, respectively.
29
<PAGE>
Payments for purchases of business acquisitions were $1.0 million in 1993, $6.3
million in 1994, $11.3 million in 1995, and $4.0 million for the six months
ending June 30, 1996. Capital expenditures, primarily for computer equipment and
furniture and fixtures, were $0.5 million, $4.9 million, $5.0 million and $3.4
million for the years ended December 31, 1993, 1994, 1995, and the six months
ended June 30, 1996, respectively. The Company expects to spend approximately
$7.0 million in total capital expenditures for 1996. In May 1996, the Company
sold certain transportation equipment for $3.3 million in cash, $1.2 million
after payment of related debt.
The Company's financing activities include borrowings and repayments under
its financing agreement and issuance and repayments of installment notes
principally to finance acquisitions and loans to stockholders. The Company's
financing activities resulted in net cash used by financing activities of $12.6
million in the period ended June 30, 1996 and net cash provided by financing
activities of $9.1 million, $19.2 million and $1.2 million in 1995, 1994 and
1993, respectively. In June and August 1996, the Company amended its financing
agreement with BNY Financial Corporation and certain other financial
institutions, to provide for borrowings up to $100 million under a revolving
credit facility. Such facility has been used to finance the Company's
acquisitions and for working capital requirements. As of June 30, 1996, there
was $76.7 million outstanding under such facility. As of August 31, 1996, there
was $94.1 million outstanding under such facility, as the Company used the
facility to fund its acquisition of Neville Jeffress and to meet its working
capital needs. The Company believes it will be able to fund its short-term cash
needs through funds from operations and a refinancing of a portion of the
Neville Jeffress acquisition financing with a working capital facility in
Australia. The Company intends to use approximately $44.1 million of the net
proceeds from this offering to reduce indebtedness under the financing
agreement. See "Use of Proceeds." After giving effect to this offering and the
use of the estimated net proceeds thereof, as of August 31, 1996 pro forma
amounts outstanding under the financing agreement would have been $50.0 million.
The financing agreement terminates on June 27, 2001 and currently bears interest
at 7.9% per annum. The interest rate of the financing agreement is determined
pursuant to a formula whereby the interest rate is, at the Company's option,
either (i) the prime rate or 1/2% over the federal funds rate, whichever is
higher, less 1% to plus 1% as determined in the financing agreement or (ii)
LIBOR plus 1 1/2% to 3 1/2% as determined under the financing agreement. The
borrowings are secured by a lien on substantially all of the Company's assets.
In addition, the financing agreement contains certain covenants which restrict,
among other things, the ability of the Company to borrow, pay dividends, acquire
businesses, make future capital expenditures, guarantee debts of others and lend
funds to affiliated companies and contain criteria on the maintenance of certain
financial statement amounts and ratios. At December 31, 1995, the Company was in
violation of certain of the covenants and financial ratios under a prior
financing agreement, which violations were waived by BNY Financial Corporation.
Part of the Company's acquisition strategy is to pay, over time, a portion
of the selling price through seller financed notes. Accordingly, such notes are
included in long term debt and the current portion of long term debt. These
notes are generally payable over five years and totaled $13.9 million at June
30, 1996. The Company will repay approximately $4.0 million of these notes with
a portion of the proceeds of this offering.
The Company made net advances of $3.2 million, $3.7 million and $2.6 million
to its principal stockholder in 1993, 1994 and the six months ended June 30,
1996 and received payments of $1.7 million from such stockholder in 1995. As of
June 30, 1996, the Company has a receivable from its principal stockholder in
the amount of $9.1 million.
The Company has an obligation for annual dividend payments of 10.5% on its
$2.0 million of redeemable preferred stock. In addition, the Company has an
obligation for annual dividend payments, included in minority interests, of
10.0% on approximately $3.0 million of preferred shares of a subsidiary (YPMS
Acquisition, Inc.) held by an employee stock ownership trust. The Company
intends to use a portion of the net proceeds from this offering to redeem both
the redeemable preferred stock and the subsidiary's preferred stock. See "Use of
Proceeds.
30
<PAGE>
The Company intends to continue its acquisition strategy and promotion of
its internet activities through the use of operating profits, borrowings against
its long-term debt facility and seller financed notes. The Company believes that
its anticipated cash flow from operations, as well as the availability of funds
under its existing financing agreement and the net proceeds of this offering,
will provide it with liquidity to meet its current foreseeable cash needs for at
least the next year.
QUARTERLY RESULTS
The following table presents unaudited interim operating results of the
Company. The Company believes that the following information includes all
adjustments (consisting only of normal recurring adjustments) that the Company
considers necessary for a fair presentation, in accordance with generally
accepted accounting principals. The operating results for any interim period are
not necessarily indicative of results for any other period.
The Company's quarterly commissions and fees are affected by the timing of
yellow page directory closings which currently have a concentration in the third
quarter. Yellow page publishers may change the timing of directory publications
which may have an effect on the Company's quarterly results. The Company's
yellow page advertising results are also affected by commissions earned for
volume placements for the year which are typically reported in the fourth
quarter. The Company's quarterly commissions and fees for recruitment
advertising are typically highest in the first quarter and lowest in the fourth
quarter; however the cyclicality in the economy and the Company's clients'
employment needs have an overriding impact on the Company's quarterly results in
recruitment advertising. Moreover, the Company's recruitment advertising
acquisition activity has had more of an impact on the Company's recently
reported quarterly results than any other factors.
31
<PAGE>
UNAUDITED QUARTERLY RESULTS
(IN MILLIONS)
<TABLE>
<CAPTION>
1994 QUARTERS
-----------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
----------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Commissions and fees:
Yellow page
advertising.......... $17.2 $17.7 $19.4 $20.2
Recruitment
advertising.......... 1.6 3.7 2.9 3.4
----- ----- ----- -----
Total commissions and
fees................. $18.8 $21.4 $22.3 $23.6
----- ----- ----- -----
----- ----- ----- -----
Operating income......... $ 0.9 $ 0.7 $ 0.9 $ 4.3
Income (loss) before
provision for income
taxes, minority
interest and equity
in earnings (losses)
of affiliates........ $(0.3) $(1.4) $(2.2) $ 1.4
Net income (loss)........ $(0.3) $(1.3) $(2.0) $ 1.1
</TABLE>
<TABLE>
<CAPTION>
1995 QUARTERS
-----------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
----------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Commissions and fees:
Yellow page
advertising.......... $19.0 $21.9 $23.1 $23.4
Recruitment
advertising.......... 7.4 9.2 9.1 10.4
Internet............... -- -- -- .4
----- ----- ----- -----
Total commissions and
fees................. $26.4 $31.1 $32.2 $34.2
----- ----- ----- -----
----- ----- ----- -----
Operating income......... $ 4.4 $ 4.4 $ 2.7 $ 7.4
Income (loss) before
provision for income
taxes, minority
interest and equity
in earnings (losses)
of affiliates........ $ 2.1 $ 1.6 $(0.2) $ 4.7
Net income (loss)........ $ 0.9 $ 0.7 $(0.4) $ 2.0
</TABLE>
<TABLE>
<CAPTION>
1996 QUARTERS
-----------------------
MARCH 31, JUNE 30,
----------- ----------
<S> <C> <C> <C> <C>
Commissions and fees:
Yellow page
advertising.......... $20.4 $23.0
Recruitment
advertising.......... 12.7 12.2
Internet............... .9 1.5
----- -----
Total commissions and
fees................. $34.0 $36.7
----- -----
----- -----
Operating income......... $ 3.7 $ 3.1
Income before provision
for income taxes,
minority interest and
equity in earnings
(losses) of
affiliates........... $ 1.0 $ 0.4
Net income (loss)........ $(0.1) $ 0.3
</TABLE>
32
<PAGE>
BUSINESS
The Company is a marketing services, communications and technology company
that provides comprehensive, individually tailored advertising services
including development of creative content, media planning, production and
placement of corporate advertising, market research, direct marketing and other
ancillary services and products. The Company is the world's largest yellow page
advertising agency and, the Company believes, one of the world's largest
recruitment advertising agencies. In 1995, the Company began marketing
Internet-based services as extensions of its core businesses and has become a
growing provider of Internet content. The Company offers advertising programs to
more than 17,000 clients, including more than 70 of the Fortune 100 and more
than 240 of the Fortune 500 companies. The Company's growth strategy is to
continue to actively pursue consolidation opportunities in its core advertising
businesses and to leverage its client base and its approximately 1,500 sales,
marketing and customer service personnel to expand its Internet-based
businesses. For the year ended December 31, 1995, the Company's gross billings
were $596.1 million, commissions and fees were $123.9 million, net income was
$3.2 million and EBITDA was $25.0 million.
TMP is the world's largest yellow page advertising agency, generating
approximately $425 million in gross billings for the year ended December 31,
1995. TMP believes it is one of the world's largest recruitment advertising
agencies, generating approximately $165 million in gross billings for the same
period. With approximately 30% of the national accounts segment of the U.S.
yellow page advertising market, TMP is approximately three times larger than its
nearest competitor, based on gross billings. In the fragmented recruitment
advertising agency market, the Company believes that it has a 7% market share in
the U.S. and a 6% market share worldwide. A substantial part of the Company's
growth has been achieved through acquisitions. From January 1, 1993 through
December 31, 1995, TMP completed 26 acquisitions which have estimated annual
gross billings of $200 million. In 1996, through August, the Company completed
eight acquisitions with estimated annual gross billings of $172 million
including the acquisition in July 1996, of Neville Jeffress, the largest
recruitment advertising agency in Australia, which has estimated annual gross
billings of $140 million. The Company believes additional acquisition
opportunities exist, particularly in the recruitment advertising and Internet
markets and intends to continue its strategy of making acquisitions which relate
to its core business.
TMP has created innovative solutions to assist its clients in capitalizing
on the growing awareness and acceptance of the Internet. For its recruitment
advertising clients, TMP has developed interactive career hubs which can be
accessed by individuals seeking employment via the Internet on a global basis.
The Company has several career hubs, including The Monster
Board-Registered Trademark-, Online Career Center-SM-, Be the Boss-SM- and
MedSearch-SM-, which collectively contain over 35,000 job listings. In 1996, the
Company began marketing its Dealer Locator service to yellow page clients.
Dealer Locator provides clients with the ability to create Web pages for their
local offices, franchisees or dealers. Potential customers can then access these
pages on the Internet by zip code or other key word searches.
The Company's predecessor was formed in 1967 by Andrew J. McKelvey. The
Company was incorporated in Delaware in August 1996, its executive offices are
located at 1633 Broadway, 33rd Floor, New York, New York 10019, and its
telephone number at that location is (212) 977-4200.
INDUSTRY OVERVIEW
THE YELLOW PAGE ADVERTISING MARKET. Yellow page directories have been
published in the U.S. since at least the 1890s and, traditionally, have been
published almost exclusively by telephone utilities. In the early 1980's, due in
part to telephone deregulation, independent companies began publishing an
increasing number of directories. Currently, approximately 7,000 yellow page
directories are published annually by 200 publishers and, in the U.S., many
cities with populations in excess of 80,000 are served by multiple directories.
The percentage of adults who use the yellow pages has remained relatively
constant over the
33
<PAGE>
last ten years at over 56%, and such readers consult the yellow pages
approximately two times weekly. Accordingly, yellow page directories continue to
be a highly effective advertising medium. For example, the Company believes that
approximately 70% of Ryder's consumer truck rental customers consulted yellow
page directories prior to renting trucks.
For the year ended December 31, 1995, total spending on yellow page
advertisements in the U.S. was $9.9 billion. Of this amount, approximately $8.5
billion was spent by local accounts and approximately $1.4 billion was spent by
national accounts. "Local" and "national," as those terms are used in the yellow
page industry, refer to whether an advertisement is solicited by a yellow page
publisher's own sales staff or is placed by an advertising agency and meets
certain criteria specified by the publisher. Local accounts are typically
merchants who primarily conduct their business within the geographic area served
by the publisher's directories.
The national account market consists of companies which sell products or
services in multiple markets and is the market in which TMP competes. Most
national accounts use independent advertising agencies to design and implement
their yellow page advertising programs to create a consistent brand image and
compelling message, to develop an effective media plan and to execute the
placement of the advertising at the local level. Agencies which place national
yellow page advertising are paid commissions by yellow page publishers. The
market has grown each year since 1981. During the period of 1990 through 1995,
the market grew at a compound average rate of approximately 4.5%.
THE RECRUITMENT ADVERTISING MARKET. Recruitment advertising consists
primarily of creating and placing recruitment advertisements in the classified
advertising sections of newspapers. While the recruitment advertising market has
historically been cyclical, during the period of 1990 through 1995, the U.S.
market grew at a compound annual growth rate of approximately 11.5%. Classified
readership by job seekers has remained constant over the last ten years and 88%
of companies use newspapers to attract potential employees. The services
provided by recruitment advertising agencies can be complex and range from the
design and placement of classified advertisements to the creation of
comprehensive image campaigns which "brand" a client as a quality employer.
Further, shortages of qualified employees in many industries, particularly in
the technology area, have increased the need for recruitment advertising
agencies to expand the breadth of their service offerings to effect national and
sometimes global recruitment campaigns. While TMP estimates that the worldwide
recruitment advertising market is approximately $10 billion in size, for the
year ended December 31, 1995, total spending on advertisements in North America
in the recruitment classified advertisement section of newspapers was
approximately $4.5 billion. Of this amount, the Company estimates that
approximately one-half was spent by organizations which use an advertising
agency for placement of their recruitment advertising and one-half was spent by
companies which place advertising directly with newspapers. Agencies which place
recruitment advertising are paid commissions generally equal to 15% of
recruitment advertising gross billings.
INTERNET. The Internet has rapidly grown from a network connecting a
limited number of government, research and educational institutions to a global
medium accessed by millions of users to communicate and exchange information.
Growth in the Internet has been fueled by an increasing usage of personal
computers at home and in the workplace, improvements in the performance and
speed of personal computers and modems, improvements in network infrastructure,
enhanced ease of access to the Internet provided by service providers,
consumer-oriented on-line services and long-distance telephone companies,
emergence of standards for Internet navigation and information access, declining
costs of Internet service due to increased competition among access providers
and increased awareness of the Internet among businesses and consumers. Growth
in Internet usage by non-technical users in particular has also been fueled by
the emergence of the Web which makes use of browser technology and simplifies
the retrieval and transmission of information.
34
<PAGE>
As the Internet has become more accessible, functional and widely used by
consumers and businesses, its commercial potential has grown. The Internet is
emerging as a medium through which businesses can interactively inform, educate,
entertain and conduct business with millions of individuals. Thousands of
companies have created corporate Web sites that feature information about their
product offerings and advertise employment opportunities. Through the Web,
Internet content providers are able to deliver timely, personalized content in a
manner not possible through traditional media. Internet content can be
continuously updated, and accessed by users at any time.
STRATEGY
Key elements of the Company's strategy are to:
CONTINUE TO GROW THE COMPANY'S RECRUITMENT AND YELLOW PAGE BUSINESSES. The
Company plans to continue to grow and enhance its recruitment and yellow page
advertising businesses through acquisitions and internal growth. From January 1,
1993 to August 31, 1996, the Company completed 34 acquisitions, with estimated
annual gross billings of $372 million. The Company intends to actively pursue
additional acquisitions and believes that the fragmented nature of the
recruitment advertising business, with no one agency representing more than 6%
of annual gross billings on a worldwide basis, provides the Company with the
opportunity to be a leader in the consolidation of this industry. The Company
also intends to selectively pursue acquisitions in the yellow page advertising
business. In addition to acquisitions, the Company intends to expand its
billings base with existing clients and by attracting new clients by leveraging
its size, resources and Internet product offerings. The Company has a dedicated
new business sales staff which focuses on adding new clients which to date in
1996, has added 88 new clients with estimated annual gross billings of
approximately $40 million.
EXPAND SERVICES TO THE INTERNET BY CAPITALIZING ON TMP'S RECRUITMENT
ADVERTISING AND YELLOW PAGE ADVERTISING BUSINESSES. The Company believes the
Internet is a powerful communications medium which can be heavily utilized by
its yellow page and recruitment advertising clients in attracting more customers
and qualified prospective employees, respectively. TMP intends to capitalize on
this opportunity by rapidly expanding, marketing and implementing its Internet
service offerings. The Company believes it is at the forefront in acquiring and
designing products to meet the needs of its client base. Since 1995, TMP has
acquired three recruitment oriented Web site companies including Adion
Information Services Inc., the creator of The Monster
Board-Registered Trademark-, Online Career Center, L.P. and MedSearch America,
Inc. In addition, during this time, the Company created Dealer Locator, a
product for yellow page clients, and modified Dealer Locator technology to
create Physician Finder, a database designed to provide information regarding
board certified physicians. The Company is designing and developing additional
Internet products and intends to opportunistically acquire Internet content
providers related to its core businesses. TMP also believes that its more than
1,500 person sales, marketing and customer service staff, and extensive base of
existing clients, provide it with a significant competitive advantage in
identifying, implementing and selling new Internet products to yellow page and
recruitment advertisers.
DIFFERENTIATE INTERNET PRODUCT OFFERINGS. The Company believes it is
important to differentiate its Internet service offerings. TMP intends to do
this by leveraging its experience in yellow page and recruitment advertising to
design and develop the most effective and frequently accessed products, by
branding its products through the use of traditional advertising mediums, by
tailoring its services to specific geographic markets, and by continually adding
incremental value-added features to its services thereby increasing their
utility to the Company's client base. The Company has begun implementing this
strategy most notably with The Monster Board-Registered Trademark- which has
been tailored to individual countries around the world, focusing on local
customs and terminology. Customized versions of The Monster
Board-Registered Trademark- currently exist in the U.S., Canada, the United
Kingdom and Australia. The Monster Board-Registered Trademark- is also tailored
for specific user groups. For example, The Monster Board-Registered Trademark-'s
Roar community targets college students and entry level job seekers.
35
<PAGE>
TMP'S YELLOW PAGE BUSINESS
TMP entered the yellow page business in 1967 and has grown to become the
largest yellow page advertising agency both in the world and in the U.S. based
on gross billings. For the year ended December 31, 1995, the Company had
worldwide yellow page gross billings of approximately $425 million. With
approximately 30% of the U.S. national yellow page market, TMP is approximately
three times larger than its nearest competitor, based on gross billings. The
Company's growth in yellow pages has been driven in part by acquisitions. Since
January 1, 1993, TMP has completed five acquisitions and intends to continue to
pursue acquisitions as a part of its overall growth strategy.
CREATING AND PLACING YELLOW PAGE ADVERTISEMENTS. There are currently
approximately 7,000 yellow page directories in the U.S. Each has a separate
closing date for accepting advertisements and one or more of these closings
occur on every working day of the year. The steps involved in placing an
advertisement are numerous and can take as long as nine months.
The first step in the process is the formulation of the advertising
program's creative elements including illustrations, advertising copy, slogans
and other elements which are designed to attract a potential customer's
attention. To assess the effectiveness of a proposed campaign, TMP generally
undertakes extensive research to determine which alternatives best reach the
client's target market. This research typically includes focus group testing and
the running of split-run advertisements. Focus group testing involves forming
groups of potential customers and gauging their reaction to a variety of
potential advertisements. Split-run testing measures the results of specific
campaigns by placing more than one version of an advertisement in various
editions of the same yellow page directory. By using multiple phone numbers and
various monitoring methods, the Company can then determine which advertisements
generate the most effective response.
After designing an advertising program, TMP creates a media plan which
cost-effectively reaches the client's customer base. The Company analyzes
targeted directories to determine circulation, rate of usage and demographic
profile. It then recommends advertisements ranging from a full page to as little
as a one line listing. For some of the Company's larger yellow page clients,
advertisements are placed in over 2,000 directories.
To ensure client satisfaction, TMP maintains an extensive quality control
program. Account teams have frequent in-person client contact as well as formal
annual creative reviews. The Company also solicits feedback through client
interviews, written surveys and other methods. The principal aims of this
program are client retention and sales growth. TMP believes that its focus on
customer service has enabled it to increase its client retention rate from 90%
in 1991 to 96% in 1995, and to increase billings to existing clients by 7% for
the year ended December 31, 1995, as compared to the year ended December 31,
1994.
In addition to traditional advertising, the Company offers selected yellow
page clients a variety of value-added services ranging from managing the
maintenance and installation of telephone lines for branch locations to the
staffing and operation of fulfillment centers which respond to toll-free calls
requesting product brochures and other information. While beyond the typical
scope of services provided by an advertising agency, these ancillary services
are designed to further integrate TMP into client processes for the mutual
benefit of both parties.
TMP earns commissions from yellow page advertising paid by directory
publishers which result in an effective commission rate to the Company of
approximately 20% of yellow page gross billings.
CLIENTS. TMP has over 2,100 yellow page clients, virtually all of whom
determine the content of their advertising programs on a centralized basis.
Placement of the advertising, however, requires an extensive local selling and
quality control effort because many of TMP's clients are franchisors or
manufacturers who are dependent upon franchisees or independent dealers for
distribution. The participation of franchisees
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and dealers in the yellow page program is discretionary and must be solicited at
the local level. As an example of the scale of this task, TMP visited
approximately 80% of the over 1,800 Midas shops owned by over 600 franchisees
while executing the 1995 Midas yellow page program.
To implement this local effort, TMP has a yellow page sales, marketing and
customer service staff of approximately 680 people. The Company believes the
size and breadth of this staff, its local client relationships and its databases
of client branch locations, franchisees, and dealers provide it with a strong
competitive advantage in executing the yellow page programs of existing clients.
TMP believes these resources are critical in marketing its services to potential
new clients and in marketing and executing its new Internet-based service
offerings.
The following are some of TMP's larger yellow page accounts:
<TABLE>
<S> <C> <C>
Beneficial Management ITT Industries Inc. Sears, Roebuck & Co.
Corporation Kohler Co. ServiceMaster L.P.
Bridgestone/Firestone Inc. Mailboxes, Etc. Sharp Electronics Corp.
Columbia/HCA Healthcare Corp. MCI Telecommunciations Siemens Rohm--AG
Culligan International Corporation Communications
Company Midas International Terminix International L.P.
Ford Motor Company Corporation United Van Lines, Inc.
Hallmark Cards, Inc. Pizza Hut Inc. York Heating and Air
H&R Block Tax Services Inc. PRIMESTAR Partners L.P. Conditioning
Ryder
</TABLE>
No account represents more than 5% of the Company's yellow page commissions
and fees.
INTERNET-BASED SOLUTIONS FOR YELLOW PAGE ADVERTISING CLIENTS. To complement
the broad reach and penetration of yellow page advertising, the Company has
recently begun to offer its clients an Internet-based solution called Dealer
Locator. In creating a Dealer Locator program, the Company typically creates a
home page for each franchise or dealer location and links it to the client's
corporate Web site. Internet users can then retrieve information on a specific
location such as directions to, or a map of, such location, hours of operation
and potentially other information such as sale items and other special offers.
Dealer Locator is designed to provide an additional source of customer flow to
TMP's clients while, through linkage to the corporate Web sites, reinforcing the
desired brand imagery. TMP charges clients who utilize the Dealer Locator
product an up-front fee for the development of each individual home page as well
as an annual maintenance fee thereafter.
The Company's strategy with respect to Internet yellow page products is
twofold. First, develop appropriate Internet products which are attractive to
yellow page clients. Second, work with yellow page clients to drive traffic to
the client's Web sites.
The Company believes its pre-existing relationships with yellow page clients
is a key competitive advantage in marketing Dealer Locator. The Company
maintains databases containing the address, telephone number and contact person
for each of its accounts and, in addition, the Company's sales and marketing
staff personally visits most of its accounts at least annually. The Company
believes that these databases and personal relationships when combined with
TMP's knowledge of its client's businesses will position TMP to capitalize on
its marketing Internet-based products.
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The Company began marketing Dealer Locator in June 1996. The following
illustrates the Dealer Locator program which the Company created for Midas
International Corporation:
[LOGO]
The Company believes that Internet services must be interactive in order to
maintain or expand their rate of usage. Dealer Locator was designed to be as
interactive as the user desires. For example, a user utilizing Dealer Locator
can retrieve pertinent information about the nearest Midas location or,
alternatively, the user can learn to diagnose certain car problems, learn about
the history of Midas or learn about Midas products. In addition, Midas' Dealer
Locator has an e-mail function which enables Midas to respond to customers'
questions and comments. The Company is researching other ways to make Dealer
Locator even more interactive.
The Company believes that the Dealer Locator concept is appropriate for many
of its yellow page clients. For example, the Company is adapting Dealer Locator
technology to create Physician Finder. Physician Finder will list the names and
addresses of, and other pertinent information pertaining to, board certified
physicians. The Company anticipates that Physician Finder will be on-line by the
beginning of 1997.
TMP'S RECRUITMENT ADVERTISING BUSINESS
TMP entered the recruitment advertising business in 1993 with the
acquisition of Bentley, Barnes & Lynn, Inc. and has grown both through
acquisitions and internally. Since 1993, the Company has acquired 26 recruitment
advertising agencies, and the Company believes it is one of the largest
recruitment advertising agencies. For the year ended December 31, 1995, TMP had
recruitment advertising gross billings of $166.5 million representing
approximately 7% of the U.S. market. In addition to its 45 offices in the United
States, the Company has 25 locations outside the United States. The Company also
maintains relationships with 24 affiliated agencies throughout the world,
further enhancing the Company's ability to reach qualified job candidates. As a
full service agency, TMP offers its clients comprehensive recruitment
advertising services including creation and placement of classified advertising,
development of employer image campaigns, creation of collateral materials such
as recruiting brochures and implementation of alternative recruitment programs
such as job fairs, employee referral programs and campus recruiting. The Company
specializes in designing recruitment advertising campaigns for clients in high
growth industries and in industries with high employee turnover rates. TMP
believes that the scope of its services and scale of operations differentiate it
from its competitors. Further, the Company believes that as employers find it
more difficult to attract qualified employees, they will increasingly seek out
agencies which can implement national and, in some cases, global recruitment
strategies.
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CREATING AND PLACING THE ADVERTISEMENT. The Company's task in formulating
and implementing a global recruitment advertising program is to design the
creative elements of the campaign and to select the appropriate media and/or
other recruitment methods. This is done in the context of the client's staffing
parameters which generally include skill requirements, job location and
advertising budget. In addition, while executing a given campaign, TMP will
often undertake basic research with respect to demographic profiles of selected
geographic areas to assist the client in developing an appropriate overall
strategy.
The Company has historically found that the strongest recruitment
advertising campaigns "brand" the client's image, demonstrate the client's
unique selling points and stress the client's employee benefits and corporate
culture. Effectively differentiating one employer from another has become
particularly important in the technology and healthcare sectors where there is
an acute shortage of qualified job candidates. The success of the campaign may
depend on whether an organization is seen as sufficiently distinct from its
competitors.
After completing the design of an advertisement's creative elements, the
Company develops an appropriate media plan. Typically, a variety of media is
used, including newspapers, trade journals, the Internet, billboards, direct
mail, radio and television. If the Company recommends use of newspapers, it may
recommend certain newspapers or editions of a particular newspaper which are
targeted to a specific demographic segment of the population. TMP may also
recommend a variety of advertisement sizes and vary the frequency with which an
advertisement appears.
After an advertisement is placed, the Company conducts extensive customer
analysis to assure satisfaction, including monitoring the effectiveness of the
chosen media. As an example, for a transportation client, TMP analyzed
cost-per-response, cost-per-application and cost-per-hire data for over a dozen
media vehicles running in approximately 30 markets in an effort to determine the
return on investment of each media vehicle. TMP's recruitment advertising
division also maintains a quality assurance program for its larger clients which
provides services similar to those provided to the Company's yellow page
clients.
The Company receives commissions generally equal to 15% of recruitment
advertising gross billings. The Company also earns fees from value-added
services such as design, research and other creative and administrative services
which resulted in aggregate commissions and fees equal to approximately 21% of
recruitment advertising gross billings.
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CLIENTS. The Company has more than 2,500 recruitment advertising clients.
The Company believes that an important component of its growth in recruitment
advertising is working with clients in high growth industries and in industries
with high employee turnover rates. The following are some of TMP's larger
recruitment advertising clients:
<TABLE>
<CAPTION>
TECHNOLOGY FINANCE RETAIL
- ------------------------------------ ------------------------------ -------------------------------------------
<S> <C> <C>
Cisco Systems Inc. Bank America Corp. Good Guys Inc.
Compaq Computer Corp. Dean Witter Reynolds, Inc. Kohl's Corp.
Gateway 2000 NationsBanc Services, Inc. Federated Department Stores Inc.
International Business Machines Nike Inc.
Corp. Office Max Inc.
Motorola Inc. Target Stores Inc.
Sun Microsystems Inc.
</TABLE>
<TABLE>
<CAPTION>
PHARMACEUTICALS RESTAURANTS TRANSPORTATION
- ------------------------------------ ------------------------------ -------------------------------------------
<S> <C> <C>
Abbott Laboratories Darden Restaurants Inc. J.B. Hunt Transport Services Inc.
Genentech Inc. Pizza Hut Inc.
</TABLE>
<TABLE>
<CAPTION>
HEALTHCARE CONSULTING
- ------------------------------------------------------------------ ----------------------------------------------
<S> <C>
Cigna Corp. Price Waterhouse LLP
Kaiser Permanente/Kaiser Foundation Health Plan Inc. System Software Associates Inc.
NovaCare Inc.
</TABLE>
Through its acquisition strategy, the Company believes it has become one of
the largest full service recruitment advertising agencies and is now leveraging
its size and service offerings to attract new and larger clients. For example,
of the accounts shown above, 12 became clients as a result of the Company's new
business efforts. No account represents more than 5% of the Company's
recruitment advertising commissions and fees.
INTERNET-BASED SOLUTIONS FOR RECRUITMENT ADVERTISING CLIENTS. To complement
the broad reach and penetration of print recruitment advertising, the Company
offers its clients Internet-based solutions to meet their recruitment needs. The
Company has several career hubs including, The Monster
Board-Registered Trademark-, Online Career Center-SM-, Be the Boss-SM- and
MedSearch-SM-. Each of these Web sites consists of a database of job and resume
listings and a variety of other value added features. Collectively, TMP's career
hubs contain more than 35,000 job postings. The Company intends to continue to
build and expand its portfolio of product offerings through both internal
development and acquisitions.
Based on its experience with its clients, the Company believes that only 20%
to 30% of open job positions are advertised using traditional print media. It is
the Company's belief that on-line solutions will significantly expand the
recruitment advertising market because of their global reach and continuous
availability. Furthermore, on-line advertising is extremely cost effective when
compared to other traditional recruitment methods. TMP intends to aggressively
pursue this market by leveraging its relationships with its existing clients and
by using its portfolio of on-line services to attract new accounts. TMP's
Internet recruitment services have been actively marketed since May 1995 and are
currently generating approximately $600,000 in monthly revenue, approximately
45% of which is from new clients.
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The Company's strategy with respect to Internet recruitment products is
twofold. First, develop a portfolio of attractive product offerings and
differentiate them through functionality, target market and price points.
Second, drive user traffic to its Web sites to maximize the value of the medium
to TMP's customers.
TMP believes its products are among the most popular career hubs on the
Internet. The Monster Board-Registered Trademark- (HTTP://WWW.MONSTER.COM),
launched in April 1994, was rated by COMMUNICATIONS WEEK (June 10, 1996 edition)
as the premier career oriented Web site in terms of its search and responding
capabilities. It was also one of the first 1,000 commercial Web sites out of the
more than 300,000 which currently exist. The Monster Board-Registered Trademark-
currently lists approximately 15,000 jobs offered by over 3,000 employers, and
clients of The Monster Board-Registered Trademark- include Nike, McDonald's, BBN
Planet, CompuServe, Deloitte & Touche, and USA TODAY. According to Nielson Media
Research Internet Profiles Corporation, The Monster Board-Registered Trademark-
received over 7.7 million hits (an entry into the log file on its server) in
June 1996, and is averaging approximately 15,000 visits daily with the average
length of each visit approaching nine and one-half minutes. Users of The Monster
Board-Registered Trademark- can search for employment opportunities three ways.
Monster Search-TM- utilizes intuitive scrollbar functionality to access the full
Monster Board-Registered Trademark- database according to location, discipline,
company and job title. Keyword Search allows a user to enter specific keywords
to match skills, job titles or other requirements and Monster NewsSearch employs
Verity-TM- technology to search over 40 Usenet Newsgroups on the Internet which
deliver over 50,000 additional job opportunities. Job seekers can post their
resume into the database free of charge, enabling them to easily transmit their
resume to prospective employers electronically. The Monster
Board-Registered Trademark- currently contains over 45,000 resumes and attracts
on average over 100 new resumes per day.
Online Career Center-SM- (HTTP://WWW.OCC.COM) ("OCC") is the Internet's
earliest career site, originating in late 1992 when a group of U.S. corporations
developed an employment database. Launched in April 1993, OCC is designed to
provide corporate recruiters and job-seekers with efficient and easy-to-use
search software. OCC enters into subscription based agreements with member
companies and functions as a central Internet recruitment and human resources
management service. OCC maintains a Member Services Department which assists
corporate users during business hours. As with The Monster
Board-Registered Trademark-, job seekers can place their resumes on-line. OCC
currently lists more than 20,000 jobs for a broad client base including Allied
Signal, Andersen Consulting, Eli Lilly and Co., Levi Strauss & Co., Smith Barney
and Viacom. OCC is designed for users who prefer Web sites which are more direct
with fewer ancillary features. Its value-added services include career
assistance, a self-help career information section for applicants, recruiter's
office, which provides resource information for corporate recruiters, on-campus,
a link to over 700 colleges and universities nationwide, and membership
opportunities for contractors, agencies and search firms. OCC's pricing
structure is membership-based rather than volume-based, consistent with its
"less frills" market positioning.
MedSearch-SM- (HTTP://WWW.MEDSEARCH.COM) is a leading Internet Web site for
the healthcare industry. Launched in May 1994, MedSearch-SM- attracts healthcare
professionals and many of North America's largest health care providers,
including Duke University Medical Center, Henry Ford Health System, Johns
Hopkins Hospital, Kaiser Permanente, Mayo Clinics & Hospitals and NovaCare.
MedSearch-SM- offers detailed employer profiles, resume postings, discussion
groups, career and industry information, and direct links to numerous healthcare
resources on the Internet. MedSearch-SM- provides access to job listings which
can be searched by location, category, title, employer and key word. Beyond the
core business functions of jobs, resumes and employer profiles, MedSearch-SM-
provides outplacement information and a physician locator.
Be the Boss-SM- (HTTP://WWW.BETHEBOSS.COM/BTB) focuses on the growing
franchising industry. Be the Boss-SM- users can search for current franchise
opportunities on-line and apply directly to franchisors using a
franchisor-customized questionnaire. Franchisor profiles allow users to learn
more about today's top franchise companies such as The Athlete's Foot, Subway
and 7-Eleven. In addition, Be the Boss-SM- provides extensive resources to the
prospective franchisee including sound clips and articles on franchising,
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<PAGE>
interactive financial worksheets and links to other entrepreneurs' resources on
the Web. Be the Boss-SM- also includes a comprehensive directory of franchises
worldwide.
TMP has also developed private label applications of its interactive
recruitment products. For example, the Company adapted The Monster
Board-Registered Trademark- technology to create a database of jobs for Fidelity
Investments which resides, through a hyper-link, on the Fidelity home page. The
search features have the look and ease of use associated with The Monster
Board-Registered Trademark- while appearing to the user as a seamless part of
the Fidelity site. TMP intends to continue to market private label products as a
way to increase the scale of its databases.
To differentiate its on-line products, the Company has focused on segmenting
the user market place. For example, The Monster Board-Registered Trademark- is
TMP's premium general recruitment product and is therefore populated with a
variety of value-added features including:
ROAR. A segment of The Monster Board-Registered Trademark- targeted to
the college and entry-level job seekers. Roar offers young professionals the
opportunity to conduct an entry-level career search, access the latest
career and lifestyle trends, pose career-related questions, and enter into
on-line discussions with their peers.
HR1. HR1 is an interactive forum which provides Human Resources
professionals with the ability to catch up on the latest industry trends,
network with colleagues through on-line discussions, learn about pertinent
associations and educational offerings, and review current Human Resources
opportunities.
CEO EXCHANGE. CEO Exchange is an executive resource featuring
interviews with leading CEO's, on-line discussions, and strategies to
approach typical issues or dilemmas. CEO Exchange also offers an executive
level career search.
CAREER CENTER. This employment resource features interviewing and
resume tips, career fair listings, important career links and a career
counselor to respond to questions submitted by users.
In addition to market segmentation, the Company intends to differentiate its
products by tailoring them to specific geographic areas and by branding them
using both traditional advertising media and the Internet. To date, The Monster
Board-Registered Trademark- has been tailored to reflect the local customs and
terminology of the U.S., Canada, the United Kingdom and Australia. In March
1996, the Company began to execute a media plan aimed at branding The Monster
Board-Registered Trademark-.
To attract the maximum amount of volume to its Web sites, TMP intends to
continue to develop additional value-added content while developing strategic
alliances with other on-line content providers. The Company's current strategic
alliances center on The Monster Board-Registered Trademark- and include:
THE GARTNER GROUP. The Gartner Group is the leading provider of
independent research, analysis and advisory services to the information
technology industry. In August 1996, The Monster Board-Registered Trademark-
became the official career hub for Gartner Group's Web site @VANTAGE.COM.
Individuals who access this site can therefore directly access The Monster
Board-Registered Trademark- database through a hyper-link. The interface has
the same functionality and ease of use of The Monster
Board-Registered Trademark-. This arrangement was established on a
co-branded basis such that users will see the logos of both The Monster
Board-Registered Trademark- and the Gartner Group. This alliance serves to
continue to reinforce The Monster Board's brand equity while driving volume
to The Monster Board-Registered Trademark-'s jobs database.
AT&T BUSINESS NETWORK. AT&T Business Network is a comprehensive,
Web-based information and productivity resource designed for business
managers, professionals and entrepreneurs. In July 1996, TMP established a
co-branded career hub alliance with AT&T Business Network structured in a
similar fashion to the Gartner Group alliance. AT&T Business Network and
Industry.Net have merged to form Netts, Inc. and the Company anticipates
that its relationship will expand with this merger.
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<PAGE>
ZIFF DAVIS INTERACTIVE'S ZDNET. Ziff Davis is a leading publisher of
magazines for the computer industry. In August 1995, TMP entered into an
agreement with Ziff Davis Interactive to use The Monster
Board-Registered Trademark- as the official job site for the Ziff Davis
Interactive's ZDNet Web site. Unlike co-branded alliances, however, this was
structured as a private label application. Therefore, the site has the
functionality of The Monster Board-Registered Trademark-, while appearing to
be a seamless component of the host site. The strategic alliance adds
approximately 1,500 users to The Monster Board-Registered Trademark-'s
circulation each day.
RESTRAC, INC. Restrac, Inc. is the leading provider of software used to
automate the recruitment, selection, and placement of an organization's
workforce. Restrac, Inc.'s software is licensed by 450 organizations with
over 4,000 users. Imbedded in Restrac, Inc.'s software is an automatic
download feature whereby job postings can be fed directly into The Monster
Board-Registered Trademark-. Further, resumes posted on The Monster
Board-Registered Trademark- can be downloaded directly into Restrac, Inc.
This alliance significantly streamlines TMP's interface with its clients who
utilize Restrac, Inc.'s software, further enhancing the cost effectiveness
of The Monster Board-Registered Trademark-.
The Monster Board-Registered Trademark- utilizes Sun Microsystem's high-end
Sparc workstations (Sparc 1000's, Super Sparcs, Ultra Sparcs) to provide
commercial-grade Web service to an expanding Internet user-base. The Monster
Board-Registered Trademark- is currently co-located at BBN Planet and connected
to a 10 megabit/second feed. An Oracle-TM- database is incorporated to store
resumes and jobs. Oracle-TM- also allows The Monster Board-Registered Trademark-
to take advantage of agent technology, which allows enhanced user interaction,
personalization and passive, independent data searches which the user can
customize and view the next time they log on to the site. An Open Market-TM-
server is installed to ensure the speed and reliability of The Monster
Board-Registered Trademark- and to add the ability to handle encrypted credit
card transactions over the Web.
SALES AND MARKETING
TMP has over 1,500 employees focused on its sales, marketing and customer
service efforts worldwide. The Company has divided its sales, marketing and
customer service staff into two groups: (i) new business generation
(approximately 150 employees) and (ii) existing client relationships maintenance
and improvement (approximately 1,400 employees). In 1995, the Company acquired
73 new clients with estimated annual gross billings of approximately $30
million. Within each group, TMP maintains separate sales and marketing staffs
for its yellow page advertising business, recruitment advertising business and
Internet business. In addition to specializing by product, each group undertakes
a cross-selling effort of TMP's other products as appropriate. The Company's
Internet sales staff has targeted its yellow page and recruitment advertising
clients to capitalize on the interactivity and additional services that its
Internet products can cost effectively provide such clients. In addition to
pursuing cross-selling opportunities within TMP's existing client base, each
product sales force also designs targeted selling campaigns for non-TMP clients.
TMP's clients have a marketing manager who works closely with the client to
develop and design the appropriate marketing and advertising campaign. The
customer service representatives work closely with the marketing manager and the
client to implement the marketing and advertising campaign, evaluate the
effectiveness of the campaign and monitor client satisfaction levels.
The Company has more than 17,000 clients, including more than 70 of the
Fortune 100 companies and more than 240 of the Fortune 500 companies. No one
client accounts for more than 5% of the Company's annual commissions and fees.
The Company has 45 sales, marketing and customer service offices located in the
United States and 25 offices in the rest of the world. The Company also
maintains relationships with 24 international recruitment advertising agencies
throughout the world, further enhancing the Company's ability to reach qualified
job candidates.
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<PAGE>
COMPETITION
The markets for the Company's services and products are highly competitive
and are characterized by pressure to reduce prices, incorporate new capabilities
and technologies and accelerate job completion schedules.
The Company faces competition from a number of sources. These sources
include national and regional advertising agencies, media companies, as well as
specialized and integrated marketing communication firms. Many advertising
agencies and media companies have started to either internally develop or
acquire new media capabilities. New boutiques that provide integrated or
specialized services (such as advertising services or Web site design) and are
technologically proficient, especially in the new media arena, are also
competing with the Company. Many of the Company's competitors or potential
competitors have long operating histories, and some have greater financial,
management, technological, development, sales, marketing and other resources
than the Company. In addition, the Company's ability to maintain its existing
clients and generate new clients depends to a significant degree on the quality
of its services, pricing and its reputation among its clients and potential
clients.
TMP believes that its five largest competitors in the recruitment
advertising segment are Bernard Hodes Advertising, Inc., a subsidiary of
Omnicom, Nationwide Advertising Service, Inc., controlled by the Gund Brothers,
Austin Knight, JWT Specialized Communications, a subsidiary of the WPP Group
USA, Inc., and Universal Communications, a subsidiary of The Interpublic Group
of Companies, Inc. The Company also competes with hundreds of Internet content
providers.
The principal factors on which the Company competes are service, creative
quality, price, technological and new media sophistication and intangible
factors such as the interpersonal skills of the individuals managing the client
account and an adaptive corporate culture. The Company believes that it competes
favorably with respect to each of these factors. See "Risk
Factors--Competition."
PROPERTIES
Substantially all offices of the Company are located in leased premises.
The Company's principal office is located at 1633 Broadway, New York, New
York, where it occupies approximately 44,000 square feet of space under a lease
expiring in June 2004. Monthly payments under the lease currently are $105,712
and escalate during the term of the lease.
The Company also has leases covering local offices throughout the United
States and in some foreign countries.
All leased space is considered to be adequate for the operation of TMP's
business, and no difficulties are foreseen in meeting any future space
requirements.
INTELLECTUAL PROPERTY
The Company's success and ability to compete is dependent in part on the
protection of its original content for the Internet and on the goodwill
associated with its trademarks, trade names, service marks and other proprietary
rights. The Company relies on copyright laws to protect the original content
that it develops for the Internet. In addition, the Company relies on federal
trademark laws to provide additional protection for the appearance of its
Internet sites. A substantial amount of uncertainty exists concerning the
application of copyright laws to the Internet, and there can be no assurance
that existing laws will provide adequate protection for the Company's original
content. In addition, because copyright laws do not prohibit independent
development of similar content, there can be no assurance that copyright laws
will provide any competitive advantage to the Company.
The Company has registered "The Monster Board-Registered Trademark-." The
Company also asserts common law protection on certain names and marks that it
has used in connection with its business activities.
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The Company relies on trade secret and copyright laws to protect the
proprietary technologies that it has developed to manage and improve its
Internet sites and advertising services, but there can be no assurance that such
laws will provide sufficient protection to the Company, that others will not
develop technologies that are similar or superior to the Company's, or that
third parties will not copy or otherwise obtain and use the Company's
technologies without authorization. The Company has filed patent applications
with respect to certain of its software systems, methods and related
technologies, but there can be no assurance that such applications will be
granted or that any future patents will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide a competitive
advantage for the Company. In addition, the Company relies on certain technology
licensed from third parties, and may be required to license additional
technology in the future, for use in managing its Internet sites and providing
related services to users and advertising customers. The Company's ability to
generate fees from Internet commerce may also depend on data encryption and
authentication technologies that the Company may be required to license from
third parties. There can be no assurance that these third party technology
licenses will be available or will continue to be available to the Company on
acceptable commercial terms or at all. The inability to enter into and maintain
any of these technology licenses could have a material adverse effect on the
Company's business, financial condition and operating results.
Policing unauthorized use of the Company's proprietary technology and other
intellectual property rights could entail significant expense and could be
difficult or impossible, particularly given the global nature of the Internet
and the fact that the laws of other countries may afford the Company little or
no effective protection of its intellectual property. In addition, there can be
no assurance that third parties will not bring claims of copyright or trademark
infringement against the Company or claim that the Company's use of certain
technologies violates a patent. The Company anticipates an increase in patent
infringement claims involving Internet-related technologies as the number of
products and competitors in this market grows and as related patents are issued.
Further, there can be no assurance that third parties will not claim that the
Company has misappropriated their creative ideas or formats or otherwise
infringed upon their proprietary rights in connection with its Internet content.
Any claims of infringement, with or without merit, could be time consuming to
defend, result in costly litigation, divert management attention, require the
Company to enter into costly royalty or licensing arrangements or prevent the
Company from using important technologies or methods, any of which could have a
material adverse effect on the Company's business, financial condition or
operating results.
GOVERNMENT REGULATION
As an advertising agency which creates and places print and Internet
advertisements, the Company is subject to Sections 5 and 12 of the Federal Trade
Commission Act (the "FTC Act") which regulate advertising in all media,
including the Internet, and require advertisers and advertising agencies to have
substantiation for advertising claims before disseminating advertisements. The
FTC Act prohibits the dissemination of false, deceptive, misleading, and unfair
advertising, and grants the Federal Trade Commission ("FTC") enforcement powers
to impose and seek civil penalties, consumer redress, injunctive relief and
other remedies upon advertisers and advertising agencies which disseminate
prohibited advertisements. Advertising agencies such as TMP are subject to
liability under the FTC Act if the agency actively participated in creating the
advertisement, and knew or had reason to know that the advertising was false or
deceptive.
In the event that any advertising created by TMP was found to be false,
deceptive or misleading, the FTC Act could potentially subject the Company to
liability. The fact that the FTC has recently brought several actions charging
deceptive advertising via the Internet, and is actively seeking new cases
involving advertising via the Internet, indicates that the FTC Act could pose a
somewhat higher risk of liability to the advertising distributed via the
Internet.
As a provider of Internet content, the Company is subject to the provisions
of the recently enacted Communications Decency Act (the "CDA"), which, among
other things, imposes criminal penalties on
45
<PAGE>
anyone that distributes certain prohibited material over the Internet. Although
the manner in which the CDA will be interpreted and enforced and its effect on
the Company's operations cannot yet be fully determined, the CDA could subject
the Company to substantial liability. The CDA could also dampen the growth of
the Internet generally and decrease the acceptance of the Internet as an
advertising medium, and could, therefore, have a material adverse effect on the
Company's business, financial condition or operating results. It is also
possible that new laws and regulations will be adopted covering issues such as
privacy, copyright infringement, subject matter and the pricing, characteristics
and quality of Internet products and services. Application to the Internet of
existing laws and regulations governing issues such as property ownership, libel
and personal privacy is also subject to substantial uncertainty.
There can be no assurance that the CDA or other current or new government
laws and regulations, or the application of existing laws and regulations will
not subject the Company to significant liabilities, significantly dampen growth
in Internet usage, prevent the Company from offering certain Internet content or
services or otherwise cause a material adverse effect on the Company's business,
financial condition or operating results.
LEGAL PROCEEDINGS
The Company is involved in various legal proceedings that are incidental to
the conduct of its business. The Company is not involved in any pending or
threatened legal proceedings which the Company believes could reasonably be
expected to have a material adverse effect on the Company's financial condition
or results of operations.
EMPLOYEES
At August 1, 1996, the Company employed 2,145 people, of whom 1,410 were
client services personnel, 151 were sales and marketing personnel and 286 were
creative and graphics personnel. The remainder of the Company's personnel are
financial and administrative personnel. The Company's employees are not
represented by a labor union or a collective bargaining agreement. The Company
regards its employee relations as excellent.
46
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the names, ages and positions of the
executive officers and directors of the Company. Their respective backgrounds
are described following the table.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------- ----------- ---------------------------------------------------------
<S> <C> <C>
Andrew J. McKelvey............................... 62 Chairman of the Board, President and Director
Thomas G. Collison............................... 57 Vice Chairman and Secretary
David A. Hosokawa................................ 53 Vice Chairman
Paul M. Camara................................... 48 Executive Vice President--Creative/Sales/Marketing
Jeffrey C. Taylor................................ 36 Executive Vice President--Interactive
James J. Treacy.................................. 38 Executive Vice President--Finance and Strategy
Roxane Previty................................... 37 Chief Financial Officer
Bernice M. Hazell................................ 42 Senior Vice President--Client Service
V. Miller Newton................................. 37 Senior Vice President--Sales and Marketing
Myron F. Olesnyckyj.............................. 35 Vice President--General Counsel
George R. Eisele................................. 60 Executive Vice President of TMP Worldwide Direct and
Director
John R. Gaulding (1)(2).......................... 51 Director
Graeme K. Howard, Jr. (1)........................ 64 Director
Jean-Louis Pallu................................. 56 Director
John Swann (1)(2)................................ 60 Director
</TABLE>
- ------------------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
ANDREW J. MCKELVEY founded the Company in 1967, and has served as Chairman
of the Board and President since that time. Mr. McKelvey has a B.A. from
Westminster College. Mr. McKelvey was a member of the Board of Directors of the
Yellow Pages Publishers Association and the Association of Directory Marketing
from 1994 through September 1996.
THOMAS G. COLLISON joined the Company in February 1977 as Controller.
Subsequently, he was named Vice President--Finance; Senior Vice President;
Executive Vice President and Chief Financial Officer and, in March 1996, Vice
Chairman. Mr. Collison received a B.S. from Fordham University.
DAVID A. HOSOKAWA joined the Company in November 1991 as Chief Executive
Officer and, prior thereto, was a consultant to the Company for four years. He
was named to his current position in April 1996. Mr. Hosokawa has a B.A. from
St. Olaf College.
PAUL M. CAMARA joined the Company in February 1970. Mr. Camara was elected
as a Vice President of the Company in 1978 and as a Senior Vice President in
1987. He was named to his current position in April 1996. Mr. Camara received a
B.A. from University of Massachusetts--Dartmouth.
JEFFREY C. TAYLOR joined the Company in November 1995. Mr. Taylor was
founder and president of Adion, Inc., a recruitment advertising firm, from May
1989 until its purchase by the Company in November 1995. Mr. Taylor founded The
Monster Board-Registered Trademark- in April 1994. He attended the University of
Massachusetts.
JAMES J. TREACY joined the Company in June 1994 as chief executive officer
of the recruitment division. In April 1996, Mr. Treacy was named to his current
position. Prior to joining the Company, Mr. Treacy was Senior Vice
President--Western Hemisphere Treasurer for the WPP Group USA, Inc. Prior
thereto,
47
<PAGE>
Mr. Treacy was a corporate officer of The Ogilvy Group Inc. Mr. Treacy received
a B.B.A. from Siena College and an M.B.A. from St. John's University.
ROXANE PREVITY joined the Company in November 1994. Ms. Previty was employed
by WPP Group USA, Inc. in various capacities from June 1987 until October 1994.
Ms. Previty holds a B.A. from Stanford University and an M.B.A. from Harvard
Business School.
BERNICE M. HAZELL joined the Company in 1975. Ms. Hazell has been named to
various managerial positions with increasing responsibility. She was named to
her present position in October 1991.
V. MILLER NEWTON joined the Company in June 1986 as Director of New Business
Development. From 1991 through March 1996, he was appointed to various executive
positions with increasing responsibility including Group Vice President from
January 1993 through March 1996. In April 1996, he assumed his current position.
Mr. Newton attended the University of South Florida.
MYRON F. OLESNYCKYJ joined the Company in June 1994. From September 1986
through May 1994, Mr. Olesnyckyj was associated with Fulbright & Jaworski L.L.P.
and predecessor firms. Mr. Olesnyckyj holds a B.S.F.S. from Georgetown
University's School of Foreign Service and a J.D. from the University of
Pennsylvania Law School.
GEORGE R. EISELE joined the Company in 1976, and has been Executive Vice
President of TMP Worldwide Direct, the Company's direct marketing division,
since 1989, and a director of the Company since September 1987.
JOHN R. GAULDING became a director in January 1996. Mr. Gaulding is a
private investor and business consultant in the fields of strategy and
organization. He was Chairman and Chief Executive Officer of National Insurance
Group, a publicly traded financial information services company, from April
through July 11, 1996, the date of such company's sale. For six years prior
thereto, he was President and Chief Executive Officer of ADP Claims Solutions
Group. From 1985 to 1990, Mr. Gaulding was President and Chief Executive Officer
of Pacific Bell Directory, the yellow page publishing unit of Pacific Telesis
Group. Mr. Gaulding served as Co-Chairman of the Yellow Pages Publishers
Association from 1987 to 1990. He holds a B.S. from the University of California
at Los Angeles and an M.B.A. from the University of Southern California.
GRAEME K. HOWARD, JR. became a director in September 1996. Mr. Howard is an
investment banker, lawyer and publisher. Mr. Howard is a partner of Howard,
Lawson & Co., an investment banking firm which he founded in 1972. He has been
the editor or publisher of GOING PUBLIC; THE IPO REPORTER; PRIVATE PLACEMENTS;
GROWTH CAPITAL; BUSINESS BORROWER; EUROPEAN TAXATION; AND THE TAXATION OF PATENT
ROYALTIES, DIVIDEND, INTEREST IN EUROPE. Mr. Howard is a member of the
Connecticut and Pennsylvania bars and practiced international business law in
Amsterdam and Philadelphia from 1960-1967. From 1967-1972 he was a partner in
the corporate finance department of a regional investment banking firm. Mr.
Howard was a member of the Board and the audit committee of Advanta Corp., a
NASDAQ listed credit card, leasing and consumer lender from 1986-1995. From
1994-1996, Mr. Howard was vice chairman of the Board of Datatec Industries Inc,
a network integrator. Since April 1996, Mr. Howard has been a financial advisor
to Datatec. Mr. Howard received a B.A. from Amherst College and a LLB from Yale
Law School.
JEAN-LOUIS PALLU became a director in September 1996. Mr. Pallu has been
President of Office d'Annonces, a French advertising firm, since September 1984.
Prior thereto, since 1977, he was employed by that firm in various executive
capacities. Mr. Pallu was graduated from Diplome de l' Ecole with a
concentration in business. He is a Chevalier of the National Order of Merit.
JOHN SWANN became a director in September 1996. In 1995, Mr. Swann founded
Cactus Digital Imaging Systems, Ltd., Canada's largest supplier of
electronically produced large format color prints.
48
<PAGE>
All directors hold office until the next meeting of the stockholders of the
Company and until their successors are elected and qualified. Officers are
appointed to serve, at the discretion of the Board of Directors, until their
successors are appointed.
The Board of Directors has a Compensation Committee charged with
recommending to the Board the compensation for the Company's executives and
administering the Company's stock option and benefit plans. The Compensation
Committee is currently composed of Messrs. Gaulding and Swann.
The Board of Directors has an Audit Committee charged with recommending to
the Board the appointment of independent auditors of the Company, as well as
discussing and reviewing, with the independent auditors, the scope of the annual
audit and results thereof. The Audit Committee is currently composed of Messrs.
Gaulding, Swann, and Howard.
The Board of Directors has a Strategy Committee charged with recommending to
the Board strategic plans. The Strategy Committee is currently composed of
Messrs. Gaulding, Pallu and Swann.
DIRECTOR COMPENSATION
Prior to this offering, Mr. Gaulding, a non-employee director, received a
director's fee of $20,000 per quarter plus reimbursement of expenses incurred in
connection with his duties as a director. Prior to this offering, Messrs. Swann,
Pallu and Howard, each of whom is a non-employee director, was provided with
reimbursement of expenses incurred in connection with their respective duties as
a director. Upon completion of this offering, non-employee directors will
receive $15,000 per year for services rendered as directors, plus a per meeting
fee of $5,000 for each meeting of the board of directors or a committee of the
board of directors attended in person after the fifth such meeting attended in
person, plus reimbursement of expenses incurred in connection with their duties
as directors. Each current and future non-employee director is also eligible to
receive stock options under the Company's Stock Option Plan for Non-Employee
Directors. See "Management--Stock Options."
EXECUTIVE COMPENSATION
The following table sets forth information concerning all cash and non-cash
compensation awarded to, earned by or paid to the Company's chief executive
officer and each of the next four most highly compensated executive officers for
services rendered to the Company during the fiscal year ended December 31, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------
OTHER
ANNUAL
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
- ------------------------------------------------------------ --------- --------- -----------
<S> <C> <C> <C>
Andrew J. McKelvey,......................................... $558,731 $ 710,000 $ 2,730(1)
Chairman of the Board and President
David A. Hosokawa,.......................................... 299,066 129,000 2,730(1)
Vice Chairman
James J. Treacy,............................................ 180,000 197,500 2,730(1)
Executive Vice President--Finance and Strategy
Thomas G. Collison,......................................... 205,418 62,000 2,730(1)
Vice Chairman and Secretary
Paul M. Camara,............................................. 223,566 37,000 2,730(1)
Executive Vice President--Creative/Sales/Marketing
</TABLE>
- ------------------------
(1) Represents matching contributions made to the Company's 401k Plan.
49
<PAGE>
STOCK OPTIONS
In January 1996, the Company's Board of Directors adopted the 1996 Employee
Stock Option Plan (the "Stock Option Plan"), which provides for the issuance of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and non-qualified stock options,
to purchase an aggregate of up to 900,000 shares of the Common Stock of the
Company. The Stock Option Plan permits the grant of options to officers,
employees and consultants of the Company and its affiliates.
The Stock Option Plan is administered by the Compensation Committee. Each
option is evidenced by a written agreement in a form approved by the
Compensation Committee. No options granted under the Stock Option Plan are
transferable by the optionee other than by will or by the laws of descent and
distribution, and each option is exercisable, during the lifetime of the
optionee, only by the optionee.
Under the Stock Option Plan, the exercise price per share of an incentive
stock option must be at least equal to 100% of the fair market value of a share
of the Common Stock on the date of grant (110% of the fair market value in the
case of options granted to employees who hold more than ten percent of the
voting power of the Company's capital stock on the date of grant). The per share
exercise price of a non-qualified stock option must be not less than the par
value of a share of the Common Stock on the date of grant. The term of an
incentive or non-qualified stock option is not to exceed ten years (five years
in the case of an incentive stock option granted to a ten percent holder). The
Compensation Committee has the discretion to determine the period required for
full exercisability of stock options; however, in no event can the Compensation
Committee shorten such period to less than six months. Upon exercise of any
option granted under the Stock Option Plan, the exercise price may be paid in
cash, and/or such other form of payment as may be permitted under the applicable
option agreement, including, without limitation, previously owned shares of
Common Stock. The Stock Option Plan provides that the maximum option grant which
may be made to an executive officer in any calendar year is 45,000 shares.
On January 3, 1996, options to purchase an aggregate of 296,640 shares of
Common Stock were granted to 97 officers, employees and consultants of the
Company at a per share purchase price equal to $6.65, the fair market value of
the Common Stock on the date of grant as determined by the Board. Mr. Hosokawa
was granted incentive stock options to purchase 11,250 shares of Common Stock at
a per share exercise price of $6.65 per share.
The Company has adopted a Stock Option Plan for Non-Employee Directors (the
"Directors' Plan"), pursuant to which options to acquire a maximum aggregate of
180,000 shares of Common Stock may be granted to non-employee directors. Options
granted under the Directors' Plan do not qualify as incentive stock options
within the meaning of Section 422 of the Code. Pursuant to the Directors' Plan,
each of Messrs. Gaulding, Howard, Pallu and Swann, its non-employee directors,
was granted an option to purchase 11,250 shares of Common Stock at a purchase
price per share equal to the fair market value of the Common Stock on the date
of such Director's election ($6.65 in the case of Mr. Gaulding and the per share
initial public offering price in the cases of Meesrs. Swann, Pallu and Howard).
The options have a ten-year term and become exercisable as determined by the
Committee. The options may be exercised by payment in cash, check or shares of
Common Stock.
EMPLOYMENT AGREEMENT
The Company's subsidiary, TMP Interactive Inc., entered into an amended and
restated employment agreement with Jeffrey C. Taylor, effective as of September
11, 1996, for a term ending November 9, 1998. That agreement provides for
automatic renewal for successive one year terms unless either party notifies the
other to the contrary at least 60 days prior to its expiration. The agreement
provides that Mr. Taylor will serve as Chief Executive Officer of TMP
Interactive Inc. and provides Mr. Taylor with a base salary of $125,000 per year
and annual bonuses of at least $50,000 per year based on formulas mutually
agreed to by the parties. Under the agreement, Mr. Taylor may terminate his
employment upon written notice for
50
<PAGE>
certain material alterations in his responsibilities, duties, and authorities or
upon 60 days' prior written notice for any reason. The agreement provides that
in the event Mr. Taylor's employment is terminated by TMP Interactive Inc. prior
to its expiration for reasons other than cause, TMP Interactive Inc. shall pay
Mr. Taylor his base salary and a minimum $50,000 annual bonus for the remaining
term of the agreement at the times they would have been payable had he remained
employed, less the consideration paid or earned by Mr. Taylor from other
employment during such period. The agreement contains confidentiality
provisions, whereby Mr. Taylor agrees not to disclose any confidential
information regarding TMP Interactive Inc. and its affiliates, as well as
noncompetition provisions. The noncompetition covenants generally survive the
termination or expiration of Mr. Taylor's employment for two years, provided
that in certain circumstances TMP Interactive Inc. must pay Mr. Taylor one-half
of his base salary and one-half of his $50,000 minimum annual bonus for the
duration of the noncompetition obligation. Mr. Taylor's agreement also prohibits
him from soliciting or servicing customers or prospective customers of TMP
Interactive Inc. and its affiliates for a period of two years following the
termination or expiration of his employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
On September 16, 1996, the Company's Board of Directors established a
Compensation Committee, which currently consists of Messrs. Gaulding and Swann
to recommend compensation for the Company's executives and to administer the
Company's stock option and other benefit plans. Prior to September 16, 1996, all
matters concerning executive officer compensation were addressed by the entire
Board of Directors. During 1995, Messrs. McKelvey and Eisele were directors and
executive officers of the Company. See "Certain Transactions."
51
<PAGE>
CERTAIN TRANSACTIONS
The Company has made advances to Messrs. McKelvey, Hosokawa and Collison in
the respective amounts of $3,209,305, $123,689 and $119,840 for 1993;
$3,720,431, $0 and $58,927 for 1994; $0, $4,031 and $0 for 1995; and $2,606,243,
$4,958 and $0 for 1996. Mr. McKelvey repaid $1,658,322 in 1995, Mr. Hosokawa
repaid $22,689 in 1994 and $2,218 in 1995 and Mr. Collison repaid $16,837 in
1993, $20,700 in 1994, $4,550 in 1995 and $2,275 in 1996. At June 30, 1996,
Messrs. McKelvey, Hosokawa and Collison were indebted to the Company in the
amounts of $9,135,798, $107,771 and $134,405, respectively. These advances do
not bear interest. See "Principal and Selling Stockholders."
On January 3, 1995, in connection with the acquisition of a yacht, the
Company and a subsidiary of the Company, Aeronautic Media, Inc. ("AMI") entered
into an agreement with Mr. McKelvey pursuant to which Mr. McKelvey agreed to be
solely responsible for the $1,690,000 loan used to finance the yacht. Mr.
McKelvey has agreed to purchase the yacht upon consummation of this offering at
the then net book value of such yacht, thereby increasing his indebtedness to
the Company in the amount of approximately $2,920,000, the net book value of the
yacht on August 31, 1996.
On January 1, 1996, the Company purchased Mr. McKelvey's 100% interest in
Volando, Inc., the sole shareholder of Online Career Center Management, Inc.,
for $1,000, the same consideration paid by Mr. McKelvey in connection with the
initial issuance of those shares to him on December 20, 1994.
On January 1, 1996, Mr. McKelvey contributed to the Company his 100%
interest in EPI Aviation, Inc., which leases an aircraft.
On July 16, 1996, Mr. McKelvey contributed to the Company his 100% interest
in General Directory Advertising Services, Inc., a yellow page advertising
agency. On August 15, 1996, the Company purchased Mr. McKelvey's 80.42% interest
in National Media Holding Company, Inc., the sole shareholder of a yellow page
advertising agency, for $280,000. On September 1, 1996, the Company purchased
Mr. McKelvey's 48.92% interest in Telephone Directory Advertising, Inc., a
yellow page advertising agency, for $837,000. The Company had originally sold
such stock to Mr. McKelvey on December 31, 1992 for $837,306.
On September 4, 1996, Mr. McKelvey sold his interest in S.M.E.T. Servizio
Marketing Elenchi Telefonici s.r.l. to the Company for $140,620. The Company had
originally sold such interest to Mr. McKelvey on June 5, 1990 for $140,620.
Messrs. McKelvey, Collison, Camara, Newton, Eisele and Ms. Hazell have
17.8%, 5.8%, 5.4%, 0.6% and 0.2% interests, respectively, in the McKelvey
Enterprises, Inc. Profit Sharing Plan. Proceeds of this offering will be used to
redeem all of the shares of the Company's preferred stock owned by such plan.
Messrs. McKelvey, Eisele, Camara and Collison have approximately 69.4%, 10%,
5% and 5% interests, respectively, in International Drive, L.P., the lessor of
the Company's 48,000 square foot office in Mt. Olive, New Jersey. This lease
runs through December 1998 and the Company's rent for this space is $44,000 per
month. Mr. McKelvey has an 80% interest in 12800 Riverside Drive Corporation,
the lessor of the Company's 15,802 square foot office in North Hollywood,
California. This lease runs through May 2013 and the Company's rent for this
space is $16,000 per month. Mr. McKelvey has a 49% interest in TMP Development
Company Inc., the lessor of the Company's 5,000 square foot office in Holliston,
Massachusetts. This lease is month to month and the Company's rent for this
space is currently $6,875 per month. Mr. McKelvey has a 49% interest in TPH &
AJM, a partnership, the lessor of the office occupied by Telephone Directory
Advertising, Inc., an entity in which the Company has 48.92% interest. This
lease runs through May 1999 and Telephone Directory Advertising, Inc.'s rent for
this space is currently $9,955 per month.
Messrs. Collison and Camara each have a 1% interest in Programmes Marketing
Annuaires, a yellow page advertising agency in France in which the Company has a
32% interest.
52
<PAGE>
On March 17, 1996, Mr. Eisele exchanged his 10% interest in M.S.I. - Market
Support International, Inc., a subsidiary of the Company providing order
fulfillment services, for 70,056 shares of common stock of the Company.
On January 1, 1996, 3055078 Canada Inc. redeemed Mr. John Swann's ownership
interest for $510 (in Canadian Dollars), the same amount paid by Mr. Swann for
such shares in connection with their initial issuance on September 7, 1994. On
January 1, 1996, Cala H.R.C. Ltd., the Company's Canadian recruitment
advertising subsidiary, entered into a management agreement with Cala Services
Inc., a recruitment advertising company owned by Mr. Swann, pursuant to which
Cala H.R.C. Ltd. provides management services in exchange for a percentage of
the billings of Cala Services Inc. which is agreed to from time to time. The
agreement is terminable by either party on 30 days notice.
On November 10, 1995, two of the Company's subsidiaries acquired
substantially all of the assets of Adion, Inc. and Adion Information Services,
Inc. for purchase prices of $2,744,428 and $200,000, respectively, as well as
the assumption of certain liabilities. Mr. Taylor owned approximately 28% of
each of those two companies. In connection with those acquisitions, the Company
and certain of its subsidiaries also entered into arrangements with Mr. Taylor
personally providing for payments of an aggregate of $780,000, $380,000 of which
was paid at the time of the acquisitions, a lump sum payment of $150,000 was
paid in March 1996, and the balance of which payments are payable in 60 monthly
installments of $6,666.67 commencing on December 10, 1995.
Immediately prior to the effectiveness of this offering, Old TMP will merge
into McKelvey Enterprises, Inc. Thereafter Worldwide Classified Inc. will merge
into McKelvey Enterprises, Inc. Thereafter Worldwide Classified Inc. will merge
into McKelvey Enterprises, Inc. McKelvey Enterprises, Inc. will then merge into
Telephone Marketing Programs Incorporated and Telephone Marketing Programs
Incorporated will acquire the remaining interest in TMP Interactive Inc., a
subsidiary of the Company which operates The Monster Board, not currently owned
by it. As a result of the foregoing, Messrs. McKelvey, Hosokawa, Camara, Treacy,
Eisele, and Taylor will acquire 14,787,539, 467,640, 138,564, 355,860, 151,036
and 142,740 shares of the Company, respectively.
The Company believes that all transactions with the aforementioned directors
and executive officers were made on terms no less favorable to the Company than
would have been obtained from unaffiliated third parties.
53
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the effective date of the Mergers
by (i) those persons known to the Company to be the beneficial owner of more
than five percent of the outstanding Common Stock, (ii) each of the Company's
directors, (iii) each of the persons named in the Summary Compensation Table,
(iv) all directors and executive officers of the Company as a group and (v) each
Selling Stockholder. Unless otherwise indicated below, the persons named below
have sole voting and investment power with respect to the number of shares set
forth opposite their names, subject to community property laws where applicable.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK SHARES OF COMMON STOCK
BENEFICIALLY OWNED BEFORE BENEFICIALLY OWNED AFTER
THE OFFERING(1) NUMBER OF THE OFFERING(1)
------------------------- SHARES BEING -------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT SOLD NUMBER PERCENT
- ---------------------------------------------------- ------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Andrew J. McKelvey.................................. 14,787,540(2) 71.43%
Paul M. Camara...................................... 138,564 *
Thomas G. Collison.................................. 144,720 *
David A. Hosokawa(3)................................ 470,453 2.27%
James J. Treacy..................................... 355,860 1.72%
George R. Eisele.................................... 151,056 *
Graeme K. Howard, Jr.(4)............................ 5,625 *
John R. Gaulding(5)................................. 8,438 *
Jean-Louis Pallu(4)................................. 5,625 *
John Swann(4)....................................... 5,625 *
Edward C. Albertson................................. 46,350 *
Mark O. Brown....................................... 56,700 *
Alfred M. Cady III.................................. 792,270 3.83%
Gerda L. Carlson.................................... 69,840 *
Chatelain Family Trust.............................. 1,034 *
Daniel Collins...................................... 44,586 *
Crawford Charitrust................................. 4,137 *
Jennifer Dersh and Steven Dersh..................... 4,137 *
Joe M. Glick........................................ 41,400 *
Grech Family Limited Partnership.................... 82,890 *
Bernice M. Hazell................................... 81,000 *
Lance S. Johnson.................................... 81,000 *
Robert M. Kanne..................................... 277,056 1.34%
Kidd Family Trust................................... 68,965 *
Harold L. Levy...................................... 81,000 *
Ronald Plotkin...................................... 340,380 1.64%
Roxane Previty...................................... 19,080 *
Nancy Rooney........................................ 22,680 *
Susan Schneider and Mark Schneider.................. 4,137 *
J. Christopher Stimac............................... 141,282 *
Jeffrey C. Taylor(6)................................ 145,553 *
Michael Torrey...................................... 44,586 *
Lance Willis........................................ 115,614 *
John Yocom.......................................... 71,280 *
BNY Financial Corporation(7)........................ 228,644 1.10%
All directors and executive officers as a group (15
persons)(8)....................................... 16,324,765 78.86%
</TABLE>
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<PAGE>
- ------------------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power
and/or investment power with respect to those securities.
(2) Consists of Class B Common Stock which is convertible, on a share for share
basis, into Common Stock. See "Description of Common Stock--Common Stock and
Class B Common Stock."
(3) Includes 2,813 shares of Common Stock, subject to options, which are
exercisable within 60 days of the date hereof.
(4) Consists of 5,625 shares of Common Stock, subject to options, which are
exercisable within 60 days of the date hereof.
(5) Consists of 8,438 shares of Common Stock, subject to options, which are
exercisable within 60 days of the date hereof.
(6) Includes 2,813 shares of Common Stock, subject to options, which are
exercisable within 60 days of the date hereof.
(7) Represents shares subject to an immediately exercisable warrant to purchase
the indicated number of shares for a nominal exercise price. BNY Financial
Corporation intends to exercise such warrant prior to this offering.
(8) Does not include an aggregate of 53,440 shares subject to the exercise of
outstanding stock options, none of which are exercisable within 60 days of
the date hereof.
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DESCRIPTION OF CAPITAL STOCK
The Certificate of Incorporation of the Company provides the Company with
the authority to issue 200,000,000 shares of Common Stock, 39,000,000 shares of
Class B Common Stock, 200,000 shares of 10.5% Cumulative Preferred Stock and
800,000 shares of Preferred Stock. Upon consummation of the Mergers and giving
effect to the issuances of shares of Common Stock to BNY Financial Corporation
upon exercise of its warrant and to certain parties who have exercised their
options to purchase shares of Common Stock as of the date hereof and after
giving effect of the redemption of the Redeemable Preferred Stock, 4,454,960
shares of Common Stock, with one vote per share, will be outstanding
(representing [ ]% of the combined voting power of the Company), 14,787,540
shares of Class B Common Stock, with ten votes per share, will be outstanding
(representing [ ]% of the combined voting power of the Company) and 200,000
shares of 10.5% Cumulative Preferred Stock will be outstanding. The Company
intends to use a portion of the net proceeds of this offering to redeem all the
outstanding shares of 10.5% Cumulative Preferred Stock. No shares of Preferred
Stock will be outstanding at such time.
COMMON STOCK AND CLASS B COMMON STOCK
DIVIDENDS. Each share of Common Stock and Class B Common Stock is entitled
to dividends if, as and when dividends may be declared by the Board of Directors
of the Company and paid. Under the Delaware General Corporation Law, the Company
may declare and pay dividends only out of its surplus, or in case there shall be
no such surplus, out of its net profits for the fiscal year in which the
dividend is declared and/or the preceding year. No dividends may be declared,
however, if the capital of the Company has been diminished by depreciation,
losses or otherwise to an amount less than the aggregate amount of capital
represented by any issued and outstanding stock having a preference on
distribution. Dividends must be paid on both the Common Stock and the Class B
Common Stock at any time that dividends are paid on either. Any dividend so
declared and payable in cash, capital stock of the Company (other than Common
Stock or Class B Common Stock) or other property will be paid equally, share for
share, on the Class B Common Stock and Common Stock. Dividends and distributions
payable in shares of Class B Common Stock may be paid only on shares of Class B
Common Stock, and dividends and distributions payable in shares of Common Stock
may be paid only on shares of Common Stock. If a dividend or distribution
payable in Common Stock is made on the Common Stock, the Company must also make
a simultaneous dividend or distribution on the Class B Common Stock. Pursuant to
any such dividend or distribution, each share of Class B Common Stock will
receive a number of shares of Class B Common Stock equal to the number of shares
of Common Stock payable on each share of Common Stock.
VOTING RIGHTS. Each share of Common Stock is entitled to one vote and each
share of Class B Common Stock is entitled to ten votes on all matters. Except as
described below, the Common Stock and the Class B Common Stock vote together as
a single class on all matters presented for a vote of the stockholders,
including the election of directors. The holders of a majority of the
outstanding shares of Common Stock or Class B Common Stock, voting as separate
classes, must approve certain amendments affecting shares of such class.
Specifically, if there is any proposal to amend the Certificate of Incorporation
in a manner that would increase or decrease the number of authorized shares of
Common Stock or Class B Common Stock, increase or decrease the par value of the
shares of Common Stock or Class B Common Stock or alter or change the powers,
preferences, or special rights of the shares of Common Stock or Class B Common
Stock so as to affect them adversely, such an amendment must be approved by a
majority of the outstanding shares of the affected class, voting separately as a
class. In addition, any merger or consolidation in which each share of Common
Stock receives consideration that is not of the same type or is less than the
amount of the consideration to be received by each share of Class B Common
Stock, other than consideration payable in securities which provide each share
of Class B Common Stock with the number of votes that is no more than ten times
the number of votes provided each share of Common
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Stock, must be approved by a majority of the outstanding shares of Common Stock,
voting separately as a class. Shares of Common Stock and Class B Common Stock do
not have cumulative voting rights.
TERMS OF CONVERSION. Each share of Class B Common Stock is convertible at
any time, at the option of and without cost to the stockholder, into one share
of Common Stock. If at any time (i) the outstanding shares of Class B Common
Stock represent less than 15% of the combined voting power of issued and
outstanding shares of Common Stock and Class B Common Stock, or (ii) the Board
of Directors and the holder of a majority of the outstanding shares of Class B
Common Stock approve the conversion of all of the Class B Common Stock into
Common Stock, or (iii) the holder of a majority of the outstanding shares of
Class B Common Stock dies, then each outstanding share of Class B Common Stock
shall be converted automatically into one share of Common Stock without any
action by the holder. In the event of such a conversion, certificates formerly
representing outstanding shares of Class B Common Stock will thereafter be
deemed to represent an equal number of shares of Common Stock.
LIQUIDATION RIGHTS. In the event of the liquidation, dissolution or winding
up of the Company, holders of the shares of Common Stock and Class B Common
Stock are entitled to share equally, share for share, in the assets available
for distribution.
OTHER. Additional shares of Class B Common Stock may only be issued upon
stock splits of, or stock dividends on, the existing Class B Common Stock. No
stockholder of the Company has preemptive or other rights to subscribe for
additional shares of the Company.
10.5% CUMULATIVE PREFERRED STOCK
DIVIDENDS. Each share of 10.5% Cumulative Preferred Stock (the "Cumulative
Preferred Stock") is entitled to receive a cumulative cash dividend at an annual
rate of $1.05 per share, payable on the first day of May of each year (or if
such date is not a regular business day, then the next business day thereafter),
commencing on May 1, 1996. Dividends on the issued and outstanding shares of
Cumulative Preferred Stock shall be preferred and cumulative and shall accrue
from day to day from the date on which such shares are originally issued by the
Corporation ("Original Issue Date"). Holders of Cumulative Preferred Stock
("Cumulative Preferred Holders") are not entitled to participate in any other or
additional earnings or profits of the Company. The Cumulative Preferred Stock
ranks superior in terms of dividend payments to other capital stock of the
Company.
VOTING RIGHTS. Except as may otherwise be required by the Delaware General
Corporation Law, the Cumulative Preferred Holders are not entitled to vote their
shares of Cumulative Preferred Stock on any matter submitted to a vote of the
shareholders of the Company or at any meeting of such shareholders.
REDEMPTION RIGHTS. At any time or from time to time after the Original
Issue Date, Cumulative Preferred Holders may give the Company notice of
intention to require the Company, subject to certain limitations, to redeem
("Put") all or any portion of their Cumulative Preferred Stock (collectively,
"Put Shares"). If a Cumulative Preferred Holder exercises a Put, and if the
Company does not have sufficient surplus to permit it to lawfully purchase all
of the Put Shares subject to any Put under the Delaware General Corporation Law,
the Company shall purchase the Put Shares as soon thereafter as it may lawfully
do so. Upon the Company's default in the redemption of the full amount of Put
Shares subject to an exercised Put, no distribution or dividends (other than
dividends payable in Common Stock or Class B Common Stock) may be made with
respect to other capital stock until such default shall be cured in full. The
Company, pursuant to a certain schedule, may redeem the entire amount or any
part of the shares of issued and outstanding Cumulative Preferred Stock, upon
not less than 60 days' written notice to the Cumulative Preferred Holders
thereof.
LIQUIDATION RIGHTS. In the event of a liquidation, dissolution or winding
up of the Company (hereinafter referred to as "liquidation"), each Cumulative
Preferred Holder is entitled to receive out of
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the assets of the Company or the proceeds thereof, with priority over all
subordinate capital stock, a preferential payment in an amount equal to the par
value for each share of Cumulative Preferred Stock, plus an amount equal to all
unpaid cumulative dividends accrued thereon, but without interest. The
Cumulative Preferred Holders are not, however, entitled to participate in any
further distribution of the assets of the Company or otherwise by reason of
owning Cumulative Preferred Stock. Cumulative Preferred Stock may not be made
subordinate to any other class of capital stock of the Company unless at least
two-thirds of the shares of the Cumulative Preferred Stock then outstanding
permit such action.
TRANSFER RIGHTS. Cumulative Preferred Holders must deliver written notice
("Notice of Transfer") to the principal business office of the Company to the
attention of its Secretary in connection with proposed transfers of Cumulative
Preferred Stock. The Notice of Transfer constitutes an offer to transfer all of
the offered shares to the Company for the same consideration proposed to be
received from a third party.
PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more series as
determined by the Board of Directors. The Board of Directors is authorized to
issue the shares of Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, including dividend rights,
dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares constituting
any series or the designation of such series, without further vote or action by
the stockholders. The issuance of such Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company without
further action by the stockholders and may adversely affect the voting and other
rights of the holders of Common Stock, including the loss of voting control to
others. The Company currently has no plan to issue any shares of such Preferred
Stock.
REGISTRATION RIGHTS
If the Company proposes to register any of its securities, either for its
own account or for the account of other stockholders, the Company is required,
with certain exceptions, to notify stockholders of the Company holding 1,944,276
shares of Common Stock in the aggregate and, subject to certain limitations, to
include in such registration all of the shares of Common Stock requested to be
included by such holders. Registration rights with respect to 1,861,866 shares
of Common Stock terminate on December 31, 1996. The Company is generally
required to pay all the expenses of such registration other than underwriting
discounts and commissions.
DELAWARE ANTI-TAKEOVER LAW
Under Section 203 of the Delaware General Corporation Law (the "Delaware
Anti-Takeover Law"), certain "business combinations" between a Delaware
corporation whose stock generally is publicly traded or held of record by more
than 2,000 stockholders and any person acquiring 15% or more of the voting stock
of such Delaware corporation (an "interested stockholder") are prohibited for a
three-year period following the time that such stockholder became an interested
stockholder, unless (i) either the business combination or the transaction which
resulted in the stockholder becoming an "interested stockholder" was approved by
the board of directors of the corporation prior to the time the other party to
the business combination became an interested stockholder, (ii) upon
consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers and stock held in employee stock plans in
which the employees do not have a right to determine confidentially whether to
tender or vote stock held by the plan), or (iii) the business combination was
approved by the board of directors of the corporation and authorized by 66 2/3%
of the voting stock which the interested stockholder did not own. The
corporation may opt out of the effect of this statement
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by (i) including a provision to such effect in the corporation's original
certificate of incorporation, (ii) amendment to the corporation's bylaws made by
the board of directors within 90 days after the effective date of the statute or
(iii) amendment of the corporation's certificate of incorporation or bylaws
approved by holders of a majority of the shares entitled to vote; provided that
such amendment shall generally not take effect until 12 months after its
adoption and shall not effect any business combination with interested
stockholders which are effected during such 12 months. The three-year
prohibition does not apply to certain business combinations proposed by an
interested stockholder following the announcement or notification of certain
extraordinary transactions involving the corporation and a person who had not
been an interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors. The term "business combination" is defined generally to include
mergers or consolidations between a Delaware corporation and an interested
stockholder, transactions with an interested stockholder involving the assets or
stock of the corporation or its majority-owned subsidiaries and transactions
which increase an interested stockholder's percentage ownership of stock. The
term "interested stockholder" is defined generally as a stockholder who becomes
the beneficial owner of 15% or more of a Delaware corporation's voting stock.
Section 203 could have the effect of delaying, deferring or preventing a change
in control of the Company.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation provides that directors of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of a director's duty of loyalty to the Company or
its stockholders, (ii) for acts of omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law, or (iv) for any transaction from which the
director derives an improper personal benefit. Moreover, the provisions do not
apply to claims against a director for violations of certain laws, including
federal securities laws. If the Delaware General Corporation Law is amended to
authorize the further elimination or limitation of directors' liability, then
the liability of directors of the Company shall automatically be limited to the
fullest extent provided by law. The Company's Bylaws also contain provisions to
indemnify the directors and officers of the Company to the fullest extent
permitted by the Delaware General Corporation Law. In addition, the Company has
entered into indemnification agreements with its current directors. These
provisions and agreements may have the practical effect in certain cases of
eliminating the ability of stockholders to collect monetary damages from
directors. The Company believes that these contractual agreements and the
provisions in its Certificate of Incorporation and Bylaws are necessary to
attract and retain qualified persons as directors and officers.
TRANSFER AGENT
The Transfer Agent for the Common Stock is The Bank of New York.
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CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS OF COMMON STOCK
GENERAL
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a holder who is not a United States person (a "Non-U.S. Holder"), and
who acquires and owns such Common Stock as a capital asset within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"). For
this purpose, the term "Non-U.S. Holder" is defined as any person other than (i)
a citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in the United States or under the laws of the
United States or of any state, or (iii) an estate or trust whose income is
includible in gross income for United States federal income tax purposes,
regardless of its source. This discussion does not consider specific facts and
circumstances that may be relevant to a particular Non-U.S. Holder's tax
position, does not address all aspects of United States federal income and
estate taxes and does not deal with foreign, state and local tax consequences or
United States federal gift taxes that may be relevant to such Non-U.S. Holders
in light of their particular circumstances. Further, it does not discuss the
rules applicable to Non-U.S. Holders subject to special tax treatment under the
federal income tax laws (including, but not limited to, banks and insurance
companies, dealers in securities, and holders of securities held as part of a
"straddle," "hedge," or "conversion transaction"). Furthermore, this discussion
is based on current provisions of the Code, existing and proposed regulations
promulgated thereunder and administrative and judicial interpretations thereof,
all of which are subject to change, possibly on a retroactive basis. Each
prospective purchaser of Common Stock is advised to consult a tax advisor with
respect to current and possible future tax consequences of acquiring, holding,
and disposing of Common Stock.
Proposed United States Treasury Regulations were issued on April 22, 1996
(the "Proposed Regulations") which, if adopted, would affect the United States
taxation of dividends paid to a Non-U.S. Holder on Common Stock. The Proposed
Regulations are generally proposed to be effective with respect to dividends
paid after December 31, 1997, subject to certain transition rules. The
discussion below is not intended to be a complete discussion of the provisions
of the Proposed Regulations, and prospective investors are urged to consult
their tax advisors with respect to the effect the Proposed Regulations would
have if adopted.
An individual may, among other ways, subject to certain exceptions, be
deemed to be a resident alien (as opposed to a nonresident alien) by virtue of
being present in the United States on at least 31 days in the calendar year and
for an aggregate of at least 183 days during a three-year period ending in the
current calendar year (counting, for such purposes, all of the days present in
the current year, one-third of the days present in the immediately preceding
year, and one-sixth of the days present in the second preceding year). Resident
aliens are subject to United States federal income tax as if they were United
States citizens.
DIVIDENDS
In general, dividends paid to a Non-U.S. Holder of Common Stock will be
subject to withholding of United States federal income tax at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty, unless the
dividends are effectively connected with the conduct of a trade or business of
the Non-U.S. Holder within the United States ("United States trade or business
income"). If the dividend is United States trade or business income, the
dividend would be subject to United States federal income tax on a net income
basis at applicable graduated individual or corporate rates and would be exempt
from the 30% withholding tax described above if such holder claims the exemption
from withholding by filing Form 4224 or any successor thereto. Any such
dividends that are United States trade or business income received by a foreign
corporation may, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. Certain
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certification and disclosure requirements must be complied with in order to be
exempt from withholding under the United States trade or business income
exemption discussed above.
Under current United States Treasury regulations, dividends paid to a
stockholder at an address in a foreign country are presumed to be paid to a
resident of such country for purposes of the withholding discussed above (unless
the payor has knowledge to the contrary) and, under the current interpretation
of United States Treasury regulations, for purposes of determining the
applicability of a tax treaty rate, unless an applicable tax treaty requires
some other method for determining a stockholder's residence.
Under the Proposed Regulations, to obtain a reduced rate of withholding
under a treaty, a Non-U.S. Holder would generally be required to provide an
Internal Revenue Service Form W-8 and/or other document certifying such Non-U.S.
Holder's entitlement to benefits under a treaty. The Proposed Regulations would
also provide special rules to determine whether, for purposes of determining the
applicability of a tax treaty, dividends paid to a Non-U.S. Holder that is an
entity should be treated as paid to the entity or those holding an interest in
that entity.
A Non-U.S. Holder of Common Stock eligible for a reduced rate of United
States withholding tax pursuant to a tax treaty or whose dividends have
otherwise been subjected to withholding in an amount which exceeds such holder's
United States federal income tax liability, may obtain a refund or credit of any
excess amounts withheld by filing an appropriate claim for refund with the
United States Internal Revenue Service (the "Service").
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to United States federal
income tax with respect to gain recognized on a sale or other disposition of
Common Stock unless (i) the gain is effectively connected with the conduct of a
trade or business of such holder in the United States, (ii) in the case of a
Non-U.S. Holder who is a nonresident alien individual and who holds the Common
Stock as a capital asset, such holder is present in the United States for 183 or
more days in the taxable year of the sale or other disposition and certain other
conditions are met, (iii) the Non-U.S. Holder is subject to tax pursuant to
provisions of United States tax law that apply to certain expatriates, or (iv)
under certain circumstances if the Company is or has been during certain time
periods a "U.S. real property holding corporation" for United States federal
income tax purposes. The Company is not and does not anticipate becoming a "U.S.
real property holding corporation" for United States federal income tax
purposes.
If an individual Non-U.S. Holder falls under clause (i) above, such person
will be taxed on the net gain derived from the sale under regular graduated
United States federal income tax rates. If the individual falls under clause
(ii) above, such person will be subject to a flat 30% tax on such person's
United States source capital gains for the taxable year which may be offset by
United States source capital losses for such year (notwithstanding the fact that
he is not considered a resident of the United States). Thus, Non-U.S. Holders
who spend 183 days or more in the United States in the taxable year in which
they contemplate a sale of the Common Stock are urged to consult their tax
advisors as to the tax consequences of such sale.
If a Non-U.S. Holder that is a foreign corporation falls under clause (i)
above, it will be taxed on its gain on a net income basis at applicable
graduated corporate rates and, in addition, may be subject to the branch profits
tax equal to 30% of its "effectively connected earnings and profits" within the
meaning of the Code for the taxable year, as adjusted for certain items, unless
it qualifies for a lower rate under an applicable income tax treaty.
Periodically, legislation has been introduced in Congress pursuant to which
the gain from the sale of stock of a domestic corporation by a foreign
corporation or a non-resident alien individual would be considered to be
effectively connected income, if such person owns 10% or more (by vote or value)
of the domestic corporation at any time during the previous five years. It is
not known whether such or similar legislation will be enacted.
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FEDERAL ESTATE TAXES
Common Stock that is owned, or treated as owned, by a non-resident alien
individual (as specifically determined under residence rules for United States
federal estate tax purposes) at the time of death or that has been the subject
of certain lifetime transfers will be included in such holder's gross estate for
United States federal estate tax purposes, unless an applicable estate tax
treaty provides otherwise.
UNITED STATES INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
The Company must report annually to the Service and to each Non-U.S. Holder
the amount of dividends paid to such holder and the amount, if any, tax withheld
with respect to such dividends. These information reporting requirements apply
regardless of whether withholding is required. Copies of the information returns
reporting such dividends and withholding may also be made available, under the
provisions of an applicable treaty or agreement, to the tax authorities in the
country in which such holder resides.
United States backup withholding tax (which generally is a withholding tax
imposed at the rate of thirty-one percent (31%) on certain payments to persons
that fail to furnish certain information under the United States information
reporting requirements) generally will not apply to dividends paid on Common
Stock to a Non-U.S. Holder at an address outside the United States. Except as
provided below, Non-U.S. Holders will not be subject to backup withholding with
respect to the payment of proceeds from the disposition of Common Stock effected
by the foreign office of a broker; except that if the broker is a United States
person or a "U.S. related person," information reporting (but not backup
withholding) is required with respect to the payment, unless the broker has
documentary evidence in its files that the owner is a Non-U.S. Holder (and the
broker has no actual knowledge to the contrary) and certain other requirements
are met or the holder otherwise establishes an exemption. For this purpose, a
"U.S. related person" is (i) a "controlled foreign corporation" for United
States federal income tax purposes, or (ii) a foreign person 50% or more of
whose gross income from all sources for the three-year period ending with the
close of its taxable year preceding the collection or payment of such proceeds
(or for such part of the period that the broker has been in existence) is
derived from activities that are effectively connected with the conduct of a
United States trade or business. The payment of the proceeds of a sale of shares
of Common Stock to or through a United States office of a broker is subject to
information reporting and possible backup withholding unless the owner certifies
its non-United States status under penalties of perjury or otherwise establishes
an exemption. Backup withholding is not an additional tax. Any amounts withheld
under the backup withholding rules from a payment to a Non-U.S. Holder will be
allowed as a refund or a credit against such Non-U.S. Holder's United States
federal income tax liability, provided that the required information is
furnished to the Service.
The Proposed Regulations would, if adopted, alter the foregoing rules in
certain respects. Among other things, the Proposed Regulations would provide
certain presumptions under which a Non-United States Holder would be subject to
backup withholding in the absence of the required certification.
THE FOREGOING DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY.
ACCORDINGLY, EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT WITH HIS TAX ADVISOR
WITH RESPECT TO THE UNITED STATES FEDERAL INCOME TAX AND FEDERAL ESTATE TAX
CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF COMMON STOCK,
INCLUDING THE APPLICATION AND EFFECT OF THE LAWS OF ANY STATE, LOCAL, FOREIGN,
OR OTHER TAXING JURISDICTION.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the Common Stock
of the Company, and no prediction can be made as to the effect, if any, that
market sales of shares or the availability of such shares for sale will have on
the market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock, or the perception that such sales could
occur, could adversely affect prevailing market prices.
Upon completion of this offering, the Company will have shares of
Common Stock outstanding. Of those shares, the shares sold in the offering
will be freely tradeable without restriction (except as to affiliates of the
Company) or further registration under the Securities Act.
The Company, all of the Company's executive officers and directors and
certain other stockholders of the Company, including the Selling Stockholders,
have agreed that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the Underwriters, they will not (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock (provided that such shares or securities are either now owned by
such stockholder or are hereafter acquired prior to or in connection with this
offering) (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise, for a period of 180 days after the date of this Prospectus,
other than (A) the sale to the Underwriters of the shares of Common Stock under
the Underwriting Agreement or (B) the issuance by the Company of shares of
Common Stock upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof of which the Underwriters have been
advised in writing. These individuals and entities collectively hold
shares of Common Stock. Of such shares of Common Stock, approximately
shares of Common Stock held by affiliates will be eligible for sale in the
public market, subject to certain volume and other limitations, days from
the date of this Prospectus pursuant to Rule 144 under the Securities Act.
Certain of the Company's stockholders have the right to include their shares in
any future registration of securities effected by the Company under the
Securities Act. See "Risk Factors--Shares Eligible for Future Sale" and
"Description of Capital Stock--Registration Rights."
In general, under Rule 144 of the Securities Act as currently in effect, a
person (or persons whose shares are aggregated) who has beneficially owned
restricted securities within the meaning of Rule 144 ("Restricted Shares") for
at least two years (including any period of ownership of immediately preceding
non-affiliated holders), would be entitled to sell within any three-month period
a number of shares that does not exceed the greater of one percent of the then
outstanding shares of Common Stock or the average weekly trading volume of the
Common Stock on the National Association of Securities Dealers Automated
Quotation System during the four calendar weeks preceding such sale. Sales under
Rule 144 are also subject to certain manner of sale provisions, notice
requirements and the availability of current public information about the
Company. Any person (or persons whose shares are aggregated) who is not deemed
to have been an affiliate of the Company at any time during the three months
preceding a sale, and who has beneficially owned shares for at least three years
(including any period of ownership of preceding non-affiliated holders), would
be entitled to sell such shares under Rule 144(k) without regard to the volume
limitations, manner of sale provisions, public information requirements or
notice requirements. An "affiliate" is a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such issuer. The Securities and Exchange Commission has
proposed to reduce the holding period requirements of Rule 144 to permit sales
in accordance with such rule after one year and two years, respectively, as
opposed to the two year and three year periods currently permitted, as described
above.
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The Company intends to file registration statements under the Securities Act
registering the 1,900,000 shares of Common Stock reserved for issuance under the
Stock Option Plan and the 180,000 shares of Common Stock reserved for issuance
under the Directors' Plan shortly after the closing of this offering. See
"Management--Stock Options." These registration statements will become effective
automatically upon filing. Accordingly, shares registered under such
registration statements will be available for sale in the open market, unless
such shares are subject to vesting restrictions with the Company or the
contractual restrictions described above.
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UNDERWRITERS
Under the terms and subject to the conditions in the Underwriting Agreement
dated the date of this Prospectus (the "Underwriting Agreement"), the Company
and the Selling Stockholders have agreed to sell [ ] shares of Common Stock
and the U.S. Underwriters named below, for whom Morgan Stanley & Co.
Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Ladenburg,
Thalmann & Co. Inc. are serving as U.S. Representatives, have severally agreed
to purchase, and the International Underwriters named below, for whom Morgan
Stanley & Co. International Limited, Donaldson, Lufkin & Jenrette Securities
Corporation and Ladenburg, Thalmann & Co. Inc. are serving as International
Representatives, have severally agreed to purchase, the respective number of
shares of Common Stock set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated..............................................
Donaldson, Lufkin & Jenrette Securities Corporation............................
Ladenburg, Thalmann & Co. Inc..................................................
----------
Subtotal.....................................................................
International Underwriters:
Morgan Stanley & Co. International Limited.....................................
Donaldson, Lufkin & Jenrette Securities Corporation............................
Ladenburg, Thalmann & Co. Inc..................................................
----------
Subtotal.....................................................................
----------
Total........................................................................ [ ]
----------
----------
</TABLE>
The U.S. Underwriters and the International Underwriters are collectively
referred to as the "Underwriters." The U.S. Representatives and the
International Representatives are collectively referred to as the
"Representatives." The Underwriting Agreement provides that the obligations of
the several Underwriters to pay for and accept delivery of the shares of Common
Stock offered hereby are subject to the approval of certain legal matters by
counsel and to certain other conditions. The Underwriters are obligated to take
and pay for all the shares of Common Stock offered hereby if any such shares are
taken.
Pursuant to the Agreement Between U.S. Underwriters and International
Underwriters, each U.S. Underwriter has represented and agreed that, with
certain exceptions, (a) it is not purchasing any U.S. Shares (as defined below)
being sold by it for the account of anyone other than a United States or
Canadian Person (as defined below) and (b) it has not offered or sold, and will
not offer or sell, directly or indirectly, any U.S. Shares or distribute any
prospectus relating to the U.S. Shares outside the United States or Canada or to
any one other than a United States or Canadian Person. Pursuant to the Agreement
Between U.S. Underwriters and International Underwriters, each International
Underwriter has represented and agreed that, with certain exceptions, (a) it is
not purchasing any International Shares (as defined below) being sold by it for
the account of any United States or Canadian Person and (b) its has not offered
or sold, and will not offer or sell, directly or indirectly, any International
Shares or distribute any prospectus relating to the International Shares within
the United States or Canada or to any United States or Canadian Person. With
respect to any Underwriter that is a U.S. Underwriter and an International
65
<PAGE>
Underwriter, the foregoing representations and agreements (i) made by it in its
capacity as a U.S. Underwriter shall apply only to shares purchased by it in its
capacity as a U.S. Underwriter, (ii) made by it in its capacity as an
International Underwriter shall apply only to shares purchased by it in its
capacity as an International Underwriter, and (iii) do not restrict its ability
to distribute any prospectus relating to the shares of Common Stock to any
person. The foregoing limitations do not apply to stabilization transactions or
to certain other transactions specified in the Agreement Between U.S.
Underwriters and International Underwriters. As used herein, "United States or
Canadian Person" means any national or resident of the United States and Canada
or any corporation, pension, profit-sharing, or other trust or other entity
organized under the laws of the United States or Canada or any political
subdivision thereof (other than a branch located outside the United States and
Canada of any United States or Canadian Person) and includes any United States
or Canadian branch of a person who is otherwise not a United States or Canadian
Person. All shares of Common Stock to be purchased by the U.S. Underwriters and
the International Underwriters under the Underwriting Agreement are referred to
herein as the "U.S. Shares" and the "International Shares," respectively.
Pursuant to the Agreement Between U.S. Underwriters and International
Underwriters, sales may be made between the U.S. Underwriters and International
Underwriters of any number of shares of Common Stock to be purchased pursuant to
the Underwriting Agreement as may be mutually agreed. The per share price of any
shares so sold shall be the Price to Public set forth on the cover page hereof,
in United States dollars, less an amount not greater than the per share amount
of the concession to dealers set forth below.
Pursuant to the Agreement Between U.S. Underwriters and International
Underwriters, each U.S. Underwriter has represented that it has not offered or
sold, and has agreed not to offer or sell, any shares of Common Stock, directly
or indirectly, in any province or territory of Canada or to, or for the benefit
of, any resident of any province or territory of Canada in contravention of the
securities laws thereof and has represented that any offer of shares of Common
Stock in Canada will be made only pursuant to an exemption from the requirement
to file a prospectus in the province or territory of Canada in which such offer
is made. Each U.S. Underwriter has further agreed to send to any dealer who
purchases from it any shares of Common Stock a notice stating in substance that,
by purchasing such shares of Common Stock, such dealer represents and agrees
that it has not offered or sold, and will not offer or sell, directly or
indirectly, any such shares of Common Stock in any province or territory of
Canada or to, or for the benefit of, any resident of any province of territory
of Canada in contravention of the securities laws thereof and that any offer of
shares of Common Stock in Canada will be made only pursuant to an exemption from
the requirement to file a prospectus in the province or territory of Canada in
which such offer is made, and that such dealer will deliver to any other dealer
to whom it sells any of such shares of Common Stock a notice to the foregoing
effect.
Pursuant to the Agreement Between U.S. Underwriters and International
Underwriters, each International Underwriter has represented and agreed that (a)
it has not offered or sold, during the period of six months from the date
hereof, and will not offer or sell any shares of Common Stock in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing, or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulation (1995) (the
"Regulations"); (b) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 and the Regulations with respect
to anything done by it in relation to the shares of Common Stock offered hereby
in, from, or otherwise involving the United Kingdom; and (c) it has only issued
or passed on and will only issue or pass on to any person in the United Kingdom
any document received by it in connection with the issue of the shares of Common
Stock, if that person is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements)(Exemptions) Order 1995, or is a
person to whom such document may lawfully be issued or passed on.
66
<PAGE>
Pursuant to the Agreement Between U.S. Underwriters and International
Underwriters, each International Underwriter has represented and agreed that it
has not offered or sold, and agrees not to offer or sell, directly or
indirectly, in Japan or to or for the account of any resident thereof, any of
the shares of Common Stock acquired in connection with the distribution
contemplated hereby, except for offers or sales to Japanese International
Underwriters or dealers and except pursuant to any exemption from the
registration requirements of the Securities and Exchange Law or any other
relevant laws and regulations of Japan. Each International Underwriter further
agrees to send to any dealer who purchases from it any of the shares of Common
Stock a notice stating in substance that, by purchasing such shares, such dealer
represents and agrees that it has not offered or sold, and will not offer or
sell any of such shares, directly or indirectly in Japan or to or for the
account of any resident thereof except for offers or sales to Japanese
Underwriters or dealers and except pursuant to any exemption from the
registration requirements of the Securities and Exchange Law and any other
relevant laws and regulations of Japan. Each International Underwriter further
agrees to send to any dealer who purchases from it any of the shares of Common
Stock a notice stating in substance that, by purchasing such shares, such dealer
represents and agrees that it has not offered or sold, and will not offer or
sell any of such shares, directly or indirectly in Japan or to or for the
account of any resident thereof except for offers or sales to Japanese
Underwriters or dealers and except pursuant to any exemption from the
registration requirements of the Securities and Exchange Law of Japan, and that
such dealer will send to any other dealer to whom it sells any of such shares of
Common Stock a notice containing substantially the same statement as contained
in the foregoing.
The Underwriters propose to offer part of the shares of Common Stock offered
hereby directly to the public at the initial public offering price set forth on
the cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $ a share below the initial public offering
price. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $ a share to other Underwriters or to certain dealers.
The Company has granted to the U.S. Underwriters an option, exercisable for
30 days from the date of this Prospectus, to purchase up to [ ] additional
shares of Common Stock at the initial public offering price set forth on the
cover page hereof, less underwriting discounts and commissions. The U.S.
Underwriters may exercise such option to purchase solely for the purpose of
covering over-allotments, if any, made in connection with this offering.
The Representatives of the Underwriters have informed the Company that the
Underwriters do not intend sales to discretionary accounts to exceed five
percent of the total number of shares of Common Stock offered by them.
The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act of 1933, as amended.
At the request of the Company, the Underwriters have reserved for sale, at
the initial public offering price, up to shares offered hereby for
directors, officers, employees, business associates and related persons of the
Company. The number of shares of Common Stock available for sale to the general
public will be reduced to the extent such persons purchase such reserved shares.
Any reserved shares which are not so purchased will be offered by the
Underwriters to the general public on the same basis as the other shares offered
hereby.
The Company, all of the Company's executive officers and directors and
certain other stockholders of the Company, including the Selling Stockholders,
have agreed that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the Underwriters, they will not (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock (provided that such shares or securities are either now owned by
such stockholder or are hereafter acquired prior to or in connection with this
offering), or (ii) enter into any swap or other arrangement that
67
<PAGE>
transfers to another, in whole or in part, any of the economic consequences of
ownership of the Common Stock, whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise, for a period of 180 days after the date of
this Prospectus, other than (A) the sale to the Underwriters of the shares of
Common Stock under the Underwriting Agreement or (B) the issuance by the Company
of shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof of which the
Underwriters have been advised in writing.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the shares of
Common Stock of the Company. Consequently, the initial public offering price
will be determined by negotiation among the Company, the Selling Stockholders
and the Representatives. Among the factors contained in determining the initial
public offering price will be the Company's record of operations, the Company's
current financial condition and future prospects, the experience of its
management, the economics of the industry in general, the general condition of
the equity securities market and the market price of similar securities of
companies considered comparable to the Company. There can be no assurance that a
regular trading market for the shares of Common Stock will develop after the
offering or, if developed, that a public trading market can be sustained. There
can also be no assurance that the prices at which the Common Stock will sell in
the public market after the offering will not be lower than the price at which
it is issued by the Underwriters in the offering.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholders by Fulbright & Jaworski
L.L.P., 666 Fifth Avenue, New York, New York 10103. Certain legal matters will
be passed upon for the Underwriters by Davis Polk & Wardwell.
EXPERTS
The consolidated financial statements and schedule of TMP Worldwide Inc. and
Subsidiaries and the financial statements of Rogers & Associates Advertising,
Inc. included in this Prospectus and in the Registration Statement have been
audited by BDO Seidman, LLP, independent certified public accountants, and the
consolidated financial statements of Neville Jeffress Australia Pty Limited and
Subsidiaries included in this Prospectus and in the Registration Statement have
been audited by BDO Nelson Parkhill, independent auditors, to the extent and for
the periods set forth in their reports appearing elsewhere in this Prospectus
and in the Registration Statement, and are included in reliance upon such
reports given upon the authority of such firms as experts in auditing and
accounting.
68
<PAGE>
ADDITIONAL INFORMATION
A Registration Statement on Form S-1 relating to the Common Stock offered
hereby has been filed by the Company with the Securities and Exchange Commission
(the "Commission"). This Prospectus, which is part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement and the exhibits and schedules thereto, certain items of which are
omitted as permitted by the rules and regulations of the Commission. Statements
contained in this Prospectus as to the contents of any contract or any other
document referred to are not necessarily complete and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference. For further information with respect to the Company and the
Common Stock offered hereby, reference is hereby made to the Registration
Statement and to the financial statements, exhibits and schedules thereto. The
Registration Statement may be inspected without charge and may be obtained at
prescribed rates at the Public Reference Section of the Commission, maintained
by the Commission at its principal office located at 450 Fifth Street, N.W.,
Washington, D.C. 20549, the New York Regional Office located at 7 World Trade
Center, New York, New York 10048, and the Chicago Regional Office located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661.
The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
69
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
TMP WORLDWIDE INC. AND SUBSIDIARIES
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS....................................................... F-2
CONSOLIDATED FINANCIAL STATEMENTS:
Balance sheets as of December 31, 1994 and 1995 and
June 30, 1996 (unaudited)............................................................................ F-3
Statements of operations for the years ended December 31, 1993, 1994 and 1995
and for the six months ended June 30, 1995 and 1996 (unaudited)...................................... F-4
Statements of stockholders' deficit for the years ended December 31, 1993, 1994 and 1995
and for the six months ended June 30, 1996 (unaudited)............................................... F-5
Statements of cash flows for the years ended December 31, 1993, 1994 and 1995 and
for the six months ended June 30, 1995 and 1996 (unaudited).......................................... F-6
Notes to consolidated financial statements............................................................. F-7
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT............................................................................. F-23
CONSOLIDATED FINANCIAL STATEMENTS:
Balance sheets as of June 30, 1995 and March 31, 1996 (unaudited)...................................... F-24
Statements of profit and loss for the year ended June 30, 1995 and the nine months
ended March 31, 1995 and 1996 (unaudited)............................................................ F-25
Statements of shareholders' equity for the year ended June 30, 1995 and the nine months
ended March 31, 1996 (unaudited)..................................................................... F-26
Statements of cash flows for the year ended June 30, 1995 and the nine months
ended March 31, 1995 and 1996 (unaudited)............................................................ F-27
Summary of accounting policies......................................................................... F-28
Notes to consolidated financial statements............................................................. F-32
ROGERS & ASSOCIATES ADVERTISING, INC.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS....................................................... F-44
FINANCIAL STATEMENTS:
Statements of operations for the year ended March 31, 1994 and the nine months
ended December 31, 1994.............................................................................. F-45
Statements of cash flows for the year ended March 31, 1994 and the nine months
ended December 31, 1994.............................................................................. F-46
Notes to financial statements.......................................................................... F-47
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
[THE FOLLOWING IS THE FORM OF OPINION THAT BDO SEIDMAN, LLP WILL BE IN A
POSITION TO ISSUE UPON THE CONSUMMATION OF THE MERGERS DISCUSSED IN NOTE 1 AND
THE STOCK ISSUANCE DISCUSSED IN NOTE 2]
TMP Worldwide Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of TMP
Worldwide Inc. and Subsidiaries as of December 31, 1994 and 1995, and the
related consolidated statements of operations, stockholders' deficit, and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of TMP
Worldwide Inc. and Subsidiaries as of December 31, 1994 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
BDO SEIDMAN, LLP
New York, New York
March 15, 1996, except for Note 15(b)
which is as of July 24, 1996,
Note 15(c) which is as of July 29, 1996,
Note 15(d) which is as of August 1, 1996,
Note 6 which is as of August 29, 1996 and
Notes 1 and 2 which are as of October , 1996
F-2
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1995
---------- ---------- JUNE 30,
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................. $ 2,359 $ 2,719 $ 4,122
Accounts receivable, net.................................................. 117,938 155,720 164,448
Work-in-process........................................................... 11,710 13,220 14,707
Assets held for sale...................................................... -- 5,735 2,878
Prepaid and other......................................................... 2,306 3,122 4,115
---------- ---------- -----------
Total current assets.................................................. 134,313 180,516 190,270
Receivable from principal stockholder....................................... 8,188 6,530 9,136
Property and equipment, net................................................. 15,392 11,937 13,815
Deferred income taxes....................................................... 10,962 9,474 8,877
Intangibles, net of accumulated amortization of $7,670, $10,073 and $12,052,
respectively.............................................................. 25,263 46,837 51,505
Other assets................................................................ 4,847 2,800 5,048
---------- ---------- -----------
$ 198,965 $ 258,094 $ 278,651
---------- ---------- -----------
---------- ---------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.......................................................... $ 123,991 $ 151,680 $ 172,120
Accrued expenses and other liabilities.................................... 11,018 13,336 13,433
Deferred income taxes..................................................... 7,905 9,422 9,902
Current portion of long-term debt......................................... 3,210 11,809 8,669
---------- ---------- -----------
Total current liabilities............................................. 146,124 186,247 204,124
Long-term debt, less current portion........................................ 72,008 88,070 88,204
---------- ---------- -----------
Total liabilities..................................................... 218,132 274,317 292,328
---------- ---------- -----------
Minority interests.......................................................... 3,153 3,105 3,174
---------- ---------- -----------
Redeemable preferred stock.................................................. 2,000 2,000 2,000
---------- ---------- -----------
Redeemable common stock, 283,521 shares outstanding......................... -- -- 2,227
---------- ---------- -----------
Commitments and contingencies...............................................
Stockholders' deficit:
Preferred stock, $.001 par value, authorized 800,000 shares; issued and
outstanding--none....................................................... -- -- --
Common stock, $.001 par value, authorized 200,000,000 shares; issued and
outstanding--4,276,869, 4,276,869 and 4,023,735 shares, respectively.... 4 4 4
Class B common stock, $.001 par value, authorized 39,000,000 shares;
issued and outstanding--14,787,540 shares............................... 15 15 15
Additional paid-in capital................................................ 655 655 675
Foreign currency translation adjustment................................... 2 (25) 81
Deficit................................................................... (24,996) (21,977) (21,853)
---------- ---------- -----------
Total stockholders' deficit........................................... (24,320) (21,328) (21,078)
---------- ---------- -----------
$ 198,965 $ 258,094 $ 278,651
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1996
------------ ------------ ------------ ------------ ------------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Commissions and fees....................... $ 73,791 $ 86,165 $ 123,907 $ 57,462 $ 70,663
------------ ------------ ------------ ------------ ------------
Operating expenses:
Salaries and related costs............... 37,747 45,758 58,329 27,086 35,561
Office and general....................... 29,824 30,316 43,432 20,061 26,337
Amortization of intangibles.............. 2,471 3,264 3,237 1,518 2,013
Restructuring charges.................... 1,318 -- -- -- --
------------ ------------ ------------ ------------ ------------
Total operating expenses............... 71,360 79,338 104,998 48,665 63,911
------------ ------------ ------------ ------------ ------------
Operating income....................... 2,431 6,827 18,909 8,797 6,752
------------ ------------ ------------ ------------ ------------
Other income (expense):
Interest expense......................... (7,952) (9,434) (11,249) (5,208) (6,035)
Interest income.......................... 300 256 355 75 202
Other, net............................... (386) (146) 150 29 450
------------ ------------ ------------ ------------ ------------
(8,038) (9,324) (10,744) (5,104) (5,383)
------------ ------------ ------------ ------------ ------------
Income (loss) before provision (benefit)
for income taxes, minority interests and
equity in earnings (losses) of
affiliates............................... (5,607) (2,497) 8,165 3,693 1,369
Provision (benefit) for income taxes....... (1,322) (333) 4,222 1,772 930
------------ ------------ ------------ ------------ ------------
Income (loss) before minority interests and
equity in earnings (losses) of
affiliates............................... (4,285) (2,164) 3,943 1,921 439
Minority interests......................... 351 336 435 211 226
Equity in earnings (losses) of affiliates.. 10 33 (279) (141) 16
------------ ------------ ------------ ------------ ------------
Net income (loss).......................... (4,626) (2,467) 3,229 1,569 229
Preferred stock dividends.................. (210) (210) (210) (105) (105)
------------ ------------ ------------ ------------ ------------
Net income (loss) applicable to common and
Class B common stockholders.............. $ (4,836) $ (2,677) $ 3,019 $ 1,464 $ 124
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Net income (loss) per common and Class B
common share............................. $ (.27) $ (.14) $ .15 $ .08 $ .01
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Weighted average number of common,
Class B common and common equivalent
shares
outstanding.............................. 17,775,525 19,230,022 19,517,956 19,517,956 19,638,176
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CLASS B
COMMON STOCK, $.001 COMMON STOCK, FOREIGN
PAR VALUE $.001 PAR VALUE CURRENCY
---------------------- ---------------------- ADDITIONAL TRANSLATION
SHARES AMOUNT SHARES AMOUNT PAID-IN CAPITAL ADJUSTMENT DEFICIT
--------- ----------- --------- ----------- --------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1993............ 2,439,609 $ 2 14,787,540 $ 15 $ -- $ (32) $ (16,595)
Issuance of warrant................. -- -- -- -- 600 -- --
Sale of common stock................ 1,837,260 2 -- -- -- -- --
Repurchase of common stock.......... -- -- -- -- -- -- (888)
Foreign currency translation
adjustment........................ -- -- -- -- -- 308 --
Dividends on preferred stock........ -- -- -- -- -- -- (210)
Net loss............................ -- -- -- -- -- -- (4,626)
--------- --- --------- --- ------- ----- ---------
BALANCE, December 31, 1993.......... 4,276,869 4 14,787,540 15 600 276 (22,319)
374,940 shares of common stock given
to employees by principal
stockholder as compensation....... -- -- -- -- 55 -- --
Foreign currency translation
adjustment........................ -- -- -- -- -- (274) --
Dividends on preferred stock........ -- -- -- -- -- -- (210)
Net loss............................ -- -- -- -- -- -- (2,467)
--------- --- --------- --- ------- ----- ---------
BALANCE, December 31, 1994.......... 4,276,869 4 14,787,540 15 655 2 (24,996)
Foreign currency translation
adjustment........................ -- -- -- -- -- (27) --
Dividends on preferred stock........ -- -- -- -- -- -- (210)
Net income.......................... -- -- -- -- -- -- 3,229
--------- --- --------- --- ------- ----- ---------
BALANCE, December 31, 1995.......... 4,276,869 4 14,787,540 15 655 (25) (21,977)
Stock repurchase agreements
(unaudited)....................... -- -- -- -- 1,172 -- --
Issuance of shares for purchase of
minority interest in subsidiary
(unaudited)....................... 159,231 -- -- -- 1,055 -- --
Reclassification of redeemable
common stock (unaudited).......... (283,521) -- -- -- (2,227) -- --
Issuance of shares as compensation
(unaudited)....................... 142,740 -- -- -- 20 -- --
Repurchase and cancellation of com-
mon stock (unaudited)............. (271,584) -- -- -- -- -- --
Foreign currency translation
adjustment (unaudited)............ -- -- -- -- -- 106 --
Dividends on preferred stock
(unaudited)....................... -- -- -- -- -- -- (105)
Net income (unaudited).............. -- -- -- -- -- -- 229
--------- --- --------- --- ------- ----- ---------
BALANCE, June 30, 1996 (unaudited).. 4,023,735 $ 4 14,787,540 $ 15 $ 675 $ 81 $ (21,853)
--------- --- --------- --- ------- ----- ---------
--------- --- --------- --- ------- ----- ---------
<CAPTION>
TOTAL
STOCKHOLDERS'
DEFICIT
-------------
<S> <C>
BALANCE, January 1, 1993............ $ (16,610)
Issuance of warrant................. 600
Sale of common stock................ 2
Repurchase of common stock.......... (888)
Foreign currency translation
adjustment........................ 308
Dividends on preferred stock........ (210)
Net loss............................ (4,626)
-------------
BALANCE, December 31, 1993.......... (21,424)
374,940 shares of common stock given
to employees by principal
stockholder as compensation....... 55
Foreign currency translation
adjustment........................ (274)
Dividends on preferred stock........ (210)
Net loss............................ (2,467)
-------------
BALANCE, December 31, 1994.......... (24,320)
Foreign currency translation
adjustment........................ (27)
Dividends on preferred stock........ (210)
Net income.......................... 3,229
-------------
BALANCE, December 31, 1995.......... (21,328)
Stock repurchase agreements
(unaudited)....................... 1,172
Issuance of shares for purchase of
minority interest in subsidiary
(unaudited)....................... 1,055
Reclassification of redeemable
common stock (unaudited).......... (2,227)
Issuance of shares as compensation
(unaudited)....................... 20
Repurchase and cancellation of com-
mon stock (unaudited)............. --
Foreign currency translation
adjustment (unaudited)............ 106
Dividends on preferred stock
(unaudited)....................... (105)
Net income (unaudited).............. 229
-------------
BALANCE, June 30, 1996 (unaudited).. $ (21,078)
-------------
-------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- ---------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1996
--------- ---------- --------- --------- ----------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ (4,626) $ (2,467) $ 3,229 $ 1,569 $ 229
--------- ---------- --------- --------- ----------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization of property and
equipment............................................. 2,157 2,940 3,396 1,471 2,036
Amortization of intangibles............................. 2,471 3,264 3,237 1,518 2,013
Provision for doubtful accounts......................... 1,744 793 2,850 1,192 1,993
Minority interests...................................... 351 336 435 211 226
Provision (benefit) for deferred income taxes........... (1,430) (987) 3,005 1,105 1,078
Other................................................... 446 154 522 (7) 151
Changes in assets and liabilities, net of effects from
purchase of businesses:
Increase in accounts receivable, net................ (10,367) (11,630) (30,256) (18,622) (6,496)
(Increase) in work-in-process....................... (1,486) (1,269) (1,510) (1,337) (1,063)
(Increase) decrease in prepaid and other............ (1,342) 1,820 (425) (1,293) 43
(Increase) decrease in other assets................. (378) (70) 430 374 (326)
Increase (decrease) in accounts payable and accrued
liabilities....................................... 10,139 (3,812) 21,793 18,607 18,640
--------- ---------- --------- --------- ----------
Total adjustments....................................... 2,305 (8,461) 3,477 3,219 18,295
--------- ---------- --------- --------- ----------
Net cash provided by (used in) operating activities..... (2,321) (10,928) 6,706 4,788 18,524
--------- ---------- --------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (480) (4,946) (4,954) (2,361) (3,429)
Payments for purchases of businesses, net of cash
acquired................................................ (973) (6,327) (11,324) (8,689) (4,037)
Proceeds from sale of assets.............................. -- 1,949 7 (978) 3,347
Advances to and investments in affiliates................. 320 842 835 64 (443)
--------- ---------- --------- --------- ----------
Net cash used in investing activities..................... (1,133) (8,482) (15,436) (11,964) (4,562)
--------- ---------- --------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capitalized leases............................ (736) (739) (1,064) (564) (434)
(Advances to) repayments from principal stockholder,
net..................................................... (3,209) (3,720) 1,658 (316) (2,606)
Net borrowings (repayments) under line of credit and other
increases in long-term debt............................. 7,056 26,264 12,920 6,507 (925)
Principal payments on long-term debt...................... (1,147) (2,052) (3,731) (899) (8,332)
Distribution to Minority Interests........................ (591) (304) (483) (175) (157)
Dividends on preferred stock.............................. (210) (210) (210) (105) (105)
--------- ---------- --------- --------- ----------
Net cash provided by (used in) financing activities....... 1,163 19,239 9,090 4,448 (12,559)
--------- ---------- --------- --------- ----------
Net increase (decrease) in cash and cash equivalents...... (2,291) (171) 360 (2,728) 1,403
Cash and cash equivalents, beginning of period............ 4,821 2,530 2,359 2,359 2,719
--------- ---------- --------- --------- ----------
Cash and cash equivalents, end of period.................. $ 2,530 $ 2,359 $ 2,719 $ (369) $ 4,122
--------- ---------- --------- --------- ----------
--------- ---------- --------- --------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
(INFORMATION RELATED TO THE SIX MONTHS ENDED JUNE 30, 1995 AND
SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION
TMP Worldwide Inc. (the "Company") is the successor to businesses formerly
conducted by TMP Worldwide Inc. and subsidiaries ("Old TMP"), Worldwide
Classified Inc. and subsidiaries ("WCI"), McKelvey Enterprises, Inc. and
subsidiaries ("MEI") and certain other entities under the control of Andrew J.
McKelvey (the "Principal Stockholder").
WCI was organized in 1993 to sell recruitment advertising. Immediately prior
to the effectiveness of this offering, Old TMP, which sells yellow page
advertising, will merge into MEI. Thereafter, WCI will merge into MEI, MEI will
merge into Telephone Marketing Programs Incorporated and MEI will acquire the
outstanding minority interest of a subsidiary (the "Mergers"). The minority
stockholders of Old TMP had received compensation in lieu of their share of
earnings of the Company and WCI and the MEI subsidiary had cumulative losses.
Accordingly, no amounts were attributable to these minority interests in the
accompanying consolidated financial statements.
Due to the common control of these companies by the Principal Stockholder,
the Mergers have been accounted for in a manner similar to a
pooling-of-interests, and upon the consummation of the Mergers, (i) goodwill in
the amount of approximately $2 million will be recorded on the exchange of the
shares of the Old TMP minority stockholders who were considered to have a
substantive investment and (ii) special management compensation in the amount of
approximately $54 million will be recorded on the exchange of the shares of the
Old TMP, WCI and the MEI subsidiary stockholders who were not considered to have
made substantive investments for their minority shares.
The accompanying consolidated financial statements reflect the shares of the
Company that will be outstanding after the Mergers.
In addition, in 1996, the Principal Stockholder, sold or contributed to the
Company his majority interests, and in one case a 49% interest, in five
companies primarily engaged in yellow page and Internet-based advertising. Due
to the element of common control of these companies, all of these transactions
have been accounted for in a manner similar to a pooling-of-interests and each
of the five companies has been included in the accompanying consolidated
financial statements from their respective dates of acquisition by the Principal
Stockholder. Pursuant to the Mergers, Telephone Marketing Programs Incorporated
will change its name to TMP Worldwide Inc.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and all of its wholly-owned and majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Investments in unconsolidated affiliates are accounted for using the equity
method when the Company owns at least 20% but no more than 50% of such
affiliates. Under the equity method, the Company records its proportionate share
of profits and losses based on its percentage interest in earnings of companies
50% or less owned.
F-7
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
(INFORMATION RELATED TO THE SIX MONTHS ENDED JUNE 30, 1995 AND
SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed
primarily using the straight-line method over the following estimated useful
lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements............................................................. 32
Furniture and equipment................................................................ 5-7
Transportation equipment............................................................... 5-18
</TABLE>
Leasehold improvements are amortized over their estimated useful lives or
the lives of the related leases, whichever is shorter.
INTANGIBLES
Intangibles represent acquisition costs in excess of the fair value of net
tangible assets of businesses purchased and consist primarily of the value of
ongoing client relationships and goodwill. These costs are being amortized over
periods ranging from five to thirty years on a straight-line basis. Intangibles
are evaluated for impairment when events or changes in circumstances indicate
that the carrying amounts of the assets may not be recoverable through the
estimated undiscounted future cash flows resulting from the use of these assets.
When any such impairment exists, the related assets will be written down to fair
value. This policy is in accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which is effective for fiscal years beginning after December 15, 1995. Adoption
of this pronouncement did not have a material impact on the financial
statements.
FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
The financial position and results of operations of the Company's foreign
subsidiaries (which are not material) are determined using local currency as the
functional currency. Assets and liabilities of these subsidiaries are translated
at the exchange rate in effect at each year-end. Income statement accounts are
translated at the average rate of exchange prevailing during the year.
Translation adjustments arising from the use of differing exchange rates from
period to period are included in the cumulative translation adjustment account
in stockholders' deficit. Gains and losses resulting from foreign currency
transactions are included in other income (expense).
F-8
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
(INFORMATION RELATED TO THE SIX MONTHS ENDED JUNE 30, 1995 AND
SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
Substantially all revenues are derived from commissions for advertisements
placed in telephone directories, newspapers and other media, plus associated
fees for related services. In addition, the Company earns fees for the placement
of advertisements on the Internet, including its career Web sites. Commissions
and fees are generally recognized upon placement date for newspapers and other
media and on publication close date for yellow page advertisements.
Direct expenses incurred that relate to future revenue, principally for
yellow page advertisements, are deferred (recorded as work-in-process in the
accompanying consolidated balance sheets) and are subsequently charged to
expense when the directories are closed for publication and the related
commission is recognized as income.
INCOME TAXES
The provision (benefit) for income taxes is computed on the pretax income
(loss) based on the current tax law. Deferred income taxes are recognized for
the tax consequences in future years of differences between the tax basis of
assets and liabilities and their financial reporting amounts at each year-end
based on enacted tax laws and statutory tax rates.
NATURE OF BUSINESS AND CREDIT RISK
The Company operates in one business segment and primarily earns commission
income for selling and placing yellow page and recruitment advertising to a
large number of customers in many different industries, principally throughout
North America. Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily accounts receivable. The Company
performs continuing credit evaluations of its customers and does not require
collateral. For the most part, the Company has not experienced significant
losses related to receivables from individual customers or groups of customers
in any particular industry or geographic area.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the consolidated balance sheets for cash
and cash equivalents, accounts receivable, miscellaneous receivables, accounts
payable and accrued expenses and other liabilities approximate fair value
because of the immediate or short-term maturity of these financial instruments.
The carrying amount reported for long-term debt approximates fair value because,
in general, the interest on the underlying instruments fluctuates with market
rates. The carrying amounts for minority interests and redeemable preferred
stock approximate fair value based on appraisals in prior periods. The fair
values of the receivable from the Principal Stockholder and redeemable common
stock cannot be determined.
F-9
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
(INFORMATION RELATED TO THE SIX MONTHS ENDED JUNE 30, 1995 AND
SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation". The Company has determined that it will continue to account for
employee stock-based compensation under Accounting Principles Board No. 25 and
elect the disclosure-only alternative under SFAS No. 123. The Company will be
required to disclose the pro forma net income or loss and per share amounts in
the notes to consolidated financial statements using the fair value based method
beginning in 1996. The Company has not determined the impact of these pro forma
adjustments.
EARNINGS PER SHARE OF COMMON AND CLASS B COMMON STOCK
Net income (loss) per common and Class B common share is computed using the
weighted average number of common, Class B common and common equivalent shares
outstanding, after reflecting the issuance of shares pursuant to the Mergers
immediately prior to this offering. Common equivalent shares from stock options
and warrants are excluded from the computation if their effect is antidilutive,
except that, pursuant to the Securities and Exchange Staff Accounting Bulletins,
common and common equivalent shares issued at prices below the public offering
price during the twelve months immediately preceding the initial filing date
have been included in the calculation as if they were outstanding for all
periods presented using the treasury stock method and the assumed initial public
offering price of $[ ].
SUPPLEMENTAL EARNINGS PER SHARE
Supplemental net income per common and Class B common share for the year
ended December 31, 1995 was $ . For this calculation, the weighted
average number of common and Class B common shares includes the shares assumed
to provide the proceeds, at the assumed initial public offering price of
$[ ], needed to retire average borrowings outstanding under the Company's
financing agreement and debt for the period from the beginning of the year (or
the date the debt was incurred) to the respective retirement date, and the net
income was adjusted to exclude the related financing and interest expenses of
the debt.
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of the Company's management, the consolidated balance sheet
as of June 30, 1996, the consolidated statements of operations and cash flows
for the six months ended June 30, 1995 and 1996, and the consolidated statement
of stockholders' deficit for the six months ended June 30, 1996 contain all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the information set forth therein. The results of operations for
the six months ended June 30, 1996 are not necessarily indicative of the results
for any other period.
STATEMENTS OF CASH FLOWS
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments and other short-term investments
with an initial maturity of three months or less to be
F-10
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
(INFORMATION RELATED TO THE SIX MONTHS ENDED JUNE 30, 1995 AND
SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
cash equivalents. The Company has determined that the effect of foreign exchange
rate changes on cash flows is not material.
NOTE 3 -- ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Trade........................................................................ $ 108,056 $ 146,002 $ 153,966
Earned commissions (A)....................................................... 11,900 13,583 14,358
---------- ---------- ----------
119,956 159,585 168,324
Less: Allowance for doubtful accounts........................................ 2,018 3,865 3,876
---------- ---------- ----------
Accounts receivable, net................................................... $ 117,938 $ 155,720 $ 164,448
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
- ------------------------
(A) Earned commissions receivable represent commissions on advertisements that
have not been published, and relate to yellow page advertisements only. Upon
publication of the related yellow page directories, the earned commissions
plus the related advertising cost at December 31, 1994 and 1995 and June 30,
1996 are recorded as accounts receivable of $63,049, $75,161 and $77,792,
respectively, and the related advertising costs are recorded as accounts
payable of $51,149, $61,578 and $63,434, respectively.
NOTE 4 -- PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Buildings and improvements....................................................... $ 969 $ 881 $ 885
Furniture and equipment.......................................................... 22,080 25,028 30,270
Leasehold improvements........................................................... 2,524 3,027 3,195
Transportation equipment (see below)............................................. 5,643 226 436
--------- --------- ---------
31,216 29,162 34,786
Less: Accumulated depreciation and amortization.................................. 15,824 17,225 20,971
--------- --------- ---------
Property and equipment, net.................................................... $ 15,392 $ 11,937 $ 13,815
--------- --------- ---------
--------- --------- ---------
</TABLE>
Furniture and equipment includes equipment under capital leases at December
31, 1994 and 1995 and June 30, 1996 with a cost of $3,001, $3,637, and $4,927,
respectively, and accumulated amortization of $1,578, $2,063 and $2,427,
respectively.
F-11
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
(INFORMATION RELATED TO THE SIX MONTHS ENDED JUNE 30, 1995 AND
SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 4 -- PROPERTY AND EQUIPMENT, NET (CONTINUED)
Assets held for sale of $5,735 and $2,878 at December 31, 1995 and June 30,
1996, respectively, represents certain transportation equipment, part of which
was sold during May 1996 to a third party for a $464 gain which is included in
Other, net in the consolidated statement of operations for the six months ended
June 30, 1996, and the balance of which will be purchased by the Principal
Stockholder at net book value upon the closing of this offering.
NOTE 5 -- BUSINESS ACQUISITIONS
The Company has acquired 31 businesses (primarily recruitment and
Internet-based advertising businesses) between January 1, 1993 and June 30,
1996. The total amount of cash paid and promissory notes issued for these
acquisitions was approximately $8,743, $12,230 and $26,709 during 1993, 1994 and
1995, respectively, and $4,658 during the six months ended June 30, 1996. These
acquisitions have been accounted for under the purchase method. Accordingly,
operations of these businesses have been included in the consolidated financial
statements from their acquisition dates.
The summarized unaudited pro forma results of operations set forth below for
1994 and 1995 assume the acquisitions in 1994 and 1995 occurred as of January 1,
1994.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
<S> <C> <C>
1994 1995
---------- ----------
Commissions and fees............................................. $ 100,353 $ 128,520
Net income (loss) applicable to common stockholders.............. (3,286) 2,853
Net income (loss) per common share............................... (.17) .15
</TABLE>
On July 2, 1996, the Company acquired all of the outstanding shares of
Neville Jeffress Australia Pty Limited ("Neville Jeffress"). Neville Jeffress
had commissions and fees of approximately $17,000 for the year ended June 30,
1995. In addition, as of August 31, 1996, the Company has also acquired two and
entered into agreements to acquire or is probable of acquiring a majority
interest in five other unrelated companies, primarily engaged in recruitment
advertising, which had aggregate annual commissions and fees of approximately
$9,000. The aggregate purchase price for these acquisitions and Neville Jeffress
is expected to be approximately $22,000, payable $18,000 in cash and $4,000 in
notes.
These acquisitions will be accounted for using the purchase method of
accounting. The excess of the acquisition costs over the fair value of net
tangible assets acquired, which is expected to be approximately $21,200, will be
amortized on a straight-line basis over 30 years.
NOTE 6 -- FINANCING AGREEMENT
The Company obtains its financing from a financial institution under a
five-year financing agreement as amended and restated on June 27, 1996, and as
further amended on August 29, 1996, with automatic one-year extensions unless
terminated by either party at least 90 days prior to expiration of the initial
term or any renewal term (the "Agreement"). The Agreement provides for
borrowings of up to $100,000 at an interest rate of either: (a) prime rate or
1/2% over the Federal Funds Rate, whichever is higher, less 1% to plus 1% as
determined under the Agreement; or (b) LIBOR, plus 1 1/2% to 3 1/2% as
determined under the
F-12
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
(INFORMATION RELATED TO THE SIX MONTHS ENDED JUNE 30, 1995 AND
SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 6 -- FINANCING AGREEMENT (CONTINUED)
Agreement; at the borrower's option. Borrowings under the Agreement are based on
90% of eligible accounts receivable, which are amounts billed under 120 days old
and amounts to be billed on an installment basis under 360 days old from first
installment billing, as defined. Substantially all assets of the Company are
pledged as collateral for borrowings under the Agreement. The Agreement contains
certain covenants which restrict, among other things, the ability of the Company
to borrow, pay dividends, acquire businesses, guarantee debts of others and lend
funds to affiliated companies and contains criteria on the maintenance of
certain financial statement amounts and ratios, all as defined in the Agreement.
In addition, the Agreement also provides for a 0.50% fee on any unused portion
of the commitment and a termination fee of $3,000 through June 30, 1997 which is
reduced annually thereafter. However, in the event of an initial public
offering, the termination fee is fixed at $1,000 for the life of the Agreement.
At December 31, 1995, the Company was in violation of certain of the covenants
and financial ratios under a prior agreement, which violations were waived by
the lender.
At June 30, 1996, the prime rate, Federal Funds Rate and one month LIBOR
were 8.25%, 5.81% and 5.50%, respectively, and borrowings outstanding were at a
weighted average interest rate of 7.98%.
In October 1993, in connection with a prior agreement, the Company issued a
warrant to the lender to purchase [ ] percent of the issued and outstanding
common stock of the Company for an exercise price of $.01 per share. Such
warrant, which was valued at $[ ] based on an independent appraisal, is
exercisable in whole or in part only upon the closing of an initial public
offering of the Company's common stock and expires on December 31, 2001 (the
"Expiration Date"). In the event that the warrant does not become exercisable
prior to the Expiration Date, the financial institution has a right to surrender
the unexercised warrant to the Company at any time thereafter for $500. If the
value of the shares covered by this warrant at the initial public offering price
is less than $1,000, then the Company is obligated to make up the deficiency. In
addition, in the quarter in which this offering is completed, there will be an
additional interest charge of approximately $2.5 million upon the exercise of
such warrant to reflect the difference between the value of the stock issued at
the assumed initial public offering price of [$ ] per share (the midpoint of
the range of the estimated initial public offering price) and the original
amount recorded.
F-13
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
(INFORMATION RELATED TO THE SIX MONTHS ENDED JUNE 30, 1995 AND
SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 7--LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Borrowings under financing agreement (see Note 6)................................ $ 66,541 $ 77,536 $ 76,664
Borrowings under financing agreement, interest payable at the Canadian Prime Rate
(which approximated 7.0% at December 31, 1995), expiring March 1998 and
collateralized by the assets of a subsidiary in the amount of approximately
$4,000 at June 30, 1996........................................................ 275 2,200 1,979
Acquisition notes payable in annual and monthly installments through 1997 with
interest at 8.5%............................................................... -- 7,026 4,087
Other acquisition notes payable, noninterest bearing, interest imputed at 6.7% to
8.0%, in varying installments through 2000..................................... 2,822 8,277 9,834
Capitalized lease obligations, payable with interest from 9% to 15%, in varying
installments through 2000...................................................... 1,869 1,571 2,523
Notes payable, in varying monthly installments maturing through 2001, with
interest at rates ranging from 7.5% to 8.5%.................................... 3,711 3,269 1,786
--------- --------- ---------
75,218 99,879 96,873
Less: Current portion............................................................ 3,210 11,809 8,669
--------- --------- ---------
$ 72,008 $ 88,070 $ 88,204
--------- --------- ---------
--------- --------- ---------
</TABLE>
The noncurrent portion of long-term debt matures as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
1997............................................................................ $ 5,755
1998............................................................................ 3,379
1999............................................................................ 1,010
2000............................................................................ 340
Thereafter...................................................................... 77,586
------------
$ 88,070
------------
------------
</TABLE>
NOTE 8--MINORITY INTEREST
In connection with an acquisition in 1990, a subsidiary of the Company
issued 88,425 shares of nonvoting convertible 10% cumulative preferred stock in
exchange for 88,425 shares (58%) of the outstanding common stock of the acquired
company held by the acquired company's employee stock ownership trust. The
preferred stock is callable by this subsidiary at $36.00 per share plus accrued
dividends and is subject to a put option on the shares of the subsidiary's
common stock exercisable by participants in the plan upon distribution and a put
option by the plan or participants. The redemption price with respect to the put
is the greater of $36.00 plus a call premium of $1.80 per share and any unpaid
dividends on the preferred stock or the fair market value of the subsidiary's
common stock, into which the preferred stock may be converted. The conversion
rate is equal to the number of shares of the subsidiary's
F-14
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
(INFORMATION RELATED TO THE SIX MONTHS ENDED JUNE 30, 1995 AND
SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 8--MINORITY INTEREST (CONTINUED)
common stock which have a fair market value equal to the number of shares of
preferred stock. The respective fair market values would be determined by an
independent appraiser. The book value of these shares of approximately $3,000,
which approximates the redemption price, is included in minority interest in the
consolidated balance sheets. These shares are expected to be redeemed upon the
completion of this offering.
NOTE 9--REDEEMABLE PREFERRED STOCK
During 1991, the Company sold 200,000 shares of 10.5% nonvoting cumulative
preferred stock ($10.00 par value) to the Company's profit sharing plan for
$2,000. The preferred stock is puttable by the holders and redeemable in an
amount equal to the par value plus a call premium of $.525 per share and any
unpaid cumulative dividends. There are certain restrictions, as defined,
regarding the maximum amount of shares which can be put to the Company in any
year. These shares are expected to be redeemed upon the completion of this
offering.
NOTE 10--STOCKHOLDERS' DEFICIT
STOCK INCENTIVE PLANS
In January 1996, the Company's Board of Directors (the "Board") adopted the
1996 Employee Stock Option Plan (the "Stock Option Plan"), which provides for
the issuance of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified stock
options, to purchase an aggregate of up to 900,000 shares of the common stock of
the Company. The Stock Option Plan permits the granting of options to officers,
employees and consultants of the Company, its subsidiaries and affiliates.
Under the Stock Option Plan, the exercise price of an incentive stock option
must be at least equal to 100% of the fair market value of the common stock on
the date of grant (110% of the fair market value in the case of options granted
to employees who hold more than ten percent of the voting power of the Company's
capital stock on the date of grant). The exercise price of a nonqualified stock
option must be not less than the par value of a share of the common stock on the
date of grant. The term of an incentive or nonqualified stock option is not to
exceed ten years (five years in the case of an incentive stock option granted to
a ten percent holder). The Stock Option Plan provides that the maximum option
grant which may be made to an executive officer in any calendar year is 45,000
shares.
On January 3, 1996, options to purchase an aggregate of 296,640 shares of
common stock were granted to officers, employees and consultants of the Company
at a purchase price equal to $6.65 per share, the fair market value of the
common stock on the date of grant as determined by the Board. Such options vest
at the rate of 25% of the original grant commencing one year after the date of
grant. At June 30, 1996, none of these options were exercisable.
In January 1996, the Company also adopted a stock option plan for
non-employee directors (the "Directors' Plan"), pursuant to which options to
acquire a maximum aggregate of 180,000 shares of common stock may be granted to
non-employee directors. Options granted under the Directors' Plan do not qualify
as incentive stock options within the meaning of Section 422 of the Code. The
Directors' Plan
F-15
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
(INFORMATION RELATED TO THE SIX MONTHS ENDED JUNE 30, 1995 AND
SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 10--STOCKHOLDERS' DEFICIT (CONTINUED)
provides for an automatic grant to each of the Company's nonemployee directors
of an option to purchase 11,250 shares of common stock on the date of such
director's initial election or appointment to the Board. The options will have
an exercise price of 100% of the fair market value of the common stock on the
date of grant, have a ten-year term and become exercisable in accordance with a
vesting schedule determined by the Board of Directors.
Options to purchase 11,250 shares of common stock at a purchase price per
share equal to $6.65 per share, the fair market value of the common stock on the
date of grant as determined by the Board, were granted on January 24, 1996 to
one non-employee director. Half of these options vested on the date of the grant
and the balance vests in 2 equal annual installments commencing one year after
the date of grant. At June 30, 1996, 5,625 options are exercisable. In September
1996, options to purchase an aggregate of 33,750 of common stock were granted to
three directors under this plan at an exercise price per share equal to the
initial public offering price per share, the fair value on the date of grant as
determined by the Board. Vesting is on terms similar to that of the previous
director's grant.
STOCK OPTIONS
In connection with an acquisition in 1995, the Company issued options to
acquire shares of the Company's common stock in exchange for a $400 obligation
of the Company incurred in connection with this acquisition. That obligation was
amended in September 1996 in consideration of the termination of a put option.
The number of shares to be acquired is determined by formula. Based on the
assumed initial public offering price of $[ ], the number of shares to be
issued will be 82,410. The option holders have given notice to exercise their
options on the closing of the public offering.
F-16
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
(INFORMATION RELATED TO THE SIX MONTHS ENDED JUNE 30, 1995 AND
SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 11 -- PROVISION (BENEFIT) FOR INCOME TAXES
The components of income (loss) before the provision (benefit) for income
taxes, minority interests and equity in earnings of affiliates are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1996
---------- --------- --------- --------- ---------
Domestic...................................................... $ (5,548) $ (2,661) $ 6,955 $ 2,908 $ (70)
Foreign....................................................... (59) 164 1,210 785 1,439
---------- --------- --------- --------- ---------
Total income (loss) before provision (benefit) for income
taxes, minority interests and equity in earnings of
affiliates................................................ $ (5,607) $ (2,497) $ 8,165 $ 3,693 $ 1,369
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
</TABLE>
The provision (benefit) for income taxes is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
Current tax provision (benefit):
U.S. Federal................................................... $ 64 $ 194 $ 87 $ 254 $ (505)
State and local................................................ 16 298 320 64 (126)
Foreign........................................................ 28 162 810 349 483
--------- --------- --------- --------- ---------
Total current............................................ 108 654 1,217 667 (148)
--------- --------- --------- --------- ---------
Deferred tax provision (benefit):
U.S. Federal................................................... (543) (787) 2,051 892 835
State and local................................................ (887) (200) 535 213 191
Foreign........................................................ -- -- 419 -- 52
--------- --------- --------- --------- ---------
Total deferred........................................... (1,430) (987) 3,005 1,105 1,078
--------- --------- --------- --------- ---------
Total provision (benefit)................................ $ (1,322) $ (333) $ 4,222 $ 1,772 $ 930
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
F-17
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
(INFORMATION RELATED TO THE SIX MONTHS ENDED JUNE 30, 1995 AND
SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 11 -- PROVISION (BENEFIT) FOR INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to the Company's
deferred tax asset (liability) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C> <C>
JUNE 30,
1994 1995 1996
--------- --------- ---------
Current deferred tax assets (liabilities):
Earned commissions.............................................................. $ (4,760) $ (5,433) $ (5,660)
Allowance for doubtful accounts................................................. 832 1,462 1,550
Work-in-process................................................................. (4,684) (5,316) (5,831)
Accrued expenses and other liabilities.......................................... 707 (135) 39
--------- --------- ---------
Total current deferred tax liability........................................ (7,905) (9,422) (9,902)
--------- --------- ---------
Noncurrent deferred tax assets (liabilities):
Property and equipment.......................................................... 2,056 1,237 187
Intangibles..................................................................... 38 (76) (206)
Tax loss carryforwards.......................................................... 8,868 8,313 8,896
--------- --------- ---------
Total noncurrent deferred tax asset......................................... 10,962 9,474 8,877
--------- --------- ---------
Net deferred tax asset (liability).......................................... $ 3,057 $ 52 $ (1,025)
--------- --------- ---------
--------- --------- ---------
</TABLE>
At December 31, 1995, the Company has net operating loss carryforwards for
U.S. federal tax purposes of approximately $21,300 which expire through 2009.
The Company has concluded that, based on expected future results and the future
reversals of existing taxable temporary differences, it is more likely than not
that the deferred tax assets will be realized.
The provision (benefit) for income taxes differs from the amount computed
using the federal statutory income tax rate as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
Provision (benefit) at federal statutory rate................... $ (1,906) $ (849) $ 2,776 $ 1,256 $ 465
State income taxes, net of federal income tax effect............ (159) (35) 514 190 62
Nondeductible expenses.......................................... 231 342 419 187 251
Interest imputed on receivable from principal stockholder....... 127 146 198 90 50
Losses for which no tax benefits are available.................. 313 4 503 77 270
Foreign income taxes at other than the federal statutory rate... 47 (19) 149 67 38
Other........................................................... 25 78 (337) (95) (206)
--------- --------- --------- --------- ---------
Income tax provision (benefit).................................. $ (1,322) $ (333) $ 4,222 $ 1,772 $ 930
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
F-18
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
(INFORMATION RELATED TO THE SIX MONTHS ENDED JUNE 30, 1995 AND
SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 11 -- PROVISION (BENEFIT) FOR INCOME TAXES (CONTINUED)
Provision has not been made for U.S. or additional foreign taxes on
undistributed earnings of foreign subsidiaries. Those earnings have been and
will continue to be reinvested. These earnings could become subject to
additional tax if they were remitted as dividends, if foreign earnings were
loaned to the Company or a U.S. affiliate, or if the Company should sell its
stock in the foreign subsidiaries. It is not practicable to determine the amount
of additional tax, if any, that might be payable on the foreign earnings;
however, the Company believes that foreign tax credits would substantially
offset any U.S. tax. At December 31, 1995, the cumulative amount of reinvested
earnings was not material.
NOTE 12--COMMITMENTS AND CONTINGENCIES
(A) LEASES
The Company leases its facilities and certain equipment under operating
leases and certain equipment under capital leases. Future minimum lease
commitments under both noncancellable operating leases and capital leases at
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------------- -----------
<S> <C> <C>
1996................................................................................... $ 673 $ 6,189
1997................................................................................... 507 5,171
1998................................................................................... 283 4,740
1999................................................................................... 171 4,510
2000................................................................................... 102 3,789
Thereafter............................................................................. -- 6,867
------ -----------
1,736 $ 31,266
-----------
-----------
Less: Amount representing interest..................................................... 229
------
Present value of minimum lease payments................................................ 1,507
Less: Current portion.................................................................. 531
------
$ 976
------
------
</TABLE>
Rent and related expenses under operating leases amounted to approximately
$6,035, $6,470 and $7,735 for the years ended December 31, 1993, 1994 and 1995,
respectively, and $3,713 and $4,392 for the six months ended June 30, 1995 and
1996, respectively.
(B) CONSULTING, EMPLOYMENT AND NONCOMPETE AGREEMENTS
The Company has entered into various consulting, employment and noncompete
agreements with certain management personnel and former owners of acquired
businesses. These agreements are generally
F-19
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
(INFORMATION RELATED TO THE SIX MONTHS ENDED JUNE 30, 1995 AND
SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 12--COMMITMENTS AND CONTINGENCIES (CONTINUED)
three to five years in length, with one for a term of fifteen years and two
providing aggregate annual lifetime payments of approximately $135, and provide
for the following total payments:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
-------------
<S> <C>
1996............................................................................ $ 1,483
1997............................................................................ 1,220
1998............................................................................ 833
1999............................................................................ 536
2000............................................................................ 472
Thereafter...................................................................... 1,414
------
$ 5,958
------
------
</TABLE>
(C) EMPLOYEE BENEFIT PLANS
The Company has a 401(k) profit sharing plan covering all eligible
employees. Employer matching contributions, which are a maximum of 2% of payroll
of participating employees, amounted to approximately $392, $368 and $584 for
the years ended December 31, 1993, 1994 and 1995, respectively, and $306 and
$321 for the six months ended June 30, 1995 and 1996, respectively.
In addition, the Company has a defined contribution profit sharing plan
covering all eligible employees. Contributions, which are at the discretion of
the Board of Directors, were not made in the years ended December 31, 1993, 1994
and 1995 and the six months ended June 30, 1996. The Board does not anticipate
any contributions will be made in the future.
(D) LITIGATION
The Company is subject to various claims, suits and complaints arising in
the ordinary course of business. Although the outcome of these legal matters
cannot be determined, it is the opinion of management that the final resolution
of these matters will not have a material adverse effect on the Company's
financial condition, operations or liquidity.
(E) OTHER
(i) The Company is contingently liable on a note of the Principal
Stockholder in the amount of approximately $1,600. In addition, a corporate
asset is pledged as collateral for the repayment of this note.
(ii) The majority stockholder of an unconsolidated equity investee has
an agreement which requires the Company to purchase his interest, based on a
formula value, upon death. The value of his shares at December 31, 1995 is
approximately $4,000 based on the formula.
F-20
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
(INFORMATION RELATED TO THE SIX MONTHS ENDED JUNE 30, 1995 AND
SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 13--RELATED PARTY TRANSACTIONS
(A) The Company has loaned three affiliates, in which the Principal
Stockholder of the Company is an equity owner, a total of $1,346, $258 and $258
at December 31, 1994 and 1995 and June 30, 1996, respectively.
(B) The Company has receivables from certain of its stockholders
aggregating $235, $500, and $417 at December 31, 1994 and 1995 and June 30,
1996, respectively.
(C) Receivables from its Principal Stockholder of $8,188, $6,530 and $9,136
at December 31, 1994 and 1995 and June 30, 1996, respectively, consist primarily
of noninterest-bearing advances. These advances are expected to be paid in full
promptly upon the completion of this offering.
(D) During the six months ended June 30, 1996, the Company entered into an
agreement with one of its stockholders to repurchase such stockholders' common
stock of the Company in the event that the Company does not close an initial
public offering of its common stock during 1996. The purchase price for the
shares is $1,172, to be paid in the form of a note providing for 60 equal
monthly payments beginning in February 1997. This obligation is included in
redeemable common stock at June 30, 1996. In addition, in connection with the
purchase of the minority interest in a subsidiary, the Company issued 159,231
shares of Common Stock valued at $1,055. These stockholders entered into
agreements with the Company which provide that upon death or termination of
employment such shareholder is required to sell and the Company is required to
purchase the shares at a formula price, as defined in the agreement. Such
requirement to repurchase these shares expires upon an initial public offering
of the Company's common stock. Accordingly these shares are includable in
redeemable common stock.
(E) The Company charged management and other fees to affiliates for
services provided of approximately $550, $670, $873, $456, and $315 for the
years ended December 31, 1993, 1994, 1995 and the six months ended June 30, 1995
and 1996, respectively.
(F) In January 1994, the Company acquired a 50% interest in an agency
selling real estate advertising for $150,000. In connection with this
acquisition, the Company agreed to provide the agency with certain office and
administrative services which amounted to $685, $725, $341, and $415 in the
years ended December 31, 1994 and 1995 and the six months ended June 30, 1995
and 1996, respectively, in exchange for 50% of the agency's profits, as defined
in the agreement. The Company also entered into three-year employment and
consulting agreements with the two other stockholders of the agency and granted
them the right to convert their agency shares into Company shares after an
initial public offering. That conversion right, as amended, provides that those
two stockholders may convert 25% of the agency's stock into unregistered common
stock of the Company with a total value of $1,000 as of the effective date of
conversion. The conversion cannot be exercised prior to January 2, 1997.
(G) In 1994, the Principal Stockholder gave 374,940 shares of common stock
as compensation to certain employees. These shares were recorded at fair market
value of $55 on the date they were given, as determined by the Company. In 1996
the Company issued 142,740 shares of common stock as compensation to one
employee. These shares were valued at fair market value of $20 on the date they
were issued, as determined by the Company.
F-21
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
(INFORMATION RELATED TO THE SIX MONTHS ENDED JUNE 30, 1995 AND
SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 13--RELATED PARTY TRANSACTIONS (CONTINUED)
(H) The Company leases three offices from entities in which the Principal
Stockholder and other stockholders have between a 49% and 90% ownership
interest. Annual rent expense under these leases, which expire on various dates
through the year 2013, amounts to approximately $803. In addition an investee of
the Company leases an office, at an annual rental of approximately $119, from a
partnership in which the Principal Stockholder holds a 49% interest.
NOTE 14 -- SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and income taxes amounted to the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
Interest........................................................ $ 7,731 $ 8,809 $ 10,601 $ 4,338 $ 5,064
Income taxes.................................................... 119 239 589 253 492
</TABLE>
In conjunction with business acquisitions, the Company used cash as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
Fair value of assets acquired, excluding cash................ $ 3,417 $ 16,537 $ 37,260 $ 30,940 $ 7,488
Less: Liabilities assumed and created upon acquisition....... 2,444 10,210 25,936 22,251 3,451
--------- --------- --------- --------- ---------
Net cash paid................................................ $ 973 $ 6,327 $ 11,324 $ 8,689 $ 4,037
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
NOTE 15--SUBSEQUENT EVENTS
(A) The Company plans to complete an underwritten Offering of [ ]
shares of its common stock.
(B) On July 24, 1996 the Company purchased 168,300 shares of common stock
from a stockholder for $807.
(C) On July 29, 1996 the Company issued 46,350 shares of common stock in
exchange for the individual's shares in a subsidiary company.
(D) On August 1, 1996, the Company purchased one-half of a stockholder's
common stock holdings equal to 41,400 shares for $12.
F-22
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Members of
Neville Jeffress Australia Pty Limited
SCOPE
We have audited the accompanying consolidated balance sheet of Neville
Jeffress Australia Pty Limited (the "Company") as of 30 June 1995, and the
related consolidated statements of profit and loss, shareholder's equity and
cash flows for the year then ended (the "audit period").
These special purpose financial statements, which have been prepared in
accordance with accounting principles generally accepted in Australia, are the
responsibility of the Company's management.
Our responsibility is to conduct an independent audit of the financial
statements for the audit period in order to express an opinion on them based on
our audit.
We conducted our audit in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
Our audit opinion expressed in this report has been formed on the above
basis.
OPINION
In our opinion, the consolidated financial statements of Neville Jeffress
Australia Pty Limited for the audit period present fairly, in all material
respects, the financial position of the Company and its subsidiaries at 30 June
1995, and the results of their operations and their cash flows for the year then
ended in conformity with accounting principles generally accepted in Australia,
as described in the financial statements.
Dated at Sydney, Australia, this 30th day of July 1996.
BDO NELSON PARKHILL
Chartered Accountants
F-23
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN AUSTRALIAN DOLLARS)
<TABLE>
<CAPTION>
30 JUNE 31 MARCH
1995 1996
NOTES $ $
----- ----------- -----------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
FIXED ASSETS
Intangible fixed assets......................................................... 1 -- --
Tangible fixed assets: 2
Land and buildings............................................................ 1,658,176 1,648,875
Other fixed assets............................................................ 2,960,241 3,208,244
----------- -----------
Total tangible fixed assets..................................................... 4,618,417 4,857,119
----------- -----------
TOTAL FIXED ASSETS.............................................................. 4,618,417 4,857,119
----------- -----------
OTHER NON-CURRENT ASSETS
Investments..................................................................... 3 549,692 549,692
Future income tax benefit....................................................... 1,443,829 1,278,780
----------- -----------
TOTAL NON-CURRENT ASSETS........................................................ 1,993,521 1,828,472
----------- -----------
CURRENT ASSETS
Inventories..................................................................... 4 178,923 301,437
Cash at bank.................................................................... 1,674,722 2,928,771
Accounts receivable:
Trade debtors................................................................. 26,024,689 30,439,145
Receivables from related entities............................................. 2,355,276 2,307,970
Short-term deposits........................................................... 7,602,468 300,086
Other debtors and prepayments................................................. 752,428 1,129,826
----------- -----------
TOTAL CURRENT ASSETS............................................................ 38,588,506 37,407,235
----------- -----------
TOTAL ASSETS.................................................................... 45,200,444 44,092,826
----------- -----------
----------- -----------
EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY............................................................ 3,842,695 4,771,124
----------- -----------
OUTSIDE SHAREHOLDERS' INTEREST.................................................. 5 147,667 220,883
----------- -----------
PROVISIONS: 6
Employee entitlements........................................................... 1,701,448 1,858,961
Deferred taxation............................................................... 86,951 86,951
----------- -----------
1,788,399 1,945,912
----------- -----------
LONG-TERM LIABILITIES
Bank loans...................................................................... 600,000 600,000
Lease liability................................................................. 7 438,678 447,924
Amounts due to related entities................................................. 242,489 --
Other creditors and borrowings.................................................. 38,619 41,963
----------- -----------
1,319,786 1,089,887
----------- -----------
CURRENT LIABILITIES
Bank loan....................................................................... 3,202,076 1,907,793
Secured loans................................................................... 2,940,000 --
Unsecured loans................................................................. 1,708,966 1,290,559
Lease liability................................................................. 7 337,684 285,068
Trade creditors................................................................. 27,185,095 29,910,480
Amounts due to related companies................................................ 228,206 --
Taxation liabilities............................................................ 910,640 516,326
Other liabilities and accrued expenses.......................................... 1,589,230 2,154,794
----------- -----------
38,101,897 36,065,020
----------- -----------
TOTAL EQUITY AND LIABILITIES.................................................... 45,200,444 44,092,826
----------- -----------
----------- -----------
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-24
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PROFIT AND LOSS
(IN AUSTRALIAN DOLLARS)
<TABLE>
<CAPTION>
30 JUNE 31 MARCH 31 MARCH
1995 1995 1996
12 MONTHS 9 MONTHS 9 MONTHS
NOTES $ $ $
----- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Commissions and fees............................... 21,663,259 16,178,502 23,299,143
--------- --------- ---------
Operating expenses:
Wages and salaries............................... 10,449,141 8,345,872 13,174,110
Depreciation of fixed assets..................... 577,807 219,835 595,285
Abnormal bad debt provision...................... 2,144,331 1,865,804 --
Other operating expenses......................... 7,684,587 4,518,324 7,836,033
--------- --------- ---------
Total operating expenses........................... 20,855,866 14,949,835 21,605,428
--------- --------- ---------
Operating profit................................... 807,393 1,228,667 1,693,715
--------- --------- ---------
Interest income.................................... 440,856 151,873 468,520
Interest expense................................... 329,510 22,819 462,865
--------- --------- ---------
Net financial income............................. 111,346 129,054 5,655
--------- --------- ---------
Income before income tax expense................... 918,739 1,357,721 1,699,370
Income tax expense................................. 8 65,246 403,578 681,375
--------- --------- ---------
Net income......................................... 853,493 954,143 1,017,995
Outside equity interest in net income.............. 5 22,669 9,062 73,216
--------- --------- ---------
Net income attributable to members of Neville
Jeffress Australia Pty Limited................... 830,824 945,081 944,779
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-25
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN AUSTRALIAN DOLLARS)
<TABLE>
<CAPTION>
FOREIGN
SHARE CAPITAL CAPITAL CURRENCY ASSET
PAR VALUE $1 RETAINED PROFITS TRANSLATION REVALUATION OTHER
-------------------- EARNINGS RESERVE RESERVE RESERVE RESERVES
SHARES $ $ $ $ $ $
--------- --------- --------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, 30 June 1994............... 1,220,000 1,220,000 1,685,935 106,621 (6,607) (7,085) 19,759
Net income attributable to
members........................... -- -- 830,824 -- -- --
Adjustment relating to adoption of
new accounting standard........... -- -- (53,900) -- -- -- --
Transfers between reserves.......... -- -- 19,759 -- -- -- (19,759)
Gain on translation of foreign
controlled entities............... -- -- -- -- 47,148 -- --
--------- --------- --------- ----------- ----------- ------ -----------
Balance, 30 June 1995............... 1,220,000 1,220,000 2,482,618 106,621 40,541 (7,085) --
Net income attributable to members
(unaudited)....................... -- -- 944,779 -- -- -- --
Loss on translation of foreign
controlled entities (unaudited)... -- -- -- -- (16,350) -- --
--------- --------- --------- ----------- ----------- ------ -----------
Balance, 31 March 1996
(unaudited)....................... 1,220,000 1,220,000 3,427,397 106,621 24,191 (7,085) --
--------- --------- --------- ----------- ----------- ------ -----------
--------- --------- --------- ----------- ----------- ------ -----------
<CAPTION>
TOTAL
SHAREHOLDERS'
EQUITY
$
-------------
<S> <C>
Balance, 30 June 1994............... 3,018,623
Net income attributable to
members........................... 830,824
Adjustment relating to adoption of
new accounting standard........... (53,900)
Transfers between reserves.......... --
Gain on translation of foreign
controlled entities............... 47,148
-------------
Balance, 30 June 1995............... 3,842,695
Net income attributable to members
(unaudited)....................... 944,779
Loss on translation of foreign
controlled entities (unaudited)... (16,350)
-------------
Balance, 31 March 1996
(unaudited)....................... 4,771,124
-------------
-------------
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-26
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN AUSTRALIAN DOLLARS)
<TABLE>
<CAPTION>
30 JUNE 31 MARCH 31 MARCH
1995 1995 1996
12 MONTHS 9 MONTHS 9 MONTHS
NOTES $ $ $
----- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit after income tax.................................. 830,824 945,081 944,779
Add/(deduct) non-cash items:
Depreciation & amortisation........................................ 577,807 219,835 595,285
Bad debts write-off................................................ 1,876,858 1,466,804 --
Profit on sale of property, plant and equipment.................... (12,966) (9,406) --
Loss on disposal of controlled entity.............................. 15,289 15,289 --
Amortisation of goodwill on acquisition............................ 56,848 56,848 30,000
Change due to application of new accounting standard............... (53,900) (53,900) --
Increase in outside shareholders' interest......................... 22,669 36,276 73,216
Gain/(loss) on translation of foreign controlled entities.......... 47,148 26,717 (16,350)
Other.............................................................. (58,224) 75,659 --
Changes in assets and liabilities :
(Increase) in trade debtors........................................ (3,960,773) (4,394,634) (4,414,456)
(Increase)/decrease in inventories................................. 161,251 185,688 (122,514)
(Increase)/decrease in other current assets and prepayments........ 322,746 (947,380) (377,398)
(Increase)/decrease in future income tax benefit................... (153,113) 668,592 165,049
Increase in trade creditors........................................ 1,662,980 2,064,067 2,725,385
Increase/ (decrease) in other creditors and accruals............... (1,943,907) 531,207 568,908
Increase/ (decrease) in tax provision.............................. 142,095 (242,320) (394,314)
Increase in employee entitlements.................................. 375,088 201,750 157,513
----------- ----------- -----------
Net cash flows from operating activities........................... (91,280) 846,173 (64,897)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash (into)/out of short-term deposit.............................. (5,248,849) 266,740 7,302,382
Acquisition of property, plant and equipment....................... (980,956) (338,423) (833,987)
Proceeds from sale of property, plant and equipment................ 78,836 28,190 --
Net cash flow on disposal of controlled entity..................... 11 118,096 118,096 --
Cash paid for purchase of entity................................... (544,604) (433,931) (30,000)
Net cash inflow/(outflow) on acquisition of controlled entity...... 11 1,490,459 (344,512) --
----------- ----------- -----------
Net cash from investing activities................................. (5,087,018) (703,840) 6,438,395
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Finance lease repayments, net...................................... 118,857 62,374 (43,370)
Repayments of borrowings
-external parties................................................ -- (735,403) (3,358,407)
-related entities................................................ -- (702,450) (423,389)
Proceeds of borrowings
-external parties................................................ 2,231,376 -- --
-related entities................................................ 650,491 -- --
----------- ----------- -----------
Net cash from/(used in) financing activities....................... 3,000,724 (1,375,479) (3,825,166)
----------- ----------- -----------
NET INCREASE/(DECREASE) IN CASH HELD............................... (2,177,574) (1,233,146) 2,548,332
Cash at beginning of the reporting period.......................... 50,220 50,220 (2,127,354)
----------- ----------- -----------
CASH AT END OF REPORTING PERIOD.................................... (2,127,354) (1,182,926) 420,978
----------- ----------- -----------
----------- ----------- -----------
RECONCILIATION OF CASH
Cash balances comprise:
Cash at bank....................................................... 1,674,722 124,401 2,928,771
Bank loan.......................................................... (3,802,076) (1,307,327) (2,507,793)
----------- ----------- -----------
(2,127,354) (1,182,926) 420,978
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-27
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
BASIS OF ACCOUNTING
These consolidated financial statements are a special purpose financial
report prepared in order to meet the requirements of a registration statement to
be submitted to the Securities and Exchange Commission.
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in Australia. These include
applicable Accounting Standards and other mandatory professional reporting
requirements with the exception of AASB 1024: Consolidated Accounts (see
Principles of Consolidation)
The accounts have also been prepared on an accrual basis. They are based on
historical costs and do not take into account changing money values or, except
where specifically stated, current valuations of non-current assets.
The accounting policies adopted have been consistently applied throughout
the periods presented.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements comprise the fully consolidated
financial information for Neville Jeffress Australia Pty Limited and its group
companies in which the company has majority control, with the exception of the
following companies:
Media Monitors Australia Pty Limited;
National Advertising Services Pty Limited; and
Neville Jeffress Newsagencies Pty Limited.
These companies were not included at the effective date of the acquisition
of Neville Jeffress Australia Pty Limited and subsidiaries by TMP Worldwide Inc
("TMP"). Accordingly they do not form part of the group being acquired by TMP.
The consolidated financial statements comprise the financial statements of
those companies as set out in Note 3 to the consolidated financial statements.
The consolidated financial statements include the information contained in
the financial statements of Neville Jeffress Australia Pty Limited and each of
the entities in the group being acquired by TMP as from the date the company
obtains control until such time as control ceases.
The accounts of subsidiaries are prepared for the same reporting period as
the company, using consistent accounting policies. Adjustments are made to bring
into line any dissimilar accounting policies which may exist.
All intercompany balances and transactions, between entities consolidated,
including unrealised profits and losses, have been eliminated in consolidation.
INVESTMENTS
The company's interest in subsidiaries not forming part of the group of
companies acquired by TMP was not consolidated (see Principles of Consolidation
above), and has been included with associated entities at cost, and only
dividend income received is taken into earnings. Associated entities are those
in
F-28
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
which the company holds a significant shareholding of the issued ordinary
capital and participates in commercial and policy decision making.
INVENTORIES
Inventories, including work-in-progress, are valued at the lower of cost and
net realisable value.
RECOVERABLE AMOUNTS
Assets are not revalued to an amount above their recoverable amount and,
where carrying values exceed this recoverable amount, assets are written down.
In determining the recoverable amount, the expected net cash flows have not been
discounted to their present value.
PROPERTY, PLANT AND EQUIPMENT
COST AND VALUATION
Property, plant and equipment are valued at cost or at independent
valuation. Decrements arising from revaluation have been debited to the profit
and loss account. Acquisitions since the last revaluation have been brought to
account at cost.
Where assets have been revalued, the potential effect of the capital gains
tax on disposal has not been taken into account in the determination of the
revalued carrying amount where it is expected that a liability for capital gains
tax will arise.
Any gain or loss on the disposal of revalued assets is determined as the
difference between the carrying value of the asset at the time of disposal and
the proceeds from disposal, and is included in the results of the group in the
year of disposal.
DEPRECIATION AND AMORTISATION
Buildings, plant and equipment are depreciated on a straight-line basis so
as to write-off the cost or valuation of each asset over its anticipated useful
life.
Major depreciation periods are:
Freehold buildings - 40 years
Plant and equipment - 3 to 15 years
INCOME TAX
Tax-effect accounting is applied using the liability method whereby income
tax is regarded as an expense and is calculated on the accounting profit after
allowing for permanent differences. To the extent timing differences occur
between the time items are recognised in the accounts and when items are taken
into account in determining taxable income, the net related taxation benefit or
liability, calculated at current rates, is disclosed as a future income tax
benefit or a provision for deferred income tax. The net future income tax
benefit relating to tax losses and timing differences is not carried forward as
an asset unless the benefit is virtually certain of being realised.
Where the earnings of overseas subsidiaries are subject to taxation under
the Controlled Foreign Companies rules, this tax has been provided for in the
accounts.
F-29
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
The income tax expense for the nine months ended 31 March 1995 and for the
year ended 30 June 1995 is calculated using the 33% income tax rate; however,
the deferred tax balances at those balance dates have been adjusted to reflect
the increased corporate tax of 36%. The adjustment recognises that reversal of
timing differences will occur within the 1995-96 or later income tax years, at
which time tax will be attributable at a rate of 36%. The corresponding
adjustment has been charged to income tax expense.
FOREIGN CURRENCIES
TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies of entities within the group are
converted to local currency at the rate of exchange ruling at the date of the
transaction.
Amounts payable to and by the entities within the group that are outstanding
at the balance date and are denominated in foreign currencies have been
converted to local currency using rates of exchange ruling at the balance sheet
date.
TRANSLATION OF ACCOUNTS OF OVERSEAS OPERATIONS
All overseas operations are deemed self-sustaining as each is financially
and operationally independent of Neville Jeffress Australia Pty Limited. The
accounts of overseas operations are translated using the current rate method and
any exchange differences are taken directly to the foreign currency translation
reserve.
LEASES
Finance leases, which effectively transfer to the group substantially all of
the risks and benefits incidental to ownership of the leased item, are
capitalised at the present value of the minimum lease payments, disclosed as
leased property, plant and equipment, and amortised over the period the group is
expected to benefit from the use of the leased assets.
Operating lease payments, where the lessor effectively retains substantially
all of the risks and benefits of ownership of the leased items, are included in
the determination of the operating profit in equal instalments over the lease
term.
EMPLOYEE ENTITLEMENTS
Provision is made for employee entitlement benefits accumulated as a result
of employees rendering services up to the reporting date. These benefits include
wages and salaries, annual leave, and long service leave.
Liabilities arising in respect of wages and salaries, annual leave, and any
other employee entitlements expected to be settled within twelve months of the
reporting date are measured at their nominal amounts. All other employee
entitlement liabilities are measured at the present value of the estimated
future cash outflows to be made in respect of services provided by employees up
to the reporting date. In determining the present value of future cash outflows,
the interest rates attaching to government guaranteed securities which have
terms to maturities approximating the terms of the related liability are used.
Employee entitlement expenses and revenues arising in respect of the
following categories:
- wages and salaries, non-monetary benefits, annual leave, long service
leave, sick leave and other leave entitlements; and
F-30
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
- other types of employee entitlements,
are charged against profits on a net basis in their respective categories.
Contributions are made by the group to employee defined contribution
superannuation funds. These contributions are charged as expenses when incurred.
CASH FLOW DEFINITIONS
For the purpose of the Consolidated Statements of Cash Flows, the group
considers cash to include cash on hand and in banks and investments in money
market instruments readily convertible to cash within two working days, net of
outstanding bank overdraft.
GOODWILL
Goodwill represents the excess of the purchase consideration over the fair
value of identifiable net assets acquired at the time of acquisition of a
business or share in a subsidiary. It is written off to the profit and loss
account on acquisition.
F-31
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN AUSTRALIAN DOLLARS)
1 INTANGIBLES
<TABLE>
<CAPTION>
30 JUNE 31 MARCH
1995 1996
$ $
---------- -----------
<S> <C> <C>
(UNAUDITED)
Goodwill................................................................................. 125,456 155,456
Provision for amortisation............................................................... (125,456) (155,456)
---------- -----------
-- --
---------- -----------
---------- -----------
</TABLE>
2 TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
LAND AND OTHER FIXED
BUILDINGS ASSETS TOTAL
$ $ $
---------- ----------- ----------
<S> <C> <C> <C>
Movements in tangible fixed assets are:
1 July 1994
Cost....................................................................... 1,824,870 3,941,228 5,766,098
Accumulated depreciation................................................... 144,172 2,243,710 2,387,882
---------- ----------- ----------
Book value................................................................. 1,680,698 1,697,518 3,378,216
---------- ----------- ----------
---------- ----------- ----------
Movements in year ended 30 June 1995
Acquisition of controlled entities
Cost....................................................................... -- 1,266,993 1,266,993
Accumulated depreciation................................................... -- (364,071) (364,071)
Acquisitions............................................................... -- 980,956 980,956
Depreciation............................................................... (22,522) (555,285) (577,807)
Disposals.................................................................. -- (119,004) (119,004)
Accumulated depreciation on disposals...................................... -- 53,134 53,134
---------- ----------- ----------
(22,522) 1,262,723 1,240,201
---------- ----------- ----------
Cost....................................................................... 1,824,870 6,070,173 7,895,043
Accumulated depreciation................................................... 166,694 3,109,932 3,276,626
---------- ----------- ----------
Book value................................................................. 1,658,176 2,960,241 4,618,417
---------- ----------- ----------
---------- ----------- ----------
Movements in 9 months ended 31 March 1996 (unaudited)
Acquisitions............................................................... -- 833,987 833,987
Depreciation............................................................... (9,301) (585,984) (595,285)
---------- ----------- ----------
(9,301) 248,003 238,702
---------- ----------- ----------
31 March 1996 (unaudited)
Cost....................................................................... 1,824,870 6,904,160 8,729,030
Accumulated depreciation................................................... 175,995 3,695,916 3,871,911
---------- ----------- ----------
Book value................................................................. 1,648,875 3,208,244 4,857,119
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
F-32
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN AUSTRALIAN DOLLARS)
2 TANGIBLE FIXED ASSETS (CONTINUED)
Land and buildings were collateralized in favour of certain bank loans.
These loans were retired subsequent to the balance sheet date.
Included in other fixed assets are assets subject to finance lease which are
collateralized in favour of the finance lease creditor.
3 INVESTMENTS
<TABLE>
<CAPTION>
30 JUNE 31 MARCH
1995 1996
$ $
--------- -----------
<S> <C> <C>
(UNAUDITED)
INVESTMENTS COMPRISE:
(i) Investments in subsidiaries not consolidated in these financial statements:
Shares at cost
National Advertising Services Pty Limited............................................... 112,024 112,024
Media Monitors Australia Pty Limited.................................................... 432,580 432,580
Neville Jeffress Newsagencies Pty Limited............................................... 4,853 4,853
--------- -----------
549,457 549,457
--------- -----------
(ii) Associated entities
Shares at cost
Print Production Trust.................................................................. 235 235
--------- -----------
549,692 549,692
--------- -----------
--------- -----------
<CAPTION>
BENEFICIAL INTEREST
----------------------
% %
--------- -----------
<S> <C> <C>
Investments in subsidiaries not consolidated in these financial statements
Neville Jeffress Newsagencies Pty Limited and its controlled entity:
The Cremorne Newsagency............................................................... 100 100
National Advertising Services Pty Limited............................................... 100 100
Media Monitors Australia Pty Limited and its controlled entities:
Media Monitors NSW Pty Limited........................................................ 45 45
Media Monitors Victoria Pty Limited................................................... 45 45
Media Monitors ACT Pty Limited........................................................ 45 45
Media Monitors Queensland Pty Limited................................................. 45 45
News Bank Pty Limited................................................................. 45 45
News Monitor Pty Limited.............................................................. 45 45
</TABLE>
F-33
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN AUSTRALIAN DOLLARS)
3 INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
30 JUNE 31 MARCH
1995 1996
--------- -----------
(UNAUDITED)
BENEFICIAL INTEREST
----------------------
% %
<S> <C> <C>
Associates
Print Production Trust.................................................................. 45 45
Investments in subsidiaries consolidated in these financial statements
Neville Jeffress--Perth Pty Limited..................................................... 100 100
Neville Jeffress--Darwin Pty Limited.................................................... 100 100
Neville Jeffress--Queensland Pty Limited and its controlled entity:
Neville Jeffress--Queensland Pty Limited.............................................. 91 91
Neville Jeffress Brisbane Pty Limited................................................. 91 91
Neville Jeffress--Adelaide Pty Limited.................................................. 100 100
Neville Jeffress--Canberra Pty Limited.................................................. 100 100
Neville Jeffress NSW Pty Limited and its controlled entities:
Neville Jeffress NSW Pty Limited...................................................... 100 100
Neville Jeffress Sydney Pty Limited................................................... 100 100
Neville Jeffress Pty Limited.......................................................... 100 100
Neville Jeffress Parramatta Pty Limited................................................. 100 100
Neville Jeffress Financial Pty Limited.................................................. 90 90
Neville Jeffress Advertising (Tasmania) Pty Limited..................................... 100 100
Neville Jeffress Caldwell Limited....................................................... 70 70
Neville Jeffress Victoria Pty Limited................................................... 100 100
Neville Jeffress New Zealand Pty Ltd.................................................... 90 90
Armstrong's Australia Pty Limited and its controlled entities:
Armstrong's Australia Pty Limited..................................................... 100 100
Armstrong's--Victoria Pty Limited..................................................... 100 100
Armstrong's--NSW Pty Limited.......................................................... 100 100
Armstrong's--Queensland Pty Limited................................................... 100 100
Armstrong's--W.A. Pty Limited......................................................... 100 100
</TABLE>
4 INVENTORIES
<TABLE>
<CAPTION>
30 JUNE 31 MARCH
1995 1996
$ $
--------- -----------
<S> <C> <C>
(UNAUDITED)
Work-in-progress.......................................................................... 178,923 301,437
--------- -----------
--------- -----------
</TABLE>
F-34
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN AUSTRALIAN DOLLARS)
5 OUTSIDE SHAREHOLDERS' INTEREST
<TABLE>
<CAPTION>
SHARE RETAINED
CAPITAL RESERVES INCOME TOTAL
$ $ $ $
--------- ------------- --------- ---------
<S> <C> <C> <C> <C>
MOVEMENTS IN OUTSIDE SHAREHOLDERS' INTERESTS ARE:
Balance, 1 July 1994................................................... 65,377 -- 23,854 89,231
Acquisition of controlled entities..................................... 35,767 -- -- 35,767
Net income attributable to outside shareholders........................ -- -- 22,669 22,669
--
--------- --------- ---------
Balance, 30 June 1995.................................................. 101,144 -- 46,523 147,667
Net income attributable to outside shareholders (unaudited)............ -- -- 73,216 73,216
--
--------- --------- ---------
Balance, 31 March 1996 (unaudited)..................................... 101,144 -- 119,739 220,883
--
--
--------- --------- ---------
--------- --------- ---------
</TABLE>
6 PROVISIONS
<TABLE>
<CAPTION>
$
----------
<S> <C>
Employee Entitlements
Balance, 1 July 1994............................................................................. 724,757
Charged to profit and loss....................................................................... 417,768
Acquisition of controlled entities............................................................... 505,023
Adjustment to reserves on introduction of new accounting standard................................ 53,900
----------
Balance, 30 June 1995............................................................................ 1,701,448
Charged to profit and loss (unaudited)........................................................... 157,513
----------
Balance, 31 March 1996 (unaudited)............................................................... 1,858,961
----------
----------
Deferred Taxation
Balance, 1 July 1994............................................................................. 66,738
Charged to profit and loss....................................................................... 20,213
----------
Balance, 30 June 1995............................................................................ 86,951
Charged to profit and loss (unaudited)........................................................... --
----------
Balance, 31 March 1996 (unaudited)............................................................... 86,951
----------
----------
</TABLE>
F-35
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN AUSTRALIAN DOLLARS)
7 LEASE LIABILITY
<TABLE>
<CAPTION>
30 JUNE 31 MARCH
1995 1996
$ $
---------- -----------
<S> <C> <C>
(UNAUDITED)
Not later than one year.................................................................. 408,423 408,423
Later than one year and not later than two years......................................... 296,357 296,357
Later than two years and not later than five years....................................... 188,383 145,013
Later than five years.................................................................... -- --
---------- -----------
Minimum lease payments................................................................... 893,163 849,793
Future finance charges................................................................... (116,801) (116,801)
---------- -----------
776,362 732,992
---------- -----------
---------- -----------
Current lease liability.................................................................. 337,684 285,068
Non-current lease liability.............................................................. 438,678 447,924
---------- -----------
776,362 732,992
---------- -----------
---------- -----------
</TABLE>
8 INCOME TAX
<TABLE>
<CAPTION>
30 JUNE 31 MARCH 31 MARCH
1995 1995 1996
12 MONTHS 9 MONTHS 9 MONTHS
$ $ $
----------- ----------- -----------
<S> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
The prima facie tax, using tax rates applicable in the country of operation,
on income before income tax differs from the income tax provided in the
accounts and is calculated as follows:
Prima facie tax on income before income tax................................. 303,184 448,048 611,773
Tax effect of permanent differences......................................... (18,762) 28,860 69,602
Future income tax benefit not previously brought to account................. (175,944) (94,734) --
Income tax underprovided in previous year................................... 61,616 61,616 --
Net gain from change in income tax rate from 33% to 36%..................... (104,848) (40,212) --
----------- ----------- -----------
Income tax attributable to operating profit................................. 65,246 403,578 681,375
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-36
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN AUSTRALIAN DOLLARS)
8 INCOME TAX (CONTINUED)
<TABLE>
<CAPTION>
30 JUNE 31 MARCH 31 MARCH
1995 1995 1996
12 MONTHS 9 MONTHS 9 MONTHS
$ $ $
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Income tax provided comprises:
Provision attributable to future years:
Future income tax benefit................................................. (855,206) 21,852 165,049
Provision for deferred income tax......................................... 20,213 -- --
Underprovision of previous year............................................. 61,616 61,616 --
Provision attributable to current period.................................... 838,623 320,110 516,326
----------- ----------- -----------
65,246 403,578 681,375
----------- ----------- -----------
----------- ----------- -----------
The amount of future income tax benefit carried forward as an asset in the
consolidated financial statements which is attributable to tax losses is
:......................................................................... 252,967 -- 240,146
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
9 EXPENDITURE COMMITMENTS
<TABLE>
<CAPTION>
30 JUNE 31 MARCH
1995 1996
$ $
---------- -----------
<S> <C> <C>
(UNAUDITED)
Lease commitments
Operating lease commitments not provided for in the accounts:
Not later than one year................................................................. 737,161 715,614
Later than one year and not later than two years........................................ 276,252 396,686
Later than two years and not later than five years...................................... 68,007 81,063
Later than five years................................................................... -- --
---------- -----------
1,081,420 1,193,363
---------- -----------
---------- -----------
</TABLE>
10 EMPLOYEE ENTITLEMENTS AND SUPERANNUATION COMMITMENTS
<TABLE>
<CAPTION>
30 JUNE 31 MARCH
1995 1996
$ $
---------- -----------
<S> <C> <C>
(UNAUDITED)
Employee Entitlements:
The aggregate employee entitlement liability is comprised of:
Accrued wages, salaries and oncosts................................................... 14,710 47,330
Provisions (current).................................................................. 1,269,914 1,443,417
Provisions (non-current).............................................................. 431,534 415,544
---------- -----------
1,716,158 1,906,291
---------- -----------
---------- -----------
</TABLE>
F-37
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN AUSTRALIAN DOLLARS)
11 CONSOLIDATED STATEMENTS OF CASH FLOWS
(a) The company acquired a controlling interest in the following entities:
(i) 95.93% in Armstrong's Australia Pty Limited
(ii) 90% of Neville Jeffress New Zealand Pty Limited
(iii) 100% of Neville Jeffress Victoria Pty Limited
<TABLE>
<CAPTION>
30 JUNE
1995
$
-----------
<S> <C>
The acquisition details are:
Cash consideration................................................................................... 2,204,677
Outside equity interest.............................................................................. 35,767
Share of reserves attributable to investment......................................................... 75,463
-----------
2,315,907
-----------
-----------
DETAILS OF NET ASSETS ACQUIRED
Assets
Cash at bank....................................................................................... 3,695,136
Trade debtors...................................................................................... 7,268,424
Inventory.......................................................................................... 137,399
Other debtors and prepayments...................................................................... 568,990
Plant and equipment--at cost....................................................................... 1,266,993
Accumulated depreciation........................................................................... (364,071)
Other assets....................................................................................... 624,854
Liabilities
Trade creditors.................................................................................... (7,688,646)
Taxation........................................................................................... (123,768)
Other.............................................................................................. (3,126,252)
-----------
Fair value of net tangible assets.................................................................... 2,259,059
Goodwill arising on acquisition...................................................................... 56,848
-----------
2,315,907
-----------
-----------
NET CASH EFFECT
Cash consideration................................................................................... (2,204,677)
Cash at bank included in net assets acquired......................................................... 3,695,136
-----------
Cash inflow on purchase of controlled entities as reflected in consolidated accounts................. 1,490,459
-----------
-----------
</TABLE>
F-38
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN AUSTRALIAN DOLLARS)
11 CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(b) The Company disposed of 100% of Group Communications Pty Limited. The
disposal details are:
<TABLE>
<CAPTION>
30 JUNE
1995
$
----------
<S> <C>
Proceeds on sale:
Cash............................................................................ 118,096
Other........................................................................... --
----------
118,096
----------
----------
DETAILS OF NET ASSETS DISPOSED
Assets
Cash at bank.................................................................... --
Trade debtors................................................................... 133,385
Liabilities
Bank overdraft.................................................................. --
----------
Fair value of net tangible assets................................................. 133,385
Loss on disposal.................................................................. (15,289)
----------
118,096
----------
----------
NET CASH EFFECT
Cash proceeds..................................................................... 118,096
Cash at bank included in net assets disposed...................................... --
Bank overdraft included in net assets disposed.................................... --
----------
Cash proceeds from disposal of controlled entities as reflected in consolidated
accounts......................................................................... 118,096
----------
----------
</TABLE>
(C) FINANCING ACTIVITIES
COMMONWEALTH BANK FACILITY
Neville Jeffress Australia Pty Limited has an overdraft facility with the
Commonwealth Bank of Australia. The facility is also with Neville Jeffress
Sydney Pty Limited, Neville Jeffress Canberra Pty Limited, Neville Jeffress
Queensland Pty Limited, Neville Jeffress Adelaide Pty Limited, Neville Jeffress
Darwin Pty Limited and Armstrong's Australia Pty Limited. The conditions of the
facility provide for an aggregate overdraft limit across all of the
aforementioned companies of $100,000. At 30 June 1995, this facility was not in
use.
FINANCE FACILITIES IN PLACE AT 30 JUNE 1995
BILLS DISCOUNT FACILITY
Neville Jeffress Queensland Pty Limited had a Bills Discount Facility of
$800,000 with the Commonwealth Bank of Australia, which was subject to annual
review and which was due to expire on 1 December 1999. At 30 June 1995, this
facility was fully utilized.
F-39
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN AUSTRALIAN DOLLARS)
11 CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
AGC FACILITY
Neville Jeffress Sydney Pty Limited had a business loan facility of
$3,250,000 with Australian Guarantee Corporation Limited ("AGC"). At 30 June
1995, $2,740,000 of the facility was in use. The AGC facility is subject to
annual review.
Armstrong's Australia Pty Limited had a similar facility with AGC to draw up
to $1,000,000. Drawings were secured by the debtors of Armstrong's NSW Pty
Limited and Armstrong's Victoria Pty Limited. At 30 June 1995, this facility was
not in use.
Media Monitors Australia Pty Limited had a similar facility with AGC to draw
up to $400,000. Drawings were secured on the debtors of Armstrong's NSW Pty
Limited and Armstrong's Victoria Pty Limited. At 30 June 1995, this facility was
not in use.
12 RELATED PARTY TRANSACTIONS
REMUNERATION OF DIRECTORS
<TABLE>
<CAPTION>
30 JUNE
1995
12 MONTHS
$
----------
<S> <C>
Amounts received or due and receivable by the directors of the economic entity from corporations of
which they are directors or related bodies corporate or entities controlled by the chief entity.... 2,973,832
----------
----------
The directors have availed themselves of ASC Class Order 94/1529 in the disclosure of directors'
remunerations and benefits
Amounts received or due and receivable by directors of Neville Jeffress Australia Pty Limited from
that company and related bodies corporate.......................................................... 506,580
The number of directors of Neville Jeffress Australia Pty Limited whose remuneration (including
superannuation contributions) falls within the following bands:
$20,000-$29,999..................................................................................... 1
$60,000-$69,999..................................................................................... 2
$150,000-$159,999.................................................................................... 1
$210,000-$219,999.................................................................................... 1
</TABLE>
In the opinion of the directors, remuneration paid to directors is
considered reasonable.
OTHER RELATED PARTY TRANSACTIONS
(a) The directors of Neville Jeffress Australia Pty Limited during the 1995
financial year were:
<TABLE>
<S> <C>
N Jeffress B M Robertson
P G Bush P A Allen
C D Cameron
</TABLE>
F-40
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN AUSTRALIAN DOLLARS)
12 RELATED PARTY TRANSACTIONS (CONTINUED)
(b) Related party transactions which occurred during the financial year
included:
(i) Transactions with related parties of the Neville Jeffress Australia
Group
During the year, the company traded with other companies in the Neville
Jeffress Group at normal commercial rates.
Interest has been paid/(received) on intercompany loans between subsidiaries
of Neville Jeffress Australia Pty Limited under normal commercial terms and
conditions.
Interest received on a loan from Neville Jeffress Australia Pty Limited to
Neville Jeffress Holdings Pty Limited under normal commercial terms and
conditions amounted to $104,582 for the year ended 30 June 1995.
Loans receivable under normal commercial terms and conditions at:
<TABLE>
<CAPTION>
30 JUNE
1995
$
------------
<S> <C>
Current
Neville Jeffress Holdings Pty Limited......................................... 2,355,276
Controlled entities of Neville Jeffress Australia Pty Limited................. --
Other related parties......................................................... --
Non-Current
Neville Jeffress Holdings Pty Limited......................................... --
Controlled entities of Neville Jeffress Australia Pty Limited................. --
Other related parties......................................................... --
------------
2,355,276
------------
------------
</TABLE>
Loans payable under normal commercial terms and conditions at:
<TABLE>
<CAPTION>
30 JUNE
1995
$
------------
<S> <C>
Current
Neville Jeffress Holdings Pty Limited......................................... --
Controlled entities of Neville Jeffress Australia Pty Limited................. --
Other related parties......................................................... 228,206
Non-Current
Neville Jeffress Holdings Pty Limited......................................... --
Controlled entities of Neville Jeffress Australia Pty Limited................. --
Other related parties......................................................... 242,489
------------
470,695
------------
------------
</TABLE>
Franchise fees have been received by Neville Jeffress Australia Pty Limited
from subsidiaries under normal commercial terms and conditions, amounting to
$1,648,759 for the year ended 30 June 1995.
F-41
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN AUSTRALIAN DOLLARS)
12 RELATED PARTY TRANSACTIONS (CONTINUED)
Subsidiaries of Neville Jeffress Australia Pty Limited have paid rent on
buildings they occupied that are owned by a company controlled by N. Jeffress
under normal commercial terms and conditions amounting to $516,142 for the year
ended 30 June 1995.
The premises occupied by Neville Jeffress - Parramatta Pty Limited were
rented from The Jeffress Advertising Staff Superannuation Fund under normal
commercial terms and conditions.
(ii) Transactions with the directors of Neville Jeffress Australia Pty
Limited and the economic entity
Accounting and taxation services were provided by C.D. Cameron to other
group companies under normal terms and conditions.
Consulting fees were paid to J Griffin Pty Ltd, of which Mr. J Griffin is a
director, at normal commercial rates. J Griffin Pty Ltd has loaned funds to the
company at 9% interest per annum, compounded quarterly and repayable at call. At
30 June 1995, the balance of the loan outstanding was $26,877. Mr. J. Griffin is
a director of Neville Jeffress Perth Pty Limited.
The company has borrowed funds from N. Jeffress, a director. At 30 June
1995, the balance of this unsecured loan amounted to $170,381.
(iii) Transactions with director-related entities
Travel services were provided by Barrenjoey Travel Pty Limited under normal
commercial terms and conditions. Directors associated with Barrenjoey Travel are
N. Jeffress and C.D. Cameron.
Mrs. L. Griffin, a director-related party, has loaned funds to the company
at 9% interest per annum, compounded quarterly and repayable at call. At 30 June
1995, the balance of the loan outstanding was $24,493.
Media billings revenue under normal commercial terms and conditions
aggregated $639. These transactions were undertaken with respect to Bernie
Finance and Leasing of which Mr. B.D. Lewis is a director. Mr. B.D. Lewis is a
director of Neville Jeffress Adelaide Pty Limited.
(c) At 30 June 1995, Neville Jeffress Holdings Pty Limited was the ultimate
controlling entity.
(d) Interests in the shares of entities within the economic entity held by
directors of the company and their director-related entities as of 30 June 1995.
Mr. N. Jeffress had an indirect interest in 91% of the shares of Neville
Jeffress Australia Pty Limited through his controlling interest in Neville
Jeffress Holdings Pty Limited.
Messrs. C.D. Cameron and P.G. Bush had an indirect interest in the shares of
Neville Jeffress Australia Pty Limited through their interest in Petzow Holdings
Pty Limited which owned 9% of the shares of Neville Jeffress Australia Pty
Limited.
There have been no movements in directors' shareholdings since the 1 July
1994, with the exception of:
Mr. N. Jeffress disposed of
(a) 150,800 ordinary shares of Armstrong's Australia Pty Limited; and
F-42
<PAGE>
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN AUSTRALIAN DOLLARS)
12 RELATED PARTY TRANSACTIONS (CONTINUED)
(b) one ordinary share of Neville Jeffress Victoria Pty Limited
13 CONTINGENT LIABILITIES
Neville Jeffress Australia Pty Limited has agreed to support the valuation
of The Neville Jeffress Advertising Staff Superannuation Fund investment
property at 12 Palmer Street, North Parramatta, of which Neville
Jeffress--Parramatta Pty Limited is the sole tenant. Based on a company
valuation at 30 June 1995, a contingent liability of $260,000 exists.
A liability may exist in relation to the contract of employment of a senior
executive of the Company. Notice has been served on the company under the
contract and the company is proceeding to establish its contractual liability.
The maximum exposure of the liability is estimated at $500,000.
14 SUBSEQUENT EVENTS
All of the issued share capital of the company was acquired by a subsidiary
of TMP Worldwide Inc. with effect from 1 July 1996. In accordance with the terms
of the purchase of shares agreement prior to 30 June 1996, the following
transactions occurred:
(1) NJA disposed of its investments in:
-- Media Monitors Australia Pty Limited and its controlled entities;
-- National Advertising Services Pty Limited; and
-- Neville Jeffress Newsagencies Pty Limited.
(2) Certain controlled entities of NJA, which owned certain properties,
disposed of those properties.
(3) The company declared and paid to its previous shareholders a
dividend amounting to $4,714,183.
(4) The company acquired the minority interests in certain controlled
entities.
F-43
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TMP Worldwide Inc.
New York, New York
We have audited the statements of operations and cash flows of Rogers &
Associates Advertising, Inc. for the year ended March 31, 1994 and the nine
months ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows for the year
ended March 31, 1994 and the nine months ended December 31, 1994 of Rogers &
Associates Advertising, Inc., in conformity with generally accepted accounting
principles.
BDO SEIDMAN, LLP
San Francisco, California
July 25, 1996
F-44
<PAGE>
ROGERS & ASSOCIATES ADVERTISING, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
MARCH 31, 1994 DECEMBER 31, 1994
--------------- -----------------
<S> <C> <C>
Commissions and fees.......................................................... $ 5,128,820 $ 6,576,309
--------------- -----------------
Operating expenses:
Salaries and related costs.................................................. 2,573,656 2,276,553
Office and general.......................................................... 1,935,314 2,044,810
--------------- -----------------
Total operating expenses................................................ 4,508,970 4,321,363
--------------- -----------------
Operating income........................................................ 619,850 2,254,946
Other income (expense):
Finance charges and interest income......................................... 49,000 63,992
Interest expense............................................................ (3,154) (885)
Other, net.................................................................. 48,022 (12,110)
--------------- -----------------
Income before provision for income taxes...................................... 713,718 2,305,943
Provision for income taxes.................................................... 2,374 3,227
--------------- -----------------
Net income.................................................................... $ 711,344 $ 2,302,716
--------------- -----------------
--------------- -----------------
</TABLE>
See accompanying notes to financial statements.
F-45
<PAGE>
ROGERS & ASSOCIATES ADVERTISING, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
MARCH 31, 1994 DECEMBER 31, 1994
-------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................. $ 711,344 $ 2,302,716
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation.............................................................. 107,067 91,573
Allowance for doubtful accounts........................................... 10,000 22,880
Gain on sale of marketable securities..................................... -- (2,275)
Loss on disposition of furniture and equipment............................ -- 14,385
Changes in assets and liabilities:
Increase in accounts receivable......................................... (1,547,267) (1,590,437)
(Increase) decrease in other receivables................................ 21,694 (27,296)
Increase in prepaid expenses............................................ (2,172) (68,800)
(Increase) decrease in deposits......................................... (7,728) 2,356
Increase in accounts payable............................................ 918,375 568,890
Increase (decrease) in accrued expenses................................. (33,889) 54,670
Increase (decrease) in deferred revenue................................. (35,189) 330,222
Increase (decrease) in income taxes payable............................. (35,198) 1,627
-------------- ------------------
Net cash provided by operating activities............................. 107,037 1,700,511
-------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment......................................... (174,436) (145,298)
Proceeds from sale of marketable securities................................. -- 13,875
Purchase of marketable securities........................................... -- (15,475)
Notes receivable--shareholders.............................................. (38,003) (154,460)
Notes receivable--employees................................................. (32,894) 6,809
-------------- ------------------
Net cash used in investing activities................................. (245,333) (294,549)
-------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on line of credit.................................................. (20,000) (300,000)
Distributions to shareholders............................................... (151,923) (300,000)
Bank overdraft.............................................................. 139,701 (139,701)
-------------- ------------------
Net cash used in financing activities................................. (32,222) (739,701)
-------------- ------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......................... (170,518) 666,261
CASH AND CASH EQUIVALENTS, beginning of period................................ 170,518 --
-------------- ------------------
CASH AND CASH EQUIVALENTS, end of period...................................... $ -- $ 666,261
-------------- ------------------
-------------- ------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest.................................................................. $ 3,154 $ 885
Income taxes.............................................................. 2,857 800
</TABLE>
See accompanying notes to financial statements.
F-46
<PAGE>
ROGERS & ASSOCIATES ADVERTISING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INCOME TAXES
Rogers & Associates Advertising, Inc. (the "Company") has elected S
Corporation status for both federal and California income tax reporting
purposes. Under S Corporation status, income and expense flow directly to the
Company's shareholders and the Company generally has no federal income tax
liability for federal income tax reporting purposes. Under current California
laws, S Corporations are treated the same as for federal purposes, but are
liable for a nominal income tax rate at the corporation level.
Pursuant to Internal Revenue Code Section 7519, S Corporations that maintain
fiscal year-ends are required to make deposits with the Internal Revenue
Service. These deposits represent deferred tax, calculated based on personal
income tax rates, on revenue earned during the deferral period that will be
passed through to the Company's shareholders.
REVENUE RECOGNITION
Revenues are derived from commissions for advertisements placed in
newspapers and other media, plus associated fees for related services.
Commissions and fees are recognized upon placement date of the related
advertisement.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all
highly liquid instruments with original maturities of three months or less to be
cash equivalents.
NATURE OF BUSINESS
The Company was incorporated in the State of California in March 1981. The
Company provides recruitment and other advertising services through branch
offices in California, Texas, Florida and Illinois.
NOTE 2 -- COMMITMENTS
The Company leases all of its branch facilities under long-term operating
leases which expire at various times through November 1999. The lease agreement
calls for the Company to pay for insurance and property taxes associated with
some of the facilities. Rent expense for the year ended March 31, 1994
F-47
<PAGE>
ROGERS & ASSOCIATES ADVERTISING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- COMMITMENTS (CONTINUED)
and the nine months ended December 31, 1994 was $363,368 and $258,278. The
future minimum lease payments required under noncancelable operating leases as
of December 31, 1994 are as follows:
<TABLE>
<S> <C>
1995............................................................... $ 275,396
1996............................................................... 247,983
1997............................................................... 222,775
1998............................................................... 223,879
1999............................................................... 112,229
---------
$1,082,262
---------
---------
</TABLE>
NOTE 3 -- EMPLOYEE BENEFIT PLANS
The Company maintains a profit sharing plan under Section 401(k) of the
Internal Revenue Code ("IRC"). Under the plan, employees may elect to defer up
to fifteen percent of their salary, subject to Internal Revenue Service limits.
In addition, the plan allows for the Company to make discretionary contributions
based upon participants' salaries. The Company made approximately $12,700 and
$13,500 in contributions to the plan for the year ended March 31, 1994 and the
nine months ended December 31, 1994, respectively. In addition, the Company
maintains an employee benefit plan pursuant to Section 125 of the IRC, whereby
employees may elect to withhold pre-tax dollars to pay for certain health
insurance and/or other employee benefits.
NOTE 4 -- CREDIT RISK AND ECONOMIC DEPENDENCE
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily accounts receivable. The Company
performs continuing credit evaluations of its customers and does not require
collateral. The Company has not experienced significant losses related to
receivables from individual customers or groups of customers in any particular
industry or geographic area.
A material part of the Company's business is performed for one customer.
Revenue earned from this customer represents approximately 20% of the Company's
total revenue and $460,880 of the Company's accounts receivable balance as of
December 31, 1994.
At December 31, 1994, the Company has deposits with a financial institution
in excess of $100,000, the federally-insured limit.
NOTE 5 -- SUBSEQUENT EVENT
On January 4, 1995, the Company entered into an asset purchase agreement
(the "Agreement") whereby it sold substantially all of its assets. The Agreement
calls for the total purchase price of $10,755,000, plus accounts payable and new
equity (estimated at approximately $3,000,000) to be paid over a period of three
years.
Prior to December 31, 1994, the Company received $300,000 related to an
option payment received from the purchaser, which will be recorded as revenue in
the period the sale is completed.
F-48
<PAGE>
[LOGO]
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[ALTERNATE INTERNATIONAL]
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED SEPTEMBER 23, 1996
[ ] SHARES
TMP WORLDWIDE INC.
COMMON STOCK
--------------
OF THE [ ] SHARES OF COMMON STOCK OFFERED HEREBY, [ ] SHARES ARE
BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE
INTERNATIONAL UNDERWRITERS AND [ ] SHARES ARE BEING OFFERED
INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE
U.S. UNDERWRITERS. SEE "UNDERWRITERS."
OF THE [ ] SHARES OF COMMON STOCK OFFERED HEREBY, [ ] SHARES
ARE BEING OFFERED BY TMP WORLDWIDE INC. ("TMP" OR THE "COMPANY") AND
[ ] SHARES ARE BEING OFFERED BY CERTAIN STOCKHOLDERS OF THE
COMPANY (THE "SELLING STOCKHOLDERS"). THE COMPANY WILL NOT RECEIVE ANY
OF THE PROCEEDS FROM THE SALE OF THE COMMON STOCK BY THE SELLING
STOCKHOLDERS. SEE "PRINCIPAL AND SELLING STOCKHOLDERS." PRIOR TO
THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON
STOCK OF THE COMPANY. IT IS CURRENTLY ANTICIPATED THAT THE
INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN $[ ] AND
$[ ] PER SHARE. SEE "UNDERWRITERS" FOR A DISCUSSION
OF THE FACTORS TO BE CONSIDERED IN DETERMINING THE
INITIAL PUBLIC OFFERING PRICE.
------------------------
APPLICATION HAS BEEN MADE FOR QUOTATION OF THE COMMON STOCK ON THE
NASDAQ NATIONAL MARKET UNDER THE SYMBOL "TMPW."
------------------------
AFTER GIVING EFFECT TO THIS OFFERING (ASSUMING THE OVER-ALLOTMENT OPTION IS NOT
EXERCISED), THE COMPANY WILL HAVE OUTSTANDING SHARES OF COMMON STOCK
WITH ONE VOTE PER SHARE (REPRESENTING % OF THE COMBINED VOTING POWER
OF THE COMPANY) AND SHARES OF CLASS B COMMON STOCK WITH TEN
VOTES PER SHARE (REPRESENTING % OF THE COMBINED VOTING POWER OF
THE COMPANY). CLASS B COMMON STOCK IS CONVERTIBLE, ON A
SHARE-FOR-SHARE BASIS, INTO COMMON STOCK. OTHER THAN VOTING
AND CONVERSION RIGHTS, THE TERMS OF THE COMMON STOCK AND
CLASS B COMMON STOCK ARE SUBSTANTIALLY SIMILAR.
SEE "DESCRIPTION OF CAPITAL STOCK."
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 OF THIS PROSPECTUS FOR INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------
PRICE $ A SHARE
-----------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
PER SHARE..................... $ $ $ $
TOTAL(3)...................... $ $ $ $
</TABLE>
- ------------
(1) THE COMPANY AND THE SELLING STOCKHOLDERS HAVE AGREED TO INDEMNIFY THE
UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SEE "UNDERWRITERS."
(2) BEFORE DEDUCTING ESTIMATED EXPENSES OF THE OFFERING PAYABLE BY THE COMPANY,
ESTIMATED AT $1,800,000.
(3) THE COMPANY HAS GRANTED THE U.S. UNDERWRITERS AN OPTION, EXERCISABLE WITHIN
30 DAYS OF THE DATE HEREOF, TO PURCHASE UP TO AN AGGREGATE OF 1,[ ]
ADDITIONAL SHARES OF COMMON STOCK AT THE PRICE TO PUBLIC, LESS UNDERWRITING
DISCOUNTS AND COMMISSIONS, FOR THE PURPOSE OF COVERING OVER-ALLOTMENTS, IF
ANY. IF THE U.S. UNDERWRITERS EXERCISE SUCH OPTION IN FULL, THE TOTAL PRICE
TO PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS AND PROCEEDS TO SELLING
STOCKHOLDERS WILL BE $ , $ AND $ , RESPECTIVELY.
SEE "UNDERWRITERS."
THE SHARES ARE OFFERED, SUBJECT TO PRIOR SALE WHEN, AS AND IF ACCEPTED BY
THE UNDERWRITERS NAMED HEREIN AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS
BY DAVIS POLK & WARDWELL, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT
DELIVERY OF THE SHARES WILL BE MADE ON OR ABOUT , 1996 AT THE OFFICES OF
MORGAN STANLEY & CO. INCORPORATED, NEW YORK, N.Y., AGAINST PAYMENT THEREOF IN
SAME DAY FUNDS.
-------------------
MORGAN STANLEY & CO.
INTERNATIONAL
DONALDSON LUFKIN & JENRETTE
SECURITIES CORPORATION
LADENBURG, THALMANN & CO. INC.
, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an itemized statement of all estimated
expenses in connection with the issuance and distribution of the securities
being registered:
<TABLE>
<S> <C>
SEC filing fee................................................ $ 27,758.62
NASD filing fee............................................... $ 8,550.00
Nasdaq National Market Listing Fee............................ $ *
Printing expenses............................................. $ *
Legal fees and expenses....................................... $ *
Accounting fees and expenses.................................. $ *
Blue sky expenses and counsel fees............................ $ 20,000.00
Transfer agent and registrar fees............................. $ *
Miscellaneous................................................. $ *
------------
Total....................................................... $1,800,000.00
------------
------------
</TABLE>
- ------------------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the General Corporation Law of the State of Delaware
provides that a Delaware corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
Section 145(b) provides that a Delaware corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person acted in
any of the capacities set forth above, against expenses actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted under standards similar to those discussed above, except that
no indemnification may be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine that despite the adjudication of liability, such person
is fairly and reasonably entitled to be indemnified for such expenses which the
Court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to in subsections (a) and (b) or in the defense of any claim, issue or
matter therein, he shall be indemnified against expenses actually and reasonably
incurred by him in connection therewith; that indemnification provided for by
Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; and that the corporation may purchase and
maintain insurance on behalf of a director or officer of the corporation
II-1
<PAGE>
against any liability asserted against him or incurred by him in any such
capacity or arising out of his status as such whether or not the corporation
would have the power to indemnify him against such liabilities under such
Section 145. The Company's directors and officers are insured against losses
arising from any claim against them as such for wrongful acts or omissions,
subject to certain limitations.
The Company's Bylaws provide that the Company shall indemnify certain
persons, including officers, directors and controlling persons, to the fullest
extent permitted by the General Corporation Law of the State of Delaware. The
Company has also entered into indemnification agreements with its current
directors and executive officers. Reference is made to the Bylaws and Form of
Indemnification Agreement filed as Exhibits 3.2 and 10.2.
Under Section 9 of the Underwriting Agreement, the underwriters are
obligated, under certain circumstances, to indemnify officers, directors and
controlling persons of the Company against certain liabilities, including
liabilities under the Securities Act of 1933. Reference is made to the form of
Underwriting Agreement to be filed as Exhibit 1.1 hereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Immediately prior to the effectiveness of this Registration Statement, the
Company will issue 5,943,506 shares of Common Stock, 14,787,539 shares of Class
B Common Stock and 200,000 shares of 10.5% Cumulative Preferred Stock to the
stockholders of McKelvey Enterprises, Inc. ("MEI") pursuant to the merger of MEI
with and into the Company and the exercise of certain warrants and options. On
August 30, 1996, the Company had issued one share of Class B Common to Andrew J.
McKelvey at a purchase price of $[ ]. Prior to the foregoing issuances of
stock, the Company had not issued any securities.
The securities to be issued by the Company as described above will not be
registered under the Securities Act in reliance upon exemptions contained in
Section 4(2) thereof.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation.
3.2 Bylaws.
4.1 Form of Common Stock Certificate*
5.1 Opinion of Fulbright & Jaworski L.L.P.*
10.1 Form of Employee Confidentiality and Non-Solicitation Agreement.
10.2 Form of Indemnification Agreement.
10.3 1996 Stock Option Plan.*
10.4 Form of Stock Option Agreement under 1996 Stock Option Plan.
10.5 1996 Stock Option Plan for Non-Employee Directors.
10.6 Form of Stock Option Agreement under 1996 Stock Option Plan for Non-Employee Directors.
10.7 Lease, dated as of October 31, 1978, between Telephone Marketing Programs Inc. and PDC Realty Inc. as
agent for MRI Broadway Rental, Inc., as modified by modifications dated January, 1979 and June 20, 1991.
10.8 Share Sale and Purchase Agreement, dated July 2, 1996, relating to the entire issued share capital of
Neville Jeffress Australia Pty Limited, between Neville Jeffress Holding Pty Limited, Petzow Holdings Pty
Ltd, TMP Australia Pty Limited and Neville Jeffress Australia Pty Ltd.
10.9 Asset Purchase Agreement, dated as of January 3, 1995, by and among Rogers Acquisition Corp., Rogers &
Associates Advertising, Inc., Curtis Rogers, Steven Schmidt and Ronni Rogers.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<C> <S>
10.10 Amended and Restated Accounts Receivable Management and Security Agreement, dated as of June 27, 1996,
between TMP Worldwide Inc. and BNY Financial Corporation, as amended by Amendment No. 1 to Amended and
Restated Accounts Receivable Management and Security Agreement, dated as of August 29, 1996.
10.11 Form of Agreement and Plan of Merger of TMP Worldwide Inc., Worldwide Classified Inc., McKelvey
Enterprises, Inc. and Telephone Marketing Programs Incorporated.
10.12 Stock Purchase Agreement, dated May 26, 1977, among Telephone Marketing Programs, Inc. Andrew J. McKelvey,
Timothy P. Hanley and Bard Publishing Company, as amended on June 15, 1977.
10.13 Agreement, dated as of January 3, 1995, among Andrew J. McKelvey, Aeronautic Media, Inc. and McKelvey
Enterprises, Inc., relating to a yacht.
10.14 Stock Purchase Agreement, dated as of January 1, 1996, between Andrew J. McKelvey and McKelvey
Enterprises, Inc., relating to the common stock of Volando, Inc.
10.15 Contribution Agreement, dated as of January 1, 1996, between Andrew J. McKelvey and McKelvey Enterprises,
Inc., relating to the common stock of EPI Aviation, Inc.
10.16 Lease Agreement, dated as of June 1, 1996, by and between TPH & AJM, a partnership, and Telephone
Directory Advertising, Inc.
10.17 Contribution Agreement, dated as of July 16, 1996, between Andrew J. McKelvey and McKelvey Enterprises,
Inc., relating to the common stock of General Directory Advertising Services, Inc.
10.18 Stock Purchase Agreement, dated as of August 15, 1996, between Andrew J. McKelvey and McKelvey
Enterprises, Inc., relating to the common stock of National Media Holding Company, Inc.
10.19 Stock Purchase Agreement, dated as of September 1, 1996, between Andrew J. McKelvey and McKelvey
Enterprises, Inc., relating to the common stock of Telephone Directory Advertising, Inc.
10.20 Stock Purchase Agreement, dated as of September 4, 1996, between Andrew J. McKelvey and McKelvey
Enterprises, Inc., relating to the common stock of S.M.E.T. Servizio Marketing Elenchi Telefonici s.r.l.
10.21 Agreement, dated as of March 17, 1996, between TMP Worldwide Inc. and George Eisele, as amended by
Amendment 1 to Agreement, dated as of September 5, 1996.
10.22 Management Agreement, dated as of January 1, 1996, between Cala Services Inc. and Cala H.R.C. Ltd.
10.23 Lease Agreement, dated May 15, 1993, between 12800 Riverside Drive Corporation and TMP Worldwide Inc., as
amended by Amendment No. 1 to Lease Agreement, dated June 1, 1993.
10.24 Indenture, dated April 29, 1988, between International Drive, L.P. and Telephone Marketing Programs, Inc.
10.25 Amended and Restated Employment Agreement, dated as of September 11, 1996, between TMP Interactive Inc.
and Jeffrey C. Taylor.
11 Statement regarding computation of earnings per share.
21 Subsidiaries of the Company.*
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of BDO Nelson Parkhill.
23.3 Consent of Fulbright & Jaworski L.L.P. (to be filed as part of Exhibit 5.1).
24 Power of Attorney (included on signature page).
</TABLE>
- ------------------------
* To be filed by amendment.
II-3
<PAGE>
(b) Financial Statement Schedules. The following financial statement
schedules are filed herewith:
Schedule II-Valuation of Qualifying Accounts.
All other schedules are omitted because they are not required or are not
applicable or the information is included in the financial statements or notes
thereto.
ITEM 17. UNDERTAKINGS
A. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the provisions described above in Item 14, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted against the Registrant by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
B. The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
C. The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
under the Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on September 20, 1996.
By: /s/ ANDREW J. MCKELVEY
--------------------------------------
Name: Andrew J. McKelvey
Title: Chairman of the Board and
President
II-5
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints Andrew J. McKelvey, Thomas G. Collison and Roxane
Previty, or any one of them acting alone, his true and lawful attorney-in-fact
and agent with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign (i) any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and all documents in connection
therewith, and (ii) a Registration Statement, and any and all amendments
thereto, relating to the offering covered hereby filed pursuant to Rule 462(b)
under the Securities Act of 1933, with the Securities and Exchange Commission,
granting unto each said attorney-in-fact and agents full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that any said
attorneys-in-fact and agents, or any substitute or substitutes of any of them,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ ANDREW J. MCKELVEY Chairman of the Board, September 20, 1996
- ------------------------------ President and Director
Andrew J. McKelvey (principal executive
officer)
/s/ THOMAS G. COLLISON Vice Chairman September 20, 1996
- ------------------------------ (principal financial
Thomas G. Collison officer)
/s/ ROXANE PREVITY Chief Financial Officer September 20, 1996
- ------------------------------ (principal accounting
Roxane Previty officer)
/s/ GEORGE R. EISELE Director September 20, 1996
- ------------------------------
George R. Eisele
/s/ JOHN R. GAULDING Director September 20, 1996
- ------------------------------
John R. Gaulding
/s/ GRAEME K. HOWARD, JR. Director September 20, 1996
- ------------------------------
Graeme K. Howard, Jr.
Director September , 1996
- ------------------------------
Jean-Louis Pallu
/s/ JOHN SWANN Director September 20, 1996
- ------------------------------
John Swann
II-6
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE
[THE FOLLOWING IS THE FORM OF THE OPINION THAT BDO SEIDMAN, LLP WILL BE IN A
POSITION TO ISSUE UPON CONSUMMATION OF THE MERGERS DISCUSSED IN NOTE 1 AND THE
STOCK ISSUANCE DISCUSSED IN NOTE 2 TO THE CONSOLIDATED FINANCIAL STATEMENTS.]
TMP Worldwide Inc.
New York, New York
The audits referred to in our report dated March 15, 1996, except for Note
15(b) which is as of July 24, 1996, Note 15(c) which is as of July 29, 1996,
Note 15(d) which is as of August 1, 1996, Note 6 which is as of August 29, 1996
and Notes 1 and 2 which are as of October , 1996, relating to the consolidated
financial statements of TMP Worldwide Inc. and Subsidiaries, which is included
in the Prospectus constituting a part of this Registration Statement included
the audit of financial statement Schedule II, Valuation and Qualifying Accounts.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based upon our audits.
In our opinion, such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
BDO SEIDMAN, LLP
New York, New York
March 15, 1996
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN C
-----------
COLUMN B ADD COLUMN E
----------- ----------- -----------
COLUMN A BALANCE AT CHARGED TO COLUMN D BALANCE AT
- ---------------------------------------------------------------- BEGINNING COSTS AND ----------- END OF
DESCRIPTIONS OF PERIOD EXPENSES DEDUCTIONS PERIOD
- ---------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1993
Allowance for doubtful accounts................................ $ 1,117 $ 1,744 $ 1,207 $ 1,654
Year ended December 31, 1994
Allowance for doubtful accounts................................ $ 1,654 $ 793 $ 429 $ 2,018
Year ended December 31, 1995
Allowance for doubtful accounts................................ $ 2,018 $ 2,850 $ 1,003 $ 3,865
Six months June 30, 1996
Allowance for doubtful accounts................................ $ 3,865 $ 1,993 $ 1,982 $ 3,876
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. DESCRIPTION PAGE
- --------- --------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
1.1 Form of Underwriting Agreement.*...................................................................
3.1 Certificate of Incorporation.......................................................................
3.2 Bylaws.............................................................................................
4.1 Form of Common Stock Certificate*..................................................................
5.1 Opinion of Fulbright & Jaworski L.L.P.*............................................................
10.1 Form of Employee Confidentiality and Non-Solicitation Agreement....................................
10.2 Form of Indemnification Agreement..................................................................
10.3 1996 Stock Option Plan.*...........................................................................
10.4 Form of Stock Option Agreement under 1996 Stock Option Plan........................................
10.5 1996 Stock Option Plan for Non-Employee Directors..................................................
10.6 Form of Stock Option Agreement under 1996 Stock Option Plan for Non-Employee Directors.............
10.7 Lease, dated as of October 31, 1978, between Telephone Marketing Programs Inc. and PDC Realty Inc.
as agent for MRI Broadway Rental, Inc., as modified by modifications dated January, 1979 and June
20, 1991...........................................................................................
10.8 Share Sale and Purchase Agreement, dated July 2, 1996, relating to the entire issued share capital
of Neville Jeffress Australia Pty Limited, between Neville Jeffress Holding Pty Limited, Petzow
Holdings Pty Ltd, TMP Australia Pty Limited and Neville Jeffress Australia Pty Ltd.................
10.9 Asset Purchase Agreement, dated as of January 3, 1995, by and among Rogers Acquisition Corp.,
Rogers & Associates Advertising, Inc., Curtis Rogers, Steven Schmidt and Ronni Rogers..............
10.10 Amended and Restated Accounts Receivable Management and Security Agreement, dated as of June 27,
1996, between TMP Worldwide Inc. and BNY Financial Corporation, as amended by Amendment No. 1 to
Amended and Restated Accounts Receivable Management and Security Agreement, dated as of August 29,
1996...............................................................................................
10.11 Agreement and Plan of Merger of TMP Worldwide Inc., Worldwide Classified Inc., McKelvey
Enterprises, Inc. and Telephone Marketing Programs Incorporated....................................
10.12 Stock Purchase Agreement, dated May 26, 1977, among Telephone Marketing Programs, Inc. Andrew J.
McKelvey, Timothy P. Hanley and Bard Publishing Company, as amended on June 15, 1977...............
10.13 Agreement, dated as of January 3, 1995, among Andrew J. McKelvey, Aeronautic Media, Inc. and
McKelvey Enterprises, Inc., relating to a yacht....................................................
10.14 Stock Purchase Agreement, dated as of January 1, 1996, between Andrew J. McKelvey and McKelvey
Enterprises, Inc., relating to the common stock of Volando, Inc....................................
10.15 Contribution Agreement, dated as of January 1, 1996, between Andrew J. McKelvey and McKelvey
Enterprises, Inc., relating to the common stock of EPI Aviation, Inc...............................
10.16 Lease Agreement, dated as of June 1, 1996, by and between TPH & AJM, a partnership, and Telephone
Directory Advertising, Inc.........................................................................
10.17 Contribution Agreement, dated as of July 16, 1996, between Andrew J. McKelvey and McKelvey
Enterprises, Inc., relating to the common stock of General Directory Advertising Services, Inc.....
10.18 Stock Purchase Agreement, dated as of August 15, 1996, between Andrew J. McKelvey and McKelvey
Enterprises, Inc., relating to the common stock of National Media Holding Company, Inc.............
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION PAGE
- --------- --------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
10.19 Stock Purchase Agreement, dated as of September 1, 1996, between Andrew J. McKelvey and McKelvey
Enterprises, Inc., relating to the common stock of Telephone Directory Advertising, Inc............
10.20 Stock Purchase Agreement, dated as of September 4, 1996, between Andrew J. McKelvey and McKelvey
Enterprises, Inc., relating to the common stock of S.M.E.T. Servizio Marketing Elenchi Telefonici
s.r.l..............................................................................................
10.21 Agreement, dated as of March 17, 1996, between TMP Worldwide Inc. and George Eisele, as amended by
Amendment 1 to Agreement, dated as of September 5, 1996............................................
10.22 Management Agreement, dated as of January 1, 1996, between Cala Services Inc. and Cala H.R.C.
Ltd................................................................................................
10.23 Lease Agreement, dated May 15, 1993, between 12800 Riverside Drive Corporation and TMP Worldwide
Inc., as amended by Amendment No. 1 to Lease Agreement, dated June 1, 1993.........................
10.24 Indenture, dated April 29, 1988, between International Drive, L.P. and Telephone Marketing
Programs, Inc......................................................................................
10.25 Amended and Restated Employment Agreement, dated as of September 11, 1996, between TMP Interactive
Inc. and Jeffery C. Taylor.........................................................................
11 Statement regarding computation of earnings per share..............................................
21 Subsidiaries of the Company.*......................................................................
23.1 Consent of BDO Seidman, LLP........................................................................
23.2 Consent of BDO Nelson Parkhill.....................................................................
23.3 Consent of Fulbright & Jaworski L.L.P. (to be filed as part of Exhibit 5.1)........................
24 Power of Attorney (included on signature page).....................................................
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
CERTIFICATE OF INCORPORATION
OF
TELEPHONE MARKETING PROGRAMS INCORPORATED
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Title 8, Chapter 1 of the Delaware Code and the
Acts amendatory thereof and supplemental thereto, and known, identified, and
referred to as the "General Corporation Law of the State of Delaware"), does
hereby certify:
ARTICLE I
NAME
The name of the Corporation is Telephone Marketing Programs
Incorporated (the "Corporation").
ARTICLE II
AGENT FOR SERVICE
The address of the Corporation's registered office in the State of
Delaware is 15 East North Street, in the City of Dover, County of Kent. The
name of the Corporation's registered agent at such address is United
Corporate Services, Inc.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
INCORPORATOR
The name and mailing address of the sole incorporator is as follows:
Andrew J. McKelvey
c/o TMP Worldwide Inc.
1633 Broadway - 33rd Floor
New York, New York 10103
<PAGE>
ARTICLE V
CAPITAL
(1) CLASSES AND NUMBER OF SHARES
The total number of shares of all classes of stock which the
Corporation has authority to issue is two hundred forty million (240,000,000)
shares, consisting of two hundred million (200,000,000) shares of Common Stock,
par value $.001 per share (the "Common Stock"), thirty-nine million
(39,000,000) shares of Class B Common Stock, par value $.001 per share (the
"Class B Common Stock"), two hundred thousand shares (200,000) shares of 10.5%
Cumulative Preferred Stock, par value $10.00 per share (the "Cumulative
Preferred Stock"), and eight hundred thousand (800,000) shares of Preferred
Stock, par value $.001 per share, which shall have such designations as may be
authorized by the Board of Directors from time to time (the "Preferred Stock").
(2) POWER AND RIGHTS OF THE COMMON STOCK AND THE CLASS B COMMON STOCK
A. VOTING RIGHTS. Each share of Common Stock is entitled to one
vote and each share of Class B Common Stock is entitled to ten votes on all
matters. Except as described below, the Common Stock and the Class B Common
Stock vote together as a single class on all matters presented for a vote of the
stockholders, including the election of directors. The holders of a majority of
the outstanding shares of Common Stock or Class B Common Stock, voting as
separate classes, must approve certain amendments affecting shares of such
class. Specifically, if there is any proposal to amend the Certificate of
Incorporation in a manner that would increase or decrease the number of
authorized shares of Common Stock or Class B Common Stock, increase or decrease
the par value of the shares of Common Stock or Class B Common Stock or alter or
change the powers, preferences, or special rights of the shares of Common Stock
or Class B Common Stock so as to affect them adversely, such an amendment must
be approved by a majority of the outstanding shares of the affected class,
voting separately as a class. In addition, any merger or consolidation in which
each share of Common Stock receives consideration that is not of the same type
or is less than the amount of the consideration to be received by each share of
Class B Common Stock, other than consideration payable in securities which
provide each share of Class B Common Stock with the number of votes that is no
more than ten times the number of votes provided each share of Common Stock,
must be approved by a majority of the outstanding shares of Common Stock, voting
separately as a class. Shares of Common Stock and Class B Common Stock do not
have cumulative voting rights.
B. DIVIDENDS. Each share of Common Stock and Class B Common Stock
is entitled to dividends if, as and when dividends may be declared by the Board
of Directors of the Corporation and paid. Dividends must be paid on both the
Common Stock and the
-2-
<PAGE>
Class B Common Stock at any time that dividends are paid on either. Any
dividend so declared and payable in cash, capital stock of the Corporation
(other than Common Stock or Class B Common Stock) or other property will be paid
equally, share for share, on the Class B Common Stock and Common Stock.
Dividends and distributions payable in shares of Class B Common Stock may be
paid only on shares of Class B Common Stock, and dividends and distributions
payable in shares of Common Stock may be paid only on shares of Common Stock.
If a dividend or distribution payable on Common Stock is made on the Common
Stock, the Corporation must also make a simultaneous dividend or distribution on
the Class B Common Stock. Pursuant to any such dividend or distribution, each
share of Class B Common Stock will receive a number of shares of Class B Common
Stock equal to the number of shares of Common Stock payable on each share of
Common Stock.
C. CLASS B COMMON STOCK CONVERSION. Each share of the Class B Common
Stock may at any time be converted at the election of the holder thereof into
one share of the Common Stock. Any holder of shares of Class B Common Stock may
elect to convert any or all of such shares at one time or at various times in
such holder's discretion. Such right shall be exercised by the surrender of the
certificate representing each share of Class B Common Stock to be converted to
the Corporation at its principal executive offices, accompanied by a written
notice of the election by the holder thereof to convert and (if so required by
the Corporation) by instruments of transfer, in form satisfactory to the
Corporation, duly executed by such holder or his duly authorized attorney. The
issuance of a certificate or certificates for shares of the Common Stock upon
conversion of shares of Class B Common Stock shall be made without charge for
any stamp or other similar tax in respect of such issuance. However, if any
such certificate or certificates is or are to be issued in a name other than
that of the holder of the shares of Class B Common Stock to be converted, the
person or persons requesting the issuance thereof shall pay to the Corporation
the amount of any tax which may be payable in respect of any such transfer, or
shall establish to the satisfaction of the Corporation that such tax has been
paid. As promptly as practicable after the surrender for conversion of a
certificate or certificates representing shares of Class B Common Stock and the
payment of any tax as hereinabove provided, the Corporation will deliver to, or
upon the written order of, the holder of such certificate or certificates, a
certificate or certificates representing the number of shares of Common Stock
issuable upon such conversion, issued in such name or names as such holder may
direct. Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of the surrender of the certificate or
certificates representing shares of Class B Common Stock (or, if on such date
the transfer books of the Corporation shall be closed, then immediately prior to
the close of business on the first date thereafter that said books shall be
open), and all rights of such holder arising from ownership of shares of Class B
Common Stock shall cease at such time, and the person or persons in whose name
or names the certificate or certificates representing shares of Common Stock are
to be issued shall be treated for all purposes as having become the record
holder or holders of such shares of Common Stock at such time and shall have and
may exercise all the rights and powers appertaining thereto. No adjustments in
respect of
-3-
<PAGE>
past cash dividends shall be made upon the conversion of any share of Class B
Common Stock; PROVIDED, THAT, if any shares of Class B Common Stock shall be
converted into shares of Common Stock subsequent to the record date for the
payment of a dividend or other distribution on shares of Class B Common Stock
but prior to such payment, the registered holder of such shares of Class B
Common Stock at the close of business on such record date shall be entitled to
receive on the payment date, with respect to the shares of Common Stock received
upon such conversion, the dividend or other distribution which would have been
payable had such shares of Common Stock been outstanding and held of record on
such dividend record date by the registered holder on such dividend record date
of the shares of Class B Common Stock so converted in lieu of the dividend
otherwise payable on the shares of Class B Common Stock so converted. The
Corporation shall at all times reserve and keep available, solely for the
purpose of issuance upon conversion of outstanding shares of Class B Common
Stock, such number of shares of Common Stock as may be issuable upon the
conversion of all such outstanding shares of Class B Common Stock; PROVIDED,
THAT, the Corporation may deliver shares of Common Stock which are held in the
treasury of the Corporation for shares of Class B Common Stock to be converted.
If any share of Common Stock requires registration with or approval of any
governmental authority under any federal or state law before such share of
Common Stock may be issued upon conversion, the Corporation will endeavor to
cause such share to be duly registered or approved, as the case may be. The
Corporation will endeavor to list shares of Common Stock required to be
delivered upon conversion prior to such delivery upon any national securities
exchange or national market system on which the outstanding shares of Common
Stock may be listed at the time of such delivery. All shares of Common Stock
which may be issued upon conversion of shares of Class B Common Stock will, upon
issuance, be fully paid and nonassessable. The aggregate amount of stated
capital represented by shares of Common Stock issued upon conversion of shares
of Class B Common Stock shall be the same as the aggregate amount of stated
capital represented by the shares of Class B Common Stock so converted.
D. MANDATORY CONVERSION OF CLASS B COMMON STOCK. At any time when
(i) the aggregate voting power of all outstanding shares of Class B Common Stock
as reflected on the stock transfer books of the Corporation falls below 15% of
the aggregate voting power of all outstanding shares of Common Stock and Class B
Common Stock of the Corporation, (ii) the Board of Directors and the holders of
a majority of the outstanding shares of Class B Common Stock approve the
conversion of all the shares of Class B Common Stock into Common Stock, or (iii)
when the death of the holder of a majority of the shares of Class B Common Stock
occurs, then, immediately upon the occurrence of any such event, without any act
on anyone's part, the outstanding shares of Class B Common Stock shall be
converted into shares of Common Stock in accordance with Section C above. At
any time when a holder of shares of Class B Common Stock sells or assigns such
holder's beneficial ownership of any shares of Class B Common Stock then,
immediately upon the occurrence of any such event, without any act on anyone's
part, the specific shares of Class B Common Stock so sold or assigned shall be
converted into shares of Common Stock in
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accordance with Section C above. For purposes of the immediately preceding
sentence, the pledge or grant of a security interest in, or the formation or
existence of any lien, encumbrance or similar right against, a share of Class B
Common Stock shall not be deemed a sale or assignment of the beneficial
ownership of that share of Class B Common Stock unless and until the beneficiary
of such pledge, security interest, lien, encumbrance or similar right realizes
or forecloses upon its interest therein and becomes the beneficial owner of such
specific share of Class B Common Stock. In the event of any conversion
described above, certificates formerly representing outstanding shares of Class
B Common Stock shall thereupon and thereafter be deemed to represent the number
of shares of Common Stock into which such shares of Class B Common Stock are
convertible.
E. LIQUIDATION RIGHTS. In the event the Corporation shall be
liquidated, dissolved or wound up, whether voluntarily or involuntarily, after
there shall have been paid or set aside for the holders of all shares of the
Preferred Stock and Cumulative Preferred Stock then outstanding the full
preferential amounts to which they are entitled under the terms of such
Preferred Stock or Cumulative Preferred Stock, the net assets of the Corporation
remaining thereafter shall be divided among the holders of the Common Stock and
Class B Common Stock in such a manner that the amount of such net assets
distributed to each share of Common Stock shall be equal to the amount of such
assets distributed to each share of Class B Common Stock.
F. RESTRICTIONS ON THE ISSUANCE OF ADDITIONAL CLASS B COMMON STOCK.
Additional shares of Class B Common Stock may only be issued upon stock splits
of, or stock dividends on, the existing Class B Common Stock. No stockholder of
the Corporation shall have preemptive or other rights to subscribe for
additional shares of the Corporation.
G. MERGER, CONSOLIDATION, SALE OF ASSETS. Subject to the prior and
superior rights of the Preferred Stock and the Cumulative Preferred Stock, if
any, in the event of any merger or consolidation of the Corporation with or into
another corporation in which the Corporation shall not survive, or the sale or
transfer of all or substantially all of the assets of the Corporation to another
entity, or a merger or consolidation in which the Corporation shall be the
surviving entity but its Common Stock and Class B Common Stock is exchanged for
stock, securities or property of another entity, the holders of Common Stock and
Class B Common Stock shall be entitled to receive all cash, securities and other
property received by the Corporation.
H. RESIDUAL RIGHTS. All rights accruing to the outstanding shares of
the Corporation not expressly provided for to the contrary in this Certificate
of Incorporation, as it may from time to time be amended or supplemented, shall
be vested in the Common Stock and Class B Common Stock.
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(3) POWER AND RIGHTS OF THE 10.5% CUMULATIVE PREFERRED STOCK AND
PREFERRED STOCK.
A. 10.5 % CUMULATIVE PREFERRED STOCK
1. DIVIDEND RIGHTS. (a) The holders ("Cumulative Preferred
Holder(s)") of issued and outstanding shares of 10.5% Cumulative Preferred Stock
(the "Cumulative Preferred Stock") shall be entitled to receive, when and as
declared by the Board of Directors of the Corporation, out of funds legally
available for the payment of dividends, a cumulative cash dividend at an annual
rate of $1.05 per share, payable on the first day of May of each year (or if
such date is not a regular business day, then the next business day thereafter),
commencing on May 1, 1996. Dividends on the issued and outstanding shares of
Cumulative Preferred Stock shall be preferred and cumulative and shall accrue
from day to day from the date on which such shares are originally issued by the
Corporation ("Original Issue Date"). The initial Cumulative Preferred Holders
shall also be entitled to receive, when and as declared by the Board of
Directors of the Corporation, out of funds legally available for the payment of
dividends, a cash dividend on each share equal to the amount of accrued but
unpaid dividends, if any, to which such holders were entitled on the Original
Issue Date as a result of their ownership of a share of 10.5% Cumulative
Preferred Stock of McKelvey Enterprises, Inc., a New York corporation (the
"McKelvey Enterprises Preferred Stock"), that was converted into a share of
Cumulative Preferred Stock. Cumulative Preferred Holders shall not be entitled
to participate in any other or additional earnings or profits of the Corporation
beyond the foregoing dividend rights by reason of owning Cumulative Preferred
Stock.
(b) Unless the full amount of cumulative dividends on the Cumulative
Preferred Stock up to and including the most current dividend payment date shall
have been paid, or declared and a sum sufficient for the payment thereof set
apart, or in the event the Corporation is in default in its redemption
obligations under Section A3(a) below, the Corporation shall not at any time (i)
set aside or apply any sum for the purchase or redemption of any outstanding
Common Stock or other capital stock of the Corporation, except the Cumulative
Preferred Stock, or (ii) declare any dividend (other than a dividend payable in
Common Stock of the Corporation) or distribution on, or set aside or apply any
sum for the payment of any dividend or other distribution on, the Common Stock
or other capital stock of the Corporation, except the Cumulative Preferred
Stock.
2. VOTING RIGHTS. Except as may otherwise be required by the
General Corporation Law of the State of Delaware and as set forth below in
Section A5, the Cumulative Preferred Holders shall not be entitled to vote their
shares of Cumulative Preferred Stock on any matter submitted to a vote of the
shareholders of the Corporation or at any meeting of such shareholders.
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3. REDEMPTION RIGHTS.
(a) OPTIONAL REDEMPTION BY CUMULATIVE PREFERRED HOLDERS ("PUT").
(i) At any time or from time to time after the Original Issue Date,
any Cumulative Preferred Holder may give the Corporation notice of intention to
require the Corporation to redeem ("Put") all or any portion of such Cumulative
Preferred Holder's Cumulative Preferred Stock (collectively, "Put Shares"); and
the Corporation shall redeem the Put Shares, all subject to the limitations
described below.
(ii) Notwithstanding the Put right provided to Cumulative Preferred
Holders under Section A3(a)(i) above, the Corporation shall not be required to
redeem Put Shares in any single twelve-month period commencing on and continuing
after the original issue date of the McKelvey Enterprises Preferred Stock in
excess of the number of shares of Cumulative Preferred Stock equal to (A) 20% of
the aggregate number of shares of the McKelvey Enterprises Preferred Stock
originally issued, multiplied by the number of twelve-month periods after the
original issue date of the McKelvey Enterprises Preferred Stock (with the first
twelve-month period immediately following the original issue date of the
McKelvey Enterprises Preferred Stock being considered "one," the twelve-month
period thereafter being considered "two" and so on), less (B) the sum of the
number of Put Shares previously redeemed by the Corporation pursuant to the
exercise by Cumulative Preferred Holders of Put rights and the number of put
shares previously redeemed by McKelvey Enterprises, Inc. pursuant to the
exercise by holders of McKelvey Enterprises Preferred Stock of their put rights.
In addition, in the event required distributions or loan obligations to
participants under the Corporation's profit sharing plan at any time exceeds the
limitations set forth above, the Cumulative Preferred Holders may require the
Corporation to redeem that number of additional shares of Cumulative Preferred
Stock needed to permit the Cumulative Preferred Holders to make such
distributions or loans to participants and the proceeds shall be applied solely
for such purposes.
(iii) The cash redemption price to be paid for each Put Share redeemed
pursuant to this Section A3(a) shall be an amount equal to the par value
thereof, plus the amount of any unpaid cumulative dividends accrued thereon
through the date of redemption (collectively, "Put Price").
(iv) A Cumulative Preferred Holder may exercise a Put by mailing to
the Corporation written notice of exercise of the Put ("Put Notice"), first
class postage prepaid, certified, return receipt requested, not less than 30
days nor more than 60 days prior to the proposed redemption date. Such Put
Notice shall be accompanied by the certificate or certificates evidencing all
the Put Shares, together with executed stock transfer instruments sufficient to
effect the transfer of all the Put Shares to the Corporation. Such Put Notice
shall specify the number of Put Shares subject to such Put and shall become
effective three business days after mailing to the Corporation (accompanied by
certificates and appropriate
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stock transfer instruments) in the manner provided above. Certificates
accompanying the Put Notice shall represent Put Shares which are free and clear
of all liens, claims and encumbrances of every nature and kind whatsoever,
except any restrictions imposed by the federal and any applicable state
securities laws and except as provided in Section A6 hereof. The closing of the
Put shall take place on the date specified by the Cumulative Preferred Holder in
its Put Notice, which date shall not be less than 30 days nor more than 60 days
after the effective date of the Put Notice. At the closing, the Cumulative
Preferred Holder shall receive from the Corporation a wire transfer or certified
check in an amount equal to the total Put Price for all Put Shares redeemed
thereby.
(v) If a Cumulative Preferred Holder exercises a Put, and if the
Corporation shall not have sufficient surplus to permit it to lawfully purchase
all of the Put Shares subject to any Put under the General Corporation Law of
the State of Delaware, the Corporation shall purchase all of such Put Shares as
soon thereafter as it may lawfully do so.
(vi) In the event that the Corporation shall default in the redemption
of the full amount of Put Shares subject to an exercised Put, until such default
shall be cured in full (A) no dividends shall be declared, paid or set aside for
payment on the issued and outstanding shares of Common Stock (other than a
dividend payable in Common Stock of the Corporation) or any other capital stock
of the Corporation (other than a dividend payable in Class B Common Stock of the
Corporation), except the Cumulative Preferred Stock; (B) no other distribution
shall be declared, made or set aside for distribution upon the shares of Common
Stock or any other capital stock of the Corporation, except the Cumulative
Preferred Stock; (C) no shares of Common Stock, or any other capital stock of
the Corporation, except the Cumulative Preferred Stock, shall be redeemed,
purchased or otherwise acquired for any consideration by the Corporation; and
(D) cumulative dividends on such unredeemed Put Shares shall continue to accrue
through the ultimate redemption date and be added to the Put Price.
(vii) In case less than all of the shares of Cumulative Preferred Stock
represented by any surrendered certificate are not subject to redemption
pursuant to the exercise of a Put right, a new certificate shall be issued
representing the unredeemed shares.
(viii) All shares of Cumulative Preferred Stock redeemed pursuant to the
exercise of a Put as hereinabove provided, shall be retired and cancelled and
shall not be reissued, and no shares shall be issued in lieu thereof or in
exchange therefor.
(b) OPTIONAL REDEMPTION BY CORPORATION ("CALL").
(i) At any time or from time to time on and after May 1, 1996, the
Corporation shall have the right and option, exercisable by a resolution of its
Board of Directors, to redeem the entire amount or any part of the shares of
issued and outstanding Cumulative Preferred Stock (collectively, "Called
Shares") out of funds legally available
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therefore, upon not less than 60 days' written notice ("Call Notice") to the
Cumulative Preferred Holders thereof specifying the date ("Call Date") and the
place for surrender of the certificates evidencing the Called Shares, by paying
to each such Cumulative Preferred Holder the following amount for each Called
Share (depending upon the Call Date), together with the amount of any unpaid
cumulative dividends accrued on the Called Shares through the Call Date
(collectively, "Call Price"):
Call Price
Call Date (plus unpaid dividends)
----------------------------- -----------------------
May 1, 1996 - April 30, 1997 $10.525
May 1, 1997 - April 30, 1998 10.420
May 1, 1998 - April 30, 1999 10.315
May 1, 1999 - April 30, 2000 10.210
May 1, 2000 - April 30, 2001 10.105
May 1, 2001 and thereafter 10.000
(ii) (A) A Call Notice shall be given by the Corporation by mailing
to the Cumulative Preferred Holders a written notice of such Call, first class
postage prepaid, certified, return receipt requested, not less than 30 days nor
more than 60 days prior to the Call Date, at each of such Cumulative Preferred
Holders' last address as shall appear upon the stock transfer records of the
Corporation. Any Call Notice which is mailed in the manner provided above shall
be conclusively presumed to have been duly given three business days after such
mailing; and any nonmaterial defect in such Call Notice to any Cumulative
Preferred Holder shall not affect the validity of the proceedings for the Call
of any Called Shares.
(B) The Call Notice to each Cumulative Preferred Holder shall specify
(I) the Call Date; (II) the number of Called Shares and, if fewer than all of
the then issued and outstanding shares of Cumulative Preferred Stock are to be
called, the number of such Called Shares to be called from such Cumulative
Preferred Holder; (III) the total Call Price per Called Share; and (IV) where
payment of the Call Price is to be made by the Corporation upon surrender of the
certificate or certificates representing such Called Shares. The Call Notice
shall also state that any unpaid cumulative dividends accrued thereon through
the Call Date will be paid as specified therein as part of the Call Price and
that from and after the Call Date dividends thereon will cease to accrue.
(C) If any Call Notice shall have been duly given, then from and
after the Call Date set forth therein (unless the Corporation shall default in
the payment of the Call
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Price), notwithstanding that any certificate for Called Shares shall not have
been surrendered for cancellation, all such Called Shares so called shall no
longer be deemed outstanding on and after the Call Date, and the right to
receive dividends thereon and all other rights (including Put rights) with
respect to such Called Shares shall cease and terminate on such Call Date;
except only the right of the Cumulative Preferred Holders thereof to receive the
Call Price, without interest thereon, upon surrender of the certificate or
certificates for such Called Shares.
(iii) If less than all of the issued and outstanding shares of
Cumulative Preferred Stock are to be called, the particular shares to be called
shall be conclusively selected or determined by the Board of Directors of the
Corporation by lot or such other equitable manner as the Board of Directors of
the Corporation shall designate and prescribe by resolution.
(iv) In case less than all of the shares of Cumulative Preferred Stock
represented by any surrendered certificate are called, a new certificate shall
be issued representing the uncalled shares.
(v) All shares of Cumulative Preferred Stock called as hereinabove
provided or otherwise shall be retired and cancelled and shall not be reissued,
and no shares shall be issued in lieu thereof or in exchange therefor.
4. LIQUIDATION RIGHTS. In the event of a partial or complete
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary (hereinafter referred to as "liquidation"), before any assets of the
Corporation shall be paid to, set aside for or distributed to holders of issued
and outstanding shares of Common Stock or any other class of capital stock
ranking subordinate to the Cumulative Preferred Stock, each Cumulative Preferred
Holder shall be entitled to receive out of the assets of the Corporation or the
proceeds thereof, a preferential payment in an amount equal to the par value for
each share of Cumulative Preferred Stock held of record thereby, plus an amount
equal to all unpaid cumulative dividends accrued thereon, but without interest.
Except as provided herein, the Cumulative Preferred Holders shall not be
entitled to participate in any further distribution of the assets of the
Corporation or otherwise by reason of owning Cumulative Preferred Stock. If the
assets distributable upon a liquidation shall be insufficient to permit the
distribution to the Cumulative Preferred Holders of the full preferential
amounts to which such Cumulative Preferred Holders shall be entitled, then such
amounts shall be distributed ratably among the Cumulative Preferred Holders in
proportion to the respective amounts which would otherwise be distributed to
such Cumulative Preferred Holders if such distribution was made in full.
Neither the consolidation or merger of the Corporation with or into any other
corporation or corporations, nor the sale or transfer by the Corporation of all
or any part of its assets or stock, shall be deemed to be a liquidation of the
Corporation for purposes of this Section A4.
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5. PRIORITY OF CUMULATIVE PREFERRED STOCK. The Corporation shall
not at any time (either directly or through merger or consolidation with another
corporation), except with the affirmative vote of the Cumulative Preferred
Holders of at least two-thirds of the shares of the Cumulative Preferred Stock
then outstanding, voting as a single and separate class with one vote per share,
(i) authorize any class of capital stock ranking equal or prior to the
Cumulative Preferred Stock either as to rights on liquidation or redemption, or
as to dividends; (ii) amend the Corporation's Certificate of Incorporation so as
to affect adversely or prejudice the relative rights, preferences or limitations
of the shares of the Cumulative Preferred Stock; or (iii) merge or consolidate
with or into any other corporation, or sell, lease, exchange, mortgage, pledge,
or otherwise dispose of all, or substantially all, of the property and assets of
the Corporation. No vote or consent of the Cumulative Preferred Holders, as a
class, shall be required in connection with the authorization of, or the
increase of the total number of authorized shares of, the Common Stock or any
other class of stock ranking subordinate to the Cumulative Preferred Stock as to
rights on liquidation and redemption, and as to dividends.
6. TRANSFER RIGHTS.
(a) In the event a Cumulative Preferred Holder should decide to sell,
pledge, assign, exchange, hypothecate, encumber or otherwise transfer or dispose
of in any manner, whether voluntarily or by operation of law (hereinafter
collectively referred to as "transfer"), any shares of Cumulative Preferred
Stock, such Cumulative Preferred Holder (hereinafter referred to as a
"Transferring Holder") shall first deliver written notice thereof ("Notice of
Transfer") to the principal business office of the Corporation to the attention
of its Secretary. Such Notice of Transfer shall specify (i) the number of
shares proposed to be transferred ("Offered Shares"); (ii) the date of the
proposed transfer ("Transfer Date"), which Transfer Date shall not be less than
30 days after actual receipt by the Corporation of the Notice of Transfer; (iii)
the identity, including the complete name, address and telephone number, of the
proposed transferee of the Offered Shares ("Proposed Transferee"); and (iv) the
proposed consideration to be received and terms of payment for the Offered
Shares (collectively, "Offering Price"). The Notice of Transfer shall constitute
an offer to transfer all of the Offered Shares to the Corporation and the date
of such offer ("Offer Date") shall be the date of actual receipt by the
Corporation of the Notice of Transfer. The Notice of Transfer shall be
delivered to the Corporation accompanied by the certificate or certificates for
the Offered Shares, together with executed stock transfer instruments sufficient
to effect the transfer of all of the Offered Shares to the Corporation or the
Proposed Transferee, if and when any purchase thereof is effected by the
Corporation or by the Proposed Transferee pursuant to this Section A6, which
shall be held in trust for delivery by the Corporation for the account of the
Transferring Holder, if and when any purchase thereof is effected by the
Corporation or by the Proposed Transferee pursuant to this Section A6. Such
certificates when delivered shall represent Offered Shares which are free and
clear of all liens, claims and encumbrances of every nature or kind whatsoever
(other than the contingent purchase
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right of the Proposed Transferee and any restrictions imposed by the federal and
any applicable state securities laws).
(b) (i) For a period of 30 days after the Offer Date ("Option
Period"), the Corporation shall have the option and right to purchase the
Offered Shares at the price ("Exercise Price") equal to the Offering Price.
(ii) In the event the Corporation shall exercise its option and right
to purchase the Offered Shares pursuant to clause (i) hereof, as evidenced by a
resolution of the Board of Directors of the Corporation, the Corporation shall
signify such exercise within the Option Period by mailing to the Transferring
Holder a written notice of such exercise ("Notice of Exercise"), first class
postage prepaid to the Transferring Holder's last address as shall appear upon
the stock transfer records of the Corporation. The Notice of Exercise shall
specify that (A) the Corporation is exercising its option and right to purchase
the Offered Shares pursuant to clause (i) hereof; (B) the total Exercise Price
for all of the Offered Shares being purchased by the Corporation; and (C) a
business day and hour within 15 days after the date of mailing the Notice of
Exercise for the closing of the purchase ("Purchase Date"). Any Notice of
Exercise which is mailed in the manner provided herein shall be conclusively
presumed to have been duly given when mailed.
(iii) If the Corporation does not duly give the Notice of Exercise
within the Option Period, the offer to the Corporation shall thereupon lapse and
the Transferring Holder may transfer the Offered Shares to the Proposed
Transferee within a period of 30 days thereafter without restriction, but only
in strict compliance with the terms of transfer set forth in the Notice of
Transfer, including, without limitation, the Offering Price. In the event the
proposed transfer of the Offered Shares to the Proposed Transferee is not
consummated within such 30 day period in accordance with the provisions of this
clause (iii), the restrictions of this Section A6 shall again apply. The
Offered Shares so transferred to the Proposed Transferee, and the Proposed
Transferee upon such transfer, shall continue to be subject to all of the terms
and conditions of this Article V, including, without limitation, the provisions
of this Section A6.
(c) All certificates for shares of Cumulative Preferred Stock shall
bear an appropriate legend thereon reflecting the restrictions on the transfer
of such shares otherwise than pursuant to the provisions of this Section A6.
(d) (i) In the event a proposed transfer of the Offered Shares to a
Proposed Transferee or the Corporation shall not be consummated for whatever
reason whatsoever, the holder thereof, and the Offered Shares not transferred,
shall continue to be subject to the provisions of this Section A6.
(ii) Notwithstanding the transfer of any Offered Shares pursuant to
this Section A6, the shares of Cumulative Preferred Stock not transferred to the
Proposed
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Transferee or the Corporation shall continue to be subject to the provisions of
this Section A6.
(iii) The provisions of this Section A6 shall apply to any and all
shares of Cumulative Preferred Stock acquired by a Cumulative Preferred Holder,
whether by purchase, stock dividend, stock split or otherwise.
(e) In the event a Cumulative Preferred Holder shall attempt to
transfer such shares of Cumulative Preferred Stock without complying with the
provisions of this Section A6, including, without limitation, any transfer by
operation of law, or otherwise fails to comply with such Cumulative Preferred
Holder's respective obligations hereunder, the Corporation shall have the right
and option to cancel all of the certificates evidencing the shares of Cumulative
Preferred Stock attempted to be transferred and to reissue stock certificates
representing such shares in the name of the Corporation upon the payment to the
Cumulative Preferred Holder thereof of the aggregate par value for such shares;
and the Cumulative Preferred Holder thereof shall indemnify and hold the
Corporation harmless from and against all costs, losses, damages, liabilities
and expenses as a result of such attempted transfer.
(f) Notwithstanding anything in this Section A6 to the contrary, any
transfer of shares of Cumulative Preferred Stock by a Cumulative Preferred
Holder may be made only in compliance with the Securities Act of 1933, as
amended, and applicable state blue sky statutes, or exemptions therefrom.
B. PREFERRED STOCK. The Board of Directors is hereby authorized,
subject to the provisions contained in this Article V, to issue the Preferred
Stock from time to time in one or more series, which Preferred Stock shall rank
senior to the Common Stock as to dividends and distribution of assets of the
Corporation on dissolution, as hereinafter provided, and shall have such
distinctive designations as may be stated in the resolution or resolutions
providing for the issue of such stock adopted by the Board of Directors. In
such resolution or resolutions providing for the issuance of shares of a
particular series of Preferred Stock, the Board of Directors is hereby expressly
authorized and empowered to fix the number of shares constituting such series
and to fix the relative rights and preferences of the shares of the series so
established to the full extent allowable by law except insofar as such rights
and preferences are fixed herein. Such authorization in the Board of Directors
shall expressly include the authority to fix and determine the relative rights
and preferences of such shares in all respects including, without limitation,
the following:
1. the rate of dividend;
2. whether shares can be redeemed or called and, if so, the
redemption or call price and terms and conditions of redemption
or call;
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3. the amount payable upon shares in the event of dissolution,
voluntary and involuntary liquidation or winding up of the
affairs of the Corporation;
4. purchase, retirement or sinking fund provisions, if any, for the
call, redemption or purchase of shares;
5. the terms and conditions, if any, on which shares may be
converted into Common Stock or any other securities;
6. whether or not shares have voting rights, and the extent of such
voting rights, if any; and
7. whether shares shall be cumulative, noncumulative, or partially
cumulative as to dividends and the date from which any cumulative
dividends are to accumulate.
ARTICLE VI
MEETINGS
Meetings of the stockholders of the Corporation may be held within or
without the State of Delaware, as the Bylaws may provide. The books of the
Corporation may be kept (subject to any provisions contained in the statutes)
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the Bylaws of the Corporation.
Elections of directors need not be by written ballot unless the Bylaws of the
Corporation shall so provide.
ARTICLE VII
BYLAWS
In the furtherance and not in limitation of objects, purposes and
powers conferred by statute, the Board of Directors is expressly authorized to
make, alter or repeal the Bylaws of the Corporation.
ARTICLE VIII
CREDITORS
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may,
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on the application in a summary way of the Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers appointed
for the Corporation under the provisions of Section 291 the General Corporation
Law of the State of Delaware or on the application of trustees in dissolution or
of any receiver or receivers appointed for the Corporation under the provisions
of Section 279 of the General Corporation Law of the State of Delaware, order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing
three fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
ARTICLE IX
DIRECTOR LIABILITY
A director of the Corporation shall have no personal liability to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, this Article shall not eliminate or limit
the liability of a director (i) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of Delaware,
or (iv) for any transaction from which the director derived an improper personal
benefit. If the General Corporation Law of the State of Delaware is hereafter
amended to authorize the further elimination or limitation of the liability of
directors, then the liability of a director of the Corporation, in addition to
the limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended General Corporation Law of the State of
Delaware. Any repeal or modification of this Article by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
ARTICLE X
INDEMNIFICATION
The Corporation shall have the power to provide indemnification to the
fullest extent permitted by Section 145 of the General Corporation Law of the
State of Delaware.
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ARTICLE XI
AMENDMENTS
The Corporation reserves the right to amend, alter, change or repeal
any provisions contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
THE UNDERSIGNED, being the sole incorporator hereinbefore named, for
the purpose of forming the Corporation pursuant to the General Corporation Law
of the State of Delaware, does make this Certificate, hereby declaring and
certifying that this is his act and deed and the facts herein stated are true,
and accordingly has hereunto set his hand this 29th day of August, 1996.
/s/ Andrew J. McKelvey
--------------------------------------
Andrew J. McKelvey
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B Y L A W S
OF
TELEPHONE MARKETING PROGRAMS INCORPORATED
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Dover,
County of Kent, State of Delaware.
Section 2. The Corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of New York, State of New York at such place
as may be fixed from time to time by the board of directors, or at such other
place either within or without the State of Delaware as shall be designated from
time to time by the board of directors and stated in the notice of the meeting.
Meetings of stockholders for any other purpose may be held at such time and
place, within or without the State of Delaware, as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held at such date
and time as shall be designated from time to time by the board of directors and
stated in the notice of the meeting, at which they shall elect by a plurality
vote a board of directors, and transact such other business as may properly be
brought before the meeting.
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not less than ten nor more than sixty days before the date of
the meeting.
Section 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
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The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the chairman of the board or the president and
shall be called by the chairman of the board, the president or secretary at the
request in writing of a majority of the board of directors, or at the request in
writing of stockholders owning a majority in amount of the entire capital stock
of the Corporation issued and outstanding and entitled to vote. Such request
shall state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not less than ten nor more than sixty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, and except as
provided in Section 2 of Article II of these bylaws, the vote of the holders of
a majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which by express provision of the statutes or of the certificate of
incorporation, a different vote is required, in which case such express
provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on or
after three years from its date, unless the proxy provides for a longer period.
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Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the Corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be not less than one and not more than nine as shall be fixed from
time to time by resolution passed by a majority of the whole board. The
directors shall be elected at the annual meeting of the stockholders, except as
provided in Section 2 of this Article, and each director elected shall hold
office until that director's successor is elected and qualified. Directors need
not be stockholders, residents of Delaware or citizens of the United States.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, by a sole remaining
director, or by the stockholders of the Corporation and the directors so chosen
shall hold office until the next annual election and until their successors are
duly elected and shall qualify, unless sooner displaced. If there are no
directors in office, then an election of directors may be held in the manner
provided by statute. If, at the time of filling any vacancy or any newly
created directorship, the directors then in office shall constitute less than a
majority of the whole board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office.
Section 3. The business of the Corporation shall be managed by or
under the direction of its board of directors which may exercise all such powers
of the Corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by these bylaws directed or required
to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
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Section 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may called by the chairman
of the board or the president or any director on seven day's notice to each
director, which notice shall be delivered personally, by courier, by mail or
telegram.
Section 8. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these bylaws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member
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or members thereof present at any meeting and not disqualified from voting,
whether or not such member or members constitute a quorum, may unanimously
appoint another member of the board of directors to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the board of directors, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
certificate of incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the bylaws of the Corporation; and, unless the resolution or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the board of directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
EXECUTIVE COMMITTEE
Section 13. The board of directors may, by resolution passed by a
majority of the whole board of directors, designate an executive committee which
shall have and may exercise all the powers and authority of the board of
directors in the management of the business, properties and affairs of the
Corporation, including authority to take all action provided by law and in the
bylaws to be taken by the board of directors, except as such powers and
authority are limited by Section 11 of this Article. The executive committee
shall consist of those directors appointed by the board of directors. All acts
done and powers conferred by the executive committee shall be deemed to be, and
may be certified as being, done or conferred under authority of the board of
directors.
COMPENSATION OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the board of directors shall have the authority
to fix the compensation of directors. The directors may also be paid their
expenses, if any, of attendance at each meeting of the board of directors and
may be paid a fixed sum for attendance at each meeting of the board of directors
and/or a stated salary as director. The directors may also be granted stock
options at the discretion of the board of directors. No such payment or
compensation shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor. Members of special or
standing committees may be allowed like compensation for attending committee
meetings.
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REMOVAL OF DIRECTORS
Section 15. Unless otherwise restricted by the certificate of
incorporation or these bylaws, any director or the entire board of directors may
be removed, with or without cause, by the holders of a majority of shares
entitled to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at such person's address as it appears on the records
of the Corporation, with postage thereon prepaid, and such notice shall be
deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given by courier or telegram or
personally.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the Corporation shall be chosen by the
board of directors and shall be a chairman of the board, a president, a
secretary and a treasurer. The board of directors may also choose one or more
vice presidents and one or more assistant secretaries and assistant treasurers.
Any number of offices may be held by the same person, unless the certificate of
incorporation or these bylaws otherwise provide.
Section 2. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a chairman of the board of
directors, a president, a secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the Corporation
shall be fixed by the board of directors.
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Section 5. The officers of the Corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by
the board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
Corporation shall be filled by the board of directors.
THE CHAIRMAN AND VICE CHAIRMAN OF THE BOARD
Section 6. The chairman of the board of directors shall preside at
all meetings of stockholders and of the board of directors. The chairman shall
have such other powers and perform such other duties as are provided in these
bylaws and, in addition thereto, as the board of directors may from time to time
determine. The Vice Chairman of the board of directors shall perform such
duties as may be prescribed by the board of directors.
THE PRESIDENT
Section 7. The president shall be the chief executive officer of the
Corporation, shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 8. The president shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the Corporation.
THE VICE-PRESIDENTS
Section 9. In the absence of the president or in the event of the
president's inability or refusal to act, the vice-president (or in the event
there be more than one vice-president, the vice-presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the president, and when so
acting shall have all the powers of and be subject to all the restrictions upon
the president. The vice-presidents shall perform such other duties and have
such other powers as the board of directors may from time to time prescribe.
The board may designate one or more vice-presidents as a senior vice-president.
THE SECRETARY AND ASSISTANT SECRETARY
Section 10. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the Corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. The secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the board of directors, and
shall perform such other duties as may be prescribed by the board of directors
or president, under whose supervision the secretary shall be. The secretary
shall have custody of the
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corporate seal of the Corporation and the secretary, or an assistant secretary,
shall have authority to affix the same to any instrument requiring it and when
so affixed, it may be attested by the secretary's signature or by the signature
of such assistant secretary. The board of directors may give general authority
to any other officer to affix the seal of the Corporation and to attest the
affixing by that officer's signature.
Section 11. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the board of directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the secretary or in the event of the secretary's inability or
refusal to act, perform the duties and exercise the powers of the secretary and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 12. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the board of directors.
Section 13. The treasurer shall disburse the funds of the Corporation
as may be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all the treasurer's transactions as treasurer and of the financial condition of
the Corporation.
Section 14. If required by the board of directors, the treasurer
shall give the Corporation a bond (which shall be renewed every six years) in
such sum and with such surety or sureties as shall be satisfactory to the board
of directors for the faithful performance of the duties of the treasurer's
office and for the restoration to the Corporation, in case of the treasurer's
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in the treasurer's
possession or control belonging to the Corporation.
Section 15. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of the treasurer's
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
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ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the Corporation shall be entitled
to have a certificate, signed by, or in the name of the Corporation by, the
chairman or vice-chairman of the board of directors, or the president or a
vice-president and the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the Corporation, certifying the number of shares owned
by that holder in the Corporation.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if that
person or entity were such officer, transfer agent or registrar at the date of
issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or the
owner's legal representative, to advertise the same in such manner as it shall
require and/or to give the Corporation a bond or payment of applicable insurance
premium in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the Corporation or the transfer agent of
the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meetings, nor more than sixty days prior to
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any other action. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
INDEMNIFICATION
Section 1. The Corporation shall indemnify any director and officer
of the Corporation who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that such director or officer is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by such director or
officer in connection with such action, suit or proceeding if such director or
officer acted in good faith and in a manner such director or officer reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO
CONTENDERE or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his or her conduct was unlawful.
Section 2. The Corporation shall indemnify any director and officer
of the Corporation who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that such
director or officer is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by such director or officer in connection with
the defense or settlement of such action or suit if such director or officer
acted in good faith and in a manner such director or officer reasonably
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believed to be in or not opposed to the best interests of the Corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 3. To the extent that a director or officer of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 1 or 2 of this Article VII or
in defense of any claim, issue or matter therein, that director or officer shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
Section 4. Any indemnification under Sections 1 or 2 of this Article
VII (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director or officer is proper in the circumstances because that director or
officer has met the applicable standard of conduct set forth in Sections 1 or 2
or this Article VII. Such determination shall be made (a) by the board of
directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceedings, or (b) if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders.
Section 5. Expenses (including attorneys' fees) incurred by a
director or officer of the Corporation in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the board of directors in the specific case upon
receipt of an undertaking by or on behalf of the director or officer to repay
such amount if it shall ultimately be determined that such director or officer
is not entitled to be indemnified by the Corporation as authorized in this
Article.
Section 6. The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in an official capacity
and as to action in another capacity while holding such office or position, and
shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director or officer and shall inure to the benefit
of the heirs, executors and administrators of such a person.
Section 7. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the
Corporation, as a director, officer, employee or agent of another Corporation,
partnership, joint venture, trust or other enterprise against any liability
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asserted against such person and incurred by such person in any such capacity,
or arising out of that person's status as such, whether or not the Corporation
would have the power to indemnify such person against such liability under the
provisions of this Article.
Section 8. For purposes of Article VII, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves service by, such director,
officer, employee, or agent, as the case may be, with respect to an employee
benefit plan, its participants, or beneficiaries; and a person who acted in good
faith and in a manner that person reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the Corporation"
as referred to in Article VII.
ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the Corporation
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the Corporation.
CHECKS
Section 4. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
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FISCAL YEAR
Section 5. The fiscal year of the Corporation shall be fixed, and
shall be subject to change, by the Board of Directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name
of the Corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE IX
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new
bylaws may be adopted by the stockholders or by the entire board of directors,
when such power is conferred upon the board of directors by the certificate of
incorporation, at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal bylaws is conferred upon the board of directors by the
certificate of incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal bylaws.
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TMP WORLDWIDE INC.
CONFIDENTIALITY/NON-SOLICITATION AGREEMENT
As a material inducement to my employment by TMP Worldwide Inc. or one
of its affiliates (collectively, "TMP"), I hereby agree as follows:
1. CONFIDENTIALITY. During the course of my employment with TMP I have had
and/or will have access to trade secret, proprietary and confidential
information relating to TMP and its clients, including but not limited to
marketing data, financial information, client lists (including without
limitation Rolodex type or computer based compilations maintained by TMP or me),
details of TMP or client programs and methods, pricing policies, strategies,
profit margins and software. During the course of my employment and thereafter,
I will keep secret and retain in strictest confidence all of such trade secret,
proprietary and confidential information, and will not disclose, disseminate or
use such information to my own advantage or for the advantage of any party other
than TMP.
2. NON-SOLICITATION. For a period of one year after the last day of my
employment with TMP:
(a) I will not, directly or indirectly, call on, solicit, perform
services for, interfere with or endeavor to entice away from TMP any client to
whom TMP provided services at any time during the 12 months preceding the last
day of my employment with TMP, or any prospective client to whom TMP had made a
presentation at any time during the 12 months preceding the last day of my
employment with TMP; and
(b) I will not, directly or indirectly, hire, attempt to hire,
solicit for employment or encourage the departure of any employee of TMP or any
individual who was employed by TMP at any time during the 12 months preceding
the last day of my employment with TMP.
3. GENERAL. During the term of my employment with TMP, I will not directly or
indirectly become employed by or render any services to any competitor of TMP.
I acknowledge that in the event I violate any provisions of this agreement in
addition to its other rights and remedies, TMP shall be entitled to injunctive
relief without the necessity of proving actual damages. I acknowledge that if
any provision of this agreement is held to be unenforceable, the court making
such holding shall have the power to modify such provision and in its modified
form such provision shall be enforced.
THIS AGREEMENT DOES NOT RESTRICT ME FROM WORKING FOR ANY COMPETITOR OF TMP OR
ANY OTHER FIRM AT ANY TIME AFTER MY LAST DAY OF EMPLOYMENT WITH TMP, SUBJECT TO
MY COMPLIANCE WITH 1 AND 2 ABOVE.
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Employee Signature Date Signed
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INDEMNITY AGREEMENT
This INDEMNITY AGREEMENT made and entered into as of ____________,
____, by and between TMP Worldwide Inc., a Delaware corporation (the "Company"),
and ________________ (the "Indemnitee");
WHEREAS, highly competent persons are becoming more reluctant to serve
or to continue serving corporations as directors, officers, employees, agents or
in other capacities unless they are provided with adequate protection through
insurance and indemnification against inordinate risks of claims and actions
against them arising out of their service to and activities on behalf of such
corporations; and
WHEREAS, the current difficulties of obtaining adequate insurance have
increased the difficulty of attracting and retaining such persons; and
WHEREAS, the Board of Directors of the Company has determined that the
inability to attract and retain such persons is detrimental to the best
interests of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection in
the future; and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified; and
WHEREAS, the Indemnitee is willing to serve, continue to serve and
take on additional service for or on behalf of the Company on the condition that
the Indemnitee be so indemnified.
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and the Indemnitee do hereby covenant and agree as
follows:
SECTION 1. INDEMNIFICATION. The Company shall indemnify the
Indemnitee to the fullest extent permitted by applicable law in effect on the
date hereof or as such laws may from time to time be amended. Without
diminishing the scope of the indemnification provided by this Section 1, the
rights of indemnification of the Indemnitee provided hereunder shall include but
shall not be limited to those rights hereinafter set forth, except that no
indemnification shall be paid to the Indemnitee:
(a) on account of any suit in which judgment is rendered against
the Indemnitee for an accounting of profits made from the purchase or
sale by the Indemnitee of securities of the Company pursuant to the
provisions of Section 16(b) of the Securities Exchange Act of 1934, as
amended from time to time, or similar provisions of any federal, state
or local statutory law;
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(b) on account of the Indemnitee's conduct which is finally
adjudged to have been knowingly fraudulent or deliberately dishonest,
or to constitute willful misconduct;
(c) to the extent expressly prohibited by applicable law;
(d) for which payment is actually made to the Indemnitee under a
valid and collectible insurance policy or under a valid and
enforceable indemnity clause, bylaw or agreement, except in respect of
any excess beyond payment under such insurance, clause, bylaw or
agreement;
(e) if a final decision by a court having jurisdiction in the
matter shall determine that such indemnification is not lawful (and,
in this respect, both the Company and the Indemnitee have been advised
that the Securities and Exchange Commission believes that
indemnification for liabilities arising under the federal securities
laws is against public policy and is, therefore, unenforceable and
that claims for indemnification should be submitted to the appropriate
court for adjudication); or
(f) in connection with any proceeding (or part thereof)
initiated by the Indemnitee, or any proceeding by the Indemnitee
against the Company or its directors, officers, employees or other
indemnitees, unless (i) such indemnification is expressly required to
be made by law, (ii) the proceeding was authorized by the Board of
Directors of the Company, (iii) such indemnification is provided by
the Company, in its sole discretion, pursuant to the powers vested in
the Company under applicable law, or (iv) except as provided in
Sections 11 and 12 hereof.
SECTION 2. ACTION OR PROCEEDING OTHER THAN AN ACTION BY OR IN THE
RIGHT OF THE COMPANY. The Indemnitee shall be entitled to the indemnification
rights provided in this Section if the Indemnitee is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative in nature,
other than an action by or in the right of the Company, by reason of the fact
that the Indemnitee is or was a director, officer, employee, agent or fiduciary
of the Company, or is or was serving at the request of the Company as a
director, officer, employee, agent or fiduciary of any other entity or
enterprise, including, but not limited to, another corporation, partnership,
joint venture or trust, or by reason of anything done or not done by the
Indemnitee in any such capacity. Pursuant to this Section, the Indemnitee shall
be indemnified against all expenses (including attorneys' fees), costs,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by the Indemnitee in connection with such action, suit or
proceeding (including, but not limited to, the investigation, defense or appeal
thereof), if the Indemnitee acted in good faith and in a manner the Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the Indemnitee's conduct was unlawful.
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SECTION 3. ACTIONS BY OR IN THE RIGHT OF THE COMPANY. The Indemnitee
shall be entitled to the indemnification rights provided in this Section if the
Indemnitee is a person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding brought by or
in the right of the Company to procure a judgment in its favor by reason of the
fact that the Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or is or was serving at the request of the Company as
a director, officer, employee, agent or fiduciary of another entity or
enterprise, including, but not limited to, another corporation, partnership,
joint venture or trust, or by reason of anything done or not done by the
Indemnitee in any such capacity. Pursuant to this Section, the Indemnitee shall
be indemnified against all expenses (including attorneys' fees), costs and
amounts paid in settlement actually and reasonably incurred by the Indemnitee in
connection with such action, suit or proceeding (including, but not limited to,
the investigation, defense or appeal thereof) if the Indemnitee acted in good
faith and in a manner the Indemnitee reasonably believed to be in or not opposed
to the best interests of the Company; provided, however, that no such
indemnification shall be made in respect of any claim, issue, or matter as to
which applicable law expressly prohibits such indemnification by reason of any
adjudication of liability of the Indemnitee to the Company, unless and only to
the extent that, the Court of Chancery of the State of Delaware or the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, the Indemnitee is fairly and reasonably entitled to indemnity for such
expenses, costs and amounts paid in settlement which such court shall deem
proper.
SECTION 4. INDEMNIFICATION FOR COSTS, CHARGES AND EXPENSES OF
SUCCESSFUL PARTY. Notwithstanding the other provisions of this Agreement, to
the extent that the Indemnitee has served as a witness on behalf of the Company
or has been successful, on the merits or otherwise, in defense of any action,
suit or proceeding referred to in Sections 2 and 3 hereof, or in defense of any
claim, issue or matter therein, including, without limitation, the dismissal of
any action without prejudice, the Indemnitee shall be indemnified against all
costs, charges and expenses (including attorneys' fees) actually and reasonably
incurred by the Indemnitee in connection therewith.
SECTION 5. PARTIAL INDEMNIFICATION. If the Indemnitee is entitled
under any provision of this Agreement to indemnification by the Company for some
or a portion of the expenses (including attorneys' fees), costs, judgments,
fines and amounts paid in settlement actually and reasonably incurred by the
Indemnitee in connection with the investigation, defense, appeal or settlement
of such suit, action, investigation or proceeding described in Section 2 or 3
hereof, but not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), costs, judgments, penalties, fines and amounts paid
in settlement actually and reasonably incurred by the Indemnitee to which the
Indemnitee is entitled.
SECTION 6. DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION. Upon
written request by the Indemnitee for indemnification pursuant to Section 2 or 3
hereof, the entitlement of the Indemnitee to indemnification pursuant to the
terms of this Agreement shall be determined by the following person or persons
who shall be empowered to make such determination: (a) by a majority vote of
Disinterested Directors (as defined in Section 17 below), even though less
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than an quorum; (b) if there are no Disinterested Directors, or if the Board of
Directors by the majority vote of Disinterested Directors so directs, by
Independent Counsel (as defined in Section 17 below) in a written opinion to the
Board of Directors, a copy of which shall be delivered to the Indemnitee, or (c)
by the stockholders. Such Independent Counsel shall be selected by the Board of
Directors and shall be subject to the approval of the Indemnitee, whose approval
shall not be unreasonably withheld. Upon failure of the Board to so select such
Independent Counsel or upon failure of the Indemnitee to so approve, such
Independent Counsel shall be selected by the Chancellor of the State of Delaware
or such other person as the Chancellor shall designate to make such selection.
Such determination of entitlement to indemnification shall be made not later
than 45 days after receipt by the Company of a written request for
indemnification. Such request shall include documentation or information which
is necessary for such determination and which is reasonably available to the
Indemnitee. Any costs or expenses (including attorneys' fees) incurred by the
Indemnitee in connection with the Indemnitee's request for indemnification
hereunder shall be borne by the Company. The Company hereby indemnifies and
agrees to hold the Indemnitee harmless therefrom irrespective of the outcome of
the determination of the Indemnitee's entitlement to indemnification. If the
person making such determination shall determine that the Indemnitee is entitled
to indemnification as part (but not all) of the application for indemnification,
such person shall reasonably prorate such partial indemnification among such
claims, issues or matters.
SECTION 7. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS. The
Secretary of the Company shall, promptly upon receipt of the Indemnitee's
request for indemnification, advise in writing the Board of Directors or such
other person or persons empowered to make the determination as provided in
Section 6 that the Indemnitee has made such request for indemnification. Upon
making such request for indemnification, the Indemnitee shall be presumed to be
entitled to indemnification hereunder and the Company shall have the burden of
proof in the making of any determination contrary to such presumption. If the
person or persons so empowered to make such determination shall have failed to
make the requested indemnification within 45 days after receipt by the Company
of such request, the requisite determination of entitlement to indemnification
shall be deemed to have been made and the Indemnitee shall be absolutely
entitled to such indemnification, absent actual and material fraud in the
request for indemnification. The termination of any action, suit, investigation
or proceeding described in Section 2 or 3 hereof by judgment, order, settlement
or conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not,
of itself: (a) create a presumption that the Indemnitee did not act in good
faith and in a manner which the Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, that the Indemnitee had reasonable cause to believe that
the Indemnitee's conduct was unlawful; or (b) otherwise adversely affect the
rights of the Indemnitee to indemnification except as may be provided herein.
SECTION 8. ADVANCEMENT OF EXPENSES AND COSTS. All reasonable expenses
and costs incurred by the Indemnitee (including attorneys' fees, retainers and
advances of disbursements required of the Indemnitee) shall be paid by the
Company in advance of the final disposition of such action, suit or proceeding
at the request of the Indemnitee within twenty days after the receipt by the
Company of a statement or statements from the Indemnitee requesting such advance
or advances from time to time. The Indemnitee's entitlement to such expenses
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shall include those incurred in connection with any proceeding by the Indemnitee
seeking an adjudication or award in arbitration pursuant to this Agreement.
Such statement or statements shall reasonably evidence the expenses and costs
incurred by the Indemnitee in connection therewith and shall include or be
accompanied by an undertaking by or on behalf of the Indemnitee to repay such
amount if it is ultimately determined that the Indemnitee is not entitled to be
indemnified against such expenses and costs by the Company as provided by this
Agreement or otherwise.
SECTION 9. REMEDIES OF THE INDEMNITEE IN CASES OF DETERMINATION NOT
TO INDEMNIFY OR TO ADVANCE EXPENSES. In the event that a determination is made
that the Indemnitee is not entitled to indemnification hereunder or if payment
has not been timely made following a determination of entitlement to
indemnification pursuant to Sections 6 and 7, or if expenses are not advanced
pursuant to Section 8, the Indemnitee shall be entitled to a final adjudication
in an appropriate court of the State of Delaware or any other court of competent
jurisdiction of the Indemnitee's entitlement to such indemnification or advance.
Alternatively, the Indemnitee at the Indemnitee's option may seek an award in
arbitration to be conducted by a single arbitrator pursuant to the rules of the
American Arbitration Association, such award to be made within sixty days
following the filing of the demand for arbitration. The Company shall not
oppose the Indemnitee's right to seek any such adjudication or award in
arbitration or any other claim. Such judicial proceeding or arbitration shall be
made DE NOVO and the Indemnitee shall not be prejudiced by reason of a
determination (if so made) that the Indemnitee is not entitled to
indemnification. If a determination is made or deemed to have been made
pursuant to the terms of Section 6 or Section 7 hereof that the Indemnitee is
entitled to indemnification, the Company shall be bound by such determination
and is precluded from asserting that such determination has not been made or
that the procedure by which such determination was made is not valid, binding
and enforceable. The Company further agrees to stipulate in any such court or
before any such arbitrator that the Company is bound by all the provisions of
this Agreement and is precluded from making any assertions to the contrary. If
the court or arbitrator shall determine that the Indemnitee is entitled to any
indemnification hereunder, the Company shall pay all reasonable expenses
(including attorneys' fees) and costs actually incurred by the Indemnitee in
connection with such adjudication or award in arbitration (including, but not
limited to, any appellant proceedings).
SECTION 10. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after
receipt by the Indemnitee of notice of the commencement of any action, suit or
proceeding, the Indemnitee will, if a claim in respect thereof is to be made
against the Company under this Agreement, notify the Company in writing of the
commencement thereof; but the omission to so notify the Company will not relieve
it from any liability that it may have to the Indemnitee otherwise than under
this Agreement. Notwithstanding any other provision of this Agreement, with
respect to any such action, suit or proceeding as to which the Indemnitee
notifies the Company of the commencement thereof:
(a) The Company will be entitled to participate therein at its
own expense; and
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(b) Except as otherwise provided in this Section 10(b), to the
extent that it may wish, the Company, jointly with any other
indemnifying party similarly notified, shall be entitled to assume the
defense thereof, with counsel satisfactory to the Indemnitee. After
notice from the Company to the Indemnitee of its election to so assume
the defense thereof, the Company shall not be liable to the Indemnitee
under this Agreement for any legal or other expenses subsequently
incurred by the Indemnitee in connection with the defense thereof
other than reasonable costs of investigation or as otherwise provided
below. The Indemnitee shall have the right to employ the Indemnitee's
own counsel in such action, suit or proceeding, but the fees and
expense of such counsel incurred after notice from the Company of its
assumption of the defense thereof shall be at the expense of the
Indemnitee unless (i) the employment of counsel by the Indemnitee has
been authorized by the Company, (ii) the Indemnitee shall have
reasonably concluded that there may be a conflict of interest between
the Company and the Indemnitee in the conduct of the defense of such
action or (iii) the Company shall not in fact have employed counsel to
assume the defense of the action, in each of which cases the fees and
expenses of counsel shall be at the expense of the Company. The
Company shall not be entitled to assume the defense of any action,
suit or proceeding brought by or on behalf of the Company or as to
which the Indemnitee shall have made the conclusion provided for in
(ii) above.
(c) The Company shall not be liable to indemnify the Indemnitee
under this Agreement for any amounts paid in settlement of any action
or claim effected without its written consent. The Company shall not
settle any action or claim in any manner that would impose any penalty
or limitation on the Indemnitee without the Indemnitee's written
consent. Neither the Company nor the Indemnitee will unreasonably
withhold their consent to any proposed settlement.
SECTION 11. OTHER RIGHTS TO INDEMNIFICATION. The indemnification and
advancement of expenses (including attorneys' fees) and costs provided by this
Agreement shall not be deemed exclusive of any other rights to which the
Indemnitee may now or in the future be entitled under any provision of the
bylaws or Certificate of Incorporation of the Company, any agreement, any vote
of stockholders or Disinterested Directors, any provision of law or otherwise.
SECTION 12. ATTORNEYS' FEES AND OTHER EXPENSES TO ENFORCE AGREEMENT.
In the event that the Indemnitee is subject to or intervenes in any proceeding
in which the validity or enforceability of this Agreement is at issue or seeks
an adjudication or award in arbitration to enforce the Indemnitee's rights
under, or to recover damages for breach of, this Agreement, the Indemnitee, if
the Indemnitee prevails in whole or in part in such action, shall be entitled to
recover from the Company and shall be indemnified by the Company against any
actual expenses for attorneys' fees and disbursements reasonably incurred by the
Indemnitee.
SECTION 13. DURATION OF AGREEMENT. This Agreement shall continue
until and terminate upon the later of: (a) ten years after the Indemnitee has
ceased to occupy any of the positions or have any relationships described in
Sections 2 and 3 of this Agreement; and (b) the
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final termination of all pending or threatened actions, suits, proceedings or
investigations to which the Indemnitee may be subject by reason of the fact that
the Indemnitee is or was a director, officer, employee, agent or fiduciary of
the Company or is or was serving at the request of the Company as a director,
officer, employee, agent or fiduciary of any other entity or enterprise,
including, but not limited to, another corporation, partnership, joint venture
or trust, or by reason of anything done or not done by the Indemnitee in any
such capacity. The indemnification provided under this Agreement shall continue
as to the Indemnitee even though the Indemnitee may have ceased to be a
director, officer, employee, agent or fiduciary of the Company. This Agreement
shall be binding upon the Company and its successors and assigns and shall inure
to the benefit of the Indemnitee and the Indemnitee's spouse, assigns, heirs,
devises, executors, administrators or other legal representatives. Nothing in
this Agreement shall confer upon the Indemnitee the right to continue in the
employ of the Company or affect the right of the Company to terminate the
Indemnitee's employment at any time in the sole discretion of the Company, with
or without cause.
SECTION 14. SEVERABILITY. If any provision or provisions of this
Agreement shall be held invalid, illegal or unenforceable for any reason
whatsoever, (a) the validity, legality and enforceability of the remaining
provisions of this Agreement (including, without limitation, all portions of any
paragraphs of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby, and (b) to
the fullest extent possible, the provisions of this Agreement (including,
without limitation, all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifest by the provision held invalid, illegal or
unenforceable.
SECTION 15. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same Agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.
SECTION 16. HEADINGS. The headings of the paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
SECTION 17. DEFINITIONS. For purposes of this Agreement:
(a) "Disinterested Director" shall mean a director of the
Company who is not or was not a party to the action, suit,
investigation or proceeding in respect of which indemnification is
being sought by the Indemnitee.
(b) "Independent Counsel" shall mean a law firm or a member of a
law firm that neither is presently nor in the past five years has been
retained to represent: (i) the Company or the Indemnitee in any
matter material to either such party, or (ii) any other party to the
action, suit, investigation or proceeding
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giving rise to a claim for indemnification hereunder. Notwithstanding
the foregoing, the term "Independent Counsel" shall not include any
person who, under the applicable standards of professional conduct
then prevailing, would have a conflict of interest in representing
either the Company or the Indemnitee in an action to determine the
Indemnitee's right to indemnification under this Agreement.
SECTION 18. MODIFICATION AND WAIVER. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
SECTION 19. NOTICES. All notices, requests, demands or other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand, courier, or personally, on the date of
delivery, or (ii) if mailed by certified or registered mail with postage
prepaid, on the third business day after the date on which it is so mailed:
(a) If to the Indemnitee, to:
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(b) If to the Company, to:
TMP Worldwide Inc.
1633 Broadway, 33rd Floor
New York, NY 10019
Attention: Andrew J. McKelvey
with a copy to:
TMP Worldwide Inc.
1633 Broadway, 33rd Floor
New York, NY 10019
Attention: Myron F. Olesnyckyj, Esq.
or to such other address as may be furnished to the Indemnitee by the Company or
to the Company by the Indemnitee, as the case may be.
SECTION 20. GOVERNING LAW. The parties hereto agree that this
Agreement shall be governed by, construed and enforced in accordance with, the
laws of the State of Delaware.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
TMP WORLDWIDE INC.
By:
-------------------------------
Name:
Title:
-----------------------------------
Indemnitee
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TMP WORLDWIDE INC.
STOCK OPTION AGREEMENT
AGREEMENT made as of the _________ day of _________________, ____, by
and between TMP Worldwide Inc., a Delaware corporation (the "Company") and
___________________________ (the "Optionee").
W I T N E S S E T H
WHEREAS, pursuant to the TMP Worldwide Inc. 1996 Stock Option Plan
(the "Plan"), the Company desires to grant to the Optionee and the Optionee
desires to accept an option to purchase shares of common stock, $.01 par value
per share, of the Company (the "Common Stock") upon the terms and conditions set
forth in this agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. GRANT. The Company hereby grants to the Optionee an option to
purchase ____________ shares of Common Stock, at a purchase price per share of
$______. This option is intended to be treated as an option which does [not]
qualify as an incentive stock option within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
2. RESTRICTIONS ON EXERCISABILITY. Except as specifically provided
otherwise herein, the option will become exercisable in accordance with the
following schedule based upon the period of the Optionee's continuous employment
or service with the Company or [a Subsidiary] [an Affiliate] (as defined below)
following ________________ ______, _______:
Period of Continuous Incremental Percentage Cumulative Percentage
Employment/Service of Option Exercisable of Option Exercisable
------------------ -------------------- ----------------------
[Less than 1 year 0% 0%
1 year 25% 25%
2 years 25% 50%
3 years 25% 75%
4 or more years 25% 100%]
No shares of Common Stock may be purchased hereunder unless the Optionee shall
have remained in the continuous employ or service of the Company or [a
Subsidiary] [an Affiliate] for at least one year from _______________ _____,
_______. If the Optionee performs services for the Company or [a Subsidiary]
[an Affiliate] in a capacity other than as a director or employee, then, for
purposes hereof, those services will be deemed to be continuous until they are
terminated, and they will be deemed to be terminated at the earlier of the time
provided therefor in the consulting or other agreement governing the performance
of such services or upon completion of the services provided in such agreement
or, if there is no such agreement, at the earlier of the time the Company or
such [Subsidiary] [Affiliate] notifies the Optionee that it no longer
contemplates the utilization of such services or the Optionee's completion or
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termination of such services. Unless sooner terminated, the option will expire
if and to the extent it is not exercised within ten years from the date hereof.
3. EXERCISE. The option may be exercised in whole or in part in
accordance with the above schedule by delivering to the Secretary of the Company
(a) a written notice specifying the number of shares to be purchased, and (b)
payment in full of the exercise price, together with the amount, if any, deemed
necessary by the Company to enable it to satisfy any income tax withholding
obligations with respect to the exercise (unless other arrangements acceptable
to the Company are made for the satisfaction of such withholding obligations).
The exercise price shall be payable in cash or by bank or certified check. The
Company may (in its sole and absolute discretion) permit all or part of the
exercise price to be paid with previously-owned shares of Common Stock, or in
installments (together with interest) evidenced by the Optionee's secured
promissory note.
4. RIGHTS AS STOCKHOLDER. No shares of Common Stock shall be sold
or delivered hereunder until full payment for such shares has been made (or, to
the extent payable in installments, provided for). The Optionee shall have no
rights as a stockholder with respect to any shares covered by the option until a
stock certificate for such shares is issued to the Optionee. Except as
otherwise provided herein, no adjustment shall be made for dividends or
distributions of other rights for which the record date is prior to the date
such stock certificate is issued.
5. NONTRANSFERABILITY. The option is not assignable or transferable
except upon the Optionee's death to a beneficiary designated by the Optionee or,
if no designated beneficiary shall survive the Optionee, pursuant to the
Optionee's will and/or the laws of descent and distribution. During the
Optionee's lifetime, the option may be exercised only by the Optionee or the
Optionee's guardian or legal representative.
6. TERMINATION OF SERVICE, DISABILITY OR DEATH. [If the Optionee
ceases to be employed by or to perform services for the Company and any
[Subsidiary] [Affiliate] for any reason other than death or disability (as
defined below), then, unless sooner terminated under the terms hereof, the
option will terminate on the date three months after the date of the Optionee's
termination of employment or service. If the Optionee's employment or service
is terminated by reason of the Optionee's death or disability (or if the
Optionee's employment or service is terminated by reason of disability and the
Optionee dies within one year after such termination of employment or service),
then, unless sooner terminated under the terms hereof, the option will terminate
on the date one year after the date of such termination of employment or service
(or one year after the Optionee's later death). For purposes hereof, the term
"disability" means the inability of Optionee to perform the customary duties of
Optionee's employment or other service for the Company or [a Subsidiary] [an
Affiliate] by reason of a physical or mental incapacity which is expected to
result in death or be of indefinite duration.]
7. SECURITIES REGISTRATION REQUIRED. Notwithstanding anything
herein to the contrary, the option may not be exercised unless and until a
registration statement covering the shares of Common Stock issuable upon
exercise of the option granted hereunder has been filed with and declared
effective by the Securities and Exchange Commission under the Securities Act of
1933, as amended. Nothing in this agreement shall be deemed to obligate the
Company to
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<PAGE>
effect any such registration. In addition, the option shall in no event be
exercisable and shares shall not be issued hereunder if, in the opinion of
counsel to the Company, such exercise and/or issuance may result in a violation
of federal or state securities laws.
8. STOCK SPLITS, MERGERS, ETC.
(a) In case of any split-up or consolidation of shares, stock
dividend or similar transaction which increases or decreases the number of
outstanding shares of Common Stock, appropriate adjustment shall be made by the
Board of Directors, whose determination shall be final, to the number of shares
which may be purchased under the Plan and the number and option exercise price
per share of the Common Stock which may be purchased under any outstanding
options, including but not limited to those granted hereunder. In the case of a
merger (other than a merger of the Company in which the holders of Common Stock
immediately prior to the merger have the same proportionate ownership of common
stock in the surviving corporation immediately after the merger), consolidation,
acquisition of property or stock, separation, reorganization (other than a mere
reincorporation or the creation of a holding company) or liquidation of the
Company, as a result of which the stockholders of the Company receive cash,
stock or other property in exchange for or in connection with their shares of
Common Stock, the Company will make a reasonable effort, but shall not be
required, to replace any outstanding options with comparable options to purchase
the stock of such other corporation and the Company may, in its sole discretion,
provide for immediate vesting of any unvested shares, it being understood that
immediately prior to any such transaction the Optionee shall nevertheless have
the right to exercise the Optionee's then vested options in accordance with the
terms of this agreement, with all options (vested or unvested) not being
exercised within the time period specified by the Board of Directors being
terminated.
(b) In the event of any adjustment in the number of shares
covered by any option pursuant to the provisions hereof, any fractional shares
resulting from such adjustment will be disregarded and each such option will
cover only the number of full shares resulting from the adjustment.
(c) All adjustments under this Section 8 shall be made by the
Board of Directors of the Company, and its determination as to what adjustments
shall be made, if any, and the extent thereof, shall be final, binding and
conclusive.
9. NONSOLICITATION; CONFIDENTIALITY. As a material inducement to
the Company to grant the option contemplated by this agreement and to enter into
this agreement, the Optionee hereby expressly agrees as follows:
(a) During the course of the Optionee's relationship with one or more
of the Company, its Subsidiaries or Affiliates, the Optionee has had and will
have access to trade secret, proprietary and confidential information relating
to the Company, its Subsidiaries and Affiliates and their respective clients,
including but not limited to marketing data, financial information, client lists
(including without limitation Rolodex type or computer based compilations
maintained by the Company, its Subsidiaries or Affiliates or the Optionee), and
details of programs and methods, pricing policies, strategies, profit margins
and software, in each case of the Company, its Subsidiaries, Affiliates and/or
their respective clients. The
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<PAGE>
Optionee agrees to keep secret and retain in strictest confidence all of such
trade secret, proprietary and confidential information, and will not disclose,
disseminate or use such information to the Optionee's own advantage or for the
advantage of any other person or entity. In the event disclosure of any such
trade secret, proprietary and confidential information is required or
purportedly required by law, the Optionee will provide the Company with prompt
notice of any such requirement so that the Company may seek an appropriate
protective order.
(b) Through the date which is one year after the last day of the
Optionee's employment or service for the Company or any of its Subsidiaries or
Affiliates (the "Termination Date"), except prior to the Termination Date on
behalf of the Company, its Subsidiaries and Affiliates in accordance with the
terms of the Optionee's employment or other relationship, the Optionee will not,
directly or indirectly, solicit or perform Business (as defined below) related
services for, or interfere with or endeavor to entice away from the Company or
any of its Subsidiaries or Affiliates, any client to whom the Company or any of
its Subsidiaries or Affiliates provided services at any time during the 12
months preceding the Termination Date, or any prospective client to whom the
Company or any of its Subsidiaries or Affiliates had made a formal presentation
at any time during the 12 months preceding the Termination Date, and the
Optionee will not, directly or indirectly, hire, attempt to hire, solicit for
employment or encourage the departure of any employee of the Company or any of
its Subsidiaries or Affiliates or any individual who was employed by the Company
or any of its Subsidiaries or Affiliates at any time during the 12 months
preceding the Termination Date. As used herein, the term "Business" means the
yellow pages advertising business, the recruitment advertising business, the
Internet advertising business and any other business in which the Company or any
of its Subsidiaries or Affiliates becomes engaged at any time prior to the
Termination Date.
(c) The Optionee acknowledges that in the event the Optionee violates
any provisions of this Section 9 in addition to its other rights and remedies,
the Company shall be entitled to injunctive relief without the necessity of
proving actual damages. The Optionee acknowledges that if any provision of this
Section 9 is held to be unenforceable, the court making such holding shall have
the power to modify such provision and in its modified form such provision shall
be enforced.
(d) The Optionee acknowledges and agrees that the provisions of this
Section 9 are IN ADDITION TO, and not in lieu of, any nonsolicitation,
confidentiality and/or noncompetition obligations which the Optionee may have,
whether by agreement, fiduciary obligation or otherwise and that the grant and
exercisability of options contemplated by this agreement are expressly made
contingent on the Optionee's compliance with the provisions of this Section 9.
10. CERTAIN DEFINITIONS. As used in this agreement, the term
"Subsidiary" means a subsidiary of the Company within the meaning of Section
424(f) of the Code. As used in this agreement, the term "Affiliate" means an
affiliate of the Company within the meaning of Rule 405 under the Securities Act
of 1933, as amended.
11. NO EMPLOYMENT OR SERVICE RIGHTS. Nothing in this agreement shall
give the Optionee any right to continue in the employ or service of the Company
or [a Subsidiary] [an Affiliate], or interfere in any way with the right of the
Company or [a Subsidiary] [an Affiliate] to terminate the employment or service
of the Optionee.
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<PAGE>
12. PROVISIONS OF PLAN. The provisions of the Plan shall govern if
and to the extent that there are inconsistencies between those provisions and
the provisions hereof. The Optionee acknowledges receipt of a copy of the Plan
prior to the execution of this agreement.
13. ADMINISTRATION. The committee appointed by the Board of
Directors of the Company to administer the Plan will have full power and
authority to interpret and apply the provisions of this agreement and act on
behalf of the Company and the Board of Directors in connection with this
agreement, and the decision of the committee as to any matter arising under
this agreement shall be binding and conclusive as to all persons.
14. MISCELLANEOUS.
(a) This agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
(b) This agreement shall be governed by and construed in
accordance with the laws of the State of Delaware. Except as expressly provided
in Section 9, this agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and controls and supersedes
any prior understandings, agreements or representations by or between the
parties, written or oral with respect to its subject matter and may not be
modified except by written instrument executed by the parties.
[In accordance with the Plan, a number of provisions of this
agreement, including but not limited to the vesting schedule and other bracketed
items throughout this agreement, are subject to revision or change at the
discretion of the Board of Directors.]
IN WITNESS WHEREOF, this agreement has been executed as of the date
first above written.
TMP WORLDWIDE INC.
By:
-------------------------------
---------------------------------
Optionee
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<PAGE>
TMP WORLDWIDE INC.
1996 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE.
The purpose of this 1996 Stock Option Plan for Non-Employee Directors
(the "Plan") of TMP Worldwide Inc. (the "Corporation") is to strengthen the
Corporation's ability to attract and retain the services of knowledgeable and
experienced persons who, through their efforts and expertise, can make
significant contributions to the success of the Corporation's business by
serving as members of the Corporation's Board of Directors and to provide
additional incentive for such directors to continue to work for the best
interests of the Corporation and its stockholders through ownership of its
Common Stock, $.01 par value (the "Common Stock"). Accordingly, the Corporation
will grant to each non-employee director options to purchase shares of the
Corporation's Common Stock on the terms and conditions hereafter established.
2. STOCK SUBJECT TO PLAN.
The Corporation may issue and sell a total of 10,000 shares of its
Common Stock pursuant to the Plan. Such shares may be either authorized and
unissued or held by the Corporation in its treasury. New options may be granted
under the Plan with respect to shares of Common Stock which are covered by the
unexercised portion of an option which has terminated or expired by its terms,
by cancellation or otherwise.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Board of Directors of the
Corporation (the "Board") or by a committee established by the Board. The
interpretation and construction by the Board of any provisions of the Plan or of
any other matters related to the Plan shall be final. The Board may from time
to time adopt such rules and regulations for carrying out the Plan as it may
deem advisable. No member of the Board shall be liable for any action or
determination made in good faith with respect to the Plan.
The Board may at any time amend, alter, suspend or terminate the Plan;
provided, however, that any such action would not impair any option to purchase
Common Stock theretofore granted under the Plan; and provided further that
without the approval of the Corporation's stockholders, no amendments or
alterations would be made which would (i) increase the number of shares of
Common Stock that may be purchased by each non-employee
<PAGE>
director under the Plan (except as permitted by Paragraph 10), (ii) increase the
aggregate number of shares of Common Stock as to which options may be granted
under the Plan (except as permitted by Paragraph 10), (iii) decrease the option
exercise price (except as permitted by Paragraph 10), or (iv) extend the period
during which outstanding options granted under the Plan may be exercised; and
provided further that Paragraph 5 of the Plan shall not be amended more than
once every six months other than to comply with changes in the Internal Revenue
Code of 1986, as amended, or the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.
4. ELIGIBILITY.
All non-employee directors of the Corporation shall be eligible to
receive options under the Plan. Receipt of stock options under any other stock
option plan maintained by the Corporation or any subsidiary shall not, for that
reason, preclude a director from receiving options under the Plan.
5. GRANTS.
(i) Each non-employee director shall be issued an option to
purchase 625 shares of the Corporation's Common Stock (the "Option") on the date
of his initial election or appointment to the Board of Directors (the "Grant
Date") at the following price for the following term and otherwise in accordance
with the terms of the Plan:
(a) The Option exercise price per share of Common Stock shall be
the Fair Market Value (as defined below) of the Common Stock covered
by such Option on the Grant Date.
(b) Except as provided herein, the term of an Option shall be
for a period of ten (10) years from the Grant Date.
(c) Each Option granted under the Plan will be evidenced by a
written agreement in a form approved by the Board. Such agreement
shall contain such terms and conditions as are not inconsistent with
the terms and conditions hereof.
(ii) For purposes hereof, the Fair Market Value of a share of
Common Stock on any date shall be equal to the closing price per share as
published by a national securities exchange on which shares of the Common Stock
are traded on such date or, if there is no sale of Common Stock on such date,
the average of the bid and asked prices on such exchange at the closing of
trading on such date, or if shares of the Common Stock are not listed on a
national securities exchange on such date, the closing price or, if none, the
average
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<PAGE>
of the bid and asked prices in the over the counter market at the close of
trading on such date, or if the Common Stock is not traded on a national
securities exchange or the over the counter market, the fair market value of a
share of the Common Stock on such date as determined in good faith by the Board.
(iii) Options granted hereunder shall not be "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended.
6. REGULATORY COMPLIANCE AND LISTING.
The issuance or delivery of any Option may be postponed by the
Corporation for such period as may be required to comply with the Federal
securities laws, any applicable listing requirements of any applicable
securities exchange and any other law or regulation applicable to the issuance
or delivery of such Options, and the Corporation shall not be obligated to issue
or deliver any Options if the issuance or delivery of such Options would
constitute a violation of any law or any regulation of any governmental
authority or applicable securities exchange.
7. CESSATION AS NON-EMPLOYEE DIRECTOR.
In the event that the holder of an Option granted pursuant to the
Plan shall cease to be a non-employee director of the Corporation for any
reason such holder may exercise any portion of the Option that is exercisable
by him at the time he ceases to be a non-employee director of the
Corporation, but only to the extent such Option is exercisable as of such
date, within six months after the date he ceases to be a non-employee
director of the Corporation.
8. RESTRICTIONS ON EXERCISABILITY AND SALE.
(i) The Board will determine and will set forth in the Option
agreement any vesting or other restrictions on the exercisability of the Option,
subject to earlier termination of the Option as may be required hereunder, and
any vesting or other restrictions on shares of Common Stock acquired pursuant to
the exercise of the Option. All or part of the exercisable portion of an Option
may be exercised at any time during the Option period.
(ii) Notwithstanding anything in the Plan to the contrary, no
Option may be exercised unless and until a registration statement covering the
shares of Common Stock issuable upon exercise of Options granted hereunder has
been filed with, and declared effective by, the Securities and Exchange
Commission under the Securities Act of 1933, as amended. Nothing in this Plan
shall be deemed to obligate the Company to effect any such registration.
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<PAGE>
9. DEATH. In the event that a holder of an Option granted
pursuant to the Plan shall die, his estate, personal representative or
beneficiary may exercise any portion of the Option that was exercisable by the
deceased optionee at the time of his death, but only to the extent such Option
is exercisable as of such date, within twelve months after the date of his
death.
10. STOCK SPLITS, MERGERS, ETC.
In the event of any stock split, stock dividend or similar
transaction which increases or decreases the number of outstanding shares of
Common Stock, appropriate adjustment shall be made by the Board, whose
determination shall be final, to the number and Option exercise price per
share of Common Stock which may be purchased under any outstanding Options.
In the case of a merger, consolidation, sale of stock or similar transaction
which results in a change in control of the Corporation, the Corporation will
make a reasonable effort, but shall not be required, to replace any
outstanding Options granted under the Plan with comparable options to
purchase the stock of such other corporation, or may, in its sole discretion,
provide for immediate maturity of all outstanding Options, with all Options
not being exercised within the time period specified by the Board being
terminated. In the event of any adjustment in the number of shares covered
by any Option pursuant to the provisions hereof, any fractional shares
resulting from such adjustment will be disregarded, and each such Option will
cover only the number of full shares resulting from the adjustment.
11. TRANSFERABILITY.
Options are not assignable or transferable, except upon the
optionholder's death to a beneficiary designated by the optionee in accordance
with procedures established the Board or, if no designated beneficiary shall
survive the optionholder, pursuant to the optionholder's will or by the laws of
descent and distribution, to the extent set forth in Paragraph 9, and during the
optionholder's lifetime, may be exercised only by him.
12. EXERCISE OF OPTIONS.
An optionholder electing to exercise an Option shall give written
notice to the Corporation of such election and of the number of shares of Common
Stock that he has elected to acquire. An optionholder shall have no rights of a
stockholder with respect to shares of Common Stock covered by his Option until
after the date of issuance of a stock certificate to him upon partial or
complete exercise of his Option.
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<PAGE>
13. PAYMENT.
The Option exercise price shall be payable in cash, check or in shares
of Common Stock upon the exercise of the Option. If the shares of Common Stock
are tendered as payment of the Option exercise price, the value of such shares
shall be the Fair Market Value as of the date of exercise. If such tender would
result in the issuance of fractional shares of Common Stock, the Corporation
shall instead return the difference in cash or by check to the optionholder.
14. OBLIGATION TO EXERCISE OPTION.
The granting of an Option shall impose no obligation on the director
to exercise such Option.
15. CONTINUANCE AS DIRECTOR.
Nothing in the Plan shall be deemed to create any obligation on the
part of the Board to nominate any director for reelection by the Corporation's
stockholders.
16. TERM OF PLAN.
The Plan shall be effective as of the date on which it is adopted by
the Board, subject to the approval of the stockholders of the Corporation within
one year from the date of adoption by the Board. The Plan will terminate on the
date ten years after the date of adoption by the Board, unless sooner terminated
by the Board. The rights of optionees under Options outstanding at the time of
the termination of the Plan shall not be affected solely by reason of the
termination and shall continue in accordance with the terms of the Option (as
then in effect or thereafter amended).
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<PAGE>
TMP WORLDWIDE INC.
STOCK OPTION AGREEMENT
UNDER 1996 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
AGREEMENT made as of the _________ day of _________________, ____, by
and between TMP Worldwide Inc., a Delaware corporation (the "Company") and
___________________________ (the "Optionee").
W I T N E S S E T H
WHEREAS, pursuant to the TMP Worldwide Inc. 1996 Stock Option Plan for
Non-Employee Directors (the "Plan"), the Company desires to grant to the
Optionee and the Optionee desires to accept an option to purchase shares of
common stock, $.01 par value per share, of the Company (the "Common Stock") upon
the terms and conditions set forth in this agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. GRANT. The Company hereby grants to the Optionee an option to
purchase 625 shares of Common Stock, at a purchase price per share of $______.
This option is intended to be treated as an option which does not qualify as an
incentive stock option within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
2. RESTRICTIONS ON EXERCISABILITY. Except as specifically provided
otherwise herein, the option will become exercisable in accordance with the
following schedule based upon the period of the Optionee's continuous service as
a non-employee director of the Company following ________________ ______,
_______:
Period of Continuous
Service as a Non- Incremental Percentage Cumulative Percentage
Employee Director of Option Exercisable of Option Exercisable
------------------ ---------------------- ---------------------
[Less than 1 year 0% 0%
1 year 25% 25%
2 years 25% 50%
3 years 25% 75%
4 or more years 25% 100%]
No shares of Common Stock may be purchased hereunder unless the Optionee shall
have remained a non-employee director of the Company for at least one year from
_______________ _____, _______. Unless sooner terminated, the option will
expire if and to the extent it is not exercised within ten years from the date
hereof.
<PAGE>
3. EXERCISE. The option may be exercised in whole or in part in
accordance with the above schedule by delivering to the Secretary of the Company
(a) a written notice specifying the number of shares to be purchased, and (b)
payment in full of the exercise price, together with the amount, if any, deemed
necessary by the Company to enable it to satisfy any income tax withholding
obligations with respect to the exercise (unless other arrangements acceptable
to the Company are made for the satisfaction of such withholding obligations).
The exercise price shall be payable in cash or by bank or certified check. The
Company may (in its sole and absolute discretion) permit all or part of the
exercise price to be paid with previously-owned shares of Common Stock, or in
installments (together with interest) evidenced by the Optionee's secured
promissory note.
4. RIGHTS AS STOCKHOLDER. No shares of Common Stock shall be sold
or delivered hereunder until full payment for such shares has been made (or, to
the extent payable in installments, provided for). The Optionee shall have no
rights as a stockholder with respect to any shares covered by the option until a
stock certificate for such shares is issued to the Optionee. Except as
otherwise provided herein, no adjustment shall be made for dividends or
distributions of other rights for which the record date is prior to the date
such stock certificate is issued.
5. NONTRANSFERABILITY. The option is not assignable or transferable
except upon the Optionee's death to a beneficiary designated by the Optionee or,
if no designated beneficiary shall survive the Optionee, pursuant to the
Optionee's will and/or the laws of descent and distribution. During the
Optionee's lifetime, the option may be exercised only by the Optionee or the
Optionee's guardian or legal representative.
6. TERMINATION OF SERVICE OR DEATH. If the Optionee ceases to be a
non-employee director of the Company for any reason other than death, then,
unless sooner terminated under the terms hereof, the portion of the option not
exercisable on such date shall terminate immediately and the portion of the
option that is exercisable on such date will terminate on the date six months
after the date of the Optionee's termination of service as a non-employee
director for any reason other than death. If the Optionee ceases to be a non-
employee director by reason of the Optionee's death, then, unless sooner
terminated under the terms hereof, the portion of the option not exercisable on
such date shall terminate immediately and the portion of the option that is
exercisable on such date will terminate on the date one year after the date of
the Optionee's termination of service as a non-employee director by reason of
the Optionee's death.
7. SECURITIES REGISTRATION REQUIRED. Notwithstanding anything
herein to the contrary, the option may not be exercised unless and until a
registration statement covering the shares of Common Stock issuable upon
exercise of the option granted hereunder has been filed with and declared
effective by the Securities and Exchange Commission under the Securities Act of
1933, as amended. Nothing in this agreement shall be deemed to obligate the
Company to effect any such registration. In addition, the option shall in no
event be exercisable and shares shall not be issued hereunder if, in the opinion
of counsel to the Company, such exercise and/or issuance may result in a
violation of federal or state securities laws.
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<PAGE>
8. STOCK SPLITS, MERGERS, ETC.
(a) In case of any split-up or consolidation of shares, stock
dividend or similar transaction which increases or decreases the number of
outstanding shares of Common Stock, appropriate adjustment shall be made by the
Board of Directors, whose determination shall be final, to the number of shares
which may be purchased under the Plan and the number and option exercise price
per share of the Common Stock which may be purchased under any outstanding
options, including but not limited to those granted hereunder. In the case of a
merger (other than a merger of the Company in which the holders of Common Stock
immediately prior to the merger have the same proportionate ownership of common
stock in the surviving corporation immediately after the merger), consolidation,
acquisition of property or stock, separation, reorganization (other than a mere
reincorporation or the creation of a holding company) or liquidation of the
Company, as a result of which the stockholders of the Company receive cash,
stock or other property in exchange for or in connection with their shares of
Common Stock, the Company will make a reasonable effort, but shall not be
required, to replace any outstanding options with comparable options to purchase
the stock of such other corporation and the Company may, in its sole discretion,
provide for immediate vesting of any unvested shares, it being understood that
immediately prior to any such transaction the Optionee shall nevertheless have
the right to exercise the Optionee's then vested options in accordance with the
terms of this agreement, with all options (vested or unvested) not being
exercised within the time period specified by the Board of Directors being
terminated.
(b) In the event of any adjustment in the number of shares
covered by any option pursuant to the provisions hereof, any fractional shares
resulting from such adjustment will be disregarded and each such option will
cover only the number of full shares resulting from the adjustment.
(c) All adjustments under this Section 8 shall be made by the
Board of Directors of the Company, and its determination as to what adjustments
shall be made, if any, and the extent thereof, shall be final, binding and
conclusive.
9. NONSOLICITATION; CONFIDENTIALITY. As a material inducement to
the Company to grant the option contemplated by this agreement and to enter into
this agreement, the Optionee hereby expressly agrees as follows:
(a) During the course of the Optionee's service as a non-employee
director of the Company, the Optionee has had and will have access to trade
secret, proprietary and confidential information relating to the Company, its
Subsidiaries (as defined below) and Affiliates (as defined below) and their
respective clients, including but not limited to marketing data, financial
information, client lists (including without limitation Rolodex type or computer
based compilations maintained by the Company, its Subsidiaries or Affiliates or
the Optionee), and details of programs and methods, pricing policies,
strategies, profit margins and software, in each case of the Company, its
Subsidiaries, Affiliates and/or their respective clients. The Optionee agrees
to keep secret and retain in strictest confidence all of such trade secret,
proprietary and confidential information, and will not disclose, disseminate or
use such information to the Optionee's own advantage or for the advantage of any
other person or entity. In the event disclosure of any such trade secret,
proprietary and confidential information is
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<PAGE>
required or purportedly required by law, the Optionee will provide the Company
with prompt notice of any such requirement so that the Company may seek an
appropriate protective order.
(b) Through the date which is one year after the date the Optionee
ceases to be a non-employee director of the Company (the "Termination Date"),
except prior to the Termination Date on behalf of the Company, its Subsidiaries
and Affiliates, the Optionee will not, directly or indirectly, solicit or
perform Business (as defined below) related services for, or interfere with or
endeavor to entice away from the Company or any of its Subsidiaries or
Affiliates, any client to whom the Company or any of its Subsidiaries or
Affiliates provided services at any time during the 12 months preceding the
Termination Date, or any prospective client to whom the Company or any of its
Subsidiaries or Affiliates had made a formal presentation at any time during the
12 months preceding the Termination Date, and the Optionee will not, directly or
indirectly, hire, attempt to hire, solicit for employment or encourage the
departure of any employee of the Company or any of its Subsidiaries or
Affiliates or any individual who was employed by the Company or any of its
Subsidiaries or Affiliates at any time during the 12 months preceding the
Termination Date. As used herein, the term "Business" means the yellow pages
advertising business, the recruitment advertising business, the Internet
advertising business and any other business in which the Company or any of its
Subsidiaries or Affiliates becomes engaged at any time prior to the Termination
Date.
(c) The Optionee acknowledges that in the event the Optionee violates
any provisions of this Section 9 in addition to its other rights and remedies,
the Company shall be entitled to injunctive relief without the necessity of
proving actual damages. The Optionee acknowledges that if any provision of this
Section 9 is held to be unenforceable, the court making such holding shall have
the power to modify such provision and in its modified form such provision shall
be enforced.
(d) The Optionee acknowledges and agrees that the provisions of this
Section 9 are IN ADDITION TO, and not in lieu of, any nonsolicitation,
confidentiality and/or noncompetition obligations which the Optionee may have,
whether by agreement, fiduciary obligation or otherwise and that the grant and
exercisability of options contemplated by this agreement are expressly made
contingent on the Optionee's compliance with the provisions of this Section 9.
10. CERTAIN DEFINITIONS. As used in this agreement, the term
"Subsidiary" means a subsidiary of the Company within the meaning of Section
424(f) of the Code. As used in this agreement, the term "Affiliate" means an
affiliate of the Company within the meaning of Rule 405 under the Securities Act
of 1933, as amended.
11. NO RIGHTS TO CONTINUE SERVICE. Nothing in this agreement shall
give the Optionee any right to continue as a non-employee director of the
Company, or interfere in any way with the right of the Company to terminate the
service of the Optionee.
12. PROVISIONS OF PLAN. The provisions of the Plan shall govern if
and to the extent that there are inconsistencies between those provisions and
the provisions hereof. The Optionee acknowledges receipt of a copy of the Plan
prior to the execution of this agreement.
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<PAGE>
13. ADMINISTRATION. The committee appointed by the Board of
Directors of the Company to administer the Plan will have full power and
authority to interpret and apply the provisions of this agreement and act on
behalf of the Company and the Board of Directors in connection with this
agreement, and the decision of the committee as to any matter arising under this
agreement shall be binding and conclusive as to all persons.
14. MISCELLANEOUS.
(a) This agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
(b) This agreement shall be governed by and construed in
accordance with the laws of the State of Delaware. Except as expressly provided
in Section 9, this agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and controls and supersedes
any prior understandings, agreements or representations by or between the
parties, written or oral with respect to its subject matter and may not be
modified except by written instrument executed by the parties.
[In accordance with the Plan, a number of provisions of this
agreement, including but not limited to the vesting schedule, are subject to
revision or change at the discretion of the Board of Directors.]
IN WITNESS WHEREOF, this agreement has been executed as of the date
first above written.
TMP WORLDWIDE INC.
By:
---------------------------------
------------------------------------
Optionee
-5-
<PAGE>
________________________________________________________________________________
________________________________________________________________________________
PDC REALTY INC.,
As Agent For
MRI BROADWAY RENTAL, INC.,
Landlord,
-and-
TELEPHONE MARKETING PROGRAMS INC.
Tenant.
________________________________________________________________________________
L E A S E
________________________________________________________________________________
Dated: as of October 31, 1978
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
AGREEMENT made as of 31 October, 1978 between PDC REALTY INC., as agent for
MRI BROADWAY RENTAL, INC., a New York corporation, having an office at 1001 East
Touhy Avenue, Des Plaines, Illinois (the "Landlord") and TELEPHONE MARKETING
PROGRAMS INC., a New York corporation having an office at 605 Third Avenue, New
York, New York (the "Tenant").
W I T N E S S E T H
WHEREAS:
A. Landlord and Tenant simultaneously herewith are entering into a
certain lease (the "Lease") dated as of the date hereof, covering certain
premises (the "Premises") located on the thirty-third floor of the building
known as 1633 Broadway, New York, New York.
B. Landlord and Tenant wish to enter into a separate agreement with
respect to the furnishing of electrical energy to the premises prior to the rent
commencement date (as that term is defined in the Lease).
NOW, THEREFORE, in consideration of the premises and the agreements
hereinafter contained, it is mutually covenanted and agreed as follows:
1. Pursuant to the provisions of the Lease, Tenant may occupy the
premises prior to the rent commencement date for the performance of Tenant's
Changes (as that term is defined in the Lease). Notwithstanding anything
contained to the contrary in the Lease, Tenant shall pay to Landlord, as
additional rent, $39,650.00 per annum (pro rated for any period less than a
full month), during the period commencing on the term commencement date (as that
term is defined in the Lease) through and including the day immediately
preceding the rent commencement date, representing reimbursement to Landlord for
the furnishing to Tenant of electrical energy during said period.
2. The amount payable pursuant to paragraph 1 above shall be
subject to adjustment as provided in Article 24 of the Lease, however,
notwithstanding the provisions of Article 24 of the Lease, in connection with
Tenant's computer area to be located in the northwest portion of the premises,
which shall be in operation prior to Tenant's occupancy of any portion of the
premises for Tenant's business purposes, the initial survey shall determine the
electrical energy requirements of such computer area and the electrical energy
requirements relating to the performance of Tenant's Changes and the amount
payable pursuant to paragraph 1 above shall be adjusted to reflect such
electrical usage prior to the date Tenant occupies any portion of the premises
for Tenant's business purposes, and the initial unpaid amount of any increase or
decrease in said amount, as the case may be, shall be paid as provided for in
Section 24.03 of the Lease.
<PAGE>
3. Such additional rent shall be paid by Tenant on the first day of each
and every calendar month from the term commencement date to the day immediately
preceding the rent commencement date.
4. The Lease, as modified by this agreement, is hereby in all respects
ratified, confirmed and approved.
IN WITNESS WHEREOF, the parties hereto have respectively executed this
agreement as of the day and year first above written.
[SEAL] PDC REALTY INC.
By: /s/ John B. Farren
----------------------------
President
TELEPHONE MARKETING PROGRAMS INC.
By: /s/ Andrew J. McKelvey
----------------------------
<PAGE>
State of Illinois )
SS.:
County of Cook )
On the 7th day of November, 1978, before me personally came John B. Farren,
to me known, who, being by me duly sworn, did depose and say that he resides at
No. 1001 E. Touhy Ave. Des Plaines, Illinois ; that he is the President of PDC
Realty Inc., the corporation described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by order of the
board of directors of said corporation, and that he signed his name thereto by
like order.
/s/ Janet M. (illegible signature)
--------------------------------------------
My Commission Expires March 14, 1982
State of New York )
SS.:
County of New York )
On the 30th day of October, 1978, before me personally came Andrew
J. McKelvey to me known, who being by me duly sworn, did depose and say that he
resides at No. 300 East 40th Street New York, New York; that he is the President
of Telephone Marketing Programs Inc., the corporation described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the board of directors of said corporation, and that he
signed his name thereto by like order.
/s/ Muriel T. Ruttgeizer
--------------------------------------------
Muriel T. Ruttgeizer
Notary Public State of New York
No. 24-4625170
Qualified in Kings County
Commission Expires March 30, 1979
<PAGE>
_______________________________________________________________________________
TABLE OF CONTENTS
_______________________________________________________________________________
Article Page
- ------- ----
1 Premises, Term, Purposes and Rent ------------------------------ 1
2 Completion and Occupancy --------------------------------------- 2
3 Use of Premises ------------------------------------------------ 3
4 Appurtenances, Etc., Not to be Removed ------------------------- 4
5 Various Covenants ---------------------------------------------- 5
6 Changes or Alterations by Landlord ----------------------------- 10
7 Damage by Fire, Etc. ------------------------------------------- 11
8 Condemnation --------------------------------------------------- 14
9 Compliance with Laws ------------------------------------------- 15
10 Accidents to Plumbing and Other Systems ------------------------ 17
11 Notices -------------------------------------------------------- 17
12 Conditions of Limitation --------------------------------------- 18
13 Reentry by Landlord -------------------------------------------- 20
14 Damages -------------------------------------------------------- 21
15 Waivers by Tenant ---------------------------------------------- 22
16 Waiver of Trial by Jury ---------------------------------------- 23
17 Elevators, Cleaning, Heating, Air
Conditioning, Services, Etc. -------------------------------- 23
18 Lease Contains All Agreements--No Waivers ---------------------- 25
19 Parties Bound -------------------------------------------------- 26
20 Curing Tenant's Defaults -- Additional Rent -------------------- 28
21 Inability to Perform ------------------------------------------- 29
22 Adjacent Excavation--Shoring ----------------------------------- 30
23 Article Headings ----------------------------------------------- 30
24 Electricity and Water ------------------------------------------ 30
25 Assignment, Mortgaging, Subletting, Etc.------------------------ 34
26 Escalation ----------------------------------------------------- 43
27 Subordination -------------------------------------------------- 47
28 Miscellaneous -------------------------------------------------- 48
29 Layout and Finish ---------------------------------------------- 52
30 Insurance ------------------------------------------------------ 55
31 Security Deposit ----------------------------------------------- 56
32 Quiet Enjoyment ------------------------------------------------ 57
Signatures ----------------------------------------------------- 58
Acknowledgments ------------------------------------------------ 59
Rules and Regulations ------------------------------------------ 60
Cleaning Specifications ---------------------------------------- 65
Floor Plan -----------------------------------------------------
<PAGE>
LEASE, dated as of October 31, 1978, between PDC REALTY INC., as Agent for MRI
BROADWAY RENTAL, INC., a New York corporation, having an office at 1001 East
Touhy Avenue, Des Plaines, Illinois (hereinafter called "Landlord") and
TELEPHONE MARKETING PROGRAMS INC., a New York corporation, having an office at
605 Third Avenue, New York, New York (hereinafter called "Tenant").
W I T N E S S E T H:
ARTICLE 1
PREMISES, TERM, PURPOSES AND RENT
SECTION 1.01. Landlord does hereby lease to Tenant, and Tenant does
hereby hire from Landlord, subject to any ground leases and/or underlying leases
and/or mortgages as hereinafter provided, and upon and subject to the covenants,
agreements, terms, provisions and conditions of this Lease, for the term
hereinafter stated, a portion of the thirty-third (33rd) floor, substantially as
shown hatched on the rental plan annexed hereto and made a part hereof in the
building (hereinafter called "the Building") known as 1633 Broadway, New York,
New York. Said leased premises, together with all fixtures, equipment,
improvements, installations and appurtenances which at the commencement of or
during the term of this Lease are thereto attached (except items not deemed to
be included therein and removable by Tenant as provided in Article 4 of this
Lease) are hereinafter called "the premises". The plot of land on which the
Building is erected is hereinafter called "the Land".
SECTION 1.02. The term of this Lease shall commence on the date hereof
(hereinafter called "the term commencement date") and shall end on the fifteenth
anniversary of the rent commencement date (as hereinafter defined) or shall end
on such earlier date upon which said term may expire or be terminated as
hereinafter provided or pursuant to law.
SECTION 1.03. The premises shall be used for the following, but no
other purpose, namely: Executive and general offices.
SECTION 1.04. The rent reserved under this Lease for the term hereof
shall be and consist of the following fixed rent (hereinafter called the "fixed
rent"), namely: Three Hundred Seventy Two Thousand Seven Hundred Ten
($372,710.00) DOLLARS per annum, commencing on July 1, 1979 (such date for the
commencement of rent hereof being herein
<PAGE>
called the "rent commencement date"), and shall be payable in equal monthly
installments in advance on the first day of each and every calendar month during
said term (except that Tenant shall pay the first monthly installment on the
execution hereof), plus such additional rent and other charges as shall become
due and payable hereunder, which additional rent and other charges shall be
payable as hereinafter provided; all to be paid to Landlord at its office, or
such other place as Landlord may designate, in lawful money of the United States
of America.
SECTION 1.05. Tenant does hereby covenant and agree promptly to pay
the fixed rent, additional rent and other charges herein reserved as and when
the same shall become due and payable, without demand therefor, and without any
set-off or deduction whatsoever, and to keep, observe and perform, and to permit
no violation of, each and every of the covenants, agreements, terms, provisions
and conditions herein contained on the part and on behalf of Tenant to be kept,
observed and performed.
SECTION 1.06. The parties agree that the rentable area of the demised
premises is 31,720 square feet. In determining the rentable area of any portion
of the premises pursuant to any other provision of this Lease, the rentable area
of such portion shall be the rentable area thereof in square feet determined in
accordance with the Standard Method of Floor Measurement for Office Buildings
adopted by The Real Estate Board of New York, New York, Inc., effective April
16, 1968.
ARTICLE 2
COMPLETION AND OCCUPANCY
SECTION 2.01. Tenant acknowledges that it has inspected the premises
and agrees to accept possession of same in its "as-is" physical condition on the
term commencement date, it being understood and agreed that Landlord shall not
be obligated to perform any alterations, improvements or repairs to the
premises.
SECTION 2.02. Tenant shall occupy the premises as soon as the premises
are available for occupancy. The fixed rent reserved and covenanted to be paid
under this Lease shall commence on the rent commencement date. Tenant, by
entering into occupancy of any part of the premises shall be conclusively deemed
to have agreed that Landlord, up to the time of such occupancy, had performed
all of its obligations hereunder with
2
<PAGE>
respect to such part and that such part was in satisfactory condition as of the
date of such occupancy, unless within ten (10) days after such date Tenant shall
give written notice to Landlord specifying the respects in which the same was
not in such condition.
SECTION 2.03. If, by reason of any of the provisions of this Lease,
the fixed rent shall commence on any date other than the first day of a calendar
month, the fixed rent for such calendar month shall be prorated.
ARTICLE 3
USES OF PREMISES
SECTION 3.01. Tenant shall not use the premises or any part thereof,
or permit the premises or any part thereof to be used, for any purpose other
than the use hereinbefore specifically mentioned. Those portions, if any, of
the premises, which are identified as toilets and utility areas, shall be used
by Tenant only for the purposes for which they are designed.
SECTION 3.02. Tenant shall not use or permit the use of the premises
or any part thereof in any way which would violate any of the covenants,
agreements, terms, provisions and conditions of this Lease or for any unlawful
purposes or in any unlawful manner and Tenant shall not suffer or permit the
premises or any part thereof to be used in any manner or anything to be done
therein or anything to be brought into or kept therein which shall in any way
impair or tend to impair the character, reputation or appearance of the Building
as a high quality office building, impair or interfere with or tend to impair or
interfere with any of the Building services or the proper and economic heating,
cleaning, air conditioning or other servicing of the Building or premises, or
impair or interfere with or tend to impair or interfere with the use of any of
the other areas of the Building by, or occasion discomfort, inconvenience or
annoyance to, any of the other tenants or occupants of the Building.
SECTION 3.03. If any governmental license or permit shall be required
for the proper and lawful conduct of Tenant's business or other activity carried
on in the premises, and if the failure to secure such license or permit might or
would, in any way, affect Landlord, then Tenant, at Tenant's expense, shall duly
procure and thereafter maintain such license or permit and submit the same to
inspection by Land-
3
<PAGE>
lord. Tenant, at Tenant's expense, shall at all times, comply with the
requirements of each such license or permit.
ARTICLE 4
APPURTENANCES, ETC., NOT TO BE REMOVED
SECTION 4.01. All fixtures, equipment, improvements, installations and
appurtenances attached to, or built into the premises at the commencement of or
during the term hereof (hereinafter severally, and collectively called, in this
Section 4.01, "Appurtenances"), whether or not furnished or installed at the
expense of Tenant or by Tenant, shall be and remain part of the premises and be
deemed the property of Landlord and shall not be removed by Tenant, except as
otherwise expressly provided in this Lease. Without limiting the generality of
the next preceding sentence, all electric, plumbing, heating, sprinkler,
dumbwaiter, elevator, pneumatic tube, telephone, telegraph, communication, radio
and television systems, fixtures and outlets, venetian blinds, partitions,
railings, gates, doors, vaults, stairs, paneling, display cases, cupboards
(whether or not recessed in paneling), molding, shelving, radiator enclosures,
cork, rubber, tile and composition floors, and ventilating, silencing, air
conditioning and cooling equipment shall be deemed to be included in such
Appurtenances, whether or not attached to or built into the premises. Anything
hereinbefore in this Article 4 contained to the contrary notwithstanding, any
Appurtenances furnished and installed in any part of the premises (whether or
not attached thereto or built therein) at the sole expense of Tenant (and with
respect to which no credit or allowance shall have been granted to Tenant by
Landlord and which was not furnished and installed in replacement of an item
which Tenant would not be entitled to remove in accordance with this Article 4)
may be removed from the Building by Tenant prior to the expiration of the term
hereof, and, if and to the extent requested by Landlord (either prior to or not
more than thirty (30) days after such expiration), shall be removed from the
Building by Tenant prior to such expiration unless such request is made after
such expiration, in which event such Appurtenances shall be removed from the
Building by Tenant with reasonable promptness after the receipt of such request.
Tenant shall repair and restore, in a good and workmanlike manner to its
original condition any damage to the premises or the Building caused by such
removal. If any Appurtenance which as aforesaid may or is required to be
removed from the Building by Tenant is not removed by Tenant from the Building
within the time above specified therefor, then Landlord (in addition
4
<PAGE>
to all other rights and remedies to which Landlord may be entitled at any
time) may at its election deem that the same has been abandoned by Tenant to
Landlord, but no such election shall relieve Tenant of Tenant's obligation to
pay the expenses of removing the same from the premises or the expense of
repairing damage to the premises or to the Building arising from such removal.
SECTION 4.02. All the perimeter walls of the premises, any balconies,
terraces or roofs adjacent to the premises, and any space in and/or adjacent to
the premises used for shafts, stairways, stacks, pipes, vertical conveyors, mail
chutes, pneumatic tubes, conduits, ducts, electric or other utilities, rooms
containing elevator or air conditioning machinery and equipment, sinks, or other
similar or dissimilar Building facilities, and the use thereof, as well as
access thereto through the premises for the purpose of such use and the
operation, improvement, replacement, addition, repair, maintenance and/or
decoration thereof, are expressly reserved to Landlord.
ARTICLE 5
VARIOUS COVENANTS
SECTION 5.01. Tenant covenants and agrees that Tenant will:
(a) Take good care of the premises, and pay to Landlord the
expense of making good any injury, damage or breakage done by or on behalf of
Tenant (including, without limitation, the cost of removing stains from the
floors and walls resulting from the preparation, dispensing or consumption of
food or beverages or from any other cause).
(b) Faithfully observe and comply with the rules and regulations
annexed hereto and such additional reasonable rules and regulations as Landlord
hereafter at any time or from time to time may make and may communicate in
writing to Tenant, provided, however, that in the case of any conflict between
the provisions of this Lease and any such rule or regulation, the provisions of
this Lease shall control, and provided further that nothing contained in this
Lease shall be construed to impose upon Landlord any duty or obligation to
enforce the rules and regulations or the terms, covenants or conditions in any
other lease as against any other tenant and provided further that Landlord shall
not be liable to Tenant for violation of the same by any other ten-
5
<PAGE>
ant, its employees, agents, visitors, invitees, subtenants or licensees.
(c) Permit Landlord and any mortgagee of the Building and/or the
Land or of the interest of Landlord therein and any lessor under any ground or
underlying lease, and their representatives, to enter the premises at all
reasonable hours for the purposes of inspection, or of making repairs,
replacements or improvements in or to the premises or the Building or equipment,
or of complying with all laws, orders and requirements of governmental or other
authority or of exercising any right reserved to Landlord by this Lease
(including the right during the progress of such repairs, replacements or
improvements or while performing work and furnishing materials in connection
with compliance with any such laws, orders or requirements, to keep and store
within the premises all necessary materials, tools and equipment).
(d) Make no claim against Landlord or any lessor under any
ground or underlying lease for any damage to property of Tenant or of others
entrusted to employees of the Building or for any loss of or damage to any
property of Tenant by theft or any injury or damage to Tenant or other persons
or property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water, rain or snow or leaks from any part of the Building or from
the pipes, appliances or plumbing works or from the roof, street or sub-surface
or from any other place or by dampness or by any other cause of whatsoever
nature, unless caused by or due to the negligence of Landlord, its agents,
servants or employees; or any such damage caused by other tenants or persons
in the Building or caused by construction of any private, public or quasi
public work; or any latent defect in the premises or in the Building. No
property other than such as might normally be brought upon or kept in the
premises as an incident to the reasonable use of the premises for the
purposes specified in this Lease shall be brought upon or kept in the
premises.
(e) Make no alterations, decorations, installations, repairs,
additions, improvements or replacements (hereinafter collectively called
"Tenant's Changes") in, to or about the premises without Landlord's prior
written consent, and then only by contractors or mechanics approved by Landlord
and Landlord agrees, with respect to decorations, non-structural replacements
and repairs, not to unreasonably withhold its consent. Tenant's Changes shall
be done at Tenant's sole expense and at such times and in such manner as
Landlord may from time to time designate. Prior to the commencement of
6
<PAGE>
any Tenant's Changes, Tenant shall submit to Landlord, for Landlord's written
approval, plans and specifications (to be prepared by and at the expense of
Tenant) of such proposed Tenant's Changes in detail satisfactory to Landlord.
In no event shall any material or equipment be incorporated in or to the
premises in connection with any such Tenant's Changes which is subject to any
lien, security agreement, charge, mortgage or other encumbrance of any kind
whatsoever or is subject to any conditional sale or other similar or dissimilar
title retention agreement. Any mechanic's lien filed against the premises or
the Building for work done for, or claimed to have been done for, or materials
furnished to, or claimed to have been furnished to, Tenant shall be discharged
by Tenant within ten (10) days thereafter, at Tenant's expense, by filing the
bond required by law or otherwise. All Tenant's Changes shall at all times
comply with (1) laws, rules, orders and regulations of governmental authorities
having jurisdiction thereof, (2) rules and regulations of Landlord, and (3)
plans and specifications prepared by and at the expense of Tenant theretofore
submitted to Landlord for Landlord's prior written approval. No Tenant's
Changes shall be undertaken, started or begun by Tenant or by its agents,
employees, contractors or anyone else acting for or on behalf of Tenant until
Landlord has approved such plans and specifications, and no amendments or
additions to such plans and specifications shall be made without the prior
written consent of Landlord. Landlord agrees that, with respect to Tenant's
contemplated Tenant's Changes in connection with its initial occupancy of the
premises, Landlord shall not unreasonably withhold its consent, provided that
such Tenant's Changes do not include any structural alterations, additions,
installations or improvements, do not affect the outside appearance of the
Building and do not interfere with any fixtures or equipment in the Building or
any mechanical, electrical or plumbing facilities servicing other portions of
the Building. If Tenant's installation of any computer, telephone, telex or
other similar equipment in the premises involves other portions of the Building,
such installations shall be made at locations specified by Landlord and Tenant
specifically agrees to do such work in such a manner as not to interfere with or
impair the use of other portions of the Building by Landlord and other tenants
of the Building and if necessary to prevent such interference or impairment to
do work after business hours whether or not additional expense may be incurred
thereby by Tenant.
(f) Not violate, or permit the violation of, any condition
imposed by the standard fire insurance policy issued for office buildings in
the Borough of Manhattan, City
7
<PAGE>
of New York, and not do anything or permit anything to be done, or keep anything
or permit anything to be kept, in the premises, which would increase the fire or
other casualty insurance rate on the Building or the property therein, or which
would result in insurance companies of good standing refusing to insure the
Building or any such property in amounts and against risks as reasonably
determined by Landlord. If by reason of failure of Tenant to comply with the
provisions of this paragraph including, but not limited to, the mere use to
which Tenant puts the premises, the fire insurance rate shall at the beginning
of this Lease or at any time thereafter be higher than it otherwise would be,
then Tenant shall reimburse Landlord, as additional rent hereunder, for that
part of all fire insurance premiums thereafter paid by Landlord which shall have
been charged because of such failure or use by Tenant, and shall make such
reimbursement upon the first day of the month following such outlay by Landlord.
In any action or proceeding wherein Landlord and Tenant are parties, a schedule
or "make up" rate for the Building or premises issued by the New York Fire
Insurance Rating Organization, or other body making fire insurance rates for the
premises, shall be conclusive evidence of the facts therein stated and of the
several items and charges in the fire insurance rate then applicable to the
premises. That the premises are being used for the purpose set forth in Article
3 hereof, shall not relieve Tenant from the foregoing duties, obligations and
expenses.
(g) Permit Landlord, at reasonable times, to show the premises
to any lessor under any ground or underlying lease, or any lessee or mortgagee,
or any prospective purchaser, lessee, mortgagee, or assignee of any mortgage of
the Building and/or the Land or of Landlord's interest therein, and their
representatives, and during the period of six (6) months next preceding the date
of expiration of the term hereof with respect to any part of the premises
similarly show any part of the premises to any person contemplating the leasing
of all or a portion of the same.
(h) At the end of the term, quit and surrender to Landlord
the premises broom-clean and in good order and condition except for ordinary
wear and tear and Tenant shall remove all of its personal property, except a
may be otherwise provided in Article 4 hereof. Any personal property which
shall remain in the premises after the expiration or termination of the term
of this Lease shall be deemed to have been abandoned, and either may be
retained by Landlord as its property or may be disposed of in such manner as
Landlord may see fit; provided, however, that, notwithstanding the foregoing,
8
<PAGE>
Tenant will, upon request of Landlord made not later than thirty (30) days after
the expiration or termination of the term hereof, promptly remove from the
Building any such personal property at Tenant's own cost and expense. If the
last day of the term of this Lease falls on Sunday or a legal holiday, this
Lease shall expire on the business day immediately preceding.
(i) At any time and from time to time upon not less than five
(5) days' prior notice by Landlord to Tenant, execute, acknowledge and deliver
to Landlord, or to anyone Landlord shall designate, a statement of Tenant (or if
Tenant is a corporation, an appropriate officer of Tenant) in writing certifying
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that the same is in full force and effect as modified and
stating the modifications), specifying the dates to which the fixed rent,
additional rent and other charges have been paid in advance, if any, and stating
whether or not to the best knowledge of the signer of such certificate Landlord
is in default in performance of any provision of this Lease and, if so,
specifying each such default of which the signer may have knowledge, it being
intended that any such statement so delivered may be relied upon by any lessor
under any ground or underlying lease, or any lessee or mortgagee, or any
prospective purchaser, lessee, mortgagee, or assignee of any mortgage, of the
Building and/or the Land or Landlord's interest therein.
(j) Not move any safe, heavy machinery, heavy equipment,
freight, bulky matter or fixtures into or out of the Building without Landlord's
prior written consent. such safe, machinery, equipment, freight, bulky matter or
fixtures requires special handling, Tenant agrees to employ only persons holding
a Master Rigger's License to do said work, and that all work in connection
therewith shall comply with the Administrative Code of the City of New York.
Notwithstanding said consent of Landlord, Tenant shall indemnify Landlord for,
and hold Landlord harmless and free from, damages sustained by person or
property and for any damages or monies paid out by Landlord in settlement of any
claims or judgments, as well as for all expenses and reasonable attorneys' fees
incurred in connection therewith and all costs incurred in repairing any damage
to the Building or appurtenances.
(k) Indemnify, and save harmless, Landlord and any mortgagee and
any lessor under any ground or underlying lease, and their respective officers,
directors, contractors agents and employees, from and against any and all
liability
9
<PAGE>
(statutory or otherwise), claims, actions, suits, demands, damages, judgments,
costs, interest and expenses of any kind or nature of anyone whomsoever
(including, but not limited to, counsel fees and disbursements incurred in the
defense of any action or proceeding), to which they may be subject or which they
may suffer by reason of, or by reason of any claim for, any injury to, or death
of, any person or persons or damage to property (including any loss of use
thereof) or otherwise arising from or in connection with the use of or from any
work, installation or thing whatsoever done (other than by Landlord or its
contractors or the agents or employees of either) in the premises prior to,
during or subsequent to, the term of this Lease or arising from any condition of
the premises due to or resulting from any default by Tenant in the performance
of Tenant's obligations under this Lease or from any act, omission or negligence
of Tenant or any of Tenant's officers, directors, agents, contractors,
employees, subtenants, licensees or invitees.
ARTICLE 6
CHANGES OR ALTERATIONS BY LANDLORD
SECTION 6.01. Landlord reserves the right to make such changes,
alterations, additions, improvements, repairs or replacements in or to the
Building (including the premises) and the fixtures and equipment thereof, as
well as in or to the street entrances, halls, passages, elevators, escalators,
stairways and other parts thereof, including the erection, maintenance and use
of pipes, ducts and conduits in and through the premises, all as Landlord may
deem necessary or desirable; provided, however, that there be no unreasonable
obstruction of the means of access to the premises or unreasonable interference
with the use of the premises. Nothing contained in this Article 6 shall relieve
Tenant of any duty, obligation or liability of Tenant with respect to making any
repair, replacement or improvement or complying with any law, order or
requirement of any governmental or other authority.
SECTION 6.02. Landlord reserves the right to name the Building and to
change the name or address of the Building at any time and from time to time.
Neither this Lease nor any use by Tenant shall give Tenant any easement or other
right in or to the use of any door or any passage or any concourse or any plaza
connecting the Building with any subway or any other building or to any public
conveniences, and the use of such doors, passages, concourses, plazas and
conveniences may without notice to Tenant, be regulated or discontinued at any
time
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by Landlord. If at any time any windows of the premises are temporarily
darkened or obstructed incident to or by reason of repairs, replacements,
maintenance and/or cleaning in, on, to or about the Building or any part or
parts thereof or are permanently darkened for any reason beyond Landlord's
control or are temporarily or permanently closed or rendered inoperable, for any
reason whatsoever including, but not limited to, Landlord's own acts, Landlord
shall not be liable for any damage Tenant may sustain thereby and Tenant shall
not be entitled to any compensation therefor nor abatement of rent nor shall the
same release Tenant from its obligations hereunder nor constitute an eviction.
SECTION 6.03. Except as provided in Article 7 of this Lease, there
shall be no allowance to Tenant for a dimunition of rental value, the same shall
not constitute an eviction of Tenant in whole or in part and Landlord shall
incur no liability whatsoever by reason of inconvenience, annoyance or injury to
business arising from Landlord, Tenant or others making any changes,
alterations, additions, improvements, repairs or replacements in or to any
portion of the Building or the premises or in or to fixtures, appurtenances or
equipment thereof or in the taking or storing of material in the premises in
connection therewith and no liability shall be incurred by Landlord for failure
of Landlord or others to make any changes, alterations, additions, improvements,
repairs or replacements in or to any portion of the Building or the premises, or
in or to the fixtures, appurtenances or equipment thereof.
ARTICLE 7
DAMAGE BY FIRE, ETC.
SECTION 7.01. If any part of the premises shall be damaged by fire or
other casualty, Tenant shall give prompt written notice thereof to Landlord and
Landlord shall proceed with reasonable diligence, and in a manner consistent
with the provisions of any ground or underlying lease and any mortgage affecting
the same or the Land and/or the Building or Landlord's interest therein, to
repair such damage, and if any part of the premises shall be rendered
untenantable by reason of such damage, the annual fixed rent payable hereunder
shall be abated to the extent that such fixed rent relates to such part of the
premises (and such abatement is in excess of the annual rate of any other
existing abatement of fixed rent relating thereto under any other provision of
this Lease) for the period from the date of such damage to the date when such
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part of the premises shall have been made tenantable or to such earlier date
upon which the full term of this Lease with respect to such part of the premises
shall expire or terminate, unless such fire or other casualty shall have
resulted from the negligence of Tenant or the employees, licensees or invitees
of Tenant. Landlord shall not be liable for any inconvenience or annoyance to
Tenant or injury to the business of Tenant resulting in any way from such damage
or the repair thereof. Tenant understands that Landlord will not carry
insurance of any kind on Tenant's Property, to wit, Tenant's goods, furniture or
furnishings or any fixtures, equipment, improvements, installations or
appurtenances removable by Tenant as provided in this Lease, and that Landlord
shall not be obligated to repair any damage thereto or replace the same.
SECTION 7.02. If substantial alteration or reconstruction of the
Building shall, in the sole opinion of Landlord, be required as a result of
damage by fire or other casualty (whether or not the premises shall have been
damaged by such fire or other casualty), then this Lease and the term and estate
hereby granted may be terminated by Landlord by its giving to Tenant within one
hundred twenty 120 days after the date of such damage written notice specifying
a date, not less than thirty (30) days after the giving of such notice, for such
termination. In case of any damage or destruction mentioned in this Section,
Tenant may cancel this Lease by written notice to Landlord, if (i) within 60
days from the date of the damage or destruction, Landlord does not file a proof
of loss with its insurer; (ii) within 90 days of the date of damage or
destruction Landlord does not let a contract or contracts which shall provide
for the complete restoration of the premises within a period of one year from
the date of the damage or destruction; (iii) work under such contract or
contracts has not commenced within 120 days of the date of said damage or
destruction; or (iv) said work is not prosecuted with reasonable diligence to
its completion; provided that Tenant shall not be entitled to cancel this Lease
pursuant to this sentence more than thirty (30) days after Landlord shall have
given written notice to Tenant that the state of facts specified in clause (i),
(ii) or (iii) of this sentence, as the case may be, has occurred. The period
for the completion of the required repairs and restoration work shall be
extended by the number of days lost (not to exceed, however, one year) in the
event such loss results from strike, act of God, war, governmental action,
national or state or municipal emergency or any other similar cause beyond the
reasonable control of Landlord. In the event of the giving of a notice of
termination, as described in this Section, this Lease and the term and
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estate hereby granted shall expire as of the date specified therefor in such
notice with the same effect as if such date were the date hereinbefore specified
for the expiration of the full term of this Lease, and the fixed rent payable
hereunder shall be apportioned as of such date of termination, subject to
abatement, if any, as and to the extent provided in Section 7.01 hereof.
SECTION 7.03. Each party agrees to endeavor to have included in each
of its fire insurance policies (insuring the Building and Landlord's property
therein, in the case of Landlord, and insuring Tenant's Property in the
premises, in the case of Tenant, against loss, damage or destruction by fire or
other casualty therein covered) a waiver of the insurer's right of subrogation
against the other party, or, if such waiver should be unobtainable or
unenforceable, (a) an express agreement that such policy shall not be
invalidated if the assured waives, before the casualty, the right of recovery
against any party responsible for a casualty covered by the policy or (b) any
other form of permission shall not be, or shall cease to be, obtainable (i)
without additional charge or (ii) at all, the insured party shall so notify the
other party promptly after learning thereof. In the first such case, if the
other party shall so elect and shall pay the insurer's additional charge
therefor, such waiver, agreement or permission shall be included in the policy.
SECTION 7.04. Each party hereby releases the other party with respect
to any claim (including a claim for negligence) which it might otherwise have
against the other party for loss, damage or destruction with respect to its
property occurring during the term of this Lease to the extent to which it is
insured under a policy or policies containing a waiver of subrogation or
permission to release liability, as provided in Section 7.03 hereof. If,
notwithstanding the recovery of insurance proceeds by either party for such
loss, damage or destruction of its property, the other party is liable to the
first party with respect thereto or is obligated under this Lease to make
replacement, repair or restoration or payment, then (provided the first party's
right of full recovery under its insurance policies is not thereby prejudiced or
otherwise adversely affected) the amount of the net proceeds of the first
party's insurance against such loss, damage or destruction shall be offset
against the second party's liability to the first party therefor, or shall be
made available to the second party to pay for replacement, repair or
restoration, as the case may be. Nothing contained in this Section 7.04 shall
relieve either party of any duty imposed elsewhere in this
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Lease to repair, restore or rebuild or to nullify any abatement of rent provided
for elsewhere in this Lease.
SECTION 7.05. This Lease shall be considered an express agreement
governing any case of damage to or destruction of the Building or any part
thereof by fire or other casualty, and Section 227 of the Real Property Law of
the State of New York providing for such a contingency in the absence of express
agreement, and any other law of like import now or hereafter in force, shall
have no application in such case.
ARTICLE 8
CONDEMNATION
SECTION 8.01. in the event that the whole of the premises shall be
lawfully condemned or taken in any manner for any public or quasi-public use,
this Lease and the term and estate hereby granted shall forthwith cease and
terminate as of the date of vesting of title. In the event that only a part of
the premises shall be so condemned or taken, then, effective as of the date of
vesting of title, the fixed rent hereunder shall be abated in an amount thereof
apportioned according to the area of the premises so condemned or taken. In the
event that only a part of the Building shall be so condemned or taken, then, (a)
Landlord (whether or not the premises be affected) may, at Landlord's option,
terminate this Lease and the term and estate hereby granted as of the date of
such vesting of title by notifying Tenant in writing of such termination within
one hundred twenty (120) days following the date on which Landlord shall have
received notice of vesting of title or (b) if such condemnation or taking shall
be of a substantial part of the premises or of a substantial part of the means
of access thereto, Tenant may, at Tenant's option, by delivery of notice in
writing to Landlord within sixty (60) days following the date on which Tenant
shall have received notice of vesting of title, terminate this Lease and the
term and estate hereby granted as of the date of testing of title, or (c) if
neither Landlord nor Tenant elects to terminate this Lease, as aforesaid, this
Lease shall be and remain unaffected by such condemnation or taking, except that
the fixed rent payable hereunder shall be abated to the extent, if any,
hereinbefore provided in this Article 8. In the event that only a part of the
premises shall be so condemned or taken and this Lease and the term and estate
hereby granted with respect to the remaining portion of the premises are not
terminated as hereinbefore provided, Landlord will, with reasonable diligence
and at its expense, restore the remaining portion of the
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premises as nearly as practicable to the same condition as it was in prior to
such condemnation or taking, however, Landlord shall not be obligated to repair
any damage to Tenant's Property (as defined in Section 7.01 hereof) or replace
the same.
SECTION 8.02. In the event of a termination of this Lease pursuant to
Section 8.01 of this Article 8, this Lease and the term and estate hereby
granted shall expire as of the date of such termination with the same effect as
if that were the date hereinbefore set for the expiration of the full term of
this Lease, and the fixed rent payable hereunder shall be apportioned as of such
date.
SECTION 8.03. In the event of any condemnation or taking hereinbefore
mentioned of all or a part of the Building, Landlord shall be entitled to
receive the entire award in the condemnation proceeding, including any award
made for the value of the estate vested by this Lease in Tenant, and Tenant
hereby expressly assigns to Landlord any and all right, title and interest of
Tenant now or hereafter arising in or to any such award or any part thereof, and
Tenant shall be entitled to receive no part of such award. The foregoing shall
not prohibit Tenant's independent claim for the value of Tenant's trade fixtures
and moving expenses and any other claim permitted under law so long as any award
made to Tenant based upon such claim does not reduce the award otherwise payable
to Landlord.
SECTION 8.04. It is expressly understood and agreed that the
provisions of this Article 8 shall not be applicable to any condemnation or
taking for governmental occupancy for a limited period of not more than six (6)
months.
ARTICLE 9
COMPLIANCE WITH LAWS
SECTION 9.01. Tenant, at Tenant's expense, shall comply with all laws
and ordinances, and all rules, orders and regulations of all governmental
authorities and of all insurance bodies, at any time duly issued or in force,
applicable to the premises or any part thereof or to Tenant's use thereof,
except that Tenant shall not hereby be under any obligation to comply with any
law, ordinance, rule, order or regulation requiring any structural alteration of
or in connection with the premises, unless such alteration is required by reason
of a condition which has been created by, or at the instance of Tenant, or is
attributable to the use or manner of
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use to which Tenant puts the premises, or is required by reason of a breach of
any of Tenant's covenants and agreements hereunder. Where any structural
alteration of or in connection with the premises is required by any such law,
ordinance, rule, order or regulation, and, by reason of the express exception
hereinabove contained, Tenant is not under any obligation to make such
alteration, then Landlord shall have the option of making such alteration and
paying the cost thereof, or of terminating this Lease and the term and estate
hereby granted by giving to Tenant not less than thirty (30) days' prior written
notice of such termination; provided, however, that if within fifteen (15)
days after the giving by Landlord of its notice of termination as aforesaid,
Tenant shall give written notice to Landlord stating that Tenant elects to make
such alteration at the expense of Tenant, then such notice of termination shall
be ineffective provided that Tenant, at Tenant's expense, shall concurrently
with the giving of such notice to Landlord, execute and deliver to Landlord
Tenant's written undertaking, with a surety and in form and substance
satisfactory to Landlord, obligating Tenant to promptly and duly make such
alteration in a manner satisfactory to Landlord and to save Landlord harmless
from any and all costs, expenses, penalties and/or liabilities (including, but
not limited to, accountants' and attorneys' fees) in connection therewith or by
reason thereof; and Tenant covenants and agrees that, after so electing to make
any such alteration, Tenant will, at Tenant's expense, and in compliance with
all the covenants, agreements, terms, provisions and conditions of this Lease,
including but not limited to, Section 5.01(b) hereof, make such alteration and
Tenant, at Tenant's expense, will promptly and duly perform all the conditions
of such undertaking and that all such conditions of such undertaking shall be
deemed to constitute provisions of this Lease to be kept or performed on the
part of Tenant with the same force and effect as if same had been set forth
herein.
SECTION 9.02. In the event that a notice of termination shall be
given by Landlord under the provisions of this Article 9 and such notice
shall not become ineffective as hereinbefore provided, this Lease and the
term and estate hereby granted shall expire as of the date specified therefor
in such notice with the same effect as if that were the date hereinbefore set
for the expiration of the full term of this Lease, and the fixed rent payable
hereunder shall be apportioned as of such date of termination.
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ARTICLE 10
ACCIDENTS TO PLUMBING AND OTHER SYSTEMS
SECTION 10.01. Tenant shall give to Landlord prompt written notice
of any damage to, or defective condition in, any part or appurtenance of the
Building's plumbing, electrical, heating, air conditioning or other systems
serving, located in, or passing through, the premises. Following such notice,
any such damage or defective condition shall be remedied by Landlord with
reasonable diligence, but if such damage or defective condition was caused by,
or resulted from the use by, Tenant or by the employees, agents, licensees or
invitees of Tenant, the cost of the remedy thereof shall be paid by Tenant.
Tenant shall not be entitled to claim any damages arising from any such damage
or defective condition unless the same shall have been caused by the negligence
of Landlord in the operation or maintenance of the premises or Building and the
same shall not have been remedied by Landlord with reasonable diligence after
written notice thereof from Tenant to Landlord; nor shall Tenant be entitled to
claim any eviction by reason of any such damage or defective condition.
ARTICLE 11
NOTICES
SECTION 11.01. Any notice, consent, approval, demand or statement
hereunder by either party to the other party shall be in writing and shall be
deemed to have been duly given if sent by registered or certified mail,
return receipt requested, addressed to such other party, which address for
Landlord shall be the address as hereinbefore set forth with a copy to
Cushman & Wakefield, Inc., 529 Fifth Avenue, New York, New York 10017,
Attention: William Butler, and for Tenant shall be the premises (or Tenant's
address as hereinbefore set forth if mailed prior to Tenant's occupancy of
the premises), or if the address of such other party for notices shall have
been duly changed as herein provided, if mailed, as aforesaid, to such other
party at such changed address. Either party may at any time change the
address for such notices, consents, approvals, demands or statements by
mailing, as aforesaid, to the other party a notice stating the change and
setting forth the changed address. If the term Tenant as used in this Lease
refers to more than one person, any notice, consent, approval, demand or
statement given as aforesaid to any one of such persons shall be deemed to
have been duly given to Tenant.
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CONDITIONS OF LIMITATION
SECTION 12.01. This Lease and the term and estate hereby granted are
subject to the limitation that:
(a) in case Tenant shall make an assignment of its property for
the benefit of creditors or shall file a voluntary petition under any
bankruptcy or insolvency law, or an involuntary petition under any bankruptcy
or insolvency law shall be filed against Tenant and such involuntary petition
is not dismissed within sixty (60) days after the filing thereof,
(b) in case a petition is filed by or against Tenant under the
Reorganization provisions of the United States Bankruptcy Act or under the
provisions of any law of like import, unless such petition under said
Reorganization provisions be one filed against Tenant which is dismissed within
sixty (60) days after its filing,
(c) in case Tenant shall file a petition under the Arrangement
provisions of the United States Bankruptcy Act or under the provisions of any
law of like import,
(d) in case a permanent receiver, trustee or liquidator shall be
appointed for Tenant or of or for the property of Tenant, and such receiver,
trustee or liquidator shall not have been discharged within sixty (60) days
from the date of his appointment,
(e) in case Tenant shall default in the payment of any fixed rent
or additional rent or any other charge payable hereunder by Tenant to
Landlord on any date upon which the same becomes due, and such default shall
continue for five (5) days after Landlord shall have given to Tenant a
written notice specifying such default,
(f) in case Tenant shall default in the due keeping, observing or
performance of any covenant, agreement, term, provision or condition of this
Lease on the part of Tenant to be kept, observed or performed (other than a
default of the character referred to in clauses (e) or (f) of this Section
12.01), and if such default shall continue and shall not be remedied by
Tenant within fifteen (15) days after Landlord shall have given to Tenant a
written notice specifying the same, or, in the case of such a default which
for causes beyond Tenant's control cannot with due diligence be cured within
said period of fifteen (15) days, if Tenant (i) shall
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not, promptly upon the giving of such notice, advise Landlord in writing of
Tenant's intention to take all steps necessary to remedy such default with due
diligence, (ii) shall not duly institute and thereafter diligently prosecute
to completion all steps necessary to remedy the same, or (iii) shall not
remedy the same within a reasonable time after the date of the giving of said
notice by Landlord,
(g) in case any event shall occur or any contingency shall
arise whereby this Lease or the estate hereby granted or the unexpired balance
of the term hereof would, by operation of law or otherwise, devolve upon or
pass to any firm, association, corporation, person or entity other than Tenant
except as expressly permitted under Article 25 hereof, or whenever Tenant shall
desert or abandon the premises or the same shall become vacant (whether the
keys be surrendered or not and whether the rent be paid or not), or
(h) in case any other lease held by Tenant from Landlord
shall expire and terminate (whether or not the term thereof shall then have
commenced) as a result of the default of Tenant thereunder or of the occurrence
of an event as therein provided (other than by expiration of the fixed term
thereof or pursuant to a cancellation or termination option therein contained),
then, in any of said cases, Landlord may give to Tenant a notice of intention
to end the term of this Lease at the expiration of three (3) days from the
date of the giving of such notice, and, in the event such notice is given, this
Lease and the term and estate hereby granted (whether or not the term shall
theretofore have commenced) shall expire and terminate upon the expiration of
said three (3) days with the same effect as if that day were the date
hereinbefore set for the expiration of the full term of this Lease, but Tenant
shall remain liable for damages as provided in this Lease or pursuant to law.
If the term "Tenant", as used in this Lease, refers to more than one person,
then as used in clauses (a), (b), (c), (d) and (i) of this Section 12.01, said
term shall be deemed to include all of such persons or any one of them; if any
of the obligations of Tenant under this Lease is guaranteed, the term "Tenant"
as used in said clauses, shall be deemed to include also the guarantor or, if
there be more than one guarantor, all or any one of them; and, if this Lease
shall have been assigned, the term "Tenant", as used in said clauses, shall be
deemed to include the assignee and the assignor or either of them under any
such assignment unless Landlord shall, in connection with such assignment,
release
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the assignor from any further liability under this Lease, in which event the
term "Tenant", as used in said clauses, shall not include the assignor so
released.
ARTICLE 13
REENTRY BY LANDLORD
SECTION 13.01. If Tenant shall default in the payment of any fixed
rent or additional rent or any other charge payable hereunder by Tenant to
Landlord on any date upon which the same becomes due, or if this Lease shall
terminate as in Article 12 hereof provided, Landlord or Landlord's agents and
servants may immediately or at any time thereafter reenter into or upon the
premises, or any part thereof, in the name of the whole, either by summary
dispossess proceedings or by any suitable action or proceeding at law, or by
force or otherwise, without being liable to indictment, prosecution or damages
therefor, and may repossess the same, and may remove any persons therefrom, to
the end that Landlord may have, hold and enjoy the premises again as and of its
first estate and interest therein. The words "reenter," "reentry" and
"reentering" as used in this Lease are not restricted to their technical legal
meanings.
SECTION 13.02. In the event of any termination of this Lease
under the provisions of Article 12 hereof or in the event that Landlord shall
reenter the premises under the provisions of this Article 13 or in the event
of the termination of this Lease (or of reentry) by or under any summary
dispossess or other proceeding or action or other measure undertaken by
Landlord for the enforcement of its, aforesaid right of reentry or any
provision of law (any such termination of this Lease being hereinafter called
a "Default Termination"), Tenant shall thereupon pay to Landlord the fixed
rent, additional rent and any other charge payable hereunder by Tenant to
Landlord up to the time of such Default Termination or of such recovery of
possession of the premises by Landlord, as the case may be, and shall also
pay to Landlord damages as provided in Article 14 hereof or pursuant to law.
Also, in the event of a Default Termination Landlord shall be entitled to
retain all moneys, if any, paid by Tenant to Landlord, whether as advance
rent, security or otherwise, but such moneys shall be credited by Landlord
against any fixed rent, additional rent or any other charge due from Tenant
at the time of such Default Termination or, at Landlord's option, against any
damages payable by Tenant under Article 14 hereof or pursuant to law.
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SECTION 13.03. In the event of a breach or threatened breach on
the part of Tenant with respect to any of the covenants, agreements, terms,
provisions or conditions on the part of or on behalf of Tenant to be kept,
observed or performed, Landlord shall also have the right of injunction.
The specified remedies to which Landlord may resort hereunder are cumulative
and are not intended to be exclusive of any other remedies or means of
redress to which Landlord may lawfully be entitled at any time, and Landlord
may invoke any remedy allowed at law or in equity as if specific remedies
were not herein provided for.
ARTICLE 14
DAMAGES
SECTION 14.01. In the event of a Default Termination of this Lease,
Tenant will pay to Landlord as damages, at the election of Landlord, either:
(a) a sum which at the time of such Default Termination
represents the then value of the excess, if any, of (1) the aggregate of the
fixed rent and the additional rent under Article 26 hereof (if any) which would
have been payable hereunder by Tenant for the period commencing with the day
following the date of such Default Termination and ending with the date
hereinbefore set for the expiration of the full term hereby granted, over (2)
the aggregate rental value of the premises for the same period, or
(b) sums equal to the aggregate of the fixed rent and the additional
rent under Article 26 hereof (if any) which would have been payable by Tenant
had this Lease not terminated by such Default Termination, payable upon
the due date therefor specified herein following such Default Termination and
until the date hereinbefore set for the expiration of the full term hereby
granted; provided, however, that if Landlord shall relet all or any part of
the premises for all or any part of said period, Landlord shall credit Tenant
with the net rents received by Landlord from such reletting, such net rents
to be determined by first deducting from the gross rents as and when received
by Landlord from such reletting the expenses incurred or paid by Landlord in
terminating this Lease and of re-entering the premises and of securing
possession thereof, as well as the expenses of reletting, including altering
and preparing the premises for new tenants, brokers' commissions and all
other expenses properly chargeable against the premises and the rental
therefrom in connection with such reletting,
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it being understood that any such reletting may be for a period equal to or
shorter or longer than said period; provided, further that (i) in no event
shall Tenant be entitled to receive any excess of such net rents over the sums
payable by Tenant to Landlord hereunder, (ii) in no event shall Tenant be
entitled, in any suit for the collection of damages pursuant to this clause
(b), to a credit in respect of any net rents from a reletting except to the
extent that such net rents are actually received by Landlord prior to the
commencement of such suit, and (iii) if the premises or any part thereof should
be relet in combination with other space, then appropriate apportionment on a
square foot rentable area basis shall be made of the rent received from such
reletting and of the expenses of reletting.
For the purposes of subdivision (a) of this Section 14.01, the
amount of additional rent which would have been payable by Tenant under Article
26 hereof, for each Tax Year and/or Operation Year (as hereinafter defined)
ending after such Default Termination, shall be deemed to be an amount equal to
the amount of such additional rent payable by Tenant for the Tax Year and/or
Operation Year (as the case may be) ending immediately preceding such Default
Termination. Suit or suits for the recovery of such damages, or any
installments thereof, may be brought by Landlord from time to time at its
election, and nothing contained herein shall be deemed to require Landlord to
postpone suit until the date when the term of this Lease would have expired but
for such Default Termination.
SECTION 14.02. Nothing herein contained shall be construed as
limiting or precluding the recovery by Landlord against Tenant of any sums or
damages to which, in addition to the damages particularly provided above,
Landlord may lawfully be entitled by reason of any default hereunder on the
part of Tenant.
ARTICLE 15
WAIVERS BY TENANT
SECTION 15.01. Tenant, for Tenant, and on behalf of any and all
firms, corporations, associations, persons or entities claiming through or
under Tenant, including creditors of all kinds, does hereby waive and surrender
all right and privilege which they or any of them might have under or by reason
of any present or future law to redeem the premises or to have a continuance of
this Lease for the full term hereby
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demised after Tenant is dispossessed or ejected therefrom by process of law or
under the terms of this Lease or after the expiration or termination of this
Lease as herein provided or pursuant to law. Tenant also waives the provisions
of any law relating to notice and/or delay in levy of execution in case of an
eviction or dispossess, and of any other law of like import now or hereafter in
effect. If Landlord commences any summary proceeding, Tenant agrees that
Tenant will not interpose any counterclaim of whatever nature or description in
any such proceeding, but Tenant may bring an independent action therefor.
ARTICLE 16
WAIVER OF TRIAL BY JURY
SECTION 16.01. It is mutually agreed by and between Landlord and
Tenant that, except in the case of any action, proceeding or counterclaim
brought by either of the parties against the other for personal injury or
property damage, the respective parties hereto shall, and they hereby do,
waive trial by jury in any action, proceeding or counterclaim brought by either
of the parties hereto against the other on any matters whatsoever arising out
of or in any way connected with this Lease, the relationship of landlord and
tenant, Tenant's use or occupancy of the premises, and any emergency or any
other statutory remedy.
ARTICLE 17
ELEVATORS, CLEANING, HEATING, AIR CONDITIONING,
SERVICES, ETC.
SECTION 17.01. Landlord will provide elevator facilities during
Business Hours (as hereinafter defined) and have one passenger elevator subject
to call during the other hours. Heat, for the warming of the premises and the
public portions of the Building, will be supplied by Landlord during Business
Hours when and as required by law. "Business Hours", as used in this Lease,
means the generally customary daytime business hours of Tenant (but not before
9:00 A.M. or after 6:00 P.M.) of days other than Saturdays, Sundays and
holidays, and "holidays", as used in this Lease means all days observed by the
State or Federal Government as legal holidays. Landlord will clean the
premises provided the same are kept in order by Tenant, except any portions of
the premises which may be used for the preparation, dispensing or consumption
of food or beverages or for storage, shipping room, classroom or similar pur-
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poses or for the operation of computer, data processing or similar equipment,
all of which portions Tenant shall cause to be kept clean at Tenant's own
expense. The Cleaning Specifications attached hereto are hereby made a part
hereof.
SECTION 17.02. Landlord shall, through the air conditioning system,
furnish to, and distribute in, the premises air conditioning during Business
Hours during the period May 15th to September 15th when in the judgement of
Landlord, reasonably exercised, it may be required for the comfortable
occupancy of the premises by Tenant and during Business Hours during other
months of the year ventilate the Premises. Tenant agrees to lower and close
the blinds when necessary because of the sun's position whenever said air
conditioning system is in operation, and Tenant agrees at all times to cooper-
ate fully with Landlord and to abide by all the regulations and requirements
which Landlord may prescribe for the proper functioning and protection of said
air conditioning system. In addition to any and all other rights and remedies
which Landlord may invoke for any violation by Tenant of this Article 17,
Landlord may discontinue the furnishing of such air conditioning service
without any diminution or abatement of rent or other compensation to Tenant
whatsoever. Landlord shall at all times have free and unrestricted access to
any and all air conditioning facilities in the premises. Landlord shall not be
required to furnish, and Tenant shall not be entitled to receive, any air
conditioning during any period wherein Tenant shall be in default in the
payment of fixed rent or additional rent as specified in this Lease.
SECTION 17.03. Landlord will, when and to the extent reasonably
requested by Tenant, furnish additional elevator, air conditioning, heating
and/or cleaning services upon such terms and conditions as shall be determined
by Landlord in its sole discretion; and Tenant shall pay to Landlord promptly
on demand as additional rent Landlord's charge for such additional services,
which charge shall be Landlord's prevailing rate to other tenants of the
Building. Without limiting the generality of the next preceding sentence,
Tenant shall pay to Landlord Landlord's charge for (a) any cleaning of the
Building or any part thereof required because of the material carelessness or
indifference of Tenant, (b) any cleaning done at the request of Tenant of any
portions of the premises which may be used for the preparation, dispensing or
consumption of food or beverages or for storage, shipping room, classroom or
similar purposes or for the operation of computer, data processing or similar
equipment, and (c) the removal of any of Tenant's refuse and rubbish from the
Building, except re-
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fuse and rubbish arising from ordinary cleaning by Landlord as specified in
Section 17.01 hereof. Tenant shall pay to Landlord an amount equal to any
increase in the cost to Landlord for cleaning the premises if such increase
shall be due to (i) the use of the premises by Tenant during hours other than
Business Hours or (ii) the installation in the premises, at the request of or by
Tenant, of any materials or finish other than those which are of the standard
adopted by Landlord for the Building.
SECTION 17.04. At any time or times all or any of the elevators in the
Building may, at the option of Landlord, be manual and/or automatic elevators,
and Landlord shall be under no obligation to furnish an elevator operator for
any automatic elevator. If Landlord shall at any time or times furnish any
elevator operator for any automatic elevator, Landlord may discontinue
furnishing such elevator operator without any diminution, reduction or abatement
of rent.
SECTION 17.05. Landlord reserves the right, without liability to
Tenant and without constituting any claim of constructive eviction, to stop or
interrupt any heating, elevator, escalator, lighting, ventilating, air
conditioning, gas, steam, power, electricity, water, cleaning or other service
and to stop or interrupt the use of any Building facilities such times as may be
necessary and for as long as may at reasonably be required by reason of
accidents, strikes, or the making of repairs, alterations or improvements, or
inability to secure a proper supply of fuel, gas, steam, water, electricity,
labor or supplies, or by reason of any other similar or dissimilar cause beyond
the reasonable control of Landlord. No such stoppage or interruption shall
entitle Tenant to any diminution or abatement of rent or other compensation nor
shall this Lease or any of the obligations of Tenant be affected or reduced by
reason of any such stoppage or interruption.
ARTICLE 18
LEASE CONTAINS ALL AGREEMENTS--NO WAIVERS
SECTION 18.01. This Lease contains all of the covenants, agreements,
terms, provisions and conditions relating to the leasing of the premises
hereunder, and Landlord has not made and is not making, and Tenant in executing
and delivering this Lease is not relying upon, any warranties, representations,
promises or statements, except to the extent that the same may expressly be set
forth in this Lease.
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SECTION 18.02. The failure of Landlord to insist in any instance upon
the strict performance of any provision of this Lease or to exercise any
election herein contained shall not be construed as a waiver or relinquishment
for the future of such provision or election, but the same shall continue and
remain in full force and effect. No waiver or modification by Landlord of any
provision of this Lease or other right or benefit shall be deemed to have been
made unless expressed in writing and signed by Landlord. No surrender of the
premises or of any part thereof or of any remainder of the term of this Lease
shall be valid unless accepted by Landlord in writing. Any breach by Tenant of
any provision of this Lease shall not be deemed to be waived by (a) the receipt
and retention by Landlord of fixed rent or additional rent from anyone other
than Tenant or (b) the acceptance of such other person as a tenant or (c) a
release of Tenant from the further performance by Tenant of the provisions of
this Lease or (d) the receipt and retention by Landlord of fixed rent or
additional rent with knowledge of the breach of any provision of this Lease. No
payment by Tenant or receipt or retention by Landlord of a lesser amount than
any fixed rent or additional rent herein stipulated shall be deemed to be other
than on account of the earliest stipulated rent, nor shall any endorsement or
statement of any check or any letter accompanying any check or payment as such
rent be deemed an accord and satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
rent or pursue any other remedy in this Lease provided. No executory agreement
hereafter made between Landlord and Tenant shall be effective to change, modify,
waive, release, discharge, terminate or effect an abandonment of this Lease, in
whole or in part, unless such executory agreement is in writing, refers
expressly to this Lease and is signed by the party against whom enforcement of
the change, modification, waiver, release, discharge or termination or
effectuation of the abandonment is sought.
ARTICLE 19
PARTIES BOUND
SECTION 19.01. The covenants, agreements, terms, provisions and
conditions of this Lease shall bind and benefit the respective successors,
assigns and legal representatives of the parties hereto with the same effect as
if mentioned in each instance where a party hereto is named or referred to,
except that no violation of the provisions of Article 25 hereof shall operate to
vest any rights in any successor, assignee or
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legal representative of Tenant and that the provisions of this Article 19 shall
not be construed as modifying the conditions of limitation contained in Article
12 hereof. It is understood and agreed, however, that the covenants and
obligations on the part of Landlord under this Lease shall not be binding upon
Landlord herein named with respect to any period subsequent to the transfer of
its interest in the Building, that in the event of such a transfer said
covenants and obligations shall thereafter be binding upon each transferee of
such interest of Landlord herein named, but only with respect to the period
ending with a subsequent transfer of such interest, and that a lease of the
entire interest shall be deemed a transfer within the meaning of this Article
19.
SECTION 19.02. If Tenant is a partnership (or is comprised of two (2)
or more persons, individually and/or as co-partners of a partnership) or if
Tenant's interest in this Lease shall be assigned to a partnership (or to two
(2) or more persons, individually and/or as co-partners of a partnership)
pursuant to Article 25 (any such partnership and such persons are referred to in
this Section as "Partnership Tenant"), the following provisions of this Section
shall apply to such Partnership Tenant: (a) the liability of each of the parties
comprising Partnership Tenant shall be joint and several, and (b) each of the
parties comprising Partnership Tenant hereby consents in advance to, and agrees
to be bound by, any written instrument which may hereafter be executed,
changing, modifying or discharging this Lease, in whole or in part, or
surrendering all or any part of the premises to Landlord or renewing or
extending this Lease and by any notices, demands requests or other
communications which may hereafter be given, by Partnership Tenant or by any of
the parties comprising Partnership Tenant, and (c) any bills, statements,
notices, demands; requests or other communications given or rendered to
Partnership Tenant or to any of the parties comprising Partnership Tenant shall
be deemed given or rendered to Partnership Tenant and to all such parties and
shall be binding upon Partnership Tenant and all such parties, and (d) if
Partnership Tenant shall admit new partners, all of such new partners shall, by
their admission to Partnership Tenant, be deemed to have assumed performance of
all of the terms, covenants and conditions of this Lease on Tenant's part to be
observed and performed, and (e) Partnership Tenant shall give prompt notice to
Landlord of the admission of any such new partners, and upon demand of Landlord,
shall cause each such new partner to execute and deliver to Landlord an
agreement in form satisfactory to Landlord, wherein each such new partner shall
assume performance of all of the terms, covenants and conditions of
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this Lease on Tenant's part to be observed and performed (but neither Landlord's
failure to request any such agreement nor the failure of any such new partner to
execute or deliver any such agreement to Landlord shall vitiate the provisions
of subdivision (d) of this Section).
ARTICLE 20
CURING TENANT'S DEFAULTS--ADDITIONAL RENT
SECTION 20.01. If Tenant shall default in the keeping, observance or
performance of any provision or obligation of this Lease, Landlord, without
thereby waiving such default, may perform the same for the account and at the
expense of Tenant, without notice in a case of emergency and in any other case
if such default continues after three (3) days from the date of the giving by
Landlord to Tenant of written notice of intention so to do. Bills for any
expense incurred by Landlord in connection with any such performance by Landlord
for the account of Tenant, and bills for all costs, expenses and disbursements
of every kind and nature whatsoever, including, but not limited to, reasonable
counsel fees, involved in collecting or endeavoring to collect the fixed rent or
additional rent or other charge or any part thereof or enforcing or endeavoring
to enforce any rights against Tenant, under or in connection with this Lease, or
pursuant to law, including (without being limited to) any such cost, expense and
disbursement involved in instituting and prosecuting any action or proceeding
(including any summary dispossess proceeding), as well as bills for any
property, material, labor or services provided, furnished or rendered, or caused
to be provided, furnished or rendered, by Landlord to Tenant including (without
being limited to) electric lamps and other equipment, construction work done for
the account of Tenant, water, towel and other services, as well as for any
charges for any additional elevator, heating, air conditioning or cleaning
services incurred under Article 17 hereof and any charges for other similar or
dissimilar services incurred under this Lease, may be sent by Landlord to Tenant
monthly, or immediately, at Landlord's option, and shall be due and payable in
accordance with the terms of said bills, and if not paid when due, the amounts
thereof shall immediately become due and payable as additional rent under this
Lease. If any fixed rent, additional rent or any other costs, expenses or
disbursements payable under this Section by Tenant to Landlord are not paid when
due, the same shall bear interest at the rate of one percent (1%) per month or
the maximum rate permitted by law, whichever is less, from the due date thereof
until paid and
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the amount of such interest shall be additional rent.
SECTION 20.02. In the event that Tenant is in arrears in payment of
fixed rent or additional rent or any other charge, Tenant waives Tenant's right,
if any, to designate the items against which any payments made by Tenant are to
be credited, and Tenant agrees that Landlord may apply any payments made by
Tenant to any items Landlord sees fit, irrespective of and notwithstanding any
designation or request by Tenant as to the items against which any such payments
shall be credited. However, such waiver shall not be deemed to constitute a
waiver by Tenant with respect to any payment disputed by Tenant. Landlord
reserves the right, without liability to Tenant without constituting any claim
of constructive eviction, to suspend furnishing or rendering to Tenant any
property, material, labor, utility or other service, wherever Landlord is
obligated to furnish or render the same at the expense of Tenant, in the event
that (but only so long as) Tenant is in arrears in paying Landlord therefor.
However, such waiver shall not be deemed to constitute a waiver by Tenant with
respect to any payment disputed by Tenant.
ARTICLE 21
INABILITY TO PERFORM
SECTION 21.01. This Lease and the obligations of Tenant to pay rent
hereunder and perform all of the other covenants, agreements, terms, provisions
and conditions hereunder on the part of Tenant to be performed shall in no wise
be affected, impaired or excused because Landlord is unable to fulfill any of
its obligations under this Lease or is unable to supply or is delayed in
supplying any service expressly or impliedly to be supplied or is unable to make
or is delayed in making any repairs, replacements, additions, alterations or
decorations or is unable to supply or is delayed in supplying any equipment or
fixtures if Landlord is prevented or delayed from so doing by reason of strikes
or labor troubles or any other similar or dissimilar cause whatsoever beyond
Landlord's reasonable control, including, but not limited to, governmental
preemption in connection with a national emergency or by reason of any rule,
order or regulation of any department or subdivision thereof of any governmental
agency or by reason of the conditions of supply and demand which have been or
are affected by war, hostilities or other similar or dissimilar emergency.
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ARTICLE 22
ADJACENT EXCAVATION--SHORING
SECTION 22.01. If an excavation shall be made upon land adjacent to or
under the Building, or shall be authorized to be made, Tenant shall afford to
the person causing or authorized to cause such excavation, license to enter upon
the premises for the purpose of doing such work as said person shall deem
necessary or desirable to preserve the Building from injury or damage and to
support the same by proper foundations without any claim for damages or
indemnity against Landlord, or diminution or abatement of rent.
ARTICLE 23
ARTICLE HEADINGS
SECTION 23.01. The Article headings of this Lease are for convenience
only and are not to be considered in construing the same.
ARTICLE 24
ELECTRICITY AND WATER
SECTION 24.01. For the purpose of this Article the term "Electric
Rate" shall mean an amount equal to the cost to Landlord per kilowatt hour,
including taxes, demand charges, fuel factors, transfer adjustment factors or
any other charge of the utility for electricity, for the cost of all the
electricity purchased for the Building for the various billing periods being
used in the determination of the amount to be included in fixed rent.
SECTION 24.02. Subject to the provisions of this Article, Landlord
shall furnish the electric energy that Tenant shall require in the premises for
the purposes permitted under this Lease on a "rent inclusion basis' and there
shall be no charge to Tenant for such electric energy by way of measuring the
same on any meter or otherwise, such electric energy being included in
Landlord's services which are covered by the fixed rent. The amount to be so
included in the fixed rent shall be determined from time to time as hereinafter
provided in this Article; and Landlord and Tenant agree that pending the initial
determination, the amount of the annual fixed rent set forth in Article 1
includes the annual sum of $39,650.00 for electric energy on a rent inclusion
basis. Such determination
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shall take into account, among other things, any special electric energy
requirements of Tenant and whether Tenant is utilizing electric energy at times
other than Business Hours. Landlord shall furnish and install, at Tenant's
expense, all replacement lighting tubes, lamps, bulbs and ballasts required in
the premises. Within one year after the term commencement date and, at
Landlord's or Tenant's option, from time to time thereafter (but not more
frequently than annually) an electric consultant, selected by Landlord in the
case of the initial survey or by the party requesting the survey in the case of
a later survey, shall make a survey of the electric lighting power load in the
premises to determine the average monthly electric current consumption therein.
The cost of each such survey shall be borne by the party who requests it. The
findings of the consultant as to any increase or decrease in the fixed rent
based on such average monthly electric current consumption and the determination
of Landlord's consultant under Section 24.05 shall be conclusive and binding
upon the parties unless within 30 days after either Landlord or Tenant notifies
the other party in writing of the results of such survey or of a determination
under Section 24.05 as determined by its expert or consultant, the second party,
upon written notice to the other given within such 30 day period, promptly
causes a like survey, inspection and determination to be made by an independent
electrical engineer or consultant selected by it and paid solely by it. If
Landlord or Tenant, as the case may be, so elects, upon completion of the second
survey, inspection and determination, that party shall notify the other of the
results of its survey as determined by the second expert or consultant. If such
determination differs from that made by the expert or consultant, selected by
Landlord in the case of the initial survey or the first expert or consultant in
the case of later surveys, the matter shall be referred for resolution to the
two experts or consultants selected, respectively, by Landlord and Tenant. If
the two engineers or consultants shall not reach unanimous agreement within 30
days after the matter is referred to them for resolution, then the two shall
appoint a third independent electrical engineer or consultant, and the three
engineers or consultants shall determine the matter submitted to them; provided,
however, that if the two engineers or consultants are unable to agree upon the
appointment of a third engineer or consultant within 15 days after they become
obligated so to do, the parties shall apply to the American Arbitration
Association in New York, New York, for the appointment of such engineer or
consultant. A decision of a majority of said engineers or consultants shall be
final and binding upon Landlord and Tenant. All costs and expenses incurred in
connection with the third engineer or consultant
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shall be paid equally by the parties. Any such increase, or decrease resulting
from the initial survey shall be effective as of the term commencement date, and
any such increase or decrease resulting from a subsequent survey shall be
effective as of the date of the change in usage. The initial unpaid amount of
each such increase or decrease shall be paid to Landlord or Tenant, as the case
may be, within ten (10) days after Landlord furnishes Tenant with a statement
thereof, and shall be made by Tenant in accordance with Landlord's statements
even if Tenant disputes the correctness thereof and if a refund is finally
agreed upon or determined to be due to Tenant within ten (10) days after such
agreement or determination. Thereafter, each such increase or decrease shall be
added to or deducted from the fixed rent payable monthly on the first day of
each and every month during the term of this lease, in advance.
SECTION 24.04. Tenant's use of electric energy in the Premises shall
not at any time exceed the capacity of any of the electrical conductors and
equipment in or otherwise serving the Premises. In order to insure that such
capacity is not exceeded and to avert possible adverse effect upon the
Building's electric service, Tenant shall not, without Landlord's prior consent
in each instance, which consent shall not be unreasonably withheld in connection
with the Tenant Changes contemplated for Tenant's initial occupancy of the
premises, connect any fixtures, appliances or equipment to the Building's
electric distribution system or make any material alteration or addition to the
electric system of the premises existing on the term commencement date and will
promptly advise Landlord of any other alteration or addition to such electrical
appliances or equipment. Should Landlord grant such consent, all additional
risers or other equipment required therefor shall be provided by Landlord and
the cost thereof shall be paid by Tenant to Landlord on demand.
SECTION 24.05. If at any time during the term of this lease the
Electric Rate shall change, then, effective as of the date of the change in the
Electric Rate, the sum included in the fixed rent under this Article shall be
increased or decreased to reflect such change in the Electric Rate (as
determined by an electrical consultant selected by Landlord, whose determination
shall be binding and conclusive upon the parties except as provided in Section
24.03).
SECTION 24.06. The adjustments in the fixed rent under the preceding
Sections of this Article shall be made with reference to (a) the Electric Rate
in effect at the time
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each such adjustment shall be effective, and (b) the then effective
determination of the average monthly electric consumption in the Premises.
SECTION 24.07. The parties shall execute, acknowledge and deliver to
each other a supplemental agreement in such form as Landlord shall reasonably
require to reflect each change in the fixed rent under this Article, but any
such change shall be effective as of the effective date described in the Section
under which such change is provided for, even if such agreement is not executed
and delivered.
SECTION 24.08. Landlord reserves the right to discontinue furnishing
electric energy to Tenant in the premises at any time upon not less than 90
days' notice to Tenant. If Landlord exercises such right, this Lease shall
continue in full force and effect and shall be unaffected thereby, except that
from and after the effective date of such termination Landlord shall not be
obligated to furnish electric energy to Tenant and the fixed rent payable under
this Lease shall be reduced to what the fixed rent would then have been but for
the adjustments under this Article. If Landlord so discontinues furnishing
electric energy to Tenant, Tenant shall arrange to obtain electric energy
directly from the public utility company furnishing electric energy to the
Building. Such electric energy may be furnished to Tenant by means of the then
existing building system feeders, risers and wiring to the extent that the same
are available, suitable and safe for such purpose. All meters and additional
panel boards, feeders, risers, wiring and other conductors and equipment which
may be required to obtain electric energy directly from such public utility
company shall be furnished and installed by Landlord.
SECTION 24.09. Where water is furnished by Landlord for purposes other
than for (i) normal office use, (ii) Landlord's air conditioning equipment
during Business Hours, and (iii) drinking, lavatory or toilet facilities in the
premises, Tenant shall pay a reasonable amount for the same and for any required
pumping and heating thereof as well as any taxes, sewer rents or other charges
which may be imposed by the city or other governmental authority or agency
thereof based on the quantity of water so used by Tenant.
SECTION 24.10. Landlord shall in no way be liable or responsible to
Tenant for any loss or damage or expense which Tenant may sustain or incur by
reason of any failure, inadequacy or defect in the character, quantity or supply
of electricity or water furnished to the premises.
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ARTICLE 25
ASSIGNMENT, MORTGAGING, SUBLETTING, ETC.
SECTION 25.01. Tenant shall not, whether voluntarily, involuntarily,
or by operation of law or otherwise (a) assign or otherwise transfer this Lease
or the term and estate hereby granted, or advertise to do so, (b) sublet the
premises or any part thereof, or advertise to do so, or allow the same to be
used, occupied or utilized by any one other than Tenant, or (c) mortgage,
pledge, encumber or otherwise hypothecate this Lease or the premises or any part
thereof in any manner whatsoever, without in each instance obtaining the prior
written consent of Landlord.
SECTION 25.02. If Tenant is a corporation, the provisions of
subdivision (a) of Section 25.01 shall apply to a transfer of a majority of the
stock of Tenant (other than a transfer to the heirs, executors or administrators
of the present majority shareholder of Tenant, but any subsequent transfer shall
be subject to the provisions of subdivision (a) of Section 25.01) but shall not
apply to transactions with a corporation into or with which Tenant is merged or
consolidated or to which substantially all of Tenant's assets are transferred or
to any corporation which controls or is controlled by Tenant or is under common
control with Tenant, provided that in any of such events the successor to Tenant
has a net worth computed in accordance with generally accepted accounting
principles equal to or greater than the net worth of Tenant immediately prior to
such merger, consolidation or transfer.
SECTION 25.03. If this lease be assigned, whether or not in violation
of the provisions of this Lease, Landlord may collect rent from the assignee. If
the premises or any part thereof are sublet or used or occupied by anybody other
than Tenant, whether or not in violation of this Lease, Landlord may, after
default by Tenant, and expiration of Tenant's time to cure such default, collect
rent from the subtenant or occupant. In either event, Landlord may apply the net
amount collected to the fixed rent and additional rent herein reserved, but no
such assignment, subletting, occupancy or collection shall be deemed a waiver of
any of the provisions of Section 25.01, or the acceptance of the assignee,
subtenant or occupant as tenant, as a release of Tenant from the performance by
Tenant of Tenant's obligations under this Lease. The consent by Landlord to
assignment, mortgaging, subletting or use or occupancy by others shall not in
any way be considered
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to relieve Tenant from obtaining the express written consent of Landlord to any
other or further assignment, mortgaging or subletting or use or occupancy by
others not expressly permitted by this Article. References in this Lease to
use or occupancy by others, that is anyone other than Tenant, shall not be
construed as limited to subtenants and those claiming under or through
subtenants but as including also licensees and others claiming under or through
Tenant, immediately or remotely.
SECTION 25.04. Any assignment or transfer, whether made with or
without Landlord's consent pursuant to Section 25.01 or Section 25.02, shall be
made only if, and shall not be effective until, the assignee shall execute,
acknowledge and deliver to Landlord an agreement in form and substance
satisfactory to Landlord whereby the assignee shall assume the obligations of
this Lease on the part of Tenant to be performed or observed and whereby the
assignee shall agree that the provisions in Section 25.01 shall, notwithstanding
such assignment or transfer, continue to be binding upon it in respect of all
future assignments and transfers. The original named Tenant covenants that,
notwithstanding any assignment or transfer, whether or not in violation of the
provisions of this lease, and notwithstanding the acceptance of fixed rent
and/or additional rent by Landlord from an assignee, transferee, or any other
party, the original named Tenant shall remain fully liable for the payment of
the fixed rent and additional rents and for the other obligations of this Lease
on the part of Tenant to be performed or observed.
SECTION 25.05. The joint and several liability of Tenant and any
immediate or remote successor in interest of Tenant and the due performance of
the obligations of this Lease on Tenant's part to be performed or observed shall
not be discharged, released or impaired in any respect by any agreement or
stipulation made by Landlord extending the time of, or modifying any of the
obligations of, this Lease, or by any waiver or failure of Landlord to enforce
any of the obligations of this lease.
SECTION 25.06. Notwithstanding anything contained to the contrary in
Sections 25.01 or 25.02 of this Article, if Tenant shall at any time or times
during the term of this Lease desire to assign this Lease (other than an
assignment to be made pursuant to Sections 25.01 or 25.02) or sublet all or part
of (other than a subletting to be made pursuant to Section 25.01 or Section
25.02) the premises, Tenant shall give notice thereof to Landlord, which notice
shall be accompanied
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by (a) a conformed or photostatic copy of the proposed assignment or sublease,
the effective or commencement date of which shall be at least 45 days after the
giving of such notice, (b) a statement setting forth in reasonable detail the
identity of the proposed assignee or subtenant, the nature of its business and
its proposed use of the premises, and (c) current financial information with
respect to the proposed assignee or sub-tenant, including, without limitation,
its most recent financial report. Such notice shall be deemed an offer from
Tenant to Landlord whereby Landlord (or Landlord's designee) may, at its option
(i) sublease such space from Tenant upon the terms and conditions hereinafter
set forth (if the proposed transaction is a sublease of part of the premises for
a term, including renewal options, which does not extend into the last two years
of the Lease), (ii) terminate this Lease (if the proposed transaction is an
assignment or a sublease of all of the premises), or (iii) terminate this Lease
with respect to the space covered by the proposed sublease (if the proposed
transaction is a sublease of part of the premises other than a sub-lease
referred to in clause (i) hereof). Said option may be exercised by Landlord by
notice to Tenant at any time within 45 days after such notice has been given by
Tenant to Landlord; and during such 45-day period Tenant shall not assign this
Lease or sublet such space to any person.
SECTION 25.07. If Landlord exercises its option to terminate this
Lease in the case where Tenant desires either to assign this Lease or sublet all
of the premises, then, this Lease shall end and expire on the date that such
assignment or sublet was to be effective or commence, as the case may be, and
the fixed rent and additional rent shall be paid and apportioned to such date.
SECTION 25.08. If Landlord exercises its option to terminate this
Lease in part, in any case where Tenant desires to sublet part of the premises,
then, (a) this Lease shall end and expire with respect to such part of the
premises on the date that the proposed sublease was to commence; (b) from and
after such date the fixed rent and additional rent shall be adjusted, based upon
the proportion that the rentable area of the premises remaining bears to the
total rentable area of the premises; and (c) Tenant shall pay to Landlord, upon
demand, the costs incurred by Landlord in physically separating such part of the
premises from the balance of the Premises.
SECTION 25.9. If Landlord exercises its option to sublet the
portion(s) of the premises which Tenant desires to sublet, such sublease to
Landlord or its designee (as subtenant)
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shall be at the lower of (i) the rental rate per rentable square foot of fixed
rent and additional rent then payable pursuant to this Lease or (ii) the rentals
set forth in the proposed sublease, and shall be for the same term as that of
the proposed subletting, and:
(a) The sublease shall be expressly subject to all of the
covenants, agreements, terms, provisions and conditions of this
Lease except such as are irrelevant or inapplicable, and except
as otherwise expressly set forth to the contrary in this Section;
(b) Such sublease shall be upon the same terms and conditions
as those contained in the proposed sublease, except such as are
irrelevant or inapplicable and except as otherwise expressly set
forth to the contrary in this Section;
(c) Such sublease shall give the sublessee the unqualified
and unrestricted right, without Tenant's permission, to assign
such sublease or any interest therein and/or to sublet the space
covered by such sublease or any part or parts of such space and
to make any and all changes, alterations, and improvements in the
space covered by such sublease;
(d) Such sublease shall provide that any assignee or
further subtenant, of Landlord or its designee, may, at the
election of Landlord, be permitted subject to the requirements of
subdivision (c) above, to make alterations, decorations and
installations in such space or any part thereof and shall also
provide in substance that any such alterations, decorations and
installations in such space made therein by any assignee or
subtenant of Landlord or its designee may be removed, in whole or
in part, by such assignee or subtenant, at its option, prior to
or upon the expiration or other termination of such sublease,
provided that such assignee or subtenant, at its expense, shall
repair any damage and injury to such space so sublet caused by
such removal; and
(e) Such sublease shall also provide that
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(i) the parties to such sublease expressly negate any intention
that any estate created under such sublease be merged with any
other estate held by either of said parties, (ii) any assignment
or subletting by Landlord or its designee (as the subtenant) may
be for any purpose or purposes that Landlord, in Landlord's
uncontrolled discretion, shall deem suitable or appropriate (but
no such use shall constitute a default by Tenant), (iii) Tenant,
at Tenants' expense, shall and will at all times provide and
permit reasonably appropriate means of ingress to and egress from
such space so sublet by Tenant to Landlord or its designee, (iv)
Landlord, at Tenant's expense, may make such alterations as may
be required or deemed necessary by Landlord to physically
separate the subleased space from the balance of the premises,
and (v) that at the expiration of the term of such sublease,
Tenant will accept the space covered by such sublease in its then
existing condition, subject to the obligations of the sublessee
to make such repairs thereto as may be necessary to preserve the
premises demised by such sublease in good order and condition and
subject to subdivision (d) above.
25.10. In the event Landlord does not exercise its options pursuant
to Section 25.06 to so sublet the premises or terminate this Lease in whole or
in part and providing that Tenant is not in default of any of Tenant's
obligations under this Lease, Landlord's consent (which must be in writing and
in form satisfactory to Landlord) to the proposed assignment or sublease shall
not be unreasonably withheld, or delayed
(and shall be exercised within the 45-day period referred to in Section 25.06 of
this Article), provided and upon condition that:
(a) Tenant shall have complied with the provisions of Section
25.06 and Landlord shall not have exercised any of its options
under said Section 25.06 within the time permitted therefor;
(b) In Landlord's reasonable judgment the proposed assignee
or subtenant is engaged in a business and the premises, or the
relevant part thereof, will be used in a manner which
(i) is in keeping with the then standards
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of the Building, (ii) is limited to the use expressly permitted
under Section 2.0; and (iii) will not violate any negative
covenant as to use contained in any other lease of space in the
Building;
(c) The proposed assignee or subtenant is a reputable person
of good character and with sufficient financial worth considering
the responsibility involved, and Landlord has been furnished with
reasonable proof thereof;
(d) Neither (i) the proposed assignee or subtenant nor (ii)
any person which, directly or indirectly, controls, is controlled
by, or is under common control with, the proposed assignee or
subtenant or any person who controls the proposed assignee or
subtenant, is not then an occupant of any part of the Building;
(e) The proposed assignee or subtenant is not a person with
whom Landlord is then negotiating to lease space in the Building;
(f) The form of the proposed sublease shall comply with the
applicable provisions of this Article;
(g) There shall not be more than 4 subtenants (including
Tenant, Landlord or its designee) of the premises;
(h) The amount of the aggregate rent to be paid by the
proposed subtenant is not less than 85% of the then current rent
per rentable square foot being asked by Landlord for comparable
space in the Building, and in any event the rental and other
terms and conditions of the sublease are the same as those
contained in the proposed sublease furnished to Landlord pursuant
to Section 25.06;
(i) Tenant shall reimburse Landlord on demand for any costs
that may be incurred by Landlord in connection with said
assignment or sublease, including, without limitation, the
reasonable costs of making investigations
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as to the acceptability of the proposed assignee or subtenant,
and reasonable legal costs incurred in connection with the
granting of any requested consent;
(j) Tenant shall not have (i) advertised in any way the
availability of the premises without prior notice to and approval
by Landlord, nor shall any advertisement state the name (as
distinguished from the address) of the Building or the proposed
rental, or (ii) listed the premises for subletting, whether
through a broker, agent, representative, or otherwise at a rental
rate less than the rate permitted by subdivision (h) of this
Section.
Except for any subletting by Tenant to Landlord or its designee
pursuant to the provisions of this Article, each subletting pursuant to this
Article shall be subject to all of the covenants, agreements, terms, provisions
and conditions contained in this Lease. Notwithstanding any such subletting to
Landlord or any such subletting to any other subtenant and/or acceptance of
rent or additional rent by Landlord from any subtenant, Tenant shall and will
remain fully liable for the payment of the fixed rent and additional rent due
and to become due hereunder and for the performance of all the covenants,
agreements, terms, provisions and conditions contained in this Lease on the part
of Tenant to be performed and all acts and omissions of any licensee or
subtenant or anyone claiming under or through any subtenant which shall be in
violation of any for the obligations of this Lease, and any such violation shall
be deemed to be a violation by Tenant. Tenant further agrees that
notwithstanding any such subletting, no other and further subletting of the
premises by Tenant or any person claiming through or under Tenant (except as
provided in Section 25.9) shall or will be made except upon compliance with and
subject to the provisions of this Article. If Landlord shall decline to give its
consent to any proposed assignment or subtenant or if Landlord shall exercise
any of its options under Section 25.06, Tenant shall indemnify, defend and hold
harmless Landlord against and from any and all loss, liability, damages, costs
and expenses (including reasonable counsel fees) resulting from any claims that
may be made against Landlord by the proposed assignee or subtenant or by any
brokers or other persons claiming a commission or similar compensation in
connection with the proposed assignment or sublease.
25.11. In the event that (a) Landlord fails to exer-
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cise any of its options under Section 25.06 and consents to a proposed
assignment or sublease, and (b) Tenant fails to execute and deliver the
assignment or sublease to which Landlord consented within 60 days after the
giving of such consent, then, Tenant shall again comply with all of the
provisions and conditions of Section 25.06 before assigning this Lease or sub-
letting all or part of the premises.
25.12. With respect to each and every sublease or subletting
authorized by Landlord under the provisions of this lease, it is further agreed:
(a) The subletting shall be for a term ending prior to the
expiration of this Lease.
(b) No sublease shall be valid, and no subtenant shall take
possession of the premises or any part thereof, until an executed
counterpart of such sublease has been delivered to Landlord.
(c) Each sublease shall provide that it is subject and
subordinate to this Lease and to the matters to which this Lease
is or shall be subordinate, and that in the event of termination,
re-entry or dispossess by Landlord under this Lease Landlord may,
at its option, take over all of the right, title and interest of
Tenant, as sublessor, under such sublease, and such subtenant
shall, at Landlord's option, attorn to Landlord pursuant to the
then executory provisions of such sublease, except that Landlord
shall not (i) be liable for any previous act or omission of
Tenant under such sublease, (ii) be subject to any offset, not
expressly provided in such sublease, which theretofore accrued to
such subtenant against Tenant, or (iii) be bound by any previous
modification of such sublease or by any previous prepayment of
more than one month's rent.
25.13. If Landlord shall give its consent to any assignment of this
Lease or to any sublease, Tenant shall in consideration therefor, pay to
Landlord, as additional rent:
(a) in the case of an assignment, an amount equal to all sums
and other considerations paid
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to Tenant by the assignee for or by reason of such assignment
(including, but not limited to, sums paid for the sale of
Tenant's fixtures, leasehold improvements, equipment, furniture,
furnishings or other personal property, less, in the case of a
sale thereof, the then depreciated cost thereof determined on the
basis of Tenant's federal income tax returns) less any bona fide
brokerage commissions paid by Tenant; and
(b) in the case of a sublease, any rents, additional rent or
other consideration payable under the sublease to Tenant by the
subtenant which is in excess of the fixed rent and additional
rent accruing during the term of the sub-lease in respect of the
subleased space (at the rate per square foot payable by Tenant
here-under) pursuant to the terms hereof (including, but not
limited to, sums paid for the sale or rental of Tenant's
fixtures, leasehold improvements, equipment, furniture or other
personal property, less, inthe case of the sale thereof, the then
depreciated cost thereof determined on the basis of Tenant's
federal income tax returns) less any bona fide brokerage
commissions paid by Tenant. The sums payable under this Section
25.13(b) shall be paid to Landlord as and when received by
Tenant.
25.14. Landlord agrees that if Tenant shall, within one year after the
term commencement date, enter into a sublease or subleases to no more than 2
subtenants, covering not more than 6,000 square feet in the aggregate, located
on the north side of the premises, for a term expiring on or prior the fifth
anniversary of the rent commencement date, then, Landlord's options under
Section 25.06 shall not be applicable to such sublease, however, all of the
other provisions of this Article 25 shall be applicable thereto.
Section 25.15. Landlord will, at the request of Tenant, maintain
listings on the Building directory of the names of Tenant and any other person,
firm, association or corporation in occupancy of the premises or any part
thereof as permitted hereunder, and the names of any officers or employees of
any of the foregoing, provided, however, that the number of names so listed
shall be in the same proportion to the capacity of the Building directory as the
aggregate number of
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square feet of rentable area of the premises is to the aggregate number of
square feet of rentable area of the Building. The listing of any name other than
that of Tenant, whether on the doors of the premises, on the Building directory,
or otherwise, shall not operate to vest any right or interest in this Lease or
in the premises or be deemed to be the written consent of Landlord mentioned in
this Article 25, it being expressly understood that any such Listing is a
privilege extended by Landlord revocable at will by written notice to Tenant.
ARTICLE 26
ESCALATION
SECTION 26.01. As used in this Article 26, the
words and terms which follow mean and include the following:
(a) "Tax Year" shall mean each period of twelve (12) months,
commencing on the first day of July of each such period, in which occurs any
part of the term of this Lease or such other period of twelve (12) months
occurring during the term of this Lease as hereafter may be duly adopted as the
fiscal year for real estate tax purposes of the City of New York.
(b) "Operation Year" shall mean each calendar year, subsequent to
the year 1979, in which occurs any part of the term of this Lease.
(c) "Tenant's Proportionate Share" shall mean a fraction whose
denominator is the rentable square foot area of the Building (which shall, for
the purposes of this Article 26, be deemed to be 1,953,901 square feet) and
whose numerator shall be the Area of the Premises.
(d) "Area of the Premises" shall mean the rentable square foot
area of the premises (which shall, for the purposes of this Article 26, be
deemed to be 31,720 square feet).
(e) "Real Estate Taxes" shall mean the aggregate amount of real
estate taxes and assessments imposed upon the Land and Building (including,
without limitation, (i) real estate taxes upon any "air rights" or payable by
the Landlord to a ground lessor with respect thereto and (ii) any assessments
levied after the date of this Lease for public benefits to Land and/or Building
[excluding an amount equal to the assessments payable in whole or in part during
or for the Real
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Estate Tax Base], which assessments, if payable in installments shall be deemed
payable in the maximum number of permissible installments) in the manner in
which such taxes and assessments are imposed as of the date hereof; provided,
that if because of any change in the taxation of real estate, any other tax or
assessment (including, without limitation, any occupancy, gross receipts or
rental tax) is imposed upon Landlord or the owner of the Land and/or Building,
or upon or with respect to the Land and/or Building or the occupancy, rents or
income therefrom, in substitution for, or in addition to, any of the foregoing
Real Estate Taxes, such other taxes or assessment shall be deemed part of the
Real Estate Taxes. With respect to any Tax Year, all expenses, including legal
fees, experts' and other witnesses' fees, incurred in contesting the validity or
amount of any Real Estate Taxes or in obtaining a refund of Real Estate Taxes,
shall be considered as part of the Real Estate Taxes for such Tax Year.
(f) "Real Estate Tax Base" shall mean the Real Estate Taxes for
the Tax Year ending on June 30, 1979.
(g) "Hourly Wage Rate" as respects any Operation Year shall mean:
(1) as to the porters, the minimum hourly wage rate
prescribed to be paid to or on behalf of porters in major office buildings
(hereinafter called "Class A Office Buildings") and in effect as of January
1 in such Operation Year pursuant to an agreement between the Realty
Advisory Board on Labor Relations, Incorporated (or any successor thereto)
and Local 32B of the Building Service Employees International Union, AFL-
CIO (or any successor thereto) covering the wage rates of porters in Class
A Office Buildings, and
(2) as to female cleaners, the minimum hourly wage rate
prescribed to be paid to or on behalf of female cleaners in Class A Office
Buildings and in effect as of January 1 in such Operation Year pursuant to
an agreement between said Board (or any successor thereto and Local 32J of
said Union (or any successor thereto) covering the wage rates of female
cleaners in Class A Office Buildings;
which said minimum hourly wage rates shall be computed on the basis of the total
weekly amount required to be paid to or on behalf of said porters and female
cleaners in the Building for regular work weeks of forty (40) hours with respect
to porters and thirty (30) hours with respect to female cleaners inclu-
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sive of any overtime or premium pay work in such regular work weeks), whether
based on an hourly or other pay scale but predicated on the number of hours in
such respective work weeks. Such total weekly amounts shall be inclusive of all
payments or benefits of every nature and kind (including those required to be
paid by the employer directly to the taxing authorities or others on account of
the employment) such as, without limiting the generality of the foregoing,
social security, unemployment and all other similar taxes, holiday and vacation
pay, incentive pay, accident, health and welfare insurance programs, pension
plans, guarantee pay plans and supplemental unemployment benefit programs, and
fringe benefits, payments, plans or programs of a similar or dissimilar nature,
irrespective of whether they may be required or provided for in any applicable
law or regulation or otherwise. If there is no such agreement in effect as of
any such January 1 by which the Hourly Wage Rate for porters or for female
cleaners is determinable, computations and payments shall thereupon be made upon
the basis of the Hourly Wage Rate being paid by Landlord or by the contractor
performing the cleaning services for Landlord on such January 1 for said porters
or female cleaners as the case may be, and appropriate retroactive adjustment
shall thereafter be made when the Hourly Wage Rate paid on January 1 pursuant to
such agreement for porters or for female cleaners is finally determined, and
provided further that if, as of the last day of such Operation Year, no such
agreement covering the January 1 occurring in such Operation Year shall have
been in effect, the Hourly Wage rate paid by Landlord or by the contractor
performing the cleaning services for Landlord on such January 1 for said porters
or female cleaners, as the case may be, shall be for all purposes hereof deemed
to be such Hourly Wage Rate prescribed by such an agreement and in effect as of
such January 1. As used herein, the term "porters" shall mean that
classification of employee engaged in the general maintenance and operation of
office buildings most nearly comparable to that classification now applicable to
porters in the current agreement with said Local 32B
(which classification is presently termed "others" in said agreement).
(h) "Base Labor Rate" shall mean the Labor
Rate for the Operation Year ending December 31, 1979.
(i) "Labor Rate" for any Operation Year shall mean one-half (1/2)
of the sum of (1) the Hourly Wage Rate for porters, and (2) the Hourly Wage Rate
for female cleaners.
(j) "Escalation Statement" shall mean a state-
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merit in writing signed by Landlord, setting forth the amount payable by Tenant
for a specified Tax Year or Operation Year (as the case may be) pursuant to this
Article 26.
SECTION 26.02. If the Real Estate Taxes for any Tax Year shall be
greater than the Real Estate Tax Base, Tenant shall pay to Landlord as
additional rent for the premises for such Tax Year an amount equal to Tenant's
Proportionate Share of the amount by which the Real Estate Taxes for such Tax
Year are greater than the Real Estate Tax Base.
SECTION 26.03. If the Labor Rate for any Operation Year shall be
greater than the Base Labor Rate, Tenant shall pay to Landlord as additional
rent for the premises for such Operation Year an amount equal to the product
obtained by multiplying the Area of the Premises by the number of cents
(including any fraction of a cent) by which the Labor Rate for such Operation
Year is greater than the Base Labor Rate.
Section 26.04. Any such adjustment payable by reason of the provisions
of Sections 26.02 and 26.03 hereof shall commence as of the first day of the
relevant Tax Year or Operation Year (as the case may be) and, after Landlord
shall furnish Tenant with an Escalation Statement relating to such Tax Year or
Operation Year, all monthly installments of rental shall reflect one-twelfth of
the annual amount of such adjustment until a new adjustment becomes effective
pursuant to the provisions of this Article 26, provided, however, that if said
Escalation Statement is furnished to Tenant after the commencement of such Tax
Year or Operation Year, there shall be promptly paid by Tenant to Landlord, an
amount equal to the portion of such adjustment allocable to the part of such Tax
Year or Operation Year which shall have elapsed prior to the first day of the
calendar month next succeeding the calendar month in which said Escalation
Statement is furnished to Tenant.
SECTION 26.05. In the event (i) that the term commencement date shall
occur during a Tax Year or an Operation Year, (ii) that the date of the
expiration or other termination of this Lease shall be a day other than the last
day of a Tax Year or an Operation Year, (iii) of any abatement of the fixed rent
payable hereunder pursuant to any provision of this Lease (other than the
provisions of Article 12 hereof) or (iv) of any increase or decrease (as herein
provided in the Area of the Premises or in the rentable square foot area of the
Building) then in each such event in applying the provisions of this Article 26
with respect to any Tax Year or Operation Year
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in which such event shall have occurred, appropriate adjustments shall be made
to reflect the occurrence of such event on a basis consistent with the
principles underlying the provisions of this Article 26, taking into
consideration (x) the portion of such Tax or Operation Year which shall have
elapsed prior to the term commencement date, the date of such expiration or
other termination, or the date of such increase or decrease, or (y) the period
of such rent abatement or such increase or decrease, as the case may be, and (z)
in the case of such rent abatement or such increase or decrease, the portion of
the premises to which the same relates.
SECTION 26.06. Payments shall be made pursuant to this Article 26
notwithstanding the fact that an Escalation Statement is furnished to Tenant
after the expiration of the term of this Lease.
SECTION 26.07. In case the Real Estate Taxes for any Tax Year or part
thereof shall be reduced after Tenant shall have paid Tenant's Proportionate
Share of any increase thereof in respect of such Tax Year pursuant to Section
26.04 hereof, Landlord shall credit or refund to Tenant, Tenant's Proportionate
Share of the refund of such taxes received by Landlord (after deduction of
expenses, including counsel fees, incurred by Landlord in connection with
reducing the assessed valuation and/or in obtaining such refund of taxes). If,
after an Escalation Statement has been sent to Tenant, the assessed valuation
which had been utilized in determining the Real Estate Base Tax is reduced (as a
result of settlement, final determination of legal proceedings or otherwise)
then, and in such event (a) the Real Estate Tax Base shall be retroactively
adjusted to reflect such reduction, (b) the monthly installment of fixed rent
shall be increased accordingly and (c) all retroactive additional rent resulting
from such retroactive adjustment shall be forthwith payable when billed by
Landlord. Landlord shall send to Tenant a statement setting forth the basis for
such retroactive adjustment and additional rent payments.
SECTION 26.08. In no event shall the fixed rent under this Lease
(exclusive of the additional rent under this Article) be reduced by virtue of
this Article.
ARTICLE 27
SUBORDINATION
SECTION 27.01. This Lease is subject and subordi-
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nate in all respects to all ground leases and/or underlying leases now or
hereafter covering the real property of which the premises form a part and to
all mortgages and trust indentures which may now or hereafter be placed on or
affect such leases and/or the real property of which the premises form a part,
or any part or parts of such real property, and/or Landlord's interest therein,
and to each advance made and/or hereafter to be made under any such mortgages,
or indentures and to all renewals, modifications, consolidations, replacements
and extensions thereof and all substitutions of and for such ground leases
and/or underlying leases and/or mortgages or indentures. This Section 27.01
shall be self-operative and no further instrument of subordination shall be
required. In confirmation of such subordination, Tenant shall execute and
deliver promptly any certificate that Landlord and/or any mortgagee and/or the
lessor under any ground or underlying lease and/or their respective successors
in interest may request. Tenant hereby constitutes and appoints Landlord and/or
any mortgagee and/or the lessor under any ground or underlying lease and/or
their respective successors in interest Tenant's attorney-in-fact to execute and
deliver any such certificate or certificates for and on behalf of Tenant. Tenant
agrees that, in the event any proceedings are brought for the foreclosure of any
mortgage or indenture referred to herein, to attorn to the purchaser upon any
such foreclosure sale and to recognize such purchaser as the landlord under this
Lease. In the event of the enforcement by any mortgagee of the Building of
remedies provided for by law or by such mortgage, any person succeeding to the
interest of the Landlord as the result of such enforcement shall not be bound by
any payment of rent or additional rent for more than one month in advance.
Landlord agrees that promptly following the date hereof to use its best efforts
(but without cost and expense to Landlord) to obtain an appropriate non-
disturbance and attornment agreement from the lessor of the underlying lease and
a non-disturbance agreement from the holder of the mortgage covering such lease.
ARTICLE 28
MISCELLANEOUS
SECTION 28.01. Notwithstanding anything contained in this Lease
to the contrary, Tenant covenants and agrees that Tenant will not use the
premises or any part thereof, or permit the premises or any part thereof to be
used,
(i) for a banking, trust company, or safe deposit business,
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(ii) as a savings bank, or as a savings and loan association, or
as a loan company,
(iii) for the sale of travelers checks and/or foreign exchange,
(iv) as a stock brokerage office or for stock brokerage purposes
or for the underwriting of securities,
(v) as a news and cigar stand, as such, or
(vi) as a restaurant and/or bar and/or for the sale of
confectionery and/or soda and/or beverages and/or sandwiches and/or ice
cream and/or baked goods or for the preparation, dispensing or consumption
of food or beverages in any manner whatsoever.
SECTION 28.02. Tenant hereby represents, covenants and agrees that
Tenant's business is not photographic reproductions and/or documentary
reproductions and/or offset printing. Notwithstanding anything contained in this
Lease to the contrary, Tenant covenants and agrees that Tenant will not use the
premises or any part thereof, or permit the premises or any part thereof to be
used, for the business of photographic reproductions and/or documentary
reproductions and/or offset printing. Nothing contained in this Section 28.02
shall preclude Tenant from using any part of the premises for photographic
reproductions and/or documentary reproductions and/or offset printing in
connection with, either directly or indirectly, its own business and/or
activities.
SECTION 28.03. If, in connection with obtaining financing for the
Building, a banking, insurance or other recognized institutional lender shall
request reasonable modifications in this Lease as a condition to such financing,
Tenant will not unreasonably withhold, delay or defer its consent thereto,
provided that such modifications do not increase the obligations of Tenant
hereunder or materially adversely affect the leasehold interest hereby created.
SECTION 28.04. If, at any time during the last month of the term of
this Lease, Tenant shall have removed all or substantially all of Tenant's
property from the premises, Landlord may, and Tenant hereby irrevocably grants
to Landlord a license to, immediately enter and alter, renovate and redecorate
the premises, without limitation, diminution or abatement of rent, or incurring
liability to Tenant for any compensa-
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tion, and such acts shall have no effect upon this Lease.
SECTION 28.05. Tenant shall not place a load upon any floor of the
premises exceeding the floor load per square foot which such floor was designed
to carry and which must be placed by Tenant, at Tenant's expense, so as to
distribute the weight. Business machines and mechanical equipment shall be
placed and maintained by Tenant, at Tenant's expense, in settings sufficient in
Landlord's judgment to absorb and prevent vibration, noise and annoyance. If the
premises be or become infested with vermin as a result of the use or any misuse
or neglect of the premises by Tenant, its agents, employees, visitors or
licensees, Tenant shall at Tenant's expense cause the same to be exterminated
from time to time to the satisfaction of Landlord and shall employ such
exterminators and such exterminating company or companies as shall be approved
by Landlord.
SECTION 28.06. If Landlord shall consent to the omission or removal
of any part of, or the insertion of any door or other opening in, any wall
separating the premises from adjoining space leased to another tenant, then (i)
Tenant shall be responsible for all risk of damage to, or loss or theft of,
property arising as an incident to such omission or removal or the use of such
door or other opening, or because of the existence thereof, and shall indemnify
and save Landlord harmless from and against any claim, demand or action for, or
on account of, any such loss, theft or damage, and (ii) in the event of the
termination of this Lease or the lease of said other tenant, Landlord may enter
the premises and Landlord, at Tenant's expense, may close up any door or other
opening by erecting a wall to match the wall separating the premises from said
adjoining space, and Tenant shall not be entitled to any diminution or abatement
of rent or other compensation by reason thereof; provided, however, that nothing
herein contained shall be deemed to vest Tenant with any right or interest in,
or with respect to, said adjoining space, or the use thereof, and Tenant hereby
expressly waives any right to be made a party to, or to be served with process
or other notice under or in connection with, any proceeding or action which may
hereafter be instituted by Landlord for the recovery of the possession of said
adjoining space.
SECTION 28.07. Without incurring any liability to Tenant, Landlord may
permit access to the premises and open the same, whether or not Tenant shall be
present, upon demand of any receiver, trustee, assignee for the benefit of
creditors, sheriff, marshal or court officer entitled to, or reasonably
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purporting to be entitled to, such access for the purpose of taking possession
of, or removing, Tenant's property or for any other lawful purpose (but this
provision and any action by Landlord hereunder shall not be deemed a recognition
by Landlord that the person or official making such demand has any right or
interest in or to this Lease, or in or to the premises), or upon demand of any
representative of the fire, police, building, sanitation or other department of
the city, state or federal governments.
SECTION 28.08. Tenant shall not be entitled to exercise any right of
termination or other option granted to it by this Lease at any time when Tenant
is in default in the performance or observance of any of the covenants,
agreements, terms, provisions or conditions on its part to be performed or
observed under this Lease.
SECTION 28.09. Tenant shall not place or permit to be placed any
vending machines in the premises, except for Tenant's employees and except
otherwise with the prior written consent of Landlord in each instance.
SECTION 28.10. Tenant will not clean, nor require, permit, suffer or
allow any window in the premises to be cleaned, in violation of Section 202 of
the Labor Law of the rules of the Board of Standards and Appeals, or of any
other board or body having or asserting jurisdiction.
SECTION 28.11. Tenant represents that it has not dealt with any
person other than Helmsley-Spear Incorporated in connection with this
transaction and agrees to indemnify and hold Landlord harmless from any damage
suffered by Landlord through any breach of this representation.
SECTION 28.12. The term "Landlord" as used in this Lease means only
the owner, or the mortgagee in possession, for the time being of the Land and
Building (or the owner of a lease of the Building or the Land and Building), so
that in the event of any sale or sales of the Land and Building or of said
lease, or in the event of a lease of the Building, or of the Land and Building,
the Landlord shall be and hereby is entirely freed and relieved of all covenants
and obligations of Landlord hereunder, and it shall be deemed and construed
without further agreement between the parties or their successors in interest,
or between the parties and the purchaser, at any such sale, or the said lessee
of the Building, or of the Land and Building, that the purchaser or the lessee
of the Building has assumed and agreed to carry out any and all covenants and
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obligations of Landlord hereunder. No general or limited partner or shareholder
of Landlord (including any assignee or successor of Landlord) or other holder of
any equity interest in Landlord shall be personally liable for the performance
of Landlord's obligations under this Lease. The liability of Landlord (including
any assignee or successor of Landlord) for Landlord's obligations under this
Lease shall be limited to Landlord's interest in the land and Building and
Tenant shall not look to any of Landlord's other assets in seeking either to
enforce Landlord's obligations under this Lease or to satisfy a judgment for
Landlord's failure to perform such obligations.
SECTION 28.13. The submission by Landlord of the Lease in draft form
shall be deemed submitted solely for Tenant's consideration and not for
acceptance and execution. Such submission shall have no binding force or effect
and shall confer no rights nor impose any obligations, including brokerage
obligations, on either party unless and until both Landlord and Tenant shall
have executed the Lease and duplicate originals thereof shall have been
delivered to the respective parties.
ARTICLE 29
LAYOUT AND FINISH
SECTION 29.01. Tenant shall at Tenant's expense, and as part of
Tenant's Changes, perform all of the work in the premises necessary for Tenant's
occupancy thereof (including full sprinklerization of the premises), subject to
the provisions of this Lease. Upon execution and delivery of this Lease,
Landlord shall make the premises available to Tenant for the performance of such
work to be done by Tenant. Tenant agrees with respect to its activities and work
during such period that it will conform to all of Landlord's labor regulations
and shall not do or permit anything to be done that might create any work
stoppage, picketing or other labor disruption or dispute. Tenant agrees that it
will, prior to the commencement of any work in the premises, deliver to Landlord
all policies of insurance required to be supplied to Landlord by Tenant pursuant
to the terms of this Lease.
SECTION 29.02. In consideration of Tenant performing all of the work
necessary for its occupancy of the premises, Landlord agrees that if Tenant,
within a period of twelve (12) months from the term commencement date, shall
have submitted to Landlord (a) a detailed itemization of the lease-
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hold improvements (including, without limitation, full sprinklerization of the
premises) installed by Tenant in the premises, (b) together with receipted paid
bills therefor from a general contractor approved by Landlord and (c) an opinion
of counsel or other evidence reasonably satisfactory to Landlord to the effect
that there has not been filed with respect to the Building and/or premises or
any part thereof or upon Tenant's leasehold interest therein any vendor's,
mechanic's, laborer's, materialman's or other lien which has not been dis-
charged of record, Landlord shall reimburse or cause to be reimbursed to Tenant
an amount equal to the lesser of (i) the actual cost of the leasehold
improvements made by Tenant in the premises and (ii) Three Hundred Eighty
Thousand Six Hundred Forty ($380,640.00) DOLLARS, representing Landlord's
contribution to such work, it being understood and agreed that Landlord's
contribution shall not exceed the sum of Three Hundred Eighty Thousand Six
Hundred Forty ($380,640.00) DOLLARS, and that all costs and expenses in excess
of said sum shall be borne solely by Tenant. For purposes of this Section 29.02
and Landlord's obligation to reimburse Tenant, as aforesaid, for the leasehold
improvements made by Tenant in the premises, leasehold improvements shall not be
deemed to include any items of decoration (other than painting and wall covering
and where tile or vinyl is not installed, floor covering) furniture, furnishings
(other than work stations), millwork, or architect or designer fees. Further,
Tenant agrees that Landlord may perform Tenant's obligation to install a
sprinkler system in the premises, and Landlord may credit against Landlord's
contribution Tenant's pro rata share, seventy-three (73%) percent, of the cost
incurred by Landlord to install a sprinkler system throughout the thirty third
(33rd) floor of the Building, including, but not by way of limitation, all
risers, pipe run-outs, sprinkler heads, supplementary pumps, if required, and
all valve connections. Landlord agrees, subject to unavoidable delays, to
install said sprinkler system within thirty (30) days after submission by Tenant
to Landlord of Tenant's final working drawings for the premises. On Tenant's
request, Landlord shall submit to Tenant copies of receipted bills for such
work.
SECTION 29.03. Upon Tenant's request, Landlord's contribution as
provided in Section 29.02 shall be paid out from time to time (in
contradistinction to completion and receipt by Landlord of paid bills) as
Tenant's work progresses, which request by Tenant shall be accompanied by the
following:
(a) a certificate signed by Tenant, dated not more than ten (10)
days prior to such request, setting forth
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the following:
(i) that the sum then requested is justly due to persons
who have rendered services or furnished materials for the work therein
specified, and giving a brief description of such services and materials
and the several amounts due to each of said persons in respect thereof, and
stating that no part of such expenditure is being made the basis, in any
previous or then pending prior request, for the receipt of Landlord's
contribution or has been made out of the proceeds of Landlord's
contribution received by Tenant, and that the sum then requested does not
exceed the value of the services and materials described in the
certificate;
(ii) that except for the amount, if any, stated pursuant to
the foregoing subdivision (a)(i) in such certificate to be due for services
or materials, there is no outstanding indebtedness (except for withholding
of ten (10%) percent of such amount) known to the persons signing such
certificate, which is then due for labor, wages, materials, supplies or
services in connection with such work which, if unpaid, might immediately
become the basis of a vendor's, mechanic's, laborer's or materialman's
statutory or similar lien upon such work or upon the Land or Building or
any part thereof or upon Tenant's leasehold interest.
(b) an opinion of counsel or other evidence, reasonably
satisfactory to Landlord to the effect that there has not been filed with
respect to the Land and Building or any part thereof any lien which has not been
discharged of record.
Subject to the provisions of Section 29.02 hereof, upon compliance
with the foregoing provisions of this Section 29.03, Landlord shall pay or cause
to be paid to Tenant or the persons named (pursuant to subdivision (a)(i) of
this Section) in such certificate, the respective amounts stated therein to be
due to them; provided, however, that Landlord's total contribution shall not
exceed the sum of Three Hundred Eighty Thousand Six Hundred Forty ($380,640.00)
DOLLARS, and all costs and expenses in excess of said sum shall be borne solely
by Tenant.
SECTION 29.04. Landlord shall, at its expense, construct and decorate
the public corridors and construct demising walls adjacent to the premises
immediately following submission by Tenant to Landlord of
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approved final working drawings.
ARTICLE 30
INSURANCE
SECTION 30.01. Tenant covenants to provide prior to entry upon the
premises and to keep in force and effect during the demised term: (1)
comprehensive general liability insurance relating to the premises and its
appurtenances on an occurrence basis against claims for bodily injury or death
on account of accident upon the premises with minimum limits of liability in
amount of TWO MILLION and 00/100 ($2,000,000.00) DOLLARS per occurrence; and (2)
Workmen's Compensation Insurance to cover all persons engaged in Tenant's
Changes. Tenant agrees to deliver to Landlord, at least fifteen (15) days prior
to the time such insurance is first required to be carried by Tenant, and
thereafter at least fifteen (15) days prior to the expiration of any such
policy, either a duplicate original or a certificate and true copy of all
policies procured by Tenant in compliance with its obligations hereunder,
together with evidence of payment therefor and including an endorsement which
states that such insurance may not be cancelled except upon ten (10) days'
written notice to Landlord and any designee(s) of Landlord. Workmen's
Compensation Insurance provided for in this Section may be procured by Tenant's
contractors.
SECTION 30.02. All of the aforesaid insurance shall be issued in the
name of Landlord (and any designee(s) of Landlord) and Tenant shall be written
by one (1) or more responsible insurance companies licensed to do business in
New York State; all such insurance may be carried under a blanket policy
covering the premises and any other of Tenant's locations and shall contain
endorsements that: (1) Such insurance may not be cancelled or amended with
respect to Landlord (or its designee(s)) except upon ten (10) days written
notice by registered mail to Landlord (and such designee(s)) by the insurance
company; and (2) Tenant shall be solely responsible for payment of premiums and
that Landlord (or its designee(s)) shall not be required to pay any premiums for
such insurance. The minimum limits of the comprehensive general liability policy
of insurance shall in no way limit or diminish Tenant's liability under Section
5.01(j) hereof.
SECTION 30.03. The minimum limits of the comprehensive general
liability policy of insurance shall be subject to increase at any time, and from
time to time, after the commencement of the fifth (5th) year of the term hereof
if Land-
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lord in the exercise of its reasonable judgment shall deem the same necessary
for adequate protection. Within thirty (30) days after demand therefor by
Landlord, Tenant shall furnish Landlord with evidence that such demand has been
complied with. In case Tenant disputes the reasonableness of Landlord's demand,
the parties agree to submit the question of the reasonableness of such demand
for decision to the Chairman of the Board of Directors of the Management
Division of The Real Estate Board of New York, Inc., or to such impartial person
or persons as he may designate whose determination shall be final and conclusive
upon the parties hereto. The right to dispute the reasonableness of any such
demand by Landlord shall be deemed waived unless the same shall be asserted by
Tenant by service of a notice in writing upon Landlord within ten (!0) days
after the giving of Landlord's demand therefor.
ARTICLE 31
SECURITY DEPOSIT
31.01. Simultaneously with the execution and delivery of this lease by
Tenant, Tenant has deposited with Landlord the sum of Sixty-Two Thousand One
Hundred Eighteen and 33/100 ($62,118.33) Dollars, as security for the full and
faithful performance by Tenant of each and every term, covenant, condition and
agreement of this Lease or any renewals or extensions thereof on Tenant's part
to be performed; it being expressly understood and agreed that Tenant shall
pay rent for the last calendar month of the term hereof or of any renewals or
extensions thereof promptly on the first day of such month. If Tenant shall fail
to perform or observe, or shall breach or violate, any of the terms, covenants,
conditions or agreements of this Lease, including but not limited to the
payment of fixed rent or additional rent or any other charges, Landlord may use,
apply or retain the whole or any part of such deposit to the extent required for
the payment of any such fixed rent or additional rent or any other sum as to
which Tenant is in default or for any sum which Landlord may expend or may be
required to expend by reason of Tenant's non-performance, non-observance, breach
or violation of any of the terms, covenants, conditions or agreements of this
Lease, including but not limited to, any damages or deficiency in the re-letting
of the premises, whether such damages or deficiency accrue before or after
summary proceedings or other re-entry by Landlord.
31.02. Landlord shall not be required so to use, apply or retain the whole
or any part of said deposit, but if
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the whole or any part thereof is so used, applied or retained, Tenant shall upon
demand immediately deposit with Landlord a sum equal to the amount so used,
applied or retained. If Tenant shall fully and faithfully comply with all of the
terms, covenants, conditions and agreements of this Lease, the deposit or any
balance thereof remaining shall be returned to Tenant after the date fixed as
the end of this Lease or of any renewal or extension thereof and after delivery
of entire possession of the premises to Landlord. Landlord shall not be required
to pay Tenant any interest on said security deposit.
31.03. In the event of a sale, transfer or lease of the parcel of Land or a
sale, transfer or lease of Land and/or Building or a sale or transfer of any
such lease, Landlord may transfer or assign the security so deposited or any
balance thereof remaining the vendee, transferee or lessee, as the case may be,
and Landlord shall thereupon be released from all liability for the return of
such security, and Tenant, in each such instance, shall look solely to such
vendee, transferee or lessee, as the case may be, for the return of such
security. It is further agreed that the provisions hereof shall apply to every
such sale, transfer or lease and to every such transfer or assignment made of
such security.
31.04. Tenant shall not assign or encumber or attempt to assign or encumber
any security deposited hereunder and neither Landlord not its successors or
assigns shall be bound by any such assignment, encumbrance, attempted assignment
or attempted encumbrance.
31.05. Tenant may deposit with Landlord, in lieu of cash security referred
to in Section 31.01 of this Article, an irrevocable and unconditional bank
Letter of Credit, drawn on a bank satisfactory to Landlord, in the amount of
2,118.33, designating Landlord as the sole payee thereunder. Such Letter of
Credit shall provide for the unilateral application thereof by Landlord in the
event Tenant is in default in the observance or performance of any term,
covenant or condition of the Lease to be observed or performed by Tenant, and
shall otherwise be in form satisfactory to Landlord. Tenant covenants and agrees
that not less than sixty (60) days prior to the expiration of any such Letter of
Credit, Tenant shall furnish to Landlord a new Letter of Credit meeting each of
the requirements of this Section. Tenant's failure to comply with the provisions
of the immediately preceding sentence shall constitute a default under the
provisions of Section 12.01 of Article 12 of this Lease, permitting Landlord to
give to Tenant the notice of intention to end the term of this Lease, as pro-
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vided in said Section 12.01.
ARTICLE 32
QUIET ENJOYMENT
32.01 Landlord covenants that if and so long as, Tenant keeps and performs
each and every covenant, agreement, term, provision and condition herein
contained on the part and on behalf of Tenant to be kept and performed, Tenant
shall quietly enjoy the premises without hindrance or molestation by Landlord or
by any other person lawfully claiming the same, subject to the covenants,
agreements, terms, provisions and conditions of this Lease and to the ground
leases and/or underlying leases and/or mortgages to which this Lease is subject
and subordinate, as hereinbefore set forth.
IN WITNESS WHEREOF Landlord and Tenant have duly executed this Lease as of the
day and year first above written.
PDC REALTY INC., As Agent For
MRI BROADWAY RENTAL, INC.
ATTEST:
/s/Logan T. Dugaw By /s/John B. Farren
- -------------------------- ----------------------------------
John B. Farren, President (I-
TELEPHONE MARKETING PROGRAMS INC.
ATTEST:
/s/ Thomas G. Collison By /s/Andrew J. McKelvey
- -------------------------- ----------------------------------
(TENANT)
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LANDLORD
STATE OF ILLINOIS )
: ss.:
COUNTY OF COOK )
On this 7th day of November, 1978, before me personally came JOHN B.
FARREN, to me known, who being by me duly sworn, did depose and say that he
resides at 1001 East Touhy Avenue, Des Plaines, Illinois; that he is President
of PDC REALTY INC., the corporation described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation, and that he signed his name
thereto by like order.
/s/ Janet M. (illegible)
-------------------------------
Notary Public
My Commission Expires (illegible)
TENANT
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 30th day of October, 1978, before me personally came Andrew J.
McKelvey, to me known, who being by me duly sworn, did depose and say that he
resides at 300 East 40 St., New York, New York that he is President of TELEPHONE
MARKETING PROGRAMS INC., the corporation described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation, and that he signed his name
thereto by like order.
/s/ Muriel T. Ruttgeizer
------------------------------
Notary Public
MURIEL T. RUTTGEIZER
Notary Public State of New York
No. 24-4625170
Qualified in Kings County
Commission Expires March 30, 1979
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RULES AND REGULATIONS
1. The sidewalks, driveways, entrances, passages, courts, lobbies,
esplanade areas, plazas, elevators, vestibules, stairways, corridors or halls
shall not be obstructed or encumbered by any tenant or used for any purpose
other than ingress and egress to and from the premises and Tenant shall not
permit any of its employees, agents or invitees to congregate in any of said
areas. No doormat of any kind whatsoever shall be placed or left in any public
hall or outside any entry door of the premises.
2. No awnings or other projections shall be attached to the outside walls
of the Building. No curtains, blinds, shades or screens shall be attached to or
hung, in, or used in connection with any window or door of the premises, without
the prior written consent of Landlord. Such curtains, blinds, shades or screens
must be of a quality, type, design and color, and attached in the manner,
approved by Landlord.
3. No sign, insignia, advertisement, lettering, notice or other object
shall be exhibited, inscribed, painted or affixed by any tenant on any part of
the outside or inside of the premises or the Building without the prior written
consent of Landlord. In the event of the violation of the foregoing by any
tenant, Landlord may remove the same without any liability, and may charge the
expense incurred in such removal to the tenant or tenants violating this rule.
Interior signs, and lettering on doors and the Building directory shall, if and
when approved by Landlord, be inscribed, painted or affixed for each tenant by
Landlord at the expense of such tenant, and shall be of a size, color and style
acceptable to Landlord.
4. The sashes, sash doors, skylights, windows, and doors that reflect or
admit light and air into the halls, passageways or other public places in the
Building shall not be covered or obstructed by any tenant, nor shall any
bottles, parcels, or other articles be placed on the window sills or on the
peripheral air conditioning enclosures.
5. No showcases or other articles shall be put in front of or affixed to
any part of the exterior of the Building, nor placed in the halls, corridors or
vestibules.
6. The water and wash closets and other plumbing fixtures shall not be used
for any purposes other than those for which they were designed or constructed,
and no sweepings,
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rubbish, rags, acids or other substances shall be thrown or deposited therein.
All damages resulting from any misuse of the fixtures shall be borne by the
tenant who, or whose servants, employees, agents, visitors or licensees shall
have, caused the same. Any cuspidors or containers or receptacles used as such
in the premises, or for garbage or similar refuse, shall be emptied, cared for
and cleaned by and at the expense of Tenant.
7. No tenant shall mark, paint, drill into, or in any way deface, any
part of the premises or the Building. No boring, cutting or stringing of wires
shall be permitted, except with the prior written consent of Landlord, and as
Landlord may direct.
8. No bicycles, vehicles, animals, fish or birds of any kind shall be
brought into or kept in or about the premises.
9. No noise, including, but not limited to, music or the playing of
musical instruments, recordings, radio or television which, in the judgment of
Landlord, might disturb other tenants of the Building, shall be made or
permitted by any tenant. Nothing shall be done or permitted in the premises by
any tenant which would impair or interfere with the use or enjoyment by any
other tenant of any other space in the Building.
10. No tenant, nor any tenant's servants, employees, agents, visitors
or licensees, shall at any time bring or keep upon the premises any inflammable,
combustible or explosive fluid, chemical or substance.
11. Additional locks or bolts of any kind which shall not be operable
by the Grand Master Key for the Building shall not be placed upon any of the
doors or windows by any tenant, nor shall any changes be made in locks or the
mechanism thereof which shall make such locks inoperable by said Grand Master
Key. Each tenant shall, upon the termination of its tenancy, turn over to
Landlord all keys of stores, offices and toilet rooms, either furnished to, or
otherwise procured by, such tenant, and in the event of the loss of any keys
furnished by Landlord, such tenant shall pay to Landlord the cost thereof.
12. All removals, or the carrying in or out of any safes, freight,
furniture, packages, boxes, crates or any other object or matter of any
description must take place dur-
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ing such hours and in such elevators as Landlord or its agent may determine from
time to time. Landlord reserves the right to inspect all objects and matter to
be brought into the Building and to exclude from the Building all objects and
matter which violate any of these Rules and Regulations or the Lease of which
these Rules and Regulations are a part. Landlord may require any person leaving
the Building with any package or other object or matter to submit a pass,
listing such package or object or matter, from the tenant from whose premises
the package or object or matter is being removed, but the establishment and
enforcement of such requirement shall not impose any responsibility on Landlord
for the protection of any tenant against the removal of property from the
premises of such tenant. Landlord shall in no way be liable to any tenant for
damages or loss arising from the admission, exclusion or ejection of any person
to or from the premises or the Building under the provisions of this Rule 12 or
of Rule 16 hereof.
13. Tenant shall not occupy or permit any portion of the premises to be
occupied as an office for a public stenographer or public typist, or for the
possession, storage, manufacture, or sale of liquor, narcotics, dope, tobacco in
any form, or as a barber, beauty or manicure shop, or as a school, or as a
hiring or employment agency. Tenant shall not engage or pay any employee on the
premises, except those actually working for tenant on the premises nor advertise
for laborers giving an address at the premises. Tenant shall not use the
premises or any part thereof, or permit the premises or any part thereof to be
used for manufacturing, or for the sale at retail or auction of merchandise,
goods or property of any kind.
14. No tenant shall obtain, purchase or accept for use in the premises
ice, drinking water, food, coffee cart, beverage, towel, barbering,
bootblacking, cleaning, floor polishing or other similar services from any
persons not authorized by Landlord in writing to furnish such services. Such
services shall be furnished only at such hours, in such places within the
premises, and under such regulations, as may be fixed by Landlord.
15. Landlord shall have the right to prohibit any advertising or
identifying sign by any tenant which, in Landlord's judgment, tends to impair
the reputation of the Building or its desirability as a building for offices,
and upon written notice from Landlord, such tenant shall refrain from and
discontinue such advertising or identifying sign.
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16. Landlord reserves the right to exclude from the Building during
hours other than Business Hours (as defined in the foregoing Lease) all persons
connected with or calling upon tenant who do not present a pass to the Building
signed by tenant. Tenant shall furnish Landlord with a facsimile of such pass.
All persons entering and/or leaving the Building during hours other than
Business Hours may be required to sign a register. Tenant shall be responsible
for all persons for whom it issues any such pass and shall be liable to Landlord
for all acts or omissions of such persons.
17. Tenant, before closing and leaving the premises at any time, shall
see that all operable windows are closed and all lights are turned out. All
entrance doors in the premises shall be left locked by tenant when the premises
are not in use. Entrance doors shall not be left open at any time.
18. Unless Landlord shall furnish electric energy hereunder as a
service included in the rent, tenant shall, at tenant's expense, provide
artificial light and electric energy for the employees of Landlord and/or
Landlord's contractors while doing janitor service or other cleaning in the
premises and while making repairs or alterations in the premises.
19. The premises shall not be used for lodging or sleeping or for any
immoral or illegal purpose.
20. The requirements of tenants will be attended to only upon
application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside of their regular duties, unless under
special instructions from Landlord.
21. Canvassing, soliciting and peddling in the Building are prohibited
and each tenant shall cooperate to prevent the same.
22. There shall not be used in any space, or in the public halls of the
Building, either by any tenant or by any others, in the moving or delivery or
receipt of safes, freight, furniture, packages, boxes, crates, paper, office
material, or any other matter or thing, any hand trucks except those equipped
with rubber tires, side guards and such other safeguards as Landlord shall
require.
23. Tenant shall not cause or permit any odors of cooking or other
processes or any unusual or objectionable
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odors to emanate from the premises which would annoy other tenants or create a
public or private nuisance. No cooking shall be done in the premises except as
is expressly permitted in the foregoing Lease.
24. Landlord reserves the right to rescind, alter or waive any rule or
regulation at any time prescribed for the Building when, in its judgment, it
deems it necessary or desirable for the reputation, safety, care or appearance
of the Building, or the preservation of good order therein, or the operation or
maintenance of the Building, or the equipment thereof, or the comfort of tenants
or others in the Building. No rescission, alteration or waiver of any rule or
regulation in favor of one tenant shall operate as a rescission, alteration or
waiver in favor of any other tenant.
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[FLOORPLAN]
<PAGE>
CLEANING SPECIFICATIONS
GENERAL
All stone, ceramic, tile, marble, terrazzo and other unwaxed or untreated
flooring to be swept nightly, using approved dust-down preparation; wash such
flooring once a month.
All linoleum, rubber, asphalt tile and other similar types of flooring (that may
be waxed or treated) to be swept nightly, using approved dust-down preparation.
Waxing and interim buffing shall be done at Tenant's expense.
All carpeting and rugs to be carpet swept nightly and vacuum cleaned at least
once each week.
Hand dust and wipe clean all furniture, fixtures, window sills and convector
closure tops nightly; wash sills and tops when necessary.
Empty, clean and damp dust as necessary all waste receptacles nightly and remove
from the demised premises waste paper and waste materials.
Empty and clean all ash trays and screen all sand urns nightly.
Dust all door and other ventilating louvres within reach, as necessary.
Dust all telephones as necessary.
Remove finger marks and scuff marks from partition walls and door surfaces.
Sweep all private stairway structures nightly.
Wipe clean all metal hardware and metal fixtures and other bright work nightly.
Wipe clean all metal elevator shaftway doors and frames.
Wipe all interior metal window frames, mullions, terrace doors and other
unpainted interior metal surfaces of the perimeter walls of the building each
time the interior of the windows are washed. Such surfaces to be cleaned once
each year with appropriate cleaner.
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Vacuum clean peripheral induction air conditioning units semiannually.
Render pest control services once each month and emergency calls on request.
Normal floor cleaning only shall be performed in Tenants' computer equipment
areas, food preparation and dining areas.
LAVATORIES
Sweep and wash all lavatory floors nightly, using disinfectants. Wash and polish
all mirrors, powder shelves, bright work and enameled surfaces in all
laboratories, nightly.
Scour, wash, and disinfect all basins, bowls and urinals nightly.
Wash both sides of all toilet seats nightly.
Hand dust and clean, washing where necessary, all partitions, tile walls,
dispensers and receptacles in all lavatories and restrooms nightly.
Fill toilet tissue holders nightly (tissue to be furnished by Landlord).
Empty sanitary disposal receptacles nightly.
Wash interior of waste cans and receptacles at least once a week.
Wash and polish wall tile and stall surfaces as often as necessary but in no
event less than once every two weeks.
If directed by Tenant, fill soap dispensers and paper towel dispensers, (soap
and paper towels to be furnished by Tenant).
Empty paper towel receptacles and transport wastepaper from the demised
premises, nightly.
HIGH DUSTING
Do high dusting quarterly, which includes the following:
Dust all pictures, frames, charts, graphs and similar wall hangings not reached
in nightly cleaning.
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Dust clean all vertical surfaces, such as walls, partitions, doors and bucks and
other surfaces not reached in nightly cleaning.
Dust clean all pipes, ventilating and air conditioning louvres, ducts, high
mouldings and other high areas not reached in nightly cleaning.
Dust all lighting fixtures, annually, including plastic and glass enclosures.
Dust all venetian blinds or wash as required.
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LEASE MODIFICATION AGREEMENT
----------------------------
LEASE MODIFICATION AGREEMENT, made as of the day of January, 1979,
between PARAMOUNT EQUITIES LTD., as Agent for MRI BROADWAY RENTAL, INC., a New
York corporation having an office at 1001 East Touhy Avenue, Des Plaines,
Illinois (the "Landlord"), and TELEPHONE MARKETING PROGRAMS INC., a New York
corporation having an office at 605 Third Avenue, New York, New York (the
"Tenant").
WITNESSETH:
WHEREAS:
A. The Landlord and the Tenant, as of October 31, 1978, entered
into a lease covering a portion of the 33rd floor (the "Original Space") in the
building (the "Building") known as 1633 Broadway, New York, New York, at the
rental and upon the other terms and conditions more particularly set forth
herein and a letter agreement of even date therewith relating to electrical
service (the lease and the letter agreement being hereinafter collectively
called the "Lease").
B. The Landlord and the Tenant desire to modify the Lease by
adding the remaining premises on the 33rd floor of the Building to the Original
Space at the premises leased under the Lease and by, among other things,
increasing the rental payable under the Lease, all on the terms, conditions and
provisions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements hereinafter set forth, the Landlord and the Tenant hereby agree as
follows:
<PAGE>
2. Effective as of the date of this Agreement:
A. The premises located on the 33rd floor of the Building shown by
hatching on the plan annexed hereto (the "Additional Space") are hereby added to
the Original Space as premises leased under the Lease. The plan annexed hereto
shall be deemed to be annexed to and be part of the Lease with the same force
and effect as if physically attached thereto. The premises leased under the
Lease as modified by this Agreement shall consist of the Original Space and the
Additional Space.
B. Subject to adjustment as provided in the Lease, the annual
rental payable under the Lease is hereby increased by One Hundred Fifty Three
Thousand Sixty Three Dollars and Seventy Five Cents ($153,063.75) per year, from
Three Hundred Seventy Two Thousand Seven Hundred Ten Dollars ($372,710.00) per
year to Five Hundred Twenty Five Thousand Seven Hundred Seventy Three Dollars
and Seventy Five Cents ($525,773.75) per year.
C. The rentable area of the premises referred to in Section 1.06
of the Lease is hereby increased by 12,005 square feet, from 31,720 square feet
to 43,725 square feet.
D. The reference in Section 24.02 as the amount of annual fixed
rent set forth in Article 1 for electric energy on a rent inclusion basis is
hereby increased by $15,006.25, from $39,650.00 to $54,656.25.
E. The reference in subsection (d) of Section 26.01 of the Lease
to "Area of the Premises" is hereby increased by 12,005 square feet from 31,720
square feet to 43,725 square feet.
-2-
<PAGE>
F. The Landlord's total contribution to the Tenant's work in the
Original Space and the Additional Space, referred to in Sections 29.02 and 29.03
of the Lease, is hereby increased by One Hundred Forty Four Thousand Sixty
Dollars ($144,060.00), from Three Hundred Eighty Thousand Six Hundred and Forty
Dollars ($380,640.00) to Five Hundred Twenty Four Thousand Seven Hundred Dollars
($524,700.00).
G. The security deposit referred to in Sections 31.01 and 31.05 of
Article 31 of the Lease is hereby increased by $25,510.63, from $62,118.33 to
$87,628.96, and Landlord hereby acknowledges receipt of an irrevocable and
unconditional bank Letter of Credit in such increased amount.
H. The third sentence of Section 29.02 of the Lease is hereby amended
by deleting the following phrase therein:
"Tenant's pro rata share, seventy-three (73%) percent, of ..."
I. Section 29.04 of the Lease is hereby deleted.
J. The reference to $39,650.00 per annum in paragraph 1 of the
electrical service letter agreement referred to above is hereby increased by
$15,006.25 per annum to $54,656.25 per annum.
K. The Tenant shall use and occupy the Additional Space for
executive and general offices and for no other purposes.
2. Tenant hereby acknowledges that Tenant has caused an inspection to
be made of the Additional Space. Tenant shall accept the Additional Space "as
is" in its
-3-
<PAGE>
state and physical condition on the day on which Tenant takes possession of the
Additional Space, and Landlord shall not be required to make any repairs,
alterations or improvements (including, without limitation, improvements such
as painting, finishing, plastering or decorating) in or to the Additional Space.
3. The Tenant represents that it has not dealt with any person other
than Helmsley-Spear, Incorporated in connection with this modification of lease
and agrees to indemnify and hold the Landlord harmless for any damages suffered
by the Landlord for any breach of this representation.
4. Modifying section 25.10(g), tenant shall be permitted seven (7)
subtenants in lieu of four (4) subtenants as stated therein. In addition, the
provisions of section 25.14 are changed as follows: from one (1) year to two
(2) years, from two (2) subtenants to six (6) subtenants, from 6,000 square
feet to 18,000 square feet.
5. This Agreement may not be changed, modified, terminated or
discharged orally.
6. As modified by this Agreement, the Lease is hereby ratified and
confirmed and shall remain in full force and effect, and the provisions of the
Lease as so modified shall apply to the Additional Space.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date set forth at the outset of this Agreement.
PARAMOUNT EQUITIES LTD, as Agent for
MRI BROADWAY RENTAL, INC.
BY /s/ John B. Farren
-------------------------------------
TELEPHONE MARKETING PROGRAMS, INC.
BY /s/ Andrew J. McKelvey
-------------------------------------
<PAGE>
STATE OF ILLINOIS )
) ss.:
COUNTY OF COOK )
On this 5th day of February , 1979, before me personally came JOHN B.
FARREN, to me known, who being by me duly sworn, did depose and say that he
resides at 1001 East Touhy Avenue, Des Plaines, Illinois; that he is President
of Paramount Equities Ltd., the corporation described in and which executed the
foregoing instrument; that he knows the seal of said corporation: that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation, and that he signed his name
thereto by like order.
/s/ Carol Hinnitty
----------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this day of , 1979, before me personally came
ANDREW J. McKELVEY, to me known, who being by me duly sworn, did depose and say
that he resides at 425 East 58th Street, New York, New York; that he is
President of TELEPHONE MARKETING PROGRAMS INC. the corporation described in and
which executed the foregoing instrument; that he knows the seal of said
corporation, that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order.
/s/ Patricia Dennigan
----------------------
Notary Public
<PAGE>
[MAP OMITTED]
<PAGE>
DRAFT
- -----
SECOND LEASE MODIFICATION AGREEMENT
------------------------------------
This SECOND LEASE MODIFICATION AGREEMENT is made as of the 20th day of June,
1991, between PARAMOUNT GROUP,INC. as agent for MRI BROADWAY RENTAL, INC., a New
York corporation, having an office at Paramount Plaza, 1633 Broadway, New York,
New York 10019 ("Landlord") and TELEPHONE MARKETING PROGRAMS INC., a New York
corporation having an office at 1633 Broadway, New York, New York 10019
("Tenant").
WITNESSETH:
----------
WHEREAS, Landlord and Tenant entered into that certain lease dated as of
October 31, 1978 (the "Original Lease"), as amended by agreement dated as of
October 31, 1978 (the "Letter Agreement") and a Lease Modification Agreement
dated as February 5, 1979 (the "First Modification") (the Original Lease, the
Letter Agreement and the First Modification are hereinafter collectively
referred to as the "Lease"); and
WHEREAS, Landlord and Tenant wish to extend the term of the Lease and make
other modifications to the Lease as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the mutual receipt and legal sufficiency of which are
hereby acknowledged, Landlord and Tenant agree as follows:
1. The effective date of this amendment is July 1, 1991 (the "Effective
Date").
2. On and after the Effective Date, Section 1.02 of the Lease shall be
modified by replacing the words "the fifteenth anniversary of the rent
commencement date (as hereinafter defined)" in the third and fourth lines with
the words "June 30, 2004 (the "Expiration Date")".
3. On and after the Effective Date, Section 1.04 of the Original Lease and
Section 2.B of the First Modification shall be modified so that the fixed rent
payable by Tenant shall be One Million One Hundred Seventy-Seven Thousand, Seven
Hundred Seventy-Eight and 52/100 Dollars ($1,177,778.52) per annum.
4. On and after the Effective Date, Section 24.02 of the Lease shall be
modified by replacing the number "$39,650,00" in the twelfth line with the
number "$72,188.28".
<PAGE>
5. On and after the Effective Date, Section 26.01 (b) of the Leased shall
be modified by replacing the year "1979" in the second line with the year
"1991".
6. On and after the Effective Date, Section 26.01 (f) of the Lease shall be
modified by replacing the words "June 30, 1979" in the second line with the
words "June 30, 1991".
7. On and after the Effective Date, Section 26.01 (h) of the Lease shall be
modified by replacing the words "December 31, 1979" in the second line with the
words "December 31, 1991".
8. On and after July 1, 1994 through and including the Expiration Date, the
"Hourly Wage Rate" as defined in Section 26.01 (g) of the Lease shall exclude
all benefits of every nature and kind (including those required to be paid by
the employer directly to the taxing authorities or others on account of the
employment) as further described in the eighth through fifteenth lines on page
45 of the Original Lease.
9. On and after the Effective Date, sections 29.02 and 29.03 shall be
deleted.
10. Tenant represents that it has not dealt with any person other than
Newmark Real Estate Service, Inc. in connection with this Agreement and agrees
to indemnify and hold the Landlord harmless from and against all claims of and
liabilities to any broker(s) or other persons other than Newmark Real Estate
Service, Inc. regarding brokerage or other commissions alleged to be due as a
result of this Agreement.
11. Section 11.01 of the Lease shall be modified so that all notices shall
be sent to the parties at the addresses set forth at beginning of this
Agreement.
12. Except as modified and amended by this Agreement, (a) all of the terms,
covenants and conditions of the Lease are hereby ratified and confirmed and
shall continue to be and remain in full force and effect and (b) all terms and
conditions of the Lease are incorporated herein by reference. All references in
the Lease to "this lease" or "the Lease" shall be deemed to be, unless the
context requires otherwise, references to the Lease as supplemented by this
Agreement.
13. Tenant and Landlord represent and warrant to each other that they are
authorized to enter into this Agreement.
14. Landlord and Tenant shall execute any additional documents that are
reasonably necessary to further the intent of this Agreement.
<PAGE>
15. This Agreement may not be changed, modified, terminated or discharged
orally.
LANDLORD :
----------
MRI BROADWAY RENTAL, INC.
By: PARAMOUNT GROUP, INC., agent
By: /s/
-------------------------------------
NAME:
TITLE: Vice President Property
Management Office Buildings
TENANT:
-------
TELEPHONE MARKETING PROGRAMS INC.
By: /s/ Andrew J. McKelvey
-------------------------------------
Name:
Title: PRESIDENT
<PAGE>
DATED 2 JULY 1996
BETWEEN
NEVILLE JEFFRESS HOLDINGS PTY LIMITED
ACN 000 331 680
AND
PETZOW HOLDINGS PTY LTD
ACN 002 983 557
AND
TMP AUSTRALIA PTY LIMITED
ACN 074 319 396
AND
NEVILLE JEFFRESS AUSTRALIA PTY LTD
ACN 000 155 448
SHARE SALE AND PURCHASE AGREEMENT
RELATING TO THE ENTIRE ISSUED SHARE CAPITAL OF
NEVILLE JEFFRESS AUSTRALIA PTY LIMITED
ACN 000 155 448
D U N H I L L
M A D D E N
B U T L E R
SOLICITORS
Sydney
16 Barrack Street, Sydney 2000
New South Wales, Australia
GPO Box 427, Sydney 2001
DX 254 SYDNEY
Telephone: (02) 295 9999
International: 612 295 9999
Fax: (02) 295 9990
E.mail: [email protected]
Ref: MBY:890598
SYDNEY - MELBOURNE - BRISBANE
<PAGE>
TABLE OF CONTENTS
CLAUSE PAGE
1. DEFINITIONS AND INTERPRETATION..................................... 1
2. SALE OF THE SALE SHARES............................................ 7
3. CONSIDERATION...................................................... 7
4. SUBSCRIPTION AMOUNT, REPAYMENT OF INTER-GROUP BORROWINGS AND DISPOSAL
OF SURPLUS ASSETS.................................................. 9
5. COMPLETION......................................................... 10
6. WARRANTIES AND INDEMNITY........................................... 13
7. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION......................... 17
8. THE NJ GUARANTEES AND THE NJA GUARANTEES........................... 18
9. FURTHER ASSURANCE.................................................. 18
10. ANNOUNCEMENTS AND INFORMATION...................................... 19
11. GENERAL............................................................ 20
12. NOTICES........................................................... 21
13. PROPER LAW......................................................... 22
14. DEBTORS............................................................ 22
SCHEDULE 1
NEVILLE JEFFRESS AUSTRALIA PTY LTD GROUP..................................... 23
SCHEDULE 2
WARRANTIES................................................................... 25
<PAGE>
SCHEDULE 3
PROPERTIES - LEASEHOLD....................................................... 42
SCHEDULE 4
DEED OF INDEMNITY............................................................ 45
SCHEDULE 5
NJ GUARANTEES................................................................ 50
SCHEDULE 6
INTELLECTUAL PROPERTY RIGHTS................................................. 56
SCHEDULE 7
CONSIDERATION ADJUSTMENT..................................................... 57
SCHEDULE 8
SURPLUS ASSETS............................................................... 62
SCHEDULE 9
FACTORING ARRANGEMENTS....................................................... 63
SCHEDULE 10
NJA GUARANTEES............................................................... 64
ANNEXURE A
ACCOUNTS..................................................................... 69
<PAGE>
THIS AGREEMENT is made the 2nd day of July 1996.
BETWEEN: NEVILLE JEFFRESS HOLDINGS PTY LIMITED ACN 000 331 680 of 7/13
Parraween Street, Cremorne, Sydney ("NJA") and PETZOW HOLDINGS
PTY LTD ACN 002 983 557 ("Petzow") (hereinafter jointly referred
to as the "Vendor")
TMP AUSTRALIA PTY LIMITED ACN 074 319 396 of Level 5, 16 Barrack
Street, Sydney ("Purchaser")
AND NEVILLE JEFFRESS AUSTRALIA PTY LIMITED ACN 000 155 448 of 7/13
Parraween Street, Cremorne, Sydney ("Company")
WHEREAS:
A. The Company is incorporated in Australia.
B. The Company has, at the date of this Agreement, an issued capital of
$1,220,000 divided into 1,220,000 ordinary shares of $1.00 each, all
of which shares are fully paid ("Sale Shares").
C. The Vendor has agreed to transfer to the Purchaser the whole of the
issued share capital of the Company, being the Sale Shares, the Vendor
being unconditionally entitled to be the registered holder of the Sale
Shares and has agreed to give the Warranties (as here and after
defined).
D. This Agreement sets out the terms and conditions on which the Vendor
is willing to sell and the Purchaser is willing to purchase the Sale
Shares.
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, unless the context otherwise requires:
"ACCOUNTS" means the consolidated audited profit and loss account of
the Company for the year ended on the Accounts Date and the
consolidated audited balance sheet
<PAGE>
of the Company as at that date together with all notes, reports and
other documents annexed thereto;
"ACCOUNTING STANDARDS" means:
(a) the accounting standards as defined in the Corporations Law;
(b) where not inconsistent with the accounting standards referred
to in paragraph (a) the Australian Accounting Standards; and
(c) where not inconsistent with the accounting standards referred
to in paragraph (a) or Australian Accounting Standards,
generally accepted accounting principles and practices in
Australia consistently applied.
"ACCOUNTS DATE" means 30 June 1995;
"AUDITOR" means the auditors of the Company at the date hereof;
"AUSTRALIAN ACCOUNTING STANDARDS" means the accounting standards
issued by the Institute of Chartered Accountants in Australia and the
Australian Society of Certified Practising Accountants;
"BUSINESS DAY" means a day (not being a Saturday) on which banks are
open for business in Sydney;
"COMPLETION" means completion of the sale and purchase of the Sale
Shares as provided in Clause 5;
"COMPLETION DATE" means the date hereof;
"CONSIDERATION" has the meaning given thereto in Clause 3;
"CONSIDERATION ADJUSTMENT" means the positive or negative adjustment
to the Consideration determined in accordance with Schedule 7;
"DEED OF INDEMNITY" means the deed in the form set out in Schedule 4;
<PAGE>
"DISCLOSURE LETTER" means the letter of even date herewith from the
Vendor to the Purchaser in relation to the Warranties;
"ENCUMBRANCE" means any mortgage, charge (whether fixed or floating)
pledge, lien (including, without limitation any unpaid vendor's lien
or similar), option, hypothecation, title retention or conditional
sale agreement, lease, hire or hire purchase agreement, option,
restriction as to transfer, use or possession, easement, subordination
to any right of any other person, and any other encumbrance or
security interest;
"ENCUMBER" means to create an Encumbrance;
"FRANKABLE DIVIDEND" has the same meaning as in 160APA of the Income
Tax Assessment Act;
"GROUP COMPANIES" means the Company and its subsidiaries at Completion
being those companies listed in Schedule 1;
"INSOLVENCY EVENT" means:
(a) the bankruptcy of the person concerned;
(b) the appointment of an official manager in respect of all or
any part of the property of the person concerned;
(c) the entry by the person concerned into a scheme of arrangement
or a composition with, or assignment for the benefit of, all
or any class of its creditors, or a moratorium involving any
of them;
(d) the person concerned being or stating that it is unable to pay
its debts within the meaning of 460(2) of the Corporations
Law;
(e) the person concerned being or stating that it is unable to pay
its debts when they fall due;
(f) the appointment of a receiver, receiver and manager,
provisional liquidator or administrator in respect of the
person concerned or any part of its property;
<PAGE>
(g) the making of a winding up order, or the passing of or
attempted passing of a resolution for winding up, in respect
of the person concerned except for the purposes of
reconstruction including, without limitation, the issue of a
notice of meeting at which it is proposed to consider such
resolutions;
(h) an application being made (which is not dismissed within five
Business Days) for an order, resolution being passed or
proposed, a meeting being convened or any other action being
taken to cause anything described above;
(i) anything analogous to or of a similar effect to anything
described above under the law or any relevant jurisdiction;
and
(j) any valid attempt to enforce any Encumbrance over any of the
assets of a Group Company.
"INTELLECTUAL PROPERTY RIGHTS" means all rights in or arising out of
patents, trade, service and other marks, registered designs (and
applications for all of the same), copyrights, trade, product, brand
and business names, get-ups, inventions, discoveries, improvements,
designs, techniques, computer programs, trade secrets, technical and
commercial know-how and confidential processes and information and the
full right to all intellectual property and legal protection relating
to the same of a Group Company, the details of which are set out in
Schedule 6;
"LEASED PROPERTIES" means the properties leased by the Group Companies
in the conduct of their business, the details of which are set out in
Schedule 3;
"LEGISLATION" includes any treaty, statute, statutory instrument,
directive, regulation, by-law, official instruction and any like
legislative or other document, whether of Australia or elsewhere;
"NEVILLE JEFFRESS LIABILITY" means the amount (if any) owed by the
Company to the Vendor on the Completion Date;
"NEW LEASES" means the premises leased by a Group Company by or on
Completion the details of which are included in Schedule 3;
<PAGE>
"NJ GUARANTEES" means the guarantees given by the persons listed in
Schedule 5 in respect of the obligations owed by a Group Company, the
details of which are also set out in Schedule 5;
"NJA GUARANTEES" means the guarantees given by Group Companies of
obligations owed by persons other than Group Companies including those
set out in Schedule 10;
"PURCHASER'S SOLICITORS" means Dunhill Madden Butler;
"STOCK" means all the items of stock-in-trade of the Group Companies
at the Completion Date;
"STOCK EXCHANGE" means any Stock Exchange in Australia, the United
Kingdom or the United States;
"SUBSCRIPTION AMOUNT" means an amount equal to the Neville Jeffress
Liability;
"SURPLUS ASSETS" means the assets or former assets of the Company
listed in Schedule 8;
"SURPLUS LIABILITIES" means the liabilities relating to the Surplus
Assets which have been identified to the Purchaser;
"TAX" OR "TAXES" includes:
(a) all taxes levied, imposed or assessed under to the Income Tax
Assessment Act or any other statute, ordinance or law, in
Australia or elsewhere; and
(b) taxes in the nature of sales tax, consumption tax, value added
tax, payroll tax, group tax, PAYE, undistributed profits tax,
fringe benefits tax, recoupment tax, withholding tax, land
tax, water rates, municipal rates, stamp duties, gift duties
or other state, territorial, Commonwealth or municipal charges
or impositions levied, imposed or collected by any government
body together with any additional tax, interest, penalty,
charge, fee or other amount of any kind assessed, charged or
imposed in relation to the non, late or short payment of the
same or the failure to file any return;
<PAGE>
"VENDOR'S GROUP" means the Vendor and any holding company or
subsidiary of the Vendor or such holding company (other than the Group
Companies);
"VENDOR" and "PURCHASER" shall include their respective personal
representatives, executors, successors and permitted assigns;
"VENDOR'S DIVIDEND" means the dividend in respect of the 1996/1997
financial year to be paid to the Vendor by the Company out of its
profits and/or reserves, the details of which have been provided to
the Purchaser at least 4 days prior to Completion;
"VENDOR'S SOLICITORS" means Roper and Steggall; and
"WARRANTIES" means the representations and warranties contained in
Clause 6 and Schedule 2.
1.2 References in this Agreement to any Legislation shall be construed as
references to such legislation as replaced, re-enacted, extended or
amended from time to time (whether before or after the date hereof)
and any past Legislation which it replaced, re-enacted, extended or
amended.
1.3 The Schedules and Annexures form an integral part of this Agreement
and references to "Agreement" shall be construed accordingly.
1.4 References to Recitals, Clauses, Schedules and Annexures are, unless
otherwise stated, references to recitals to, clauses of, schedules and
Annexures to this Agreement.
1.5 A document expressed to be "in the agreed form" shall be to documents
the terms and conditions of which have been approved by each of the
parties and initialled by or on behalf of them.
1.6 Words in the singular include the plural and vice versa.
1.7 Words importing the masculine gender include the feminine and neuter
and vice versa.
1.8 References to persons include bodies corporate, unincorporated
associations, partnerships or an authority.
<PAGE>
1.9 Headings and the use of bold type in this Agreement are for
convenience only and shall not affect the interpretation of this
Agreement.
1.10 Obligations owed by the Vendor under this Agreement are owed jointly
and severally by NJH and Petzow.
1.11 Any statement in this Agreement that is qualified by the expression
"so far as the Vendor is aware" or any similar expression is to be
taken to include an additional statement that it has been made after
due and careful enquiry.
2. SALE OF THE SALE SHARES
2.1 The Vendor shall sell with full title and the Purchaser, relying on
the Warranties and undertakings by the Vendor herein contained, shall
purchase the Sale Shares free from all Encumbrances and together with
all accrued benefits and rights attaching thereto save as set out in
this Agreement.
2.2 The Vendor hereby waives all or any rights and restrictions under the
Articles of Association of the Company or otherwise to have the Sale
Shares or any of them offered to it for purchase or to have any other
shares in the capital of the Company issued to it or offered to it for
purchase or subscription and agrees to procure before Completion the
irrevocable waiver of any such rights or restrictions conferred on any
other person.
2.3 Neither the Vendor nor the Purchaser shall be obliged to complete the
sale or purchase of any of the Sale Shares unless the sale and the
purchase of all the Sale Shares is completed simultaneously.
3. CONSIDERATION
3.1 Subject to clause 3.2, the consideration for the sale and purchase of
the Sale Shares ("Consideration") shall be:
(a) if the Completion Date is on or before 2 July 1996 the sum of
$14,400,000; or
<PAGE>
(b) if the Completion Date is after 2 July 1996 the sum of
$14,340,000.
3.2 The Consideration shall be satisfied by:
(a) the payment by bank cheque to the Vendor (or as the Vendor
nominates in writing) on the Completion Date of the sum of
$12,000,000 if clause 3.1(a) applies or $11,940,000 if clause
3.1(b) applies;
(b) the payment by bank cheque to the Vendor (or as the Vendor
nominates in writing) of an amount equal to:
(A) $14,400,000 if clause 3.1(a) above applies or
$14,340,000 if clause 3.1(b) above applies;
(B) Less the clause 3.2(a) amount paid on the Completion
Date,
on the Business Day on or next following 90 days after the
Completion Date or 3 Business Days after the agreement of the
Completion Accounts under Schedule 7, whichever is the later.
3.3 The Consideration is to be adjusted by the Consideration Adjustment
calculated in accordance with Schedule 7.
3.4 (a) If the Consideration Adjustment is a positive amount, the
payment required to be made by the Purchaser to the Vendor
under clause 3.2(b) shall be increased by the Consideration
Adjustment; and
(b) if the Consideration Adjustment is a negative amount, the
payment required to be made by the Purchaser to the Vendor
under clause 3.2(b) shall be reduced by the Consideration
Adjustment and if the clause 3.2(b) amount becomes negative,
then an amount equal to the negative figure will be paid by
the Vendor on this date to the Purchaser by bank cheque.
3.5 Payments to the Vendor under this clause 3 shall be paid as between
NJH and Petzow in proportion to each's shareholding in the Company
immediately prior to Completion.
<PAGE>
4. SUBSCRIPTION AMOUNT, REPAYMENT OF INTER-GROUP BORROWINGS AND DISPOSAL
OF SURPLUS ASSETS
4.1 The Purchaser agrees to subscribe or lend to the Company on or before
30 days after Completion the Subscription Amount, such sum to be
provided to the Company by way of equity or loan funds at the option
of the Purchaser and otherwise in accordance with the terms of this
Agreement.
4.2 Upon receipt the Company shall pay the whole of the Subscription
Amount to the Vendor in full settlement of all monies owing by the
Group Companies to the Vendor's Group including the Neville Jeffress
Liability and the Vendor acknowledges on behalf of itself and the
Vendor's Group that upon payment to it of the Subscription Amount the
Group Companies will have no outstanding obligation or liability to
the Vendor's Group other than their commitments under the New Leases.
4.3 The Vendor on or before Completion shall have procured the payment to
the Group Companies in cash of all amounts (whether in the nature of
principal, interest, reimbursement or otherwise) owing to the Group
Companies by the Vendor's Group whether or not those amounts are then
due.
4.4 The Vendor on or before Completion shall have procured the payment by
the Group Companies in cash of all amounts (whether in the nature of
principal, interest, reimbursement or otherwise) owing by the Group
Companies to the Vendor's Group whether or not those amounts are then
due other than for the Neville Jeffress Liability.
4.5 The parties acknowledge that the Group Companies shall on or before
Completion transfer out of the Group Companies the Surplus Assets
listed in Schedule 8 and the Vendor shall have caused to be assumed
outside the Group Companies the obligations owed under the Surplus
Liabilities and the Vendor covenants with the Purchaser (for itself
and as trustee for the Group Companies) that it shall indemnify the
Purchaser and the Group Companies against all liabilities (including
without limiting the generality of the foregoing, all costs, claims,
expenses, disbursements, losses and payments) incurred, made or
suffered in connection with the Surplus Liabilities.
<PAGE>
5. COMPLETION
5.1 Completion shall take place on the Completion Date at the offices of
the Vendor when all (but not part only unless the Purchaser so agrees)
of the following business shall be transacted:
(a) the Vendor shall deliver or cause to be delivered to the
Purchaser or as it may direct:
(i) in respect of the Sale Shares, the relevant
certificates together with duly executed transfers
thereof in favour of the Purchaser or as it may direct;
(ii) if the Purchaser so reasonably requires, any other
documents necessary to substantiate the rights of the
Vendor to dispose of the Sale Shares and to give good
title to the same and enable the Purchaser or its
nominees to be registered as the holders thereof;
(iii) evidence of the consent by the Commonwealth Bank and
AGC (Advances) Limited to the change in control of the
Company pursuant to this Agreement;
(iv) the written resignation of Neville Jeffress from all
the Group Companies including an acknowledgment from
him that he has no claim of any nature against the
Group Companies whether in respect of salary, fees,
compensation for loss of office, loans or otherwise,
arising from holding office as a director;
(v) the Deed of Indemnity duly executed by the Vendor;
(vi) the certificates of incorporation, minute books,
registers and common seals of the Group Companies and
all prints of the memorandum and articles of
association thereof in the possession of the Vendor;
(vii) duly completed authority for the alteration of the
signatories of the bank accounts of the Group Companies
in the manner required by the Purchaser;
<PAGE>
(viii) copies of the New Leases duly executed by the lessors
and the appropriate Group Companies;
(ix) evidence of the change of names of the companies in the
Vendor's Group from including either of the words
"Neville Jeffress";
(x) evidence of the consent by the Australian Media
Accreditation Authority to the change in control of the
accredited Group Companies pursuant to this Agreement;
(xi) evidence of the transfer of the shares in Parapluie Pty
Ltd and Parraween Pty Ltd held by Neville Jeffress or
the Vendor to NJA;
(xii) evidence of the transfer of the shares in Neville
Jeffress Armstrong's Inc to persons other than the
Group Companies;
(xiii) a release of the Sale Shares by the Commonwealth Bank
from its charge number 412961 over the Vendor.
(b) the Vendor shall procure that the following business is
transacted at meetings of the directors of Group Companies:
(i) the directors of the Company shall approve the
transfers of the Sale Shares for registration and the
entry of the transferees in the register of members of
the Company, in each case, subject only to the
transfers being subsequently presented duly stamped;
(ii) the situation of the registered office of the Group
Companies shall be changed to that nominated by the
Purchaser;
(iii) all existing mandates for the operation of the bank
accounts of the Group Companies shall be revoked and
new mandates issued giving authority to those persons
nominated by the Purchaser;
(iv) any person nominated by the Purchaser for appointment
as a director or the secretary of a Group Company shall
be so appointed;
<PAGE>
(v) effect the resignation from his respective office of
the director to retire under (a)(iv) above; and
(vi) approve the allotment and issue of shares in the
Company applied for by the Purchaser (if any) pursuant
to clause 4.1 and direct the making of the required
entry in the Company's share register and the issue of
new share certificates in the name of the Purchaser or
its nominee for the shares;
(c) the Company shall pay or credit on 2 July 1996 and prior to or
on Completion the Vendor's Dividend;
(d) the Vendor shall execute documents, papers, forms and
authorisations and depose to or swear all declarations or
oaths which may be necessary for securing, completing or
enhancing or absolutely vesting full right, title and interest
to the Intellectual Property Rights in favour of a Group
Company or of conferring on a Group Company all rights of
action in relation to any infringement outstanding with
respect to the Intellectual Property Rights.
5.2 Unencumbered legal and beneficial title to the Sale Shares passes to
the Purchaser on Completion.
5.3 Risk in the Sale Shares passes to the Purchaser on Completion.
5.4 The Purchaser shall not be obliged to complete this Agreement unless:
(a) the Vendor complies fully with its obligations under Clause
5.1; and
(b) the sale of all of the Sale Shares is completed (but so that
completion of the sale of some of the Sale Shares will not
affect the rights of the Purchaser with respect to the
others).
5.5 The Vendor hereby declares that following Completion so long as any of
the Sale Shares remain under its control it will hold such shares and
the dividends and other distributions of profits or surplus or other
assets in respect thereof and all rights arising out of, or in
connection therewith, in trust for the Purchaser and its successors in
title and at all times thereafter deal with and dispose of the Sale
Shares, dividends, distributions and rights as aforesaid as the
Purchaser may direct.
<PAGE>
6. WARRANTIES AND INDEMNITY
6.1 The Vendor warrants as at the date of this Agreement to the Purchaser as
set out in Schedule 2 knowing that the Purchaser is entering into this
Agreement (including without limitation to the generality of the
foregoing, purchasing the Sale Shares and procuring the Company to pay
the Subscription Amount to the Vendor) relying upon the Warranties set
out in Schedule 2.
6.2 The Vendor shall not (in the event of any claim being made against it in
connection with the sale of the Sale Shares to the Purchaser) make any
claim against a Group Company or against any director or employee of a
Group Company on whom it may have relied before agreeing to any term of
this Agreement or of the Deed of Indemnity or authorising any statement
in the Disclosure Letter.
6.3 Each of the Warranties shall be construed as a separate warranty and
(save as expressly provided to the contrary) shall not be limited or
restricted by reference to or inference from the terms of any other
Warranty or any other term of this Agreement. The Warranties are subject
to the matters disclosed in the Disclosure Letter.
6.4 The Vendor shall immediately disclose to the Purchaser any matter or
thing which may arise or become known to it after the date of this
Agreement and before Completion which is inconsistent with any of the
Warranties or which might render any of them misleading.
6.5 If for any reason there is any interval of time between the date of this
Agreement and the date of Completion, then the Vendor shall procure that
the Warranties will not be untrue, misleading or breached as if they were
repeated as at the date of Completion and on the basis that a reference
to the actual date of Completion were substituted for any express or
implied reference to the date of this Agreement, and the Warranties shall
be deemed to be given by the Vendor at the date of Completion as well as
at the date of this Agreement.
6.6 The Purchaser shall be entitled to claim that any of the Warranties is or
was untrue or misleading in any material respect or had or had been
breached even if the Purchaser could have discovered (but not if the
Purchaser or the Purchaser's Solicitors had discovered or could
reasonably have discovered or otherwise knew) on or before
<PAGE>
Completion that the Warranty in question was untrue or misleading in any
material respect or had been breached and Completion shall not in any way
constitute a waiver of any of the Purchaser's rights.
6.7 The rights and remedies of the Purchaser in respect of a breach of any of
the Warranties shall not be affected by Completion, by the giving of any
time or other indulgence by the Purchaser to any person, by the Purchaser
rescinding or not rescinding this Agreement, or by any other cause
whatsoever except as provided for in a specific waiver or release by the
Purchaser in writing.
6.8 If it shall be found that any matter which is the subject of the
Warranties is not as warranted or represented then if the effect is that:
(a) a Group Company or any asset of any such Group Company is worth
less than its value would have been at Completion had there been no
such breach of the Warranties; or
(b) a Group Company has incurred or will incur any liability which it
would not have incurred or any liability in excess of the liability
which it would have incurred had the matter been as warranted or
represented; or
(c) a Group Company suffers any other loss, direct or indirect, or
cost, charge or expense,
then, without prejudice to any other rights and remedies available at any
time to the Purchaser, the Purchaser may at its option in respect of a
breach of such Warranties by notice to the Vendor require it to pay
forthwith to the Purchaser, an amount equal to the diminution in the
value of such assets or the loss occasioned by such liability or excess
liability or such other loss, cost, charge or expense.
6.9 The Vendor hereby covenants with the Purchaser that it will at all times,
as directed by the Purchaser, pay to the Purchaser an amount equal to any
liability payable by a Group Company in respect of any litigation (save
for debt collection in the ordinary course of business) or criminal or
arbitration proceedings or any proceedings before any tribunal that
arises directly or indirectly as a result of any act, omission, event,
transaction or series of transactions (including the entering into of
this Agreement and/or Completion) occurring wholly on or before
Completion.
<PAGE>
6.10 In establishing and/or calculating any liability of the Vendor in respect
of any Claim (as defined in sub-clause 6.11) the following provisions
shall apply:
(a) the Vendor shall be under no liability unless the Vendor shall have
been given written notice by the Purchaser prior to:
(i) in the case of liability relating to any matter, other than
in respect of matters contained in Clause 6.9 and Tax, 30
June 1998; or
(ii) in the case of liability arising from any matter relating
to Tax, the end of the sixth year after the end of the
relevant chargeable period for tax purposes of the Company
to which the Claim relates (except that there shall be no
limit if disclosure by a Group Company or the Vendor when
made was not in adherence with the Income Tax Assessment Act
in respect of any matter which gives rise to a liability to
Taxation); or
(iii) in the case of liability arising from any matter relating to
Clause 6.9, the sixth anniversary of Completion;
(b) the aggregate sum payable by the Vendor in respect of all Claims
under the Warranties and under the indemnities shall not exceed the
sum of $14,400,000 less the net amount of capital gains tax payable
by the Vendor as a result of this transaction after taking into
consideration any refunds of capital gains tax paid as a result of
Warranty claims (such sum being no greater than $3,887,700);
(c) the Purchaser shall not make any Claim or Claims against the Vendor
unless the amount of the Claim or the aggregate amount of such
Claims shall exceed $20,000 save that no Claim shall be made if the
individual amount of such Claim does not exceed $2,000;
(d) the liability of the Vendor shall be subject to adjustment
(including where appropriate repayment to the Vendor in the event
that the same reduces a prior Claim already settled by the Vendor)
in respect of any right, entitlement, receipt or benefit by a Group
Company or the Purchaser which, arises (directly or indirectly)
from, or in connection with or as a consequence of or is related to
such Claim and which reduces or mitigates the loss of the Purchaser
or the Group Company or the liability of the Vendor;
<PAGE>
(e) the Purchaser shall and shall procure that the Company shall at all
times hereafter as soon as reasonably practicable disclose in
writing to the Vendor all information and documents pertaining to
such Claim (or circumstances, action or matter which might give
rise to a Claim) and the matters giving rise thereto, and allow the
Vendor on reasonable notice and at reasonable times to inspect the
files and records of the Group Company and/or the Purchaser
relating to the same and, at the Vendor's expense, to take copies
of all relevant documents. The Purchaser and/or the Group Company
shall take such action as the Vendor may reasonably request to
defend, avoid, dispute, resist, compromise, postpone, or appeal
against any such Claim (or any circumstances, action or matter
which might give rise to the same) and any adjudication in respect
thereof including (without prejudice to the generality of the
foregoing) instructing professional advisers nominated by the
Vendor, at the Vendor's expense, to act in the name of and on
behalf of the Purchaser and/or the Group Company but in accordance
with the instructions of the Vendor so that the conduct of the same
should be delegated entirely to the Vendor provided that the Vendor
shall not be permitted at any time to remove any documents and/or
information relating to and/or owned by the Group Company or the
Purchaser;
(f) no Claim shall be capable of being validly made to the extent that
the Company or the Purchaser is or are indemnified by insurance for
such Claim (or would be if the Group Company or the Purchaser had
continued to insure in like manner after as before Completion);
(g) if the Purchaser or the Group Company fails to give written notice
in the manner specified in sub-clause 6.10 (e) then the Vendor
shall not be liable for such Claim to the extent only that such
Claim is in excess of the amount which would otherwise have been
payable had such written notice been given as specified, it being
intended, by way of example, that if the Claim is for $130,000 and
as a result of the Purchaser failing to give the written notice in
the manner specified in Clause 6.10 (e) the amount of the Claim is
increased by $30,000 to $160,000, the Vendor shall be liable only
for $130,000;
(h) where the Purchaser and/or the Group Company is entitled to recover
from some other person any sum in respect of any circumstance,
action or matter giving rise to a Claim (including, without
limitation to the generality of the foregoing, under the provisions
of any statute or extra-statutory concessions
<PAGE>
relating to Tax for the time being or from time to time in force or
available), the Purchaser and/or the Group Company shall undertake
reasonable steps to enforce such recovery prior to taking any
action against the Vendor, and in the event that such steps are
successful, the Claim against the Vendor shall be reduced by the
net amount recovered but otherwise the Vendor shall be entitled to
an assignment of such right or alleged rights of recovery from the
Purchaser or the Group Company, as the case may be;
(i) nothing contained or referred to in this Agreement or in the Deed
of Indemnity shall relieve or be deemed to relieve the Purchaser or
the Group Companies from their duty to the Vendor to mitigate its
loss;
(j) any payment made or suffered by the Vendor in respect of a Claim or
under any provision of this Agreement or the Deed of Indemnity
shall be deemed to be a reduction in the consideration for the Sale
Shares.
6.11 "Claim" for the purposes of this Clause 6 includes any claim in respect
of any act, transaction, breach, event, default, omission, failure, state
of affairs, matter, circumstance or thing whatsoever and however and by
whomsoever under or by virtue of the Warranties, the Indemnities, any
precontract representation or statements or any of them.
7. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
7.1 The Vendor shall procure that its directors and its employees shall:
(a) not disclose any confidential information of the Company to any
person;
(b) not make use of any confidential information relating to the
Company; and
(c) maintain strict confidentiality of all confidential information;
except as required by law, a court of competent jurisdiction, the Stock
Exchange or in order to give effect to this Agreement unless and until
such confidential information comes into the public domain otherwise than
as a result of a breach of this Clause 7.1. The expression "confidential
information" in this Clause 7.1 shall include, without
<PAGE>
limitation, trade secrets, customer lists, lists of suppliers, reports,
notes, inventions, know how, memoranda and any other documentary records
which are confidential.
7.2 The Vendor hereby covenants on its own behalf and on behalf of the
Vendor's Group with the Purchaser that the Vendor's Group will not at any
time after Completion use as all or part of their names or as a trade or
service mark or part thereof or as the get-up for trading in goods or
services, the words "Neville Jeffress" or any colourable imitation
thereof (whether or not such words are separated by other words).
8. THE NJ GUARANTEES AND THE NJA GUARANTEES
(a) The Purchaser will use all reasonable endeavours to procure that as
from Completion the guarantors under the NJ Guarantees ("NJ
Guarantors") shall be released from the NJ Guarantees and pending
such release the Purchaser covenants with the Vendor (for
themselves and as trustee for the other NJ Guarantors) that it
shall indemnify the NJ Guarantors against all liabilities
(including, without limiting the generality of the foregoing, all
costs, claims, expenses, disbursements, losses and payments)
incurred, made, paid or suffered in connection with the NJ
Guarantees which arise and relate to periods commencing after
Completion.
(b) The Vendor will use all reasonable endeavours to procure that as
from Completion the guarantors under the NJA Guarantees ("NJA
Guarantors") shall be released from the NJA Guarantees and pending
such release the Vendor covenants with the Purchaser (for itself
and as trustee for the other NJA Guarantors) that it shall
indemnify the NJA Guarantors against all liabilities (including
without limiting the generality of the foregoing, all costs,
claims, expenses, disbursements, losses and payments) incurred,
made, paid or suffered in connection with the NJA Guarantees which
arise and relate to periods commencing after Completion.
9. FURTHER ASSURANCE
9.1 Upon and after Completion the Vendor shall, at the Purchaser's cost, do
and execute, or procure to be done and executed, all other necessary and
reasonable acts, deeds, documents and things within its power to give
effect to this Agreement.
<PAGE>
9.2 The Vendor shall provide or procure to be provided to the Purchaser all
information in its possession or under its control that the Purchaser
shall from time to time reasonably require (both before and after
Completion) relating to the business end affairs of the Group Companies
and will give or procure to be given to the Purchaser (at its cost) its
directors and agents such access (including the right to take copies) to
such documents containing such information as the Purchaser may from time
to time reasonably require provided that this Clause 9.2 shall cease to
apply where the Purchaser may require such information in relation to a
breach or alleged breach of Warranty or any Claim.
9.3 The Purchaser shall for a period commencing on Completion and ending one
year following the expiration of the relevant time limit for the relevant
Claim, provide or procure to be provided to the Vendor, at the Vendor's
expense, all information in its possession or under its control that the
Vendor shall from time to time reasonably require relating to the Claim
being made and will give or procure to be given to the Vendor, its
directors and agents such access, at the Vendor's expense (including the
right to take copies) on reasonable notice and at reasonable times to
such documents in respect of such Claim as the Vendor may from time to
time reasonably require provided that the Vendor shall not be entitled at
any time to remove any documents and/or information relating to and/or
owned by the Group Companies or the Purchaser.
10. ANNOUNCEMENTS AND INFORMATION
10.1 The Vendor undertakes to provide (save as required by law or court of
competent jurisdiction) all such information known to it and relating to
the Group Companies as may reasonably be required by the Purchaser for
the purpose of complying with any requirements of law.
10.2 Subject to Clause 10.3, the parties shall not disclose the terms of this
Agreement and all announcements and circulars by or on behalf of any of
the parties hereto and relating to the sale and purchase hereunder
(including statements made in annual reports and accounts) shall be in
terms to be agreed between the parties.
10.3 Notwithstanding Clause 10.2, the parties to this Agreement may make an
announcement concerning this Agreement:
(a) if required by law or a court of competent jurisdiction; or
<PAGE>
(b) if required by the Stock Exchange or any recognised stock exchange
whether or not such requirement has the force of law and whether or
not such requirements have general application or are specific to
the sale and purchase of the Sale Shares.
11. GENERAL
11.1 All provisions of this Agreement shall so far as they are capable of
being performed or observed continue in full force and effect
notwithstanding Completion except in respect of those matters then
already fully performed.
11.2 No party may assign any right under this Agreement without the prior
written consent of the other parties.
11.3 Save as expressly provided by this Agreement, this Agreement shall not be
varied except in writing signed by duly authorised officers of the
parties.
11.4 No delay, neglect or forbearance on the part of any party in enforcing
against any other party any obligation under this Agreement shall operate
as a waiver or in any way prejudice any right of the first-mentioned
party under this Agreement. No waiver of any breach of any provision of
this Agreement shall be deemed to authorise any prior or subsequent
breach of the same or any other provision. Save where the context
otherwise requires, no single or partial exercise by any party of any
right, power or remedy hereunder shall preclude any prior or subsequent
exercise of the same or any other right, power or remedy.
11.5 Notwithstanding that any one or more provisions of this Agreement may
prove to be illegal or unenforceable, the remaining provisions hereof
shall continue in full force and effect and the parties shall negotiate
in good faith to agree and implement substitute provisions having similar
effect so far as the law permits.
11.6 This Agreement and the other documents referred to herein constitute the
entire agreement between the parties relating to the transactions
contemplated by this Agreement and supersede all previous agreements,
arrangements and undertakings between the parties in respect of the
subject matter hereof.
<PAGE>
11.7 This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument. The
execution by a party of one or more counterparts shall constitute
execution by that party of this Agreement for all purposes.
11.8 Each party shall bear its own costs, charges and expenses of and
incidental to the entering into and carrying into effect of this
Agreement and the documents referred to herein except as otherwise
expressly provided in this Agreement.
11.9 The receipt by the Vendor's Solicitors of any sum to be paid to the
Vendor under this Agreement shall satisfy and discharge the Purchaser's
obligation to pay it to the Vendor.
12. NOTICES
12.1 Any notice or other document to be served under this Agreement shall be
in writing and shall be delivered by hand, facsimile transmission or
prepaid registered or recorded delivery post addressed to the other party
at the respective address herein contained or such other address as may
previously have been notified in writing by such party in respect of
itself in accordance with this Clause 12.
12.2 Any notice given pursuant to Clause 12.1 shall be deemed to have been
served:
(a) if delivered by hand on delivery;
(b) if sent by facsimile transmission, on the first Business Day
following transmission provided that a confirming copy thereof is
sent by pre-paid first class or, as the case may be, air mail or,
as the case may be, post to the recipient within one Business Day
of transmission; and
(c) if sent by prepaid registered or recorded delivery post, on the
third Business Day after posting if the address of the recipient is
in the country of dispatch, otherwise on the seventh Business Day
after posting.
12.3 In proving service it shall be sufficient proof, in the case of a notice
sent by prepaid registered or recorded delivery post, that the envelope
containing the same was
<PAGE>
properly stamped, addressed and placed in the post and, in the case of
facsimile transmission, that it was property addressed and successfully
transmitted.
13. PROPER LAW
This Agreement shall be governed by and interpreted in accordance with
the laws of Australia.
14. DEBTORS
14.1 The Vendor guarantees to the Purchaser and the Group Companies the
collection of Group Companies debtors as set out in the Completion
Accounts ("Debtors") and will pay to the Purchaser 6 months after
Completion ("Final Settlement Date") an amount equal to those Debtors
which have not been paid at the Final Settlement Date less the provision
for doubtful debts in the Completion Accounts and media variation amounts
realised for advertising prior to 30 June 1996.
IN WITNESS whereof this Agreement has been executed the day and year first
before written.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1
NEVILLE JEFFRESS AUSTRALIA PTY LTD GROUP
Neville Jeffress Australia Pty Ltd ACN 000 155 488 Percentage of Number of
share capital held shares held
<S> <C> <C>
NJH 91 1,110,200
Petzow 9 109,800
-------
1,220,000
SUBSIDIARIES
NAME PERCENTAGE OF SHARE NUMBER OF
CAPITAL HELD SHARES HELD
Armstrongs - Australia Pty Ltd 100 1,052,000
ACN 005 258 319
Armstrongs - Victoria Pty Ltd 100 848,199
ACN 007 018 939
Armstrongs - NSW Pty Ltd 100 302,000
ACN 001 646 000
Armstrongs - Queensland Pty Ltd 100 80 Class A
ACN 007 033 605 20 Class E
Armstrongs - WA Pty Ltd 100 201,000
ACN 009 382 718
Neville Jeffress - Queensland Pty Ltd 100 150,000
ACN 010 568 564
Neville Jeffress - Brisbane Pty Ltd 100 75,000
ACN 010 634 983
<PAGE>
Neville Jeffress - Financial Pty Ltd 100 50,000
ACN 004 007 292
Neville Jeffress Advertising 100 85,652 Class A
(Tasmania) Pty Ltd 139,148 Class E
ACN 009 491 356
Neville Jeffress - Canberra Pty Ltd 100 100,000
ACN 008 612 628
Neville Jeffress (Darwin) Pty Ltd 100 50,000
ACN 009 621 774
Neville Jeffress - Parramatta Pty Ltd 100 150,000
ACN 000 566 236
Neville Jeffress - Perth Pty Ltd 100 51,003
ACN 008 688 551
Neville Jeffress (NSW) Pty Ltd 100 5,000
ACN 000 331 699
Neville Jeffress - Adelaide Pty Ltd 100 100,000
ACN 008 056 102
Neville Jeffress - Sydney Pty Ltd 100 100,000
ACN 001 865 612
Neville Jeffress Pty Ltd 100 35,000
ACN 000 331 671
Neville Jeffress - Victoria Pty Ltd 100 800,020
ACN 006 491 845
Neville Jeffress - Caldwell Limited 70 49,000
Neville Jeffress New Zealand Limited 90 90
</TABLE>
<PAGE>
SCHEDULE 2
WARRANTIES
1 GROUP COMPANIES
1.1 MEMORANDUM AND ARTICLES OF ASSOCIATION, STATUTORY BOOKS AND RETURNS
(a) The copies of the Memorandum and Articles of Association of the
Group Companies which have been given to the Purchaser's Solicitors
are true, accurate and complete in all respects.
(b) The Register of Members and other statutory books and registers of
the Group Companies are true, correct and complete.
(c) All material returns and filings of the Group Companies required to
be filed with or delivered to the Australian Securities Commission
have been properly and correctly made.
1.2 SALE SHARES AND SHARE CAPITAL
(a) The Sale Shares constitute the entire issued share capital of the
Company.
(b) The Vendor is entitled or is otherwise able to procure the sale and
transfer of the legal and beneficial interest in the Sale Shares on
the terms of this Agreement and is transferring with full title
free from all claims, charges, liens, encumbrances, equities and
adverse rights of any kind whatsoever and does not require the
consent of any third party in relation to such sale and transfer.
(c) No person has any right to call for the transfer or issue to him of
any shares, debentures or other securities in the Company
(including the Sale Shares).
(d) There are no options or other agreements under which the Company
may be required to issue any shares.
<PAGE>
1.3 SUBSIDIARIES
(a) The Company will, on Completion, be entitled, directly or
indirectly, to the legal and beneficial interest in the shares in,
and the ownership percentage of, the subsidiaries as set out in
Schedule 1.
(b) No person has any right to call for the transfer or issue to him of
any shares, debentures or other securities in a Group Company.
(c) There are no options or other agreements under which a Group
Company may be required to issue any shares.
(d) The Company has no interest in any other companies, partnerships,
joint ventures or other entities other than its subsidiaries as
listed in Schedule 1 which together with it make up the Group
Companies.
2. ACCOUNTS AND FINANCIAL POSITION
2.1 GENERAL
The Accounts (a copy of which is attached as Annexure B):
(a) have been prepared under the historical cost convention and in
accordance with the Accounting Standards;
(b) show a true and fair view of the affairs of the Company as at the
Accounts Date and of its results for the accounting reference
period ended on that date;
(c) comply with the requirements of the Corporations Law;
(d) are prepared on consistent bases and policies of accounting which
are the same as those adopted in preparing the corresponding
accounts for all accounting periods ending in the previous two
years;
(e) save as the Accounts expressly disclose, note or provide for, are
not affected by any unusual or non-recurring items;
<PAGE>
(f) save as provided in the Accounts, no dividends or other
distributions have been declared, made or paid on any of the Sale
Shares since the Accounts Date.
2.2 PROVISION FOR LIABILITIES ETC. IN ACCOUNTS
The Accounts make full provision or reserve for, or disclose, all
liabilities (including contingent and disputed liabilities) and all
capital commitments of the Company as at the Accounts Date, indicate
clearly which of those liabilities are not usually provided for or
reserved, and make proper provision or reserve for all bad and doubtful
debts.
2.3 TITLE TO ASSETS
The assets included in the Accounts (other than trading stock disposed of
since the Accounts Date in the ordinary course of business) and all other
assets used or employed by the Company are the absolute property of the
Company free from any mortgage, charge, lien, bill of sale or other
encumbrance and are not the subject of any leasing, hiring or hire-
purchase agreement or agreement for payment on deferred terms or
assignment or factoring or other similar agreement, and all such assets
are in the possession or under the control of the Company.
2.4 FACTORING
The Group Companies have not factored any of their debts save as shown in
the Accounts or Schedule 9, or engaged in financing of the type which
would not be required to be shown or reflected in the Accounts.
2.5 MANAGEMENT ACCOUNTS
The unaudited management accounts of the Company for the periods ended
after the Accounts Date up to 31 May 1996 were extracted from the
Company's accounting records which, so far as the Vendor is aware, were
prepared in a manner consistent with that adopted in the preparation of
previous management accounts and are not misleading in any material
respect.
<PAGE>
3. EVENTS SINCE THE ACCOUNTS DATE
Since the Accounts Date:
(a) apart from dividends (if any) provided for in the Accounts no dividend
or other distribution has been declared, paid or made by the Group
Companies other than as disclosed in writing to the Purchaser or
contemplated by this Agreement;
(b) the business of the Group Companies have been carried on in the
ordinary course and so as to maintain them as going concerns;
(c) there have been no material adverse changes in the financial or
trading position or prospects of any Group Company;
(d) the business of the Group Companies have not been materially and
adversely affected by a material reduction in spending or the loss of
any important customer or source of supply or by any abnormal factor
(otherwise than in the ordinary course of the Group Company's
business) not affecting similar businesses to a similar extent and the
Vendor is not aware of any facts likely to give rise to any such
effect whether before or after Completion other than as set out in the
management accounts provided to the Purchaser.
4. TAX
4.1 TAXATION
(a) All taxation and revenue returns due to be made by the Group Companies
have been made and made with full and true disclosure, all notices
required to be given in connection with such returns have been duly
lodged, all information, including notices of elections and Section
80G loss transfer notices, required to be retained under any relevant
Taxation legislation is currently held by the Group Companies and
there are no outstanding disputes or questions or demands between the
Group Companies and the Commissioner for Taxation or any other
Federal, State, Municipal, Semi-Governmental Instrumentality or
Authority whether in the Commonwealth of Australia or elsewhere.
<PAGE>
(b) The Group Companies have made sufficient distributions for the
purposes of Division 7 of Part III of the Income Tax Assessment Act
for all tax years to which Division 7 applied.
(c) The Group Companies have provided shareholders with complete and
accurate information, as required by Division 5 of Part 111AA of the
Income Tax Assessment Act.
(d) So far as the Vendor is aware the Group Companies have no liabilities
in respect of unpaid and/or unassessed Taxes nor will they on any date
in the future become subject to Taxes:
(i) on or in respect of or by reference to realised profits gains
or income; or
(ii) in respect of any other matter or thing referrable to any time
prior to or to any period ending on or before the Accounts
Date, in excess of the provisions for taxation included in the
Accounts and the only liabilities for tax arising since the
Accounts Date are liabilities arising out of normal business
and trading activities.
(e) The provisions of Division 6AAA of Part III and Part X of the Income
Tax Assessment Act dealing with controlled foreign companies have
never applied to the Group Companies and no amount should be included
in the Group Companies' assessable income for taxation purposes
pursuant to those provisions.
(f) The Group Companies have not given any notice pursuant to Section
160ZZ0(1)(d) of the Income Tax Assessment Act in respect of any
acquisition of any asset that has occurred since 7 December 1990.
(g) No dividend has been paid by the Group Companies:
(i) in respect of which the required franking amount (as provided
for in 160AQE of the Income Tax Act) has exceeded the franked
amount (as defined in 160APA of the Income Tax Act) of the
dividend; or
<PAGE>
(ii) which has been franked in excess of the required franking
amount, which would result in that Group Company being liable
to pay franking deficit tax under 160AQJ of the Income Tax
Assessment Act or additional tax under 160ARX of the Income
Tax Assessment Act.
(h) Since the Accounts Date and up until the time of Completion the Group
Companies will not have incurred or done anything which will result in
them incurring a liability for Tax in excess of that which arises out
of their normal business activities and in particular the payment of a
divided by any Group Company prior to or on the Completion Date will
result in a rebate of tax payable by the recipient company equal to 36
CENTS in the dollar of the amount of the dividend received, and the
payment of dividends to the Vendor up to or on Completion shall not
result in an additional Tax liability to any Group Company.
5. PROPERTIES
5.1 TITLE
(a) The Leased Properties comprise all the land and buildings used or
occupied by the Group Companies or in which they have an interest.
(b) The Group Companies will on Completion not own any real estate
property and will have no unpaid liabilities arising from their
previous ownership of real estate.
(c) Each lease in respect of the Leased Properties is in force and no
notice to quit has been served.
5.2 ENCUMBRANCES
None of the Leased Properties is subject to any legal or equitable charge
(fixed or floating), mortgage, rent charge, lien or other encumbrance
securing the repayment of moneys or securing the obligation or liability of
the Group Companies other than as disclosed in writing to the Purchaser.
<PAGE>
5.3 PLANNING MATTERS
So far as the Vendor is aware the Group Companies have complied with the
terms of all planning permissions, building regulation consents and other
necessary consents, licences and approvals and no provisions remain to be
fulfilled.
5.4 STATUTORY AND OTHER OBLIGATIONS
(a) The Group Companies have observed and complied with all applicable
statutory and by-law requirements in respect of the Leased Properties
and, in particular, with all requirements relating to health and
safety, means of escape in case of fire and the protection and
preservation of life and property.
(b) There are no outstanding statutory obligations to be fulfilled in
respect of the Leased Properties.
5.5 CONDITION OF THE PROPERTIES
There is no anticipated substantial items of expenditure in relation to the
repair and maintenance of the buildings and other structures on the Leased
Properties.
5.6 CONDITION OF PLANT
The plant, machinery, office equipment and vehicles used by the Group
Companies are in good repair, regularly maintained and fully serviceable
and comply with any applicable legal requirement or restriction, and the
vehicles are duly licensed and suitable for the purposes for which they are
used.
5.7 LEASED PROPERTIES
(a) In respect of each of the leases under which the Leased Properties are
held by the Group Companies:
(i) the Group Companies have paid the rent and observed and
substantially performed all the covenants on the part of the
tenant and the conditions contained therein;
<PAGE>
(ii) all necessary licences, consents and approvals required from
the landlords and any superior landlords have been obtained
and the covenants on the part of the tenant contained in such
licences, consents and approvals have been duly performed and
observed;
(iii) there are no rent reviews currently in progress other than as
required by the Leases;
(iv) there are no rent reviews which were due to be implemented or
triggered prior to the date hereof but which the landlord has
failed to implement or trigger other than as required by the
Leases;
(v) so far as the Vendor is aware, there are no outstanding
notices or applications.
(b) In respect of each of the Leased Properties held on lease by the Group
Companies, the Vendor has already disclosed full particulars of such
leases.
6. ENVIRONMENTAL MATTERS
The Group Companies are not engaged, nor have they within the last six
years been engaged, in any business which involves the handling, storage,
use, transportation, supply or disposal of, or has any other connection
with, any hazardous, dangerous or toxic substance, materials or waste.
7. ASSETS
(a) Save for disposals in the ordinary and proper course of trade, the
Group Companies have not, since the Accounts Date, parted with the
ownership, possession or control of or otherwise ceased to retain any
of its assets or any interest therein.
(b) So far as the Vendor is aware, the Group Companies have not acquired
any of their assets otherwise than by way of arms length transactions
excepting for the leases from the Vendor's Group.
<PAGE>
8. MATERIAL CONTRACTS AND LIABILITIES
(a) The Company has no liabilities (actual or contingent) other than the
liabilities disclosed in the Accounts or which have arisen in the
ordinary course of business since the Accounts Date, and the Company
is not party to any contract or arrangement which:
(i) is long-term (that is, unlikely to have been fully performed
in accordance with its terms more than 6 months after the date
on which it was entered into or undertaken), unusual or
onerous or not made in the ordinary course of business; or
(ii) is incapable of termination in accordance with its terms by a
Group Company on sixty days' notice or less; or
(iii) is of a loss-making nature (that is, known to be likely to
result in a loss to the Group Company on completion of
performance) other than in the ordinary course of business; or
(iv) cannot readily be fulfilled or performed by a Group Company on
time without undue or unusual or material expenditure of
money, effort or personnel.
(b) The Group Companies have not agreed to create and is not party to and
has no subsisting or contingent liability under:
(i) any mortgage, charge, lien or debenture; or
(ii) any contract of guarantee, indemnity or suretyship; or
(iii) any lease or interest in property no longer vested in a Group
Company; or
(iv) so far as the Vendor is aware any agreement or arrangement
which is capable of being terminated or as to which a Group
Company's position is liable to be adversely affected as a
direct result of the change of control of management or
shareholders of the Company effected by or pursuant to this
Agreement; or
<PAGE>
(v) any contract which is not on an arm's length basis.
(c) The Group Companies are not nor will they, solely as a result of the
lapse of time in consequence of circumstances existing at the date
hereof, become in default under any agreement or covenant to which
they are a party, or in respect of any other obligations or
restrictions binding upon them.
(d) The Group Companies are not in default under, and have not committed
any breach of any of the terms of, any agreement, instrument or
arrangement to which the Group Companies are a party, and are not
aware of any threat or claim of any such default or breach having been
made and is outstanding against a Group Company and the Group
Companies have not done anything whereby any such agreement,
instrument or arrangement is liable to be prematurely terminated or
rescinded by any other party, or whereby the terms thereof are liable
to be altered without the consent of a Group Company to the detriment
of a Group Company.
(e) None of the Group Companies' customers have cancelled or terminated or
threatened to cancel or terminate, its relationship with a Group
Company or materially reduced, or threatened to materially reduce its
business with a Group Company. A Group Company has not received any
notice and the Vendor is not aware that any customer intends to cancel
or otherwise materially modify its relationship with a Group Company
on account of this Agreement and the Vendor is not aware of any errors
or omissions which are of such a serious nature.
(f) So far as the Vendor is aware, no party to any agreement with, or
under an obligation to, a Group Company is in default thereunder, and
there are no circumstances likely to give rise to such a default.
9. COMPLIANCE WITH APPLICABLE LEGISLATION
(a) The Group Companies' records, systems, controls, data or information
recorded, stored, maintained, operated or otherwise dependent upon or
held by any means (including any electronic, mechanical or
photographic process whether computerised or not), including all means
of access thereto and therefrom, are under the exclusive ownership and
direct control of a Group
<PAGE>
of all contracts of employment and service contracts between such
employees and the Group Companies and of all written statements of
terms of employment given by the Group Companies to such employees and
particulars of all remuneration, fees and expenses payable to each
employee and the Vendor has made available for inspection by the
Purchaser all the Group Companies' personnel files relating to the
terms of the employment of such employees.
(b) There are not in existence, except as disclosed in paragraph (a)
above, any contracts or arrangements of whatsoever kind (whether
legally enforceable or not) between a Group Company and any existing
or former employees of a Group Company including (without limitation)
contracts or arrangements for any benefit or payments of any nature to
or for the benefit of any existing or former employees or any of their
dependents.
(c) A Group Company has not appointed any consultant whose consultancy
arrangements with a Group Company are current.
10.2 DISPUTES, CLAIMS, TRADE UNIONS
(a) There is no dispute actual or threatened between a Group Company and a
material number or category of its employees nor any circumstances
likely to give rise to any such dispute and there have been no
strikes, work-to-rules or go-slows (official or unofficial) by any of
the Group Companies' employees during the period of 5 years
immediately preceding the Accounts Date and there is no agreement or
arrangement written or oral or by custom and practice between a Group
Company and any trade union or other body representing employees of a
Group Company.
(b) There is not outstanding, threatened or intimated any claim against a
Group Company on the part of any person who has been or is an employee
(or the dependant of any such person) or any actual or known liability
to make any payment to any person other than as disclosed to the
Purchaser.
10.3 BONUS SCHEMES AND REMUNERATION
There are no schemes in operation by or in relation to a Group Company
whereunder any employee of a Group Company or any other person is entitled
to a commission
<PAGE>
or remuneration of any other sort calculated by reference to the whole or
part of the turnover, profits or sales of a Group Company other than as
disclosed to the Purchaser.
11. PENSIONS AND OTHER BENEFITS
(a) (i) Other than the Neville Jeffress Advertising Staff
Superannuation Fund and the Armstrong's Staff Superannuation
Fund ("Funds"), there are no other pension or life assurance
arrangements in operation by or in relation to a Group Company
whether established under trust, by contract, by board
resolution, on an ex-gratia basis, by service agreement or
otherwise other than as disclosed to the Purchaser.
(ii) Full particulars of the basis on which a Group Company makes
or is liable to make contributions to the Funds have been
disclosed in writing to the Purchaser.
(b) All contributions which are payable by a Group Company under the trust
deed rules or other provisions or arrangements governing the Funds to
secure or provide the benefits for and in respect of the members of
the Funds (including pension, deferred pension and any other persons
prospectively or contingently entitled to benefit thereunder) and all
contributions due from members of the Funds have been duly made and
the Group Companies have fulfilled all their obligations thereunder.
(c) All premiums by way of insurance which are payable in respect of the
Funds by the Group Companies or by the trustees or other administrator
of the Funds have been duly paid.
(d) All lump sum death in service benefits which may be payable under the
Funds are fully insured.
(e) No claim has been made against the trustees or administrator of the
Funds or against any other person whom a Group Company is or may be
liable to indemnify or compensate in respect of any act, event,
omission or other matter arising out of or in connection with the
Funds and the Vendor is not aware of any circumstances which may give
rise to any such claim.
<PAGE>
(f) The Funds have since 1 July 1988 been complying superannuation funds
for the purposes of Part IX of the Income Tax Assessment Act and so
far as the Vendor is aware the Funds are in compliance with all
legislation including (but without limitation) the Income Tax
Assessment Act and the Occupation Superannuation Standards Act and
Regulations.
12. INTELLECTUAL PROPERTY AND KNOW-HOW
12.1 INTERESTS
The Group Companies:
(a) are the registered proprietor (where appropriate) and the beneficial
owner of, and otherwise has good title to and is able to transfer with
full title, each of the Intellectual Property Rights, free from all
charges, liens, encumbrances, equities, licences, user and other
agreements, rights and claims whatsoever;
(b) are the beneficial owner of and otherwise has good title to and is
able to transfer with full title, all Intellectual Property Rights
required for any of the business operations of its business free from
all charges, liens, encumbrances, equities, licences, user and other
agreements, rights and claims whatsoever.
12.2 VALIDITY PROTECTION
All of the Intellectual Property Rights referred to in sub-paragraphs (a)
and (b) of paragraph 12.1 are valid, enforceable and not subject to
revocation and a Group Company has taken all steps necessary or desirable
for the fullest protection of such Intellectual Property Rights including,
without limitation, applying for and maintaining in force all possible
patents, trade or service mark registrations and registered designs in all
relevant countries and paying all application and renewal fees when due.
12.3 INFRINGEMENT ETC
So far as the Vendor is aware none of the operations carried on by a Group
Company infringes any right of another person in respect of any
Intellectual Property Right or will or may give rise to payment by the
Company of any royalty or of any sum in the
<PAGE>
nature of a royalty or to liability to pay compensation pursuant to any
applicable legislation.
12.4 CONFIDENTIALITY
Other than as disclosed to the Purchaser a Group Company has not disclosed
or permitted to be disclosed or undertaken or arranged to disclose to any
person any of its know-how, secrets, confidential information or lists of
customers or suppliers.
13. LITIGATION
(a) Other than as disclosed to the Purchaser a Group Company is not
engaged, whether as plaintiff or defendant or otherwise, in any
litigation (save for debt collection in the ordinary course of
business) or criminal or arbitration proceedings or any proceedings
before any tribunal and no such litigation, proceedings or
prosecutions are, so far as the Vendor is aware, pending or threatened
(by or against a Group Company) and, so far as the Vendor is aware,
there are no facts or circumstances which might give rise thereto or
to any proceedings in respect of which a Group Company is or may be
liable to indemnify any party concerned therein.
(b) So far as the Vendor is aware, there are no circumstances that are
likely to give rise to proceedings of any character against any
director or employee or former director or former employee of a Group
Company or any other person whatsoever in respect of any act or
defaults for which a Group Company might be vicariously liable.
14. INSOLVENCY
No Insolvency Event has occurred in relation to a Group Company.
15. ACCURATE INFORMATION
(a) All disclosures, representations and statements made by or on behalf
of the Vendor or the Company relating to the affairs, accounts or
assets of the
<PAGE>
business of the Group Companies or concerning the sale and purchase
under this Agreement are accurate and comprehensive in all respects
and there are no material omissions so far as the Vendor is aware.
(b) All information relating to the Group Companies which the Vendor knows
and which is material to be known by a purchaser for value of the Sale
Shares has been disclosed to the Purchaser prior to the date of this
Agreement.
16. AUTHORITY
The Vendor warrants to the Purchaser that:
(a) it has the legal right and power to enter into this Agreement and to
sell the Sale Shares to the Purchaser on and subject to the terms of
this Agreement;
(b) the execution, delivery and performance of this Agreement by the
Vendor has been duly and validly authorised by all necessary corporate
action on its part;
(c) this Agreement is a valid and binding Agreement on the Vendor,
enforceable in accordance with its terms;
(d) the execution and performance of this Agreement by the Vendor and the
other transactions contemplated by this Agreement does not violate or
conflict with or result in a breach of or constitute a default under
the provisions of the Memorandum and Articles of Association of the
Vendor; and
(e) the execution, delivery and performance by the Vendor and, so far as
the Vendor is aware, by the Company of this Agreement and of the Deed
of Indemnity and any other documents in the agreed form and the
completion of this Agreement do not and will not:
(i) and in the case of the Group Companies only, conflict with,
result in a breach, modification, termination or violation of,
or loss of any benefit under, constitute a default under,
accelerate the performance required by, result in or give rise
to a right to amend or modify the terms of, result in the
creation of any lien upon any assets or properties, or in any
manner release any party thereto from any
<PAGE>
obligation under, any mortgage, note, bond, contract,
agreement, lease, licence or other instrument or obligation of
any kind or nature by which a Group Company or the Vendor, or
any of their respective properties or assets, may be bound or
affected; or
(ii) conflict with, violate or result in any loss of benefit under,
any, order, judgment, writ or injunction.
17. DISCLOSURE LETTER
The recitals and Schedules 1 to 10 to the Agreement are true and accurate
in all material respects and, so far as the Vendor is aware, there is no
fact not disclosed which would render any such information inaccurate or
misleading in any material respect.
18. STAMP DUTY
All documents in the possession or under the control of a Group Company
which attract stamp duty in any State of Australia or elsewhere have been
properly stamped other than certain share transfers the details of which
have been provided to the Purchaser.
19. ARMSTRONG'S QUEENSLAND PTY LTD
The 10 "E" class shares in Armstrong's Queensland Pty Ltd held in the name
of G Anderson are beneficially owned by Armstrong's Australia Pty Ltd.
<PAGE>
42
<TABLE>
<CAPTION>
SCHEDULE 3
PROPERTIES - LEASEHOLD
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
LESSEE LESSOR PROPERTY DESCRIPTION AND CURRENT RENT REVIEW CHANGE
TERM OF LEASE RENT DATES IN CONTROL
P.A. PROVISION?
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. Armstrong's Andreatta Family Suite 4, Brookes 12/6/95 to 12/12/95. $2272.00 --- No
Queensland P/L Terraces, Currently month to
112 Brookes Street, month. Option to
Fortitude Valley, renew for further
QLD (6) months on same
rent
- -----------------------------------------------------------------------------------------------------------------------------------
2. Neville Jeffress State Superannuation Suite 5, Level 12, 1/5/93 to 30/4/95. Annually No
-Sydney P/L Investment & Management 109 Pitt Street Currently month to $36,075.00 at CPI
Corporation Sydney month.
- -----------------------------------------------------------------------------------------------------------------------------------
3. Neville Jeffress 183 Macquarie Pty Ltd 183 Macquarie 1/1/94 to 31/12/96. 31/12/96 No
(Advertising) Street, Hobart Option to renew on or $28,066.29
Tasmania P/L after 31/10/96 for
further 3 years
- -----------------------------------------------------------------------------------------------------------------------------------
4. Armstrong's Mogini P/L (Sub-Lessor Part of Level 3 1/7/92 to 31/12/97. 31/1/97 No
Sydney P/L Duesbury's) 140 Sussex Street No option to renew. $194,400.00
Sydney
- -----------------------------------------------------------------------------------------------------------------------------------
5. Neville Jeffress Arlean Pty Ltd Ground Floor 1/5/96 to 30/4/97. 30/4/97 No
Sydney Pty Ltd 105 King Street No option to renew $11,520.00
Newcastle
- -----------------------------------------------------------------------------------------------------------------------------------
6. Neville Jeffress Fletcher Construction Level 1 1/2/95 to 15/2/98 15/2/98 No
New Zealand Ltd New Zealand and South 36-38 Taranaki Street NZ$24,187.00
Pacific Ltd Wellington, NZ
- -----------------------------------------------------------------------------------------------------------------------------------
7. Neville Jeffress Russo Investments 211 Flinders Street 1/4/96 to 1/4/97-4% Yes-
Adelaide P/L Pty Ltd Adelaide 31/3/2000. Clause 55.
Option to renew for 1/4/98-4%
unspecified term. 1/4/99-4%
Obligations of N.J. $54,000.00 1/4/2000- ("Change in
Adelaide P/L Market value shareholding
under lease of Lessee")
guaranteed by N.J.
Australia P/L
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
43
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
LESSEE LESSOR PROPERTY DESCRIPTION AND CURRENT RENT REVIEW CHANGE
TERM OF LEASE RENT DATES IN CONTROL
P.A. PROVISION?
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
8. Neville Jeffress 1 York Street Holdings Part of Level 7 1/6/95 to 31/5/2000. 1/6/98- No
Sydney Pty Ltd Pty Ltd 1 York Street No option to renew. $32,450
Sydney Obligations of N.J. $29,500.00 1/6/99-
Sydney Pty Ltd Market
under lease
guaranteed by
N. Jeffress.
- -----------------------------------------------------------------------------------------------------------------------------------
9. Neville Jeffress Argot Properties Unit 6 15/3/95 to -- No
-Caldwell Ltd Limited Meriden Greens 31/1/2000
Allesley Obligations L21,550.00 Note: Only
Coventry, West guaranteed unexecuted
Midlands by N.J. Austrialia copy of
Pty Ltd Lease
provided
- -----------------------------------------------------------------------------------------------------------------------------------
10. Neville Jeffress Arundel Pty Ltd 3rd Floor 1/1/95-31/12/2000. 1/1/97 --
(Darwin) Pty Ltd Carpentaria House Option to renew for Note: Lease
five years $13,320.00 not signed
only
correspon-
dence.
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
44
NEW LEASES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
LESSEE LESSOR PROPERTY DESCRIPTION AND CURRENT RENT REVIEW CHANGE IN
TERM OF LEASE RENT DATES CONTROL
P.A. PROVISION?
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. Neville Jeffress Neville Jeffress 7-13 Parraween Five years with Annual CPI adjust- N/A
Sydney Pty Ltd Properties Pty Ltd Street option for further $441,000.00 ments with minimum 5%
Cremome five years increase each year,
review to market after
three years
- -----------------------------------------------------------------------------------------------------------------------------------
2. Neville Jeffress Wylkawn Pty Ltd as 131 Canberra Avenue Five years with Annual CPI adjust- N/A
-Canberra Pty trustee for Wylkawn Griffith, ACT option for further $119,271.18 ments with minimum of
Ltd Unit Trust five years 5% increase each year,
review to market
after three years
- -----------------------------------------------------------------------------------------------------------------------------------
3. Neville Jeffress- Neville Jeffress 120 Miller Street Five years with Annual CPI adjust- N/A
Victoria Pty Ltd Properties Pty Ltd West Melbourne option for further ments, 3% minimum and
five years $60,600.00 7% maximum increases
with review to market
after two years
- -----------------------------------------------------------------------------------------------------------------------------------
4. Armstrong's Neville Jeffress 46-50 Chetwynd Five years with Annual CPI adjust- N/A
Victoria Pty Properties Pty Ltd Street option for $208,600.00 ments, 3% minimum and
Ltd West Melbourne further five 7% maximum increases
years with review to market
after two years
- -----------------------------------------------------------------------------------------------------------------------------------
5. Neville Jeffress Wylkawn Pty Ltd as 88 Brunswick Five years with Annual CPI adjust- N/A
-Queensland trustee for Wylkawn Street, Fortitude option for ments, 4% minimum and
Pty Ltd Unit Trust Valley further five 8% maximum increases,
years $141,480.00 with review to market
after two years
- -----------------------------------------------------------------------------------------------------------------------------------
6. Neville Jeffress Wylkawn Pty Ltd as 125 Cambridge Five years with Annual CPI adjustments N/A
-Perth Pty Ltd trustee for Wylkawn Street, option for with minimum 5%
Unit Trust Leederville further five $61,600.00 increase each year,
years review to market
after two years
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 4
DEED OF INDEMNITY
THIS DEED is made the day of July 1996
BETWEEN: NEVILLE JEFFRESS HOLDINGS PTY LIMITED ACN 000 331 680 of
7/13 Parraween Street, Cremorne, Sydney and PETZOW HOLDINGS PTY
LTD ACN 002 983 557 of 4 Belgrave Street, Manly, Sydney
(hereinafter jointly referred to as the "Vendor")
TMP AUSTRALIA PTY LIMITED ACN 074 319 396 of Level 5, 16 Barrack
Street, Sydney ("Purchaser")
WHEREAS pursuant to an agreement of even date herewith and made between, inter
alia, the Vendor and the Purchaser ("Agreement") the Purchaser has today
completed the purchase from the Vendor of the Sale Shares (as therein defined)
in reliance, inter alia, upon the indemnities hereinafter contained.
NOW THIS DEED WITNESSES AND IT IS HEREBY AGREED AND DECLARED as follows:
1. DEFINITION AND INTERPRETATION
1.1 In this Deed, unless the context otherwise requires (and save to the extent
otherwise defined herein) words and expressions defined in the Agreement
shall have the same meanings herein and any provisions in the Agreement
concerning matters of construction or interpretation shall also apply in
this Deed.
1.2 A liability or increased liability to Tax or a refusal or restriction of
any deduction, set-off, loss or other relief shall be deemed to be
incurred, made or suffered in consequence of any act, transaction, omission
or event done, effected, occurring or taking place on or before Completion
if it is incurred, made or suffered in consequence of or the combined
effect of any one or more acts, transactions,
<PAGE>
omissions or events the first of which is done or effected or occurs or
takes place on or before Completion.
1.3 Any reference to any act, transaction, omission or event in consequence of
which liability or increased liability to Tax may be incurred or any
refusal or restriction of any deduction, set-off, loss or other relief may
be suffered includes a reference to anything which under the provisions of
any relevant Tax legislation is deemed to be or is treated or regarded as
being any such act, transaction, omission or event as aforesaid.
2. COVENANTS
The Vendor hereby covenants with the Purchaser that it will at all times,
as directed in writing by the Purchaser, pay to the Purchaser or the Group
Companies an amount equal to:
(a) any Tax liability of a Group Company (whether payable by a Group
Company or the Purchaser) that arises directly or indirectly as a
result of any act, omission, event, transaction or series of
transactions occurring wholly or partly on or before Completion; and
(b) any costs, expenses and/or interest incurred by the Purchaser and/or a
Group Company in connection with any Tax liability of a Group Company
(whether payable by a Group Company or the Purchaser) or in connection
with any action, proceedings or claims taken in avoiding, resisting or
settling any payment of Tax or Tax liability.
3. EXCLUSIONS
The covenants contained in Clause 2 of this Deed shall not apply to a Tax
liability:
(a) to the extent to which a provision or reserve in respect of such Tax
liability was made in the Accounts or Completion Accounts;
(b) if such Tax liability arises or is increased as a result only of any
increase in rates of Tax made after Completion with retrospective
effect or of any change
<PAGE>
in the law or published practice of any Tax authority made after
Completion with retrospective effect;
(c) if such Tax liability would not have arisen but for a voluntary
transaction, action or omission, carried out or effected by a Group
Company or the Purchaser or their respective agents after Completion
other than any such transaction, action or omission in the ordinary
course of business of a Group Company excluding for this purpose any
non-routine acquisition, disposal or other dealing with capital assets
of a Group Company;
(d) if such Tax liability comprises Australian corporation tax on profits
earned by a Group Company in the ordinary course of trading activities
during the period beginning immediately after 30 June 1996 and ending
on Completion;
(e) if such Tax liability arises from any change in accounting or taxation
policy or practice adopted by a Group Company after Completion save as
necessary to comply with any legal requirements, or any generally
accepted accounting practice; or
(f) if such Tax liability would not have arisen or would have been reduced
or eliminated but for a failure or omission on the part of a Group
Company after Completion to make any claim, election, surrender or
disclaimer or to give any notice or consent or to do any other thing
the making, giving or doing of which was taken into account in
computing the provision or reserve for Tax made in the Accounts or
Completion Accounts or taken into account in the preparation of the
Accounts or Completion Accounts.
4. GENERAL
4.1 The provisions of Clauses 11 (General), 12 (Notices) and 13 (Proper Law) of
the Agreement shall apply to this Deed in the same way as they apply to the
Agreement.
4.2 This Deed shall be binding on the respective successors and personal
representatives of the Vendor and the Purchaser.
4.3 This document is intended to be executed as a deed and shall not be treated
as delivered until it is dated.
<PAGE>
4.4 This Deed may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument. The execution by a
Party of one or more counterparts shall constitute execution by that Party
of this Deed for all purposes.
IN WITNESS whereof the parties hereto have caused this Deed to be executed the
day and year first above written.
THE COMMON SEAL of NEVILLE )
JEFFRESS HOLDINGS PTY )
LIMITED ACN 000 331 680 was )
affixed hereto in accordance with its )
articles of association in the presence of:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signature of Director/Secretary Signature of Director/Secretary
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Full Name of Signatory Full Name of Signatory
THE COMMON SEAL of TMP )
AUSTRALIA PTY LIMITED ACN )
074 319 396 was affixed hereto in )
accordance with its articles of association )
in the presence of:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signature of Director/Secretary Signature of Director/Secretary
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Full Name of Signatory Full Name of Signatory
<PAGE>
THE COMMON SEAL of PETZOW )
HOLDINGS PTY LTD ACN 002 983 )
557 was affixed hereto in accordance )
with its articles of association in the )
presence of:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signature of Director/Secretary Signature of Director/Secretary
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Full Name of Signatory Full Name of Signatory
<PAGE>
<TABLE>
<CAPTION>
50
SCHEDULE 5
NJ GUARANTEES
GUARANTOR BENEFICIARY DOCUMENT DATED BRIEF DESCRIPTION OF
OBLIGATIONS GUARANTEED
<S> <C> <C> <C> <C>
1. Neville Jeffress Media Nominees Deed of 3 August 1992 Obligations of accredited
Ltd Covenant agencies to members of
Media Council of
Australia
2. Neville Jeffress Media Nominees Deed of 3 August 1992 Obligations of accredited
Holdings Ltd Covenant agencies to members of
Pty Ltd Media Council of
(ACN 000 545 522) Australia
3. Neville Jeffress Commonwealth Bank Deed of Cross 22 September 1993 All moneys from time to
of Australia Guarantee time owing by certain
Group Companies to the
Bank under various
facilities provided by it
4. Neville Jeffress Holdings Commonwealth Bank Deed of Cross 22 September 1993 Same as 3 above
Pty Ltd of Australia Guarantee
(ACN 000 545 522)
5. Neville Jeffress Commonwealth Bank Deed of Cross 22 September 1993 Same as 3 above
Properties Pty Ltd of Australia Guarantee
ACN 000 551 644)
6. Wylkawn Pty Ltd as Commonwealth Bank Deed of Cross 22 September 1993 Same as 3 above
trustee for Wylkawn Unit of Australia Guarantee
Trust established by Trust
Deed dated 3 May 1988
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
51
GUARANTOR BENEFICIARY DOCUMENT DATED BRIEF DESCRIPTION OF
OBLIGATIONS GUARANTEED
<S> <C> <C> <C> <C>
7. Neville Jeffress Holdings AGC Ltd & AGC General Deed of 9 March 1993 All liabilities and
Pty Ltd (Advances) Ltd Collateralisation obligations of various
(ACN 000 545 522) Group Companies to AGC
and AGC Advances under
various facilities
provided by them
8. Neville Jeffress AGC Ltd and AGC General Deed of 9 March 1993 Same as 7 above
Newsagencies Pty Ltd (Advances) Ltd Collateralisation
(ACN 000 545 522)
9. Neville Jeffress AGC Ltd and AGC General Deed of 9 March 1993 Same as 7 above
(Advances) Ltd Collateralisation
10. Media Monitors NSW AGC Ltd and AGC General Deed of 9 March 1993 Same as 7 above
Pty Ltd (Advances) Ltd Collateralisation
(ACN 003 016 760)
11. News Monitor Pty Ltd AGC Ltd and AGC General Deed of 9 March 1993 Same as 7 above
(ACN 002 778 225) (Advances) Ltd Collateralisation
12. News Bank Pty Ltd AGC Ltd and AGC General Deed of 9 March 1993 Same as 7 above
(ACN 006 649 832) (Advances) Ltd Collateralisation
13. Media Monitors ACT Pty AGC Ltd and AGC General Deed of 9 March 1993 Same as 7 above
Ltd (Advances) Ltd Collateralisation
(ACN 008 597 939)
14. Media Monitors AGC Ltd and AGC General Deed of 9 March 1993 Same as 7 above
Queensland Pty Ltd (Advances) Ltd Collateralisation
(ACN 010 645 075)
15. Armstrong's (Melbourne) AGC Ltd and AGC General Deed of 9 March 1993 Same as 7 above
Advertising and Marketing (Advances) Ltd Collateralisation
Pty Ltd
(ACN 007 048 786)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
52
GUARANTOR BENEFICIARY DOCUMENT DATED BRIEF DESCRIPTION OF
OBLIGATIONS GUARANTEED
<S> <C> <C> <C> <C>
16. National Advertising AGC Ltd and AGC General Deed of 9 March 1993 Same as 7 above
Services Pty Ltd (Advances) Ltd Collateralisation
(ACN 000 380 147)
17. Wylkawn Pty Ltd AGC Ltd and AGC General Deed of 9 March 1993 Same as 7 above
(ACN 008 635 587) (Advances) Ltd Collateralisation
18. Armstrong's (Sydney) AGC Ltd and AGC General Deed of 9 March 1993 Same as 7 above
Advertising & Marketing Pty (Advances) Ltd Collateralisation
Ltd
(ACN 003 805 105)
19. Media Monitors Victoria AGC Ltd and AGC General Deed of 9 March 1993 Same as 7 above
Pty Ltd (ACN 051 312 595) (Advances) Ltd Collateralisation
20. Media Monitors Australia AGC Ltd and AGC General Deed of 9 March 1993 Same as 7 above
Pty Ltd (Advances) Ltd Collateralisation
(ACN 002 533 851)
21. Neville Jeffress AGC Ltd and AGC General Deed of 9 March 1993 Same as 7 above
Properties Pty Ltd (Advances) Ltd Collateralisation
(ACN 000 551 644)
22. Neville Jeffress AGC Ltd & AGC Master Lease Undated Due and punctual payment
Holdings Pty Ltd (Finance) Ltd Agreement and of Secured Moneys and
(ACN 000 331 680) Master Asset performance of all of the
Purchase Lessee's/Hirer's
Agreement (including Group Company)
obligations under each
Lease and Asset Purchase
Agreement.
23. Neville Jeffress AGC Ltd & AGC Master Lease Undated Same as 22 above
Newsagencies Pty Ltd (Finance) Ltd Agreement and
(ACN 000 545 522) Master Asset
Purchase
Agreement
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
53
GUARANTOR BENEFICIARY DOCUMENT DATED BRIEF DESCRIPTION OF
OBLIGATIONS GUARANTEED
<S> <C> <C> <C> <C>
24. Neville Jeffress AGC Ltd & AGC Master Lease Undated Same as 22 above
(Finance) Ltd Agreement and
Master Asset
Purchase
Agreement
25. Media Monitors NSW Pty AGC Ltd & AGC Master Lease Undated Same as 22 above
Ltd (Finance) Ltd Agreement and
(ACN 003 016 760) Master Asset
Purchase
Agreement
26. News Monitor Pty Ltd AGC Ltd & AGC Master Lease Undated Same as 22 above
(ACN 002 778 225) (Finance) Ltd Agreement and
Master Asset
Purchase
Agreement
27. News Bank Pty Ltd AGC Ltd & AGC Master Lease Undated Same as 22 above
(ACN 006 649 832) (Finance) Ltd Agreement and
Master Asset
Purchase
Agreement
28. Media Monitors ACT Pty AGC Ltd & AGC Master Lease Undated Same as 22 above
Ltd (Finance) Ltd Agreement and
(ACN 008 597 939) Master Asset
Purchase
Agreement
29. Media Monitors AGC Ltd & AGC Master Lease Undated Same as 22 above
Queensland Pty Ltd (Finance) Ltd Agreement and
(ACN 010 645 075) Master Asset
Purchase
Agreement
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
54
GUARANTOR BENEFICIARY DOCUMENT DATED BRIEF DESCRIPTION OF
OBLIGATIONS GUARANTEED
<S> <C> <C> <C> <C>
30. Armstrong's (Melbourne) AGC Ltd & AGC Master Lease Undated Same as 22 above
Advertising & Marketing Pty (Finance) Ltd Agreement and
Ltd Master Asset
(ACN 007 048 786) Purchase
Agreement
31. National Advertising AGC Ltd & AGC Master Lease Undated Same as 22 above
Services Pty Ltd (Finance) Ltd Agreement and
(ACN 000 380 147) Master Asset
Purchase
Agreement
32. Wylkawn Pty Ltd AGC Ltd & AGC Master Lease Undated Same as 22 above
(ACN 008 635 587) (Finance) Ltd Agreement and
Master Asset
Purchase
Agreement
33. Armstrong's (Sydney) AGC Ltd & AGC Master Lease Undated Same as 22 above
Advertising & Marketing Pty (Finance) Ltd Agreement and
Ltd Master Asset
(ACN 003 805 105) Purchase
Agreement
34. Media Monitors Victoria AGC Ltd & AGC Master Lease Undated Same as 22 above
Pty Ltd (ACN 051 312 595) (Finance) Ltd Agreement and
Master Asset
Purchase
Agreement
35. Neville Jeffress AGC Ltd & AGC Master Lease Undated Same as 22 above
Properties Pty Ltd (Finance) Ltd Agreement and
(ACN 000 557 644) Master Asset
Purchase
Agreement
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
55
GUARANTOR BENEFICIARY DOCUMENT DATED BRIEF DESCRIPTION OF
OBLIGATIONS GUARANTEED
<S> <C> <C> <C> <C>
36. Media Monitors AGC Ltd & AGC Master Lease Undated Same as 22 above
Australia Pty Ltd (Finance) Ltd Agreement
(ACN 002 533 851) and Master
Asset
Purchase
Agreement
</TABLE>
<PAGE>
56
SCHEDULE 6
INTELLECTUAL PROPERTY RIGHTS
PART A
Application/ Class
Registration No.
Trademarks
Nil
-------------------
PART B
Copyright
Nil
-------------------
PART C
Patents
Nil
-------------------
PART D
Business Names
"Neville Jeffress Advertising"
"The Monster Board"
"NJ Campaign Advertising"
-------------------
PART E
Agreement granting right to use
any Intellectual Property Right
Nil
--------------------
PART F
Agreements under which the Company is
obliged to pay royalty for any
Intellectual Property Right
Nil
<PAGE>
57
SCHEDULE 7
CONSIDERATION ADJUSTMENT
SC7.1 CONSIDERATION ADJUSTMENT
The Consideration Adjustment means the dollar amount equal to the
difference between the Net Asset Value in the Completion Accounts and
zero.
SC7.2 PREPARATION AND AUDIT
The Vendor shall procure that the Vendors' Accountants as soon as
possible after Completion:
(a) prepare the Completion Accounts; and
(b) audit and report on the Completion Accounts.
SC7.3 BASIS OF PREPARATION
The Completion Accounts are to be prepared:
(a) subject to clause SC7.3(b), in accordance with the Accounting
Standards;
(b) so that no upwards revaluation of any of the Assets or real
property made since the Accounts Date is reflected in the
Completion Accounts.
(c) so that the Vendors' Accountants calculate the Net Asset Value in
the Completion Accounts and the Consideration Adjustment;
(d) subject to clause SC7.3(a) and (b), on a basis consistent with
that employed in preparing the Accounts; and
(e) if the Vendor and Purchaser are unable to otherwise agree, so
that:
(i) they include an unqualified certificate from the Vendors'
Accountants; and
(ii) all necessary adjustments are made to enable the issue of
that unqualified certificate.
<PAGE>
58
(f) so that Stock has a nil value.
SC7.4 ACCOUNTING PRINCIPLES
Subject to clause SC7.3:
(a) all computations and determinations as to financial matters, and
all financial statements to be delivered under this document is
made or prepared in accordance with Schedule 8 of the
Corporations Regulations and otherwise in accordance with the
Accounting Standards; and
(b) all accounting terms used in this document have the same meaning
as in the Corporations Regulations and the Accounting Standards.
SC7.5 DELIVERY OF THE COMPLETION ACCOUNTS
As soon as the final draft of the Completion Accounts have been prepared,
audited and reported on by the Vendors' Accountants, the Vendor shall
cause the Vendor's Accountants to deliver to the Vendor and the
Purchaser:
(a) a copy of the draft Completion Accounts;
(b) the report of the Vendor's Accountants; and
(c) a statement of the Consideration Adjustment based on the
Completion Accounts, and upon delivery the Purchaser and the
Vendor shall instruct their respective accountants to discuss the
draft of the Completion Accounts and the calculation of the
Consideration Adjustment.
SC7.6 REVIEW BY THE PURCHASER'S ACCOUNTANT
(a) The Purchaser's Accountant may:
(i) within 10 Business Days of delivery of the draft
Completion Accounts, report and statement under clause
SC7.5 request access to the audit working papers of the
Vendors' Accountants; and
<PAGE>
59
(ii) examine and review the audit working papers of the
Vendors' Accountants.
(b) The Vendor's Accountants and the Purchaser's Accountants are to
be given full and free access during normal business hours to all
Assets and real property, and records and, if the Purchaser so
requests under clause SC7.6(a), all the audit working papers of
the Vendor's Accountants for the purpose of reviewing the draft
Completion Accounts.
(c) The Vendor and the Purchaser shall co-operate fully with the
Vendor's Accountants and Purchaser's Accountants and with each
other in relation to the preparation, audit and review of the
Completion Accounts.
(d) If the Purchaser's Accountants are not given full access to the
audit working papers of the Vendor's Accountants, the Assets,
real property and all records on or before the date on which the
Purchaser receives the Completion Accounts, the Purchaser may
give to the Vendor a notice in writing of that fact within 10
Business Days after that receipt specifying in reasonable detail
those audit working papers, Assets, real property and records to
which the Purchaser's Accountants have not been given access.
SC7.7 DELIVERY OF BALANCE SHEET AND OBJECTIONS
(a) The Purchaser shall give to the Vendor a notice in writing
advising whether or not it accepts:
(i) that the Completion Accounts have been properly prepared
in accordance with the terms of this Agreement; and
(ii) the amount of the Consideration Adjustment,
within 15 Business Days after the later of:
(A) receipt by the Purchaser of the draft Completion Accounts,
report and the statement under clause SC7.6(a); or
(B) the date on which the Purchaser's Accountants are first
given full access to the audit working papers of the
Vendor's Accountants, the Assets, real property and all
records.
<PAGE>
60
(b) If the Purchaser does not give to the Vendor a notice under
clause SC7.7(a) within the prescribed time limit, it is taken to
have given to the Vendors a notice advising that it accepts:
(i) that the Completion Accounts have been properly prepared
in accordance with the provisions of this Agreement; and
(ii) the statement of the Consideration Adjustment and confirms
that the Purchaser's Accountants have been given full
access to the audit working papers of the Vendor's
Accountants, the Assets, real property and records and
waiving any right of access that may not have been given.
SC7.8 RESOLUTION OF DISAGREEMENT BY NOMINATED ACCOUNTANTS
If the Vendor and the Purchaser do not agree on the Completion Accounts
for the Consideration Adjustment within 15 Business Days after the later
of the dates specified in clause SC7.7(a)(A) and (B), the Vendors or the
Purchaser may refer all or any of the outstanding issues to the Nominated
Accountants for determination with a request that the Nominated
Accountants make a decision in relation to those issues within 20
Business Days from receiving the request so that the provisions of clause
SC7.3(a) to (d) apply:
SC7.9 COSTS
The Company is to bear its own costs and expenses relating to the
preparation audit, review and production of the Completion Accounts.
SC7.10 DEFINITIONS
For the purposes of this Schedule 7:
"ASSETS" means the assets of the Company except the real property and the
Stock.
"COMPLETION ACCOUNTS" means the audited balance sheet of the Group
Companies drawn at the 30 June 1996 adjusted for the transactions
contemplated in this Agreement and in particular:
(a) the payment of the Vendor's Dividend;
<PAGE>
61
(b) the transfer of the Surplus Assets and Surplus Liabilities;
(c) the repayment of inter-company loans under clause 4;
(d) any stamp duty for which a Group Company is liable on share
transfers relating to the subsidiaries listed in Schedule 1 to
ensure they are owned on Completion as set out in Schedule 1;
(e) the inclusion of a provision for all Taxes which may be payable
by Group Companies including any capital gains tax arising as a
result of all transactions occurring on or before Completion
which gives rise to a Tax liability for the Group Companies and
in particular which result from (a), (b), (c) and (d) above,
prepared and agreed in accordance with this Schedule including all
applicable notes, statements and reports.
"NET ASSET VALUE" means the amount by which the total assets of the
Company exceeds or is less than the aggregate amount of all liabilities
and provisions of the Company as shown in the Completion Accounts.
"NOMINATED ACCOUNTANTS" means Pannell Kerr Forster.
"PURCHASER'S ACCOUNTANTS" means BDO Nelson Parkhill.
"VENDORS' ACCOUNTANTS" means Ernst & Young.
<PAGE>
62
SCHEDULE 8
SURPLUS ASSETS
ASSET
1. Shares in Media Monitors Australia Pty Limited
2. Shares in National Advertising Services Pty Ltd
3. Shares in Neville Jeffress Newsagencies Pty Ltd
4. Real Estate at 88 Brunswick Street, Fortitude Valley, Queensland and
125 Cambridge Street, Western Australia
<PAGE>
63
SCHEDULE 9
FACTORING ARRANGEMENTS
Nil
<PAGE>
64
SCHEDULE 10
NJA GUARANTEES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
GUARANTOR BENEFICIARY DOCUMENT DATED BRIEF DESCRIPTION OF
OBLIGATIONS GUARANTEED
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Neville Jeffress Commonwealth Deed of Cross 22 September All moneys from time to
Australia Pty Ltd (ACN Bank of Guarantee 1993 time owing by certain
000 155 448) Australia Vendor Group companies
to the Bank under
various facilities
provided by it.
- --------------------------------------------------------------------------------------------------------------------------
2. Neville Jeffress - Commonwealth Deed of Cross 22 September Same as 1 above.
Queensland Pty Ltd (ACN Bank of Guarantee 1993
010 568 564) Australia
- --------------------------------------------------------------------------------------------------------------------------
3. Neville Jeffress AGC and AGC General 9 March 1993 All liabilities and
Sydney Pty Ltd (ACN 001 (Advances) Deed of obligations of various
865 612) Limited Collateralisation Vendor Group companies
to AGC Ltd and AGC
(Advances) Ltd under
various facilities
provided by them.
- --------------------------------------------------------------------------------------------------------------------------
4. Neville Jeffress Perth AGC and AGC General 9 March 1993 Same as 3 above
Pty Ltd (ACN 008 688 (Advances) Deed of
551) Limited Collateralisation
- --------------------------------------------------------------------------------------------------------------------------
5. Neville Jeffress AGC and AGC General 9 March 1993 Same as 3 above
Victoria Pty Ltd (ACN (Advances) Deed of
006 491 845) Limited Collateralisation
- --------------------------------------------------------------------------------------------------------------------------
6. Armstrong's - AGC and AGC General 9 March 1993 Same as 3 above
Queensland Pty Ltd (ACN (Advances) Deed of
007 033 605) Limited Collateralisation
- --------------------------------------------------------------------------------------------------------------------------
7. Armstrong's - WA Pty AGC and AGC General 9 March 1993 Same as 3 above
Limited (ACN 009 382 (Advances) Deed of
718) Limited Collateralisation
- --------------------------------------------------------------------------------------------------------------------------
8. Neville Jeffress AGC and AGC General 9 March 1993 Same as 3 above
Australia Pty Ltd (ACN (Advances) Deed of
000 155 448) Limited Collateralisation
- --------------------------------------------------------------------------------------------------------------------------
<PAGE>
65
- --------------------------------------------------------------------------------------------------------------------------
GUARANTOR BENEFICIARY DOCUMENT DATED BRIEF DESCRIPTION OF
OBLIGATIONS GUARANTEED
- --------------------------------------------------------------------------------------------------------------------------
9. Neville Jeffress (NSW) AGC and AGC General 9 March 1993 Same as 3 above
Pty Ltd (ACN 000 331 (Advances) Deed of
699) Limited Collateralisation
- --------------------------------------------------------------------------------------------------------------------------
10. Neville Jeffress - AGC and AGC General 9 March 1993 Same as 3 above
Queensland Pty Ltd (ACN (Advances) Deed of
010 568 564) Limited Collateralisation
- --------------------------------------------------------------------------------------------------------------------------
11. Neville Jeffress AGC and AGC General 9 March 1993 Same as 3 above
Financial Pty Ltd (ACN (Advances) Deed of
004 007 292) Limited Collateralisation
- --------------------------------------------------------------------------------------------------------------------------
12. Neville Jeffress - AGC and AGC General 9 March 1993 Same as 3 above
Parramatta Pty Ltd (ACN (Advances) Deed of
000 566 236) Limited Collateralisation
- --------------------------------------------------------------------------------------------------------------------------
13. Armstrong's Australia AGC and AGC General 9 March 1993 Same as 3 above
Pty Ltd (ACN 005 258 (Advances) Deed of
319) Limited Collateralisation
- --------------------------------------------------------------------------------------------------------------------------
14. Neville Jeffress AGC Ltd and AGC Master Undated Due and punctual
Sydney Pty Ltd (ACN 001 (Finance) Ltd Lease payment of secured
865 612) Agreement moneys and performance
and Master of all the
Asset Lessee's/Hirer's
Purchase obligations (including
Agreement Vendor Group companies)
under each Lease and
Asset Purchase Agreement
- --------------------------------------------------------------------------------------------------------------------------
15. Neville Jeffress - AGC Ltd and AGC Master Undated Same as 14 above
Victoria Pty Ltd (ACN (Finance) Ltd Lease
006 491 845) Agreement
and Master
Asset Purchase
Agreement
- --------------------------------------------------------------------------------------------------------------------------
16. Armstrong's AGC Ltd and AGC Master Undated Same as 14 above
Queensland Pty Ltd (ACN (Finance) Ltd Lease
007 033 605) Agreement
and Master
Asset Purchase
Agreement
- --------------------------------------------------------------------------------------------------------------------------
<PAGE>
66
- --------------------------------------------------------------------------------------------------------------------------
GUARANTOR BENEFICIARY DOCUMENT DATED BRIEF DESCRIPTION OF
OBLIGATIONS GUARANTEED
- --------------------------------------------------------------------------------------------------------------------------
17. Armstrong's WA Pty AGC Ltd and AGC Master Undated Same as 14 above
Ltd (ACN 009 382 718) (Finance) Ltd Lease
Agreement
and Master
Asset Purchase
Agreement
- --------------------------------------------------------------------------------------------------------------------------
18. Neville Jeffress AGC Ltd and AGC Master Undated Same as 14 above
Australia Pty Ltd (ACN (Finance) Ltd Lease
000 155 448) Agreement
and Master
Asset Purchase
Agreement
- --------------------------------------------------------------------------------------------------------------------------
19. Neville Jeffress AGC Ltd and AGC Master Undated Same as 14 above
(NSW) Pty Ltd (ACN 000 (Finance) Ltd Lease
331 699) Agreement
and Master
Asset Purchase
Agreement
- --------------------------------------------------------------------------------------------------------------------------
20. Neville Jeffress - AGC Ltd and AGC Master Undated Same as 14 above
Queensland Pty Ltd (ACN (Finance) Ltd Lease
010 568 564) Agreement
and Master
Asset Purchase
Agreement
- --------------------------------------------------------------------------------------------------------------------------
21. Neville Jeffress - AGC Ltd and AGC Master Undated Same as 14 above
Financial Pty Ltd (ACN (Finance) Ltd Lease
004 007 292) Agreement
and Master
Asset Purchase
Agreement
- --------------------------------------------------------------------------------------------------------------------------
22. Neville Jeffress - AGC Ltd and AGC Master Undated Same as 14 above
Parramatta Pty Ltd (ACN (Finance) Ltd Lease
000 566 236) Agreement
and Master
Asset Purchase
Agreement
- --------------------------------------------------------------------------------------------------------------------------
<PAGE>
67
- --------------------------------------------------------------------------------------------------------------------------
GUARANTOR BENEFICIARY DOCUMENT DATED BRIEF DESCRIPTION OF
OBLIGATIONS GUARANTEED
- --------------------------------------------------------------------------------------------------------------------------
23. Armstrong's Australia AGC Ltd and AGC Master Undated Same as 14 above
Pty Ltd (ACN 005 258 (Finance) Ltd Lease
319) Agreement
and Master
Asset Purchase
Agreement
- --------------------------------------------------------------------------------------------------------------------------
24. Neville Jeffress AGC Ltd and AGC Master Undated Same as 14 above
Canberra Pty Ltd (ACN (Finance) Ltd Lease
008 612 628) Agreement
and Master
Asset Purchase
Agreement
- --------------------------------------------------------------------------------------------------------------------------
25. Neville Jeffress Parraween Deed of 15 February Sale value of premises
Australia Pty Ltd (ACN Productions Pty Guarantee 1993 located at 12 Palmer
000 155 448) Ltd Street, North
Parramatta
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
68
SIGNED by a director for and on behalf ) /s/ Neville Jeffress
of NEVILLE JEFFRESS HOLDINGS ) --------------------------------
PTY LIMITED in the presence of: )
/s/ John O'Connor
- ------------------------------------
Witness
SIGNED by a director for and on behalf ) /s/ Don Gill
of PETZOW HOLDINGS PTY LTD in ) --------------------------------
the presence of: )
/s/ John O'Connor
- ------------------------------------
Witness
SIGNED by a director for and on behalf ) /s/ Andrew J. McKelvey
of TMP AUSTRALIA PTY LTD in ) --------------------------------
the presence of: )
/s/ Michael Yates
- ------------------------------------
Witness
SIGNED by a director for and on behalf ) /s/ Philip Bush
of NEVILLE JEFFRESS AUSTRALIA ) --------------------------------
PTY LIMITED in the presence of: )
/s/ John O'Connor
- ------------------------------------
Witness
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of this 3rd day
of January, 1995, by and among ROGERS ACQUISITION CORP., a Delaware corporation
("Purchaser"), ROGERS & ASSOCIATES ADVERTISING, INC., a California corporation
("Seller"), and Curtis Rogers, Steven Schmidt and Ronni Rogers, being all of the
shareholders of Rogers (the "Principal Shareholders").
WHEREAS, the Principal Shareholders own, in the aggregate, all of the
issued and outstanding shares of the capital stock of Seller;
WHEREAS, Seller is engaged in the business of advertising, specializing in
the placement of advertising for employment positions (the "Business") and
conducts the Business at the locations set forth on SCHEDULE 3.10 (collectively,
the "Premises");
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, substantially all of the assets utilized in the conduct of
the Business, upon the terms and conditions set forth below.
NOW THEREFORE, in consideration of the mutual covenants of the parties set
forth in this Agreement and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
---------
DEFINITIONS
-----------
For purposes of this Agreement, the capitalized terms set forth below shall
have the following meanings:
"Acquired Assets" means all of the assets, rights, properties, business and
claims of every kind and nature whatsoever, whether tangible or intangible,
which are used in, arise out of or relate to the Business or are considered to
be assets of Seller (other than the Excluded Assets) including, without
limitation, the following:
(a) All of the cash, cash equivalents, accounts receivable and
notes receivable of Seller and all notes, bonds and other evidences of
indebtedness of any Person held by Seller arising from the Business
(other than notes receivable from Ronni Rogers, Steve Schmidt and
Kasey Sixt);
(b) Seller's rights to the Leased Property (as defined in
SECTION 3.10 below) and all other rights, if any, under the leases
related thereto including any security deposits thereunder;
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(c) All equipment, fixtures, tools, inventory, supplies, office
equipment, office machines, computer hardware and peripheral
equipment, transportation equipment, leasehold improvements, objects
of art, furniture, furnishings and other tangible assets;
(e) The Proprietary Rights, including, without limitation, all
of Seller's right, title and interest in and to the computer software
program titled "Career Taxi" and the use of its corporate name and any
deviations or combinations thereof, together with all goodwill
associated therewith and with the Business;
(f) The Insurance Policies (as defined in SECTION 3.23 below);
(g) All of Seller's rights under any and all agreements,
contracts, purchase orders, licenses and leases pertaining to the
Business, which Purchaser shall assume, including the Material
Contracts (as defined in SECTION 3.11 below) and agreements containing
covenants not to compete with Seller or the Business (collectively,
the "Contracts");
(h) All causes of action, claims, rights of recovery and set-off
of every kind and character pertaining or relating to the Acquired
Assets, including all insurance, warranty and condemnation proceeds
received after the Closing Date with respect to damage, destruction or
loss of any of the Acquired Assets;
(i) All of the business records and files of Seller, including,
without limitation, all originals and copies of all operating data and
records of the Business located at the Premises or in the possession
or control of the Seller and/or the Principal Shareholders including,
without limitation, sales and sales promotional data, advertising
materials, marketing analyses, past and present price lists, past and
present customer service files, credit files, written operating
methods and procedures, specifications, operating records and other
information related to the Acquired Assets, referenced catalogues,
insurance files, personnel records and other records, on whatever
media, pertaining to the Acquired Assets or customers or suppliers of,
or any other parties having contracts or other business relationships
with, the Business;
(j) All existing telephone, telex, fax and twix numbers used by
Seller;
(k) All Licenses (as defined in SECTION 3.13 below);
(l) All insurance, warranty and condemnation proceeds of Seller
received after the Closing Date with respect to damage, nonconformance
of or loss to the Acquired Assets; and
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(m) All deposits and prepaid expenses pertaining or relating to
the Acquired Assets or the Business.
"Agreement" means this Asset Purchase Agreement by and among Purchaser,
Seller and the Principal Shareholders, as the same may be amended from time to
time.
"Affiliate" means, as to any specified Person, any other Person
controlling, controlled by or under common control with such specified Person.
"Control" means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; provided, that no Person shall be deemed to be an
Affiliate of any other Person solely as a result of the transactions
contemplated in any of the Transaction Documents.
"Bill of Sale and Assignment and Assumption Agreement" means the bill of
sale and assignment and assumption agreement, dated as of the Effective Date, to
be entered into between Seller and Purchaser, which Bill of Sale and Assignment
and Assumption Agreement shall be substantially in the form attached hereto as
Exhibit A.
"Business" means the business of advertising, and specializing primarily in
the placement of advertising for employment positions, as conducted by Seller as
of the date hereof.
"Cash Payment" means the sum of $4,000,000 to be paid by Purchaser to
Seller on the Closing Date.
"Closing" means the transactions scheduled to occur on the Closing Date
effective as of the Effective Date.
"Closing Date" means January 4, 1995.
"Code" means the Internal Revenue Code of 1986, as amended, and any
subsequent Internal Revenue Code. If there is a subsequent Internal Revenue
Code, any references herein to Internal Revenue Code sections shall be deemed to
refer to comparable sections of any subsequent Internal Revenue Code.
"December 31, 1994 Financials" means the audited Balance Sheet, Income
Statement, Statement of Cash Flow and Statement of Stockholders Equity dated as
of and for the period ended, December 31, 1994.
"Effective Date" means January 3, 1995.
"Employee Benefit Plan" means any "Employee Pension Benefit Plan" (as
defined in Section 3(2) of ERISA), "Employee Welfare Benefit Plan" (as defined
in Section 3(1) of ERISA), "multi-employer plan" (as defined in Section 3(37) of
ERISA), plan of deferred compensation, medical plan, life insurance plan, long-
term disability plan, dental plan or other
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plan providing for the welfare of any of Seller's or any Plan Affiliate's
employees or former employees or beneficiaries thereof, personnel policy
(including but not limited to vacation time, holiday pay, bonus programs,
moving expense reimbursement programs and sick leave), excess benefit plan,
bonus or incentive plan (including but not limited to stock options,
restricted stock, stock bonus and deferred bonus plans), salary reduction
agreement, change-of-control agreement, employment agreement, consulting
agreement or any other benefit, program or contract.
"Employment Agreement" means each of the employment agreements to be
entered into between each of the Principal Shareholders and Purchaser upon
consummation of the acquisition of the Acquired Assets, which agreements shall
each be substantially in the form attached hereto as EXHIBIT B.
"Environmental and Safety Requirements" means all federal, state and local
laws, rules, regulations, ordinances, orders, statutes, actions, policies and
requirements relating to public health and safety, worker health and safety,
pollution and protection of the environment, all as amended or hereafter
amended, including the Comprehensive Environmental Response, Compensation and
Liability Act 42 U.S.C. Sec. 9601 ET SEQ. and the Resource Conservation and
Recovery Act, 42 U.S.C. Sec. 6901 ET SEQ.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means:
(a) All Employee Benefit Plan assets;
(b) Seller's corporate records, such as its Certificate of
Incorporation, corporate seal, minute books and stock books;
(c) Seller's rights under this Agreement, including, without
limitation, the consideration paid to Seller pursuant to this
Agreement; and
(d) The other Excluded Assets listed on SCHEDULE 1 attached
hereto.
"Financial Statements" means the following audited and unaudited financial
statements of Seller: (i) an unaudited Balance Sheet, Income Statement,
Statement of Cash Flow and Statement of Stockholders Equity dated as of, and for
the period ended September 30, 1994 and the fiscal year ended March 31, 1994,
(ii) audited Balance Sheets, Income Statements, Statements of Cash Flow and
Statements of Stockholders Equity dated as of, and for the fiscal year ended,
March 31, 1993, and (iii) an unaudited Balance Sheet, Income Statement,
Statement of Cash Flow and Statement of Stockholders Equity dated as of, and for
the periods ended, March 31, 1991, 1992 and December 31, 1993.
"GAAP" means generally accepted accounting principles, consistently
applied.
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"Guaranty" means that certain guaranty of the Note and Note II to be
entered into by TMP in substantially the form attached hereto as EXHIBIT C.
"Liens" means any claims, liens, charges, restrictions, options, preemptive
rights, mortgages, hypothecations, assessments, pledges, encumbrances or
security interests of any kind or nature whatsoever.
"Management Agreement" means that certain management agreement, dated
February 1, 1994, among the Principal Shareholders, Seller and TMP.
"New Equity" means the change in stockholders' equity of Seller, as
reflected on the December 31, 1994 Financials and the April 1, 1993 Balance
Sheet of Seller, for the period beginning April 1, 1993 to and including
December 31, 1994 determined in accordance with SECTION 2.4 hereof. There shall
be an appropriate offset from such New Equity in respect of the notes receivable
of Seller not transferred to Purchaser pursuant to this Agreement as part of the
Acquired Assets.
"Note" means that certain promissory note, dated as of the Effective Date,
to be executed and delivered by Purchaser to Seller at the Closing, in an
original principal amount equal to the Purchase Price less the Cash Payment and
the New Equity, which Note shall be substantially in the form attached hereto as
EXHIBIT D.
"Note II" means that certain promissory note, dated in accordance with
SECTION 2.4 hereof, in an original principal amount equal to the New Equity,
which Note II shall be substantially in the form attached hereto as EXHIBIT E.
"Option Agreement" means that certain Option Agreement, dated February 1,
1994, by and among TMP, Seller and the Principal Shareholders.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, limited liability company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.
"Parent" means Worldwide Classified, Inc., a Delaware corporation.
"Parent Shareholders" means Joan Olsen, Gerda L. Carlson, Rosemary
Hopkinson, Martin L. Felde, Mark O. Brown, Paul M. Camara, Thomas G. Collison,
Bernice M. Hazell, Lance S. Johnson, Harold L. Levy, David A. Hosokawa, Fred D.
Tendler, John Yocom, Andrew J. McKelvey, George R. Eisele.
"Parent Shares" means the 9,698 shares of common stock of Parent which are
issued and outstanding as of the date hereof and which represent all of the
issued and outstanding shares of capital stock of Parent as of the date hereof.
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"Plan Affiliate" means any person or entity with which Seller constitutes
all or part of a controlled group of corporations, a group of trades or
businesses under common control or an affiliated service group, as each of those
terms are defined in Section 414 of the Code.
"Principal Shareholders" means Curtis Rogers, Steven Schmidt and Ronni
Rogers.
"Proprietary Rights" means all patents, trademarks, service marks, trade
names, copyrights (including computer software and data, including, without
limitation, the computer software titled "Career Taxi") and other intellectual
property, including without limitation, all inventions, designs, models,
processes and applications of any of the foregoing.
"Purchase Price" means the sum of $10,750,000 plus the New Equity.
"Purchaser" means Rogers Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Security Agreement" means that certain stock pledge agreement, dated as of
the Effective Date, to be entered into between the Parent Shareholders and
Seller, pursuant to which Parent Shareholders shall pledge the Parent Shares to
Seller and which Security Agreement shall be substantially in the form attached
as EXHIBIT F.
"Seller" means Rogers & Associates Advertising, Inc., a California
corporation.
"Tax" means any federal, state, local or foreign income, gross receipts,
franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer,
registration, value added, excise, natural resources, severance, stamp,
occupation, windfall profit, environmental, customs, duties, real property,
personal property, capital stock, social security, unemployment, disability,
payroll, license, employee or other withholding, or other tax, of any kind
whatsoever, including any interest, penalties or additions to tax or additional
amounts in respect of the foregoing.
"Tax Return" means a return, declaration, report, claim for refund,
information return or other document (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of any Taxes of
Seller or any Affiliates of Seller or the administration of any laws,
regulations or administrative requirements relating to any Taxes.
"TMP" means TMP Worldwide Inc., a Delaware corporation.
"Transaction Documents" means this Agreement, the Note, the Note II, the
Guaranty, the Security Agreement, the Employment Agreements, the Bill of Sale
and Assignment and
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Assumption Agreement and any other agreements, documents, certificates or
instruments contemplated by any of the foregoing.
"Transactions" means the purchase and sale of the Acquired Assets and the
other transactions and events contemplated herein to occur on the Closing Date
and effective as of the Effective Date.
"Transfer Taxes" shall mean all sales taxes, use taxes, conveyance taxes,
transfer taxes, filing fees, recording fees, reporting fees and other similar
duties, taxes and fees, if any, imposed upon, or resulting from, the transfer of
the Acquired Assets hereunder, except federal, state or local income or similar
taxes based upon or measured by revenue, income, profit or gain from the
transfer of the Acquired Assets or the operation of the Business prior to the
Effective Date or by any increase in the value of any of the Acquired Assets.
ARTICLE II
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PURCHASE AND SALE
-----------------
2.1 PURCHASE AND SALE OF ACQUIRED ASSETS. Subject to the terms and
conditions set forth herein, at the Closing and effective as of the Effective
Date, Seller shall sell, convey, transfer, assign and deliver to Purchaser, and
Purchaser shall purchase from Seller all of Seller's right, title and interest
in and to the Acquired Assets, free and clear of all Liens, other than the
Assumed Liabilities, for the consideration provided for in SECTION 2.2 hereof.
2.2 PURCHASE PRICE.
(a) PURCHASE PRICE. The aggregate purchase price for the Acquired
Assets shall be the sum of $10,750,000 plus the New Equity (the "Purchase
Price"), plus Purchaser's assumption of the Assumed Liabilities (as defined
in SECTION 2.3(b) below).
(b) ALLOCATION. The Purchase Price shall be allocated among the
Acquired Assets in a manner to be determined by Purchaser, subject to the
approval of Seller, which approval shall not be unreasonably withheld. The
maximum allocated to the equipment that is part of the Acquired Assets
shall not exceed Seller's tax basis in such equipment.
2.3 PAYMENT OF PURCHASE PRICE; ASSUMED LIABILITIES.
(a) PAYMENT. The Purchase Price shall be payable by Purchaser to
Seller as follows:
(i) CASH PAYMENT. Purchaser shall, on the Closing Date, pay to
Seller the Cash Payment by delivery of a bank certified or bank
cashier's check or by wire transfer;
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(ii) NOTE. Purchaser shall, at the Closing on the Closing Date,
execute and deliver to Seller the Note; and
(iii) NOTE II. Purchaser shall, following the final determination
of the New Equity as provided herein, execute and deliver to Seller
the Note II.
(b) ASSUMPTION OF LIABILITIES. Purchaser shall, as of the Effective
Date, assume all liabilities and obligations of Seller, except for the
Retained Liabilities (as defined below), provided that any such liability
or obligation has been properly accrued on the books of Seller, as and if
required by generally accepted accounting principals, and reflected in the
December 31, 1994 Financials, in each case to the extent that the existence
of such liability or obligation is not contrary to any covenant,
representation or warranty of Seller hereunder (the "Assumed Liabilities"),
pursuant to the terms of the Bill of Sale and Assignment and Assumption
Agreement. For purposes of this Agreement, "Retained Liabilities" shall
mean: (i) any liability or obligation of Seller that has not been properly
accrued on the books of Seller, as and if required by generally accepted
accounting principals, or is not reflected in the December 31, 1994
Financials, (ii) all obligations of Seller for any federal, state, local or
foreign income taxes, (iii) any liability or obligation of any Employee
Benefit Plan or of Seller with respect thereto, and (iv) any liability or
obligation which was required to be disclosed by Seller pursuant to Article
III of this Agreement (or on any other Exhibit or Schedule hereto or
delivery to Purchaser hereunder) which was not properly disclosed herein or
in a Schedule hereto.
2.4 DETERMINATION OF NEW EQUITY. On or before March 28, 1995 Seller shall
deliver to Purchaser the December 31, 1994 Financials, which shall be
accompanied by Seller's written calculation of the New Equity. If Purchaser
agrees with Seller's calculation of the New Equity, then within 20 days
following Purchaser's receipt of the December 31, 1994 Financials Purchaser
shall execute and deliver the Note II to Seller. In the event that Purchaser
shall object to Seller's calculation of the New Equity, Purchaser shall deliver
to Seller, within 20 days following Purchaser's receipt of the December 31, 1994
Financials, Purchaser's written calculation of the New Equity, which shall set
forth in detail the items to which Purchaser objects. If within 20 days
following Seller's receipt of Purchaser's calculation of the New Equity, the
parties are not able to agree on the calculation of the New Equity, then the
matter shall be submitted to arbitration pursuant to SECTION 9.7 hereof.
Purchaser shall, within 10 days following the issuance of an arbitrator's
decision, execute and deliver to Seller the Note II.
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ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES
------------------------------
OF SELLER AND THE PRINCIPAL SHAREHOLDERS
----------------------------------------
As an inducement to Purchaser to enter into and perform its obligations
under this Agreement, Seller and each of the Principal Shareholders hereby
jointly and severally represent and warrant to and with Purchaser as follows:
3.1 ORGANIZATION AND GOOD STANDING. Seller is a corporation duly
organized, existing and in good standing under the laws of the State of
California. Seller has full corporate power and authority to execute and
deliver this Agreement and the other Transaction Documents to which it is a
party, to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. Seller is duly licensed and
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the location of its property and assets or the
character of the operations of the Business requires such license or
qualification, except for those jurisdictions where the failure to be so
qualified or in good standing would not individually or in the aggregate have a
material adverse effect on Seller or the operations of its Business.
3.2 CORPORATE AUTHORIZATION. The execution and delivery of this Agreement
and the other Transaction Documents to which Seller is a party, and the
performance by Seller of its obligations hereunder and thereunder, and the
consummation of the transactions contemplated hereunder and thereunder, have
been duly authorized by all necessary corporate action. This Agreement and the
other Transaction Documents to which each of the Principal Shareholders and
Seller is a party, constitute the legal, valid and binding obligations of such
Person, enforceable against such Person in accordance with their respective
terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally.
3.3 SUBSIDIARIES. Seller does not own or control (directly or
indirectly), or own or hold any right to acquire, any stock, partnership
interest, joint venture interest, equity participation or other security or
interest in any other corporation, partnership, trust or any other business
association.
3.4 NO VIOLATION. The execution, delivery and performance by each of
Seller and the Principal Shareholders of this Agreement and the Transaction
Documents to which such Person is a party and the consummation of the
transactions contemplated herein and therein will not:
(a) result in the breach of any of the terms or conditions of, or
constitute a default under, or in any manner release any party thereto from
any obligation under, any mortgage, note, bond, indenture, contract,
agreement, license or other instrument or obligation of any kind or nature
by which Seller, any of the Principal Shareholders or any of the property
or assets of any of them may be bound or affected;
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(b) violate any order, writ, injunction, regulation, statute or
decree of any court, administrative agency, or governmental body; or
(c) violate any provision of the Articles of Incorporation or Bylaws
of Seller.
3.5 NO CONSENT REQUIRED. No consent, approval, order or authorization of,
or declaration, filing or registration with, any Person or governmental
authority is required to be made or obtained by Seller or any of the Principal
Shareholders in connection with the authorization, execution, delivery or
performance of this Agreement, the Transaction Documents to which such Person is
a party or the transactions contemplated hereunder or thereunder.
3.6 FINANCIAL STATEMENTS. SCHEDULE 3.6 contains the Financial Statements
of Seller, all of which have been prepared in accordance with GAAP. Each of the
Financial Statements is complete and correct in all material respects, is
consistent with the books and records of Seller and fairly presents Seller's
financial condition, assets and liabilities as of their respective dates and the
results of operations and cash flows for the periods related thereto in
accordance with GAAP, except that the unaudited interim financial statements
lack the footnote disclosure and normal recurring accruals otherwise required by
GAAP, none of which, if provided, would reflect a material adverse change in the
operations or financial condition of Seller.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Seller does not have any material
debts, liabilities or obligations of any nature (whether accrued, absolute,
contingent, direct, indirect, perfected, inchoate, unliquidated or otherwise and
whether due or to become due) arising out of transactions entered into on or
prior to the date hereof, or any transaction, series of transactions, action or
inaction occurring on or prior to the date hereof, or any state of facts or
condition existing on or prior to the date hereof (regardless of when such
liability or obligation is asserted), including but not limited to liabilities
or obligations on account of Taxes or governmental charges or penalties,
interest or fines thereon or in respect thereof, except (a) as and to the extent
clearly and accurately reflected and accrued for or fully reserved against in
the Financial Statements and the December 31, 1994 Financials, (b) for
liabilities specifically delineated as to nature and amount on the Schedules
hereto and (c) for liabilities and obligations arising in the ordinary course of
business since the date of the last Financial Statement.
3.8 PROPERTIES. Seller has, and by this Agreement agrees to convey to
Purchaser, good and marketable title to all of the Acquired Assets (other than
property and assets held under leases described in SECTION 3.10), including
without limitation, all of the property and assets reflected on Seller's Balance
Sheet as of December 31, 1994, except property sold or otherwise disposed of
since that date in the ordinary course of business, subject to no Liens, except
as set forth in SCHEDULE 3.8 and except for liens for Taxes not yet due and
payable. Seller does not own any real property. All of the Acquired Assets are
in good condition and repair, ordinary wear and tear excepted, and are usable in
the ordinary course of business. None of the Acquired Assets require any repair
or replacement except for maintenance in the ordinary course of business.
Except as set forth on SCHEDULE 3.8, none of the personal property or assets of
Seller is held under any lease, security agreement, conditional sales contract
or other
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title retention or security arrangement, or is located other than at one of the
Seller offices. The Acquired Assets include all assets of any nature which are
used to conduct the Business as presently conducted by Seller.
3.9 ACCOUNTS RECEIVABLE. All of Seller's accounts receivable have arisen
in bona fide arm's-length transactions in the ordinary course of business and,
except to the extent of any reserves for bad debts set forth in the Financial
Statements, are valid and binding obligations of the account debtors without any
counterclaims, set-offs or other defenses thereto, and are collectible by Seller
or Purchaser, as the case may be, in the ordinary course. Except as set forth
on SCHEDULE 3.9 and recorded on the books of Seller and reflected on the
December 31, 1994 Financials, Seller has not prebilled or received payment from
any of its customers or clients for advertisements to be placed or services to
be rendered or expenses to be incurred subsequent to the date hereof.
3.10 LEASES. All leases of real and personal property leased by Seller and
utilized in the Business, including all such leases with related parties or any
Affiliates of Seller (collectively, the "Leased Property"), are listed on
SCHEDULE 3.10, and correct and complete copies previously have been furnished to
Purchaser. All leases with Affiliates and related parties carry terms and
conditions no less favorable nor more favorable in all material respects to
Seller than those which could have been obtained in arm's-length transactions
with unrelated third parties. Seller enjoys peaceful and undisturbed possession
under all such leases, and all of such leases are valid and in full force and
effect and, neither the lessee, nor to the knowledge of Seller, the lessor is in
default under any of such leases and no event has occurred which with the giving
of notice or the passage of time or both could constitute a default by the
Seller, or to the knowledge of Seller, any other party under any of such leases.
Any real property that Seller possesses under such leases is in good condition
and repair with adequate plumbing, heating and air conditioning and with access
to public roads and utilities as required for the conduct of the Business.
3.11 CONTRACTS. SCHEDULE 3.11 is a correct and complete list of every
material contract, agreement, relationship or commitment, written or oral, to
which Seller is a party or by which it is bound (the "Material Contracts"),
correct and complete copies of which previously have been furnished to the
Purchaser. Except as set forth on SCHEDULE 3.11, all of the Material Contracts
may be assigned to Purchaser without the consent, approval, novation or waiver
of any third party. Except as set forth on SCHEDULE 3.11, Seller is not in
default, and no event has occurred which with the giving of notice or the
passage of time or both would constitute a default by Seller, or to the
knowledge of Seller, any other party under any Material Contract or any other
obligation owed by Seller, and, to the knowledge of Seller, no event has
occurred which with the giving of notice or the passage of time or both would
constitute a default by any other party to any such Material Contract or
obligation.
3.12 INTELLECTUAL PROPERTY. SCHEDULE 3.12 contains a complete and correct
list of all patented, registered and other material Proprietary Rights owned by
Seller and all pending patent applications and applications for the registration
of other Proprietary Rights owned or filed by
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Seller. SCHEDULE 3.12 also contains a complete and correct list of all trade or
corporate names used by Seller and a complete and correct list of all licenses
and other rights granted by Seller to any third party with respect to
Proprietary Rights and licenses and other rights granted by any third party to
Seller. Except as set forth on SCHEDULE 3.12, (a) Seller owns and possesses all
right, title and interest in and to, or has a valid license to use, all of the
Proprietary Rights necessary for the operation of the Business as presently
conducted and none of such Proprietary Rights have been abandoned; (b) no claim
by any third party contesting the validity, enforceability, use or ownership of
any such Proprietary Rights has been made, is currently outstanding or is
threatened, and there is no reasonable basis for any such claim; (c) neither
Seller nor any registered agent of Seller has received any notices of, nor is
Seller aware of any reasonable basis for, an allegation of, any infringement or
misappropriation by, or conflict with, any third party with respect to such
Proprietary Rights, nor has Seller or any registered agent of Seller received
any claims of infringement or misappropriation of or other conflict with any
Proprietary Rights of any third party; and (d) Seller has not infringed,
misappropriated or otherwise violated any Proprietary Rights of any third
parties, and Seller is not aware of any infringement, misappropriation or
conflict which will occur as a result of the continued operation of the
Business.
3.13 COMPLIANCE WITH LAWS; PERMITS. Seller is not in violation in any
material respect of any law, regulation or requirement applicable to it or the
operation of the Business, nor has Seller received notice (written or oral) of
any such violation. Seller holds all of the licenses and permits necessary or
desirable for the operation of the Business, all of which are set forth on
SCHEDULE 3.13 (the "Licenses"). Seller is in compliance with each of such
Licenses, all of which are in full force and effect.
3.14 EMPLOYEE BENEFIT PLANS. Except as set forth in SCHEDULE 3.14, neither
Seller nor any Plan Affiliate has maintained, sponsored, adopted, made
contributions to or obligated itself to make contributions to or to pay any
benefits or grant rights under or with respect to any Employee Benefit Plan,
whether or not written or pursuant to a collective bargaining agreement, which
could give rise to or result in Seller or such Plan Affiliate having any debt,
liability, claim or obligation of any kind or nature, whether accrued, absolute,
contingent, direct, indirect, known or unknown, perfected or inchoate or
otherwise and whether or not due or to become due. Correct and complete copies
of all written Employee Benefit Plans previously have been furnished to
Purchaser. The Employee Benefit Plans are in substantial compliance with
governing documents and agreements and with applicable laws.
3.15 SALARIES. SCHEDULE 3.15 is a true, complete and correct list setting
forth (i) the names and current compensation rate and compensation, including,
without limitation, vacation accrual rate and accrued vacation time, of all
individuals presently employed by Seller on a salaried basis and the length of
their employment with Seller, (ii) the names and current compensation rate of
all individuals presently employed by Seller on an hourly or piecework basis,
including, without limitation, vacation accrual rate and accrued vacation time,
and the length of their employment with Seller and (iii) the names and total
annual compensation for all independent contractors who render services on a
regular basis to Seller whose compensation
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over the twelve months ended March 31, 1994 is in excess of $10,000. Except as
set forth in SCHEDULE 3.15, no person listed thereon has received any bonus or
increase in compensation since December 31, 1993 and there has been no "general
increase" in the compensation or rate of compensation payable to any employees
of Seller since December 31, 1993 nor since that date has there been any promise
to the employees listed on SCHEDULE 3.15 orally or in writing of any bonus or
increase in compensation, whether or not legally binding, except for increases
in the ordinary course of business consistent with the Seller's past
compensation practices and obligations incurred under existing bonus, insurance,
pension or other Employee Benefit Plans described on SCHEDULE 3.15.
3.16 PERSONNEL AGREEMENTS, PLANS AND ARRANGEMENTS. Seller is not a party
to or obligated in connection with the Business with respect to any (a)
outstanding contracts with current or former employees, agents, consultants,
advisers, salesmen, sales representatives, distributors, sales agents,
independent contractors or dealers, or (b) collective bargaining agreements or
contracts with any labor union or other representative of employees. No strike,
union organizational activity, allegation, charge or complaint of employment
discrimination or other similar occurrence has occurred or is pending or, to the
knowledge of Seller, is threatened against Seller nor does Seller know of any
basis for any such allegation, charge, or complaint. Seller has complied in all
material respects with all applicable laws relating to the employment of labor,
including provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other Taxes. There
are no administrative charges or court complaints pending or, to the knowledge
of Seller, threatened against Seller before the U.S. Equal Employment
Opportunity Commission or any state or federal court or agency concerning
alleged employment discrimination or any other matters relating to the
employment of labor.
3.17 WORKERS COMPENSATION. SCHEDULE 3.17 sets forth all expenses,
obligations, duties and liabilities individually in excess of $1,000 or in
excess in the aggregate of $10,000 relating to any claims by employees and
former employees (including dependents and spouses) of Seller (or predecessors)
made since April 1, 1993 and the extent of any specific accrual on or reserve
therefor set forth on the Financial Statements, for (a) costs, expenses and
other liabilities under any workers compensation laws, regulations, requirements
or programs and (b) any other medical costs and expenses. Except as set forth
on SCHEDULE 3.17, to the knowledge of Seller, no claims, injuries, fact, event
or condition exists which would give rise to a material claim by employees and
former employees (including dependents and spouses) of Seller under any workers
compensation laws, regulations, requirements or programs or for any other
medical costs and expenses.
3.18 SUPPLIERS. SCHEDULE 3.18 is a complete and correct list of the ten
largest suppliers (in terms of Seller's purchases from such suppliers during the
fiscal years ended March 31, 1992, 1993 and 1994 and through November 30, 1994)
to Seller of key materials and services and commodities, exclusive of utility
services. In the last twelve months, no such supplier has canceled or otherwise
terminated, or, to the knowledge of Seller, threatened to cancel or terminate,
its relationship with Seller. Seller has not received any notice and has no
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knowledge that any such supplier intends to cancel or otherwise modify its
relationship with the Business on account of the transactions contemplated
hereby or otherwise.
3.19 CUSTOMERS. SCHEDULE 3.19 is a complete list by dollar volume of sales
made or services provided (within Seller's fiscal years ended March 31, 1992,
1993 and 1994 and through November 30, 1994) to the twenty largest customers of
Seller. Except as set forth in SCHEDULE 3.19, in the last twelve months, none
of such customers has canceled or otherwise terminated, or, to the knowledge of
Seller, threatened to cancel or otherwise terminate, its relationship with
Seller, or reduced, or to the knowledge of Seller, threatened to reduce, its
business with Seller. Seller has not received any notice and has no knowledge
that any customer, whether or not one of Seller's twenty largest, intends to
cancel or otherwise modify its relationship with the Business on account of the
transactions contemplated hereby or otherwise.
3.20 INTEREST OF SELLER IN CUSTOMERS, ETC. Neither Seller nor any of its
Affiliates has any direct or indirect interest in any competitor, supplier or
customer of Seller or the Business or in any Person from whom or to whom Seller
leases any real or personal property or in any other Person with whom Seller has
any business relationship.
3.21 INTERCOMPANY TRANSACTIONS. SCHEDULE 3.21 describes (i) all material
management, administrative, computer, telephone or other services provided by
any of Seller's Affiliates to Seller and all such services provided by Seller to
any of Seller's Affiliates, and (ii) all other material contracts, agreements,
arrangements or transactions (including the purchase and sale of inventory,
supplies and other goods) between Seller, on the one hand, and any of Seller's
Affiliates on the other hand, currently in effect, in each case setting forth
the terms thereof if not effected on an arm's-length basis.
3.22 BOOKS AND RECORDS. All of the books, records and accounts of Seller
are in all material respects accurate and complete, are in all material respects
in accordance with all laws, regulations and rules applicable to Seller and the
Business and accurately present and reflect in all material respects all of the
transactions described therein.
3.23 INSURANCE POLICIES. SCHEDULE 3.23 is a correct and complete list and
description, including policy numbers, of all insurance policies owned by Seller
or otherwise pertaining to the Business, correct and complete copies of which
policies have previously been delivered to Purchaser (the "Insurance Policies").
Such policies are in full force and effect, and Seller is not in default under
any of them. Seller has not received any notice of cancellation or intent to
cancel or increase premiums with respect to such insurance policies nor, to the
knowledge of Seller, is there any basis for any such action. SCHEDULE 3.23 also
contains a list of all pending claims (other than medical/dental claims) with
any insurance company and any instances within the previous three years of a
denial of coverage of Seller by any insurance company.
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3.24 BANK ACCOUNTS. SCHEDULE 3.24 is a complete list of each bank in which
Seller has an account or safe deposit box, the number of each such account or
box and the names of all person's authorized to draw thereon or to have access
thereto.
3.25 TAXES. Seller has filed all Tax Returns that it is required to have
filed, and such returns are true, correct and complete. Seller has paid or made
adequate provision for the payment of all Taxes, interest and penalties, if any,
reflected on such Tax Returns or otherwise due and payable by it. Any
deficiencies proposed as a result of any governmental audits of such Tax Returns
have been paid or settled, and there are no present disputes as to Taxes payable
by Seller. There is no audit, investigation, or proceeding pending or
threatened against Seller or its Affiliates by any governmental agency in
connection with its Taxes; nor, to the knowledge of Seller, is there any
reasonable basis for a claim that Taxes have not been paid. Seller has
delivered true, complete and correct copies of its tax returns for the last two
years to Purchaser.
3.26 LITIGATION. Except as set forth in SCHEDULE 3.26, there is no claim,
counter-claim, action, suit, order, proceeding or investigation pending or, to
the knowledge of Seller, threatened against or involving Seller (or pending or,
to the knowledge of Seller, threatened against any of the Principal Shareholders
or any of the other officers, directors or key employees of Seller with respect
to their business activities on behalf of Seller), or relating to the
transactions contemplated hereby, before any court, agency or other governmental
body; nor, to the knowledge of Seller, is there any reasonable basis for any
such claim, action, suit, proceeding or governmental investigation. Seller is
not directly subject to or affected by any order, judgment, decree or ruling of
any court or governmental agency. Seller has not received any written opinion
or memorandum of legal advice from legal counsel retained by it to the effect
that it is exposed to any liability which may be material to Seller, the
Acquired Assets, the Premises or the Business. Seller is not engaged in any
legal action to recover monies due it or for damages sustained by it.
3.27 ENVIRONMENTAL AND SAFETY REQUIREMENTS. Seller is in material
compliance with all applicable Environmental and Safety Requirements, and Seller
possesses all required permits, licenses and certificates, and has filed all
notices or applications, required thereby. Seller has not received any notice
or other communication from any party with respect to its failure to comply with
Environmental and Safety Requirements.
3.28 CONDUCT OF THE BUSINESS. Except as set forth on SCHEDULE 3.28, since
March 31, 1994, Seller has conducted its business only in the ordinary course of
business consistent with past custom and practice, and has incurred no
liabilities other than in the ordinary course of business consistent with past
custom and practice and there has been no material adverse change in the assets,
condition (financial or otherwise), operating results, employee or customer
relations, business activities or business prospects of Seller, the Acquired
Assets or the Business. Without limiting the foregoing and except as set forth
on SCHEDULE 3.28, since March 31, 1994, Seller has not, other than in the
ordinary course of business consistent with past custom and practices:
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(a) voluntarily or involuntarily sold, transferred, abandoned,
surrendered, subjected to a Lien or otherwise disposed of any assets or
property rights relating to or used in the operation of the Business;
(b) changed any accounting principles, methods or practices used by
it or changed any of its depreciation rates or amortization policies or
rates;
(c) made any loan or advance to any Person other than salary advances
not in excess of $2,000 to any individual;
(d) incurred debt, liabilities, or obligations of any nature whether
accrued, absolute, contingent, direct, indirect, perfected or otherwise and
whether due or to become due;
(e) cancelled, waived or released any debts of, or rights or claims
against, any other Person;
(f) made any capital expenditures or commitments therefor
individually in excess of $25,000; or
(g) entered into any other material transaction, or committed to any
of the foregoing.
3.29 CLEARANCE CERTIFICATES. Except as set forth in SCHEDULE 3.29, no
clearance certificates or similar documents are required by any state taxing
authority in order to relieve Purchaser of any obligation to withhold any
portion of the Purchase Price.
3.30 BROKERS. Each of the Principal Shareholders and Seller warrants that
he, she or it has not incurred any obligation or liability, contingent or
otherwise for brokers' or finders' fees or commissions in connection with the
transactions contemplated by this Agreement or the other Transaction Documents
to which such Person is a party.
3.31 NO MISREPRESENTATION. None of the representations and warranties of
the Principal Shareholders or Seller set forth in this Agreement or any of the
other Transaction Documents to which such Person is a party, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading. There is no material
fact which has not been disclosed to Purchaser which materially adversely
affects or could reasonably be anticipated to materially adversely affect
Seller, the Acquired Assets, the Business or the Premises or the Principal
Shareholders' or Seller's ability to consummate the transactions contemplated
hereby.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to the Principal Shareholders and Seller to enter into and
perform their respective obligations under this Agreement, Purchaser hereby
represents and warrants to and with the Principal Shareholders and Seller as
follows:
4.1. ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to execute and deliver this
Agreement and the other Transaction Documents to which it is a party, to perform
its obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby.
4.2 CORPORATE AUTHORIZATION. The execution and delivery of this Agreement
and the other Transaction Documents to which Purchaser is a party, the
performance by Purchaser of its obligations hereunder and thereunder, and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action. This Agreement and the other
Transaction Documents to which Purchaser is a party constitute the legal, valid
and binding obligations of Purchaser enforceable against Purchaser in accordance
with their respective terms, subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally.
4.3 NO VIOLATION. The execution, delivery and performance by Purchaser of
this Agreement and the other Transaction Documents to which Purchaser is a party
and the consummation of the transactions contemplated herein and therein will
not:
(a) result in the breach of any of the terms or conditions of, or
constitute a default under, or in any manner release any party thereto from
any obligation under, any mortgage, note, bond, contract, indenture,
agreement, license or other instrument or obligation of any kind or nature
to which Purchaser is now a party or by which any of its properties or
assets may be bound or affected;
(b) violate any order, writ, injunction regulation, statute or decree
of any court, administrative agency or governmental body; or
(c) violate any provision of the Certificate of Incorporation or
Bylaws of Purchaser.
4.4 NO CONSENT REQUIRED. No consent, approval, order or authorization of,
or declaration, filing or registration with, any Person or governmental
authority is required to be made or obtained by Purchaser in connection with the
authorization, execution, delivery or performance of this Agreement and the
other Transaction Documents to which Purchaser is a
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party, the performance by Purchaser of its obligations hereunder or thereunder,
or the transactions contemplated hereby or thereby.
4.5 BROKER. Except as set forth on SCHEDULE 4.5, Purchaser warrants that
it has not incurred any obligation or liability contingent or otherwise, for
brokers' or finders' fees or commissions in connection with the transactions
contemplated by this Agreement or the other Transaction Documents to which
Purchaser is a party.
4.6 NO MISREPRESENTATION. None of the representations and warranties of
Purchaser set forth in this Agreement or the other Transaction Documents to
which it is a party, contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained herein or
therein not misleading. There is no material fact which has not been disclosed
to the Seller Shareholders and Seller which materially adversely affects or
could reasonably be anticipated to materially adversely affect Purchaser's
ability to consummate the transactions contemplated hereby.
ARTICLE V
PRE-CLOSING COVENANTS AND OTHER TERMS
5.1 PUBLIC ANNOUNCEMENTS. The parties covenant and agree that from the
date hereof to and including the Closing Date, no party will issue or cause the
publication of any press release or other public announcement with respect to
this Agreement or the transactions contemplated hereby without the prior consent
of Purchaser (in the case of Seller) or Seller (in the case of Purchaser), which
consent will not be unreasonably withheld or delayed; provided, however, that
nothing herein will prohibit any party (i) from issuing or causing publication
of any such press release or public announcement to the extent that such party
determines such action to be required by law, in which case the party making
such determination will use reasonable efforts to allow the other parties
reasonable time to comment on such release or announcement in advance of its
issuance or (ii) from disclosing this Agreement or the Transaction Documents and
the transactions contemplated hereby or thereby to third parties to the extent
reasonably necessary in connection with securing any necessary consent of such
third parties. To the extent feasible, all press releases or other
announcements or notices regarding the transactions contemplated by this
Agreement shall be made jointly by the parties.
5.2 INVESTIGATION BY PURCHASER. From the date hereof to and including the
Closing Date, Seller will afford to the officers, attorneys, accountants or
other authorized representatives of Purchaser reasonable access during normal
business hours to the offices, facilities, properties, files, books and records
of Seller so as to afford Purchaser the opportunity to make such review,
examination and investigation of Seller and the Business as Purchaser may deem
appropriate. Purchaser will be permitted to make extracts from or to make
copies of such books and records as may be reasonably necessary. No
investigation by Purchaser or its representatives shall offset or limit the
scope of the Principal Shareholders' or Seller's representations and warranties
in this Agreement or limit the Principal Shareholders' or Seller's liability for
any breach thereof.
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5.3 CONDUCT OF BUSINESS. From the date hereof through the Closing, except
as otherwise provided for in, or contemplated by, this Agreement, each of Seller
and the Principal Shareholders covenants and agrees that:
(a) Seller will operate the Business in the ordinary and usual course
in substantially the same manner as it is presently operated.
(b) Except as required by law or existing contractual obligations,
Seller will not (i) increase in any manner the base compensation of, or
enter into any new bonus or incentive agreement or arrangement with, any of
the employees of the Business, (ii) pay or agree to pay any additional
pension, retirement allowance or other employee benefit to any such
employee, whether past or present, (iii) enter into any new employment,
severance, consulting, or other compensation agreement with any existing
employee of the Business, (iv) hire any new employees, or (v) amend or
enter into a new Employee Benefit Plan (except as required by law, in which
case Seller shall notify Purchaser prior to amending or entering into such
Employee Benefit Plan).
(c) Subject to the terms and conditions of this Agreement, Seller
will use its best efforts to keep available the services of its present
employees of the Business, and preserve the goodwill, reputation and
present relationships of the Business with its suppliers, customers,
licensors and others having business relations with the Business.
(d) Seller will (i) maintain the Leased Property in good repair,
order and condition, (ii) use its best efforts to maintain and keep in full
force existing insurance, (iii) maintain the books and records in the
usual, regular and ordinary manner on a basis consistent with past
practices, and (iv) perform and comply with its obligations under all
Material Contracts. Seller shall not mortgage, hypothecate, grant Liens in
or otherwise encumber its interest in the Leased Property, or sublease its
interest in the Leased Property or amend any lease used in the Business to
which Seller or its Affiliates are a party.
(e) Except in the ordinary course of business or as otherwise
provided for in or contemplated by this Agreement, Seller will not (i)
sell, lease, transfer or otherwise dispose of any of the Acquired Assets,
(ii) create or permit to exist any new Lien on the Acquired Assets, (iii)
enter into any joint venture, partnership or other similar arrangement or
form any other new arrangement for the operation of the Acquired Assets,
(iv) accelerate or delay the creation or publication of any advertisement
or other service to be rendered, or the billing related thereto, to a
customer of the Business in a manner inconsistent with past practices, (v)
make any new commitments for capital expenditures, or (vi) accelerate the
payment of any of the Retained Liabilities.
5.4 NON-NEGOTIATION. In consideration of the substantial expenditure of
time, effort and expense undertaken by Purchaser in connection with its due
diligence review and the preparation and execution of this Agreement, the
Principal Shareholders and Seller agree that,
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from the date hereof to and including the Closing Date or the date of
termination of this Agreement, none of the Principal Shareholders or Seller, nor
any of their respective representatives, agents or employees, shall directly or
indirectly, solicit, encourage, negotiate or discuss with any third party
(including by way of furnishing any information concerning Seller) any
acquisition proposal relating to or affecting Seller or any part of it, or any
direct or indirect interests in Seller, whether by purchase of assets or stock,
purchase of interests, merger or other transaction, and that Seller will
promptly advise Purchaser of the terms of any communications Seller may receive
or become aware of relating to any bid for all or any part of Seller.
5.5 BEST EFFORTS. The Principal Shareholders and Seller will use their
best efforts from the date hereof to and including the Closing Date or the date
of termination of this Agreement, to secure fulfillment of all of the conditions
precedent to Purchaser's obligations hereunder, and Purchaser will use its best
efforts, from the date hereof to and including the Closing Date or the date of
termination of this Agreement, to secure fulfillment of all of the conditions
precedent to the Principal Shareholders' and Seller's obligations hereunder.
ARTICLE VI
CONDITIONS PRECEDENT TO THE CLOSING
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER. The obligations of
Purchaser under this Agreement are subject to the satisfaction, at or prior to
the Closing, of all of the following conditions, any one or more of which may be
waived at the option of Purchaser:
(a) NO BREACH OF COVENANTS; TRUE AND CORRECT REPRESENTATIONS AND
WARRANTIES. There shall have been no material breach by Seller or any of
the Principal Shareholders in the performance of any of their covenants
herein to be performed by them in whole or in part prior to the Closing,
and the representations and warranties of Seller and the Principal
Shareholders contained in this Agreement shall be true and correct in all
material respects as of the Closing, except for representations or
warranties that are made by their terms as of a specified date, which shall
be true and correct in all material respects as of the specified date.
Purchaser shall receive at the Closing a certificate dated as of the
Closing Date and validly executed by each of the Principal Shareholders and
on behalf of Seller by an executive officer certifying, in such detail as
Purchaser may reasonably require, the fulfillment of the foregoing
conditions, and restating and reconfirming as of the Closing all of the
representations and warranties of Seller contained in this Agreement.
(b) DELIVERY OF DOCUMENTS. Purchaser shall have received all
documents and other items to be delivered under SECTION 7.1(a).
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(c) NO LEGAL OBSTRUCTION. No suit, action or proceeding not
disclosed in the Schedules to this Agreement by any Person or governmental
agency shall be pending or threatened in writing, which if determined
adverse to Seller's or Purchaser's interests, would have a material adverse
effect upon (i) Seller or the Business, (ii) Purchaser or its Affiliates,
or (iii) the benefits to Purchaser or its Affiliates of the transactions
contemplated hereby. No injunction, restraining order or order of any
nature shall have been issued by or be pending before any court of
competent jurisdiction or any governmental agency challenging the validity
or legality of the transactions contemplated hereby or restraining or
prohibiting the consummation of such transactions or compelling Purchaser
to dispose of or discontinue or materially restrict the operations of a
significant portion of the Business or of the business conducted by
Purchaser as a result of the consummation of the transactions contemplated
hereby.
(d) DAMAGE OR DESTRUCTION. There shall have been no material loss or
destruction of any portion of the Acquired Assets, nor any institution or
threat of any condemnation or other proceedings to acquire or limit the use
of any of the Acquired Assets. Risk of loss for the Acquired Assets shall
be that of Rogers until the Closing.
(e) SIGNIFICANT CHANGES. From the date hereof until the Closing,
there shall have been no material adverse change in the Acquired Assets,
condition (financial or otherwise), operating results, employee, customer
or supplier relations, business activities or business prospects of Seller
and Seller shall not have lost any material customer (or, in the aggregate,
any material portion of any material customer's business). As of the
Closing Date, none of the Principal Shareholders shall be engaged in any
business competitive with the Business. The representations and warranties
set forth in SECTION 3.26 shall be true and correct as of the Closing Date
as if made on and as of the Closing Date.
(f) KEY EMPLOYEES. Purchaser shall have entered into written
employment agreements with Steve Virga and Kasey Sixt, which employment
agreements shall be in form and substance satisfactory to Purchaser in its
sole and absolute discretion.
(g) APPROVAL BY PURCHASER'S COUNSEL. All actions, proceedings,
instruments and documents reasonably required to carry out this Agreement
and all other related legal matters shall have been reasonably approved as
to form and substance by Katten Muchin & Zavis, counsel for Purchaser.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PRINCIPAL SHAREHOLDERS AND
SELLER. The obligations of the Principal Shareholders and Seller under this
Agreement are subject to the satisfaction, at or prior to the Closing, of all
the following conditions, any one or more of which may be waived at the option
of Seller or all of the Principal Shareholders:
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(a) NO BREACH OF COVENANTS; TRUE AND CORRECT REPRESENTATIONS AND
WARRANTIES. There shall have been no material breach by Purchaser in the
performance of any of the covenants herein to be performed by it in whole
or in part prior to the Closing, and the representations and warranties of
Purchaser contained in this Agreement shall be true and correct in all
material respects as of the Closing, except for representations or
warranties that are made by their terms as of a specified date, which shall
be true and correct in all material respects as of the specified date.
Seller shall receive at the Closing a certificate dated as of the Closing
Date and validly executed on behalf of Purchaser by an executive officer,
certifying in such detail as the Seller and Principal Shareholders may
reasonably require, the fulfillment of the foregoing conditions, and
restating and reconfirming as of the Closing all of the representations and
warranties of Purchaser contained in this Agreement.
(b) DELIVERY OF DOCUMENTS. The Principal Shareholders and Seller
shall have received all documents and other items to be delivered by
Purchaser under SECTION 7.1(B).
(c) NO LEGAL OBSTRUCTION. No suit, action or proceeding by any
Person or governmental agency shall be pending which challenges the
validity or legality of the transactions contemplated hereby.
(d) APPROVAL BY SELLER'S AND THE PRINCIPAL SHAREHOLDERS' COUNSEL.
All actions, proceedings, instruments and documents reasonably required to
carry out this Agreement and all other related legal matters shall have
been reasonably approved as to form and substance by Gray Cary, Ware &
Freidenrich, counsel for Seller and the Principal Shareholders.
6.3 TERMINATION.
(a) CONDITIONS OF TERMINATION. This Agreement may be terminated at
any time prior to the Closing:
(i) By the mutual written consent of the parties hereto;
(ii) By either Seller and the Principal Shareholders or Purchaser
in writing, without liability to the terminating party or parties on
account of such termination (providing the terminating party or
parties are not otherwise in default or in breach of this Agreement),
if the Closing shall not have occurred on or before January 15, 1995;
or
(iii) By either Seller and the Principal Shareholders or Purchaser
in writing, without liability to the terminating party or parties on
account of such termination (provided the terminating party or parties
is not otherwise in default or in breach of this Agreement), if
Purchaser or Seller and the Principal
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Shareholders, respectively, shall (a) fail to perform, at or prior to
the time required, in any material respect their agreements contained
herein required to be performed at or prior to the Closing, or (b)
materially breach any of their representations, warranties or
covenants contained herein.
(b) EFFECT OF TERMINATION. Termination of this Agreement pursuant to
this SECTION 6.3 shall terminate all obligations of the parties hereunder;
provided, however, that termination pursuant to clause (ii) or (iii) of
SECTION 6.3(A) shall not relieve any defaulting party or parties or
breaching party or parties from any liabilities to the other party or
parties hereto. In the event that any party shall terminate this Agreement
pursuant to SECTION 6.3(ii) above, all parties shall be relieved and
discharged from all of its obligations under the Option Agreement and the
Management Agreement and any and all other documents and agreements entered
into in connection therewith.
ARTICLE VII
DELIVERIES UPON CLOSING
7.1 CLOSING. The consummation of the Transactions shall take place at the
offices of Katten Muchin & Zavis, 525 West Monroe Street, Chicago, Illinois, on
the Closing Date at 10:00 a.m., (unless the parties shall otherwise agree), upon
the satisfaction or waiver of the conditions to the parties' respective
obligations set forth in ARTICLE VI, and shall be effective as of the Effective
Date.
(a) DELIVERIES BY SELLER AND/OR THE PRINCIPAL SHAREHOLDERS. At the
Closing, Seller and/or the Principal Shareholders, as the case may be,
shall deliver to Purchaser:
(i) BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT. The
Bill of Sale and Assignment and Assumption Agreement and such other
bills of sale, assignments, certificates of title and other documents
as shall be effective to transfer to Purchaser good and marketable
title to the Acquired Assets, in each case, duly executed by Seller;
(ii) CORPORATE DOCUMENTS. Charter documents of Seller certified
by the Secretary of State of California as being in effect as of a
date not more than ten days prior to the Closing Date, and Bylaws of
Seller certified by an appropriate officer of Seller as in effect at
the Closing;
(iii) GOOD STANDING CERTIFICATES. Certificates of Good Standing,
dated not more than ten days prior to the Closing Date, issued by the
office of the Secretary of State of California and by the Secretary of
State of each jurisdiction in which Seller is qualified to do business
as a foreign corporation;
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(iv) CERTIFIED RESOLUTIONS. A copy of a resolution of the board
of directors and the Principal Shareholders, certified by the
secretary of Seller as having been duly validly adopted and in full
force and effect as of the Closing Date, authorizing the execution and
delivery of this Agreement and the other Transaction Documents to
which Seller is a party, the performance by Seller of its obligations
hereunder and thereunder, and consummation of the transactions
contemplated hereunder and thereunder;
(v) LIEN SEARCHES. Uniform Commercial Code lien searches and
such other instruments showing that there were no financing
statements, judgments, taxes or other liens outstanding against Seller
or any of the Acquired Assets as of a date that is not more than ten
days prior to the Closing Date;
(vi) OFFICER'S CERTIFICATE. A certificate executed by each of
the Principal Shareholders and on behalf of Seller by an executive
officer thereof, dated the Closing Date, containing the information
required pursuant to SECTION 6.1(a);
(vii) EMPLOYMENT AGREEMENTS. The Employment Agreements, in each
case duly executed by the respective individual;
(viii) SECURITY AGREEMENT AND GUARANTY. Each of the Security
Agreement and the Guaranty, duly executed by the Parent Shareholders
and TMP, respectively;
(ix) LEASE ASSIGNMENT. A lease assignment and estoppel
certificate regarding each of the Premises, each duly executed by
Seller and the landlord of such Premises; and
(x) OPINION OF COUNSEL. An opinion of Seller's counsel, dated
as of the Closing Date, in form and substance reasonably satisfactory
to Purchaser;
(xi) REQUIRED CONSENTS. Evidence that the Required Consents (as
defined) have been obtained.
(xii) OTHER DOCUMENTS. Such other documents and instruments as
Purchaser or its counsel reasonably shall deem necessary to consummate
the transactions contemplated hereby.
All documents delivered to Purchaser shall be in form and substance
reasonably satisfactory to Katten Muchin & Zavis, counsel for Purchaser.
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(b) DELIVERIES BY PURCHASER. At the Closing, Purchaser will deliver
or cause to be delivered to Seller and/or the Principal Shareholders, as
the case may be, simultaneously with delivery of the items referred to in
SECTION 7.1(a) above:
(i) NOTE. The Note, duly executed by Purchaser.
(ii) SECURITY AGREEMENT. The Security Agreement, duly executed by
the Parent Shareholders; and
(iii) BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT. The
Bill of Sale and Assignment and Assumption Agreement, duly executed by
Purchaser.
(iv) CORPORATE DOCUMENTS. Charter documents of the Purchaser
certified by the Secretary of State of its state of incorporation as
being in effect as of a date not more than five days prior to the
Closing Date, and Bylaws of the Purchaser certified by an appropriate
officer of the Purchaser as in effect at the Closing;
(v) GOOD STANDING CERTIFICATES. Certificates of Good Standing,
dated not more than ten days prior to the Closing Date, with respect
to the Purchaser, issued by the office of the Secretary of State of
its state of incorporation;
(vi) CERTIFIED RESOLUTIONS. A copy of a resolution of the Board
of Directors of Purchaser certified by the Secretary of Purchaser as
having been duly and validly adopted and in full force and effect
authorizing the execution and delivery of this Agreement and the other
Transaction Documents to which Purchaser is a party, the performance
by Purchaser of its obligations hereunder and thereunder, and the
consummation of the transactions contemplated hereunder and
thereunder;
(vii) OFFICER'S CERTIFICATE. A certificate from an executive
officer of Purchaser, dated the Closing Date, containing the
information required pursuant to SECTION 6.2(a);
(viii) GUARANTY. The Guaranty duly executed by TMP.
(ix) OPINION OF COUNSEL. An opinion of Purchaser's counsel,
dated as of the Closing Date, in form and substance reasonably
satisfactory to Seller; and
(x) OTHER DOCUMENTS. Such other documents and instruments as
the Principal Shareholders or their counsel reasonably shall deem
necessary to consummate the transactions contemplated hereby.
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All documents delivered to Seller shall be in form and substance reasonably
satisfactory to Gray Cary, Ware & Freidenrich, counsel for Seller and the
Principal Shareholders.
ARTICLE VIII
OTHER AGREEMENTS
8.1 ACCESS TO INFORMATION. After the Effective Date, Purchaser will
give, or cause to be given, to Seller and the Principal Shareholders and their
respective representatives, during normal business hours, such reasonable access
to the personnel, properties, titles, contracts, books, records, files and
documents, and at Seller or the Principal Shareholders' expense copies of
titles, contracts, books, records, files and documents, as is necessary to allow
Seller or the Principal Shareholders to obtain information in connection with
the preparation and any audit of Seller's or the Principal Shareholders' tax
returns and any claims, demands, other audits, suits, actions or proceedings by
or against Seller or the Principal Shareholders as the previous owner and
operator of the Business. Purchaser agrees to cooperate fully with Seller or
the Principal Shareholders after the Effective Date at Seller or the Principal
Shareholders' expense with respect to any claims, demands, tax or other audits,
suits, actions and proceedings by or against Seller or the Principal
Shareholders as the previous owner and operator of the Business. Seller and the
Principal Shareholders agree that as a condition to receiving any information
pursuant to this SECTION 8.1, each of them will enter into a confidentiality
agreement in form and substance satisfactory to Purchaser.
8.2 SURVIVAL OF REPRESENTATION AND WARRANTIES. All of the representations
and warranties set forth in this Agreement or in any of the other Transaction
Documents shall survive the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby,
regardless of any investigation, inquiry or examination made for or on behalf of
or any knowledge of Purchaser, the Principal Shareholders, Seller or any of
their respective Affiliates, officers, directors, employees, agents, or
representatives or the acceptance by any of them of any certificate or opinion,
for a period ending upon completion of unaudited financials for Purchaser for a
full year period commencing after the Closing Date. Unless a specified period
is set forth in this Agreement or in another Transaction Document (in which
event such specified period will control), all covenants contained in this
Agreement and in any other Transaction Document will survive the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby.
8.3 NONASSIGNABLE CONTRACTS.
(a) NONASSIGNABILITY. Without limiting the generality or effect of
any provision of this Agreement, to the extent that any Material Contract,
License or other asset to be assigned, transferred or contributed
("Transferred") pursuant to the terms of this Agreement is not capable of being
Transferred without the consent, approval, novation or waiver of a third person
or entity or a governmental authority, or if such Transfer or attempted Transfer
would
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constitute a breach thereof or a violation of any law, nothing in this Agreement
will constitute a Transfer or an attempted Transfer thereof.
(b) SELLER TO USE BEST EFFORTS. Notwithstanding anything contained
in this Agreement to the contrary, but without limiting the generality or effect
of Articles II, III, VI or VII herein, Seller will not be obligated to Transfer
to Purchaser any of its rights and obligations in and to any of the Material
Contracts, Licenses or other assets referred to in SECTION 8.3(a) without first
having obtained all of the consents necessary for such Transfers (the "Required
Consents"). Seller will use its best efforts, and Purchaser will cooperate with
Seller, to obtain such Required Consents.
(c) IF WAIVERS OR CONSENTS CANNOT BE OBTAINED. To the extent that
the Required Consents referred to in SECTION 8.3(b) are not obtained by
Seller, Seller will, during the one-year period commencing with the Effective
Date or such longer period as Purchaser may reasonably request (but, as to
any particular Material Contract, License or other asset not longer than the
term thereof), (i) use reasonable efforts, with costs and expenses of Seller
related thereto to be borne by Purchaser, to provide to Purchaser the
benefits (and the burdens) of any Material Contract, License or other asset
to the extent relating to the Business, (ii) cooperate in any reasonable and
lawful arrangement designed to provide such benefits (and burdens) to
Purchaser without incurring any obligation to any other person or entity
other than to provide such benefits to Purchaser and (iii) enforce, at the
request and expense of Purchaser for the account of Purchaser any rights of
Seller arising from any such Material Contract, License or other asset
(including, without limitation, the right to elect to terminate in accordance
with the terms thereof upon the advice of Purchaser. Purchaser agrees to
cooperate with Seller in connection with the foregoing. At the end of such
one year period (or such longer period as Purchaser may reasonably request),
Seller will have no further obligations hereunder with respect to any such
Material Contract, License or other asset and the failure to obtain any
Required Consent with respect thereto will not be a breach of this Agreement;
provided that nothing contained in this SECTION 8.3(c) shall affect the
liability of Seller, if any, pursuant to this Agreement for having failed to
disclose the need for such Required Consent or to use its reasonable efforts
in accordance with the provisions hereto to obtain such Required Consent.
(d) OBLIGATION OF PURCHASER TO PERFORM. Provided (and for so long
as) Seller obtains the benefits of such Material Contract, License or other
asset for Purchaser, Purchaser will perform the obligations of Seller under or
in connection with any Material Contract, License or other asset referred to in
SECTION 8.3(a) (to the extent permitted thereunder) for the benefit of the other
party or parties thereto.
8.4 COLLECTION AND REMITTANCE OF ACCOUNTS RECEIVABLE BY SELLER. For a
period of 90 days following the Effective Date, the operations of Purchaser
respecting the collection of the accounts receivable of Seller transferred to
Purchaser pursuant to the terms of this Agreement shall be conducted by
representatives of Seller as designated by Purchaser at 3032 Bunker Hill Lane,
Suite 207, Santa Clara, California. Thereafter, Purchaser and Seller shall
jointly determine the manner in which the collection of any such accounts
receivable that remain
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uncollected shall be conducted. In the event Seller shall receive payment of
any of the accounts receivable transferred to Purchaser pursuant to the terms of
this Agreement on or after the Effective Date, such received amount shall
promptly be remitted in full to Purchaser. Seller and Purchaser each agree that
after the Effective Date they will hold and will promptly transfer and deliver
to the other, from time to time as and when received by them, any cash, checks
with appropriate endorsements (using their best efforts not to convert such
checks into cash), or other property that they may receive on or after the
Effective Date which properly belongs to the other party, including without
limitation any payment of accounts receivable, and will account to the other for
all such receipts. With respect to accounts receivable, the parties agree to
apply all amounts collected and identified to a particular account receivable
to that account receivable and shall apply all amounts not so identified to the
oldest account receivable (unless and only to the extent that the account debtor
disputes that such account receivable is properly due).
8.5 TRADE NAMES. From and after the Effective Date, neither Seller, nor
any Affiliate of Seller, shall have any rights to or interest in the name
"Rogers & Associates Advertising, Inc." or any variations thereof, or any other
tradenames under which Seller conducts the Business (the "Name"), and neither
the Principal Shareholders, Seller nor any Affiliate of the Principal
Shareholders or Seller shall use the Name for any purpose whatsoever. Seller
shall, at the Closing on the Closing Date, take such corporate action as is
required to amend its Articles of Incorporation to delete any reference to the
Name, and Seller agrees to deliver to Purchaser at the Closing all such forms
and documents, duly executed by the appropriate officers of Seller, necessary to
effect such amendment in each jurisdiction where Seller is qualified to do
business as a foreign corporation All costs of filing of recording all such
documents shall be borne by Seller.
8.6 BULK SALE INDEMNIFICATION. Without admitting that the bulk sales law
of any state is applicable to the transactions contemplated by this Agreement,
Purchaser agrees to waive compliance with the bulk sales law of any state. As
an inducement to Purchaser to waive compliance with the provisions of any
applicable bulk transfer laws, Seller covenants that all debts, obligations and
liabilities relating to the Business or the Acquired Assets which are not
expressly assumed by Purchaser under this Agreement will be promptly paid and
discharged by Seller as and when they become due and payable and all such debts,
liabilities and obligations will be satisfied in full as promptly as practicable
following the Effective Date.
8.7 EMPLOYMENT MATTERS.
(a) EMPLOYEES. All employees of Seller engaged in the Business
immediately prior to the Closing and who are listed on SCHEDULE 8.7 (the
"Employees") shall be offered employment with Purchaser as of the Effective
Date, provided, however, nothing contained herein shall require Purchaser
to continue thereafter the employment of any Employee.
(b) EMPLOYEE BENEFITS. Seller shall pay directly to each Employee
that portion of all benefits (including benefits pursuant to any Employee
Benefit Plan) which has been
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accrued on behalf of that Employee (or is attributable to expenses properly
incurred by that Employee) as of the Effective Date, and Purchaser shall
assume no liability therefore. No portion of the assets of any Employee
Benefit Plan or other plan, fund, program or arrangement, written or
unwritten, heretofore sponsored or maintained by Seller (and no amount
attributable to any such plan, fund, program or arrangement) shall be
transferred to Purchaser, and Purchaser shall not be required to continue
any such Employee Benefit Plan or other plan, fund, program or arrangement
after the Effective Date. The amount payable on account of all benefit
arrangements (other than specifically provided for herein) shall be
determined with reference to the date of the event by reason of which such
amounts become payable, without regard to conditions subsequent, and
Purchaser shall not be liable for any claim for insurance, reimbursement or
other benefits payable by reason of any event which occurs prior to the
Effective Date. All amounts payable directly to Employees, or to any
Employee Benefit Plan or other fund, program, arrangements or plan
maintained by Seller therefore shall be paid by Seller within thirty (30)
days after the Effective Date to the extent that such payment is not
inconsistent with the terms of such Employee Benefit Plan or other fund,
program, arrangement or plan. All Employees who are employed by Purchaser
on or after the Effective Date shall be new employees of Purchaser and any
prior employment by Seller of such Employee shall not affect entitlement
to, or the amount of, salary or other cash compensation, current of
deferred, which Purchaser may make available to its employees.
8.8 TRANSFER. Purchaser shall pay all Transfer Taxes.
8.9 TERMINATION OF CERTAIN AGREEMENTS. Upon the consummation of the
Transactions, the Option Agreement and the Management Agreement and any and all
other documents and agreements delivered in connection therewith shall terminate
and be of no further force and effect effective as of the Effective Date.
8.10 RELEASE OF PERSONAL GUARANTEES. From and after the Effective Date,
Purchaser shall use its reasonable best efforts to cause the Principal
Shareholders to be released from any personal obligation for or guarantee of any
obligation of Seller which arose in connection with the business operations of
Seller.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION BY SELLER AND THE PRINCIPAL SHAREHOLDERS. From and
after the Closing, Seller and the Principal Shareholders jointly and severally
agree to indemnify, defend and save Purchaser and its Affiliates, and each of
its officers, directors, employees, agents, Employee Benefit Plans, and
fiduciaries, plan administrators or other parties dealing with any such plans
(each, a "Purchaser Indemnified Party"), harmless from and against, and to
promptly pay to a Purchaser Indemnified Party or reimburse a Purchaser
Indemnified Party for, any and all liabilities (whether contingent, fixed or
unfixed, liquidated or unliquidated, or otherwise),
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obligations, deficiencies, demands, claims, suits, actions, or causes of action,
assessments, losses, costs, expenses, interest, fines, penalties, actual or
punitive damages or costs or expenses of any and all investigations,
proceedings, judgments, environmental analyses, remediations, settlements and
compromises (including reasonable fees and expenses of attorneys, accountants
and other experts) (individually and collectively, the "Losses") sustained or
incurred by any Purchaser Indemnified Party relating to, resulting from, arising
out of or otherwise by virtue of any of the following:
(a) any misrepresentation or breach of a representation or warranty
made in this Agreement or any of the other Transaction Documents by the
Principal Shareholders or Seller or non-compliance with or breach by the
Principal Shareholders or Seller of any of the covenants or agreements
contained in this Agreement or any of the other Transaction Documents to be
performed by the Principal Shareholders or Seller or any of their
Affiliates;
(b) any violations of or obligations under Environmental and Safety
Requirements relating to acts, omissions, circumstances or conditions
existing on or prior to the Effective Date, whether or not such acts,
omissions, circumstances or conditions constituted a violation of
Environmental and Safety Requirements as then in effect;
(c) the Retained Liabilities; or
(d) the non-compliance by Seller with any applicable bulk transfer
law.
Notwithstanding the foregoing, no claim for Loss may be asserted under this
SECTION 9.1 unless and until all claims for Losses aggregate at least $40,000.
Seller and the Principal Shareholders shall not be liable for aggregate claims
for Losses in excess of an amount equal to 25% of the Purchase Price.
9.2 INDEMNIFICATION BY PURCHASER. From and after the Closing, Purchaser
agrees to indemnify, defend and save Seller and the Principal Shareholders
(each, a "Seller Indemnified Party") harmless from and against, and to promptly
pay to a Seller Indemnified Party or reimburse a Seller Indemnified Party for,
any and all Losses sustained or incurred by any Seller Indemnified Party
relating to, resulting from, arising out of or otherwise by virtue of any of the
following:
(a) any misrepresentation or breach of a representation or warranty made
in this Agreement or any of the other Transaction Documents by
Purchaser or non-compliance with or breach by Purchaser of any of the
covenants or agreements contained in this Agreement or any of the
other Transaction Documents to be performed by Purchaser or any of its
Affiliates;
(b) any obligations to the broker described on SCHEDULE 4.5; or
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(c) the Assumed Liabilities.
Notwithstanding the foregoing, no claim for Loss may be asserted under this
SECTION 9.2 unless and until all claims for Losses aggregate at least $40,000.
Purchaser shall not be liable for aggregate claims for Losses in excess of an
amount equal to 25% of the Purchase Price, provided however that this limitation
shall not apply to any failure to perform its obligations under the Employment
Agreements.
9.3 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS. In the event that
subsequent to the Closing any person or entity entitled to indemnification under
this Agreement (an "Indemnified Party") asserts a claim for indemnification or
receives notice of the assertion of any claim or of the commencement of any
action or proceeding by any entity who is not a party to this Agreement or an
Affiliate of a party to this Agreement (including, but not limited to any
domestic or foreign court or governmental authority, federal, state or local) (a
"Third Party Claim") against such Indemnified Party, against which a party to
this Agreement is required to provide indemnification under this Agreement (an
"Indemnifying Party"), the Indemnified Party shall give written notice together
with a statement of any available information (other than privileged
information) regarding such claim to the Indemnifying Party within twenty (20)
business days after learning of such claim (or within such shorter time as may
be necessary to give the Indemnifying Party a reasonable opportunity to respond
to such claim). The Indemnifying Party shall have the right, upon written
notice to the Indemnified Party (the "Defense Notice") within fifteen days (15)
after receipt from the Indemnified Party of notice of such claim, which notice
by the Indemnifying Party shall specify the counsel it will appoint to defend
such claim ("Defense Counsel"), to conduct at its expense the defense against
such claim in its own name, or if necessary in the name of the Indemnified
Party; provided, however, that the Indemnified Party shall have the right to
approve the Defense Counsel, which approval shall not be unreasonably withheld,
and in the event the Indemnifying Party and the Indemnified Party cannot agree
upon such counsel within ten (10) days after the Defense Notice is provided,
then the Indemnifying Party shall propose an alternate Defense Counsel, which
shall be subject again to the Indemnified Party's approval which approval shall
not be unreasonably withheld. If the parties still fail to agree on the Defense
Counsel, then, at such time, they shall mutually agree in good faith on a
procedure to determine the Defense Counsel.
(a) In the event that the Indemnifying Party shall fail to give the
Defense Notice, it shall be deemed to have elected not to conduct the
defense of the subject claim, and in such event the Indemnified Party shall
have the right to conduct the defense in good faith and to compromise and
settle the claim in good faith without prior consent of the Indemnifying
Party and the Indemnifying Party will be liable for all costs, expenses,
settlement amounts or other Losses paid or incurred in connection
therewith.
(b) In the event that the Indemnifying Party does deliver a Defense
Notice and thereby elects to conduct the defense of the subject claim, the
Indemnified Party will cooperate with and make available to the
Indemnifying Party such assistance and materials as it may reasonably
request, all at the expense of the Indemnifying Party, and
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the Indemnified Party shall have the right at its expense to participate in
the defense assisted by counsel of its own choosing; provided, however,
that the Indemnified Party shall have the right to compromise and settle
such claim only with the prior written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld or delayed.
(c) The Indemnifying Party will not enter into any settlement of any
Third Party Claim or cease to defend against such claim without the prior
written consent of the Indemnified Party, which consent shall not be
unreasonably withheld or delayed.
(d) The Indemnifying Party shall not be entitled to control, and the
Indemnified Party shall be entitled to have sole control over, the defense
or settlement or any claim to the extent that the claim seeks a temporary
restraining order, a preliminary or permanent injunction or specific
performance against the Indemnified Party which, if successful, could
materially interfere with the business, operations, assets, condition
(financial or otherwise) or prospects of the Indemnified Party (and the
cost of such defense shall constitute an amount for which the Indemnified
Party is entitled to indemnification hereunder).
(e) If the Indemnifying Party desires to accept and agree to a
commercially reasonably settlement of a Third Party Claim, which settlement
is not prohibited by SECTION 9.3(d), the Indemnifying Party will give
written notice to the Indemnified Party to that effect. If the Indemnified
Party fails to consent to such settlement within 30 calendar days after
its receipt of such notice, the Indemnified Party may continue to contest
or defend such Third Party Claim and, in such event, the maximum liability
of the Indemnifying Party as to such Third Party Claim will not exceed the
amount of such settlement offer, plus costs and expenses paid or incurred
by the Indemnified Party through the end of such 30-day period.
(f) Any final judgement entered or settlement agreed upon in the
manner provided herein shall be binding upon the Indemnifying Party, and
shall conclusively be deemed to be an obligation with respect to which the
Indemnified Party is entitled to prompt indemnification hereunder.
9.4 DIRECT CLAIMS. It is the intent of the parties hereto that all direct
claims by an Indemnified Party against a party hereto not arising out of Third
Party Claims shall be subject to and benefit from the terms of this ARTICLE IX.
Any claim under this ARTICLE IX by an Indemnified Party for indemnification
other than indemnification against a Third Party Claim (a "Direct Claim") will
be asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, and the Indemnifying Party will have a period of 30 calendar days
within which to satisfy such Direct Claim. If the Indemnifying Party does not
so respond within such 30 calendar day period, the Indemnifying Party will be
deemed to have rejected such claim, in which event the Indemnified Party will be
free to pursue such remedies as may be available to the Indemnified Party under
this ARTICLE IX or otherwise.
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9.5 FAILURE TO GIVE TIMELY NOTICE. A failure by an Indemnified Party to
give timely, complete or accurate notice as provided in SECTIONS 9.3 or 9.4 will
not affect the rights or obligations of any party hereunder except and only to
the extent that, as a result of such failure, any party entitled to receive such
notice was deprived of its right to recover any payment under its applicable
insurance coverage or was otherwise directly and materially damaged as a result
of such failure to give timely notice.
9.6 RIGHT OF SET-OFF; SETTLEMENT OF CLAIMS.
(a) Purchaser's remedies under this ARTICLE IX shall include, without
limitation, a right to set-off any and all amounts which are due or which
Purchaser reasonably believes (after consultation with its counsel) will
become due and owing to Purchaser with respect to any claim asserted in
writing under this Agreement, including without limitation, under this
ARTICLE IX, against amounts which Purchaser shall owe at such time or from
time to time thereafter to Seller pursuant to the Note.
(b) In the event Purchaser has asserted a claim for indemnification
of a Loss under SECTION 9.1, Purchaser may exercise its right of set-off
upon delivery of notice thereof to Seller. If Seller objects in writing to
Purchaser's exercise of its right of set-off within 30 business days of
notice thereof, the matter shall be submitted to arbitration. Purchaser
shall not be deemed to be in default under the Note with respect to any
payment or payments with respect to which Purchaser has exercised its right
of set-off hereunder, unless Purchaser shall have failed to make such
payment or payments within 30 days following the date upon which an
arbitrator shall have issued a decision adverse to Purchaser.
9.7 DISPUTE RESOLUTION.
(a) If any controversy or claim between the parties hereto arises out
of this Agreement or any of the Transaction Documents, except as otherwise
specifically provided in this Agreement, such disagreement or dispute shall
be submitted to binding arbitration in Chicago, Illinois under the
Commercial Arbitration Rules of the American Arbitration Association.
(b) An arbitrator shall be appointed under the Commercial Arbitration
Rules of the American Arbitration Association, who shall be a licensed
attorney who has practiced in the area of corporate law for at least ten
years; provided, however, that if any disagreement arises concerning
specialized matters such as employee benefits, the arbitrator shall be a
specialist in such matters. As soon as an arbitrator has been agreed upon,
a hearing date shall be set as soon thereafter as determined by the
arbitrator. Written submittals shall be presented and exchanged by both
parties as determined by the Commercial Arbitration Rules, including
reports prepared by experts upon whom either party intends to rely. At
such time the parties shall also exchange copies of all documentary
evidence upon which they will rely at the arbitration hearing and a list of
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the witnesses whom they intend to call to testify at the hearing. Each
party shall also make its respective experts available for deposition by
the other party prior to the hearing date. The arbitrator shall make his
award as promptly as practicable after conclusion of the hearing.
(c) The arbitrator shall not be bound by the rules of evidence or
civil procedure, but rather may consider such writings and oral
presentations as reasonable businessmen would use in the conduct of their
day-to-day affairs, and may require the parties to submit some or all of
their presentation orally or in written form as the arbitrator may deem
appropriate.
(d) The arbitrator shall have the discretion to award the costs of
arbitration, arbitrator's fees and the respective attorneys' fees of each
party between the parties as he sees fit. Judgment upon the award entered
by the arbitrator may be entered in any court having jurisdiction thereof.
The arbitrator shall make his award in accordance with applicable law and
based on the evidence presented by the parties, and at the request of
either party at the start of the arbitration shall include in his award,
findings of fact and conclusions of law, both in law and equity, which
would be available in a court having jurisdiction over the parties and over
the subject matter of the dispute. Such powers shall include, but not be
limited to, the power to require specific performance.
(e) The arbitration provision set forth herein shall not limit a
court from granting a temporary restraining order or preliminary injunction
in order to preserve the status quo of the parties pending arbitration.
Further, the arbitrator shall have power to enter such orders by way of
interim award, and they shall be enforceable in court.
ARTICLE X
MISCELLANEOUS
10.1 NOTICES, CONSENTS, ETC. Any notices, consents or other communication
required to be sent or given hereunder by any of the parties shall in every case
be in writing and shall be deemed properly served if (a) delivered personally,
(b) sent by registered or certified mail, in all such cases with first class
postage prepaid, return receipt requested, (c) delivered by a recognized
overnight courier service, or (d) sent by facsimile transmission to the parties
at the addresses as set forth below or at such other addresses as may be
furnished in writing. All such notices and communications shall be deemed
received upon the actual receipt thereof by the addressee, except in the case of
notice given by facsimile transmission, which shall be deemed received upon
transmission thereof by the sender and issuance by the transmitting machine of a
confirmation slip confirming that the number of pages constituting the notice
have been transmitted without error to the recipient's telecopy number. In the
case of notices sent by
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facsimile transmission, the sender shall contemporaneously mail a copy of the
notice to the addressee at the address provided for above; however, such mailing
shall in no way alter the time at which the facsimile notice is deemed received.
(a) If to Seller or the Principal Shareholders:
Rogers & Associates Advertising, Inc.
3032 Bunker Hill Lane
Suite 207
Santa Clara, California 95054
Attention: Curtis Rogers and Steven Schmidt
Telecopy No: (408) 496-1112
with a copy to:
Gray Cary, Ware & Freidenrich
400 Hamilton Avenue
Palo Alto, California 94301
Attention: Howard Clowes, Esq.
Telecopy No: (415) 327-3699
(b) If to Purchaser:
c/o Worldwide Classified, Inc.
1633 Broadway
New York, New York 10019
Attention: Andrew McKelvey
Thomas Collison
Telecopy No: (212) 940-3972
with a copy to:
Katten Muchin & Zavis
525 W. Monroe Street
Chicago, Illinois 60661
Attention: David R. Shevitz, Esq.
Jeffrey R. Patt, Esq.
Telecopy No: (312) 902-1061
Date of service of such notice shall be (w) the date such notice is personally
delivered, (x) three (3) days after the date of mailing if sent by certified or
registered mail, (y) one (1) day after date of delivery to the overnight courier
if sent by overnight courier or (z) the next succeeding business day after
transmission by facsimile.
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10.2 SEVERABILITY. The unenforceability or invalidity of any provision of
this Agreement shall not affect the enforceability or validity of any other
provision.
10.3 AMENDMENT AND WAIVER. This Agreement may be amended, or any provision
of this Agreement may be waived, provided that any such amendment or waiver must
be expressly identified as an amendment or waiver, and will be binding on a
Person only if such amendment or waiver is set forth in a writing executed by
such Person. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any other
breach.
10.4 DOCUMENTS. Each party will execute all documents and take such other
actions as any other party may reasonably request in order to consummate the
transactions provided for herein and to accomplish the purposes of this
Agreement.
10.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties hereto and
delivered to the other.
10.6 EXPENSES. Except as otherwise specifically provided herein, each of
the parties shall pay all costs and expenses incurred or to be incurred by it in
negotiating and preparing this Agreement and in closing and carrying out the
transactions contemplated by this Agreement.
10.7 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, the laws
of the State of New York without giving effect to provisions thereof regarding
conflicts of law.
10.8 HEADINGS. The subject headings of Articles and Sections of this
Agreement are included for purposes of convenience only and shall not affect the
construction or interpretation of any of its provisions.
10.9 ASSIGNMENT. This Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, but will not be assignable or delegable by any party without the prior
written consent of the other parties; provided, however, that nothing in this
Agreement is intended to limit Purchaser's ability to assign its rights or
delegate its responsibilities, liabilities and obligations under this Agreement
to any Affiliate of Purchaser or to lenders of Purchaser as security for
borrowings, at any time whether prior to or following the Closing Date, without
consent.
10.10 ENTIRE AGREEMENT. This Agreement and the documents, schedules and
exhibits described herein or attached or delivered pursuant hereto constitute
the sole and only agreement among Purchaser, the Principal Shareholders and
Seller representing the transactions described in this Agreement and correctly
sets forth the obligations of Purchaser, the Principal
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<PAGE>
Shareholders and Seller to each other as of its date. Any agreements or
representations respecting the transactions contemplated by this Agreement,
including without limitation, any correspondence, discussions or course of
dealing, which are not expressly set forth in this Agreement or the documents,
schedules and exhibits described herein or attached or delivered pursuant
thereto are null and void.
10.11 THIRD PARTIES. Except as expressly set forth in ARTICLE IX of this
Agreement, nothing herein expressed or implied is intended or shall be construed
to confer upon or give to any person or entity, other than the parties to this
Agreement and their respective permitted successors and assigns, any rights or
remedies under or by reason of this Agreement.
10.12 INTERPRETATIVE MATTERS. Unless the context otherwise requires, (a)
all references to Articles, Sections or Schedules are to Articles, Sections or
Schedules in this Agreement, (b) each accounting term not otherwise defined in
this Agreement has the meaning assigned to it in accordance with GAAP, and (c)
words in the singular or plural include the singular and plural, pronouns stated
in either the masculine, the feminine or neuter gender shall include the
masculine, feminine and neuter and (d) the term "including" shall mean by way of
example and not by way of limitation.
10.13 KNOWLEDGE. Where any representation or warranty of Seller contained
in this Agreement is expressly qualified by reference "to the knowledge of
Seller," it refers to the knowledge of the Principal Shareholders as to the
existence or absence of facts that are the subject of such representations and
warranties after consultation with and due inquiry of all persons responsible
for the matters addressed by such representation and warranties; it being
understood that Seller has not made any other independent investigation or
consulted with any outside third parties, other than Seller's accountants and
legal counsel.
10.14 NO STRICT CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party
hereto.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ROGERS ACQUISITION CORP.
/s/ Curtis Rogers
- ----------------------------- By: Thomas G. Collison
Curtis Rogers ------------------------------------
Its: Vice President
------------------------------------
/s/ Steven Schmidt ROGERS & ASSOCIATES ADVERTISING, INC.
- -----------------------------
Steven Schmidt
By: /s/ Steven Schmidt
------------------------------------
Its: VP
------------------------------------
/s/ Ronni Rogers
- -----------------------------
Ronni Rogers
Being all of the Shareholders
of Rogers & Associates Advertising, Inc.
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<PAGE>
AMENDED AND RESTATED ACCOUNTS RECEIVABLE MANAGEMENT
AND SECURITY AGREEMENT
This Amended and Restated Accounts Receivable Management and Security
Agreement is made as of June 27, 1996 by and between BNY FINANCIAL CORPORATION
("BNY"), each of the undersigned financial institutions and the various other
financial institutions which become Lenders hereunder (BNY and each of the other
financial institutions collectively, the "Lenders" and individually a "Lender"),
BNY as agent for the Lenders (BNY in such capacity, the "Agent") and TMP
WORLDWIDE INC. ("Borrower"), a Delaware corporation.
BACKGROUND
Borrower and BNY are parties to (i) an Accounts Receivable Management
and Security Agreement made as of March 14, 1994 (as same has been amended,
modified or supplemented from time to time, the "Original ARM Agreement").
Borrower is presently indebted to BNY under the Original ARM Agreement in the
aggregate principal sum of $80,250,272.20 (including all outstanding Letters of
Credit) plus all interest accrued thereon. Borrower has requested and BNY has
agreed to amend, by restating in full, the terms of the Original ARM Agreement.
The parties intend (a) that all amounts advanced or financial accommodations
provided pursuant to the Original ARM Agreement will remain outstanding and all
security interests and liens granted pursuant to the Existing Loan Documents
shall remain in full force and effect and not be limited but rather shall be
expanded and ratified by this Agreement and the Ancillary Agreements to be for
the benefit of all Lenders and to secure all Loans (as defined herein) and (b)
to restate and amend the Original ARM Agreement on the terms and conditions
hereafter set forth. The parties further intend that the terms and conditions
of all existing and future Loans (as hereafter defined) and Collateral (as
hereafter defined) interests shall be governed by this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings and the terms and conditions contained herein, the parties hereto
agree as follows:
A. AMENDMENT AND RESTATEMENT
As of the date of this Agreement, the terms, conditions, covenants,
agreements, representations and warranties contained in the Original ARM
Agreement shall be deemed amended and restated in their entirety as follows and
the Original ARM Agreement shall be consolidated with and into and superseded by
this Agreement; PROVIDED, HOWEVER, that nothing contained in this Agreement
shall impair, limit or affect the liens and security interests heretofore
granted, pledged and/or assigned to Agent for the ratable benefit of Lenders as
security for Borrower's Obligations to Lenders under the Original ARM Agreement.
<PAGE>
1. (A) GENERAL DEFINITIONS. When used in this Agreement, the
following terms shall have the following meanings:
"ACQUISITION" shall have the meaning set forth in paragraph 12(m).
"ADJUSTMENT PERCENTAGE" means the percentage derived by dividing (a)
Free Cash Flow measured on a rolling four Fiscal Quarter Basis as at the end of
each Fiscal Quarter by (b) $100,000,000.
"AFFILIATE" of any Person means (a) any Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with such Person, or (b) any Person who is a director
or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of
any Person described in clause (a) above. For purposes of this definition,
control of a Person shall mean the power, direct or indirect, (i) to vote 5% or
more of the securities having ordinary voting power for the election of
directors of such Person, or (ii) to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.
"AFFILIATE RECEIVABLES" means and includes all of each Scheduled
Affiliate's now owned or hereafter acquired accounts and contract rights,
instruments, insurance proceeds, documents, chattel paper, letters of credit and
each Scheduled Affiliate's rights to receive payment thereunder, any and all
rights to the payment or receipt of money or other forms of consideration of any
kind at any time now or hereafter owing or to be owing to a Scheduled Affiliate,
all proceeds thereof and all files in which any Scheduled Affiliate has any
interest whatsoever containing information identifying or pertaining to any of a
Scheduled Affiliate's Receivables, together with all of such Scheduled
Affiliate's rights to any merchandise which is represented thereby, and all of
such Scheduled Affiliate's right, title, security and guaranties with respect to
each Affiliate Receivable, including, without limitation, all rights of stoppage
in transit, replevin and reclamation and all rights as an unpaid vendor.
"ALTERNATE BASE RATE" means, for any day, a rate per annum equal to
the higher of (i) the Prime Rate in effect on such day and (ii) the Federal
Funds Rate in effect on such day plus 1/2 of 1%.
"ALTERNATE BASE RATE LOAN" shall mean any Loan that bears interest
based upon the Alternate Base Rate.
"ANCILLARY AGREEMENTS" means all agreements, instruments, and
documents including, without limitation, mortgages, pledges, powers of attorney,
consents, assignments, contracts, notices, security agreements, trust agreements
whether heretofore, concurrently, or hereafter executed by or on behalf of
Borrower or delivered to Agent or any Lender, relating to the Original ARM
Agreement, this Agreement or to the transactions contemplated by this Agreement.
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"ANNUAL MINIMUM" means $450,000,000.
"APPLICABLE MARGIN" means, with respect to Alternate Base Rate Loans,
Eurodollar Rate Loans and LIBOR Rate Loans the percentages which, when added to
or subtracted from the Alternate Base Rate, the Eurodollar Rate, or the LIBO
Floating Rate, as the case may be, comprise the Contract Rate and are referenced
in and are subject to adjustment as provided under section 5(a)(vi) hereof.
"BANK" means The Bank of New York.
"BNY OVERADVANCES" shall have the meaning set forth in Section 2(c).
"BORROWER ON A CONSOLIDATED BASIS" means the combination in accordance
with the GAAP of (i) the consolidation in accordance with GAAP of the accounts
and other items of Borrower and its consolidated Subsidiaries (ii) the
consolidation in accordance with GAAP of the accounts and other items of WCI and
its consolidated subsidiaries and (iii) the combination in accordance with GAAP
of the accounts and other items of all Scheduled Affiliates (other than as
included in preceding clauses (i) and (ii).
"BUSINESS DAY" shall mean with respect to Eurodollar Rate Loans, any
day on which commercial banks are open for domestic and international business,
including dealings in Dollar deposits in London, England and New York, New York
and with respect to all other loans, any day other than a day on which
commercial banks in New York are authorized or required by law to close.
"CALENDAR YEAR" shall mean each twelve month period beginning on
January 1 and ending on December 31.
"CHANGE OF CONTROL" shall mean the occurrence of any event (whether in
one or more transactions and including any merger or consolidation of or with
MEI or Borrower or a Scheduled Affiliate or sale of all or substantially all of
the property or assets of MEI or Borrower or a Scheduled Affiliate) which
results in a transfer of control of MEI or Borrower or a Scheduled Affiliate to
a Person other than the Original Owner or a Person controlled by the Original
Owner. For purposes of this definition, "control of Borrower or MEI or a
Scheduled Affiliate" shall mean the power, direct or indirect (x) to vote 50% or
more of the securities having ordinary voting power for the election of
directors of Borrower or an Affiliate or (y) to direct or cause the direction of
the management and policies of Borrower or an Affiliate by contract or
otherwise.
"CLOSING DATE" means June 27, 1996 or such other date as may be agreed
upon by the parties hereto.
"COLLATERAL" means and includes:
(A) all Inventory;
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(B) all Equipment;
(C) all General Intangibles;
(D) all Receivables;
(E) all books, records, ledgercards, files, correspondence,
computer programs, tapes, disks and related data processing software (owned by
Borrower or in which it has an interest) which at any time evidence or contain
information relating to (A), (B), (C) and (D) above or are otherwise necessary
or helpful in the collection thereof or realization thereupon;
(F) documents of title, policies and certificates of insurance,
securities, chattel paper, other documents or instruments evidencing or
pertaining to (A), (B), (C), (D) and (E) above;
(G) all guaranties, liens on real or personal property, leases,
and other agreements and property granted to Borrower or a Scheduled Affiliate
which in any way secure or relate to (A), (B), (C), (D), (E) and (F) above, or
are acquired for the purpose of securing and enforcing any item thereof;
(H) (i) all cash held as cash collateral to the extent not
otherwise constituting Collateral, all other cash or property at any time on
deposit with or held by Agent or any Lender for the account of Borrower (whether
for safekeeping, custody, pledge, transmission or otherwise), (ii) all present
or future deposit accounts (whether time or demand, interest or non-interest
bearing) of Borrower with Lender or any other Person including those to which
any such cash may at any time and from time to time be credited, (iii) all
investments and reinvestments (however evidenced) of amounts from time to time
credited to such accounts, and (iv) all interest, dividends, distributions and
other proceeds payable on or with respect to (x) such investments and
reinvestments and (y) such accounts; and
(I) all products and proceeds of (A), (B), (C), (D), (E), (F),
(G) and (H) above (including, but not limited to, all claims to items referred
to in (A), (B), (C), (D), (E), (F), (G) and (H) above) and all claims of
Borrower against third parties (x) for (i) loss of, damage to, or destruction
of, and (ii) payments due or to become due under leases, rentals and hires of,
any or all of (A), (B), (C), (D), (E), (F), (G) and (H) above and (y) proceeds
to Borrower and unearned premiums of Borrower with respect to policies of
insurance in whatever form.
"COMMITMENT PERCENTAGE" of any Lender shall mean the percentage set
forth below such Lender's name on the signature page hereof as same may be
adjusted upon any assignment by a Lender pursuant to Section 15 hereof.
"COMMITMENT TRANSFER SUPPLEMENT" shall mean a document in the form of
EXHIBIT 15 hereto, properly completed and otherwise in form and substance
satisfactory to Agent by which the Purchasing
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Lender purchases and assumes a portion of the obligation of Lenders to make
Loans under this Agreement.
"CONFORMING EQUITY EVENT" shall have the meaning set forth in Section
5(a)(vi).
"CONTRACT RATE" means an interest rate per annum equal to the (i) sum
of the Alternate Base Rate plus the Applicable Margin with respect to Alternate
Base Rate Loans, (ii) sum of the Eurodollar Rate PLUS the Applicable Margin with
respect to Eurodollar Rate Loans and (iii) sum of LIBO Floating Rate plus the
Applicable Margin with respect to LIBO Rate Loans.
"CONTRACT YEAR" means the twelve month period beginning on the Closing
Date or on the anniversary of the Closing Date in any year.
"CORPORATE RESTRUCTURE" means the proposed restructuring in one or
more consolidation, merger, acquisition, dissolution or liquidation actions and
in a manner reasonably acceptable to the Agent as being not adverse to the
interests of the Lenders, of the business, assets or operations of the Borrower,
MEI, WCI and certain of the Subsidiaries and Affiliates of each of them.
"CURRENT ASSETS" at a particular date, means all cash, cash
equivalents, accounts and inventory of Borrower on a Consolidated Basis and all
other items which would, in conformity with GAAP, be included under current
assets on a balance sheet of Borrower on a Consolidated Basis as at such date;
PROVIDED, HOWEVER, that such amounts shall not include (a) any amounts for any
indebtedness owing by Borrower or any Affiliate to Borrower or another
Affiliate, unless such indebtedness arose in connection with the sale of goods
or other property in the ordinary course of business and would otherwise
constitute current assets in conformity with GAAP, (b) any shares of stock
issued by Borrower or any Affiliate to Borrower or another Affiliate, (c) the
cash surrender value of any life insurance policy (d) any assets which would be
classified as intangible assets under GAAP, or (e) any prepaid expenses.
"CURRENT LIABILITIES" at a particular date, means all amounts which
would, in conformity with GAAP, be included under current liabilities on a
balance sheet of Borrower as at such date, but in any event including, without
limitation, the amounts of (a) all indebtedness payable on demand, or, at the
option of the Person to whom such indebtedness is owed, not more than twelve
(12) months after such date, (b) any payments in respect of any indebtedness
(whether installment, serial maturity, sinking fund payment or otherwise)
required to be made not more than twelve (12) months after such date, (c) all
reserves in respect of liabilities or indebtedness payable on demand or, at the
option of the Person to whom such indebtedness is owed, not more than twelve
(12) months after such date, the validity of which is contested at such date,
and (d) whether or not in conformity with GAAP (i) all accruals for federal or
other taxes measured by income payable within a twelve (12) month period and
(ii) all Revolving Credit Advances.
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"CUSTOMER" means and includes the account debtor with respect to any
Receivable or Affiliate Receivable and/or the prospective purchaser of goods,
services or both with respect to any contract or contract right, and/or any
party who enters into or proposes to enter into any contract or other
arrangement with Borrower or any Scheduled Affiliate, pursuant to which Borrower
or any Scheduled Affiliate is to deliver any personal property or perform any
services.
"CYCLE BILLING" means billings made by Borrower or a Scheduled
Affiliate to a Customer on the basis of equal monthly installments, the first
installment to be billed as of the first month following the "closing date" for
submission of advertisements on behalf of such Customer to the applicable
directory, each in an amount equal to between 1/2 and 1/12 of the billings to
such Customer with respect to the applicable directory; PROVIDED that Borrower
or such Scheduled Affiliate may not change the billing rate with respect to
specific services rendered.
"DEFAULT RATE" means a rate equal to two (2%) percent per annum in
excess of the Alternate Base Rate.
"DISPUTE" means any cause asserted for nonpayment of any Receivable or
Affiliate Receivable, including without limitation, any alleged defense,
counterclaim, offset, dispute or other claim (real or merely asserted) whether
arising from or relating to the sale of goods or rendition of services or
arising from or relating to any other transaction or occurrence.
"DOLLAR" and the sign "$" shall mean lawful money of the United States
of America.
"DOMESTIC PERSONS" means any Financial Party or any Subsidiary of any
Financial Party (i) which has been formed or incorporated pursuant to the laws
of a state or commonwealth of the United States of America or (ii) as to which
no less than 90% of the value of such party's assets are located in the United
States of America.
"DOMESTIC WORKING CAPITAL" means Working Capital as calculated solely
with respect to Domestic Persons.
"ELIGIBLE RECEIVABLES" means and includes each Receivable and
Affiliate Receivable (1) for which BNY performs accounts receivable management
with respect thereto and (2) which conforms to the following criteria: (a) the
rendition of services has been completed; (b) services shall not have been
rejected or disputed by the Customer and there shall not have been asserted any
offset, defense, counterclaim, or Dispute with respect to such Receivable or
Affiliate Receivable; (c) it continues to be in full conformity with the
representations and warranties made by Borrower or applicable Subsidiary or
Affiliate to Lenders with respect thereto; (d) Agent is, and continues to be, in
the good faith exercise of its reasonable discretion satisfied with the credit
standing of the Customer in relation to the amount of credit extended; (e) it is
documented by an invoice in a form approved by Agent (evidence of
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which has been received by the Agent or, in Agent's sole discretion, has been
sent to but not yet received by the Agent) and shall not be unpaid more than:
(x)(i) sixty (60) days from due date where Borrower is performing the collection
function and (ii) ninety (90) days from due date where Agent is performing the
collection function, (y)(i) ninety (90) days from invoice date where Borrower is
performing the collection function and (ii) one hundred and twenty (120) days
from invoice date where Agent is performing the collection function; all with
respect to regular billing and (z) three hundred sixty (360) days from the first
invoice date with respect to Cycle Billing; (f) less than 75% of the unpaid
amount of invoices due from such Customer remain unpaid more than ninety (90)
days from due date; (g) it is not evidenced by chattel paper or an instrument of
any kind with respect to or in payment of the Receivable or Affiliate Receivable
unless such instrument is duly endorsed to and in possession of Agent or
represents a check in payment of a Receivable or Affiliate Receivable; (h) if
the Customer is located outside of the United States or Canada, the services
which gave rise to such Receivable or Affiliate Receivable were provided after
receipt by Borrower or Affiliate from or on behalf of the Customer of an
irrevocable letter of credit, assigned and delivered to Agent and confirmed by a
financial institution acceptable to Agent and is in form and substance
acceptable to Agent, payable in the full amount of the Receivable or Affiliate
Receivable in United States dollars at a place of payment located within the
United States; (i) such Receivable or Affiliate Receivable is not subject to any
lien, other than Permitted liens; (j) it does not arise out of transactions with
any employee, officer, agent, director, stockholder or Affiliate of Borrower or
any Affiliate; (k) it is payable to Borrower or an Affiliate; (l) if the
Receivable or Affiliate Receivable arises out of a sale to any Person to which
Borrower or an Affiliate is indebted, the amount of such indebtedness, and any
anticipated indebtedness, may in the Agent's sole discretion be deducted in
determining the face amount of such Receivable or Affiliate Receivable; (m) it
is net of any returns, discounts, claims, credits and allowances; (n) if the
Receivable or Affiliate Receivable arises out of contracts between Borrower or
an Affiliate and the United States, any state, or any department, agency or
instrumentality of any of them, Borrower or Affiliate has so notified Agent, in
writing, prior to the creation of such Receivable, and, if Agent so requests,
there has been compliance with any governmental notice or approval requirements,
including without limitation, compliance with the Federal Assignment of Claims
Act; (o) it is a good and valid account representing an undisputed bona fide
indebtedness incurred by the Customer therein named, for a fixed sum as set
forth in the invoice relating thereto with respect to work, labor and/or
services rendered by Borrower or an Affiliate; (p) (i) such Affiliate Receivable
arises out of a sale or rendition of services by an Affiliate or Subsidiary that
(x) has executed and delivered a Guaranty and Guarantor Security Agreement, (y)
is majority owned or controlled by Andrew McKelvey, Borrower or a Guarantor and
(ii) Agent shall have received evidence, in form and substance satisfactory to
it (including, without limitation, a certificate of ownership executed by the
Secretary of Borrower with respect to Andrew McKelvey's share
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ownership of Borrower and each Affiliate and Subsidiary) that Andrew McKelvey,
Borrower or the applicable Guarantor is the majority owner of the applicable
Affiliate or Subsidiary; (q) is a Receivable and/or Affiliate Receivable for
which BNY is performing record keeping services pursuant to this Agreement; and
(r) is otherwise satisfactory to Agent as determined in good faith by Agent in
the reasonable exercise of its discretion.
"EQUIPMENT" means and includes all of Borrower's now owned or
hereafter acquired and owned equipment, machinery and goods (excluding
Inventory), whether or not constituting fixtures, including, without limitation:
plant and office equipment, tools, dies, parts, data processing equipment,
furniture and trade fixtures, trucks, trailers, loaders and other vehicles and
all replacements and substitutions therefore and all accessions thereto.
"EQUITY EVENT" shall mean the receipt of cash proceeds by Borrower
resulting from an initial public offering of the capital stock of any Financial
Party.
"EURODOLLAR RATE LOAN" shall mean a Loan at any time that bears
interest based on the Eurodollar Rate.
"EURODOLLAR RATE" shall mean for any Eurodollar Rate Loan for the then
current Interest Period relating thereto the rate per annum (such Eurodollar
Rate to be adjusted to the next higher 1/100 of one (1%) percent) equal to the
quotient of (a) LIBOR, divided by (b) a number equal to 1.00 minus the aggregate
of the rates (expressed as a decimal) of reserve requirements current on the day
that is two Business Days prior to the beginning of the Interest Period
(including without limitation basic, supplemental, marginal and emergency
reserves) under any regulation promulgated by the Board of Governors of the
Federal Reserve System (or any other governmental authority having jurisdiction
of the Bank) as in effect from time to time, dealing with reserve requirements
prescribed for Eurocurrency funding including any reserve requirements with
respect to "Eurocurrency liabilities" under Regulation D of the Board of
Governors of the Federal Reserve System.
"EVENT OF DEFAULT" means the occurrence of any of the events set forth
in paragraph 18.
"EXISTING LOAN DOCUMENTS" shall mean collectively, the Original ARM
Agreement and all other documents, instruments and agreements executed and
delivered in connection therewith.
"FEDERAL FUNDS RATE" means, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day which is a Business Day, the average of quotations for such
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day on such transactions received by Bank from three Federal funds brokers of
recognized standing selected by Bank.
"FINANCIAL PARTY" and collectively, "FINANCIAL PARTIES" means
Borrower, WCI, MEI, any Scheduled Affiliate and (without duplication) any
Subsidiary of Borrower, WCI or MEI which is a Scheduled Affiliate.
"FISCAL QUARTER" means each quarterly accounting period of Borrower
during any Fiscal Year.
"FOREIGN INDEBTEDNESS" means Indebtedness incurred by a Financial
Party which is not a Domestic Person.
"FORMULA AMOUNT" shall have the meaning set forth in paragraph 2(b).
"FREE CASH FLOW" means, with respect to any applicable period, the net
income of Borrower and its Subsidiaries and WCI and its Subsidiaries on a
combined basis (excluding extraordinary gains or losses) plus depreciation and
amortization charges for such period minus capital expenditures paid during such
period and minus (without duplication) all cash payments made during such a
period with respect to acquisitions permitted hereunder.
"GAAP" means generally accepted accounting principles, practices and
procedures in effect from time to time.
"GENERAL INTANGIBLES" means and includes all of Borrower's now owned
or hereafter acquired general intangibles as said term is defined in the Uniform
Commercial Code in effect in the State of New York including, without
limitation, trademarks, tradenames, tradestyles, trade secrets, equipment
formulation, manufacturing procedures, quality control procedures, product
specifications, patents, patent applications, copyrights, registrations,
contract rights, choses in action, causes of action, corporate or other business
records, inventions, designs, goodwill, claims under guarantees, licenses,
franchises, tax refunds, tax refund claims, computer programs, computer data
bases, computer program flow diagrams, source codes, object codes, customer
lists and all other intangible property of every kind and nature.
"GUARANTOR" means individually, each of the Persons listed on SCHEDULE
1(B) and any other Person who may hereafter guarantee payment or performance of
the whole or any part of the Obligations and "GUARANTORS" means collectively all
such Persons.
"GUARANTOR SECURITY AGREEMENTS" means collectively, each Security
Agreement executed by a Guarantor in favor of Agent, as same may be amended,
modified, supplemented or ratified from time to time.
"GUARANTY AGREEMENTS" means collectively, (i) (x) Amended and Restated
Guaranties and (y) Guaranties dated March 14, 1994 which are executed by each
Guarantor in favor of Agent and (ii)
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such other Guaranties as shall be executed and delivered hereafter from time to
time by a Guarantor.
"HAZARDOUS SUBSTANCE" means, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated byphenyls, petroleum and petroleum products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, ET SEQ.), RCRA, Articles 15 and 27 of
the New York State Environmental Conservation Law or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
"INCIPIENT EVENT OF DEFAULT" means any act or event which, with the
giving of notice or passage of time or both, would constitute an Event of
Default.
"INDEBTEDNESS" means as to any Person (without duplication):
(a) any indebtedness for borrowed money which such Person has
directly or indirectly created, incurred or assumed; and
(b) any indebtedness, whether or not for borrowed money, secured by
any Lien in respect of property owned by such Person, whether or not such Person
has assumed or become liable for the payment of such indebtedness; and
(c) any indebtedness, whether or not for borrowed money, including
any capital lease obligation, with respect to which such Person has become
directly or indirectly liable and which represents or has been incurred to
finance the purchase price (or a portion thereof) of any property or services or
business acquired by such Person, whether by purchase, consolidation, merger or
otherwise (excluding accounts payable incurred in the ordinary course of
business, if (i) such accounts payable are not more than 150 days past due or
(ii) such accounts payable are more than 150 days past due, are being contested
in good faith, and would not, in accordance with GAAP, appear as Indebtedness on
a balance sheet of such person; and
(d) any indebtedness of any other Person of the character referred to
in subdivision (a), (b) or (c) of this definition with respect to which the
Person whose Debt is being determined has become liable by way of a guaranty.
"INTEREST PERIOD" shall mean the period provided for any Eurodollar
Rate Loan pursuant to Section 4(b).
"INVENTORY" means and includes all of Borrower's now owned or
hereafter acquired goods, merchandise and other personal property, wherever
located, to be furnished under any contract of service or held for sale or
lease, all raw materials, work in process, artwork, finished goods and materials
and supplies (including but not limited to art supplies) of any kind, nature or
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description which are or might be used or consumed in Borrower's business or
used in selling or furnishing such goods, merchandise and other personal
property, and all documents of title or other documents representing them.
"LENDER SETTLEMENT DATE" shall mean the Closing Date and thereafter
Wednesday of each week unless such day is not a Business Day in which case it
shall be the next succeeding Business Day.
"LETTERS OF CREDIT" shall have the meaning set forth in Section 2(m).
"LETTER OF CREDIT FEES" shall have the meaning set forth in Section
5(b).
"LC RESERVE" shall mean an amount at any time equal to the aggregate
face amount of outstanding Letters of Credit.
"LIBO FLOATING RATE" shall mean the average of the daily LIBO Rate in
effect for the month for which such election is made under this Agreement.
"LIBO RATE" shall mean, relative to any day, the rate of interest
equal to the rate per annum listed in the Wall Street Journal on such day as the
LIBO Rate for a period equal to one month.
"LIBO RATE ADVANCE" shall mean the Loans or any portion thereof
bearing interest at a rate of interest determined by reference to the LIBO
Floating Rate.
"LIBOR" shall mean for any Eurodollar Rate Loan for the then current
Interest Period relating thereto, the rate per annum quoted by the Bank two (2)
Business Days prior to the first day of such Interest Period for the offering by
the Bank to prime commercial banks in the London interbank Eurodollar market of
Dollar deposits in immediately available funds for a period equal to such
Interest Period and in an amount equal to the amount of such Eurodollar Rate
Loan.
"LOAN SALE" shall have the meaning set forth in Section 5(b)(iii).
"LOANS" means the Revolving Credit Advances, Letters of Credit and all
other extensions of credit hereunder.
"MATURED FUNDS RATE" means the rate of interest, announced by BNY from
time to time, as the rate applicable to matured funds, such rate to be adjusted
automatically on the effective date of any change in such rate as announced by
BNY.
"MAXIMUM LOAN AMOUNT" means (a) $100,000,000 minus (b) the outstanding
amount of loans and advances made by BNY/Cafco Financial Corporation to National
Directory Advertising Programs, Inc.
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"MEDIA BILLING RECEIVABLES" means Receivables which arise following
delivery to the customer of (i) a copy of the advertisement which appears in the
directory publication and (ii) a copy of the invoice from the directory
publisher.
"MEI" means McKelvey Enterprises, Inc., a New York corporation.
"MINIMUM VOLUME CHARGES" shall have the meaning set forth in Section
5(e)(ii).
"NET FACE AMOUNT" of Receivables or Affiliate Receivables means the
gross face invoice amount thereof, less returns, discounts (the calculation of
which shall be determined by Agent where optional terms are given), anticipation
or any other unilateral deductions taken by Customers, and credits and
allowances to Customers of any nature.
"OBLIGATIONS" means and includes all Loans, all advances, debts,
liabilities, obligations, covenants and duties owing by Borrower to (a) all
Lenders (other than BNY) direct or indirect, absolute or contingent, due or to
become due, contractual or tortious, liquidated or unliquidated, whether
existing by operation of law or otherwise now existing or hereafter arising
under or as a result of this Agreement and the Ancillary Agreements, together
with all reasonable expenses and reasonable attorneys fees chargeable to
Borrower's account or incurred by a Lender in connection with Borrower's account
whether provided for herein or in any Ancillary Agreement and (b) BNY (or any
corporation that directly or indirectly controls or is controlled by or is under
common control with BNY) of every kind and description (whether or not evidenced
by any note or other instrument and whether or not for the payment of money or
the performance or non-performance of any act), direct or indirect, absolute or
contingent, due or to become due, contractual or tortious, liquidated or
unliquidated, whether existing by operation of law or otherwise now existing or
hereafter arising including, without limitation, any debt, liability or
obligation owing from Borrower to others which BNY may have obtained by
assignment or otherwise and further including, without limitation, all interest,
charges or any other payments Borrower is required to make by law or otherwise
arising under or as a result of this Agreement and the Ancillary Agreements,
together with all reasonable expenses and reasonable attorneys' fees chargeable
to Borrower's account or incurred by Lender in connection with Borrower's
account whether provided for herein or in any Ancillary Agreement.
"ORIGINAL OWNER" means Andrew McKelvey.
"PARTICIPATION YEAR" shall mean the twelve month period commencing as
of the first day of the month in which the first Loan Sale occurs.
"PARTIAL YEAR" shall have the meaning set forth in Section 5(e)(ii).
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"PAST DUE PAYABLES" shall mean all accounts payable of Borrower and
Scheduled Affiliates that (i) remain unpaid beyond their respective originally
granted terms or (ii) have begun to accrue interest.
"PERMITTED LIENS" means (i) liens of carriers, warehousemen, mechanics
and materialmen incurred in the ordinary course of business securing sums not
overdue; (ii) liens incurred in the ordinary course of business in connection
with workmen's compensation, unemployment insurance or other forms of
governmental insurance or benefits, relating to employees, securing sums (a) not
overdue or (b) being diligently contested in good faith provided that adequate
reserves with respect thereto are maintained on the books of Borrower in
conformity with GAAP, (iii) liens in favor of Agent, (iv) liens for taxes (a)
not yet due or (b) being diligently contested in good faith, provided that
adequate reserves with respect thereto are maintained on the books of Borrower
in conformity with GAAP, (v) liens placed on equipment or on any fixed assets
within 180 days of their acquisition to secure a portion of the purchase price
thereof provided (x) any such lien shall not encumber any other property of
Borrower and (y) the aggregate amount of indebtedness secured by such liens
incurred as a result of such purchases during any fiscal year shall not exceed
the amount provided for in Section 12(p) hereof and (vi) liens specified on
SCHEDULE 1(A) hereto.
"PERMITTED OVERADVANCES" shall have the meaning set forth in Section
2(c).
"PERMITTED PERIOD" shall have the meaning provided in Section 2(c)
hereof.
"PERSON" means an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"PRIME RATE" means the prime commercial lending rate of Bank as
publicly announced in New York, New York to be in effect from time to time, such
rate to be adjusted automatically, without notice, on the effective date of any
change in such rate. This rate of interest is determined from time to time and
is neither tied to any external rate of interest or index nor does it
necessarily reflect the lowest rate of interest actually charged to any
particular class or category of customers.
"PURCHASING LENDER" shall have the meaning set forth in Section 15
hereof.
"RECEIVABLES" means and includes all of Borrower's now owned or
hereafter acquired accounts and contract rights (including Affiliate Receivables
acquired by Borrower), instruments, insurance proceeds, documents, chattel
paper, letters of credit and Borrower's rights to receive payment thereunder,
any and all rights to the payment or receipt of money or other forms of
consideration of any kind at any time now or hereafter owing or to be owing to
Borrower, all proceeds thereof and all files in which Borrower has
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any interest whatsoever containing information identifying or pertaining to any
of Borrower's Receivables, together with all of Borrower's rights to any
merchandise which is represented thereby, and all Borrower's right, title,
security and guaranties with respect to each Receivable, including, without
limitation, all rights of stoppage in transit, replevin and reclamation and all
rights as an unpaid vendor.
"RECEIVABLES ADVANCE RATE" shall have the meaning set forth in the
definition of Receivables Availability.
"RECEIVABLES AVAILABILITY" means the amount of Revolving Credit
Advances against Eligible Receivables Lenders may from time to time during the
term of this Agreement make available to Borrower up to 90% ("Receivables
Advance Rate") of the net face amount of the Eligible Receivables; PROVIDED,
HOWEVER, that the maximum amount of Revolving Credit Advances outstanding at any
time against Media Billing Receivables shall not exceed $10,000,000.
"REPORTS" shall have the meaning set forth in Section 14.
"REQUIRED LENDERS" shall mean Lenders holding at least fifty-one
percent (51%) in aggregate principal amount of the Loans outstanding at that
time.
"RETAINED GOODS" shall have the meaning set forth in Section 8(h).
"REVOLVING CREDIT ADVANCES" shall mean all Loans made hereunder other
than Letters of Credit.
"SCHEDULED AFFILIATES" shall mean those Affiliates which (i) are
currently parties to that certain Assignment Agreement (the "Assignment
Agreement") dated as of January 1, 1992 by and among Borrower and each of the
Affiliates named therein and (ii) are Guarantors hereunder, which Affiliates are
listed on SCHEDULE 1(B) hereto as well as those Affiliates that hereafter become
Guarantors and Scheduled Affiliates hereunder upon written notice to Agent and
execution of all necessary documentation by such Affiliate.
"SETTLEMENT DATE" means two (2) Business Days after the day on which
the applicable Receivable or Affiliate Receivable is actually collected by
Agent.
"SUBORDINATED DEBT" means any debt subordinated to Lenders upon terms
and conditions satisfactory to Agent in its sole discretion and pursuant to
agreements in form and substance satisfactory to Agent and its counsel in all
respects.
"SUBSIDIARY" of any Person means a corporation or other entity 50% or
more of whose shares of stock or other ownership interests having ordinary
voting power (other than stock or other ownership interests having such power
only by reason of the happening of a contingency) to elect a majority of the
directors of such corporation, or other Persons performing similar functions for
such entity, are owned, directly or indirectly, by such Person.
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"TANGIBLE NET WORTH" at a particular date means (a) the aggregate
amount of all assets of Borrower on a Consolidated Basis as may be properly
classified as such in accordance with GAAP consistently applied (including such
assets owned on the Closing Date as are properly classified as intangible assets
under GAAP, less (b) the aggregate amount of all liabilities of the Borrower on
a Consolidated Basis. Notwithstanding the foregoing, for purposes of
calculating Tangible Net Worth, the maximum amount of Intangibles may not exceed
the greater of (i) $65,000,000 or (ii) (a) 20% or (b) 30% (following the
occurrence of a Conforming Equity Event) of the amount of all of the assets and
any excess shall not be included in the calculation of Tangible Net Worth.
"TERM" means the Closing Date through the fifth anniversary thereof
subject to acceleration upon the occurrence of an Event of Default hereunder or
other termination hereunder.
"TOTAL LIABILITIES" at a particular date means all Indebtedness of
Borrower on a Consolidated Basis as at such date.
"VOLUME" shall have the meaning set forth in Section 5(e)(ii).
"WCI" means Worldwide Classified Inc., a Delaware corporation.
"WEEK" shall mean the time period commencing with a Wednesday and
ending on the following Tuesday.
"WORKING CAPITAL" at a particular date means the excess, if any, of
Current Assets over Current Liabilities at such date.
(B) ACCOUNTING TERMS. Any accounting terms used in this Agreement
which are not specifically defined shall have the meanings customarily given
them in accordance with GAAP.
(C) OTHER TERMS. All other terms used in this Agreement and defined
in the Uniform Commercial Code as adopted in the State of New York, shall have
the meaning given therein unless otherwise defined herein.
2. ACCOUNTS RECEIVABLES MANAGEMENT; LOANS; LETTERS OF CREDIT.
(a) BNY for itself and not in its capacity as Agent shall perform
accounts receivable management and record keeping services for Borrower. The
procedure manual BNY has delivered to Borrower describes BNY's current practices
and procedures regarding its accounts receivable management and record keeping
services. BNY reserves the right to vary such practices and procedures from
time to time in its sole discretion. BNY's liability to Borrower for any
alleged failure on BNY's part to provide adequate accounts receivable management
and record keeping services shall be expressly limited to a refund of
commissions paid by Borrower during the period of such alleged failure and BNY
shall have no liability of any kind whatsoever for consequential or other
damages
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or penalties based upon any such alleged failure on BNY's part unless BNY shall
have significantly and materially adversely departed from its published
practices and procedures. In such event, Borrower may, upon one hundred twenty
(120) days prior written notice, terminate BNY's right and obligation to provide
collection services regarding Borrower's accounts receivable provided that such
termination shall not affect BNY's right to continue to conduct accounts
receivable management for Borrower PROVIDED, HOWEVER, that Borrower shall
continue to pay BNY the fees provided for in Section 5(e) less an amount equal
to the actual decrease in BNY's costs and expenses as a result of the
termination of its obligation to perform collection functions with respect to
the Receivables and/or Affiliate Receivables. Notwithstanding anything to the
contrary contained herein, so long as no Event of Default shall have occurred
hereunder, in the event that Borrower shall have (i) acquired Receivables and/or
Affiliate Receivables or (ii) entered into transactions with new Customers which
give rise to Receivables or Affiliate Receivables and, in either case, the
Receivables or Affiliate Receivables have an average face amount of $1,000 or
less, Borrower may elect not to have BNY perform accounts receivable management
and/or record keeping services with respect to such Receivables or Affiliate
Receivables, PROVIDED that Borrower shall remit the proceeds of such Receivables
or Affiliate Receivables to a blocked account maintained by Borrower in
accordance with Section 22 hereof.
(b) Subject to the terms and conditions set forth herein and in the
Ancillary Agreements, each Lender, severally and not jointly, shall make
Revolving Credit Advances to Borrower from time to time during the Term which,
in aggregate amounts outstanding at any time equal such Lender's Commitment
Percentage of the lesser of (x) the Maximum Loan Amount less the aggregate
amount of outstanding Letters of Credit or (y) an amount equal to the sum of:
(i) Receivables Availability, MINUS
(ii) the aggregate amount of outstanding Letters of Credit, MINUS
(iii) such reserves as Agent may reasonably deem proper and
necessary from time to time including, without limitation, the LC Reserve.
The sum of 2(b)(i), minus (ii) minus (iii) shall be referred to as the
"Formula Amount".
(c) Notwithstanding the limitations set forth above, Lenders retain
the right to lend Borrower from time to time such amounts in excess of such
limitations as Lenders may determine in their sole discretion. The term
"Permitted Overadvances" means (i) involuntary overadvances that may result from
time to time due to the fact that any borrowing formulas set forth in this
Agreement were unintentionally exceeded (whether at the time of any Loan or at
the time of the issuance of any Letter of Credit or otherwise) for any reason
(other than the Agent's gross negligence or willful misconduct), including
Collateral believed to be eligible in fact
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being or becoming ineligible or the return of uncollected checks or other items
applied to the reduction of the Loans or other Obligations, as well as
overadvances made by the Agent without Lenders' consent for up to two weeks
after discovering the unintentional overadvance, provided that the Agent does
not during that period voluntarily increase the amount by which the borrowing
formulas had been exceeded as of the start of that period, and (ii) (x)
voluntary overadvances made by the Agent in its sole discretion which shall not
cause the Obligations to exceed the borrowing formulas by the lesser of (x) 10%
of the amount permitted to be borrowed under Section 2(b) or (y) $8,000,000 at
any one time outstanding, or (c) be with the consent of all Lenders and (y)
voluntary overadvances made by BNY in its sole discretion ("BNY Overadvances")
which shall (i) be designated by BNY as a BNY Overadvance, (ii) be due and
payable to BNY on demand (subject to the last sentence of this Section (c)),
(iii) not exceed $5,000,000 at any time outstanding, (iv) be secured by the
Collateral on a basis junior to all other Obligations of Borrower hereunder and
(v) not result in the then aggregate Revolving Credit Advances outstanding
exceeding the Maximum Amount. Any such Permitted Overadvances in excess of
$1,000,000 (other than with respect to a BNY Overadvance) may remain outstanding
for no more than ten (10) Business Days in any thirty (30) day period. To the
extent any Permitted Overadvances are made (other than with respect to a BNY
Overadvance), each Lender shall bear its Commitment Percentage thereof. BNY
shall not demand repayment of a BNY Overadvance, unless after giving effect to
such repayment the then aggregate outstanding principal balance of outstanding
Loans (including any Permitted Overadvances) is less than the lesser of (A) the
Maximum Loan Amount or (B) the Formula Amount
(d) RESERVED
(e) Borrower acknowledges that the good faith exercise of Agent's
discretionary rights hereunder may result during the Term in one or more
increases or decreases in the Receivables Advance Rate and Borrower hereby
consents to any such increases or decreases which may limit or restrict advances
requested by Borrower, including, without limitation, any decreases in the
Receivables Advance Rate imposed by Agent in the event Borrower shall have
terminated BNY's obligation to perform accounts receivable management for
Borrower pursuant to Section 2(a) hereof.
(f) On the date that any interest, fees, costs, charges or
commissions to Agent or any Lender are due, Borrower shall thereby be deemed to
have requested, and Agent is hereby authorized at its discretion to make and
charge to Borrower's account, a Revolving Credit Advance to Borrower as of such
date in an amount equal to such unpaid interest, fees, costs, charges or
commissions.
(g) Any sums expended by Agent or any Lender due to Borrower's
failure to perform or comply with its obligations under this Agreement,
including but not limited to the payment of taxes, insurance premiums or
leasehold obligations, shall be charged to Borrower's account as a Revolving
Credit Advance and added to the Obligations.
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(h) Agent will account to Borrower monthly with a statement of all
Loans and other advances, charges and payments made pursuant to this Agreement,
and such account rendered by Agent shall be deemed final, binding and conclusive
unless Agent is notified by Borrower in writing to the contrary within thirty
(30) days of the date each account was rendered specifying the item or items to
which objection is made.
(i) During the Term, Borrower may borrow, prepay and reborrow
Revolving Credit Advances, all in accordance with the terms and conditions
hereof.
(j) The aggregate balance of Loans outstanding at any time shall not
exceed the Maximum Loan Amount. The aggregate balance of Revolving Credit
Advances outstanding at any time shall not exceed the Formula Amount.
(k) Subject to the terms and conditions hereof, Agent shall (a) issue
or cause the issuance of Letters of Credit ("Letters of Credit") PROVIDED,
HOWEVER, that Agent will not be required to issue or cause to be issued any
Letters of Credit to the extent that the face amount of such Letters of Credit
would then cause the sum of (i) the outstanding Revolving Credit Advances PLUS
(ii) outstanding Letters of Credit (with the requested Letter of Credit being
deemed to be outstanding for purposes of this calculation) to exceed the lesser
of (x) the Maximum Loan Amount or (y) the Formula Amount which is calculated as
if the requested Letter of Credit has been issued. The maximum amount of
outstanding Letters of Credit shall not exceed $5,000,000 in the aggregate at
any time. All disbursements or payments related to Letters of Credit shall be
deemed to be Revolving Credit Advances and shall bear interest at the applicable
Contract Rate; Letters of Credit that have not been drawn upon shall not bear
interest. Letters of Credit shall be subject to the terms and conditions set
forth in the Letter of Credit and Security Agreement attached hereto as EXHIBIT
2(l).
(l) Borrower may request Agent to issue or cause the issuance of a
Letter of Credit by delivering to Agent, Agent's standard form of Letter of
Credit and Security Agreement together with Bank's standard form of Letter of
Credit Application (collectively, the "Letter of Credit Application"), completed
to the satisfaction of Agent; and, such other certificates, documents and other
papers and information as Agent may reasonably request.
(m) Each Letter of Credit shall, among other things, (i) provide for
the payment of sight drafts when presented for honor thereunder in accordance
with the terms thereof and when accompanied by the documents described therein
and (ii) have an expiry date not later than twelve (12) months after such Letter
of Credit's date of issuance and in no event later than the last day of the
Term. Each Letter of Credit Application and each Letter of Credit shall be
subject to the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500, and any
amendments or revision
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thereof and, to the extent not inconsistent therewith, the laws of the State of
New York.
(n) In connection with the issuance of any Letter of Credit Borrower
shall indemnify, save and hold Agent and each Lender harmless from any loss,
cost, expense or liability, including, without limitation, payments made by
Agent and any Lender, and expenses and reasonable attorneys' fees incurred by
Agent or any Lender arising out of, or in connection with, any Letter of Credit
to be issued or created for Borrower. Borrower shall be bound by Agent's or any
issuing or accepting bank's regulations and good faith interpretations of any
Letter of Credit issued or created for Borrower's account, although this
interpretation may be different from Borrower's own; and, neither Agent nor any
Lender, the bank which opened the Letter of Credit, nor any of its
correspondents shall be liable for any error, negligence, or mistakes, whether
of omission or commission, in following Borrower's instructions or those
contained in any Letter of Credit or of any modifications, amendments or
supplements thereto or in issuing or paying any Letter of Credit, except for
Agent's or any Lender's or such correspondents' willful misconduct.
(o) Borrower shall authorize and direct any bank which issues a
Letter of Credit at the Agent's direction to name Borrower as the "Account
Party" therein and to deliver to Agent all instruments, documents, and other
writings and property received by the bank pursuant to the Letter of Credit and
to accept and rely upon Agent's instructions and agreements with respect to all
matters arising in connection with the Letter of Credit, the application
therefor or any acceptance therefor.
(p) In connection with all Letters of Credit issued or caused to be
issued by Agent under this Agreement, Borrower hereby appoints Agent, or its
designee, as its attorney, with full power and authority (i) to sign and/or
endorse Borrower's name upon any warehouse or other receipts, letter of credit
applications and acceptances; (ii) to sign Borrower's name on bills of lading;
(iii) to clear Inventory through the United States of America Customs Department
("Customs") in the name of Borrower or Agent or Agent's designee, and to sign
and delivery to Customs officials powers of attorney in the name of Borrower for
such purpose; and (iv) to complete in Borrower's name or Agent's, or in the name
of Agent's designee, any order, sale or transaction, obtain the necessary
documents in connection therewith, and collect the proceeds thereof. Neither
Agent nor its attorneys will be liable for any acts or omissions nor for any
error of judgment or mistakes of fact or law, except for Agent's or its
attorney's willful misconduct. This power, being coupled with an interest, is
irrevocable as long as any Letters of Credit remain outstanding.
(q) Each Lender shall to the extent of the percentage amount equal to
the product of such Lender's Commitment Percentage times the aggregate amount of
all unreimbursed reimbursement obligations with respect to the Letters of Credit
be deemed to have irrevocably purchased an undivided participation in each such
unreimbursed reimbursement obligation. In the event that at the
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time a disbursement is made the unpaid balance of Revolving Credit Advances
exceeds or would exceed, with the making of such disbursement, the lesser of the
Maximum Loan Amount or the Formula Amount, and such disbursement is not
reimbursed by Borrower within two (2) Business Days, the Agent shall promptly
notify each Lender and upon the Agent's demand each Lender shall pay to the
Agent such Lender's proportionate share of such unreimbursed disbursement
together with such Lender's proportionate share of the Agent's unreimbursed
costs and expenses relating to such unreimbursed disbursement. Upon receipt by
the Agent of a repayment from Borrower of any amount disbursed by the Agent for
which the Agent had already been reimbursed by the Lenders, the Agent shall
deliver to each of the Lenders that Lender's pro rata share of such repayment.
Each Lender's participation commitment shall continue until the last to occur of
any of the following events: (A) the Agent ceases to be obligated to issue
Letters of Credit hereunder; (B) no Letter of Credit issued hereunder remains
outstanding and uncancelled or (C) all Persons (other than Borrower) have been
fully reimbursed for all payments made under or relating to Letters of Credit.
3. REPAYMENT OF LOANS.
(a) Subject to the provisions of Section 2(c) hereof, Borrower shall
be required to (i) make a mandatory prepayment hereunder at any time that the
aggregate outstanding principal balance of the Loans made by Lenders to Borrower
hereunder is in excess of the lesser of the (x) Maximum Loan Amount or (y)
Formula Amount in an amount equal to such excess, and (ii) repay on the
expiration of the Term (x) the then aggregate outstanding principal balance of
Revolving Credit Advances made by any Lender to Borrower hereunder together with
accrued and unpaid interest, fees, charges and commissions and (y) all other
amounts owed any Lender under this Agreement and the Ancillary Agreements.
(b) Subject to Section 2(c) hereof with respect to BNY Overadvances,
each payment (including each prepayment) by Borrower on account of the principal
of and interest on the Revolving Credit Advances, shall be applied to the
Revolving Credit Advances pro rata according to the Commitment Percentages of
the Lenders. Except as expressly provided herein, all payments (including
prepayments) to be made by Borrower on account of principal, interest and fees
shall be made without set-off or counterclaim and shall be made to the Agent on
behalf of the Lenders, in each case on or prior to 1:00 P.M., New York time, in
Dollars and in immediately available funds.
(c) Unless the Agent shall have been notified by telephone, confirmed
in writing, by any Lender that such Lender will not make the amount which would
constitute its Commitment Percentage of the Loans available to the Agent, the
Agent may (but shall not be obligated to) assume that such Lender shall make
such amount available to the Agent and, in reliance upon such assumption, make
available to Borrower a corresponding amount. The Agent will promptly notify
Borrower of its receipt of any such notice from a Lender. If such amount is
made available to the
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Agent on a date after a Lender Settlement Date, such Lender shall pay to the
Agent on demand an amount equal to the product of (i) the daily average federal
funds rate (computed on the basis of a year of 360 days) during such period as
quoted by the Agent, times (ii) such amount, times (iii) the number of days from
and including such Lender Settlement Date to the date on which such amount
becomes immediately available to the Agent. A certificate of the Agent
submitted to any Lender with respect to any amounts owing under this paragraph
(e) shall be conclusive, in the absence of manifest error. If such amount is
not in fact made available to the Agent by such Lender within three (3) Business
Days after such Lender Settlement Date, the Agent shall be entitled to recover
such an amount, with interest thereon at the rate per annum then applicable to
Revolving Credit Advances hereunder, on demand from Borrower; PROVIDED, HOWEVER,
that the Agent's right to such recovery shall not prejudice or otherwise
adversely affect Borrower's rights (if any) against such Lender.
4. PROCEDURE FOR REVOLVING CREDIT ADVANCES.
(a) The Borrower may by written notice to Agent request a borrowing of
Revolving Credit Advances prior to 1:00 P.M. New York time on the Business Day
of its request to incur, on that day, a Revolving Credit Advance. Such notice
shall specify that portion of the Advances then being requested which are to be
Alternate Base Rate Loans or LIBO Rate Loans. All Revolving Credit Advances
shall be disbursed from whichever office or other place Agent may designate from
time to time and, together with any and all other Obligations of Borrower to
Lenders, shall be charged to the Borrower's account on Agent's books. The
proceeds of each Revolving Credit Advance made by the Lenders shall be made
available to the Borrower on the day so requested by way of credit to the
Borrower's operating account maintained with such bank as Borrower designated to
Agent. Any and all Obligations due and owing hereunder may be charged to
Borrower's account and shall constitute Revolving Credit Advances.
(b) Notwithstanding the provisions of (a) above, in the event
Borrower desires to obtain a Eurodollar Rate Loan, it shall give Agent at least
three (3) Business Days' prior written notice; specifying (i) the date of the
proposed borrowing (which shall be a Business Day), (ii) the type of borrowing
and the amount on the date of such Advance to be borrowed, which amount shall be
(x) a minimum amount of $10,000,000 and in integral multiples of $1,000,000 with
respect to Eurodollar Rate Loans and (iii) the duration of the first Interest
Period therefor. Interest Periods for a Eurodollar Rate Loan shall be for one,
two, three or six months. No more than eight (8) Eurodollar Rate Loans may be
outstanding at any time.
(c) Each Interest Period of a Eurodollar Rate Loan shall commence on
the date such Eurodollar Rate Loan is made and shall end on such date as
Borrower may elect as set forth in (b)(iii) above provided that:
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(i) any Interest Period which would otherwise end on a day which
is not a Business Day shall be the next preceding or succeeding Business Day as
is the Bank's custom in the market to which such Eurodollar Rate Loan relates;
(ii) no Interest Period shall end after the last day of the Term;
and
(iii) any Interest Period which begins on a day for which there is
no numerically corresponding day in the calendar month during which such
Interest Period is to end, shall (subject to clause (i) above) end on the last
day of such calendar month.
Borrower shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by its notice of borrowing given to the Agent pursuant to
Section 4(b) or by its notice of conversion given to the Agent pursuant to
Section 4(d), as the case may be. Borrower shall elect the duration of each
succeeding Interest Period by giving irrevocable written notice to the Agent of
such duration not less than three (3) Business Days prior to the last day of the
then current Interest Period applicable to such Eurodollar Rate Loan. If the
Agent does not receive timely notice of the Interest Period elected by Borrower,
Borrower shall be deemed to have elected to convert to an Alternate Base Rate
Loan subject to Section 4(d) hereinbelow.
(d) Provided that no Event of Default shall have occurred and be
continuing, Borrower may, convert any Loan into a Loan of another type in the
same aggregate principal amount provided that (i) any conversion of a Eurodollar
Rate Loan shall be made only on the last Business Day of the then current
Interest Period applicable to such Eurodollar Rate Loan and (ii) any conversion
of an Alternate Base Rate Loan or LIBO Rate Loan into a Eurodollar Loan may be
made only upon three (3) Business Days prior written notice as provided in
Section 4(b) above. If Borrower desires to convert a Loan, it shall give Agent
written notice, specifying the date of such conversion, the Loans to be
converted and if the conversion is to a Eurodollar Rate Loan, the duration of
the first Interest Period therefor.
(e) At its option and upon three (3) Business Days' prior written
notice, Borrower may prepay the Advances in whole at any time, with accrued
interest on the principal being prepaid to the date of such repayment in the
event that any prepayment of a Eurodollar Rate Loan is required or permitted on
a date other than the last Business Day of the then current Interest Period with
respect thereto, and Borrower shall indemnify the Agent and Lenders therefor in
accordance with Section 4(f) hereof.
(f) Borrower shall indemnify the Agent and Lenders and hold the Agent
and Lenders harmless from and against any and all losses or expenses that Agent
and Lenders may sustain or incur as a consequence of any prepayment or any
default by Borrower in the payment of the principal of or interest on any
Eurodollar Rate Loan or failure by Borrower to complete a borrowing of, a
prepayment of or conversion of or to a Eurodollar Rate Loan after notice thereof
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has been given, including (but not limited to) any interest payable by the Agent
or Lenders to lenders of funds obtained by it in order to make or maintain its
Eurodollar Rate Loans hereunder.
(g) Notwithstanding any other provision hereof, if any applicable
law, treaty, regulation or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for any Lender
(for purposes of this subsection (g), the term "Lender" shall include any Lender
and the office or branch where any Lender or any corporation or bank controlling
such Lender makes or maintains any Eurodollar Rate Loans to make or maintain its
Eurodollar Rate Loans), the obligation of the Lender to make Eurodollar Rate
Loans hereunder, shall forthwith be cancelled and Borrower shall, if any
affected Eurodollar Rate Loans are then outstanding, promptly upon request from
the Lender, either pay all such affected Eurodollar Rate Loans or convert such
affected Eurodollar Rate Loans into Loans of another type. If any such payment
or conversion of any Eurodollar Rate Loan is made on a day that is not
applicable to such Eurodollar Rate Loan, Borrower shall pay the Lender, upon the
Lender's request, such amount or amounts as may be necessary to compensate the
Lender for any loss or expense sustained or incurred by the Lender in respect of
such Eurodollar Rate Loan as a result of such payment or conversion, including
(but not limited to) any interest or other amounts payable by the Lender to
lenders of funds obtained by the Lender in order to make or maintain such
Eurodollar Rate Loan. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by the Lender to Borrower shall be
conclusive absent manifest error.
5. INTEREST; FEES; COMMISSIONS.
(a) Interest.
(i) Except as modified by paragraph 5(a)(iii) below, interest on
Revolving Credit Advances shall be paid to Agent for the benefit of the Lenders
in arrears on the last day of each month with respect to Alternate Base Rate
Loans, Eurodollar Rate Loans and LIBO Rate Loans. Interest charges shall be
computed on the actual principal of Revolving Credit Advances outstanding during
the month (the "Monthly Advances") at a rate per annum equal to the applicable
Contract Rate. Whenever subsequent to the date of this Agreement, the Alternate
Base Rate is increased or decreased, the applicable Contract Rate for Alternate
Base Rate Loans shall be similarly changed without notice or demand of any kind
by an amount equal to the amount of such change in the Alternate Base Rate
during the time such change or changes remain in effect.
(ii) Interest shall be computed on the basis of actual days
elapsed over a 360-day year.
(iii) Upon the occurrence and during the continuance of an Event
of Default, at the Agent's option interest shall be payable at the Default
Rate.
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(iv) Notwithstanding the foregoing, in no event shall interest
exceed the maximum rate permitted under any applicable law or regulation, and if
any provision of this Agreement or an Ancillary Agreement is in contravention of
any such law or regulation, such provision shall be deemed amended to provide
for interest at said maximum rate and any excess amount shall either be applied,
at Lender's option, to the outstanding Loans in such order as Lender shall
determine or refunded by Lender to Borrower.
(v) Borrower shall pay principal, interest and all other
amounts payable hereunder, or under any Ancillary Agreement, without any
deduction whatsoever, including, but not limited to, any deduction for any set-
off or counterclaim.
(vi) The Applicable Margin shall be (a) zero percent (0%)
with respect to Alternate Base Rate Loans, (b) two and one half percent (2.5%)
with respect to Eurodollar Rate Loans, and (c) two and one-half percent (2.5%)
with respect to LIBO Rate Loans provided however the Applicable Margin shall be
adjusted to the applicable amounts set forth below (subject to imposition of the
Default Rate as provided herein) based upon the corresponding Adjustment
Percentage as set forth below and as reflected in the most recent financial
statements delivered pursuant to section 11(a) or 11(b) hereof (commencing with
delivery of the audited financial statements for the fiscal year ending December
31, 1996). Each such adjustment shall take effect (if at all) as of the first
day of the first month following the date that the applicable financial
statements described in the immediately preceding sentence were received by
Agent and shall remain in effect until the latest date delivery of financial
statements are received pursuant to Section 11(a) or (b) hereof that demonstrate
a change in the Adjustment Percentage whereupon, (subject to imposition of the
Default Rate as provided herein), the Applicable Margin shall be decreased or
increased, as the case may be, to the applicable amounts set forth below:
APPLICABLE MARGIN APPLICABLE MARGIN
WITH RESPECT TO WITH RESPECT APPLICABLE MARGIN
ADJUSTMENT ALTERNATE BASE TO EURODOLLAR WITH RESPECT TO
PERCENTAGE RATE LOANS RATE LOANS LIBO RATE LOANS
---------- ------------------ ------------------ -------------------
Greater than 8% - 1% +150 +150
Equal to or less
than 8% but greater
than 7% - 1/2% +200 +200
Equal to or less
than 7% but greater
than 2% - 0 +250 +250
Equal to or less
than 2% but greater
than 1% + 1/2% +300 +300
Equal to or less
than 1% + 1% +350 +350
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Notwithstanding the foregoing, upon the occurrence of an Equity Event
pursuant to which Borrower receives cash proceeds of $60,000,000 or more
("Conforming Equity Event"), the Applicable Margin shall no longer be decreased
or increased based upon the Adjustment Percentage but rather shall be adjusted
to the applicable amounts set forth below as of the first day of the month
following the month in which the Conforming Equity Event occurs:
APPLICABLE MARGIN APPLICABLE MARGIN
AMOUNT OF WITH RESPECT TO WITH RESPECT APPLICABLE MARGIN
CONFORMING ALTERNATE BASE TO EURODOLLAR WITH RESPECT TO
EQUITY EVENT RATE LOANS RATE LOANS LIBO RATE LOANS
- ------------ ------------------ ------------------ ------------------
$75,000,000 or
more - 1% +150 +150
$60,000,000 to
$74,999,999 - 1/2% +200 +200
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(b) Fees.
(i) UNUSED LINE FEE. In the event the average closing
daily unpaid balances of all Revolving Credit Advances (which, for these
purposes shall include the aggregate face amount of all outstanding Letters
of Credit) hereunder during any calendar month is less than ($100,000,000)
for such month, Borrower shall pay to Agent a fee at a rate per annum equal
to (a) one-half of one percent (1/2%) or (b) one-quarter of one percent
(.25%) following the occurrence of a Conforming Equity Event on the amount by
which $100,000,000 exceeds such average daily unpaid balance. Such fee shall
be calculated on the basis of a year of 360 days and actual days elapsed, and
shall be charged to Borrower's account on the first day of each month with
respect to the prior month.
(ii) COLLATERAL MONITORING FEE. Upon Agent's performance of
any collateral monitoring - namely any field examination, collateral analysis or
other business analysis, the need for which is to be determined by Agent and
which monitoring is undertaken by Agent or for Agent's benefit, an amount equal
to Agent's then daily fee for such services which as of the Closing Date is $750
per day, per person, for each person reasonably employed to perform such
monitoring together with all costs, disbursements and expenses incurred by the
Agent and the person performing such collateral monitoring shall be charged to
Borrower's account, provided, that, so long as no Event of Default or Incipient
Event of Default has occurred and the prior field examinations are not
determined to be inadequate, in Agent's sole discretion, such fee shall not
exceed $75,000 during any Contract Year. Notwithstanding the foregoing,
following the occurrence of a Conforming Equity Event, Lender shall conduct such
field examinations only on a quarterly basis, provided that no such limitation
shall apply (a) following the occurrence and during the continuation of an Event
of Default or (b) if the last preceding field examination was unsatisfactory.
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(iii) COLLATERAL AGENT FEE. Borrower shall pay Agent an
annual collateral agent fee of $25,000 following the sale, assignment or
transfer of any of the Obligations ("Loan Sale") to any other financial
institutions which shall be payable in full on the first day of the month
following the month in which such Loan Sale occurs and on each 12 month
anniversary date of such day thereafter during the term hereof; PROVIDED,
HOWEVER, following the occurrence of a Conforming Equity Event such fee shall
be decreased to $15,000 per annum. Such fee shall be deemed earned in full
on the date when same is due and payable hereunder and shall not be subject
to rebate or proration upon termination of this Agreement for any reason.
(iv) LETTER OF CREDIT FEES. Borrower shall pay Agent (i)
(A) for issuing or causing the issuance of a standby Letter of Credit, a fee
computed at a rate per annum of one and one-half percent (1.50%) on the
outstanding amount thereof from time to time and (B) for issuing or causing
the issuance of a Letter of Credit that is not a standby Letter of Credit, a
fee equal to 1/4% of the original and each increase in the face amount
thereof for each 30 days or part thereof of its term (the fees set forth in
(A) and (B) referred to as "Letter of Credit Fees") and (ii) Bank's other
customary charges payable in connection with Letters of Credit as in effect
from time to time (which charges shall be furnished to Borrower by Agent upon
request). Such fees and charges shall be payable (i) in the case of any
Letter of Credit, on its opening (ii) in the case of a standby Letter of
Credit, (A) monthly thereafter in advance and (B) upon each increase in the
outstanding amount thereof and (iii) in the case of any Letter of Credit that
is not a standby Letter of Credit, at the time of each increase in face
amount thereof. Any such charge in effect at the time of a particular
transaction shall be the charge for that transaction, notwithstanding any
subsequent change in Bank's prevailing charges for that type of transaction.
All Letter of Credit Fees payable hereunder shall be deemed earned in full on
the date when the same are due and payable hereunder and shall not be subject
to rebate or proration upon the termination of this Agreement for any reason.
(v) CLOSING FEE. Borrower shall pay to Agent for the
ratable benefit of Lenders on the Closing Date a Closing Fee in the amount of
$200,000.
(vi) PERMITTED OVERADVANCE FEE. For each "Excess
Permitted Overadvance" a fee equal to the product of (a) $5,000 multiplied by
(b) the number of days in such month during which Excess Permitted
Overadvances were outstanding may, in Agent's sole discretion, be charged.
Such fee shall be paid on the last day of each month. For purposes of this
clause (vi) an Excess Permitted Overadvance shall be deemed to exist on any
day (other than during any two periods of five consecutive days in each month
when the Borrower may have outstanding Permitted Overadvances of not more
than $5,000,000) when the Borrower's Permitted Overadvances (other than BNY
Overadvances) exceed $1,000,000. Notwithstanding the foregoing, no such Fee
shall be charged with respect to one Excess Permitted Overadvance per month
which is eliminated within three
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Business Days of its occurrence. If such Excess Permitted Overadvance is not
eliminated within such period, any fee which is charged shall be calculated for
each day during that month on which an Excess Permitted Overadvance occurred.
(vii) EURODOLLAR RATE LOAN FEE. For each Eurodollar Rate Loan
that is made by Lenders hereunder, Borrower shall pay a fee to Agent of $250.00
at the time of making any such Loan, which such fee shall be subject to increase
by Agent from time to time.
(c) INCREASED COSTS. In the event that any applicable law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by any Lender (for purposes of this Section
5(c), the term "Lender" shall include any Lender and any corporation or bank
controlling Lender) with any request or directive (whether or not having the
force of law) from any central bank or other financial, monetary or other
authority, shall:
(i) subject any Lender to any tax of any kind whatsoever
with respect to this Agreement or change the basis of taxation of payments to
any Lender of principal, fees, interest or any other amount payable hereunder
or under any Ancillary Agreements (except for changes in the rate of tax on
the overall net income of any Lender by the jurisdiction in which it
maintains its principal office);
(ii) impose, modify or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held by, or
deposits in or for the account of, advances or loans by, or other credit
extended by, any office of any Lender, including (without limitation)
pursuant to Regulation D of the Board of Governors of the Federal Reserve
System; or
(iii) impose on any Lender any other condition with respect to
this Agreement or any Ancillary Agreements;
and the result of any of the foregoing is to increase the cost to any Lender of
making, renewing or maintaining its Loans hereunder by an amount that any Lender
deems to be material or to reduce the amount of any payment (whether of
principal, interest or otherwise) in respect of any of the Loans by an amount
that any Lender deems to be material, then, in any case Borrower shall promptly
pay such Lender, upon its demand, such additional amount as will compensate such
Lender for such additional cost or such reduction, as the case may be. Agent
shall certify the amount of such additional cost or reduced amount to Borrower,
and such certification shall be conclusive absent manifest error.
(d) CAPITAL ADEQUACY.
(i) In the event that Agent shall have determined that any
applicable law, rule, regulation or guideline regarding capital adequacy, or
any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency
charged with the
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interpretation or administration thereof, or compliance by Lender (for purposes
of this Section 5(d), the term "Lender" shall include any Lender and any
corporation or bank controlling any Lender) with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on any Lender's capital as a consequence of its
obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's policies with respect to capital adequacy) by an amount deemed by
such Lender to be material, then, from time to time, Borrower shall pay upon
demand to such Lender such additional amount or amounts as will compensate such
Lender for such reduction. In determining such amount or amounts, such Lender
may use any reasonable averaging or attribution methods. The protection of this
Section shall be available to such Lender regardless of any possible contention
of invalidity or inapplicability with respect to the applicable law, regulation
or condition.
(ii) A certificate of Agent setting forth such amount or
amounts as shall be necessary to compensate Lender with respect to Section 5(d)
hereof when delivered to Borrower shall be conclusive absent manifest error.
(e) COMMISSION.
(i) Borrower shall pay to BNY monthly, for its own account
and not in its capacity as Agent hereunder, on the fifteenth day of each month,
a commission at the rate of (x) .225% of the gross face amount of each invoice
assigned to BNY evidencing the first $400,000,000 in aggregate Receivables and
Affiliate Receivables purchased hereunder in any Calendar Year, (y) .175% of the
gross face amount of each invoice assigned to BNY evidencing Receivables and
Affiliate Receivables in excess of $400,000,000 but no more than $500,000,000 in
aggregate Receivables and Affiliate Receivables for any Calendar Year and (z)
.125% of the gross face amount of each invoice assigned to BNY evidencing
Receivables and Affiliate Receivables in excess of $500,000,000 in aggregate
Receivables and Affiliate Receivables for any Calendar Year. In the event that
Borrower acquires a majority of the capital stock or all or substantially all of
the assets of another Person not theretofore a Scheduled Affiliate and the sales
to invoice ratio with respect to the Receivables and/or Affiliate Receivables
acquired in connection with such Transaction shall increase BNY's costs of
managing the Receivables and Affiliate Receivables hereunder, Borrower shall
negotiate, in good faith, an increase in the commissions payable by Borrower
under this Section 5(e) with respect to the Receivables and/or Affiliate
Receivables so acquired. If Borrower and BNY shall not agree on the increased
fee, Borrower (rather than BNY) shall thereafter be obligated to perform any
collection function with respect to the Receivables and/or Affiliate Receivables
so acquired and BNY shall only be obligated to perform record keeping services
with respect to the Receivables and/or Affiliate Receivables; PROVIDED, HOWEVER,
Borrower shall pay BNY .15% of the gross face amount of each
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invoice assigned to BNY evidencing the Receivables and/or Affiliate Receivables
so acquired. Further, in the event that at the end of any month the average
billings per Customer have decreased by more than 25% in the aggregate from the
average billings per Customer in existence on March 31, 1994, Borrower shall
negotiate, in good faith, an increase in the commissions payable by Borrower
under this Section 5(e). If Borrower and BNY shall not agree on the increased
fee, BNY shall have the right to terminate its obligation to perform any
collection function and remain responsible only for record keeping services, for
which Borrower shall pay BNY a fee equal to .15% of the gross face amount of
each invoice assigned to BNY evidencing the Receivables and/or Affiliate
Receivables so serviced.
(ii) Notwithstanding anything contained in the foregoing
subsection (i) to the contrary, the aggregate amount of Receivables and
Affiliate Receivables with respect to which Borrower shall be obligated to pay
commissions hereunder and which Borrower shall be obligated to assign to Agent
hereunder ("Volume") shall not be less than the Annual Minimum for each year
during the Term (a "Contract Year") or that part of the Contract Year during
which this Agreement is in effect in the event of termination prior to the end
of a Contract Year (a "Partial Year"). In the event the Volume during any
Contract Year or Partial Year, as applicable, is less than the Annual Minimum,
then BNY shall charge Borrower's account in an amount equal to the amount by
which the commission on the Annual Minimum exceeds the commission on the Volume
for the Contract Year or Partial Year, as applicable. The foregoing amounts
which BNY shall charge to Borrower's account are hereinafter referred to as
"Minimum Volume Charges." BNY shall compute the Minimum Volume Charges on a
calendar quarterly basis and charge Borrower's account for the same on the first
day of the month following the end of such calendar quarter or on the first day
of the month following the effective date of termination of this Agreement in
the case of a Partial Year.
(f) MATURED FUNDS. On the last day of each month during the Term,
BNY shall credit Borrower's account with interest at the Matured Funds Rate in
effect during such month on the average daily balance during such month of any
amounts payable by BNY to Borrower hereunder which are not drawn by Borrower on
the Settlement Date.
5A. CONDITION TO ALL LOANS.
Notwithstanding any other provisions contained in this Agreement, the
making of each Revolving Credit Advance and issuance of a Letter of Credit
provided for in this Agreement shall be conditioned upon the satisfaction of the
matters set forth in this SECTION 5A, and each request by Borrower for a
Revolving Credit Advance or Letter of Credit shall constitute a representation
to Agent and the Lenders that each such condition set forth below has been met
or satisfied.
(A) WARRANTIES AND REPRESENTATIONS. All of the warranties and
representations contained in this Agreement or any Ancillary Agreement shall be
true and correct in all material respects on and as of the date of such
Revolving Credit Advance on
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issuance of Letters of Credit as if made on such date and each request for a
Revolving Credit Advance or Letter of Credit shall constitute an affirmation by
Borrower that such warranties and representations are then true and correct in
all material respects in each case, except to the extent that such warranties
and representations either relate to an earlier date or shall be untrue or
incorrect solely as a result of occurrences permitted under this Agreement or
are consented to by Agent or the Required Lenders in writing.
(B) NO DEFAULT. No Event of Default shall have occurred or will
result from such Revolving Credit Advance or issuance of Letter of Credit and no
Incipient Event of Default shall have occurred which may become an Event of
Default or will result from such Revolving Credit Advance or issuance of Letter
of Credit.
6. SECURITY INTEREST.
(a) To secure the prompt payment to Lenders of the Obligations,
Borrower hereby acknowledges, confirms and agrees that Agent has and shall
continue to have for the benefit of the Lenders a continuing security interest
in and upon all Collateral heretofore granted to Agent pursuant to the Original
ARM Agreement and, to the extent not otherwise granted to or held by Agent,
hereby assigns, pledges and grants to Agent, for the benefit of the Lenders, a
continuing security interest in and to the Collateral, whether now owned or
existing or hereafter acquired or arising and wheresoever located (whether or
not the same is subject to Article 9 of the Uniform Commercial Code). All of
the Borrower's ledger sheets, files, records, books of account, business papers
and documents relating to the Collateral shall, until delivered to or removed by
Agent, be kept by Borrower in trust for Agent until all Obligations have been
paid in full. Each confirmatory assignment schedule or other form of assignment
hereafter executed by Borrower shall be deemed to include the foregoing grant,
whether or not the same appears therein.
(b) Agent may file one or more financing statements disclosing
Agent's security interest in the Collateral without Borrower's signature
appearing thereon or Agent may sign on Borrower's behalf as provided in
paragraph 13 hereof. The parties agree that a carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement. If
any Receivable or Affiliate Receivable becomes evidenced by a promissory note or
any other instrument for the payment of money, Borrower will immediately deliver
such instrument to Agent appropriately endorsed. Borrower will execute any and
all documents reasonably requested by Agent to Borrower to effectuate the
assignment of any and all tax refunds payable to Borrower including, without
limitation, powers of attorney.
7. REPRESENTATIONS CONCERNING THE COLLATERAL. Borrower represents
and warrants (each of which such representations and warranties shall be deemed
repeated upon the making of each request for a Revolving Credit Advance and made
as of the time of each and every Revolving Credit Advance hereunder):
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(a) all the Collateral (i) is owned by Borrower free and clear of all
claims, liens, security interests and encumbrances (including without limitation
any claims of infringement) except (A) those in Agent's favor and (B) Permitted
Liens and (ii) is not subject to any agreement prohibiting the granting of a
security interest or requiring notice of or consent to the granting of a
security interest;
(b) all Receivables and Affiliate Receivables (i) represent complete
bona fide transactions which require no further act under any circumstances on
Borrower's part to make such Receivables or Affiliate Receivable payable by
Customers other than the acts which must reasonably and promptly in the ordinary
course be taken by Borrower in connection with Cycle Billings and Media Billings
Receivables with respect to billing and delivery of invoices, (ii) to the best
of Borrower's knowledge, are not subject to any present, future or contingent
Disputes and (iii) do not represent bill and hold sales, consignment sales,
guaranteed sales, sale or return or other similar understandings or obligations
of any Scheduled Affiliate or Subsidiary of Borrower.
(c) that the Borrower and the Scheduled Affiliates ("Obligated
Party") are solely responsible for payment of all advertising purchased by the
Obligated Party from such media source and that the media source has no recourse
against the Customer of an Obligated Party with respect to any such payment.
8. COVENANTS CONCERNING THE COLLATERAL. During the Term, Borrower
covenants that it shall:
(a) not dispose of any of the Collateral whether by sale, lease or
otherwise except for the disposition or transfer of obsolete and worn-out
Equipment in the ordinary course of business during any fiscal year only to the
extent that (x) (i) the proceeds of any such disposition are used or committed
to be used to acquire replacement Equipment which is subject to Agent's first
priority security interest and (ii) which has a fair market value not less than
the Equipment which was disposed or transferred or (y) the proceeds of which are
remitted to Agent in reduction of the Obligations;
(b) not encumber, mortgage, pledge, assign or grant any security
interest in any Collateral or any of Borrower's other assets to anyone other
than Agent except (i) Permitted Liens and (ii) as set forth on SCHEDULE 1(A)
attached hereto and made a part hereof;
(c) place notations upon Borrower's books of account and any
quarterly or annual financial statement prepared by Borrower to disclose Agent's
security interest in the Collateral;
(d) defend the Collateral against the claims and demands of all
parties.
(e) keep and maintain the Equipment in good operating condition,
except for ordinary wear and tear, and shall make all
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necessary repairs and replacements thereof so that the value and operating
efficiency shall at all times be maintained and preserved. Borrower shall not
permit any such items to become a fixture to real estate or accessions to other
personal property;
(f) not extend the payment terms of any Receivable without prompt
notice thereof to Agent;
(g) perform all other steps requested by Lender to create and
maintain in Agent's favor a valid perfected first security interest in all
Collateral; and
(h) Borrower shall promptly upon request provide Agent with duplicate
originals of all credits which Borrower issues to its Customers and immediately
notify Agent of any merchandise returns or Disputes. Borrower shall settle all
Disputes at no cost or expense to Lenders. Should Agent so elect, upon the
occurrence of any Event of Default, Agent may at any time in its discretion (i)
withdraw Borrower's authority to issue credits to its Customers without Agent's
prior written consent; (ii) litigate Disputes or settle them directly with
Customers on terms acceptable to Agent; or (iii) direct Borrower to set aside
and identify as Agent's property any returned or repossessed merchandise or
other goods which by sale resulted in Receivables or Affiliate Receivables
theretofore assigned to Agent ("Retained Goods"). All Retained Goods (and the
proceeds thereof) shall be (A) held by Borrower in trust for Agent as Agent's
property, (B) subject to Agent's security interest hereunder and (C) disposed of
only in accordance with Agent's express written instructions.
9. COLLECTION AND MAINTENANCE OF COLLATERAL AND RECORDS.
Agent may at any time verify Receivables or Affiliate Receivables
utilizing an audit control company or any other agent of Agent. Agent will
endeavor to conduct such verifications without disclosing its relationship with
Borrower and shall have no liability to Borrower in the event of such disclosure
except as a direct result of Agent's gross (not mere) negligence or willful
misconduct. Agent or Agent's designee may notify Customers, at any time at
Agent's sole discretion, of Agent's security interest in Receivables or
Affiliate Receivables, collect them directly and charge the collection costs and
expenses to Borrower's account, but, unless and until Agent does so or gives
Borrower other instructions, Borrower shall instruct all of its Customers to
make payments on account of Receivables or Affiliate Receivables to an account
under Agent's dominion and control at such bank as Agent may designate, as
provided by the terms of Section 23. To the extent Borrower receives any
payments on account of Receivables or Affiliate Receivables, it shall hold such
payments for Agent's benefit in trust as Agent's trustee and immediately deliver
them to Agent in their original form with all necessary endorsements or, as
directed by Agent, deposit such payments as directed by Agent pursuant to
Section 22 hereof. Agent will credit (conditional upon final collection) all
such payments to Borrower's account on the Settlement Date. Promptly after the
creation of any Receivables or
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Affiliate Receivables, Borrower shall provide Agent with schedules describing
all Receivables or Affiliate Receivables created or acquired by Borrower and
shall execute and deliver confirmatory written assignments of such Receivables
or Affiliate Receivables to Agent, but Borrower's failure to execute and deliver
such schedules or written confirmatory assignments of such Receivables or
Affiliate Receivables shall not affect or limit Agent's security interest or
other rights in and to the Receivables or Affiliate Receivables. Borrower shall
furnish, at Agent's request, copies of contracts, invoices or the equivalent,
any original shipping and delivery receipts for all merchandise sold or services
rendered including, without limitation, copies of all "tear sheets" (i.e.,
copies of all advertisements placed for Customers) and such other documents and
information as Agent may require. All of Borrower's invoices shall bear the
terms stated on the applicable customer order, as submitted to Agent, and no
change from the original terms of such Customer order shall be made without the
prior written consent of Agent. Borrower shall provide Agent on a monthly
(within ten (10) days after the end of each month), or more frequent basis, as
requested by Agent, a summary report of Borrower's current Inventory, unbilled
Receivables, Receivables subject to Cycle Billing, Media Billing Receivables and
accounts payable reports, certified as true and accurate by Borrower's President
or Chief Financial Officer, as well as an aged trial balance of Borrower's
existing accounts payable. Borrower shall provide Agent, as requested by Agent,
such other schedules, documents and/or information regarding the Collateral as
Agent may require.
10. INSPECTIONS. At all times during normal business hours, Agent
shall have the right to (a) visit and inspect Borrower's properties and the
Collateral, (b) inspect, audit and make extracts from Borrower's relevant books
and records, including, but not limited to, management letters prepared by
independent accountants, and (c) discuss with Borrower's principal officers, and
independent accountants, Borrower's business, assets, liabilities, financial
condition, results of operations and business prospects. Borrower will deliver
to Agent any instrument necessary for Agent to obtain records from any service
bureau maintaining records for Borrower.
11. FINANCIAL INFORMATION. The Financial Parties shall provide
Lenders (a) as soon as available, but in any event within (i) one hundred five
(105) days or (ii) ninety (90) days in the event of a Conforming Equity Event
after the end of each fiscal year of the Financial Parties, a balance sheet as
at the end of such fiscal year and the related statements of income, retained
earnings and changes in cash flow for such fiscal year with respect to (1)
Borrower and its Subsidiaries on a consolidated and consolidating basis, (2) WCI
and its Subsidiaries on a consolidated and consolidating basis, (3) Scheduled
Affiliates (without duplication) on a combining and combined basis, and (4) MEI
on a consolidated basis, setting forth in comparative form the figures as at the
end of and for the previous fiscal year with respect to the Financial Parties on
a similar basis, which shall have been reported on by independent certified
public accountants who shall
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be satisfactory to Agent and shall be accompanied by an unqualified audit report
issued by such independent certified public accountants PROVIDED, THAT, with
respect to Scheduled Affiliates, an audit report shall be required only with
respect to a Scheduled Affiliate (exclusive of the reporting Persons described
in (1) (2) and (4) above) which has assets, as reflected on its then most
current balance sheet having a value in excess of $10,000,000; (b) as soon as
available, but in any event within (i) sixty (60) days or (ii) forty five (45)
days in the event of a Conforming Equity Event, after the close of each quarter,
the balance sheet as at the end of such quarter and the related statements of
income, retained earnings and changes in cash flow for such quarter with respect
to (1) Borrower and its Subsidiaries on a consolidated basis, (2) WCI and its
Subsidiaries on a consolidated basis, (3) Borrower and WCI on a combined basis,
(4) Scheduled Affiliates (without duplication) on a consolidating basis, and (5)
MEI on a consolidated basis, which have been internally prepared by the Chief
Financial Officer for each Financial Party. All financial statements required
under (a) and (b) above shall be prepared in accordance with GAAP, subject to
year-end adjustments in the case of quarterly statements. Together with the
financial statements furnished pursuant to (a) above Borrower shall deliver a
certificate of Borrower's certified public accountants addressed to Agent
stating that (i) they have caused this Agreement and the Ancillary Agreements to
be reviewed and (ii) in making the examination necessary for the issuance of
such financial statements, nothing has come to their attention to lead them to
believe that any Event of Default or Incipient Event of Default exists and, in
particular, they have no knowledge of any Event of Default or Incipient Event of
Default or, if such is not the case, specifying such Event of Default or
Incipient Event of Default and its nature, when it occurred and whether it is
continuing. At the times the financial statements are furnished pursuant to (a)
and (b) above and at the end of each month during the Term, a certificate of
Borrower's Chief Financial Officer shall be delivered to Agent stating that to
the best knowledge of such officer no Event of Default or Incipient Event of
Default exists, or, if such is not the case, specifying such Event of Default or
Incipient Event of Default and its nature, when it occurred, whether it is
continuing and the steps being taken by Borrower with respect to such event. If
any internally prepared financial information, including that required under
this paragraph, is unsatisfactory in any manner to Agent, Agent may request that
Borrower's independent certified public accountants review same. In addition,
Borrower shall provide Agent with such other reports and documents as shall be
reasonably requested including, but not limited to, reports to stockholders, any
documents filed with any governmental agencies or stock exchanges and any
management letters received by Borrower from its accountants.
In addition to the foregoing financial statements, each Financial
Party shall furnish Agent prior to the beginning of each fiscal year commencing
with fiscal year 1997, a month by month projected operating budget and cash flow
for such fiscal year (including an income statement for each month and a balance
sheet as at the end of the last month in each fiscal quarter), such
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projections to be accompanied by a certificate signed by Borrower's President or
Chief Financial Officer to the effect that such projections have been prepared
on the basis of sound financial planning practice consistent with past budgets
and financial statements and that such officer has no reason to question the
reasonableness of any material assumptions on which such projections were
prepared.
12. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS. Borrower
represents and warrants (each of which such representations and warranties shall
be deemed repeated upon the making of a request for a Revolving Credit Advance
and made as of the time of each Revolving Credit Advance made hereunder), and
covenants that:
(a) Borrower is a corporation duly organized and validly existing
under the laws of the State of Delaware and duly qualified and in good standing
in every other state or jurisdiction in which the nature of Borrower's business
requires such qualification;
(b) the execution, delivery and performance of this Agreement and the
Ancillary Agreements (i) have been duly authorized, (ii) are not in
contravention of Borrower's certificate of incorporation, by-laws or of any
indenture, agreement or undertaking to which Borrower is a party or by which
Borrower is bound and (iii) are within Borrower's corporate powers;
(c) this Agreement and the Ancillary Agreements executed and
delivered by Borrower are Borrower's legal, valid and binding obligations,
enforceable in accordance with their terms;
(d) it keeps and will continue to keep all of its books and records
concerning the Collateral at Borrower's executive offices located at the
addresses set forth on SCHEDULE 12(d) hereof and will not move such books and
records (x) outside the continental United States or (y) to any location other
than as set forth on SCHEDULE 12(d) without giving Agent at least thirty (30)
days prior written notice;
(e) (i) the operation of Borrower's business is and will
continue to be in compliance in all material respects with all applicable
federal, state and local laws, including but not limited to all applicable
environmental laws and regulations and Borrower shall not engage in any business
activity which has been adjudicated to have violated an applicable state or
federal statute relative to health, safety or public morals.
(ii) Borrower will establish and maintain a system to assure
and monitor continued compliance with all applicable environmental laws, which
system shall include, if applicable, periodic reviews of such compliance.
(iii) In the event the Borrower obtains, gives or receives
notice of any release or threat of release of a reportable quantity of any
Hazardous Substances on its property (any such event being hereinafter referred
to as a "Hazardous Discharge") or
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receives any notice of violation, request for information or notification that
it is potentially responsible for investigation or cleanup of environmental
conditions on its property, demand letter or complaint, order, citation, or
other written notice with regard to any Hazardous Discharge or violation of any
environmental laws affecting its property or Borrower's interest therein (any of
the foregoing is referred to herein as an "Environmental Complaint") from any
Person or entity, including any state agency responsible in whole or in part for
environmental matters in the state in which such property is located or the
United States Environmental Protection Agency (any such person or entity
hereinafter the "Authority"), then the Borrower shall, within five (5) Business
Days, give written notice of same to the Agent detailing facts and circumstances
of which the Borrower is aware giving rise to the Hazardous Discharge or
Environmental Complaint and periodically inform Agent of the status of the
matter. Such information is to be provided to allow the Agent to protect its
security interest in the Collateral and is not intended to create nor shall it
create any obligation upon the Agent with respect thereto.
(iv) Borrower shall respond promptly to any Hazardous
Discharge or Environmental Complaint and take all necessary action in order to
safeguard the health of any Person and to avoid subjecting the Collateral to any
lien, charge, claim or encumbrance. If Borrower shall fail to respond promptly
to any Hazardous Discharge or Environmental Complaint or Borrower shall fail to
comply with any of the requirements of any environmental laws, the Agent may,
but without the obligation to do so, for the sole purpose of protecting the
Agent's interest in Collateral: (A) give such notices or (B) enter onto
Borrower's property (or authorize third parties to enter onto such property) and
take such actions as the Agent (or such third parties as directed by the Agent)
deem reasonably necessary or advisable, to clean up, remove, mitigate or
otherwise deal with any such Hazardous Discharge or Environmental Complaint.
All reasonable costs and expenses incurred by the Agent (or such third parties)
in the exercise of any such rights, including any sums paid in connection with
any judicial or administrative investigation or proceedings, fines and
penalties, together with interest thereon from the date expended at the Default
Rate for Revolving Credit Advances shall be paid upon demand by the Borrower,
and until paid shall be added to and become a part of the Obligations secured by
the Liens created by the terms of this Agreement or any other agreement between
Agent and Borrower.
(v) Borrower shall defend and indemnify the Lenders and hold
the Lenders harmless from and against all loss, liability, damage and expense,
claims, costs, fines and penalties, including attorney's fees, suffered or
incurred by the Agent under or on account of any environmental laws, including,
without limitation, the assertion of any lien thereunder, with respect to any
Hazardous Discharge, the presence of any hazardous substances affecting
Borrower's property, whether or not the same originates or emerges from
Borrower's property or any contiguous real estate, including any loss of value
of the Collateral as a result of the foregoing
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except to the extent such loss, liability, damage and expense is attributable to
any Hazardous Discharge resulting from actions on the part of the Agent. The
Borrower's obligations under this paragraph 12(e) shall arise upon the discovery
of the presence of any Hazardous Substances on the Borrower's property, whether
or not any federal, state, or local environmental agency has taken or threatened
any action in connection with the presence of any hazardous substances. The
Borrower's obligation and the indemnifications hereunder shall survive the
termination of this Agreement.
(vi) For purposes of paragraph 12(e) all references to
Borrower's property shall be deemed to include all of Borrower's right, title
and interest in and to all owned and/or leased premises;
(f) based upon the Employee Retirement Income Security Act of 1974
("ERISA"), and the regulations and published interpretations thereunder: (i)
Borrower has not engaged in any Prohibited Transactions as defined in paragraph
406 of ERISA and paragraph 4975 of the Internal Revenue Code, as amended; (ii)
Borrower has met all applicable minimum funding requirements under paragraph 302
of ERISA in respect of its plans; (iii) Borrower has no knowledge of any event
or occurrence which would cause the Pension Benefit Guaranty Corporation to
institute proceedings under Title IV of ERISA to terminate any employee benefit
plan(s); (iv) Borrower has no fiduciary responsibility for investments with
respect to any plan existing for the benefit of persons other than Borrower's
employees; and (v) Borrower has not withdrawn, completely or partially, from any
multi-employer pension plan so as to incur liability under the Multiemployer
Pension Plan Amendments Act of 1980;
(g) it is solvent, able to pay its debts as they mature, has capital
sufficient to carry on its business and all businesses in which it is about to
engage and the fair saleable value of its assets (calculated on a going concern
basis) is in excess of the amount of its liabilities;
(h) there is no pending or threatened litigation, actions or
proceeding which are reasonably likely to materially and adversely affect the
Borrower's business, assets, operations, condition or prospects, financial or
otherwise, or the Collateral or the ability of Borrower to perform this
Agreement;
(i) all balance sheets and income statements which have been
delivered to Agent fairly, accurately and properly state Borrower's financial
condition on a basis consistent with that of previous financial statements and
there has been no material adverse change in Borrower's financial condition as
reflected in such statements since the date thereof and such statements do not
fail to disclose any fact or facts which might materially and adversely affect
Borrower's financial condition;
(j) (x) it possesses all of the licenses, patents, copyrights,
trademarks, tradenames and permits necessary to conduct
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its business, (y) there has been no assertion or claim of violation or
infringement with respect thereof and (z) all such licenses, patents,
copyrights, trademarks, tradenames and permits are listed on SCHEDULE 12(J);
(k) it will pay or discharge when due all taxes, assessments and
governmental charges or levies imposed upon it;
(l) it will promptly inform Agent in writing of: (i) the commencement
of all proceedings and investigations by or before and/or the receipt of any
notices from, any governmental or nongovernmental body and all actions and
proceedings in any court or before any arbitrator against or in any way
concerning any of Borrower's properties, assets or business, which might singly
or in the aggregate, have a materially adverse effect on Borrower; (ii) any
amendment of Borrower's certificate of incorporation or by-laws; (iii) any
change in Borrower's business, assets, liabilities, condition (financial or
otherwise), results of operations or business prospects which has had or might
have a materially adverse effect on Borrower; (iv) any Event of Default or
Incipient Event of Default; (v) any default or any event which with the passage
of time or giving of notice or both would constitute a default under any
agreement for the payment of money to which Borrower is a party or by which
Borrower or any of Borrower's properties may be bound which would have a
material adverse effect on Borrower's business, operations, property or
condition (financial or otherwise) or the Collateral; (vi) any change in the
location of Borrower's executive offices; (vii) any change in the location of
Borrower's Inventory or Equipment from the locations listed on SCHEDULE 12(l)
attached hereto, (viii) any change in Borrower's corporate name; (ix) any
material delay in Borrower's performance of any of its obligations to any
material Customer; (x) any assertion of any material claims, offsets,
counterclaims or Disputes by any Customer; (xi) any material allowances, credits
and/or other monies granted by it to any Customer; (xii) all material adverse
information relating to the financial condition of any account debtor; and
(xiii) any material return of goods;
(m) it will not nor will any Other Financial Party (i) create, incur,
assume or suffer to exist any indebtedness (exclusive of trade debt) whether
secured or unsecured other than (x) their indebtedness to Lenders, (y)
indebtedness for capital expenditures permitted under Section 12(p) and (z) as
set forth on SCHEDULE 12(m) attached hereto and made a part hereof; (ii)
declare, pay or make any dividend or distribution in cash on any shares of their
common stock or preferred stock or apply any of their funds, property or assets
to the purchase, redemption or other retirement of any of their common or
preferred stock other than with respect to (1) payment of a cash dividend on
preferred stock of MEI not to exceed $210,000 during any fiscal year of MEI or
(2) following the occurrence of a Conforming Equity Event, the redemption of not
more than $6,000,000 of presently outstanding preferred stock; (iii) directly or
indirectly, prepay any indebtedness for borrowed money (other than to Agent), or
repurchase, redeem, retire or otherwise acquire any of their indebtedness except
concurrently with the occurrence of a
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Conforming Equity Event, they shall be permitted to prepay up to an aggregate of
$5,000,000 of such indebtedness; (iv) make advances, loans or extensions of
credit to any Person other than (a) loans, advances or extensions of credit to
Affiliates not to exceed in the aggregate outstanding at any one time (i) with
respect to MEI, (1) $22,000,000, during the 1996 Fiscal year and (2) $16,000,000
any time thereafter, provided, that at any time following an Equity Event, the
foregoing amounts shall be reduced solely with respect to MEI by an amount equal
to the net proceeds realized in connection with such Equity Event and (ii) with
respect to any Affiliate other than MEI, (1) $14,000,000 during the 1996 fiscal
Year, (2) $12,000,000 during the 1997 Fiscal year, (3) $10,000,000 during the
1998 Fiscal year and (4) $9,000,000 at any time thereafter, and (b) an advance
to National Media Holding Company, Inc. in the original principal sum of
$1,700,000; (v) become either directly or contingently liable upon the
obligations of any Person by assumption, endorsement or guaranty thereof or
otherwise other than the endorsement of checks in the ordinary course of
business except (i) as listed on Schedule 12(m) and (ii) with respect to the
issuance of the guaranties of indebtedness of foreign Affiliates provided that
at any time, the maximum aggregate outstanding amount of indebtedness secured by
all such guaranties which are not guaranties of collection and which were not in
the sole judgment of the Agent incurred by foreign Affiliates on a fully secured
basis shall not exceed $20,000,000; (vi) enter into any merger, consolidation or
other reorganization ("Merger") with or into any other Person or permit any
other Person to consolidate with or merge with it unless (a) Borrower shall be
the surviving Person in such Merger, consolidation or reorganization (other than
in connection with the Corporate Restructure), (b) such surviving Person shall
have a financial condition, in Agent's reasonable judgment, equal to or better
than Borrower had before such event (c) the surviving Person shall be in
compliance on a pro forma basis with respect to each and every financial
covenant set forth in Sections 11(n)(q)(r)(s)(t) after giving effect to such
Merger as of the end of the fiscal quarter immediately preceding the fiscal
quarter in which such Merger is taking place and (d) no Event of Default shall
have occurred and then be continuing; (vii) form any Subsidiary unless such
Subsidiary expressly joins in this Agreement as a borrower and becomes jointly
and severally liable for the obligations of Borrower hereunder or enter into any
partnership, joint venture or similar arrangement which requires contributions
of cash or assets by any Financial Party in an amount greater than $250,000 per
year; (viii) materially change the nature of the business in which it is
presently engaged; (ix) change its fiscal year or make any changes in accounting
treatment and reporting practices without prior written notice to Agent except
as required by GAAP or in the tax reporting treatment or except as required by
law; (x) except as provided in Section 12(m)(xiii), enter into any transaction
with any Affiliate (other than a Scheduled Affiliate), except in ordinary course
on arms-length terms; (xi) bill Receivables under any name except the present
name of the Borrower or such other tradenames as may be set forth on SCHEDULE
12(m) hereto; (xii) acquire all or a portion of the assets or stock of any
Person (in one or more transactions) ("Acquisition") which Acquisitions (1)
result in an aggregate purchase price in excess of
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(A) $20,000,000 in cash and $7,000,000 in unsecured note obligations during the
fiscal year ending December 31, 1996, and (B) $6,000,000 in cash and $7,000,000
in unsecured note obligations during any other fiscal year, provided that the
cash component shall be increased to $12,000,000 and the unsecured note
component to $15,000,000 following the occurrence of a Conforming Equity Event,
(2) involves a Person other than a Person engaged solely in the business of
recruitment advertising or national yellow page advertising other classified
advertising (or "internet") related business ("Permitted business") and (3)
increases the aggregate face amount of outstanding Receivables of Borrower and
Affiliate Receivables by more than 10% from the level existing immediately prior
to such acquisition; or (xiii) purchase any accounts receivable from any
Affiliate except in the ordinary course on arms-length terms. For purposes of
clause (xii) above, unsecured shall mean that the note obligations are not
secured by any assets of a Financial Party other than the capital stock of the
person being acquired.
(n) it shall not at any time permit Tangible Net Worth to be less
than the following amounts at the end of each fiscal quarter during the
following periods:
Period Amount
------ ------
1/1/96 through 12/31/96 $ 4,000,000
1/1/97 through 12/31/97 $16,000,000
1/1/98 through 12/31/98 $26,000,000
1/1/99 through 12/31/99 $38,000,000
1/1/00 and at all times thereafter $50,000,000;
provided, that at any time from and after an Equity Event, the amounts set forth
above shall be increased by an amount equal to the proceeds of the Equity Event
multiplied by 75%;
(o) all financial projections of Borrower's performance prepared by
Borrower or at Borrower's direction and delivered to Agent will represent, at
the time of delivery to Agent, Borrower's best estimate of Borrower's future
financial performance and will be based upon assumptions which are reasonable in
light of Borrower's past performance and then current business conditions;
(p) the Financial Parties will not make capital expenditures in any
fiscal year in an aggregate amount (exclusive of any fair market lease payments
or any fair market purchase option exercise payments made with respect to the
Falcon Fifty Aircraft which as of June 26, 1996 was being leased by EPI Aviation
Inc.) in excess of (a) $6,000,000 during the fiscal year ending December 31,
1996, or (b) $5,000,000 during any other fiscal year, PROVIDED, THAT, in the
event of a Conforming Equity Event such amount shall be (i) $10,000,000 during
the fiscal year in which a Conforming Equity Event occurs and the next
succeeding fiscal year and (ii) $6,000,000 during any fiscal year thereafter
(PROVIDED, FURTHER, that at least fifty percent of such expenditures must be
financed);
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(q) it shall not at any time permit any deficit in its Working
Capital or Domestic Working Capital to be more than the following amounts at the
end of each fiscal quarter during the following periods:
Period Amount
------ ------
1/1/96 through 12/31/96 ($75,000,000)
1/1/97 through 12/31/97 ($65,000,000)
1/1/98 through 12/31/98 ($65,000,000)
1/1/99 through 12/31/99 ($60,000,000)
1/1/00 and all times thereafter ($35,000,000)
provided, that at any time from and after an Equity Event, the amounts set forth
above shall be adjusted by an amount equal to the proceeds of the Equity Event
multiplied by fifty (50%) percent;
(r) it shall cause to be maintained a ratio of Current Assets to
Current Liabilities of not less than the following ratios at the end of each
fiscal quarter during the following periods:
Date Ratio
---- -----
1/1/96 through 12/31/96 .70 to 1.0
1/1/97 through 12/31/97 .70 to 1.0
1/1/98 through 12/31/98 .75 to 1.0
1/1/99 through 12/31/99 .80 to 1.0
1/1/00 through 12/31/00 .85 to 1.0
1/1/01 and each fiscal
year thereafter 1.0 to 1.0
provided, that at any time from and after an Equity Event the ratio shall not be
less than 1.0 to 1.0 and (2) less than 1.0 to 1.0 with respect to a ratio
calculated solely with respect to Domestic Persons;
(s) it will not permit the ratio of the earnings of Borrower on a
Consolidated Basis before interest, taxes, depreciation, amortization and
business non-compete expenses to total interest expense (cash and accrued
interest) of Borrower on a Consolidated Basis or such ratio as calculated solely
with respect to Domestic Persons to be less than 2.0 to 1.0 (or 2.5 to 1.0
following the occurrence of a Conforming Equity Event) at the end of any fiscal
quarter with respect to the immediately preceding four fiscal quarters then
ending;
(t) Neither Borrower on a Consolidated Basis nor Domestic Persons
will incur a loss before taxes of more than $1,500,000 for any six month period
ending the last day of any calendar month;
(t-1) the amount of Foreign Indebtedness outstanding at any time
shall not exceed the Tangible Net Worth of Borrower on a Consolidated Basis as
of such date;
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(u) none of the proceeds of the Loans hereunder will be used
directly or indirectly to "purchase" or "carry" "margin stock" or to repay
indebtedness incurred to "purchase" or "carry" "margin stock" within the
respective meanings of each of the quoted terms under Regulation G of the Board
of Governors of the Federal Reserve System as now and from time to time
hereafter in effect;
(v) it will bear the full risk of loss from any loss of any nature
whatsoever with respect to the Collateral. At it's own cost and expense in
amounts and with carriers acceptable to Agent, it shall (i) keep all its
insurable properties and properties in which it has an interest insured against
the hazards of fire, flood, sprinkler leakage, those hazards covered by extended
coverage insurance and such other hazards, and for such amounts, as is customary
in the case of companies engaged in businesses similar to Borrower's including,
without limitation, business interruption insurance; (ii) maintain a bond in
such amounts as is customary in the case of companies engaged in businesses
similar to Borrower's insuring against larceny, embezzlement or other criminal
misappropriation of insured's officers and employees who may either singly or
jointly with others at any time have access to the assets or funds of Borrower
either directly or through authority to draw upon such funds or to direct
generally the disposition of such assets; (iii) maintain public and product
liability insurance against claims for personal injury, death or property damage
suffered by others; (iv) maintain all such workmen's compensation or similar
insurance as may be required under the laws of any state or jurisdiction in
which Borrower is engaged in business; (v) obtain no later than December 31,
1996 and thereafter maintain a life insurance policy covering the life of Andrew
McKelvey ("AM") in the face amount of at least $5,000,000 which shall be
collaterally assigned to Agent for the ratable benefit of Lenders pursuant to
agreement in form and substance satisfactory to Agent, PROVIDED, THAT this
covenant shall be deemed waived if AM is found to be uninsurable by at least
three insurance carriers reasonably satisfactory to Agent and PROVIDED, FURTHER
that in the event of a Conforming Equity Event during fiscal year 1996, this
requirement shall be waived; (vi) furnish Agent with (x) copies of all policies
upon Agent's request and evidence of the maintenance of such policies at least
thirty (30) days before any expiration date, and (y) appropriate loss payable
endorsements in form and substance satisfactory to Agent, naming Agent as loss
payee and providing that as to Agent the insurance coverage shall not be
impaired or invalidated by any act or neglect of Borrower and the insurer will
provide Agent with at least thirty (30) days notice prior to cancellation.
Borrower shall instruct the insurance carriers that in the event of any loss
thereunder, the carriers shall make payment for such loss to Agent and not to
Borrower and Agent jointly. If any insurance losses are paid by check, draft or
other instrument payable to Borrower and Agent jointly, Agent may endorse
Borrower's name thereon and do such other things as Agent may deem advisable to
reduce the same to cash. Agent is hereby authorized to adjust and compromise
claims. All loss recoveries received by Agent upon any such insurance may be
applied to the Obligations, in such order as Agent in its sole discretion shall
determine. Any surplus shall be paid by Agent to Borrower or applied as may be
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otherwise required by law. Any deficiency thereon shall be paid by Borrower to
Agent, on demand;
(w) will not acquire the Receivables of a Person which are not
comparable to the current Receivables of Borrower and Affiliated Receivables
with respect to credit quality and payment terms and eligibility;
(x) not more than 10% of yellow pages publisher media payables
will be more than 60 days past due and not more than 10% of newspaper and
similar media accounts payable of either Borrower, MEI or WCI will be more than
30 days past due;
(y) Borrower will cause each of (i) its Scheduled Affiliates and
Subsidiaries, (ii) the Scheduled Affiliates and Subsidiaries of Andrew McKelvey,
(iii) each Guarantor and (iv) any other Scheduled Affiliate or Subsidiary of any
Financial Party, to execute and deliver to Agent (x) a Guaranty Agreement and
Guaranty Security Agreement and (y) an agreement, in form and substance
satisfactory to Agent, pursuant to which one hundred percent (100%) of its
issued and outstanding shares of capital stock is pledged to Agent together with
all Stock Certificates and stock powers relating thereto; provided however there
shall not be required the pledge of capital stock of Borrower or MEI;
(z) it has (i) advised its certified public accountants that Agent
and the Lenders will be relying on all financial and other information prepared
by such accountants and (ii) authorized its accountants to confer directly from
time to time with Agent;
(aa) Borrower shall, at the discretion of Agent, enter into a
contract with Tear Pages, Unlimited or its successor which is reasonably
satisfactory to Agent in all respects providing for delivery of Tearsheets
directly to Agent at Agent's request a copy of which shall be delivered to
Lender within sixty (60) days of the Closing Date;
(ab) other than as permitted pursuant to Section 12(m) hereof it
shall not nor shall any other Financial Party purchase or acquire obligations or
stock of, or any other interest in, or make any investment in any entity, except
(A) obligations issued or guaranteed by the United States of America or any
agency thereof, (B) commercial paper with maturities of not more than 180 days
and a published rating of not less than A-1 or P-1 (or the equivalent rating),
(C) certificates of time deposit and bankers' acceptances having maturities of
not more than 180 days and repurchase agreements backed by United States
government securities of a commercial bank if (x) such bank has a combined
capital and surplus of at least $500,000,000, or (y) its debt obligations, or
those of a holding company of which it is a subsidiary, are rated not less than
A (or the equivalent rating) by a nationally recognized investment rating
agency, (D) U.S. money market funds that invest solely in obligations issued or
guaranteed by the United States of America or an Agency thereof, (E) Eurodollar
time deposits with financial institutions with a published rating of not less
than A-1 or P-1 (or the equivalent rating), (F) notes evidencing amounts due
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from customers provided such notes have been delivered to Agent as additional
Collateral and (G) investments not in excess of $2,500,000 ($5,000,000 after the
occurrence of a Conforming Equity Event) in the aggregate at any time
outstanding which consist of cash or cash equivalents and which are made by a
Financial Party in the ordinary course of business; and
(ac) Agent shall be given a right to bid on each and every
institutional financing in excess of $2,500,000 hereafter sought by a Financial
Party.
13. POWER OF ATTORNEY. Borrower hereby appoints Agent or any other
Person whom Agent may designate as Borrower's attorney, with power to: (i)
endorse Borrower's name on any checks, notes, acceptances, money orders, drafts
or other forms of payment or security that may come into any Lender's
possession; (ii) sign Borrower's name on any invoice or bill of lading relating
to any Receivables, drafts against Customers, schedules and assignments of
Receivables, notices of assignment, financing statements and other public
records, verifications of account and notices to or from Customers; (iii) verify
the validity, amount or any other matter relating to any Receivable by mail,
telephone, telegraph or otherwise with Customers; (iv) execute customs
declarations and such other documents as may be required to clear Inventory
through Customs; (v) do all things necessary to carry out this Agreement, any
Ancillary Agreement and all related documents; and (vi) on or after the
occurrence and continuation of an Event of Default, notify the post office
authorities to change the address for delivery of Borrower's mail to an address
designated by Agent, and to receive, open and dispose of all mail addressed to
Borrower. Borrower hereby ratifies and approves all acts of the attorney.
Neither Agent nor the attorney will be liable for any acts or omissions or for
any error of judgment or mistake of fact or law. This power, being coupled with
an interest, is irrevocable so long as any Receivable which is assigned to Agent
or in which Agent has a security interest remains unpaid and until the
Obligations have been fully satisfied.
14. EXPENSES. Borrower shall pay all of BNY's out-of-pocket costs
and expenses, including without limitation reasonable fees and disbursements of
counsel retained or employed by BNY and appraisers, in connection with the
preparation, execution and delivery of this Agreement and the Ancillary
Agreements, and in connection with the prosecution or defense of any action,
contest, dispute, suit or proceeding concerning any matter in any way arising
out of, related to or connected with this Agreement or any Ancillary Agreement.
Borrower shall also pay all of Lender's and each Lender's out-of-pocket costs
and expenses, including without limitation reasonable fees and disbursements of
counsel retained or employed by Agent, in connection with (a) the preparation,
execution and delivery of any waiver, any amendment thereto or consent proposed
or executed in connection with the transactions contemplated by this Agreement
or the Ancillary Agreements, (b) Agent's obtaining performance of the
Obligations under this Agreement and any Ancillary Agreements, including, but
not limited to, the enforcement or defense of Agent's security interests,
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assignments of rights and liens hereunder as valid perfected security interests,
(c) any attempt to inspect, verify, protect, collect, sell, liquidate or
otherwise dispose of any Collateral, and (d) any consultations in connection
with any of the foregoing. Borrower shall also pay Agent's then standard price
for furnishing Borrower or its designees copies of any statements, records,
files or other data (collectively, "Reports") requested by Borrower or its
designees, other than reports of the kind furnished to Borrower and Agent's
other borrowers on a regular, periodic basis in the ordinary course of Agent's
business or such reports as Borrower would have generated itself were it
conducting its own accounts receivable management. Borrower shall also pay
Agent's customary bank charges, including, without limitation, all wire transfer
fees incurred by Agent, for all bank services performed or caused to be
performed by Agent for Borrower at Borrower's request. All such costs and
expenses together with all filing, recording and search fees, taxes and interest
payable by Borrower to Agent shall be payable on demand and shall be secured by
the Collateral. If any tax by any governmental authority is or may be imposed
on or as a result of any transaction between Borrower and Agent which Agent is
or may be required to withhold or pay, Borrower agrees to indemnify and hold
Lender and each Lender harmless in respect of such taxes, and Borrower will
repay to Agent the amount of any such taxes which shall be charged to Borrower's
account; and until Borrower shall furnish Agent with indemnity therefor (or
supply Agent with evidence satisfactory to it that due provision for the payment
thereof has been made), Agent may hold without interest any balance standing to
Borrower's credit and Agent shall retain its security interests in any and all
Collateral. Borrower hereby acknowledges that Agent shall not be liable in any
manner whatsoever for any selling expenses, orders, purchases or contracts of
any kind resulting from any transaction between Borrower and any other Person
and Borrower hereby indemnifies and holds Agent harmless with respect thereto,
which indemnity shall survive termination of this Agreement.
15. ASSIGNMENT BY A LENDER. (a) This Agreement shall be binding
upon and inure to the benefit of Borrower, Agent, each Lender, all future
holders of the Loans and their respective successors and assigns, except that
Borrower may not assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of Agent and each Lender.
(b) Borrower acknowledges that in the regular course of commercial
banking business one or more Lenders may at any time and from time to time sell
participating interests in the Loans to other financial institutions (each such
transferee or purchaser of a participating interest, a "Transferee"). Each
Transferee may exercise all rights of payment (including without limitation
rights of set-off) with respect to the portion of such Loans held by it or other
Obligations payable hereunder as fully as if such Transferee were the direct
holder thereof provided that Borrower shall not be required to pay to any
Transferee more than the amount which it would have been required to pay to the
Lender which granted an interest in its Loans or other Obligations payable
hereunder to such Transferee had such Lender retained such interest in the Loans
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hereunder or other Obligations payable hereunder and in no event shall Borrower
be required to pay any such amount arising from the same circumstances and with
respect to the same Loans or other Obligations payable hereunder to both such
Lender and such Transferee. Borrower hereby grants to any Transferee a
continuing security interest in any deposits, moneys or other property actually
or constructively held by such Transferee as security for the Transferee's
interest in the Loans.
(c) Any Lender may sell, assign or transfer all or any part of its
rights under this Agreement and the Ancillary Agreements to one or more
additional banks or financial institutions which are able to make Eurodollar
Rate Loans and Fixed Rate Loans with the prior written consent of the Agent and
one or more of such additional banks or financial institutions may commit to
make Loans hereunder (each a "Purchasing Lender"), pursuant to a Commitment
Transfer Supplement, executed by a Purchasing Lender, the transferor Lender, and
Agent and delivered to Agent for recording. Upon such execution, delivery,
acceptance and recording, from and after the transfer effective date determined
pursuant to such Commitment Transfer Supplement, (i) Purchasing Lender
thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder with a Commitment Percentage as set forth therein, and (ii) the
transferor Lender thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this Agreement, the
Commitment Transfer Supplement creating a novation for that purpose. Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages and
the Maximum Loan Amount, if any, arising from the purchase by such Purchasing
Lender of all or a portion of the rights and obligations of such transferor
Lender under this Agreement and the Ancillary Agreements. Agent shall notify
Borrower of the addition of any Purchasing Lender. Borrower hereby consents to
the addition of such Purchasing Lender and the resulting adjustment of the
Commitment Percentages arising from the purchase by such Purchasing Lender of
all or a portion of the rights and obligations of such transferor Lender under
this Agreement and the Ancillary Agreements. Borrower shall execute and deliver
such further documents and do such further acts and things in order to
effectuate the foregoing.
(d) Agent shall maintain at its address a copy of each Commitment
Transfer Supplement delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Loans owing to each Lender from
time to time. The entries in the Register shall be conclusive, in the absence
of manifest error, and Borrower, Agent and Lenders may treat each Person whose
name is recorded in the Register as the owner of the Loans recorded therein for
the purposes of this Agreement. The Register shall be available for inspection
by the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice. Agent shall receive a fee in the amount of $2,500
payable by the
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applicable Purchasing Lender upon the effective date of each transfer or
assignment to such Purchasing Lender.
(e) Borrower authorizes each Lender to disclose to any Transferee
or Purchasing Lender and any prospective Transferee or Purchasing Lender any and
all financial information in such Lender's possession concerning Borrower which
has been delivered to such Lender by or on behalf of Borrower pursuant to this
Agreement or in connection with such Lender's credit evaluation of Borrower and
each Purchasing Lender and any Transferee shall hold all non-public information
obtained pursuant to the requirements of this Agreement in accordance with
applicable federal and state securities laws and its customary procedures for
handling confidential information of this nature; PROVIDED, HOWEVER each
Purchasing Lender or Transferee may disclose such confidential information (a)
to its examiners, affiliates, outside auditors, counsel and other professional
advisors, (b) to any other prospective Transferees, and (c) as required or
requested by any governmental authority or representative thereof or pursuant to
legal process.
16. WAIVERS. Borrower waives presentment and protest of any
instrument and notice thereof, notice of default and all other notices to which
Borrower might otherwise be entitled.
17. TERM OF AGREEMENT. (A) This Agreement shall continue in full
force and effect until the expiration of the Term unless terminated by either
party as provided herein. The Term shall be automatically extended for
successive periods of one (1) year each unless either party shall have provided
the other with a written notice of termination, at least ninety (90) days prior
to the expiration of the initial Term or any renewal Term, PROVIDED, HOWEVER,
that Borrower may terminate this Agreement at any time upon one hundred twenty
(120) days' prior written notice ("Termination Date") (such written notice shall
not be given by Borrower more than once during any rolling twelve month period).
Upon and concurrently with such termination, Borrower shall be obligated to pay
to Agent (solely for Agent's benefit and not for the benefit of the Lenders), a
termination fee as follows:
(a) If at the time of such termination Borrower has not received at
least $75,000,000 from Conforming Equity Event, the fees will be as set forth in
Column "Fee-A" below:
TERMINATION OCCURS BETWEEN: FEE-A FEE-B
-------------------------- ----- -----
June 27, 1996 through June 30, 1997 $3,000,000 $1,000,000
July 1, 1997 through June 30, 1998 2,000,000 1,000,000
July 1, 1998 through June 30, 1999 1,000,000 1,000,000
July 1, 1999 through June 30, 2000 500,000 1,000,000
July 1, 2000 through June 30, 2001 -0- 1,000,000
(b) If, at the time of termination, Borrower has received at least
$75,000,000 from a Conforming Equity Event, such fee shall be as set forth in
Column "Fee-B" above, PROVIDED, HOWEVER if termination occurs during the twelve
month period
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following the date any other financial institution becomes a Lender hereunder
("New Lender") Borrower shall also pay a fee of $200,000 to Agent to be
distributed by Agent in its sole discretion among all such New Lenders.
(B) Prior to any such termination, Borrower shall provide Lenders a
good faith opportunity to match the terms of any proposed replacement financing
and Borrower shall revoke any termination notice previously sent if Lenders
proposed pricing proposal is within 25 basis points of the all-in cost of the
replacement financing. For purposes of this comparison, the required
termination fee shall be included as an additional cost of the replacement
financing; PROVIDED, HOWEVER, that for purposes of this calculation, such fee
shall be amortized over the lesser of (a) the term of the replacement financing
and (b) three years.
18. EVENTS OF DEFAULT. The occurrence of any of the following
shall constitute an Event of Default:
(a) failure to make payment of any of the Obligations when required
hereunder;
(b) failure to pay any taxes when due unless such taxes are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves have been provided on Borrower's books;
(c) failure to perform under and/or committing any breach of this
Agreement or any Ancillary Agreement or any other agreement between Borrower and
Agent which (except with respect to Sections 12(m), (n), (p), (q), (r), (s),
(t), (t)(1) and (u) hereof) such failure or breach is not cured within 10
business days following receipt of notice of such failure or breach from Agent;
(d) occurrence of a default under any agreement to which Borrower
is a party with third parties which has a material adverse affect upon
Borrower's business, operations, property or condition (financial or otherwise)
including all leases for any premises where Inventory or Equipment is located;
(e) any representation, warranty or statement made by Borrower
hereunder, in any Ancillary Agreement, any certificate, statement or document
delivered pursuant to the terms hereof, or in connection with the transactions
contemplated by this Agreement should when made be false or misleading in any
material respect;
(f) an attachment or levy is made upon any of Borrower's assets
having an aggregate value in excess of (i) 250,000 or (ii) $1,000,000 following
the occurrence of a Conforming Equity Event or a judgment is rendered against
Borrower or any of Borrower's property involving a liability of more than
$100,000, which shall not have been vacated, discharged, stayed or bonded
pending appeal within thirty (30) days from the entry thereof;
(g) Agent shall have notified Borrower of any change in Borrower's
condition or affairs (financial or otherwise) which in
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Agent's good faith opinion impairs the Collateral or the ability of Borrower to
perform its Obligations;
(h) any lien created hereunder or under any Ancillary Agreement for
any reason ceases to be or is not a valid and perfected lien having a first
priority interest;
(i) if Borrower shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or liquidator
of itself or of all or a substantial part of its property, (ii) make a general
assignment for the benefit of creditors, (iii) commence a voluntary case under
the federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated
a bankrupt or insolvent, (v) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vi) acquiesce to, or fail to
have dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (vii) take any action for the
purpose of effecting any of the foregoing;
(j) Borrower shall admit in writing its inability, or be generally
unable to pay its debts as they become due or cease operations of its present
business;
(k) any Subsidiary or any Guarantor (or any Affiliate whose
accounts receivable are Affiliate Receivables hereunder) shall (i) apply for or
consent to the appointment of, or the taking possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its property, (ii) admit in writing its inability, or be generally unable, to
pay its debts as they become due or cease operations of its present business,
(iii) make a general assignment for the benefit of creditors, (iv) commence a
voluntary case under the federal bankruptcy laws (as now or hereafter in
effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vii) acquiesce to, or fail to have dismissed, within thirty (30) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(viii) take any action for the purpose of effecting any of the foregoing;
(l) any Affiliate (other than an Affiliate whose accounts
receivable are Affiliate Receivables hereunder) shall (i) apply for or consent
to the appointment of, or the taking possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property,
(ii) admit in writing its inability, or be generally unable, to pay its debts as
they become due or cease operations of its present business, (iii) make a
general assignment for the benefit of creditors, (iv) commence a voluntary case
under the federal bankruptcy laws (as now or hereafter in effect), (v) be
adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (vii) acquiesce
to, or fail to have dismissed, within thirty (30) days, any petition filed
against it in any involuntary case under such bankruptcy laws, or (viii) take
any action for the purpose of effecting any of
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the foregoing and the occurrence of any of the foregoing shall have a material
adverse impact on the Borrower, the Collateral or the ability of Borrower to
perform its obligations;
(m) Borrower directly or indirectly sells, assigns, transfers,
conveys, or suffers or permits to occur any sale, assignment, transfer or
conveyance of any assets of Borrower in excess of $500,000 (or $1,000,000 at any
time after the occurrence of a Conforming Equity Event) in the aggregate or any
interest therein, except as permitted herein;
(n) Agent shall have notified Borrower that it in good faith deems
itself insecure or unsafe or shall fear diminution in value, removal or waste of
the Collateral;
(o) a default that has not been cured within any applicable grace
period by Borrower in the payment, when due, of any principal of or interest on
any indebtedness for money borrowed exceeding (i) $500,000 or (ii) $1,000,000 at
any time after the occurrence of a Conforming Equity Event;
(p) if any Guarantor attempts to terminate, challenges the validity
of, or its liability under any Guaranty Agreement or Guarantor Security
Agreement;
(q) should any Guarantor default in its obligations under any
Guaranty Agreement or any Guarantor Security Agreement or if any proceeding
shall be brought to challenge the validity, binding effect of any Guaranty
Agreement or any Guarantor Security Agreement, or should any Guarantor breach
any representation, warranty or covenant contained in any Guaranty Agreement or
any Guarantor Security Agreement or should any Guaranty Agreement or Guarantor
Security Agreement cease to be a valid, binding and enforceable obligation;
(r) any Change of Control; or
(s) Andrew McKelvey shall cease to be involved in the day to day
operations of Borrower's operations.
19. REMEDIES. (a) Upon the occurrence of (i) an Event of Default
pursuant to paragraph 18(i) herein, all Obligations shall be immediately due and
payable and this Agreement shall be deemed terminated; (ii) upon the occurrence
and continuation of any other of the Events of Default, Agent shall have the
right to demand repayment in full of all Obligations, whether or not otherwise
due and (iii) the filing of a petition against any Borrower in any involuntary
case under any state or federal bankruptcy laws the obligations of the Lenders
to make Loans hereunder shall be terminated other than as may be required by
appropriate order of the bankruptcy court having jurisdiction over the Borrower.
Until all Obligations have been fully satisfied, Agent shall retain its security
interest in all Collateral. Agent shall have, in addition to all other rights
provided herein, the rights and remedies of a secured party under the Uniform
Commercial Code, and under other applicable law, all other legal and equitable
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rights to which Agent may be entitled, including without limitation, the right
to take immediate possession of the Collateral, to require Borrower to assemble
the Collateral, at Borrower's expense, and to make it available to Agent at a
place designated by Agent which is reasonably convenient to both parties and to
enter any of the premises of Borrower or wherever the Collateral shall be
located, with or without force or process of law, and to keep and store the same
on said premises until sold (and if said premises be the property of Borrower,
Borrower agrees not to charge Agent for storage thereof for a period up to at
least sixty (60) days after sale or disposition of said Collateral). Further,
Agent may, at any time or times after default by Borrower, sell and deliver all
Collateral held by or for Agent at public or private sale for cash, upon credit
or otherwise, at such prices and upon such terms as Agent, in Agent's sole
discretion, deems advisable or Agent may otherwise recover upon the Collateral
in any commercially reasonable manner as Agent, in its sole discretion, deems
advisable. Except as to that part of the Collateral which is perishable or
threatens to decline speedily in nature or is of a type customarily sold on a
recognized market, the requirement of reasonable notice shall be met if such
notice is mailed postage prepaid to Borrower at Borrower's address as shown in
Agent's records, at least ten (10) days before the time of the event of which
notice is being given. Agent may be the purchaser at any sale, if it is public.
In connection with the exercise of the foregoing remedies, Agent is granted
permission to use all of Borrower's trademarks, tradenames, tradestyles,
patents, patent applications, licenses, franchises and other proprietary rights
which are used in connection with (a) Inventory for the purpose of disposing of
such Inventory and (b) Equipment for the purpose of completing the manufacture
of unfinished goods. The proceeds of sale shall be applied first to all costs
and expenses of sale, including attorneys' fees, and second to the payment (in
whatever order Agent elects) of all Obligations. Agent will return any excess
to Borrower and Borrower shall remain liable to Agent for any deficiency.
20. WAIVER; CUMULATIVE REMEDIES. Failure by Agent to exercise any
right, remedy or option under this Agreement or any supplement hereto or any
other agreement between Borrower and Agent or delay by Agent in exercising the
same, will not operate as a waiver; no waiver by Agent will be effective unless
it is in writing and then only to the extent specifically stated. Agent's
rights and remedies under this Agreement will be cumulative and not exclusive of
any other right or remedy which Agent may have.
21. APPLICATION OF PAYMENTS. Borrower irrevocably waives the right
to direct the application of any and all payments at any time or times hereafter
received by Agent from or on Borrower's behalf and Borrower hereby irrevocably
agrees that Agent shall have the continuing exclusive right to apply and reapply
any and all payments received at any time or times hereafter against Borrower's
Obligations hereunder in such manner as Agent may deem advisable notwithstanding
any entry by Agent upon any of Agent's books and records.
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22. DEPOSITORY ACCOUNTS. Any payment received by Borrower on
account of any Collateral shall be held by Borrower in trust for Agent and
Borrower shall promptly deliver same in kind to Agent or deposit all such
payments into a cash collateral account at such bank as Agent may designate for
application to payment of the Obligations. Borrower shall also execute such
further documents as Agent may deem necessary to establish such an account and
all funds deposited in such account shall immediately be deemed Agent's
property.
23. LOCK BOX ACCOUNTS. Borrower shall instruct all of its
Customers to make such payments on account of Receivables to an account under
Agent's dominion and control at Bank or at such bank as Agent may designate.
Borrower shall also execute such further documents as Agent may deem necessary
to establish such an account and all funds deposited in such account shall
immediately be deemed Agent's property.
24. REVIVAL. Borrower further agrees that to the extent Borrower
makes a payment or payments to Agent, which payment or payments or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy act, state or federal law, common law or equitable cause,
then, to the extent of such payment or repayment, the obligation or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if said payment had not been made.
25. NOTICES. Any notice or request hereunder may be given to
Borrower or Agent at the respective addresses set forth below or as may
hereafter be specified in a notice designated as a change of address under this
paragraph. Any notice or request hereunder shall be given by registered or
certified mail, return receipt requested, or by overnight mail or by telecopy
(confirmed by mail). Notices and requests shall be, in the case of those by
mail or overnight mail, deemed to have been given when deposited in the mail or
with the overnight mail carrier, and, in the case of a telecopy, when confirmed.
Notices shall be provided as follows:
If to the Agent: BNY Financial Corporation
1290 Avenue of the Americas
New York, New York 10104
Attention: Robert Grbic
Jean Siegel
Frank Imperato
Telephone: (212) 408-7292
Telecopier: (212) 408-4384
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with a copy to: Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118
Attention: Daniel J. Krauss, Esq.
Telephone: (212) 736-1000
Telecopier: (212) 594-7167
If to the Borrower: TMP Worldwide Inc.
1633 Broadway, 33rd Floor
New York, New York 10019
Attention: Thomas G. Collison
Telephone: (212) 977-5400
Telecopier: (212) 940-3972
With a copy to: Donovan Leisure Newton & Irvine
30 Rockefeller Plaza
New York, New York 10112
Attention: John McCann, Esq.
Telephone: (212) 632-3000
Telecopier: (212) 632-3321
26. GOVERNING LAW AND WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK. AGENT SHALL HAVE THE RIGHTS AND REMEDIES OF A SECURED PARTY
UNDER APPLICABLE LAW INCLUDING, BUT NOT LIMITED TO, THE UNIFORM COMMERCIAL CODE
OF NEW YORK. BORROWER AGREES THAT ALL ACTIONS AND PROCEEDINGS RELATING DIRECTLY
OR INDIRECTLY TO THIS AGREEMENT OR ANY ANCILLARY AGREEMENT OR ANY OTHER
OBLIGATIONS SHALL BE BROUGHT IN THE FEDERAL DISTRICT COURT OF THE SOUTHERN
DISTRICT OF NEW YORK OR, AT AGENT'S OPTION, IN ANY OTHER COURTS LOCATED IN NEW
YORK STATE OR ELSEWHERE AS AGENT MAY SELECT AND THAT SUCH COURTS ARE CONVENIENT
FORUMS AND BORROWER SUBMITS TO THE PERSONAL JURISDICTION OF SUCH COURTS.
BORROWER WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS THAT SERVICE OF PROCESS
UPON BORROWER MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, DIRECTED TO BORROWER AT BORROWER'S ADDRESS APPEARING ON AGENT'S
RECORDS, AND SERVICE SO MADE SHALL BE DEEMED COMPLETED TWO (2) DAYS AFTER THE
SAME SHALL HAVE BEEN SO MAILED. BOTH PARTIES HERETO WAIVE THE RIGHT TO A TRIAL
BY JURY IN ANY ACTION OR PROCEEDING BETWEEN BORROWER AND AGENT AND BORROWER
WAIVES THE RIGHT TO ASSERT IN ANY ACTION OR PROCEEDING INSTITUTED BY AGENT WITH
REGARD TO THIS AGREEMENT OR ANY OF THE OBLIGATIONS ANY OFFSETS OR COUNTERCLAIMS
WHICH IT MAY HAVE.
27. LIMITATION OF LIABILITY. Borrower acknowledges and understands
that in order to assure repayment of the Obligations hereunder Agent may be
required to exercise any and all of Agent's rights and remedies hereunder and
agrees that neither Agent nor any of Agent's agents shall be liable for acts
taken or omissions made in connection herewith or therewith except for actual
bad faith.
28. ENTIRE UNDERSTANDING. (a) This Agreement and the documents
executed concurrently herewith contain the entire understanding between the
Borrower, Agent and each Lender and supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof. Any promises,
representations, warranties or guarantees not herein contained and
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<PAGE>
hereinafter made shall have no force and effect unless in writing, signed by the
Borrower's, the Agent's and each Lender's respective officers. Neither this
Agreement nor any portion or provisions hereof may be changed, modified,
amended, waived, supplemented, discharged, cancelled or terminated orally or by
any course of dealing, or in any manner other than by an agreement in writing,
signed by the party to be charged. Borrower acknowledges that it has been
advised by counsel in connection with the execution of this Agreement and
Ancillary Agreements and is not relying upon oral representations or statements
inconsistent with the terms and provisions of this Agreement.
(b) The Required Lenders, the Agent with the consent in writing of
the Required Lenders, and the Borrower may, subject to the provisions hereof,
from time to time enter into written supplemental agreements to this Agreement
or the Ancillary Agreements executed by the Borrower, for the purpose of adding
or deleting any provisions or otherwise changing, varying or waiving in any
manner the rights of the Lenders, the Agent or the Borrower thereunder or the
conditions, provisions or terms thereof of waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
provided, however, that no such supplemental agreement shall, without the
consent of all the Lenders:
(i) increase the Commitment Percentage of any Lender.
(ii) increase the Maximum Loan Amount, any sublimits
hereunder or the Receivables Advance Rate.
(iii) extend the maturity of any note or the due date for any
amount payable hereunder, or decrease the rate of interest or reduce any fee
payable by Borrower to Lenders pursuant to this Agreement.
(iv) alter the definition of the term Required Lenders or
alter, amend or modify this Section 28.
(v) release any Collateral during any calendar year having
an aggregate value in excess of $250,000.
(vi) change the rights and duties of the Agent.
Any such supplemental agreement shall apply equally to each of the Lenders and
shall be binding upon the Borrower, the Lenders, the Agent and all future
holders of the Obligations. In the case of any waiver, the Borrower, the Agent
and the Lenders shall be restored to their former positions and rights, and any
Event of Default waived shall be deemed to be cured and not continuing, but no
waiver of a specific Event of Default shall extend to any subsequent Event of
Default (whether or not the subsequent Event of Default is the same as the Event
of Default which was waived), or impair any right consequent thereon.
29. MODIFICATION. This Agreement and the Ancillary Agreements
constitute the complete agreement between the parties
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<PAGE>
with respect to the subject matter hereof and thereof and may not be modified,
altered or amended except by an agreement in writing signed by the parties
hereto and thereto.
30. SEVERABILITY. Wherever possible each provision of this
Agreement or the Ancillary Agreements shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this
Agreement or the Ancillary Agreements shall be prohibited by or invalid under
applicable law such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions thereof.
31. CAPTIONS. All captions are and shall be without substantive
meaning or content of any kind whatsoever.
32. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which taken together shall constitute one and the same
instrument.
33. CONSTRUCTION. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
34. (a) AGREEMENT AMONG AGENT AND LENDERS. Each Lender hereby
designates BNY to act as Agent for such Lender under this Agreement and the
Ancillary Agreements. Each Lender hereby irrevocably authorizes Agent to take
such action on its behalf under the provisions of this Agreement and the
Ancillary Agreements and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of Agent
by the terms hereof and thereof and such other powers as are reasonably
incidental thereto and Agent shall hold all Collateral, payments of principal
and interest, fees (except the fees set forth in Sections 5(b)(ii), 5(b)(iii)
and 5(e), charges and collections (without giving effect to any collection days)
received pursuant to this Agreement, for the ratable benefit of Lenders. Agent
may perform any of its duties hereunder by or through its agents or employees.
As to any matters not expressly provided for by this Agreement Agent shall not
be required to exercise any discretion or take any action, but shall be required
to act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding; PROVIDED, HOWEVER, that Agent shall not be
required to take any action which exposes Agent to liability or which is
contrary to this Agreement or the Ancillary Agreements or applicable law unless
Agent is furnished with an indemnification reasonably satisfactory to Agent with
respect thereto.
(b) Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and the Ancillary Agreements. Neither
Agent nor any of its officers, directors, employees or agents shall be (i)
liable for any action
-55-
<PAGE>
taken or omitted by them as such hereunder or in connection herewith, unless
caused by their gross negligence (but not mere negligence) or willful misconduct
or gross (not mere) negligence, or (ii) responsible in any manner for any
recitals, statements, representations or warranties made by Borrower or any
officer thereof contained in this Agreement, or in any of the Ancillary
Agreements or in any certificate, report, statement or other document referred
to or provided for in, or received by Agent under or in connection with, this
Agreement or any of the Ancillary Agreements or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, or
any of the Ancillary Agreements or for any failure of Borrower to perform its
obligations hereunder. Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any of the
Ancillary Agreements, or to inspect the properties, books or records of
Borrower. The duties of Agent as respects the Loans to Borrower shall be
mechanical and administrative in nature; Agent shall not have by reason of this
Agreement a fiduciary relationship in respect of any Lender; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon Agent any obligations in respect of this Agreement except as
expressly set forth herein.
(c) Notwithstanding anything to the contrary contained herein,
commencing with the first Business Day following the Closing Date, each
borrowing of Revolving Credit Advances shall be advanced by the Agent and each
payment by Borrower on account of Revolving Credit Advances shall be applied
first to those Revolving Credit Advances made by the Agent. On or before 1:00
P.M., New York time, on each Lender Settlement Date commencing with the first
Lender Settlement Date following the Closing Date, the Agent and the Lenders
shall make certain payments as follows: (I) if the aggregate amount of new
Revolving Credit Advances made by the Agent during the preceding Week exceeds
the aggregate amount of repayments applied to outstanding Revolving Credit
Advances during such preceding Week, then each Lender shall provide the Agent
with funds in an amount equal to its Commitment Percentage of the difference
between (w) such Revolving Credit Advances and (x) such repayments and (II) if
the aggregate amount of repayments applied to outstanding Revolving Credit
Advances during such Week exceeds the aggregate amount of new Revolving Credit
Advances made during such Week, then Agent shall provide each Lender with its
Commitment Percentage of the difference between (y) such repayments and (z) such
Revolving Credit Advances.
(i) Each Lender shall be entitled to earn interest at the
applicable Contract Rate on outstanding Revolving Credit Advances which it has
funded.
(ii) Promptly following each Lender Settlement Date, the
Agent shall submit to each Lender a certificate with respect to payments
received and Loans made during the Week immediately preceding such Settlement
Date. Such certificate of the Agent shall be conclusive in the absence of
manifest error.
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<PAGE>
(d) If any Lender or Participant (a "benefitted Lender") shall at
any time receive any payment of all or part of its Loans or interest thereon, or
receive any Collateral in respect thereof (whether voluntarily or involuntarily
or by set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect of such other Lender's Loans,
or interest thereon, and such greater proportionate payment or receipt of
Collateral is not expressly permitted hereunder, such benefitted Lender shall
purchase for cash from the other Lenders such portion of each such other
Lender's Loans, or shall provide such other Lender with the benefits of any such
Collateral, or the proceeds thereof, as shall be necessary to cause such
benefitted Lender to share the excess payment or benefits of such Collateral or
proceeds ratably with each of the Lenders; PROVIDED, HOWEVER, that if all or any
portion of such excess payment or benefits is thereafter recovered from such
benefitted Lender, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest. Each
Lender so purchasing a portion of another Lender's Loans may exercise all rights
of payment (including, without limitation, rights of set-off) with respect to
such portion as fully as if such Lender were the direct holder of such portion.
(e) Independently and without reliance upon Agent or any other
Lender, each Lender has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of Borrower in connection
with the making and the continuance of the Loans hereunder and the taking or not
taking of any action in connection herewith, and (ii) its own appraisal of the
creditworthiness of Borrower. Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Lender with any credit
or other information with respect thereto, whether coming into its possession
before making of the Loans or at any time or times thereafter except as shall be
provided by Borrower pursuant to the terms hereof. Agent shall not be
responsible to any Lender for any recitals, statements, information,
representations or warranties herein or in any agreement, document, certificate
or a statement delivered in connection with or for the execution, effectiveness,
genuineness, validity, enforceability, collectability or sufficiency of this
Agreement or any Ancillary Agreement, or of the financial condition of Borrower,
or be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this Agreement, the
Note, the Ancillary Agreements or the financial condition of Borrower, or the
existence of any Event of Default or any Default.
Agent may resign on sixty (60) days' written notice to each of Lenders
and Borrower and upon such resignation, the Required Lenders will promptly
designate a successor Agent reasonably satisfactory to Borrower.
Any such successor Agent shall succeed to the rights, powers and
duties of Agent, and the term "Agent" shall mean such successor agent effective
upon its appointment, and the former Agent's rights, powers and duties as Agent
shall be terminated, without any other or further act or deed on the part of
such former
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<PAGE>
Agent. After any Agent's resignation as Agent, the provisions of this Section
34 shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.
(f) If Agent shall request instructions from Lenders with respect
to any act or action (including failure to act) in connection with this
Agreement or any Ancillary Agreement, Agent shall be entitled to refrain from
such act or taking such action unless and until Agent shall have received
instructions from the Required Lenders; and Agent shall not incur liability to
any Person by reason of so refraining. Without limiting the foregoing, Lenders
shall not have any right of action whatsoever against Agent as a result of its
acting or refraining from acting hereunder in accordance with the instructions
of the Required Lenders.
(g) Agent shall be entitled to rely, and shall be fully protected
in relying, upon any note, writing, resolution, notice, statement, certificate,
telex, teletype or telecopier message, cablegram, order or other document or
telephone message believed by it to be genuine and correct and to have been
signed, sent or made by the proper person or entity, and, with respect to all
legal matters pertaining to this Agreement and the Ancillary Agreements and its
duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
(h) Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder or under the Ancillary
Agreements, unless Agent has received notice from a Lender or Borrower referring
to this Agreement or the Ancillary Agreements, describing such Default or Event
of Default and stating that such notice is a "notice of default". In the event
that Agent receives such a notice, Agent shall give notice thereof to Lenders.
Agent shall take such action with respect to such Default or Event of Default as
shall be reasonably directed by the Required Lenders; PROVIDED, THAT, unless and
until Agent shall have received such directions, Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of Lenders.
(i) To the extent Agent is not reimbursed and indemnified by
Borrower, each Lender will reimburse and indemnify Agent in proportion to its
respective portion of the Loans (or, if no Loans are outstanding, according to
its Commitment Percentage), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, fees or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against Agent in performing its duties
hereunder, including, but not limited to fees in connection with Paragraph
5(b)(ii) hereof, in the event such fees exceed $75,000 and Borrower is not
responsible for such fees pursuant to such Paragraph, or in any way relating to
or arising out of this Agreement or any Ancillary Agreement, PROVIDED THAT,
Lenders shall not be liable for any portion of such liabilities, obligations,
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<PAGE>
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from Agent's gross negligence (but not mere negligence)
or willful misconduct or gross (not mere) negligence.
(j) With respect to the obligation of Agent to lend under this
Agreement, the Loans made by it shall have the same rights and powers hereunder
as any other Lender and as if it were not performing the duties as Agent
specified herein; and the term "Lender" or any similar term shall, unless the
context clearly otherwise indicates, include Agent in its individual capacity as
a Lender. Agent may engage in business with Borrower as if it were not
performing the duties specified herein, and may accept fees and other
consideration from Borrower for services in connection with this Agreement or
otherwise without having to account for the same to Lenders.
(k) To the extent Agent receives documents and information from
Borrower pursuant to the terms of this Agreement, Agent will promptly furnish
such documents and information to Lenders.
(l) Without prejudice to their respective obligations to the
Lenders under the other provisions of this Agreement, Borrower hereby undertakes
with Agent to pay to Agent from time to time on demand all amounts from time to
time due and payable by it for the account of Agent or the Lenders or any of
them pursuant to this Agreement to the extent not already paid. Any payment
made pursuant to any such demand shall PRO TANTO satisfy Borrower's obligations
to make payments for the account of the Lenders or the relevant one or more of
them pursuant to this Agreement.
35. DELIVERIES. Notwithstanding the method of delivery of any document,
certificate, report or other writing delivered hereunder by Borrower or any of
its officers or directors, such items shall be deemed to have been delivered by
United States mail.
36. ADDITIONAL DOCUMENTS. Execute and deliver to Agent, upon request,
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year first above written.
WITNESS TMP WORLDWIDE INC.
/s/ James J. Bergin By: /s/ Thomas G. Collison
- ------------------------ --------------------------
James J. Bergin Name: Thomas G. Collison
Title:
BNY FINANCIAL CORPORATION
By: /s/ Joe Grimaldi
--------------------------
Name:
Title:
Commitment Percentage: 100%
-----
AGREED AND ACCEPTED:
McKELVEY ENTERPRISES, INC.
By: /s/ Thomas G. Collison
-------------------------
Name: Thomas G. Collison
Title:
WORLDWIDE CLASSIFIED INC.
By: /s/ Thomas G. Collison
-------------------------
Name: Thomas G. Collison
Title:
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<PAGE>
SCHEDULES
Schedule 1(A) - Permitted Liens
Schedule 1(B) - Scheduled Affiliates
Schedule 12(d) - Record Locations
Schedule 12(j) - Licenses, Patents, Trademarks and Copyrights
Schedule 12(l) - Inventory Locations
Schedule 12(m) - Permitted Indebtedness
Permitted Guaranties
Tradestyles
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<PAGE>
TMP WORLDWIDE INC.
PERMITTED LIENS SCHEDULE 1 (A)
EQUIPMENT CAPITALIZED & OPERATING LEASES
AMPLICON 517,622.91
AT&T 17,041.91
GE CAPITAL 29,273.50
GE CAPITAL 106,520.05
GRAYBAR FINANCIAL 15,940.45
LEASETECH 943,983.00
MOTOROLA 206,587.64
SIEMENS 581,596.40
SIEMENS 45,735.98
QUALITY BUSINESS SYSTMENS 1,170.07
TOTAL 2,465,471.91
<PAGE>
TMP WORLDWIDE INC. Schedule 12 (d)
FINANCIAL RECORDS LOCATIONS
1633 Broadway
New York, N.Y. 10019
4701 West Schroeder Drive
Milwaukee, WI 53223
5 Marine View Plaza
Hoboken, N.J. 07030
NDAP Division
184 Front Street East
Suite 201
Toronto, Canada ON M5A 4N3
313 Congress Street
Boston, MA 02210
3032 Bunker Hill Lane
Santa Clara, CA 95054
CALA
63 rue de Bresoles
Montreal, Quebec H2Y 1V7
MSI
600 International Drive
Mount Olive, N.J. 07828
<PAGE>
TMP WORLDWIDE INC.
Schedule 12(J)
LICENSES, PATENTS, TRADEMARKS AND COPYRIGHTS
Service Mark
The Monster Board-Registered Trademark- (granted June 18, 1996)
Copyright of Text
Online Career Center - Resumes (granted November 29, 1995)
Online Career Center - Jobs (granted November 29, 1995)
Service Marks Pending
The Monster Board's Be The Boss-SM-
The Monster Board's MedSearch-SM-
TMP Worldwide Inc.-SM-
Patent Application Pending
The Monster Board-Registered Trademark-
<PAGE>
SCHEDULE 12 (1)
INVENTORY LOCATIONS
NONE
<PAGE>
TMP WORLDWIDE INC.
Page 1 of 2
PERMITTED INDEBTEDNESS Schedule 12 (M)
B. Hodes 93,113.00
DMI 15,941.00
McDougal 328,016.00
Subtotal 437,070.00
Consulting Agreements
Archibald & Loomis 111,582.00
Canady 135,249.00
Mclaughlin 270,000.00
Bernard Hodes 75,000.00
John Stimac 375,000.00
Kahse 60,500.00 per year for life
Subtotal 966,831.00
Employment Agreements
Canady 2,579,200.00
Woodward 350,000.00
Albertson 40,292.00
Snyder 40,356.00
Subtotal 3,009,848.00
Non Compete Agreements
DMI Bernard Hodes 75,000.00
<PAGE>
Page 2 of 2
Guarantees
A. Marx 35,000.00
S.F. Neal 100,000.00
Unger & Assoc. 40,496.00
B. Dorskind 49,328.00
Elite Solutions 46,875.00
FCB 150,000.00
Keever 66,000.00
Rogers 7,438,345.00
Target 128,112.00
KSD 318,610.00
KSD 725,417.00
KSD 158,484.00
West 287,100.00
BB&L 517,065.00
Adion 1,420,000.00
HGI 1,905,433.00
Adion (Kerasiotes) 98,333.00
Cala Acquisition 223,535.00
Cala 1,043,758.00
Admasters Braggins 37,000.00
DSE Gould 82,667.00
KSD Chatelain 4,000.00
Garcia-Virginia 36,129.00
Adion Kerasoites 221,250.00
Admasters Braggins 454,138.00
DSE Gould 476,178.00
MMS Marx 350,000.00
Waltz 105,000.00
Sid Richardson 2,805,000.00
Subtotal 19,323,253.00
<PAGE>
Exhibit 10.102
(part 2)
AMENDMENT NO. 1
TO
AMENDED AND RESTATED ACCOUNTS RECEIVABLE MANAGEMENT
AND SECURITY AGREEMENT
THIS AMENDMENT NO. 1 ("Amendment") is entered into as of August 29, 1996,
by and between TMP Worldwide, Inc., a Delaware corporation ("Borrower") and BNY
Financial Corporation, as Agent (as hereinafter defined).
BACKGROUND
Pursuant to an Amended and Restated Accounts Receivable Management and
Security Agreement dated as of June 27, 1996 (as amended, supplemented or
otherwise modified from time to time, the "Loan Agreement") by and among
Borrower, BNY Financial Corporation ("BNY"), each of the other financial
institutions named therein or which are now or which hereafter become parties
thereto (BNY and such financial institutions, the "Lenders") and BNY as agent
for the Lenders (BNY in such capacity the "Agent"), Lenders and Agent agreed to
provide Borrower with certain financial accommodations.
Borrower has requested that Agent amend certain provisions of the Loan
Agreement and Agent is willing to do so on the terms and conditions hereafter
set forth.
NOW, THEREFORE, in consideration of any loan or advance or grant of credit
heretofore or hereafter made to or for the account of Borrower by Lenders, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. All capitalized terms not otherwise defined herein shall
have the meanings given to them in the Loan Agreement.
2. AMENDMENT TO LOAN AGREEMENT. Subject to satisfaction of the
conditions precedent set forth in Section 3 below, the Loan Agreement is hereby
amended as follows:
2.1. All references to and provisions concerning "Eurodollar Rate" and
"Eurodollar Rate Loan" in the Loan Agreement shall be deleted and Borrower
agrees that obtaining a Eurodollar Rate Loan pursuant to the Loan Agreement
shall no longer be an option thereunder.
2.2. Section 1.2 of the Loan Agreement is hereby amended as follows:
<PAGE>
(a) the following defined term is hereby added in the appropriate
alphabetical order:
""DILUTION" shall mean, with respect to any period, the percentage
obtained by dividing (a) the sum of chargebacks PLUS credit memos
issued for such period as determined by Agent, by (b) the sum of
collections, chargebacks, open deduction and credit memos issued for
such period."
(b) the definition of "Applicable Margin" is hereby amended by deleting
the word "LIBOR" on the second sentence thereof and replacing it with "LIBO" in
its place and stead.
(c) the definition of "LIBO Rate Advance" is hereby amended by deleting
the word "Advance" on the first line thereof and replacing it with "Loans" in
its place and stead.
2.3. Section 5(b)(ii) is hereby amended by (a) placing a period after the
word "account" on the eleventh line thereof and (b) deleting the remainder of
such paragraph.
2.4. Section 5(b) is hereby further amended by adding the following
subsection at the end thereof:
"(viii) ADDITIONAL FEE. In the event that a Conforming Equity Event
shall not occur by December 31, 1996, Borrower shall pay to Agent for the
ratable benefit of Lenders a fee equal to $25,000 which shall be due and payable
no later than December 31, 1996."
2.5. Section 12(n) is hereby amended by deleting the chart therein and
replacing it with the following chart:
Period Amount
------ ------
1/1/96 through 12/30/96 ($ 24,000,000)
12/31/96 through 12/30/97 ($ 14,000,000)
12/31/97 through 12/30/98 ($ 5,000,000)
12/31/98 through 12/30/99 $ 14,000,000
12/31/99 through 12/30/00 $ 40,000,000
12/31/00 through 12/30/01 $ 85,000,000
12/31/01 and at all times $120,000,000
thereafter
2.6. Section 12(q) is hereby amended by deleting the chart therein and
replacing it with the following chart:
Period Amount
------ ------
-2-
<PAGE>
1/1/96 through 12/30/96 ($100,000,000)
12/31/96 through 12/30/97 ($100,000,000)
12/31/97 through 12/30/98 ($ 95,000,000)
12/31/98 through 12/30/99 ($ 80,000,000)
12/31/99 through 12/30/00 ($ 60,000,000)
12/31/00 through 12/30/01 ($ 10,000,000)
12/31/01 and at all times $ 30,000,000
thereafter
2.7. Section 12(r) is hereby amended by deleting the chart therein and
replacing it with the following chart:
Period Ratio
------ -----
1/1/96 through 12/30/96 .65 to 1.00
12/31/96 through 12/30/97 .65 to 1.00
12/31/97 through 12/30/98 .70 to 1.00
12/31/98 through 12/30/99 .75 to 1.00
12/31/99 through 12/30/00 .80 to 1.00
12/31/00 through 12/30/01 .85 to 1.00
12/31/01 and at all times 1.00 to 1.00
thereafter
2.8. Section 12(t) is hereby amended by (a) inserting an "(i)" immediately
before "$1,500,000" on the third line thereof and (b) by adding the following
language immediately before the ";" at the end thereof:
"and (ii) $2,000,000 for any three month period ending the last day of
any calendar month."
2.9. Section 12(y) is hereby amended by adding the following language at
the end thereof:
"provided, further, that such stock pledge agreements, Stock
Certificates and stock powers must be delivered to Agent no later than November
30, 1996;"
2.10. Section 12 is hereby amended by adding the following new
subsection at the end thereof:
"(ad) Dilution shall not exceed ten percent (10%), on a cumulative
basis, for any three month period ending the last day of any calendar month (as
determined by Agent in the good faith exercise of its sole discretion)."
2.11. Section 18(j) of the Loan Agreement is hereby amended by
inserting "either orally or" immediately after the word "admit" on the first
line thereof.
-3-
<PAGE>
2.12. Section 18(n) of the Loan Agreement is hereby amended in its
entirety to provide as follows:
"(n) INTENTIONALLY OMITTED."
2.13. Section 18(r) of the Loan Agreement is hereby amended in its
entirety to provide as follows:
"at any time prior to the occurrence of a Conforming Equity Event,
there shall occur a Change of Control;"
2.14. Section 18(s) of the Loan Agreement is hereby amended by adding
the following language at the beginning thereof:
"at any time prior to the occurrence of a Conforming Equity Event,"
2.15. Section 18 of the Loan Agreement is hereby amended by inserting
the following new subsections at the end thereof:
"(t) Borrower or another person involved in the media industry (such
person to be mutually agreed upon by Borrower and Agent) shall advise Lender
that there is a change in (i) the laws, regulations or rules regulating the
media industry or in the interpretation or application of such laws, regulations
or rules, (ii) the technology utilized by the media industry or (iii) the
organization of or policies and procedures employed by the media industry, which
shall have a material adverse impact on Borrower and its operations.
(u) Any of Borrower's eight largest yellow pages publishers, which at
any time singularly account for more than 20% of the outstanding aggregate
amount of payables then due from Borrower to all of its yellow pages publishers,
require payment by Borrower to such publisher less than 40 days after issuance
from the invoice date thereof.
(v) Any of Borrower's newspaper publishers, which at any time
singularly account for more than 15% of the outstanding aggregate amount of
payables then due from Borrower to all of its newspaper publishers, require
payment by Borrower to such publisher less than 25 days after issuance from the
invoice date thereof.
(w) More than twenty percent (20%) of the aggregate amount of
Receivables and Affiliate Receivables shall at any time not constitute Eligible
Receivables as determined by Agent in the good faith exercise of its sole
discretion.
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<PAGE>
(x) As of the end of any fiscal year, Borrower and the Scheduled
Affiliates shall have lost customers during the course of such fiscal year which
in the aggregate accounted for more than 10% of sales for such fiscal year (such
calculation to take into account the addition of new customers during such
fiscal year).
(y) At any time following the occurrence of a Conforming Equity
Event, Andrew McKelvey shall be indebted to Borrower for money borrowed in an
amount in excess of $2,000,000."
3. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective as
of August 29, 1996, when and only when Agent shall have received four (4) copies
of this Amendment executed by Borrower and consented and agreed to by each
Guarantor and such other certificates, instruments, documents, agreements and
opinions of counsel as may be required by Agent or its counsel, each of which
shall be in form and substance satisfactory to Agent and its counsel.
4. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants as follows:
(a) This Amendment and the Loan Agreement, as amended hereby,
constitute legal, valid and binding obligations of Borrower and are
enforceable against Borrower in accordance with their respective terms.
(b) Upon the effectiveness of this Amendment, Borrower hereby
reaffirms all covenants, representations and warranties made in the Loan
Agreement to the extent the same are not amended hereby and agree that all
such covenants, representations and warranties shall be deemed to have been
remade as of the effective date of this Amendment.
(c) No Event of Default or Default has occurred and is continuing or
would exist after giving effect to this Amendment No. 1.
(d) Borrower has no defense, counterclaim or offset with respect to
the Loan Agreement.
5. EFFECT ON THE LOAN AGREEMENT.
(a) Upon the effectiveness of SECTION 2 hereof, each reference in the
Loan Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of
like import shall mean and be a reference to the Loan Agreement as amended
hereby.
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<PAGE>
(b) Except as specifically amended herein, the Loan Agreement, and
all other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall
not operate as a waiver of any right, power or remedy of Lenders or Agents, nor
constitute a waiver of any provision of the Loan Agreement, or any other
documents, instruments or agreements executed and/or delivered under or in
connection therewith.
6. GOVERNING LAW. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns and
shall be governed by and construed in accordance with the laws of the State of
New York.
7. HEADINGS. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
8. COUNTERPARTS. This Amendment may be executed by the parties hereto in
one or more counterparts, each of which shall be deemed an original and all of
which taken together shall be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, this Amendment No. 1 has been duly executed as of the
day and year first written above.
TMP WORLDWIDE, INC.
By: /s/ Thomas G. Collison
-----------------------------------------
Name: Thomas G. Collison
---------------------------------------
Title: Vice Chairman
--------------------------------------
BNY FINANCIAL CORPORATION, as Agent
By: /s/ Robert Grbic
-----------------------------------------
Name: /s/ Robert Grbic
---------------------------------------
Title: Senior Vice President
--------------------------------------
CONSENTED AND AGREED TO:
McKelvey Enterprises, Inc. Worldwide Classified Inc.
By:/s/ Thomas G. Collison By:/s/ Thomas G. Collison
---------------------- ---------------------------
Its:Vice President Its:Secretary
--------------------- --------------------------
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<PAGE>
BBL Acquisition Corp. Woodward Inc.
By:/s/ Thomas G. Collison By:/s/ Thomas G. Collison
---------------------- ---------------------------
Its:Secretary Its:Secretary
--------------------- --------------------------
National Directory Advertising Directory Services
Programs Inc. (Canada) International Corp.
By:/s/ Thomas G. Collison By:/s/ Thomas G. Collison
---------------------- ---------------------------
Its:Secretary Its:Secretary
--------------------- --------------------------
Woodward Direct Inc. EPI Aviation, Inc.
By:/s/ Thomas G. Collison By:/s/ Thomas G. Collison
---------------------- ---------------------------
Its:Secretary Its:Secretary
--------------------- --------------------------
TMP Wordwide Recruitment Inc. YPMS Acquisition, Inc.
By:/s/ Thomas G. Collison By:/s/ Thomas G. Collison
---------------------- ---------------------------
Its:Secretary Its:Vice President
--------------------- --------------------------
InterDirect Inc. AHK Capital Corp.
By:/s/ Thomas G. Collison By:/s/ Thomas G. Collison
---------------------- ---------------------------
Its:Secretary Its:Vice President
--------------------- --------------------------
TMP Medical Listings, Inc. CPC Acquisition Corp.
By:/s/ Thomas G. Collison By:/s/ Thomas G. Collison
---------------------- ---------------------------
Its:Secretary Its:Secretary
--------------------- --------------------------
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<PAGE>
BTD Acquisition, Inc. Rogers Acquisition Corp.
By:/s/ Thomas G. Collison By:/s/ Thomas G. Collison
---------------------- ---------------------------
Its:Secretary Its:Vice President
--------------------- --------------------------
Deutsch, Shea & Evans, Inc. General Directory Advertising Inc.
By:/s/ Thomas G. Collison By:/s/ Thomas G. Collison
---------------------- ---------------------------
Its:Vice President Its:Vice President
--------------------- --------------------------
MSI-Market Support International, Chalam Advertising, Inc.
Inc.
By:/s/ Thomas G. Collison By:/s/ Thomas G. Collison
---------------------- ---------------------------
Its:Treasurer Its:Secretary
--------------------- --------------------------
HGI Acquisition Corp.
By:/s/ Thomas G. Collison
----------------------
Its:Vice President
---------------------
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<PAGE>
AGREEMENT AND PLAN OF MERGER
OF
TMP WORLDWIDE INC.,
WORLDWIDE CLASSIFIED INC.,
MCKELVEY ENTERPRISES, INC.
AND
TELEPHONE MARKETING PROGRAMS INCORPORATED
AGREEMENT AND PLAN OF MERGER made as of ____________ __, 1996, by and
among TMP Worldwide Inc., a Delaware corporation ("TMP"), Worldwide Classified
Inc., a Delaware corporation ("WCI"), McKelvey Enterprises, Inc., a New York
corporation ("MEI"), Telephone Marketing Programs Incorporated, a Delaware
corporation ("Newco"), and each of the stockholders set forth on Schedule I
hereto that signs this Agreement (the "Stockholders").
W I T N E S S E T H:
WHEREAS, the issued and outstanding capital stock of TMP, WCI, MEI and
Newco consists of _______ shares of common stock, par value $.01 per share, of
TMP ("TMP Common Stock"), _____ shares of common stock, par value $.01 per
share, of WCI ("WCI Common Stock"), ___ shares of common stock, par value $.001
per share, of MEI ("MEI Common Stock"), _______ shares of 10.5% Cumulative
Preferred Stock, par value $10.00 per share, of MEI ("Preferred Stock"), and 1
share of Class B common stock, par value $.001 per share, of Newco ("Newco Class
B Common Stock"), respectively;
<PAGE>
WHEREAS, the Stockholders own issued and outstanding shares of capital
stock of TMP, WCI, MEI and Newco;
WHEREAS, one of the Stockholders (the "Interactive Stockholder") owns
10 shares of the issued and outstanding common stock, par value $.01 per share,
of TMP Interactive Inc., a Delaware corporation ("Interactive");
WHEREAS, the Stockholders desire that (i) TMP merge with and into MEI,
(ii) WCI thereupon merge with and into MEI and (iii) MEI thereupon merge with
and into Newco (collectively, the "Mergers");
WHEREAS, the Stockholders desire that upon consummation of the
Mergers, the Interactive Stockholder exchange the 10 shares of the issued and
outstanding common stock, par value $.01 per share, of Interactive ("Interactive
Common Stock") owned by him for shares of common stock, par value $.001 per
share, of Newco (the "Exchange"); and
WHEREAS, the respective Boards of Directors of TMP, WCI, MEI and Newco
deem it advisable and in the best interests of each such corporation that the
Mergers and the Exchange be effected.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree, subject to
the terms and conditions set forth herein and in the General Corporation Law of
the State of Delaware and the Business Corporation Law of the State of New York,
as follows:
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ARTICLE I
THE MERGERS AND EXCHANGE
SECTION 1.01. THE MERGERS AND EXCHANGE. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Delaware
General Corporation Law (the "GCL") and the New York Business Corporation Law
(the "BCL"), the Mergers shall occur in the following sequence at the Effective
Time (as hereinafter defined): (i) TMP shall be merged with and into MEI,
(ii) thereupon WCI shall be merged with and into MEI, and (iii) thereupon MEI
shall merge with and into Newco. Following the Mergers, the separate corporate
existence of TMP, WCI and MEI shall cease and Newco shall continue as the
surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights and obligations of TMP, WCI and MEI in accordance with the
GCL and the BCL. At the Effective Time, immediately following the consummation
of the Mergers, the Exchange shall occur.
SECTION 1.02. CLOSING. The closing of the Mergers and the Exchange will
take place at 10:00 a.m. on a date to be specified by TMP, WCI and MEI, which
may be on, but shall be no later than, the third business day after the day on
which there shall have been satisfaction or waiver of the conditions set forth
in Articles VIII, IX, X and XI (the "Closing Date"), at the offices of Newco,
1633 Broadway, New York, New York 10019, unless another date or place is agreed
to in writing by the parties hereto.
SECTION 1.03. EFFECTIVE TIME. On the Closing Date, or as soon as
practicable thereafter, the parties shall file certificates of merger or other
appropriate documents (in any such case, a "Certificate of Merger") executed in
accordance with the relevant provisions of the GCL and the BCL, as applicable,
and shall make all other filings or recordings required
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<PAGE>
under the GCL and the BCL. The Mergers shall become effective at such time as
the Certificate of Merger reflecting the Merger of MEI into Newco is duly filed
with the Delaware Secretary of State or at such other time as TMP, WCI, MEI and
Newco shall agree should be specified in that Certificate of Merger (the time
the Mergers become effective being the "Effective Time").
SECTION 1.04. EFFECTS OF THE MERGER. The Mergers shall have the effects
set forth in Section 259 of the GCL and Section 906 of the BCL, as applicable.
SECTION 1.05. CERTIFICATE OF INCORPORATION AND BYLAWS.
(a) The certificate of incorporation of Newco as in effect immediately
prior to the Effective Time, as amended by this Agreement, shall be the
certificate of incorporation of the Surviving Corporation, until thereafter
changed or amended as provided therein or by applicable law. The certificate of
incorporation of Newco is hereby amended effective as of the Effective Time by
striking ARTICLE I in its entirety and replacing therefor:
"ARTICLE I
NAME
The name of the Corporation is TMP Worldwide Inc. (the
"Corporation")."
(b) The Bylaws of Newco as in effect at the Effective Time shall be the
Bylaws of the Surviving Corporation, until thereafter changed or amended as
provided therein or by law.
SECTION 1.06. DIRECTORS AND OFFICERS. The directors and officers of Newco
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation.
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<PAGE>
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
TMP, WCI, MEI AND NEWCO; EXCHANGE OF CERTIFICATES; THE EXCHANGE
SECTION 2.01. EFFECT ON CAPITAL STOCK. As of the Effective Time, by
virtue of the Mergers and without any action on the part of any holder of TMP
Common Stock, WCI Common Stock, MEI Common Stock or Preferred Stock, or Newco
Class B Common Stock:
(a) CAPITAL STOCK OF TMP. As of the Effective Time, each then outstanding
share of TMP Common Stock shall automatically be converted into approximately
_____ shares of common stock, par value $.001 per share, of MEI (the shares of
MEI common stock into which outstanding shares of TMP Common Stock and WCI
Common Stock are converted, as provided for herein, are referred to herein as
the "MEI Exchange Stock"), as more specifically set forth opposite the name of
each holder of TMP Common Stock on Schedule I, and each then outstanding share
of TMP Common Stock shall thereupon be canceled and retired and no additional
consideration shall be delivered therefor. As of the Effective Time, each then
outstanding option to purchase a share of TMP Common Stock under TMP's 1996
Stock Option Plan and TMP's 1996 Stock Option Plan for Non-Employee Directors,
whether or not then exercisable, shall automatically be converted into an option
to purchase approximately ____ shares of MEI Exchange Stock on the same terms
and conditions applicable prior to the Effective Date except as otherwise
expressly provided on Schedule II, as more specifically set forth opposite the
name of each option holder on Schedule II, and each then outstanding option to
purchase shares of TMP Common Stock under TMP's 1996 Stock Option Plan and TMP's
1996 Stock Option Plan for Non-Employee Directors shall thereupon be canceled
and retired and no additional consideration shall be delivered therefor. As of
the Effective Time, the outstanding warrant of BNY Financial Corporation
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<PAGE>
to purchase shares of TMP Common Stock granted pursuant to the Warrant Agreement
of October 13, 1993, as amended, shall automatically be converted into a warrant
to purchase shares of MEI Exchange Stock on the same terms and conditions
applicable prior to the Effective Date except as otherwise expressly provided on
Schedule II, and the outstanding warrant of BNY Financial Corporation to
purchase shares of TMP Common Stock shall thereupon be canceled and retired and
no additional consideration shall be delivered therefor. Without limiting the
effect of the Mergers or the provisions of Section 1.04 hereof, as of the
Effective Time TMP's 1996 Stock Option Plan and 1996 Stock Option Plan for Non-
Employee Directors will each by virtue of the Mergers be assumed and adopted as
a stock option plan of MEI, adjusted to reflect the numbers of shares and option
exercise prices set forth on Schedule II. Each share of capital stock of TMP
held in the treasury of TMP shall be canceled and retired and cease to exist
without any conversion thereof. No certificates representing fractional shares
of MEI common stock, par value $.001 per share, shall be issued upon any of the
foregoing conversions.
(b) CAPITAL STOCK OF WCI. Upon the conversions specified in subsection
(a) above, each then outstanding share of WCI Common Stock shall be converted
into approximately _____ shares of MEI Exchange Stock, as more specifically set
forth opposite the name of each holder of WCI Common Stock on Schedule I, and
each then outstanding share of WCI Common Stock shall thereupon be canceled and
retired and no additional consideration shall be delivered therefor. Upon the
conversions specified in subsection (a) above, each share of capital stock of
WCI held in the treasury of WCI shall be canceled and retired and cease to exist
without any conversion thereof. No certificates representing fractional shares
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<PAGE>
of MEI common stock, par value $.001 per share, shall be issued upon any of the
foregoing conversions.
(c) CAPITAL STOCK OF MEI. Upon the conversions specified in subsections
(a) and (b) above, each then outstanding share of MEI Common Stock and MEI
Exchange Stock held and beneficially owned by persons or entities other than
Andrew J. McKelvey ("AJM") shall be converted into approximately ____ shares of
common stock, par value $.001 per share, of Newco (collectively, the "Newco
Exchange Stock"), and each then outstanding share of MEI Common Stock and MEI
Exchange Stock beneficially owned by AJM shall be converted into approximately
___ shares of Class B common stock, $.001 par value, of Newco (collectively, the
"Newco Class B Exchange Stock"), and each then outstanding share of Preferred
Stock shall be converted into approximately ____ shares of 10.5% Cumulative
Preferred Stock, par value $10.00 per share, of Newco (collectively, the "Newco
Preferred Stock"), in each case as more specifically set forth opposite the name
of each holder of MEI Common Stock and MEI Exchange Stock on Schedule I, and
each then outstanding share of MEI Common Stock, MEI Exchange Stock and
Preferred Stock shall thereupon be canceled and retired and no additional
consideration shall be delivered therefor. Upon the conversions specified in
subsections (a) and (b) above, each then outstanding option to purchase a share
of MEI Exchange Stock under TMP's 1996 Stock Option Plan and 1996 Stock Option
Plan for Non-Employee Directors resulting from the conversions specified in
subsection (a) above shall automatically be converted into an option to purchase
approximately ____ shares of Newco Exchange Stock on the same terms and
conditions applicable upon the conversions specified in subsection (a) above
except as otherwise expressly provided on Schedule II, as more specifically set
forth opposite the name of each
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<PAGE>
option holder on Schedule II, and each then outstanding option to purchase
shares of MEI Exchange Stock under TMP's 1996 Stock Option Plan and 1996 Stock
Option Plan for Non-Employee Directors resulting from the conversions specified
in subsection (a) above shall thereupon be canceled and retired and no
additional consideration shall be delivered therefor. Upon the conversions
specified in subsections (a) and (b) above, the outstanding warrant of BNY
Financial Corporation to purchase shares of MEI Exchange Stock granted pursuant
to the Warrant Agreement of October 13, 1993, as amended, resulting from the
conversions specified in subsection (a) above shall automatically be converted
into a warrant to purchase shares of Newco Exchange Stock on the same terms and
conditions applicable upon the conversion specified in subsection (a) above
except as otherwise expressly provided on Schedule II, and the outstanding
warrant of BNY Financial Corporation to purchase shares of MEI Exchange Stock
resulting from the conversions specified in subsection (a) above shall thereupon
be canceled and retired and no additional consideration shall be delivered
therefor. Without limiting the effect of the Mergers or the provisions of
Section 1.04 hereof, TMP's 1996 Stock Option Plan and 1996 Stock Option Plan for
Non-Employee Directors will each by virtue of the Mergers be assumed and adopted
as a stock option plan of Newco, adjusted to reflect the numbers of shares and
option exercise prices set forth on Schedule II. Upon the conversions specified
in subsections (a) and (b) above, each share of capital stock of MEI held in the
treasury of MEI shall be canceled and retired and cease to exist without any
conversion thereof. No certificates representing fractional shares of common
stock, par value $.001 per share, of Newco, or of Class B common stock, par
value $.001 per share, of Newco, or of 10.5%
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<PAGE>
Cumulative Preferred Stock, par value $10.00 per share, of Newco, shall be
issued upon any of the foregoing conversions.
(d) CAPITAL STOCK OF NEWCO. Upon the conversions specified in subsections
(a), (b) and (c) above, the 1 then outstanding share of Newco Class B Common
Stock shall remain outstanding as 1 outstanding share of Class B Common Stock of
Newco, the Surviving Corporation, as more specifically set forth on Schedule I.
(e) THE EXCHANGE. Upon the conversions specified in subsections (a), (b)
and (c) above, the 10 then outstanding shares of Interactive Common Stock shall
be exchanged by the Interactive Stockholder for the number of shares of Newco
Exchange Stock set forth opposite the name of the Interactive Stockholder on
Schedule I. The Interactive Stockholder shall deliver the certificate for the
10 shares of Interactive Common Stock owned by him duly endorsed for transfer or
accompanied by a duly executed stock power.
(f) SHARES OF DISSENTING STOCKHOLDERS. Notwithstanding anything in this
Agreement to the contrary, any issued and outstanding shares of TMP Common
Stock, WCI Common Stock, MEI Common Stock or Preferred Stock held by a person (a
"Dissenting Stockholder") who objects to the Mergers and complies with all the
provisions of Delaware law or New York law, as applicable, concerning the right
of holders of TMP Common Stock, WCI Common Stock, MEI Common Stock or Preferred
Stock to dissent from the Mergers and require appraisal of their shares of TMP
Common Stock, WCI Common Stock, MEI Common Stock or Preferred Stock ("Dissenting
Shares") shall not be converted as described in Section 2.01(a), (b) or (c), as
applicable, but shall become the right to receive such consideration as may be
determined to be due to such Dissenting Stockholder pursuant to the laws of the
State of Delaware or the State of New York, as applicable. If, after the
Effective Time, such
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<PAGE>
Dissenting Stockholder withdraws his demand for appraisal or fails to perfect or
otherwise loses his right of appraisal, in any case pursuant to the GCL or BCL,
as applicable, his shares of TMP Common Stock, WCI Common Stock, MEI Common
Stock or Preferred Stock, as applicable, shall be deemed canceled and retired as
of the Effective Time and such Dissenting Stockholder shall receive the shares
of MEI Exchange Stock, Newco Exchange Stock, Newco Class B Exchange Stock or
Newco Preferred Stock, as applicable, set forth opposite his name on Schedule I.
If required pursuant to the terms of this Section, Newco shall take all lawful
action necessary to make the appropriate cash payments, if any, to holders of
Dissenting Shares.
SECTION 2.02. EXCHANGE OF CERTIFICATES.
(a) Newco shall act as exchange agent in connection with the Mergers and
the Exchange. At or prior to the Closing Date, holders of TMP Common Stock, WCI
Common Stock, MEI Common Stock and Preferred Stock shall have delivered
certificates representing such TMP Common Stock, WCI Common Stock, MEI Common
Stock and Preferred Stock to Newco. Upon delivery to Newco of certificates
representing TMP Common Stock and WCI Common Stock, Newco shall cancel and
retire such certificates and issue to the holders thereof the shares of MEI
Exchange Stock to which they are entitled as a result of the Mergers as
specified on Schedule I. Holders of MEI Exchange Stock shall immediately
deliver such shares to Newco. Upon delivery to Newco of certificates
representing MEI Exchange Stock, MEI Common Stock and Preferred Stock, Newco
shall cancel and retire such certificates and issue to the holders thereof the
shares of Newco Exchange Stock, Newco Class B Exchange Stock and Newco Preferred
Stock to which they are entitled as a result of the Mergers as specified on
Schedule I. Upon delivery to Newco of certificates
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<PAGE>
representing Interactive Common Stock in accordance with Section 2.01(e), Newco
shall become the owner of those shares and shall issue to the Interactive
Stockholder the shares of Newco Exchange Stock to which he is entitled as a
result of the Exchange as specified on Schedule I.
(b) NO FURTHER OWNERSHIP RIGHTS IN STOCK. All shares of Newco Exchange
Stock, Newco Class B Exchange Stock and Newco Preferred Stock issued upon the
surrender of TMP Common Stock, WCI Common Stock, MEI Common Stock and Preferred
Stock and MEI Exchange Stock in accordance with the terms of this Article II
shall be deemed to have been issued in full satisfaction of all rights
pertaining to the shares of TMP Common Stock, WCI Common Stock, MEI Common Stock
and Preferred Stock and MEI Exchange Stock, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of TMP Common Stock, WCI Common Stock, MEI Common
Stock and Preferred Stock which were outstanding immediately prior to the
Effective Time or MEI Exchange Stock which were outstanding at the Effective
Time in accordance with this Agreement. If, after the Effective Time, TMP
Common Stock, WCI Common Stock, MEI Common Stock and Preferred Stock or MEI
Exchange Stock is presented to the Surviving Corporation or the exchange agent
for any reason, such stock shall be canceled and retired and MEI Exchange Stock,
Newco Common Stock or Newco Preferred Stock, as the case may be, shall be
exchanged as provided in this Article II, except as otherwise provided by law.
Until shares of TMP Common Stock, WCI Common Stock, MEI Common Stock and
Preferred Stock and MEI Exchange Stock are surrendered for conversion, all such
shares shall, by virtue of the Mergers, be deemed for all purposes to evidence
ownership of the number of shares of Newco Exchange Stock, Newco Class B
Exchange Stock or Newco Preferred
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<PAGE>
Stock, as the case may be, to which the holder (or, in the case of AJM, the
beneficial owner) of TMP Common Stock, WCI Common Stock, MEI Common Stock and
Preferred Stock and MEI Exchange Stock would be entitled upon full conversion as
though all conversions applicable to those shares pursuant to the Mergers had
taken place, except as otherwise required by law. All shares of Newco Exchange
Stock issued to the Interactive Stockholder upon the surrender of the 10 shares
of Interactive Common Stock owned by him in accordance with the terms of this
Article II shall be deemed to have been issued in full satisfaction of all
rights pertaining to those shares of Interactive Common Stock. If, after the
Effective Time, all or part of the 10 shares of Interactive Common Stock owned
prior to the Effective Date by the Interactive Stockholder are presented to the
Surviving Corporation or the exchange agent or Interactive for any reason, Newco
shall become the owner of those shares and shall issue to the Interactive
Stockholder the shares of Newco Exchange Stock to which he is entitled as a
result of the Exchange as specified on Schedule I. Until the 10 shares of
Interactive Common Stock held by the Interactive Stockholder prior to the
Effective Date are surrendered for exchange, all such shares shall, by virtue of
the Exchange, be deemed for all purposes to evidence ownership of the number of
shares of Newco Exchange Stock to which the Interactive Stockholder would be
entitled upon their exchange pursuant to the Exchange.
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<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
The Stockholders hereby represent and warrant severally, and not jointly,
to TMP, WCI, MEI and Newco that:
SECTION 3.01. STOCK OWNERSHIP. Each Stockholder owns, of record and
beneficially, all of the TMP Common Stock, WCI Common Stock, MEI Common Stock
and Preferred Stock, Newco Class B Common Stock and Interactive Common Stock set
forth opposite such Stockholder's name on Schedule I.
SECTION 3.02. AUTHORITY. Each Stockholder has full capacity to enter into
this Agreement and this Agreement is a legal, valid and binding obligation of
each Stockholder and is enforceable against such Stockholder in accordance with
its terms and conditions.
SECTION 3.03. INVESTMENT INTENT. Each Stockholder understands and
acknowledges that the MEI Exchange Stock, Newco Exchange Stock, Newco Class B
Exchange Stock and Newco Preferred Stock are being offered to the Stockholders
in reliance by TMP, WCI, MEI and Newco upon the exemption provided in Section
4(2) of the Securities Act of 1933, as amended (the "Securities Act"), from the
registration requirements of the Securities Act; and each Stockholder makes the
following representations and warranties with the intent that the same may be
relied upon in determining the suitability of each Stockholder as a purchaser of
securities:
(a) MEI Exchange Stock, Newco Exchange Stock, Newco Class B Exchange Stock
and Newco Preferred Stock, as the case may be, is being acquired solely for the
account of each Stockholder, for investment purposes only, and not with a view
to, or for sale in connection with, any distribution thereof and with no present
intention of distributing or
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<PAGE>
reselling any part of the MEI Exchange Stock, Newco Exchange Stock, Newco Class
B Exchange Stock and Newco Preferred Stock, as the case may be.
(b) Each Stockholder is knowledgeable and experienced in making and
evaluating investments of this nature and desires that the Mergers and the
Exchange be effected on the terms and conditions set forth herein.
(c) Each Stockholder is able to bear the economic risk of an investment in
the MEI Exchange Stock, Newco Exchange Stock, Newco Class B Exchange Stock and
Newco Preferred Stock, as the case may be.
(d) Each Stockholder has had the opportunity to ask questions of and
receive answers from TMP, WCI, MEI, Newco and Interactive concerning the Mergers
and the Exchange. Notwithstanding the foregoing, however, each Stockholder is
entering into this Agreement based solely on such Stockholder's evaluation of
the Mergers and the Exchange.
SECTION 3.04. LEGEND. Each Stockholder agrees that the certificates
evidencing the stock acquired pursuant to this Agreement will have a legend
placed thereon stating that the shares represented by such certificates have not
been registered under the Securities Act or any state securities laws and
setting forth or referring to the restrictions on transferability.
SECTION 3.05. INDEMNIFICATION. Each Stockholder agrees to defend and hold
TMP, WCI, MEI, Newco and each other Stockholder harmless against and in respect
of any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies, including interest,
penalties, and reasonable attorney fees, that any of them shall incur or suffer,
which arise out of, result from or relate to any material breach of, or failure
by such Stockholder to perform any of its representations, warranties, covenants
and
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<PAGE>
agreements in this Agreement or in any exhibit or other instrument furnished or
to be furnished by such Stockholder under this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TMP
TMP represents and warrants to WCI, MEI, Newco and the Stockholders that:
SECTION 4.01. ORGANIZATION. TMP is a corporation duly organized, validly
existing, and in good standing under the laws of Delaware and has all necessary
corporate power to own its properties and to carry on its business as presently
conducted.
SECTION 4.02. CAPITAL. The authorized capital stock of TMP consists of
1,000,000 shares of common stock, par value $.01 per share, of which _______
shares are currently issued and outstanding.
SECTION 4.03. AUTHORITY. The Board of Directors of TMP has authorized the
execution of this Agreement and the transactions contemplated hereby, and TMP
has full power and authority to execute, deliver and perform this Agreement and
this Agreement is a legal, valid and binding obligation of TMP, and is
enforceable against TMP in accordance with its terms and conditions, subject to
the approval of its stockholders. TMP shall submit this Agreement to the
stockholders of TMP entitled to vote thereon in accordance with the GCL and
TMP's certificate of incorporation and bylaws.
SECTION 4.04. INDEMNIFICATION. TMP agrees to indemnify, defend and hold
WCI, MEI, Newco and the Stockholders harmless against and in respect of any and
all claims, demands, losses, costs, expenses, obligations, liabilities, damages,
recoveries and deficiencies, including interest, penalties, and reasonable
attorney fees, that any of them
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shall incur or suffer, which arise out of, result from or relate to any material
breach of, or failure by TMP to perform any of its representations, warranties,
covenants and agreements in this Agreement or in any schedule, certificate,
exhibit or other instrument furnished or to be furnished by TMP under this
Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WCI
WCI represents and warrants to TMP, MEI, Newco and the Stockholders that:
SECTION 5.01. ORGANIZATION. WCI is a corporation duly organized, validly
existing, and in good standing under the laws of Delaware and has all necessary
corporate power to own its properties and to carry on its business as presently
conducted.
SECTION 5.02. CAPITAL. The authorized capital stock of WCI consists of
1,000,000 shares of common stock, par value $.01 per share, of which _____
shares are currently issued and outstanding.
SECTION 5.03. AUTHORITY. The Board of Directors of WCI has authorized the
execution of this Agreement and the transactions contemplated hereby, and WCI
has full power and authority to execute, deliver and perform this Agreement and
this Agreement is a legal, valid and binding obligation of WCI, and is
enforceable against WCI in accordance with its terms and conditions, subject to
the approval of its stockholders. WCI shall submit this Agreement to the
stockholders of WCI entitled to vote thereon in accordance with the GCL and
WCI's certificate of incorporation and bylaws.
SECTION 5.04. INDEMNIFICATION. WCI agrees to indemnify, defend and hold
TMP, MEI, Newco and the Stockholders harmless against and in respect of any and
all
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claims, demands, losses, costs, expenses, obligations, liabilities, damages,
recoveries and deficiencies, including interest, penalties, and reasonable
attorney fees, that any of them shall incur or suffer, which arise out of,
result from or relate to any material breach of, or failure by WCI to perform
any of its representations, warranties, covenants and agreements in this
Agreement or in any schedule, certificate, exhibit or other instrument furnished
or to be furnished by WCI under this Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF MEI
MEI represents and warrants to TMP, WCI, Newco and the Stockholders that:
SECTION 6.01. ORGANIZATION. MEI is a corporation duly organized, validly
existing, and in good standing under the laws of New York and has all necessary
corporate power to own its properties and to carry on its business as presently
conducted.
SECTION 6.02. CAPITAL. The authorized capital stock of MEI consists of
200,000 shares of 10.5% Cumulative Preferred Stock, par value $10.00 per share,
of which _____ shares are currently issued and outstanding, and 2,000,000 shares
of common stock, par value $.001 per share, of which ________ shares are
currently issued and outstanding. The MEI Exchange Stock to be issued in the
Mergers is duly authorized, validly existing and, upon issuance in accordance
with the terms of this Agreement, will be fully paid and nonassessable.
SECTION 6.03. AUTHORITY. The Board of Directors of MEI has authorized the
execution of this Agreement and the transactions contemplated hereby, and MEI
has full power and authority to execute, deliver and perform this Agreement and
this Agreement is
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a legal, valid and binding obligation of MEI, and is enforceable against MEI in
accordance with its terms and conditions, subject to the approval of its
stockholders. MEI shall submit this Agreement to the stockholders of MEI
entitled to vote thereon in accordance with the BCL and MEI's certificate of
incorporation and bylaws.
SECTION 6.04. INDEMNIFICATION. MEI agrees to indemnify, defend and hold
TMP, WCI, Newco and the Stockholders harmless against and in respect of any and
all claims, demands, losses, costs, expenses, obligations, liabilities, damages,
recoveries and deficiencies, including interest, penalties, and reasonable
attorney fees, that any of them shall incur or suffer, which arise out of,
result from or relate to any material breach of, or failure by MEI to perform
any of its representations, warranties, covenants and agreements in this
Agreement or in any schedule, certificate, exhibit or other instrument furnished
or to be furnished by MEI under this Agreement.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF NEWCO
Newco represents and warrants to TMP, WCI, MEI and the Stockholders that:
SECTION 7.01. ORGANIZATION. Newco is a corporation duly organized,
validly existing, and in good standing under the laws of Delaware and has all
necessary corporate power to own its properties and to carry on its business as
presently conducted.
SECTION 7.02. CAPITAL. The authorized capital stock of Newco consists of
200,000,000 shares of common stock, par value $.001 per share, no shares of
which are currently issued and outstanding, 39,000,000 shares of Class B common
stock, par value $.001 per share, of which one share is currently issued and
outstanding, 200,000 shares of
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10.5% Cumulative Preferred Stock, par value $10.00 per share, no shares of which
are currently issued and outstanding, and 800,000 shares of preferred stock, par
value $.001 per share, no shares of which are currently issued and outstanding.
The Newco Exchange Stock, the Newco Class B Exchange Stock and the Newco
Preferred Stock to be issued in the Mergers are duly authorized, validly
existing and, upon issuance in accordance with the terms of this Agreement, will
be fully paid and nonassessable.
SECTION 7.03. AUTHORITY. The Board of Directors of Newco has authorized
the execution of this Agreement and the transactions contemplated hereby, and
Newco has full power and authority to execute, deliver and perform this
Agreement and this Agreement is a legal, valid and binding obligation of Newco,
and is enforceable against Newco in accordance with its terms and conditions,
subject to the approval of its stockholders. Newco shall submit this Agreement
to the stockholders of Newco entitled to vote thereon in accordance with the GCL
and Newco's certificate of incorporation and bylaws.
SECTION 7.04. INDEMNIFICATION. Newco agrees to indemnify, defend and hold
TMP, WCI, MEI and the Stockholders harmless against and in respect of any and
all claims, demands, losses, costs, expenses, obligations, liabilities, damages,
recoveries and deficiencies, including interest, penalties, and reasonable
attorney fees, that any of them shall incur or suffer, which arise out of,
result from or relate to any material breach of, or failure by Newco to perform
any of its representations, warranties, covenants and agreements in this
Agreement or in any schedule, certificate, exhibit or other instrument furnished
or to be furnished by Newco under this Agreement.
ARTICLE VIII
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CONDITIONS PRECEDENT TO TMP'S PERFORMANCE
SECTION 8.01. CONDITIONS. TMP's obligations hereunder shall be subject to
the satisfaction, on or before the Closing Date, of all the conditions set forth
in this Article VIII. TMP may waive any or all of these conditions in whole or
in part without prior notice; provided, however, that no such waiver of a
condition shall constitute a waiver by TMP of any other condition of or any of
TMP's other rights or remedies, at law or in equity, if WCI, MEI, Newco or the
Stockholders shall be in default of any of their respective representations,
warranties or covenants under this Agreement.
SECTION 8.02. ACCURACY OF REPRESENTATIONS. Except as otherwise permitted
by this Agreement, all representations and warranties by WCI, MEI, Newco and the
Stockholders in this Agreement or in any written statement that shall be
delivered to TMP by WCI, MEI, Newco or the Stockholders under this Agreement
shall be true and accurate on and as of the Closing Date as though made at that
time.
SECTION 8.03. PERFORMANCE. WCI, MEI, Newco and the Stockholders shall
have performed, satisfied and complied with all covenants, agreements and
conditions required by this Agreement to be performed or complied with by them,
on or before the Closing Date.
SECTION 8.04. ABSENCE OF LITIGATION. No action, suit or proceeding before
any court or any governmental body or authority, pertaining to the transactions
contemplated by this Agreement or to their consummation, shall have been
instituted or threatened against WCI, MEI, Newco or the Stockholders (or any of
them) on or before the Closing Date.
Section 8.05. STOCKHOLDER APPROVAL. The stockholders of each of TMP, WCI,
MEI and Newco shall have duly approved and adopted this Agreement by the
votes or
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consents of stockholders, if any, required by the applicable provisions of
the GCL or BCL, as the case may be.
SECTION 8.06. CLOSING CERTIFICATE. Each of WCI, MEI, Newco and each
Stockholder shall have delivered to TMP a certificate, dated the Closing Date,
certifying that each of the conditions specified in Sections 8.02, 8.03, 8.04
and 8.05 hereof have been fulfilled.
ARTICLE IX
CONDITIONS PRECEDENT TO WCI'S PERFORMANCE
SECTION 9.01. CONDITIONS. WCI's obligations hereunder shall be subject to
the satisfaction, on or before the Closing Date, of all the conditions set forth
in this Article IX. WCI may waive any or all of these conditions in whole or in
part without prior notice; provided, however, that no such waiver of a condition
shall constitute a waiver by WCI of any other condition of or any of WCI's other
rights or remedies, at law or in equity, if TMP, MEI, Newco or the Stockholders
shall be in default of any of their respective representations, warranties or
covenants under this Agreement.
SECTION 9.02. ACCURACY OF REPRESENTATIONS. Except as otherwise permitted
by this Agreement, all representations and warranties by TMP, MEI, Newco and the
Stockholders in this Agreement or in any written statement that shall be
delivered to WCI by TMP, MEI, Newco or the Stockholders under this Agreement
shall be true and accurate on and as of the Closing Date as though made at that
time.
SECTION 9.03. PERFORMANCE. TMP, MEI, Newco and the Stockholders shall
have performed, satisfied and complied with all covenants, agreements and
conditions required
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by this Agreement to be performed or complied with by them, on or before the
Closing Date.
SECTION 9.04. ABSENCE OF LITIGATION. No action, suit or proceeding before
any court or any governmental body or authority, pertaining to the transactions
contemplated by this Agreement or to their consummation, shall have been
instituted or threatened against TMP, MEI, Newco or the Stockholders (or any of
them) on or before the Closing Date.
SECTION 9.05. STOCKHOLDER APPROVAL. The stockholders of each of TMP, WCI,
MEI and Newco shall have duly approved and adopted this Agreement by the votes
or consents of stockholders, if any, required by the applicable provisions of
the GCL or BCL, as the case may be.
SECTION 9.06. CLOSING CERTIFICATE. Each of TMP, MEI, Newco and each
Stockholder shall have delivered to WCI a certificate, dated the Closing Date,
certifying that each of the conditions specified in Sections 9.02, 9.03, 9.04
and 9.05 hereof have been fulfilled.
ARTICLE X
CONDITIONS PRECEDENT TO MEI'S PERFORMANCE
SECTION 10.01. CONDITIONS. MEI's obligations hereunder shall be subject
to the satisfaction, on or before the Closing Date, of all the conditions set
forth in this Article X. MEI may waive any or all of these conditions in whole
or in part without prior notice; provided, however, that no such waiver of a
condition shall constitute a waiver by MEI of any other condition of or any of
MEI's other rights or remedies, at law or in equity, if TMP,
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WCI, Newco or the Stockholders shall be in default of any of their respective
representations, warranties or covenants under this Agreement.
SECTION 10.02. ACCURACY OF REPRESENTATIONS. Except as otherwise
permitted by this Agreement, all representations and warranties by TMP, WCI,
Newco and the Stockholders in this Agreement or in any written statement that
shall be delivered to MEI by TMP, WCI, Newco or the Stockholders under this
Agreement shall be true and accurate on and as of the Closing Date as though
made at that time.
SECTION 10.03. PERFORMANCE. TMP, WCI, Newco and the Stockholders shall
have performed, satisfied and complied with all covenants, agreements and
conditions required by this Agreement to be performed or complied with by them,
on or before the Closing Date.
SECTION 10.04. ABSENCE OF LITIGATION. No action, suit or proceeding
before any court or any governmental body or authority, pertaining to the
transactions contemplated by this Agreement or to their consummation, shall
have been instituted or threatened against TMP, WCI, Newco or the Stockholders
(or any of them) on or before the Closing Date.
SECTION 10.05. STOCKHOLDER APPROVAL. The stockholders of each of TMP,
WCI, MEI and Newco shall have duly approved and adopted this Agreement by the
votes or consents of stockholders, if any, required by the applicable
provisions of the GCL or BCL, as the case may be.
SECTION 10.06. CLOSING CERTIFICATE. Each of TMP, WCI, Newco and each
Stockholder shall have delivered to MEI a certificate, dated the Closing Date,
certifying that each of the conditions specified in Sections 10.02, 10.03, 10.04
and 10.05 hereof have been fulfilled.
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ARTICLE XI
CONDITIONS PRECEDENT TO NEWCO'S PERFORMANCE
SECTION 11.01. CONDITIONS. Newco's obligations hereunder shall be subject
to the satisfaction, on or before the Closing Date, of all the conditions set
forth in this Article XI. Newco may waive any or all of these conditions in
whole or in part without prior notice; provided, however, that no such waiver of
a condition shall constitute a waiver by Newco of any other condition of or any
of Newco's other rights or remedies, at law or in equity, if TMP, WCI, MEI or
the Stockholders shall be in default of any of their respective representations,
warranties or covenants under this Agreement.
SECTION 11.02. ACCURACY OF REPRESENTATIONS. Except as otherwise permitted
by this Agreement, all representations and warranties by TMP, WCI, MEI and the
Stockholders in this Agreement or in any written statement that shall be
delivered to Newco by TMP, WCI, MEI or the Stockholders under this Agreement
shall be true and accurate on and as of the Closing Date as though made at that
time.
SECTION 11.03. PERFORMANCE. TMP, WCI, MEI and the Stockholders shall have
performed, satisfied and complied with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by them, on or
before the Closing Date.
SECTION 11.04. ABSENCE OF LITIGATION. No action, suit or proceeding before
any court or any governmental body or authority, pertaining to the transactions
contemplated by this Agreement or to their consummation, shall have been
instituted or threatened against TMP, WCI, MEI or the Stockholders (or any of
them) on or before the Closing Date.
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SECTION 11.05. STOCKHOLDER APPROVAL. The stockholders of each of TMP, WCI,
MEI and Newco shall have duly approved and adopted this Agreement by the votes
or consents of stockholders, if any, required by the applicable provisions of
the GCL or BCL, as the case may be.
SECTION 11.06. CLOSING CERTIFICATE. Each of TMP, WCI, MEI and each
Stockholder shall have delivered to Newco a certificate, dated the Closing Date,
certifying that each of the conditions specified in Sections 11.02, 11.03, 11.04
and 11.05 hereof have been fulfilled.
ARTICLE XII
CONDITIONS PRECEDENT TO
THE STOCKHOLDERS' PERFORMANCE
SECTION 12.01. CONDITIONS. The Stockholders' obligations hereunder shall
be subject to the satisfaction, on or before the Closing Date, of all the
conditions set forth in this Article XII. The Stockholders may waive any or
all of these conditions in whole or in part without prior notice; provided,
however, that no such waiver of a condition shall constitute a waiver by the
Stockholders of any other condition of or any of the Stockholders' rights or
remedies, at law or in equity, if TMP, WCI, MEI and Newco shall be in default
of any of their representations, warranties or covenants under this Agreement.
SECTION 12.02. ACCURACY OF REPRESENTATIONS. Except as otherwise permitted
by this Agreement, all representations and warranties by TMP, WCI, MEI and Newco
in this Agreement or in any written statement that shall be delivered to the
Stockholders by WCI, TMP, MEI and Newco under this Agreement shall be true and
accurate on and as of the Closing Date as though made at that time.
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SECTION 12.03. PERFORMANCE. TMP, WCI, MEI and Newco shall have performed,
satisfied and complied with all covenants, agreements and conditions required by
this Agreement to be performed or complied with by them, on or before the
Closing Date.
SECTION 12.04. ABSENCE OF LITIGATION. No action, suit or proceeding before
any court or any governmental body or authority, pertaining to the transactions
contemplated by this Agreement or to their consummation, shall have been
instituted or threatened against TMP, WCI, MEI or Newco on or before the Closing
Date.
SECTION 12.05. STOCKHOLDER APPROVAL. The stockholders of each of TMP, WCI,
MEI and Newco shall have duly approved and adopted this Agreement by the votes
or consents of stockholders, if any, required by the applicable provisions of
the GCL or BCL, as the case may be.
SECTION 12.06. CLOSING CERTIFICATE. Each of WCI, TMP, MEI and Newco shall
have delivered to the Stockholders a certificate, dated the Closing Date and
signed by the president of each of TMP, WCI, MEI and Newco certifying that each
of the conditions specified in Sections 12.02, 12.03, 12.04 and 12.05 have been
fulfilled.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. CAPTIONS AND HEADINGS. The Articles and Section headings
throughout this Agreement are for convenience and reference only, and shall in
no way be deemed to define, limit, or add to the meaning of any provision of
this Agreement.
SECTION 13.02. NO ORAL CHANGE. This Agreement and any provisions hereof
may not be waived, changed, modified, or discharged orally, but it can be
changed by an
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agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, or discharge is sought.
SECTION 13.03. NON-WAIVER. Except as otherwise expressly provided herein,
no waiver of any covenant, condition, or provision of this Agreement shall be
deemed to have been made unless expressly in writing and signed by the party
against whom such waiver is charged; and (i) the failure of any party to insist
in any one or more cases upon the performance of any of the provisions,
covenants, or conditions of this Agreement or to exercise any option herein
contained shall not be construed as a waiver or relinquishment for the future of
any such provisions, covenants or conditions, (ii) the acceptance of performance
of anything required by this Agreement to be performed with knowledge of the
breach or failure of a covenant, condition, or provision hereof shall not be
deemed a waiver of such breach or failure, and (iii) no waiver by any party of
one breach by another party shall be construed as a waiver with respect to any
other or subsequent breach.
SECTION 13.04. ENTIRE AGREEMENT. This Agreement contains the entire
Agreement and understanding among the parties hereto with respect to its subject
matter, and supersedes all prior agreements and understandings with respect to
its subject matter.
SECTION 13.05. CHOICE OF LAW. This Agreement and its application shall be
governed by the laws of the State of Delaware, without giving effect to the
principles of conflicts of laws thereof.
SECTION 13.06. TAX EFFECTS. The applicable provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, pertinent
judicial authorities, interpretive rulings of the Internal Revenue Service and
such other relevant authorities will apply to the Mergers. The mergers of WCI
with and into MEI, and MEI with and into
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Newco, shall under current law, constitute tax-free reorganizations under
Section 368(a) of the Code. WCI and MEI will both be parties to their
reorganization, and MEI and Newco will both be parties to their reorganization,
within the meaning of Section 368(b) of the Code. The merger of TMP with and
into MEI shall constitute a liquidation of a subsidiary into its parent, which
under current law, is a tax-free liquidation under Section 332 of the Code. No
gain or loss shall be recognized on the receipt by the parent corporation of
property distributed in complete liquidation of its subsidiary.
Section 13.07. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 13.08. NOTICES. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally on the party to
whom notice is to be given, or on the third day after mailing if mailed to the
party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed as follows (or such other
address with respect to any party as shall be provided in writing by such party
to the other parties hereto):
TMP, WCI, MEI or NEWCO:
TMP Worldwide Inc.
1633 Broadway
New York, New York 10019
Attention: Mr. Andrew J. McKelvey
Myron F. Olesnyckyj, Esq.
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WITH A COPY TO:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Paul Jacobs, Esq.
THE STOCKHOLDERS:
to each Stockholder, respectively, in care of TMP.
SECTION 13.09. BINDING EFFECT. This Agreement shall inure to and be
binding upon the heirs, executors, personal representatives, successors and
permitted assigns, if any, of each of the parties to this Agreement who have
executed the same.
SECTION 13.10. MUTUAL COOPERATION. The parties hereto shall cooperate with
each other to achieve the purpose of this Agreement, and shall execute such
other and further documents and take such other and further actions as may be
necessary or convenient to effect the transactions described herein. Without
limiting the foregoing, if at any time after the Effective Date the Surviving
Corporation shall consider it to be advisable that any further conveyances,
agreements, documents, instruments and assurances of law or any other things are
necessary or desirable to vest, perfect, confirm or record in the Surviving
Corporation the title to any property, rights, privileges, powers, licenses and
franchises of TMP, WCI or MEI or otherwise to carry out the provisions of this
Agreement, the officers of TMP, WCI or MEI last in office shall execute and
deliver, upon the Surviving Corporation's request, any and all proper
conveyances, agreements, documents, instruments and assurances of law, and do
all things necessary or proper to vest, perfect, or confirm title to such
property, rights, privileges, powers, licenses and franchises in the Surviving
Corporation, and otherwise to carry out the provisions of this Agreement.
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SECTION 13.11. CONTRACTUAL OBLIGATIONS; MISCELLANEOUS. Without in any way
limiting the effect of the Mergers, it is understood and agreed that any
contractual rights, obligations and restrictions applicable to or relating to
any shares of, or any holders of shares of, TMP Common Stock, WCI Common Stock,
MEI Common Stock or Preferred Stock or MEI Exchange Stock shall remain in full
force and effect as to the applicable shares of, or to the applicable holder of
shares of, Newco Exchange Stock, Newco Class B Common Stock or Newco Preferred
Stock issuable or issued upon conversion of any shares of TMP Common Stock, WCI
Common Stock, MEI Common Stock or Preferred Stock or MEI Exchange Stock,
including but not limited to the rights, obligations and restrictions arising
under that certain TMP Stockholders' Agreement effective as of January 1, 1992.
It is understood and agreed that unless otherwise agreed to in writing by Newco
and AJM, no person or entity other than AJM, whether or not such person or
entity is specifically named in this Agreement or in the Schedules, shall be
entitled to convert or exchange their securities of, or rights, options or
warrants to acquire securities of, any of TMP, WCI or MEI into shares of, or
rights, options or warrants to acquire shares of, Class B common stock, par
value $.01 per share, of Newco. Without limiting the generality of the
foregoing, it is understood that any rights, options or warrants to purchase
common stock of any of TMP, WCI or MEI which are not specifically dealt with in
this Agreement or in the Schedules but survive the Merger by operation of law,
if any, shall mean and be rights, options or warrants to purchase common stock,
par value $.001 per share, of Newco.
SECTION 13.12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations, warranties, covenants and agreements of the parties set forth
in this Agreement or in any
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instrument, certificate, opinion, or other writing providing for in it, shall
survive the Closing Date irrespective of any investigation made by or on behalf
of any party.
AGREED TO AND ACCEPTED as of the date first above written.
TMP WORLDWIDE INC.
By:
--------------------------------
Name:
Title:
WORLDWIDE CLASSIFIED INC.
By:
--------------------------------
Name:
Title:
MCKELVEY ENTERPRISES, INC.
By:
--------------------------------
Name:
Title:
TELEPHONE MARKETING PROGRAMS
INCORPORATED
By:
--------------------------------
Andrew J. McKelvey, President
------------------------------------
Andrew J. McKelvey
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------------------------------------
Edward C. Albertson
------------------------------------
Mark O. Brown
BTD ACQUISITION, INC.
By:
--------------------------------
Name:
Title:
------------------------------------
Alfred M. Cady, III
------------------------------------
Paul M. Camara
------------------------------------
Gerda L. Carlson
------------------------------------
Daniel Collins
------------------------------------
Thomas G. Collison
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CPC ACQUISITION CORP.
By:
--------------------------------
Name:
Title:
------------------------------------
George R. Eisele
------------------------------------
Martin L. Felde
------------------------------------
Joe M. Glick
------------------------------------
Grech Family Limited Partnership
------------------------------------
Bernice M. Hazell
------------------------------------
David A. Hosokawa
------------------------------------
Lance Johnson
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------------------------------------
Robert M. Kanne
------------------------------------
Harold L. Levy
------------------------------------
Ronald Plotkin
------------------------------------
Roxane Previty
------------------------------------
Nancy Rooney
------------------------------------
J. Christopher Stimac
------------------------------------
Michael Torrey
------------------------------------
James J. Treacy
------------------------------------
Lance Willis
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------------------------------------
John Yocom
YPMS ACQUISITION, INC.
By:
--------------------------------
Name:
Title:
TELEPHONE MARKETING PROGRAMS, INC.
PROFIT SHARING PLAN
By:
--------------------------------
Paul Camara
--------------------------------
Harold Levy
--------------------------------
Thomas G. Collison
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TELEPHONE DIRECTORY ADVERTISING, INC.
STOCK PURCHASE AGREEMENT
This agreement made this 26 day of May, 1977 among Timothy P. Hanley of
Dekalb County, Georgia, hereinafter referred to as "Hanley",
and
Telephone Marketing Programs, Inc., a New York Corporation, hereinafter
referred to as "TMP",
and
Andrew J. McKelvey of the City of New York, New York, hereinafter referred
to as "McKelvey",
and
Bard Publishing Company, a New York Corporation, hereinafter referred to as
"Bard".
WHEREAS, Hanley is presently employed as President and sole stockholder of
a Georgia Corporation known as Telephone Directory Advertising, Inc.,
hereinafter referred to as "TDA"; and
WHEREAS, McKelvey is the owner of all of the issued and outstanding shares
of TMP and has agreed to be bound by certain restrictive covenants set forth
hereunder; and
WHEREAS, TMP conducts a business similar to that carried on by TDA; and
WHEREAS TMP has agreed to furnish certain services to TDA as are
specifically described in that Services Agreement dated the 26 day of May, 1977,
between Bard Publishing Company, TMP and TDA; and
WHEREAS, Bard Publishing Company has agreed to furnish certain services in
the aforementioned Agreement; and
WHEREAS, upon the issuance of 96 shares of stock of TDA and the purchase of
same by TMP, TMP will then own 48.98 percent of the outstanding stock of TDA and
Hanley will own 51.02 percent of the outstanding stock of TDA; and
WHEREAS, the parties have entered into this Agreement to
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provide for the rights of Hanley and TMP as shareholders of TDA and to provide
for certain provisions relating to the management and control of TDA and for the
mutual protection of the parties to this Agreement; and
WHEREAS, the parties recognize that Hanley has been employed by TDA for
years and his knowledge and expertise in the management and control of TDA is
essential to its future operation and
WHEREAS, Hanley has agreed to serve as President and Chief Executive
Officer of TDA.
NOW THEREFORE, this Agreement witnesses that in consideration of the sum
of $10.00 in hand paid by each party to the other and of the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each party, the parties hereto
agree to cause such meetings of TDA to be held, votes cast, resolutions
passed, by-laws enacted and amended as necessary, documents executed and all
things and acts done to insure the following arrangements with respect to the
operation and control of TDA, and the parties agree as follows:
ARTICLE ONE
CAPITAL STOCK
1.01 Hanley, as sole stockholder and director of TDA shall, by appropriate
resolution, cause TDA to authorize the issuance of 96 shares of Capital Stock to
TMP for which TMP shall pay the sum of $29,000.00, and said resolution shall
authorize TDA to place the sum of $20,000.00 in an escrow or other special
purpose account for the purpose of retiring the existing $20,000.00 indebtedness
of TDA to Tucker Wayne, Inc.
ARTICLE TWO
OPERATION AND FINANCE
2.01 Hanley shall be President of and Chief Executive Officer of the
Corporation and be responsible for the day-to-day
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<PAGE>
operations and management of TDA, and shall devote his whole time attention, and
energies to the management, operation, and improvement of said business to the
utmost of his ability, and shall do and perform all such services, acts, and
things connected therewith which properly belong to the duties of a President
of TDA.
2.02. In consideration of the services to be rendered to the
Corporation by Hanley, Hanley shall be paid or shall receive the following
amounts as President of TDA:
(a) an annual salary of $40,000 payable twice a month;
(b) A standard size automobile obtainable at a cost no greater than a new
Chevrolet Impala or Ford LTD automobile or the largest automobile available
in the Ford or Chevrolet line, for use in connection with his position as
President of the Corporation, together with reimbursement for usual car and
travel expenses, including, but not limited to, taxes, title, insurance,
license tag, gas, oil, maintenance, and parking;
(c) reimbursement for entertainment and promotional expenses incurred in
connection with the business of TDA;
(d) TDA shall also pay to Hanley his reasonable expenses of travelling,
board and lodging, postage, customer entertainment, and other such expenses
reasonably incurred by him as President of TDA in or about its business.
2.03. In the event Hanley's gross income from TDA for wages, bonus,
profit sharing and dividends in any calendar year in which Hanley was employed
by TDA for a period of 12 months is less than $60,000, then and in that event,
his salary for that year only shall be supplemented pursuant to Paragraph 2.04
below.
2.04. The supplement to the salary to be paid to Hanley as provided in
paragraph 2.03 above shall be determined as follows:
(a) As promptly as practicable at the end of the year for which a cost of
living salary increase is made applicable pursuant to Paragraph 2.03, TDA shall
compute the increase, if any, in the
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cost of living, using as the basis of such computation the "Revised Consumer
Price Index - Cities (1957-59=100)", hereinafter called the Index, published by
the Bureau of Labor Statistics of the United States Department of Labor.
(b) The Index number in the column for Atlanta, Georgia entitled "all
items", for the month of January, 1977, shall be the "Base Index Number" and the
corresponding Index number for the month of January on each anniversary of this
agreement, or any extension thereof, shall be the "Current Index Number".
(c) The increase in the cost of living on each anniversary of this
agreement as such increase may be applicable pursuant to Paragraph 2.03, shall
be determined by dividing the Current Index Number (CIN) by the Base Index
Number (BIN), and subtracting the integer 1 from the quotient, in accordance
with the following formula:
Increase in cost of living = (CIN) - 1.
-----
(BIN)
(d) The percentage of increase in the cost of living, multiplied by
$40,000, shall be the increase required to be determined by subparagraph (a).
Any portion of the increase retroactively due shall be payable within five days
after the computation hereunder has been made.
(e) Appropriate adjustment shall be promptly made in case there is a
published amendment of the Index figures upon which the computation is based.
(f) If publication of the Consumers Price Index is discontinued, the
parties hereto shall accept comparable statistics on the cost of living for the
City of Atlanta, Georgia as computed and published by an agency of the United
States or by a responsible financial periodical of recognized authority then to
be selected by the parties.
ARTICLE THREE
PROVISIONS FOR CONTROL OF THE CORPORATION (TDA)
3.01. Unless authorized by unanimous vote of the Board of Directors
and Shareholders of the Corporation, no additional shares of stock of the
Corporation will be authorized or issued.
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<PAGE>
3.02. As long as Hanley owns the stock of TDA, TMP and Hanley shall
cause Hanley, Diane Hanley, John L. Blandford, and McKelvey to be elected as the
sole directors of the corporation.
3.03. The corporation shall have three officers, namely, a president,
vice president and secretary, the offices of which shall, at all times, be
filled by the following respective individuals: President, Hanley; Vice
President, A.J. McKelvey; and secretary, Diane Hanley.
3.04. No decisions shall be made by Hanley in his capacity as a
director of the Corporation which would have the effect of resulting in harsh or
oppressive treatment of TMP in its capacity as a minority shareholder of the
corporation.
3.05. A quorum for a meeting of shareholders of the Corporation shall
be two persons holding at least 75% of the issued and outstanding shares of the
Corporation carrying the right to vote, present in person or represented by
proxy. Shareholders meetings shall require at least 14 days prior written
notice.
3.06. The remuneration payable to Hanley hereunder shall be subject to
annual review by the Board of Directors, and shall not be increased or reduced
unless unanimously agreed to by said Board, and in order to effectuate this
provision, TDA's by-laws and the certificate of incorporation shall be amended,
as required, under the laws of the State of Georgia.
ARTICLE FOUR
RIGHT OF FIRST REFUSAL
4.01. In the event that at any time either party (hereinafter in this
ARTICLE FOUR called the "Selling Party") receives a bona fide offer to purchase
or otherwise acquire the Common Shares owned by the Selling Party, before
accepting such offer the Selling Party shall give notice in writing to the other
party (hereinafter in this ARTICLE FOUR called the "Other Party") (which notice
is in this ARTICLE FOUR called a "Notice of Offer") stating the terms,
conditions and price contained in such offer. The Other Party shall then have
the right, option and privilege to be exercised by notice in writing which must
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<PAGE>
be received by the Selling Party within 30 days after date of mailing of the
Notice of Offer, to purchase all but not less than all the Common Shares in
respect of which the Selling Party has received an offer, at a price and on the
terms and conditions set out in the Notice of Offer. In the event that the Other
Party does not elect to purchase the Common Shares of the Selling Party, and
provided that the pruchaser of the Common Shares owned by the Selling Party
becomes a party to this agreement upon the same terms and conditions as are
contained herein, the Selling Party shall, for a period c-mmencing not less than
31 days after the date on which the Notice of Offer is mailed and not more than
60 days after such date, have the right to accept such bona fide offer or
otherwise to sell, assign, transfer or dispose of his Common Shares to any other
person or persons at a price and on terms and subject to conditions not more
favorable to the purchaser than the price, terms and conditions set out in the
Notice of Offer. If the sale of the Common Shares is not completed on or before
the expiration of the said 60 day period, the provisions of this Paragraph
4.01 shall continue to apply again and shall only be exhausted with respect to
the Selling Party's obligations if any such sale is completed.
ARTICLE FIVE
BUY-SELL
--------
5.01. For the purposes of this ARTICLE FIVE, the value of the Common Shares
issued and outstanding (not including treasury stock) at any time between the
date hereof and the end of the first 12 month fiscal year shall be at least
$240,000. For each fiscal year commencing thereafter, the value of the Common
Shares shall be an amount equal to 200% of the gross commissions earned in the
immediately-preceding fiscal year by TDA.
5.02. If a purchase and sale of the shares of TDA is required to take place
as a result of a death contemplated bv Section 5.03, prior to such sale being
completed, the full amount of TDA's consolidated retained earnings computed to
the end of the month in which such death occurred shall be paid as a divident
ratably among the shareholders of TDA.
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<PAGE>
5.03 In the event of the death of Hanley, TMP shall be required to purchase
the Common Shares of the Corporation owned by Hanley and in the event of the
death of McKelvey, Hanley shall have the option for only a period of 90 days
following the death of McKelvey to purchase the Common Shares of TMP owned by
it, subject to the terms and condigions set forth in this ARTICLE FIVE and in
ARTICLE SEVEN, excluding Paragraph 5.07.
5.04 For the purposes of this Article, the value per Common Share shall be
computed by dividing the value of the Common Shares determined in Paragraph 5.01
by the number of issued and outstanding Common Shares of the Corporation (not
including treasury stock). The purchase price shall be an amount equal to the
value per Common Share times the number of Common Shares which are to be
purchased.
5.05 The total purchase price shall be payable on the date of closing, which
date shall be 60 days from the date of death of either Hanley or McKelvey, as
the case may be, or five days after the date of receipt by the survivor of the
insurance proceeds on the life of the deceased, whichever is later, subject to
any agreement among the parties to the contrary.
5.06 Within 18 months from the acquisition of the Common Shares of TDA,
TMP and Hanley shall use their best efforts to cause such policies of
insurance to be obtained and from time to time maintained in force as will
enable TMP to purchase for cash the Common Shares owned by Hanley at his
death or enable Hanley to purchase the shares owned by TMP at McKelvey's
death. The Board of Directors of TDA may, by resolution of a majority of the
Board,. authorize the purchase of such policies and payment of premiums
thereon by TDA.
5.07 (a) At any time during the term of this agreement, either Han!ey or TMP
(hereinafter called the
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<PAGE>
"0fferor") shall have the right to send a notice in writing (hereinafter
called the "Notice of Offer ) to the other (herein after called the
"Offeree") which to be effective shall be signed by the Offeror and contain
the following:
(i) an offer to purchase all the Common Shares owned or controlled by
the Offeree at a price equal to the value per Common Share times the
number of Common Shares owned by the Offeree; and
(ii) an offer to sell all the Common Shares owned or controlled by the
Offeror at a price equal to the value per Common Share times the
number of Common Shares owned by the Offeror. The Offeree shall be
entitled by written notice (hereinafter called "Notice of Acceptance")
given to the Offeror within 30 days of the receipt by the Offeree of
the Notice of Offer to accept either of the offers contained in the
Notice of Offer.
(b) If the Offeree accepts the offer referred to in subparagraph 5.07
(a) (i) then subject to Paragraph 5.12, the Offeree (hereinafter called the
"Vendor") shall sell the Offeror (hereinafter called the "Purchaser") who shall
purchase from the Vendor all of the Common Shares owned or controlled by the
Vendor at the price set out in the Notice and the transaction shall be closed on
the day 28 days following the receipt by the Vendor of the Notice of Acceptance.
(c) If the Offeree accepts the offer referred to in subparagraph 5.07
(a) (ii) then the Offeree (hereinafter called the "Purchaser") shall purchase
from the Offeror (hereinafter called the Vendor") who shall sell to the
Purchaser all the Common Shares owned or controlled by the Vendor at the price
set out in the Notice of Offer and the transaction shall be closed
on the date 28 days following the receipt by the Vendor of the Notice of
Acceptance.
<PAGE>
(d) If the Offeree does not accept either of the offers contained in the
Notice of Offer within the said period of 30 days then the Offeree shall be
deemed to have accepted the offer referred to in subparagraph 5.07 (a)(i) and
the Offeree (hereinafter called the "Vendor") who shall sell to the Purchaser
all of the Common Shares owned or controlled by the Vendor at the price as set
out in the Notice of Offer and the transaction shall be closed on the date 28
days following the end of such 30-day period.
5.08 The purchase price for the Common Shares being purchased and sold
pursuant to the provisions of Paragraph 5.07 shall be paid as follows:
(a) 50% of such purchase price in lawful U.S. money by cash or
certified check on the date fixed for closing; and
(b) the balance of the purchase price by cash or certified check on a
date which is one year from the date of closing together with interest
on the balance from time to time outstanding at a rate of eight
percent.
(c) Hanley may elect to have the price for the Common Shares purchased
from him by TMP to be paid as follows:
(1) 29% of such purchase price in lawful U.S. money by cash or
certified check on the date fixed for closing; and
(2) 24% of the purchase price to be paid on the second day of January
in the calendar year immediately following the year in which sale is
consummated, 24% of the purchase price to be paid on the second day of
January in the second calendar year immediately following the year in
which sale is consummated; and the fourth and final payment of 23% of
the purchase price to be paid on the second day in January in the third
calendar year immediately following the year in which the sale is
consummated.
<PAGE>
(3) For the indebtedness on the installment payments set forth in (b) and
(c) above, the purchaser shall execute a promissory note bearing interest
at the rate of 8% per annum from the date the sale is consummated,
providing that upon default for ten days in any one of such notes all the
remaining notes, at the option of the holder or holders, shall immediately
become due and payable along with 20% attorney's fees if collected through
an attorney, provided that if the purchaser is TMP, and if such purchase by
TMP is made while McKelvey is an officer, director, or stockholder of TMP,
and if said McKelvey should subsequently resign as officer or director of
TMP or enter into an agreement to convey or transfer his stock therein
prior to the full payment of the balance due on the purchase price of the
stock sold by Hanley pursuant to this Article, then and in any such event
and at the option of Hanley, the outstanding balance of the purchase price
shall become immediately due and payable in full.
5.09. If either Hanley or McKelvey (hereinafter in this paragraph 5.09
called "the disabled party") becomes disabled and in the opinion of a qualified
medical practitioner given not less than six months after commencement of such
disability, the disabled party will be confined to a hospital bed or other
convalescent confinement for a period of at least eighteen months from the date
of commencement of such disability, then
(a) in the case of the disability of Hanley, TMP shall have the obligation
to purchase the Common Shares owned by Hanley at a price and upon the terms
determined as if Hanley had died on the date on which the opinion of the
qualified medical practitioner is given; or
(b) in the case of the disability of McKelvey then Hanley shall have the
option for a period of 90 days following the date on which the opinion of a
qualified medical practitioner is given, to purchase the Common Shares
owned by TMP at a price and upon the terms determined as if McKelvey died
on the date on which
<PAGE>
ARTICLE SIX
RESTRICTIVE COVENANTS
-----------------------
6.01 In consideration for the compensation paid Hanley hereunder, and for
the additional consideration of S1,000.00, Hanley agrees that if he resigns from
the employ of the Corporation or sells his stock in the corporation, then, for a
period of two years following the termination of his relationship with the
corporation (regardless of whether such termination was voluntary or
involuntary), he shall not, directly or indirectly, or as a member of a
partnership or as an officer, director, stockholder, or employee of any
corporation or other company, solicit any accounts in connection with the sale
of Yellow Page advertising which were accounts of TDA at the time of termination
of his relationship or within 12 months prior thereto;
6.02 If Hanley purchases the Common Shares of TDA owned by TMP, the
restrictive covenants set forth in Paragraph 6.01 shall apply to TMP and Bard
Publishing Company and McKelvey for a period of two years from the date of
closing of said purchase.
6.03 TMP -shall, at no cost and expense to TDA advise TDA as to its method
of operating its Yellow Page advertising business. In this connection, it shall
disclose to TDA the names of its customers as well as other relevant
information. In consideration for the foregoing, TDA agrees that for a period of
two years following the furnishing of services referred to in this paragraph,
TDA shall not, directly or indirectly, or as a member of a partnership, or
otherwise, solicit any accounts in connection with the sale of Yellow Page
advertising which were accounts of TMP at the time of the termination of the
services referred to herein or within 12 months prior thereto or disclose to any
person, firm, association or corporation, the name and addresses of any such
accounts or any trade secrets and confidential knowledge.
<PAGE>
6.04 . COVENANT NOT TO DISCLOSE NAMES OR ADDRESSES OF TDA'S CUSTOMERS.
McKelvey, TMP and Hanley further agree that during the period of this
agreement and for a period of two (2) years immediately after the termination of
this agreement as herein provided, they will not, either directly or indirectly,
make known or divulge the names or addresses of any of the customers or patrons
of TDA with whom they became acquainted after entering this agreement, to any
person, firm, or corporation, and that they will not, directly or indirectly
either for themselves or for any other person, firm, company or corporation,
call upon, solicit, divert, or take away, or attempt to solicit, divert or take
away any of the customers, business or patrons, of TDA with whom they came to
know by or through TDA or for whom they performed services and/or kept account
information for, by or through or at the instance of TDA.
McKelvey and TMP and Hanley hereby consent and agree that for any violation
of any of the provisions of this agreement, a restraining order and/or an
injunction may issue against them in addition to any other rights TDA may have.
In the event that TDA, McKelvey or Hanley is successful in any suit or
proceeding brought or instituted by it or him to enforce any of the provisions
of the within agreement or on account of any damages sustained by TDA, Hanley,
Or McKelvey by reason of the violation by TMP, Hanley or McKelvey of any of the
terms and/or provisions of this Agreement to be performed by them, they agree to
pay to TDA, Hanley, or McKelvey as the case may be, reasonable attorney's fees
to be fixed by the Court, plus liquidated damages as to each violation involving
a particular customer computed on the following formula: "1.5 x sum of the
customer's gross billing by TDA for the six highest billing months during the
calendar year immediately preceding the alleged breach".
6.05 COVENANT NOT TO DIVULGE TRADE SECRETS. TMP, McKelvey and Hanley further
covenant not to communicate during the continuance of this agreement, or at any
time subsequently, any information relating to the secrets of the traveling,
advertising and ccanvassing departments, nor any knowledge or secrets
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<PAGE>
which he then had or might from time to time acquire pertaining to other
departments of the business of TDA, to any person not a member of the TDA firm,
except as requested in writing by TDA. In case of violation of this covenant,
McKelvey, TnP and Hanley agree to pay to TDA. Hanley or McKelvey as the case may
be or their successors, the sum of $10,000 as liquidated damages, but such
payment is not to release them from the obligations undertaken, or from
liability for further breach thereof.
ARTICLE SEVEN
GENERAL SALE PROVISIONS
-----------------------
7.01 The provisions of this ARTICLE SEVEN shall apply to any sale of
Common Shares pursuant to ARTICLE FIVE.
7.02 On the date of closing the Purchaser shall pay to the Vendor the amount
of the purchase price required to be paid on closing in cash or by certified
check and deliver over the security documents herein mentioned as security for
the unpaid balance, if any, of the purchase price and the Vendor shall:
(a) deliver the required share certificates duly endorsed in blank for
transfer, which share certificates are then to be pledged with the Vendor as
security for the balance of the purchase price, if any;
(b) deliver to the Corporation signed resignations of himself and all of his
nominees from their positions on the Board of Directors of the Corporation and
from any offices and employments with the Corporation;
(c) do all other things and deliver all other documents necessary to
transfer to the Purchaser title to the Common Shares being transferred free and
clear of all liens and encumbrances, subject only to their being pledged with
the Vendor as security for the balance, if any, of the purchase price, including
succession duty and capital gains tax releases and declarations of transmission.
7.03 On the date of closing the Vendor and his or its nominees shall deliver
to the Corporation a release of all of their claims against the Corporation in
respect of loss of office as
<PAGE>
director and/or officer, or out of any employment agreement which they may have
entered into with the Corporation, other than with respect to accrued salaries,
if any, and shall resign as directors and officers of TDA.
7.04 If the Purchaser makes default in any payment of principal or interest
due on any deferred balance of the purchase price, or in the event that the
Purchaser makes default in the observance of any of the provisions set forth in
Paragraph 7.10 and such default shall have continued for 30 days, without
prejudice to any other rights which the Vendor may have, the whole unpaid
balance of the purchase price shall, at the option of the Vendor, immediately be
accelerated and become due and payable in full.
7.05 If, at the time of such sale, the Vendor (and/or McKelvey, where the
Vendor is TMP) shall be indebted to the Corporation in an amount recorded in the
books of such Corporation and verified by the auditor of the Corporation, the
Purchaser shall have the right to pay, satisfy and discharge all or any portion
of such indebtedness out of the purchase price and to receive and take credit
against the purchase price for the amount or amounts so paid on account of the
indebtedness.
7.06 Any claim of Hanley against McKelvey and/or TMP, or of TMP and/or
McKelvey against Hanley being a liquidated demand acknowledged in writing shall
be a charge against all of the Common Shares owned or controlled by the person
against whom the claim is made and shall be satisfied and discharged before the
completion of any sale under ARTICLE FIVE and an adjustment shall be made in the
purchase price therefor.
7.07 If, at the time of such sale, the Vendor, or any person, firm or
corporation, for or on behalf of the Vendor,
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shall have personal guarantees, securities or covenants lodged with any person
or bank to secure an indebtedness, liability or obligation of the Corporation
and/or the Purchaser then the Purchaser shall use his or its best efforts to
deliver up, or cause to be delivered up to the Vendor and cancel or cause to be
cancelled such guarantees, securities and/or covenants upon the closing of the
transaction of purchase and sale. If notwithstanding such best efforts, the
release of any such personal guarantee, security or covenant is not obtained,
then the Purchaser shall deliver to the Vendor and/or the persons, firms or
corporations which shall have provided such guarantee, security or covenant for
the Vendor, an indemnity in writing indemnifying them from any and all
liabilities under the terms of the said personal guarantee, security or
covenant.
7.08 On the date of closing the Purchaser shall deliver to the Vendor as
security for any unpaid balance of the pruchase price a promissory note for such
unpaid balance and as additional security therefor a mortgage or like lien of
all the Common Shares owned or controlled by Purchaser. Such mortgage or like
lien shall be in the amount of the purchase price then outstanding, the payments
referred to therein shall be the total of the payments required to be made under
ARTICLE FIVE and such mortgage shall be in form sufficient to give to the
mortgagee, among other usual terms, all powers of sale and rights of
foreclosure. All of the Common Shares pledged with the Vendor shall be held by
the Vendor until payment in full shall have been made pursuant to the terms of
the said mortgage, provided that the Purchaser when not in default hereunder
shall be entitled to vote the said shares, but if in default and such default is
not remedied for a period of fifteen days after notice thereof shall be given by
the Vendor, without prejudice and in addition to any other remedies available to
him, the Vendor may vote the said shares.
7.09 If the Buy-Sell provisions of ARTICLE FIVE shall have been validly
commenced from such date until the closing shall have taken place, none of the
parties hereto shall do or cause or permit to be done anything except in the
ordinary course of business of the Corporation.
<PAGE>
7.10 The Purchaser covenants and agrees that he or it will exercise his vote
and influence and each of the Purchaser and the Corporation covenants and agrees
to do all such acts and things as may be necessary to ensure that as long as any
unpaid balance of the purchase price shall be payable to the Vendor:
(a) In any fiscal year of the Corporation, the total amount of
salaries, commission, bonuses, directors' fees or any other
remuneration paid by the Corporation to the Purchaser or any person,
firm or corporation related to or not dealing at arm's length with the
Purchaser, shall not be greater than such amount paid during the
fiscal year ending immediately prior to the completion of the
transaction, as a result of which such unpaid balance of the purchase
price is so payable;
(b) No loans from the Purchaser to the Corporation shall be repaid;
(c) The Corporation will not sell, mortgage, transfer, exchange or
otherwise dispose of any of its assets except in the normal course of
its business;
(d) The Corporation will not divert any of its business to any other
person, firm or corporation;
(e) The Corporation will not pay any dividends, purchase, redeem or
otherwise retire any of its shares or permit any withdrawals by or on
behalf of any of its shareholder, unless all of the monies arising
therefrom are used in payment of such unpaid balance of the purchase
price;
(f) The Corporation shall deliver to the Vendor, forthwith after their
preparation, all financial statements, whether audited or unaudited,
for the Corporation.;
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<PAGE>
(g) There will be no increase or decrease in the capital structure of
the Corporation or alteration of any sort of its capital structure;
(h) No new shares in the capital of the Corporation will be issued,
allotted or sold; and
(i) The Purchaser will not hypothecate, charge or pledge any of his
shares in the capital of the Corporation and will not sell, transfer
or assign any of his shares in the capital of the Corporation, unless
all of the monies received by the Purchaser in consideration of such
sale, transfer or assignment are paid to the Vendor on account of such
unpaid balance of the purchase price.
ARTICLE EIGHT
GENERAL CONTRACT PROVISIONS
8.01 Except as herein specifically permitted, neither Hanley nor TMP may
sell, transfer, assign, mortgage, hypothecate, charge or in any way encumber his
or its Common Shares without the prior written consent of the other.
8.02 Time shall be of the essence of this Agreement and of every part
hereof.
8.03 Any of the parties hereto may for himself or itself waive any breach by
any of the other parties of any of the provisions contained in this agreement or
any default in the observance and performance of any covenants or conditions
required to be observed or performed by such other parties under the provisions
hereof but such waiver shall not extend to or be taken in any manner whatsoever
to affect any other breach or default or the rights resulting therefrom.
8.04 All share certificates of the Corporation shall have the following
memorandum endorsed thereon forthwith after execution of this agreement:
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<PAGE>
"The rights, privileges, limitations and restrictions attaching to the
shares represented by this certificate, are governed by the
provisions of a shareholders' agreement dated the
day of ,1977 made
between the Shareholders of the Corporation, a copy of which may be
inspected at the offices of the Corporation."
8.05 All notices, requests, demands or other communications by the
terms hereof required or permitted to be given by one party to another shall be
given in writing, either personally or by registered mail, postage prepaid,
addressed to such other party as follows:
(a) If to Hanley:
Timothy P. Hanley
1729 Foresta Court
Chamblee, Georgia 30341
(b) If to McKelvey:
Andrew J. McKelvey
c/o Telephone Marketing Programs, Inc.
605 Third Avenue
New York, New York 10016
(c) If to TMP:
Telephone Marketing Programs, Inc.
605 Third Avenue
New York, New York 10016
All notices shall be deemed to have been received on the third business day
following the posting of such notice.
8.06 The parties hereto shall sign such further and other papers, cause such
meetings to be held, resolutions passed and by-laws enacted, exercise their vote
and influence, do and perform and cause to be done and performed such further
and other acts and things as may be necessary or desirable in order to give full
effect to this agreement and every part hereof.
8.07 This agreement and the terms hereof shall constitute the entire
agreement between the parties hereto with respect to all of the matters herein
and its execution has not been induced by, nor do any of the parties hereto rely
upon or regard
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<PAGE>
as material any representation or writings whatsoever not incorporated herein
and made a part hereof and shall not be amended, altered or qualified except by
a memorandum in writing signed by all of the parties hereto and any amendment,
alteration or qualification hereof shall be null and void and shall not be
binding upon any party who has not given his consent as aforesaid.
8.08 TMP and Hanley shall cause Bard Publishing Company to become a
signatory to this agreement and shall cause TDA to become a signatory to this
agreement upon the acquisition of the TDA stock as provided herein and shall
vote their shares and do all such things as necessary to insure that TDA
complies with each and every obligation on its part hereunder.
8.09 This agreement shall be read with all changes in number and gender as
may be required by the context.
8.10 This agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.
8.11 Should any litigation arise between the parties as to this agreement,
the agreement shall be construed pursuant to the laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this agreement.
/s/ Timothy P. Hanley
---------------------------
Timothy P. Hanley
/s/ Andrew J. McKelvey
---------------------------
Andrew J. McKelvey
TELEPHONE MARKETING PROGRAMS, INC.
By: /s/ Andrew J. McKelvey
---------------------------
BARD PUBLISHING, COMPANY
By: /s/ Andrew J. McKelvey
---------------------------
Andrew J. McKelvey, President
- 19 -
<PAGE>
(3) For the indebtedness on the installment payments set forth in
(b) and (c) above, the purchase shall deposit with a corporate fiduciary to
be designated by the seller, as escrow agent the full balance due for the
purchase price. The escrow agent shall disburse to the seller the balance due
on the purchase price in such amounts and at such times as set forth under
the terms of subparagraphs (b) or (c) above on the dates when the payments are
to be made by purchaser as set forth therein. In the meantime, and while such
funds are on deposit with the escrow agent, any interest earned thereon shall
be payable to the purchaser.
5.09 If either Hanley or McKelvey (hereinafter in this paragraph 5.09
called ("the disabled party") becomes disabled and in the opinion of a qualified
medical practitioner given not less than six months after commencement of such
disability, the disabled party will be confined to a hospital bed or other con-
valescent confinement for a period of at least eighteen months from the date of
commencement of such disability, then
(a) in the case of the disability of Hanley, TMP shall have the
obligation to purchase the Common Shares owned by Hanley at a price
and upon the terms determined as if Hanley had died on the date on
which the opinion of the qualified medical practitioner is given; or
(b) in the case of the disability of McKelvey then Hanley shall have
the option for a period of 90 days following the date on which the
opinion of a qualified medical practitioner is given, to purchase the
Common Shares owned by TMP at a price and upon the terms determined as
if McKelvey died on the date on which the opinion of the qualified
medical practitioner is given.
-10-
This revised Page 10 accepted this l5th day of June, 1977
Telephone Marketing Programs, Inc.
/s/ Timothy P. Hanley By: /s/ Andrew J. McKelvey
- ------------------------------- -----------------------------------
Timothy P. Hanley Andrew J. McKelvey, Pres.
Bard Publishing Co.
By: /s/ Andrew J. McKelvey
- ------------------------------------- /s/ Andrew J. McKelvey
-----------------------------------
Andrew J. McKelvey
<PAGE>
AGREEMENT
Agreement, made as of this 3rd day of January, 1995, among ANDREW J.
MCKELVEY ("AJM"), AERONAUTIC MEDIA, INC., a Delaware corporation ("AMI"), and
MCKELVEY ENTERPRISES, INC., a New York corporation ("MEI").
AMI has acquired a motoryacht type AZIMUT 78' Ultra bldg. no. 33,
powered by twin DEUTZ diesel engines of 1400 HP each (the "Yacht"). The parties
wish to set forth certain understandings and agreements concerning the Yacht.
NOW, THEREFORE, in consideration of the mutual obligations and duties
of the parties hereto and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. The Yacht is an asset of AMI, to be dealt with by AMI as it sees fit.
Notwithstanding the foregoing and the fact that in connection with the financing
of the Yacht each of the undersigned is a party to the Promissory Note for the
benefit of First New England, a unit of GE Capital (the "Note"), all liabilities
arising out of or in connection with the Note are the sole obligation and
responsibility of AJM. AJM agrees to indemnify, defend hold harmless each of
AMI and MEI from and against, and shall promptly pay each of them for any and
all losses, liabilities, damages and expenses (including but not limited to
reasonable attorneys' fees) AMI or MEI may suffer or incur arising out of or in
connection with the Note, including but not limited to any payment which may be
made by either of AMI or MEI under the Note or any damages suffered by AMI in
the event First New England realizes on its security interest in the Yacht.
2. This agreement (i) constitutes the entire agreement among the parties
with respect to the subject matter hereof and supersedes any previous
arrangements relating thereto, (ii) may be signed in counterparts, (iii) shall
be governed by the laws of the state of New York (other than the conflicts of
laws provisions thereof) and (iv) may not be amended, terminated or waived
orally.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
date first above written.
/s/ Andrew J. McKelvey
---------------------------------
Andrew J. McKelvey
AERONAUTIC MEDIA, INC.
By: /s/ Thomas G. Collison
-----------------------------
MCKELVEY ENTERPRISES, INC.
By: /s/ Thomas G. Collison
-----------------------------
<PAGE>
STOCK PURCHASE AGREEMENT
Agreement, made as of this 1st day of January, 1996, between ANDREW J.
MCKELVEY ("Seller") and MCKELVEY ENTERPRISES, INC., a New York corporation
("Buyer").
Seller is the record and beneficial owner of 100 shares of the common
stock, $.01 par value per share (the "Common Stock"), of Volando, Inc.
("Volando"), a Delaware corporation, represented by certificate number 1 (the
100 shares of Common Stock owned by Seller are sometimes collectively referred
to herein as the "Stock"). Seller desires to sell and Buyer desires to purchase
the shares of Stock on the terms and conditions stated herein.
NOW, THEREFORE, in consideration of the mutual obligations and duties
of the parties hereto and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. On the basis of the representations and agreements contained herein,
Seller hereby sells, assigns and transfers to Buyer and Buyer hereby purchases
from Seller, the Stock. Seller represents and warrants that (i) Seller is the
sole record and beneficial owner of, and is hereby conveying to Buyer good and
marketable title in and to the Stock, free and clear of any liens, claims and
encumbrances, (ii) the Stock constitutes all of the issued and outstanding
securities of Volando and there are no outstanding rights or options relating to
securities of Volando, (iii) Seller has paid any and all stock transfer taxes
relating to the transfer of the Stock, (iv) Volando is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware, and (iv) Volando owns all of the issued and outstanding securities of
Online Career Center Management, Inc., a Delaware corporation, and there are no
rights or options relating to securities of Online Career Center Management,
Inc. Simultaneously herewith Seller is delivering to Buyer a stock certificate
evidencing the Stock and a duly executed stock power relating thereto.
2. In payment for the Stock, Buyer is hereby paying Seller $1,000 in
cash, receipt of which is hereby acknowledged by Seller.
3. Buyer represents that it (i) has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits of an
investment in Volando, and (ii) is acquiring the Stock for its own account for
investment purposes only and not with a view to, or for sale in connection with,
any distribution thereof. Buyer understands that the Stock has not been
registered under the Securities Act of 1933, as amended, and that the Stock must
be held indefinitely unless it is subsequently registered under such act or an
exemption therefrom is available. Buyer acknowledges having had an opportunity
to discuss Volando's business, management and financial affairs with Volando's
management.
4. This agreement (i) constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes any previous
arrangements relating thereto, (ii) may be signed in counterparts, (iii) shall
be governed by the laws of the state of New York (other than the conflicts of
laws provisions thereof) and (iv) may not be amended, terminated or waived
orally.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
date first above written.
SELLER:
/s/ Andrew J. McKelvey
-------------------------------------
Andrew J. McKelvey
BUYER:
MCKELVEY ENTERPRISES, INC.
By: /s/ Thomas G. Collison
----------------------------------
<PAGE>
CONTRIBUTION AGREEMENT
Agreement, made as of this 1st day of January, 1996, between ANDREW J.
MCKELVEY ("AJM") and MCKELVEY ENTERPRISES, INC., a New York corporation ("MEI").
AJM is the record and beneficial owner of all of the issued and
outstanding shares of the common stock, $.01 par value per share (the "Common
Stock"), of EPI Aviation, Inc. ("EPI"), a Delaware corporation (the shares of
Common Stock owned by AJM are sometimes collectively referred to herein as the
"Stock"). AJM desires to contribute to MEI and MEI desires to accept the
contribution of the shares of Stock on the terms and conditions stated herein.
NOW, THEREFORE, in consideration of the mutual obligations and duties
of the parties hereto and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. On the basis of the representations and agreements contained herein,
AJM hereby contributes to MEI and MEI hereby accepts AJM's contribution of, the
Stock. AJM represents and warrants that (i) AJM is the sole record and
beneficial owner of, and is hereby conveying to MEI good and marketable title in
and to, the Stock, free and clear of any liens, claims and encumbrances, (ii)
the Stock constitutes 100% of the issued and outstanding securities of EPI and
there are no outstanding rights or options relating to the Stock or any other
securities of EPI, (iii) AJM has paid any and all stock transfer taxes relating
to the transfer of the Stock, and (iv) EPI is a corporation duly organized,
validly existing and in good standing under the laws of the state of Delaware.
Simultaneously herewith Seller is delivering to Buyer a stock certificate
evidencing the Stock and a duly executed stock power relating thereto.
2. MEI represents that it (i) has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits of an
investment in EPI, and (ii) is acquiring the Stock for its own account for
investment purposes only and not with a view to, or for sale in connection with,
any distribution thereof. MEI understands that the Stock has not been
registered under the Securities Act of 1933, as amended, and that the Stock must
be held indefinitely unless it is subsequently registered under such act or an
exemption therefrom is available. MEI acknowledges having had an opportunity to
discuss EPI's business, management and financial affairs with EPI's management.
3. This agreement (i) constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes any previous
arrangements relating thereto, (ii) may be signed in counterparts, (iii) shall
be governed by the laws of the state of New York (other than the conflicts of
laws provisions thereof) and (iv) may not be amended, terminated or waived
orally.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
date first above written.
/s/ Andrew J. McKelvey
---------------------------------
Andrew J. McKelvey
MCKELVEY ENTERPRISES, INC.
By: /s/ Thomas G. Collison
------------------------------
<PAGE>
LEASE AGREEMENT
THIS LEASE, made as of the 1st day of June 1996, by and between TPH & AJM, a
partnership, first party, (herein after called "Landlord"); and Telephone
Directory Advertising, Inc., second party, (herein after called "Tenant").
WITNESSETH
*** PREMISES
The Landlord, in consideration of rents and agreements herein after mentioned,
does hereby rent to the Tenant the following described property (herein after
called "Premises"), to wit:
BUILDINGS NO. 5 & 6, 8399 DUNWOODY PLACE, ATLANTA, GEORGIA
*** TERM
This lease shall be for a term of 5 years beginning on the 1st day of June 1996,
and ending on the 31st day of May 2001, at midnight, unless terminated sooner as
herein after provided.
*** RENTAL
Tenant agrees to pay Landlord within the first 10 days of the month during the
term of this lease a monthly rental of $9,955.00 (at the rate of $15.55 per
square foot for 7,680 square feet).
*** UTILITY BILLS
All utility bills, including but not limited to electricity, water, sewer, gas,
fuel, light and heat bills will be paid by Tenant.
*** USE OF PREMISES
Premises shall be used for ADVERTISING AGENCY purposes. Premises shall not be
used for any illegal purposes; nor in any manner to create any nuisance or
trespass; nor in any manner to cause an increase in the insurance rates on
premises.
*** REPAIRS BY LANDLORD
Landlord agrees to keep in good repair the roof, foundations and exterior walls
of the premises, and underground utility and sewer pipes outside the exterior
walls of the building, except repairs rendered necessary by the negligence of
the Tenant, its agents, employees or invitees.
*** ESCALATION
Tenant shall pay as additional rent during the term of this lease an
inflation adjustment equal to the annual increase in the consumer price index
at December 31 of each year applied to the prior year's annual base rent.
The first increase is effective for rental years beginning after May 31, 1997.
*** DESTRUCTION OR DAMAGE OF PREMISES
If premises are totally destroyed by any casualty, this lease shall terminate.
If premises are partially destroyed by casualty, Landlord may, at his option,
reduce the monthly rental or restore the premises to substantially the same
condition as before the damage. Tenant may, at his option, accept the reduced
monthly rental, wait for restoration, or terminate the lease.
<PAGE>
Lease of Buildings No. 5 & 6
8399 Dunwoody Place, Atlanta, Georgia
Page 2
*** INDEMNITY
Tenant agrees to indemnify and save harmless the Landlord against all claims for
damages to persons or property by reason of the use of occupancy of the leased
premises and all expenses incurred by Landlord because thereof, including
attorneys fees and court costs.
*** SUBLETTING
Tenant may not sublet premises without the written approval of the Landlord.
*** REMOVAL OF FIXTURES
Tenant may remove all fixtures and equipment which he has placed in the premises
provided that Tenant repairs all damage to premises caused by such removal.
*** EXTERIOR SIGNS
Tenant may not place any exterior signs on the premises without the consent,
written or otherwise, of the Landlord. In any event, Landlord may, at his
option, require the removal of any exterior sign after written notification to
the Tenant 60 days prior to intended date of removal.
*** SPECIAL
In so far as the following stipulations conflict with any of the foregoing
provisions, the following shall control: NONE.
This lease contains the entire agreement of the parties hereto and no
representations, inducements, promises or agreements, oral or otherwise, between
the parties, not embodied herein, shall be in force or effect.
IN WITNESS WHEREOF, the parties herein have hereunto set their hands.
- ---------------------------- ----------------------------------------
LANDLORD (TPH & AJM) TENANT (Telephone Directory Advertising)
/s/ Tim Hanley Pres. /s/ Tim Hanley Pres.
- ---------------------------- ----------------------------------------
BY AND TITLE BY AND TITLE
6-1-96 6-1-96
- ---------------------------- ----------------------------------------
DATE DATE
<PAGE>
CONTRIBUTION AGREEMENT
Agreement, made as of this 16th day of July, 1996, between ANDREW J.
MCKELVEY ("AJM") and MCKELVEY ENTERPRISES, INC., a New York corporation ("MEI").
AJM is the record and beneficial owner of 100 shares of the common
stock, $.01 par value per share (the "Common Stock"), of General Directory
Advertising Services, Inc. ("GDAS"), a Delaware corporation (the 100 shares of
Common Stock owned by AJM are sometimes collectively referred to herein as the
"Stock"). AJM desires to contribute to MEI and MEI desires to accept the
contribution of the shares of Stock on the terms and conditions stated herein.
NOW, THEREFORE, in consideration of the mutual obligations and duties
of the parties hereto and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. On the basis of the representations and agreements contained herein,
AJM hereby contributes to MEI and MEI hereby accepts AJM's contribution of, the
Stock. AJM represents and warrants that (i) AJM is the sole record and
beneficial owner of, and is hereby conveying to MEI good and marketable title in
and to, the Stock, free and clear of any liens, claims and encumbrances, (ii)
the Stock constitutes 100% of the issued and outstanding securities of GDAS and
there are no outstanding rights or options relating to the Stock or any other
securities of GDAS, (iii) AJM has paid any and all stock transfer taxes relating
to the transfer of the Stock, and (iv) GDAS is a corporation duly organized,
validly existing and in good standing under the laws of the state of Delaware.
Simultaneously herewith Seller is delivering to Buyer a stock certificate
evidencing the Stock and a duly executed stock power relating thereto.
2. MEI represents that it (i) has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits of an
investment in GDAS, and (ii) is acquiring the Stock for its own account for
investment purposes only and not with a view to, or for sale in connection with,
any distribution thereof. MEI understands that the Stock has not been
registered under the Securities Act of 1933, as amended, and that the Stock must
be held indefinitely unless it is subsequently registered under such act or an
exemption therefrom is available. MEI acknowledges having had an opportunity to
discuss GDAS's business, management and financial affairs with GDAS's
management.
3. This agreement (i) constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes any previous
arrangements relating thereto, (ii) may be signed in counterparts, (iii) shall
be governed by the laws of the state of New York (other than the conflicts of
laws provisions thereof) and (iv) may not be amended, terminated or waived
orally.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
date first above written.
/s/ Andrew J. McKelvey
--------------------------------
Andrew J. McKelvey
MCKELVEY ENTERPRISES, INC.
By: /s/ Thomas G. Collison
-----------------------------
<PAGE>
STOCK PURCHASE AGREEMENT
Agreement, made as of this 15th day of August, 1996, between ANDREW J.
MCKELVEY ("Seller") and MCKELVEY ENTERPRISES, INC., a New York corporation
("Buyer").
Seller is the record and beneficial owner of 410,000,000 shares of the
common stock (the "Common Stock"), of National Media Holding Company, Inc.
("NMHC"), a Colorado corporation (the 410,000,000 shares of Common Stock owned
by Seller are sometimes collectively referred to herein as the "Stock"). Seller
desires to sell and Buyer desires to purchase the shares of Stock on the terms
and conditions stated herein.
NOW, THEREFORE, in consideration of the mutual obligations and duties
of the parties hereto and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. On the basis of the representations and agreements contained herein,
Seller hereby sells, assigns and transfers to Buyer and Buyer hereby purchases
from Seller, the Stock. Seller represents and warrants that (i) Seller is the
sole record and beneficial owner of, and is hereby conveying to Buyer good and
marketable title in and to the Stock, free and clear of any liens, claims and
encumbrances, (ii) the Stock constitutes approximately 80.42% of all of the
issued and outstanding common stock of NMHC and there are no outstanding rights
or options relating to the Stock, (iii) Seller has paid any and all stock
transfer taxes relating to the transfer of the Stock, (iv) NMHC is a corporation
duly organized, validly existing and in good standing under the laws of the
state of Colorado, and (v) NMHC owns all of the issued and outstanding shares of
common stock of National Media Services, Inc. Simultaneously herewith Seller is
delivering to Buyer a stock certificate evidencing the Stock and a duly executed
stock power relating thereto.
2. In payment for the Stock, Buyer is hereby paying Seller $280,000,
receipt of which is hereby acknowledged by Seller.
3. Buyer represents that it (i) has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits of an
investment in NMHC, and (ii) is acquiring the Stock for its own account for
investment purposes only and not with a view to, or for sale in connection with,
any distribution thereof. Buyer understands that the Stock has not been
registered under the Securities Act of 1933, as amended, and that the Stock must
be held indefinitely unless it is subsequently registered under such act or an
exemption therefrom is available. Buyer acknowledges having had an opportunity
to discuss NMHC's business, management and financial affairs with NMHC's
management.
4. This agreement (i) constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes any previous
arrangements relating thereto, (ii) may be signed in counterparts, (iii) shall
be governed by the laws of the state of New York (other than the conflicts of
laws provisions thereof) and (iv) may not be amended, terminated or waived
orally.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
date first above written.
SELLER:
/s/ Andrew J. McKelvey
---------------------------------
Andrew J. McKelvey
BUYER:
MCKELVEY ENTERPRISES, INC.
By: /s/ Thomas G. Collison
-----------------------------
<PAGE>
STOCK PURCHASE AGREEMENT
Agreement, made as of this 1st day of September, 1996, between ANDREW
J. MCKELVEY ("Seller") and MCKELVEY ENTERPRISES, INC., a New York corporation
("Buyer").
Seller is the record and beneficial owner of 96 shares of the common
stock (the "Common Stock"), of Telephone Directory Advertising, Inc. ("TDA"), a
Georgia corporation (the 96 shares of Common Stock owned by Seller are sometimes
collectively referred to herein as the "Stock"). Seller desires to sell and
Buyer desires to purchase the shares of Stock on the terms and conditions stated
herein.
NOW, THEREFORE, in consideration of the mutual obligations and duties
of the parties hereto and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. On the basis of the representations and agreements contained herein,
and effective as of 12:01 a.m. on September 1, 1996, Seller hereby sells,
assigns and transfers to Buyer and Buyer hereby purchases from Seller, the
Stock. Seller represents and warrants that (i) Seller is the sole record and
beneficial owner of, and is hereby conveying to Buyer good and marketable title
in and to the Stock, free and clear of any liens, claims and encumbrances, other
than the liens, claims and encumbrances created by the Stock Purchase Agreement,
dated May 26, 1977 among Timothy P. Hanley, Seller, Buyer and another party (the
"Initial Agreement"), (ii) the Stock constitutes 48.98% of all of the issued and
outstanding securities of TDA and there are no outstanding rights or options
relating to the Stock, (iii) Seller has paid any and all stock transfer taxes
relating to the transfer of the Stock, and (iv) TDA is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Georgia. Simultaneously herewith Seller is delivering to Buyer a stock
certificate evidencing the Stock and a duly executed stock power relating
thereto.
2. In payment for the Stock, Buyer is hereby paying Seller $837,000,
receipt of which is hereby acknowledged by Seller.
3. Buyer represents that it (i) has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits of an
investment in TDA, and (ii) is acquiring the Stock for its own account for
investment purposes only and not with a view to, or for sale in connection with,
any distribution thereof. Buyer understands that the Stock has not been
registered under the Securities Act of 1933, as amended, and that the Stock must
be held indefinitely unless it is subsequently registered under such act or an
exemption therefrom is available. Buyer acknowledges having had an opportunity
to discuss TDA's business, management and financial affairs with TDA's
management. Buyer acknowledges that it is taking the Stock subject to all the
provisions of the Initial Agreement applicable to "Telephone Marketing Programs,
Inc." or "TMP."
4. This agreement (i) constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes any previous
arrangements relating thereto, (ii) may be signed in counterparts, (iii) shall
be governed by the laws of the state of New York (other than the conflicts of
laws provisions thereof) and (iv) may not be amended, terminated or waived
orally.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
date first above written.
SELLER:
/s/ Andrew J. McKelvey
---------------------------------
Andrew J. McKelvey
BUYER:
MCKELVEY ENTERPRISES, INC.
By: /s/ Thomas G. Collison
-----------------------------
<PAGE>
STOCK PURCHASE AGREEMENT
Agreement, made as of this 4th day of September, 1996, between ANDREW
J. MCKELVEY ("Seller") and MCKELVEY ENTERPRISES, INC., a New York corporation
("Buyer").
Seller is the record and beneficial owner of 12,000 shares of the
stock (quota), par value 1000 lire per share, of S.M.E.T. Servizio Marketing
Elenchi Telefonici s.r.l. ("SMET"). Seller desires to sell and Buyer desires to
purchase 9,999 of such the shares of Stock on the terms and conditions stated
herein (such 9,999 shares are sometimes collectively referred to herein as the
"Stock").
NOW, THEREFORE, in consideration of the mutual obligations and duties
of the parties hereto and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. On the basis of the representations and agreements contained herein,
Seller hereby sells, assigns and transfers to Buyer and Buyer hereby purchases
from Seller, the Stock. Seller represents and warrants that (i) Seller is the
sole record and beneficial owner of, and is hereby conveying to Buyer good and
marketable title in and to the Stock, free and clear of any liens, claims and
encumbrances imposed by or through Seller, (ii) Seller has paid or will pay any
and all stock transfer taxes relating to the transfer of the Stock, and (iii)
SMET is a corporation duly organized, validly existing and in good standing
under the laws of Italy.
2. In payment for the Stock, Buyer is hereby paying Seller US$140,620,
receipt of which is hereby acknowledged by Seller.
3. Buyer represents that it (i) has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits of an
investment in SMET, and (ii) is acquiring the Stock for its own account for
investment purposes only and not with a view to, or for sale in connection with,
any distribution thereof. Buyer acknowledges having had an opportunity to
discuss SMET's business, management and financial affairs with SMET's
management.
4. This agreement (i) constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes any previous
arrangements relating thereto, (ii) may be signed in counterparts, (iii) shall
be governed by the laws of the state of New York (other than the conflicts of
laws provisions thereof) and (iv) may not be amended, terminated or waived
orally.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
date first above written.
SELLER:
/s/ Andrew J. McKelvey
---------------------------------
Andrew J. McKelvey
BUYER:
MCKELVEY ENTERPRISES, INC.
By: /s/ Thomas G. Collison
-----------------------------
<PAGE>
Exhibit 10.21
(part 1)
AGREEMENT
AGREEMENT made and entered into as of this 17th day of March, 1996 by
and between TMP Worldwide Inc., a Delaware corporation with an address at 1633
Broadway, 33rd Floor, New York, NY 10019 (the "Company"), and George Eisele, an
individual with an address c/o TMP Worldwide Inc., 600 International Drive, Mt.
Olive, NJ 07828 ("Eisele").
PRELIMINARY RECITALS
A. Eisele is the record and beneficial owner of 10 shares of the
common stock, $.01 par value per share (such 10 shares are sometimes referred to
herein as the "MSI Stock"), of M.S.I. - Market Support International, Inc., a
New Jersey corporation ("MSI"), represented by certificate number 4. Eisele
desires to exchange the MSI Stock for 3,892 newly issued shares of the common
stock, par value $.01 per share, of the Company (such 3,892 shares are sometimes
referred to herein as the "Company Stock") and the Company desires to exchange
the Company Stock for the MSI Stock.
B. The parties desire to set forth certain agreements relating to
such exchange and the sale and other disposition of the Company Stock and for
certain other matters.
NOW, THEREFORE, in consideration of the mutual covenants set forth in
this Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. EXCHANGE.
(a) The parties agree that on the basis of the representations and
agreements contained herein, Eisele hereby exchanges the MSI Stock for the
Company Stock and the Company hereby exchanges the Company Stock for the MSI
Stock.
(b) Eisele represents and warrants that he is the sole record and
beneficial owner of, and is hereby conveying to the Company good and marketable
title in and to, the shares of MSI Stock, free and clear of any liens, claims
and encumbrances, and that Eisele has paid any and all stock transfer taxes
relating to the transfer of the shares of MSI Stock to the Company.
Simultaneously herewith Eisele is delivering to the Company stock certificate
number 4 representing the MSI Stock and a duly executed stock power relating to
the MSI Stock.
(c) The Company represents that the shares of Company Stock being
issued to Eisele hereunder are validly issued, fully paid and nonassessable, and
that the Company has paid any and all stock transfer taxes relating to the
issuance of the Company Stock to Eisele. Simultaneously herewith the Company is
delivering to Eisele a stock certificate or certificates relating to the Company
Stock.
(d) Eisele represents and warrants to the Company as follows:
(i) Eisele has such knowledge and experience in financial and
business matters and such experience in evaluating and investing in
companies such as the
<PAGE>
Company as to be capable of evaluating the merits and risks of an
investment in the Company Stock. Eisele has the financial ability to bear
the economic risk of Eisele's investment, has adequate means for providing
for Eisele's current needs and contingencies and has no need for liquidity
with respect to Eisele's investment in the Company.
(ii) Eisele is acquiring the shares of Company Stock for
investment for Eisele's own account, for investment purposes only, and not
with the view to, or for resale in connection with, any distribution
thereof. Eisele understands that the shares of Company Stock have not been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), or under the securities laws of various states, by reason of a
specified exemption from the registration provisions thereunder which
depends upon, among other things, the bona fide nature of Eisele's
investment intent as expressed herein.
(iii) Eisele acknowledges that the shares of Company Stock
must be held indefinitely unless they are subsequently registered under the
Securities Act and under applicable state securities laws or an exemption
from such registration is available, and that the shares of Company Stock
are subject to strict limitations on transfer pursuant to this Agreement.
Eisele has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act which permits limited resale of the
securities purchased in a private placement subject to the satisfaction of
certain conditions and that such rule is not now and may not become
available for resale of the shares of Company Stock. Eisele understands
that only the Company can take action to register shares of Company Stock
and the Company is under no obligation to do so, and does not otherwise
propose to do so.
(iv) Eisele has relied upon independent investigations made by
him or his representatives and he is fully familiar with the business,
results of operations, financial condition, prospects and other affairs of
the Company and MSI (collectively, the "Companies"). Eisele acknowledges
that in connection with the transactions contemplated hereby, neither of
the Companies nor anyone acting on their behalf or any other person has
made, and he is not relying upon, any representations, statements or
projections concerning either of the Companies, their present or projected
results of operations, their prospects, their present or future plans,
their products, or the value of their shares or business or any other
matter in relation to their business or affairs. Eisele has had an
opportunity to discuss each of the Companies' business, management,
financial affairs and acquisition plans with its management, to review the
Companies' facilities, and to obtain such additional information concerning
Eisele's investment in the shares of the Company Stock in order for Eisele
to evaluate its merits and risks, and Eisele has determined that the shares
of the Company Stock are a suitable investment for Eisele and that at this
time Eisele could bear a complete loss of Eisele's investment.
2. OWNERSHIP OF STOCK. Eisele agrees that except as provided in Section
3 below, Eisele shall not sell, transfer, distribute, assign, place in trust,
pledge, hypothecate, encumber,
-2-
<PAGE>
grant a security interest in or otherwise dispose of all or any portion of the
Stock (as defined below), in each case whether by express agreement, operation
of law or otherwise, except to the Company, as provided in Section 4 below. As
used in this Agreement, the term "Stock" means the shares of Company Stock
issued to Eisele on the date hereof, and any securities of the Company or any
successor of any nature or kind whatsoever issued in respect of the foregoing,
including but not limited to those issued upon any stock split, stock dividend,
stock distribution, stock conversion, recapitalization, merger, consolidation or
similar event.
3. LAPSE OF RESTRICTIONS. Notwithstanding the provisions of Section 2,
it is understood that in the event that during 1996 the Company closes an
underwritten initial public offering of its common stock pursuant to a
registration statement filed with and declared effective by the Securities and
Exchange Commission (an "IPO"), the restrictions of Section 2 shall lapse
immediately.
4. SALE OF STOCK UPON TERMINATION OF EMPLOYMENT OR OTHERWISE. In the
event of the termination or expiration of Eisele's employment with the Company
or any of its affiliates for any reason, including, without limitation, Eisele's
death or disability and whether voluntary or involuntary, or in the event that
at any time prior to any such termination or expiration Eisele gives the Company
written notice of his desire to sell the Stock, the Company shall purchase and
acquire, and Eisele, or in the event of his death, the legal representative of
his estate, shall sell and assign to the Company, free and clear of any and all
liens, claims and encumbrances, all of the Stock owned by Eisele, for the
purchase price, and upon the terms and conditions set forth in Sections 5 and 6
hereof.
5. PURCHASE PRICE. The purchase price for any sale of the Stock by
Eisele to the Company shall be the product of (x) a fraction, the numerator of
which is the number of shares of common stock of the Company that are subject to
the restrictions of Section 2 hereof as of the effective date of termination or
expiration of Eisele's employment with the Company or any of its affiliates or,
if sooner, as of the date of delivery of Eisele's written notice of his desire
to sell the Stock (the earlier of such dates referred to herein as the
"Effective Date") and the denominator of which is the number of shares of common
stock of the Company outstanding (on a fully diluted basis, assuming full
exercise of all rights and options and full conversion of all convertible
securities) as of the Effective Date, and (y) the gross media commissions for
the then most recent full fiscal year of the Company ending prior to the
Effective Date, net of credits, rebates, refunds, allowances or amounts written
off by the Company, in each case as determined in accordance with generally
accepted accounting principles.
6. CLOSING; PAYMENT OF CONSIDERATION. Any purchase and sale of Stock
pursuant to Sections 2 and 4 above shall close at the principal office of the
Company on the 90th day after the date of termination or expiration of Eisele's
employment with the Company or an affiliate of the Company, or, in the event of
Eisele's death, on the 90th day after the appointment of a legal representative
of Eisele's estate, or, in the event of Eisele's notice of desire to sell the
Stock, on the 90th day after delivery of such notice to the Company. At the
closing, Eisele or his estate shall deliver to the Company stock certificates
representing all of the Stock being sold, duly endorsed for transfer, and such
Stock shall be (and Eisele and his estate shall represent and
-3-
<PAGE>
warrant that the Stock is) free and clear of any and all liens, claims and
encumbrances, with all stock transfer taxes paid in full. In payment of the
purchase price for the Stock, at the closing the Company shall deliver to the
Eisele or his estate a promissory note, substantially in the form of Exhibit A
hereto, in the aggregate principal amount of the purchase price of the Stock,
providing for payment of the purchase price in 60 equal monthly installments,
without interest, commencing 30 days after the closing of such purchase and
sale.
7. STOCK LEGEND. All certificates for Stock at any time or from time to
time issued to Eisele shall bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF WITHOUT SUCH REGISTRATION OR THE DELIVERY TO THE ISSUER OF AN
OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER, THAT SUCH DISPOSITION
WILL NOT REQUIRE REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THE SECURITIES
ARE SUBJECT TO, AND ARE TRANSFERABLE ONLY IN VERY LIMITED
CIRCUMSTANCES IN ACCORDANCE WITH, THE TERMS OF AN AGREEMENT DATED
MARCH 17, 1996, A COPY OF WHICH AGREEMENT IS ON FILE IN THE OFFICE OF
THE SECRETARY OF THE ISSUER."
8. ASSIGNMENT. Eisele may not assign or delegate, by operation of law or
otherwise, any of his rights, interests or obligations hereunder without the
prior written consent of the Company. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of either of the parties hereto shall bind and inure to the benefit of the
respective legal representatives, heirs, successors and assigns of the parties
hereto whether so expressed or not.
9. NOTICES. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been properly served if (a) delivered
personally, (b) delivered by courier, or (c) delivered by certified or
registered mail, return receipt requested and first class postage prepaid, in
each case to the parties at their addresses set forth on the first page of this
Agreement, in the case of notices to the Company to the attention of Andrew
McKelvey or Thomas Collison, or such other addresses as the recipient party has
specified by prior written notice to the sending party. All such notices and
communications shall be deemed received upon the actual delivery thereof in
accordance with the foregoing.
10. ADDITIONAL DOCUMENTS. Each party shall execute and deliver to the
other such documents as are reasonably necessary for the implementation and
consummation of the transactions contemplated hereby. This Agreement (i)
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes any previous arrangements
-4-
<PAGE>
between or among them relating thereto, the parties acknowledging that as
between them, the M.S.I. - Market Support International, Inc. 1993 Stockholders'
Agreement is terminated and of no further force or effect, (ii) may be signed in
counterparts, (iii) shall be governed by the laws of the state of New York
(other than the conflicts of laws provisions thereof) and (iv) may not be
amended, terminated or waived orally.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
date first above written.
TMP WORLDWIDE INC.
By: /s/ Thomas G. Collison
---------------------------------
/s/ George Eisele
--------------------------------------
George Eisele
-5-
<PAGE>
EXHIBIT A
$_________ _________, 199__
New York, NY
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, TMP Worldwide Inc., a Delaware
corporation with an address at 1633 Broadway, 33rd Floor, New York, New York
10019, hereby promises to pay to George Eisele, with an address of
___________________________, (the "Beneficiary") the principal sum of
$_________, without interest. The principal amount of this Note shall be due
and payable in sixty (60) equal monthly installments, without interest,
commencing on the date which is 30 days after the date hereof. Payments
hereunder are to be made in lawful money of the United States. This Note is
delivered pursuant to the terms of an agreement, dated as of March 17, 1996,
between the Beneficiary and the undersigned, and is subject in all respects to
the terms and conditions thereof.
1. OPTIONAL PREPAYMENT. The undersigned shall have the right to prepay
in whole or in part, without penalty or premium, this Note or any portion
thereof, at any time and from time to time.
2. WAIVER OF PRESENTMENT. Without limiting the express provisions of
this Note, the undersigned hereby waives presentment, demand for payment, notice
of dishonor, and notice of protest in connection with the delivery, acceptance
and performance of this instrument.
3. NOTICES. All notices, requests and other communications required to
be sent or given under this Note by the undersigned or the Beneficiary shall in
every case be in writing and shall be deemed properly served if (i) delivered
personally, (ii) delivered by registered or certified mail with first class
postage prepaid, return receipt requested, or (iii) delivered by courier, if to
the undersigned, to it at its address set forth above, to the attention of
Andrew McKelvey and Thomas Collison, and if to the Beneficiary, to the
Beneficiary's address set forth above, or to such other addresses as the
recipient party has specified by prior written notice to the sending party.
4. CANCELLATION. Upon the payment in full of the unpaid principal amount
of this Note, if any, this Note shall be void and of no further force or effect.
Upon such payment in full, the Beneficiary covenants to promptly surrender this
Note to the undersigned marked "Cancelled."
5. GOVERNING LAW. This Note shall be construed and enforced in
accordance with, and shall be governed by, the laws of the State of New York
without giving effect to provisions thereof regarding conflict of laws.
6. WAIVER. The failure of the Beneficiary to insist, in any one or more
instances, on performance of any of the terms and conditions of this Note shall
not be construed as a
-6-
<PAGE>
waiver or relinquishment of any rights granted hereunder or of the future
performance of any such terms, covenants or conditions but the obligation of the
undersigned with respect thereto shall continue to be in full force and effect.
TMP WORLDWIDE INC.
By:
---------------------------------
Name: Thomas G. Collison
Title: Thomas G. Collison
ACCEPTED AND AGREED:
- -------------------------
George Eisele
-7-
<PAGE>
Exhibit 10.21
(part 2)
Amendment No. 1 to Agreement
As of September 5, 1996
Reference is made to the Agreement dated as of March 17, 1996 (the
"Agreement") by and between TMP Worldwide Inc., a Delaware corporation (the
"Company"), and George R. Eisele ("Eisele"). For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Section 3 of the Agreement is hereby amended to read in its
entirety as follows:
"3. LAPSE OF RESTRICTIONS OF SECTION 2; RIGHT OF FIRST REFUSAL.
Notwithstanding the provisions of Section 2, in the event that a registration
statement relating to the first firm commitment underwritten public offering of
the Company's common stock for the account of the Company (with gross proceeds
to the Company, exclusive of any overallotment option, of not less than
$15,000,000) is declared effective by order of the Securities and Exchange
Commission or otherwise becomes effective (the "Effective Date") under the
Securities Act of 1933, as amended (the "IPO"), the restrictions of the first
sentence of Section 2 shall immediately lapse, PROVIDED THAT from and after the
Effective Date until the earlier of (i) the date which is one year from the
Effective Date or (ii) the closing of the IPO, Eisele shall not sell, transfer,
distribute, assign, place in trust, pledge, hypothecate, encumber, grant a
security interest in or otherwise dispose of all or any portion of the Stock, in
each case whether by express agreement, operation of law or otherwise, except as
provided in this Section 3. In the event that during the period described in
the preceding sentence, Eisele receives from an unrelated and unaffiliated third
party, and desires to accept, a bona fide written offer to purchase all, but not
less than all, of Eisele's Stock, Eisele shall give written notice to the
Company (the "Notice of Proposed Sale") setting forth in reasonable detail the
name and address of the prospective purchaser and the terms and conditions of,
and enclosing a copy of, the bona fide written offer, which terms shall include
but not be limited to the purchase price (all of which purchase price shall be
payable in cash or check and/or installments of cash or check). The Company
shall then have the option, exercisable within 30 days after the Notice of
Proposed Sale is given (the "Option Period"), to purchase (or cause the
Company's designee to purchase) from Eisele all of Eisele's Stock for a purchase
price equal to the purchase price set forth in the Notice of Proposed Sale. At
the Company's election, the purchase price shall be payable (i) in the manner
specified in the Notice of Proposed Sale or (ii) by delivery by the Company or
its designee to Eisele of a promissory note, substantially in the form of
Exhibit A hereto, in the aggregate principal amount of the purchase price of the
Stock, providing for payment of the purchase price in 60 equal monthly
installments, without interest, commencing 30 days after the closing of such
purchase and sale. Any purchase and sale of Stock pursuant to this Section 3
shall close at the principal office of TMP on the 90th day after the expiration
of the Option Period. At the closing of such purchase and sale, Eisele shall
deliver to the Company or its designee stock certificates representing all of
the Stock being sold, duly endorsed for transfer, and such Stock shall be (and
Eisele shall represent and warrant that the Stock is) free and clear of any and
all liens, claims and encumbrances, with all stock transfer taxes paid in full.
In the event the Company's designee purchases the Stock, the Company shall
guarantee all purchase price payments."
<PAGE>
2. Section 4 of the Agreement is hereby amended to add the words
"prior to the Effective Date" immediately following the words "for any reason".
3. Section 5 of the Agreement is hereby amended to add the words
"pursuant to Section 4" immediately following the words "any sale of the Stock
by Eisele to the Company".
4. All capitalized terms used but not otherwise defined herein shall
have the meanings ascribed to them in the Agreement. The terms of the
Agreement, as modified by this Amendment, are hereby ratified and confirmed and
shall remain in full force and effect. This Amendment may be signed in
counterparts.
SELLER:
TMP WORLDWIDE INC.
By: /s/ Thomas G. Collison
--------------------------------
Name: Thomas G. Collison
Title: Vice Chairman
/s/ George R. Eisele
-------------------------------------
George R. Eisele
<PAGE>
THIS AGREEMENT dated for reference January 1, 1996, is made
BETWEEN
CALA SERVICES INC./ LES SERVICES CALA INC., a company duly
incorporated under the laws of Canada, and having an office at
294 Alberta Street, Suite 404, Ottawa, K1P 6E6
(the "Company");
AND
CALA H.R.C. LTD., a company with an office at 63 de Bresoles
Street, Montreal, Quebec, H2I 1V7
(the "Manager").
BACKGROUND
A. The Company is in the business of providing employment recruitment
advertising services (the "Business") to its clients;
B. The Manager is also engaged in the Business for its own account and is
experienced in managing all aspects of the Business.
C. The Company wishes to have the Manager and the Manager has agreed to
administer and manage the Business of the Company on the terms and conditions
set out in this Agreement.
NOW THEREFORE in consideration of the premises and mutual agreements and
covenants herein contained, the parties hereto (the "parties") hereby covenant
and agree as follows:
1. DUTIES
The Company agrees to retain and employ the Manager to provide the following
services in respect of the Business of the Company:
<PAGE>
-2-
(a) conceptualization and production of advertisements;
(b) media research, recommendation and placement;
(c) monitoring and verification of media placement;
(d) consulting and implementation of human resources communication
plan;
(e) administration of payroll and employee benefits;
(f) administration and collection of accounts receivable;
(g) administration of accounts payable;
(h) management of cash flow and relations with bankers;
(i) maintenance of a general ledger and all necessary accounting
books and records;
(j) preparation of monthly financial statements and analytical
reports;
(k) preparation of financial statements and year end file for
external auditors;
(l) preparation and administration of all statutory reports, returns
and filings;
(m) the advice of and access to managerial expertise of senior
management of the Manager or their delegate or representatives;
(n) administration and management of other projects as requested from
time to time by the Company; and
(o) all customer service functions including proposals, tenders,
communications, inquiries, billings and collections.
<PAGE>
-3-
2. REMUNERATION
The Company will pay to the Manager on a month to month basis a management fee
equal to a percentage (as agreed from time to time) of total billings on all
sales made by the Company (the "Management Fee").
3. TERM
3.1 Renewal
This Agreement will automatically renew each month provided that this Agreement
is not terminated by either party in the manner set out in Subsections 3.2 and
3.3 of this Agreement.
3.2 TERMINATION WITH NOTICE
This Agreement may be terminated by either party by giving 30 days notice in
writing of termination to the other party.
3.3 TERMINATION WITHOUT NOTICE
Notwithstanding Subsection 3.2 of this Agreement, the Company may terminate this
Agreement without notice for cause effective immediately.
4. CONFIDENTIAL INFORMATION
Each of the parties acknowledges that, during the term of this Agreement, they
will gain access to certain information concerning the Business and the Business
of the Company of a special and unique value. Each of the parties further
acknowledges that such information is proprietary and includes trade secrets.
Except as required by law and only to the extent that a third party has a
ligitimate need to know, each of the parties agrees to keep in strictest
confidence all Confidential Information relating to the Business of the Company
which either of them acquires in connection with or as a result of performance
of this Agreement, and not to publish, communicate, divulge or disclose to any
third party or parties any Confidential Information, without the prior written
consent of the other, during the term of this Agreement or at any time
subsequent to it. The term "Confidential Information" includes, but is not
limited to, information emanating from the Company or the Manager or their
respective associates, affiliates, agents, suppliers or customers
<PAGE>
-4-
or conceived or developed by the Company or the Manager concerning research,
development, intellectual property rights, products, marketing plans and
strategies, records, documents and oral communication pertaining to operations,
finance, accounting, sales, personnel, management, customer names, customer
addresses, price list, customer requirements, cost of providing service or
equipment, operating costs, maintenance costs, material cost and pricing
matters, systems and procedures relating to the Business of the Company.
5. RETURN OF PROPERTY AND CONFIDENTIAL DATA
On termination of this Agreement for any reason or cause, the Manager will
deliver to the Company the property and data of the Company in the Manager's
possession or control which contain Confidential Information as defined in
Section 4 of this Agreement including, but not limited to, all documents,
notebooks, charts, files, computers, diskettes, records, memoranda, equipment,
audio and videotapes.
6. INDEMNIFICATION OF MANAGER
The Company will and hereby agrees to indemnify and save harmless the Manager
from and against all claims and demands of any nature or kind whatsoever brought
against the Manager as a result of the performance in good faith of the duties
and obligations of the Manager pursuant to this Agreement.
7. MISCELLANEOUS
7.1 ENUREMENT
This Agreement enures to the benefit of and is binding on the Parties and,
except as otherwise provided in this Agreement or as would be inconsistent with
the provisions of this Agreement, their respective successors and permitted
assigns.
7.2 HEADINGS
The headings in this Agreement are for convenience only and will not effect the
interpretation of this Agreement.
<PAGE>
-5-
7.3 FURTHER ASSURANCES
The Parties covenant and agree to execute and deliver any other deeds, documents
and assurances and to do any other acts required to carry out the true intent
and meaning of this Agreement.
7.5 LANGUAGE
The Parties agree that this Agreement and all other documentation between the
Parties be in the English language. Les parties aux presentes ont exige que la
presente convention et toute autre documentation soit redigee en langue
anglaise. A singular or masculine expression used in this Agreement includes
the plural, the feminine or the body corporate as the context requires.
7.6 SEVERABILITY
If any provision of this Agreement is found to be illegal or unenforceable for
any reason, it will be considered separate and severable from this Agreement and
the remaining provisions of this Agreement will remain in force and be binding
upon the Parties as though the Agreement has been executed without the illegal
or unenforceable portion and it is hereby declared the intention of the Parties
that this Agreement would have been executed without reference to any portion
that may, for any reason, be hereafter declared or held invalid.
7.7 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the Parties and this
Agreement supersedes any and all prior oral or written agreements between the
Parties.
7.8 AMENDMENT
This Agreement may not be amended or modified except as provided in this
Agreement or by subsequent agreement in writing signed by the Parties.
<PAGE>
-6-
7.9 COUNTERPARTS
This Agreement may be executed in two counterparts, each of which will be deemed
to be an original, but all of which together will constitute one and the same
instrument, notwithstanding that all the parties are not signatories to the same
counterpart.
7.10 NOTICE
Any notice, document or communication required or permitted to be given
hereunder will be in writing and will be deemed to have been duly given if
delivered by hand, mailed by pre-paid registered mail or telex or by facsimile
to the party concerned addressed as follows:
If to the Company:
CALA Services Inc./Les Services CALA Inc.
294 Alberta Street, Suite 404
Ottawa, Ontario K1P 6E6
Tel: (613) 230-3393
Fax: (613): 230-9213
If to the Manager:
CALA H.R.C Ltd.
63 de Bresoles Street
Montreal, Quebec H2Y 1V7
Tel: (514) 288-9004
or 1-800-361-6268
Fax: (514) 288-1689
or to any other address as may be from time to time be notified in writing by
any of the Parties. Any notice, document or communication will be deemed to
have been give, if delivered by hand, on the day delivered, and if mailed, four
business days, excluding Saturdays, Sundays and statutory holidays in the
country to which notice, document or communication is addressed, following the
date of posting; provided that if there is at the time of mailing or within four
business days thereof a mail strike, slowdown or other labour dispute that might
affect delivery
<PAGE>
-7-
by the mails, then the notice, document or communication will be effective only
when actually received.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
day, month and year first above written.
CALA H.R.C. LTD.
Per:
- ---------------------
Authorized Signatory
CALA Services Inc./Les Services CALA Inc.
Per:
/s/ John Swann
- ---------------------
Authorized Signatory
<PAGE>
STANDARD OFFICE LEASE--GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
[LOGO]
1. Basic Lease Provisions ("Basic Lease Provisions").
1.1 Parties: This Lease, dated, for reference purposes only, May 15, 1993,
is made by and between 12800 Riverside Drive Corporation (herein called
"Lessor") and TMP Worldwide, doing business under the name of TMP Worldwide,
(herein called "Lessee").
1.2 Premises: Suite Number(s) Entire Building floors, consisting of
approximately 15,802 feet, more or less, defined in paragraph 2 and as shown on
Exhibit "A" hereto (the "Premises").
1.3 Building: Commonly described as being located at 12800 Riverside Drive
in the City of Valley Village (previously North Hollywood), County of Los
Angeles, State of California, as more particularly described in Exhibit
------
hereto, and as defined in paragraph 2.
1.4 Use: General Office Use, subject to paragraph 6.
1.5 Term: 240 Months--20 Years commencing June 1, 1993 ("Commencement
Date") and ending May 31, 2013 as defined in paragraph 3.
1.6 Base Rent: $27,653 per month, payable on the 1st day of each month per
paragraph 4.1.
1.7 Base Rent Increase: On No Increases In Base Rent During Lease the
monthly Base Rent payable under paragraph 1.6 above shall be adjusted as
provided in paragraph 4.3 below.
1.8 Rent Paid Upon Execution: -0- (or ).
----------------------------------
1.9 Security Deposit: -0-.
1.10 Lessee's Share of Operating Expense Increase: 100% as defined in
paragraph 4.2.
2. Premises, Parking and Common Areas.
2.3 Common Areas--Definition. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary
line of the Office Building Project that are provided and designated by the
Lessor from time to time for the general non-exclusive use of Lessor, Lessee
and of other lessees of the Office Building Project and their respective
employees, suppliers, shippers, customers and invitees, including but not
limited to common entrances, lobbies, corridors, stairways and stairwells,
public restrooms, elevators, escalators, parking areas to the extent not
otherwise prohibited by this Lease, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, ramps, driveways, landscaped areas
and decorative walls.
2.4 Common Areas--Rules and Regulations. Lessee agrees to abide by and
conform to the rules and regulations attached hereto as Exhibit B with
respect to the Office Building Project and Common Areas, and to cause its
employees, suppliers, shippers, customers, and invitees to so abide and
conform. Lessor or such other person(s) as Lessor may appoint shall have the
exclusive control and management of the Common Areas and shall have the
right, from time to time, to modify, amend and enforce said rules and
regulations. Lessor shall not be responsible to Lessee for the non-compliance
with said rules and regulations by other lessees, their agents, employees and
invitees of the Office Building Project.
2.5 Common Areas--Changes. Lessor shall have the right, in Lessor's sole
discretion, from time to time:
(a) To make changes to the Building interior and exterior and
Common Areas, including, without limitation, changes in the location, size,
shape, number, and appearance thereof, including but not limited to the
lobbies, windows, stairways, air shafts, elevators, escalators, restrooms,
driveways, entrances, parking spaces, parking areas, loading and unloading
areas, ingress, egress, direction of traffic, decorative walls, landscaped
areas and walkways; provided, however, Lessor shall at all times provide the
parking facilities required by applicable law;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To designate other land and improvements outside the boundaries
of the Office Building Project to be a part of the Common Areas, provided
that such other land and improvements have a reasonable and functional
relationship to the Office Building Project;
(d) To add additional buildings and improvements to the Common
Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Office Building Project, or any
portion thereof;
(f) To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas and Office Building Project as
Lessor may, in the exercise of sound business judgment deem to be appropriate.
3. Term.
3.1 Term. The term and Commencement Date of this Lease shall be as
specified in paragraph 1.5 of the Basic Lease Provisions.
3.2 Delay in Possession. Notwithstanding said Commencement Date, if for
any reason Lessor cannot deliver possession of the Premises to Lessee on said
date and subject to paragraph 3.2.2, Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this Lease
or the obligations of Lessee hereunder or extend the term hereof; but, in
such case, Lessee shall not be obligated to pay rent or perform any other
obligation of Lessee under the terms of this Lease, except as may be
otherwise provided in this Lease, until possession of the Premises is
tendered to Lessee, as hereinafter defined; provided, however, that if Lessor
shall not have delivered possession of the Premises within sixty (60) days
following said Commencement Date,
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option, by notice in writing to Lessor within ten (10) days thereafter,
cancel this Lease, in which event the parties shall be discharged from all
obligations hereunder; provided, however, that, as to Lessee's obligations,
Lessee first reimburses Lessor for all costs incurred for Non-Standard
Improvements and, as to Lessor's obligations, Lessor shall return any money
previously deposited by Lessee (less any offsets due Lessor for Non-Standard
Improvements); and provided further, that if such written notice by Lessee is
not received by Lessor within said ten (10) day period, Lessee's right to
cancel this Lease hereunder shall terminate and be of no further force or
effect.
3.2.1 Possession Tendered--Defined. Possession of the Premises shall be
deemed tendered to Lessee ("Tender of Possession") when (1) improvements to
be provided by Lessor under this Lease are substantially completed, (2) the
Building utilities are ready for use in the Premises, (3) Lessee has
reasonable access to the Premises, and (4) ten (10) days shall have expired
following advance written notice to Lessee of the occurrence of the matters
described in (1), (2) and (3), above of this paragraph 3.2.1.
3.2.2 Delays Caused by Lessee. There shall be no abatement of rent, and
the sixty (60) day period following the Commencement Date before which
Lessee's right to cancel this Lease accrues under paragraph 3.2, shall be
deemed extended to the extent of any delays caused by acts or omissions of
Lessee, Lessee's agents, employees and contractors.
3.3 Early Possession. If Lessee occupies the Premises prior to said
Commencement Date, such occupancy shall be subject to all provisions of this
Lease, such occupancy shall not change the termination date, and Lessee shall
pay rent for such occupancy.
3.4 Uncertain Commencement. In the event commencement of the Lease term
is defined as the completion of the improvements, Lessee and Lessor shall
execute an amendment to this Lease establishing the date of Tender of
Possession (as defined in paragraph 3.2.1) or the actual taking of possession
by Lessee, whichever first occurs, as the Commencement Date.
4. Rent.
4.1 Base Rent. Subject to adjustment as hereinafter provided in
paragraph 4.3, and except as may be otherwise expressly provided in this
Lease, Lessee shall pay to Lessor the Base Rent for the Premises set forth in
paragraph 1.6 of the Basic Lease Provisions, without offset or deduction,
Lessee shall pay Lessor upon execution hereof the advance Base Rent described
in paragraph 1.8 of the Basic Lease Provisions. Rent for any period during
the term hereof which is for less than one month shall be prorated based upon
the actual number of days of the calendar month involved. Rent shall be
payable in lawful money of the United States to Lessor at the address stated
herein or to such other persons or at such other places as Lessor may
designate in writing.
4.2 Operating Expense Increase. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share, as hereinafter
defined, of the amount by which all Operating Expenses, as hereinafter
defined, for each Comparison Year exceeds the amount of all Operating
Expenses for the Base Year, such excess being hereinafter referred to as the
"Operating Expense Increase," in accordance with the following provisions.
(a) "Lessee's Share" is defined, for purposes of this Lease, as the
percentage set forth in paragraph 1.10 of the Basic Lease Provisions, which
percentage has been determined by dividing the approximate square footage of
the Premises by the total approximate square footage of the rentable space
contained in the Office Building Project. It is understood and agreed that
the square footage figures set forth in the Basic Lease Provisions are
approximations which Lessor and Lessee agree are reasonable and shall not be
subject to revision except in connection with an actual change in the size of
the Premises or a change in the space available for lease in the Office
Building Project.
(b) "Base Year" is defined as the calendar year in which the Lease
term commences.
(c) "Comparison Year" is defined as each calendar year during the
term of this Lease subsequent to the Base Year; provided, however, Lessee
shall have no obligation to pay a share of the Operating Expense Increase
applicable to the first twelve (12) months of the Lease Term (other than such
as are mandated by a governmental authority, as to which government mandated
expenses Lessee shall pay Lessee's Share, notwithstanding they occur during
the first twelve (12) months). Lessee's Share of the Operating Expense
Increase for the first and last Comparison Years of the Lease Term shall be
prorated according to that portion of such Comparison Year as to which Lessee
is responsible for a share of such increase.
(d) "Operating Expenses" is defined, for purposes of this Lease, to
include all costs, if any, incurred by Lessor in the exercise of its
reasonable discretion, for:
(i) The operation, repair, maintenance, and replacement, in
neat, clean, safe, good order and condition, of the Office Building Project
including but not limited to, the following:
(aa) The Common Areas, including their surfaces,
coverings, decorative items, carpets, drapes and window coverings, and
including parking areas, loading and unloading areas, trash areas, roadways,
sidewalks, walkways, stairways, parkways, driveways, landscaped areas,
striping, bumpers, irrigation systems, Common Area lighting facilities,
building exteriors and roofs, fences and gates;
(bb) All heating, air conditioning, plumbing, electrical
systems, life safety equipment, telecommunication and other equipment used in
common by, or for the benefit of, lessees or occupants of the Office Building
Project, including elevators and escalators, tenant directories, fire
detection systems including sprinkler system maintenance and repair.
(ii) Trash disposal, janitorial and security services;
(iii) Any other service to be provided by Lessor that is
elsewhere in this Lease stated to be an "Operating Expense";
(iv) The cost of the premiums for the liability and property
insurance policies to be maintained by Lessor under paragraph 8 hereof;
(v) The amount of the real property taxes to be paid by
Lessor under paragraph 10.1 hereof;
(vi) The cost of water, sewer, gas, electricity, and other
publicly mandated services to the Office Building Project;
(vii) Labor, salaries and applicable fringe benefits and
costs, materials, supplies and tools, used in maintaining and/or cleaning the
Office Building Project and accounting and a management fee attributable to
the operation of the Office Building Project;
(viii) Replacing and/or adding improvements mandated by any
governmental agency and any repairs or removals necessitated thereby
amortized over its useful life according to Federal income tax regulations or
guidelines for depreciation thereof (including interest on the unamortized
balance as is then reasonable in the judgment of Lessor's accountants);
(ix) Replacements of equipment or improvements that have a
useful life for depreciation purposes according to Federal income tax
guidelines of five (5) years or less, as amortized over such life.
(e) Operating Expenses shall not include the costs of replacements
of equipment or improvements that have a useful life for Federal income tax
purposes in excess of five (5) years unless it is of the type described in
paragraph 4.2(d)(viii), in which case their cost shall be included as above
provided.
(f) Operating Expenses shall not include any expenses paid by any
lessee directly to third parties, or as to which Lessor is otherwise
reimbursed by any third party, other tenant, or by insurance proceeds.
(g) Lessee's Share of Operating Expense Increase shall be payable
by Lessee within ten (10) days after a reasonably detailed statement of
actual expenses is presented to Lessee by Lessor. At Lessor's option,
however, an amount may be estimated by Lessor from time to time in advance of
Lessee's Share of the Operating Expense Increase for any Comparison Year, and
the same shall be payable monthly or quarterly, as Lessor shall designate,
during each Comparison Year of the Lease term, on the same day as the Base
Rent is due hereunder. In the event that Lessee pays Lessor's estimate of
Lessee's Share of Operating Expense Increase as aforesaid, Lessor shall
deliver to Lessee within sixty (60) days after the expiration of each
Comparison Year a reasonably detailed statement showing Lessee's Share of the
actual Operating Expense Increase incurred during such year. If Lessee's
payments under this paragraph 4.2(g) during said Comparison Year exceed
Lessee's Share as indicated on said statement, Lessee shall be entitled to
credit the amount of such overpayment against Lessee's Share of Operating
Expense Increase next falling due. If Lessee's payments under this paragraph
during said Comparison Year were less than Lessee's Share as indicated on
said statement, Lessee shall pay to Lessor the amount of the deficiency
within ten (10) days after delivery by Lessor to Lessee of said statement.
Lessor and Lessee shall forthwith adjust between them by cash payment any
balance determined to exist with respect to that portion of the last
Comparison Year for which Lessee is responsible as to Operating Expense
Increases, notwithstanding that the Lease term may have terminated before the
end of such Comparison Year.
4.3 Rent Increase.
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5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof
the security deposit set forth in paragraph 1.9 of the Basic Lease.
Provisions as security for Lessee's faithful performance of Lessee's
obligations hereunder. If Lessee fails to pay rent or other charges due
hereunder, or otherwise defaults with respect to any provision of this Lease,
Lessor may use, apply or retain all or any portion of said deposit for the
payment of any rent or other charge in default for the payment of any other
sum to which the Lessor may become obligated by reason of Lessee's default,
or to compensate Lessor for any loss or damage which Lessor may suffer
thereby. If Lessor so uses or applies all or any portion of said deposit,
Lessee shall within ten (10) days after written demand therefor deposit cash
with Lessor in an amount sufficient to restore said deposit to the full
amount then required of Lessee. If the monthly Base Rent shall, from time to
time, increase during the term of this Lease, Lessee shall, at the time of
such increase, deposit with Lessor additional money as a security deposit so
that the total amount of the security deposit held by Lessor shall at all
times bear the same proportion to the then current Base Rent as the initial
security deposit bears to the initial Base Rent set forth in paragraph 1.6 of
the Basic Lease Provisions. Lessor shall not be required to keep said
security deposit separate from its general accounts. If Lessee performs all
of Lessee's obligations hereunder, said deposit, or so much thereof as has
not heretofore been applied by Lessor, shall be returned, without payment of
interest or other increment for its use, to Lessee (or, at Lessor's option,
to the last assignee, if any, of Lessee's interest hereunder) at the
expiration of the term hereof, and after Lessee has vacated the Premises. No
trust relationship is created herein between Lessor and Lessee with respect
to said Security Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied only for the purpose
set forth in paragraph 1.4 of the Basic Lease Provisions or any other use
which is reasonably comparable to that use and for no other purpose.
6.2 Compliance with Law.
(a) Lessor warrants to Lessee that the Premises, in the state
existing on the date that the Lease term commences, but without regard to
alterations or improvements made by Lessee or the use for which Lessee will
occupy the Premises, does not violate any covenants or restrictions of record
or any applicable building code, regulation or ordinance in effect on such
Lease term Commencement Date. In the event it is determined that this
warranty has been violated, then it shall be the obligation of the Lessor,
after written notice from Lessee, to promptly, at Lessor's sole cost and
expense, rectify any such violation.
(b) Except as provided in paragraph 6.2(a) Lessee shall, at
Lessee's expense, promptly comply with all applicable statutes, ordinances,
rules, regulations, orders, covenants and restrictions of record, and
requirements of any fire insurance underwriters or rating bureaus, now in
effect or which may hereafter come into effect, whether or not they reflect a
change in policy from that now existing, during the term or any part of the
term hereof, relating in any manner to the Premises and the occupation and
use by Lessee of the Premises. Lessee shall conduct its business in a lawful
manner and shall not use or permit the use of the Premises or the Common
Areas in any manner that will tend to create waste or a nuisance or shall
tend to disturb other occupants of the Office Building Project.
6.3 Condition of Premises.
(a) Lessor shall deliver the Premises to Lessee in a clean
condition on the Lease Commencement Date (unless Lessee is already in
possession) and Lessor warrants to Lessee that the plumbing, lighting, air
conditioning, and heating system in the Premises shall be in good operating
condition. In the event that it is determined that this warranty has been
violated, then it shall be the obligation of Lessor, after receipt of written
notice from Lessee setting forth with specificity the nature of the
violation, to promptly, at Lessor's sole cost, rectify such violation.
(b) Except as otherwise provided in this Lease, Lessee hereby
accepts the Premises and the Office Building Project in their condition
existing as of the Lease Commencement Date or the date that Lessee takes
possession of the Premises, whichever is earlier, subject to all applicable
zoning, municipal, county and state laws, ordinances and regulations
governing and regulating the use of the Premises, and any easements,
covenants or restrictions of record, and accepts this Lease subject thereto
and to all matters disclosed thereby and by any exhibits attached hereto.
Lessee acknowledges that it has satisfied itself by its own independent
investigation that the Premises are suitable for its intended use, and that
neither Lessor nor Lessor's agent or agents has made any representation or
warranty as to the present or future suitability of the Premises, Common
Areas, or Office Building Project for the conduct of Lessee's business.
7. Maintenance, Repairs, Alterations and Common Area Services.
7.1 Lessor's Obligations. Lessor shall keep the Office Building Project,
including the Premises, interior and exterior walls, roof, and common areas,
and the equipment whether used exclusively for the Premises or in common with
other premises, in good condition and repair; provided, however, Lessor shall
not be obligated to paint, repair or replace wall coverings, or to repair or
replace any improvements that are not ordinarily a part of the Building or
are above then Building standards. Except as provided in paragraph 9.5, there
shall be no abatement of rent or liability of Lessee on account of any injury
or interference with Lessee's business with respect to any improvements,
alterations or repairs made by Lessor to the Office Building Project or any
part thereof. Lessee expressly waives the benefits of any statute now or
hereafter in effect which would otherwise afford Lessee the right to make
repairs at Lessor's expense or to terminate this Lease because of Lessor's
failure to keep the Premises in good order, condition and repair.
7.2 Lessee's Obligations.
(a) Notwithstanding Lessor's obligation to keep the Premises in
good condition and repair, Lessee shall be responsible for payment of the
cost thereof to Lessor as additional rent for that portion of the cost of any
maintenance and repair of the Premises, or any equipment (wherever located)
that serves only Lessee or the Premises, to the extent such cost is
attributable to causes beyond normal wear and tear. Lessee shall be
responsible for the cost of painting, repairing or replacing wall coverings,
and to repair or replace any Premises improvements that are not ordinarily a
part of the Building or that are above then Building standards. Lessor may,
at its option, upon reasonable notice, elect to have Lessee perform any
particular such maintenance or repairs the cost of which is otherwise
Lessee's responsibility hereunder.
(b) On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same
condition as received, ordinary wear and tear excepted, clean and free of
debris. Any damage or deterioration of the Premises shall not be deemed
ordinary wear and tear if the same could have been prevented by good
maintenance practices by Lessee. Lessee shall repair any damage to the
Premises occasioned by the installation or removal of Lessee's trade
fixtures, alterations, furnishings and equipment. Except as otherwise stated
in this Lease, Lessee shall leave the air lines, power panels, electrical
distribution systems, lighting fixtures, air conditioning, window coverings,
wall coverings, carpets, wall panelling, ceilings and plumbing on the Premises
and in good operating condition.
7.3 Alterations and Additions.
(a) Lessee shall not, without Lessor's prior written consent make
any alterations, improvements, additions, Utility Installations or repairs
in, on or about the Premises, or the Office Building Project. As used in this
paragraph 7.3 the term "Utility Installation" shall mean carpeting, window
and wall coverings, power panels, electrical distribution systems, lighting
fixtures, air conditioning, plumbing, and telephone and telecommunication
wiring and equipment. At the expiration of the term, Lessor may require the
removal of any or all of said alterations, improvements, additions or Utility
Installations, and the restoration of the Premises and the Office Building
Project to their prior condition, at Lessee's expense. Should Lessor permit
Lessee to make its own alterations, improvements, additions or Utility
Installations, Lessee shall use only such contractor as has been expressly
approved by Lessor, and Lessor may require Lessee to provide Lessor, at
Lessee's sole cost and expense, a lien and completion bond in an amount equal
to one and one-half times the estimated cost of such improvements, to insure
Lessor against any liability for mechanic's and materialmen's liens and to
insure completion of the work. Should Lessee make any alterations,
improvements, additions or Utility Installations without the prior approval
of Lessor, or use a contractor not expressly approved by Lessor, Lessor may,
at any time during the term of this Lease, require that Lessee remove any
part or all of the same.
(b) Any alterations, improvements, additions or Utility
Installations in or about the Premises or the Office Building Project that
Lessee shall desire to make shall be presented to Lessor in written form,
with proposed detailed plans. If Lessor shall give its consent to Lessee's
making such alteration, improvement, addition or Utility Installation, the
consent shall be deemed conditioned upon Lessee acquiring a permit to do so
from the applicable government agencies, furnishing a copy thereof to Lessor
prior to the commencement of the work, and compliance by Lessee with all
conditions of said permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises, the Building or the Office Building
Project, or any interest therein.
(d) Lessee shall give Lessor not less than ten (10) days' notice
prior to the commencement of any work in the Premises by Lessee, and Lessor
shall have the right to post notices of non-responsibility in or on the
Premises or the Building as provided by law. If Lessee shall, in good faith,
contest the validity of any such lien, claim or demand, then Lessee shall, at
its sole expense defend itself and Lessor against the same and shall pay and
satisfy
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any such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises, the Building or the Office
Building Project, upon the condition that if Lessor shall require, Lessee
shall furnish to Lessor a surety bond satisfactory to Lessor in an amount
equal to such contested lien claim or demand indemnifying Lessor against
liability for the same and holding the Premises, the Building and the Office
Building Project free from the effect of such lien or claim. In addition,
Lessor may require Lessee to pay Lessor's reasonable attorneys' fees and
costs in participating in such action if Lessor shall decide it is to
Lessor's best interest so to do.
(e) All alterations, improvements, additions and Utility
Installations (whether or not such Utility Installations constitute trade
fixtures of Lessee), which may be made to the Premises by Lessee, including but
not limited to, floor coverings, paneling, doors, drapes, built-ins,
moldings, sound attenuation, and lighting and telephone or communication
systems, conduit, wiring and outlets, shall be made and done in a good and
workmanlike manner and of good and sufficient quality and materials and shall
be the property of Lessor and remain upon and be surrendered with the
Premises at the expiration of the Lease term, unless Lessor requires their
removal pursuant to paragraph 7.3(a). Provided Lessee is not in default,
notwithstanding the provisions of this paragraph 7.3(e), Lessee's personal
property and equipment, other than that which is affixed to the Premises so
that it cannot be removed without material damage to the Premises or the
Building, and other than Utility Installations, shall remain the property of
Lessee and may be removed by Lessee subject to the provisions of paragraph
7.2.
(f) Lessee shall provide Lessor with as-built plans and
specifications for any alterations, improvements, additions or Utility
Installations.
7.4 Utility Additions. Lessor reserves the right to install new or
additional utility facilities throughout the Office Building Project for the
benefit of Lessor or Lessee, or any other lessee of the Office Building
Project, including, but not by way of limitation, such utilities as plumbing,
electrical systems, communication systems, and fire protection and detection
systems, so long as such installations do not unreasonably interfere with
Lessee's use of the Premises.
8. Insurance; Indemnity.
8.1 Liability Insurance--Lessee. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease a policy of
Comprehensive General Liability Insurance utilizing an Insurance Services
Office standard form with Broad Form General Liability Endorsement (GL0404)
or equivalent, in an amount of not less than $1,000,000 per occurrence of
bodily injury and property damage combined or in a greater amount as
reasonably determined by Lessor and shall insure Lessee with Lessor as an
additional insured against liability arising out of the use, occupancy or
maintenance of the Premises. Compliance with the above requirement shall not,
however, limit the liability of Lessee hereunder.
8.2 Liability Insurance--Lessor. Lessor shall obtain and keep in force
during the term of this Lease a policy of Combined Single Limit Bodily Injury
and Broad Form Property Damage Insurance, plus coverage against such other
risks Lessor deems advisable from time to time, insuring Lessor but not
Lessee, against liability arising out of the ownership, use, occupancy or
maintenance of the Office Building Project in an amount not less than
$5,000,000.00 per occurrence.
8.3 Property Insurance--Lessee. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease for the benefit of
Lessee, replacement cost fire and extended coverage insurance, with vandalism
and malicious mischief, sprinkler leakage and earthquake sprinkler leakage
endorsements, in an amount sufficient to cover not less than 100% of the full
replacement cost, as the same may exist from time to time, of all of Lessee's
personal property, fixtures, equipment and tenant improvements.
8.4 Property Insurance--Lessor. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies of insurance covering loss
or damage to the Office Building Project improvements, but not Lessee's
personal property, fixtures, equipment or tenant improvements, in the amount
of the full replacement cost thereof, as the same may exist from time to
time, utilizing Insurance Services Office standard form, or equivalent,
providing protection against all perils included within the classification of
fire, extended coverage, vandalism, malicious mischief, plate glass, and such
other perils as Lessor deems advisable or may be required by a lender having
a lien on the Office Building Project. In addition, Lessor shall obtain and
keep in force, during the term of this Lease, a policy of rental value
insurance covering a period of one year, with loss payable to Lessor, which
insurance shall also cover all Operating Expenses for said period. Lessee
will not be named in any such policies carried by Lessor and shall have no
right to any proceeds therefrom. The policies required by these paragraphs
8.2 and 8.4 shall contain such deductibles as Lessor or the aforesaid lender
may determine, in the event that the Premises shall suffer an insured loss as
defined in paragraph 9.1(f) hereof, the deductible amounts under the
applicable insurance policies shall be deemed an Operating Expense. Lessee
shall not do or permit to be done anything which shall invalidate the
insurance policies carried by Lessor. Lessee shall pay the entirety of any
increase in the property insurance premium for the Office Building Project
over what it was immediately prior to the commencement of the term of this
Lease. If the increase is specified by Lessor's insurance carrier as being
caused by the nature of Lessee's occupancy or any act or omission of Lessee.
8.5 Insurance Policies. Lessee shall deliver to Lessor copies of
liability insurance policies required under paragraph 8.1 or certificates
evidencing the existence and amounts of such insurance within seven (7) days
after the Commencement Date of this Lease. No such policy shall be
cancellable or subject to reduction of coverage or other modification except
after thirty (30) days prior written notice to Lessor. Lessee shall, at least
thirty (30) days prior to the expiration of such policies, furnish Lessor
with renewals thereof.
8.6 Waiver of Subrogation. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other
for direct or consequential loss or damage arising out of or incident to the
perils covered by property insurance carried by such party, whether due to
the negligence of Lessor or Lessee or their agents, employees, contractors
and/or invitees. If necessary all property insurance policies required under
this Lease shall be endorsed to so provide.
8.7 Indemnity. Lessee shall indemnify and hold harmless Lessor and its
agents, Lessor's master or ground lessor, partners and lenders, from and
against any and all claims for damage to the person or property of anyone or
any entity arising from Lessee's use of the Office Building Project, or from
the conduct of Lessee's business or from any activity, work or things done,
permitted or suffered by Lessee in or about the Premises or elsewhere and
shall further indemnify and hold harmless Lessor from and against any and all
claims, costs and expenses arising from any breach or default in the
performance of any obligation on Lessee's part to be performed under the
terms of this Lease, or arising from any act or omission of Lessee, or any of
Lessee's agents, contractors, employees, or invitees, and from and against
all costs, attorney's fees, expenses and liabilities incurred by Lessor as
the result of any such use, conduct, activity, work, things done, permitted
or suffered, breach, default or negligence, and in dealing reasonably
therewith, including but not limited to the defense or pursuit of any claim
or any action or proceeding involved therein; and in case any action or
proceeding be brought against Lessor by reason of any such matter, Lessee
upon notice from Lessor shall defend the same at Lessee's expense by counsel
reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in
such defense. Lessor need not have first paid any such claim in order to be
so indemnified. Lessee, as a material part of the consideration to Lessor,
hereby assumes all risk of damage to property of Lessee or injury to persons,
in, upon or about the Office Building Project arising from any cause and
Lessee hereby waives all claims in respect thereof against Lessor.
8.8 Exemption of Lessor from Liability. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefrom or for loss of or damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers, or any other
person in or about the Premises or the Office Building Project, nor shall
Lessor be liable for injury to the person of Lessee, Lessee's employees,
agents or contractors, whether such damage or injury is caused by or results
from theft, fire, steam, electricity, gas, water or rain, or from the
breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any
other cause, whether said damage or injury results from conditions arising
upon the Premises or upon other portions of the Office Building Project, or
from other sources or places, or from new construction or the repair,
alteration or improvement of any part of the Office Building Project, or of
the equipment, fixtures or appurtenances applicable thereto, and regardless
of whether the cause of such damage or injury or the means of repairing the
same is inaccessible, Lessor shall not be liable for any damages arising from
any act or neglect of any other lessee, occupant or user of the Office
Building Project, nor from the failure of Lessor to enforce the provisions of
any other lease of any other lessee of the Office Building Project.
8.9. No Representation of Adequate Coverage. Lessor makes no
representation that the limits or forms of coverage of insurance specified in
this paragraph 8 are adequate to cover Lessee's property or obligations under
this Lease.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Damage" shall mean if the Premises are damaged or
destroyed to any extent.
(b) "Premises Building Partial Damage" shall mean if the Building
of which the Premises are a part is damaged or destroyed to the extent that
the cost to repair is less than fifty percent (50%) of the then Replacement
Cost of the building.
(c) "Premises Building Total Destruction" shall mean if the
Building of which the Premises are a part is damaged or destroyed to the
extent that the cost to repair is fifty percent (50%) or more of the then
Replacement Cost of the Building.
(d) "Office Building Project Buildings" shall mean all of the
buildings on the Office Building Project site.
(e) "Office Building Project Buildings Total Destruction" shall
mean if the Office Building Project Buildings are damaged or destroyed to the
extent that the cost of repair is fifty percent (50%) or more of the then
Replacement Cost of the Office Building Project Buildings.
(f) "Insured Loss" shall mean damage or destruction which was
caused by an event required to be covered by the insurance described in
paragraph 8. The fact that an Insured Loss has a deductible amount shall not
make the loss an uninsured loss.
(g) "Replacement Cost" shall mean the amount of money necessary to
be spent in order to repair or rebuild the damaged area to the condition that
existed immediately prior to the damage occurring, excluding all improvements
made by lessees, other than those installed by Lessor at Lessee's expense.
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9.2 Premises Damage; Premises Building Partial Damage.
(a) Insured Loss: Subject to the provisions of paragraphs 9.4 and
9.5, if at any time during the term of this Lease there is damage which is an
Insured Loss and which falls into the classification of either Premises
Damage or Premises Building Partial Damage, then Lessor shall, as soon as
reasonably possible and to the extent the required materials and labor are
readily available through usual commercial channels, at Lessor's expense
repair such damage (but not Lessee's fixtures, equipment or tenant
improvements originally paid for by Lessee) to its condition existing at the
time of the damage, and this Lease shall continue in full force and effect.
(b) Uninsured Loss: Subject to the provisions of paragraphs 9.4 and
9.5, if at any time during the term of this Lease there is damage which is
not an Insured Loss and which falls within the classification of Premises
Damage or Premises Building Partial Damage, unless caused by a negligent or
willful act of Lessee (in which event Lessee shall make the repairs at
Lessee's expense), which damage prevents Lessee from making any substantial
use of the Premises, Lessor may at Lessor's option either (i) repair such
damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written
notice to Lessee within thirty (30) days after the date of the occurrence of
such damage of Lessor's intention to cancel and terminate this Lease as of
the date of the occurrence of such damage, in which event this Lease shall
terminate as of the date of the occurrence of such damage.
9.3 Premises Building Total Destruction; Office Building Project Total
Destruction. Subject to the provisions of paragraphs 9.4 and 9.5, if at any
time during the term of this Lease there is damage, whether or not it is an
Insured Loss, which falls into the classifications of either (i) Premises
Building Total Destruction, or (ii) Office Building Project Total
Destruction, then Lessor may at Lessor's option either (i) repair such damage
or destruction as soon as reasonably possible at Lessor's expense (to the
extent the required materials are readily available through usual commercial
channels) to its condition existing at the time of the damage, but not
Lessee's fixtures, equipment or tenant improvements, and this Lease shall
continue in full force and effect, or (ii) give written notice to Lessee
within thirty (30) days after the date of occurrence of such damage of
Lessor's intention to cancel and terminate this Lease, in which case this
Lease shall terminate as of the date of the occurrence of such damage.
9.4 Damage Near End of Term.
(a) Subject to paragraph 9.4(b), if at any time during the last
twelve (12) months of the term of this Lease there is substantial damage to
the Premises, Lessor may at Lessor's option cancel and terminate this Lease
as of the date of occurrence of such damage by giving written notice to
Lessee of Lessor's election to do so within 30 days after the date of
occurrence of such damage.
(b) Notwithstanding paragraph 9.4(a), in the event that Lessee has
an option to extend or renew this Lease, and the time within which said
option may be exercised has not yet expired, Lessee shall exercise such
option, if it is to be exercised at all, no later than twenty (20) days after
the occurrence of an Insured Loss falling within the classification of
Premises Damage during the last twelve (12) months of the term of this Lease.
If Lessee duly exercises such option during said twenty (20) day period,
Lessor shall, at Lessor's expense, repair such damage, but not Lessee's
fixtures, equipment or tenant improvements, as soon as reasonably possible
and this Lease shall continue in full force and effect. If Lessee fails to
exercise such option during said twenty (20) day period, then Lessor may at
Lessor's option terminate and cancel this Lease as of the expiration of said
twenty (20) day period by giving written notice to Lessee of Lessor's
election to do so within ten (10) days after the expiration of said twenty
(20) day period, notwithstanding any term or provision in the grant of option
to the contrary.
9.5 Abatement of Rent; Lessee's Remedies.
(a) In the event Lessor repairs or restores the Building or
Premises pursuant to the provisions of this paragraph 9, and any part of the
Premises are not usable (including loss of use due to loss of access or
essential services), the rent payable hereunder (including Lessee's Share of
Operating Expense Increase) for the period during which such damage, repair
or restoration continues shall be abated, provided (1) the damage was not the
result of the negligence of Lessee, and (2) such abatement shall only be to
the extent the operation and profitability of Lessee's business as operated
from the Premises is adversely affected. Except for said abatement of rent,
if any, Lessee shall have no claim against Lessor for any damage suffered by
reason of any such damage, destruction, repair or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
or the Building under the provisions of this paragraph 9 and shall not
commence such repair or restoration within ninety (90) days after such
occurrence, or if Lessor shall not complete the restoration and repair within
six (6) months after such occurrence, Lessee may at Lessee's option cancel
and terminate this Lease by giving Lessor written notice of Lessee's election
to do so at any time prior to the commencement or completion, respectively,
of such repair or restoration. In such event this Lease shall terminate as of
the date of such notice.
(c) Lessee agrees to cooperate with Lessor in connection with any
such restoration and repair, including but not limited to the approval and/or
execution of plans and specifications required.
9.6 Termination--Advance Payments. Upon termination of this Lease
pursuant to this paragraph 9, an equitable adjustment shall be made
concerning advance rent and any advance payments made by Lessee to Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's security
deposit as has not theretofore been applied by Lessor.
9.7 Waiver. Lessor and Lessee waive the provisions of any statute which
relate to termination of leases when leased property is destroyed and agree
that such event shall be governed by the terms of this Lease.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessor shall pay the real property tax, as defined
in paragraph 10.3, applicable to the Office Building Project subject to
reimbursement by Lessee of Lessee's Share of such taxes in accordance with
the provisions of paragraph 4.2, except as otherwise provided in paragraph
10.2.
10.2 Additional Improvements. Lessee shall not be responsible for paying
any increase in real property tax specified in the tax assessor's records and
work sheets as being caused by additional improvements placed upon the Office
Building Project by other lessees or by Lessor for the exclusive enjoyment of
any other lessee. Lessee shall, however, pay to Lessor at the time that
Operating Expenses are payable under paragraph 4.2(c) the entirety of any
increase in real property tax if assessed solely by reason of additional
improvements placed upon the Premises by Lessee at Lessee's request.
10.3 Definition of "Real Property Tax." As used herein, the term "real
property tax" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed on the Office Building Project or
any portion thereof by any authority having the direct or indirect power to
tax, including any city, county, state or federal government, or any school,
agricultural, sanitary, fire, street, drainage or other improvement district
thereof as against any legal or equitable interest of Lessor in the Office
Building Project or in any portion thereof, as against Lessor's right to rent
or other income therefrom, and as against Lessor's business of leasing the
Office Building Project. The term "real property tax" shall also include any
tax, fee, levy, assessment or charge (i) in substitution of, partially or
totally, any tax, fee, levy, assessment or charge hereinabove included within
the definition of "real property tax," or (ii) the nature of which was
hereinbefore included within the definition of "real property tax," or (iii)
which is imposed for a fee for service or right not charged prior to June 1,
1978, or, if previously charged, has been increased since June 1, 1978, or
(iv) which is imposed as a result of a change in ownership, as defined by
applicable local statutes for property tax purposes, of the Office Building
Project or which is added to a tax or charge hereinbefore included within the
definition of real property tax by reason of such change of ownership, or (v)
which is imposed by reason this transaction, any modifications or changes
hereto, or any transfers hereof.
10.4 Joint Assessment. If the improvements or property, the taxes for
which are to be paid separately by Lessee under paragraph 10.2 or 10.5 are
not separately assessed, Lessee's portion of that tax shall be equitably
determined by Lessor from the respective valuations assigned in the
assessor's work sheets or such other information (which may include the cost
of construction) as may be reasonably available. Lessor's reasonable
determination thereof, in good faith, shall be conclusive.
10.5 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Lessee contained in the Premises or elsewhere.
(b) If any of Lessee's said personal property shall be assessed
with Lessor's real property, Lessee shall pay to Lessor the taxes
attributable to Lessee within ten (10) days after receipt of a written
statement setting forth the taxes applicable to Lessee's property.
11.1 Utilities.
11.1 Services Provided by Lessor. Lessor shall provide heating,
ventilation, air conditioning, and janitorial services as reasonably
required, reasonable amounts of electricity for normal lighting and office
machines, water for reasonable and normal drinking and lavatory use, and
replacement light bulbs and/or fluorescent tubes and ballasts for standard
overhead fixtures.
11.2 Services Exclusive to Lessee. Lessee shall pay for all water, gas,
heat, light, power, telephone and other utilities and services specially or
exclusively supplied and/or metered exclusively to the Premises or to Lessee,
together with any taxes thereon. If any such services are not separately
metered to the Premises, Lessee shall pay at Lessor's option, either Lessee's
Share or a reasonable proportion to be determined by Lessor of all charges
jointly metered with other premises in the Building.
11.3 Hours of Service. Said services and utilities shall be provided
during generally accepted business days and hours or such other days or hours
as may hereafter be set forth.
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11.4 Excess Usage by Lessee. Lessee shall not make connection to the
utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses excess water,
lighting or power, or suffer or permit any act that causes extra burden upon
the utilities or services, including but not limited to security services,
over standard office usage for the Office Building Project. Lessor shall
require Lessee to reimburse Lessor for any excess expenses or costs that may
arise out of a breach of this subparagraph by Lessee. Lessor may, in its sole
discretion, install at Lessee's expense supplemental equipment and/or
separate metering applicable to Lessee's excess usage or loading.
11.5 Interruptions. There shall be no abatement of rent and Lessor shall
not be liable in any respect whatsoever for the inadequacy, stoppage
interruption or discontinuance of any utility or service due to riot, strike,
labor dispute, breakdown, accident, repair or other cause beyond Lessor's
reasonable control or in cooperation with governmental request or directions.
12. Assignment and Subletting.
12.1 Lessor's Consent Required. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in the Lease or in the
Premises, without Lessor's prior written consent, which Lessor shall not
unreasonably withhold. Lessor shall respond to the Lessee's request for
consent hereunder in a timely manner and any attempted assignment, transfer,
mortgage, encumbrance or subletting without such consent shall be void, and
shall constitute a material default and breach of this Lease without the need
for notice to Lessee under paragraph 13.1. "Transfer" within the meaning of
this paragraph 12 shall include the transfer or transfers aggregating: (a)
if Lessee is a corporation, more than twenty-five percent (25%) of the voting
stock of such corporation, or (b) if Lessee is a partnership, more than
twenty-five percent (25%) of the profit and loss participation in such
partnership.
12.2 Lessee Affiliate. Notwithstanding the provisions of paragraph 12.1
hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without Lessor's consent, to any corporation which controls, is controlled by
or is under common control with Lessee, or to any corporation resulting from
the merger or consolidation with Lessee, or to any person or entity which
acquires all the assets of Lessee as a going concern of the business that is
being conducted on the Premises, all of which are referred to as "Lessee
Affiliate"; provided that before such assignment shall be effective (a) said
assignee shall assume, in full, the obligations of Lessee under this Lease
and (b) Lessor shall be given written notice of such assignment and
assumption. Any such assignment shall not, in any way, affect or limit the
liability of Lessee under the terms of this Lease even if after such
assignment or subletting the terms of this Lease are materially changed or
altered without the consent of Lessee, the consent of whom shall not be
necessary.
12.3 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, no assignment or subletting
shall release Lessee of Lessee's obligations hereunder or alter the primary
liability of Lessee to pay the rent and other sums due Lessor hereunder
including Lessee's Share of Operating Expense Increase; and to perform other
obligations to be performed by Lessee hereunder.
(b) Lessor may accept rent from any person other than Lessee pending
approval or disapproval of such assignment.
(c) Neither a delay in the approval or disapproval of such
assignment or subletting, nor the acceptance of rent, shall constitute a
waiver or estoppel of Lessor's right to exercise its remedies for the breach
of any of the terms or conditions of this paragraph 12 of this Lease.
(d) If Lessee's obligations under this Lease have been guaranteed by
third parties, then an assignment or sublease, and Lessor's consent thereto,
shall not be effective unless said guarantors give their written consent to
such sublease and the terms thereof.
(e) The consent by Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or
to any subsequent or successive assignment or subletting by the sublessee.
However, Lessor may consent to subsequent sublettings and assignments of the
sublease or any amendments or modifications thereto without notifying Lessee
or anyone else liable on the Lease or sublease and without obtaining their
consent and such action shall not relieve such persons from liability under
this Lease or said sublease; however, such persons shall not be responsible
to the extent any such amendment or modification enlarges or increases the
obligations of the Lessee or sublessee under this Lease or such sublease.
(f) In the event of any default under this Lease, Lessor may proceed
directly against Lessee, any guarantors or any one else responsible for the
performance of this Lease, including the sublessee, without first exhausting
Lessor's remedies against any other person or entity responsible therefor to
Lessor, or any security held by Lessor or Lessee.
(g) Lessor's written consent to any assignment or subletting of the
Premises by Lessee shall not constitute an acknowledgement that no default
then exists under this Lease of the obligations to be performed by Lessee nor
shall such consent be deemed a waiver of any then existing default, except as
may be otherwise stated by Lessor at the time.
(h) The discovery of the fact that any financial statement relied
upon by Lessor in giving its consent to an assignment or subletting was
materially false shall, at Lessor's election, render Lessor's said consent
null and void.
12.4 Additional Terms and Conditions Applicable to Subletting. Regardless
of Lessor's consent, the following terms and conditions shall apply to any
subletting by Lessee of all or any part of the Premises and shall be deemed
included in all subleases under this Lease whether or not expressly
incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease heretofore or
hereafter made by Lessee, and Lessor may collect such rent and income and
apply same toward Lessee's obligations under this Lease; provided, however,
that until a default shall occur in the performance of Lessee's obligations
under this Lease, Lessee may receive, collect and enjoy the rent accruing
under such sublease. Lessor shall not, by reason of this or any other
assignment of such sublease to Lessor nor by reason of the collection of the
rents from a sublease, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such
sublessee under such sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor
stating that a default exists in the performance of Lessee's obligations
under this Lease, to pay to Lessor the rents due and to become due under the
sublease. Lessee agrees that such sublessee shall have the right to rely upon
any such statement and request from Lessor, and that such sublessee shall pay
such rents to Lessor without any obligation or right to inquire as to whether
such default exists and notwithstanding any notice from or claim from Lessee
to the contrary. Lessee shall have no right or claim against said sublessee
or Lessor for any such rents so paid by said sublessee to Lessor.
(b) No sublease entered into by Lessee shall be effective unless and
until it has been approved in writing by Lessor, in entering into any
sublease, Lessee shall use only such form of sublessee as is satisfactory to
Lessor, and once approved by Lessor, such sublease shall not be changed or
modified without Lessor's prior written consent. Any sublease shall, by
reason of entering into a sublease under this Lease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every obligation herein to be performed by Lessee other than such
obligations as are contrary to or inconsistent with provisions contained in
a sublease to which Lessor has expressly consented in writing.
(c) In the event Lessee shall default in the performance of its
obligations under this Lease, Lessor at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event
Lessor shall undertake the obligations of Lessee under such sublease from the
time of the exercise of said option to the termination of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or
security deposit paid by such sublessee to Lessee or for any other prior
defaults of Lessee under such sublease.
(d) No sublessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.
(e) With respect to any subletting to which Lessor has consented,
Lessor agrees to deliver a copy of any notice of default by Lessee to the
sublessee. Such sublessee shall have the right to cure a default of Lessee
within three (3) days after service of said notice of default upon such
sublessee, and the sublessee shall have a right of reimbursement and offset
from and against Lessee for any such defaults cured by the sublessee.
12.5 Lessor's Expenses. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting, or
if Lessee shall request the consent of Lessor for any act Lessee proposes to
do then Lessee shall pay Lessor's reasonable costs and expenses incurred in
connection therewith, including attorneys', architects', engineers' or other
consultants' fees.
12.6 Conditions to Consent. Lessor reserves the right to condition any
approval to assign or sublet upon Lessor's determination that (a) the
proposed assignee or sublessee shall conduct a business on the Premises of a
quality substantially equal to that of Lessee and consistent with the general
character of the other occupants of the Office Building Project and not in
violation of any exclusives or rights then held by other tenants, and (b) the
proposed assignee or sublessee be at least as financially responsible as
Lessee was expected to be at the time of the execution of this Lease or of
such assignment or subletting, whichever is greater.
13. Default; Remedies.
13.1 Default. The occurrence of any one or more of the following events
shall constitute a material default of this Lease by Lessee:
(a) The vacation or abandonment of the Premises by Lessee. Vacation
of the Premises shall include the failure to occupy the Premises for a
continuous period of sixty (60) days or more, whether or not the rent is paid.
(b) The breach by Lessee of any of the covenants, conditions or
provisions of paragraphs 7.3(a), (b) or (d) (alterations), 12.1 (assignment or
subletting), 13.1(a) (vacation or abandonment), 13.1(e) (insolvency), 13.1(f)
(false statement), 16(a) (estoppel certificate), 30(b) (subordination), 33
(auctions), or 41.1 (easements), all of which are hereby deemed to be
material, non-curable defaults without the necessity of any notice by Lessor
to Lessee thereof.
(c) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, or where
such failure shall continue for a period of three (3) days after written
notice thereof from Lessor to Lessee. In the event that Lessor serves Lessee
with a Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer
statutes such Notice to Pay Rent or Quit shall also constitute the notice
required by this subparagraph.
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(d) The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed
by Lessee other than those referenced in subparagraphs (b) and (c), above,
where such failure shall continue for a period of thirty (30) days after
written notice thereof from Lessor to Lessee; provided, however, that if the
nature of Lessee's noncompliance is such that more than thirty (30) days are
reasonably required for its cure, then Lessee shall not be deemed to be in
default if Lessee commenced such cure within said thirty (30) day period and
thereafter diligently pursues such cure to completion. To the extent
permitted by law, such thirty (30) day notice shall constitute the sole and
exclusive notice required to be given to Lessee under applicable Unlawful
Detainer statutes.
(e) (i) The making by Lessee of any general arrangement or general
assignment for the benefit of creditors; (ii) Lessee becoming a "debtor" as
defined in 11 U.S.C. Section 101 or any successor statute thereto (unless, in
the case of a petition filed against Lessee, the same is dismissed within
sixty (60) days; (iii) the appointment of a trustee or receiver to take
possession of substantially all of Lessee's assets located at the Premises or
of Lessee's interests in this Lease, where possession is not restored to
Lessee within thirty (30) days; or (iv) the attachment, execution or other
judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessee's interest in this Lease, where such seizure is not
discharged within thirty (30) days. In the event that any provision of this
paragraph 13.1(e) is contrary to any applicable law, such provision shall be
of no force or effect.
(f) The discovery by Lessor that any financial statement given to
Lessor by Lessee, or its successor in interest or by any guarantor of
Lessee's obligation hereunder, was materially false.
13.2 Remedies. In the event of any material default or breach of this
Lease by Lessee, Lessor may at any time thereafter, with or without notice
or demand and without limiting Lessor in the exercise of any right or
remedy which Lessor may have by reason of such default:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate
and Lessee shall immediately surrender possession of the Premises to Lessor.
In such event Lessor shall be entitled to recover from Lessee all damages
incurred by Lessor by reason of Lessee's default including, but not limited
to, the cost of recovering possession of the Premises; expenses of reletting
including necessary renovation and alteration of the Premises, reasonable
attorneys' fees, and any real estate commission actually paid; the worth at the
time of award by the court having jurisdiction thereof of the amount by which
the unpaid rent for the balance of the term after the time of such award
exceeds the amount of such rental loss for the same period that Lessee proves
could be reasonably avoided; that portion of the leasing commission paid by
Lessor pursuant to paragraph 15 applicable to the unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which case this Lease
shall continue in effect whether or not Lessee shall have vacated or
abandoned the Premises. In such event Lessor shall be entitled to enforce all
of Lessor's rights and remedies under this Lease, including the right to
recover the rent as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the states wherein the Premises are
located. Unpaid installments of rent and other unpaid monetary obligations of
Lessee under the terms of this Lease shall bear interest from the date due at
the maximum rate then allowable by law.
13.3 Default by Lessor. Lessor shall not be in default unless Lessor
fails to perform obligations required of Lessor within a reasonable time, but
in no event later than thirty (30) days after written notice by Lessee to
Lessor and to the holder of any first mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to
Lessee in writing, specifying wherein Lessor has failed to perform such
obligations; provided, however, that if the nature of Lessor's obligation is
such that more than thirty (30) days are required for performance then Lessor
shall not be in default if Lessor commences performance within such 30-day
period and thereafter diligently pursues the same to completion.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of Base Rent, Lessee's Share of Operating Expense Increase or other
sums due hereunder will cause Lessor to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to ascertain.
Such costs include, but are not limited to, processing and accounting
charges, and late charges which may be imposed on Lessor by the terms of any
mortgage or trust deed covering the Office Building Project. Accordingly, if
any installment of Base Rent, Operating Expense Increase, or any other sum
due from Lessee shall not be received by Lessor or Lessor's designee within
ten (10) days after such amount shall be due, then, without any requirement
for notice to Lessee, Lessee shall pay to Lessor a late charge equal to 6% of
such overdue amount. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Lessor will incur by
reason of late payment by Lessee. Acceptance of such late charge by Lessor
shall in no event constitute a waiver of Lessee's default with respect to
such overdue amount, nor prevent Lessor from exercising any of the other
rights and remedies granted hereunder.
14. Condemnation. If the Premises or any portion thereof or the Office
Building Project are taken under the power of eminent domain, or sold under
the threat of the exercise of said power (all of which are herein called
"condemnation"), this Lease shall terminate as to the part so taken as of the
date the condemning authority takes title or possession, whichever first
occurs; provided that if so much of the Premises or the Office Building
Project are taken by such condemnation as would substantially and adversely
affect the operation and profitability of Lessee's business conducted from
the Premises, Lessee shall have the option, to be exercised only in writing
within thirty (30) days after Lessor shall have given Lessee written notice
of such taking (or in the absence of such notice, within thirty (30) days
after the condemning authority shall have taken possession), to terminate
this Lease as of the date the condemning authority takes such possession. If
Lessee does not terminate this Lease in accordance with the foregoing, this
Lease shall remain in full force and effect as to the portion of the Premises
remaining, except that the rent and Lessee's Share of Operating Expense
Increase shall be reduced in the proportion that the floor area of the
Premises taken bears to the total floor area of the Premises. Common Areas
taken shall be excluded from the Common Areas usable by Lessee and no
reduction of rent shall occur with respect thereto or by reason thereof.
Lessor shall have the option in its sole discretion to terminate this Lease
as of the taking of possession by the condemning authority, by giving written
notice to Lessee of such election within thirty (30) days after receipt of
notice of a taking by condemnation of any part of the Premises or the Office
Building Project. Any award for the taking of all or any part of the Premises
or the Office Building Project under the power of eminent domain or any
payment made under threat of the exercise of such power shall be the property
of Lessor, whether such award shall be made as compensation for diminution in
value of the leasehold or for the taking of the fee, or as severance damages;
provided, however, that Lessee shall be entitled to any separate award for
loss of or damage to Lessee's trade fixtures, removable personal property and
unamortized tenant improvements that have been paid for by Lessee. For that
purpose the cost of such improvements shall be amortized over the original
term of this Lease excluding any options. In the event that this Lease is not
terminated by reason of such condemnation, Lessor shall to the extent of
severance damages received by Lessor in connection with such condemnation,
repair any damage to the Premises caused by such condemnation except to the
extent that Lessee has been reimbursed therefor by the condemning authority.
Lessee shall pay any amount in excess of such severance damages required to
complete such repair.
16. Estoppel Certificate.
(a) Each party (as "responding party") shall at any time upon not less
than ten (10) days' prior written notice from the other party ("requesting
party") execute, acknowledge and deliver to the requesting party a statement
in writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and
the date
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to which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to the responding party's knowledge, any
uncured defaults on the part of the requesting party, or specifying such
defaults if any are claimed. Any such statement may be conclusively relied
upon by any prospective purchaser or encumbrancer of the Office Building
Project or of the business of Lessee.
(b) At the requesting party's option, the failure to deliver such
statement within such time shall be a material default of this Lease by the
party who is to respond, without any further notice to such party, or it
shall be conclusive upon such party that (i) this Lease is in full force and
effect, without modification except as may be represented by the requesting
party, (ii) there are no uncured defaults in the requesting party's
performance, and (iii) if Lessor is the requesting party, not more than one
month's rent has been paid in advance.
(c) If Lessor desires to finance, refinance, or sell the Office
Building Project, or any part thereof, Lessee hereby agrees to deliver to any
lender or purchaser designated by Lessor such financial statements of Lessee
as may be reasonably required by such lender or purchaser. Such statements
shall include the past three (3) years' financial statements of Lessee. All
such financial statements shall be received by Lessor and such lender or
purchaser in confidence and shall be used only for the purposes herein set
forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean only the
owner or owners, at the time in question, of the fee title or a lessee's
interest in a ground lease of the Office Building Project, and except as
expressly provided in paragraph 15, in the event of any transfer of such
title or interest, Lessor herein named (and in case of any subsequent
transfers then the grantor) shall be relieved from and after the date of such
transfer of all liability as respects Lessor's obligations thereafter to be
performed, provided that any funds in the hands of Lessor or the then grantor
at the time of such transfer, in which Lessee has an interest, shall be
delivered to the grantee. The obligations contained in this Lease to be
performed by Lessor shall, subject as aforesaid, be binding on Lessor's
successors and assigns, only during their respective periods of ownership.
18. Severability. The invalidity of any provision of this Lease as determined
by a court of competent jurisdiction shall in no way affect the validity of
any other provision hereof.
19. Interest on Past-due Obligations. Except as expressly herein provided,
any amount due to Lessor not paid when due shall bear interest at the maximum
rate then allowable by law or judgments from the date due. Payment of such
interest shall not excuse or cure any default by Lessee under this Lease;
provided, however, that interest shall not be payable on late charges
incurred by Lessee nor on any amounts upon which late charges are paid by
Lessee.
20. Time of Essence. Time is of the essence with respect to the obligations
to be performed under this Lease.
21. Additional Rent. All monetary obligations of Lessee to Lessor under the
terms of this Lease, including but not limited to Lessee's Share of Operating
Expense Increase and any other expenses payable by Lessee hereunder shall be
deemed to be rent.
22. Incorporation of Prior Agreements; Amendments. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No
prior or contemporaneous agreement or understanding pertaining to any such
matter shall be effective. This Lease may be modified in writing only, signed
by the parties in interest at the time of the modification. Except as
otherwise stated in this Lease, Lessee hereby acknowledges that neither the
real estate broker listed in paragraph 15 hereof nor any cooperating broker
on this transaction nor the Lessor or any employee or agents of any of said
persons has made any oral or written warranties or representations to Lessee
relative to the condition or use by Lessee of the Premises or the Office
Building Project and Lessee acknowledges that Lessee assumes all
responsibility regarding the Occupational Safety Health Act, the legal use
and adaptability of the Premises and the compliance thereof with all
applicable laws and regulations in effect during the term of this Lease.
23. Notices. Any notice required or permitted to be given hereunder shall be
in writing and may be given by personal delivery or by certified or
registered mail, and shall be deemed sufficiently given if delivered or
addressed to Lessee or to Lessor at the address noted below or adjacent to
the signature of the respective parties, as the case may be. Mailed notices
shall be deemed given upon actual receipt at the address required, or
forty-eight hours following deposit in the mail, postage prepaid, whichever
first occurs. Either party may by notice to the other specify a different
address for notice purposes except that upon Lessee's taking possession of
the Premises, the Premises shall constitute Lessee's address for notice
purposes. A copy of all notices required or permitted to be given to Lessor
hereunder shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate by notice to
Lessee.
24. Waivers. No waiver by Lessor of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent
to or approval of any subsequent act by Lessee. The acceptance of rent
hereunder by Lessor shall not be a waiver of any preceding breach by Lessee
of any provision hereof, other than the failure of Lessee to pay the
particular rent so accepted, regardless of Lessor's knowledge of such
preceding breach at the time of acceptance of such rent.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of
this Lease for recording purposes.
26. Holding Over. If Lessee, with Lessor's consent, remains in possession of
the Premises or any part thereof after the expiration of the term hereof,
such occupancy shall be a tenancy from month to month upon all the provisions
of this Lease pertaining to the obligations of Lessee, except that the rent
payable shall be two hundred percent (200%) of the rent payable immediately
preceding the termination date of this Lease, and all Options, if any,
granted under the terms of this Lease shall be deemed terminated and be of no
further effect during said month to month tenancy.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies
at law or in equity.
28. Covenants and Conditions. Each provision of this Lease performable by
Lessee shall be deemed both a covenant and a condition.
29. Binding Effect; Choice of Law. Subject to any provisions hereof
restricting assignment or subletting by Lessee and subject to the provisions
of paragraph 17, this Lease shall bind the parties, their personal
representatives, successors and assigns. This Lease shall be governed by the
laws of the State where the Office Building Project is located and any
litigation concerning this Lease between the parties hereto shall be
initiated in the county in which the Office Building Project is located.
30. Subordination.
(a) This Lease, and any Option or right of first refusal granted
hereby, at Lessor's option, shall be subordinate to any ground lease,
mortgage, deed of trust, or any other hypothecation or security now or
hereafter placed upon the Office Building Project and to any and all advances
made on the security thereof and to all renewals, modifications,
consolidations, replacements and extensions thereof. Notwithstanding such
subordination, Lessee's right to quiet possession of the Premises shall not
be disturbed if Lessee is not in default and so long as Lessee shall pay the
rent and observe and perform all of the provisions of this Lease, unless this
Lease is otherwise terminated pursuant to its terms. If any mortgagee,
trustee or ground lessor shall elect to have this Lease and any Options
granted hereby prior to the lien of its mortgage, deed of trust or ground
lease, and shall give written notice thereof to Lessee, this Lease and such
Options shall be deemed prior to such mortgage, deed of trust or ground
lease, whether this Lease or such Options are dated prior or subsequent to
the date of said mortgage, deed of trust or ground lease or the date of
recording thereof.
(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination, or to make this Lease or any Option granted
herein prior to the lien of any mortgage, deed of trust or ground lease, as
the case may be. Lessee's failure to execute such documents within ten (10)
days after written demand shall constitute a material default by Lessee
hereunder without further notice to Lessee or, at Lessor's option, Lessor
shall execute such documents on behalf of Lessee as Lessee's
attorney-in-fact. Lessee does hereby make, constitute and irrevocably appoint
Lessor as Lessee's attorney-in-fact and in Lessee's name, place and stead, to
execute such documents in accordance with this paragraph 30(b).
31. Attorneys' Fees.
31.1 If either party or the broker(s) named herein bring an action to
enforce the terms hereof or declare rights hereunder, the prevailing party in
any such action, trial or appeal thereon, shall be entitled to his reasonable
attorneys' fees to be paid by the losing party as fixed by the court in the
same or a separate suit, and whether or not such action is pursued to
decision or judgment. The provisions of this paragraph shall inure to the
benefit of the broker named herein who seeks to enforce a right hereunder.
31.2 The attorneys' fee award shall not be computed in accordance with
any court fee schedule, but shall be such as to fully reimburse all
attorneys' fees reasonably incurred in good faith.
31.3 Lessor shall be entitled to reasonable attorneys' fees and all
other costs and expenses incurred in the preparation and service of notice of
default and consultations in connection therewith, whether or not a legal
transaction is subsequently commenced in connection with such default.
32. Lessor's Access.
32.1 Lessor and Lessor's agents shall have the right to enter the
Premises at reasonable times for the purpose of inspecting the same,
performing any services required of Lessor, showing the same to prospective
purchasers, lenders, or lessees, taking such safety measures, erecting such
scaffolding or other necessary structures, making such alterations, repairs,
improvements or additions to the Premises or to the Office Building Project
as Lessor may reasonably deem necessary or desirable and the erecting, using
and maintaining of utilities, services, pipes and conduits through the
Premises and/or other premises as long as there is no material adverse effect
to Lessee's use of the Premises. Lessor may at any time place on or about the
Premises or the Building any ordinary "For Sale" signs and Lessor may at any
time during the last 120 days of the term hereof place on or about the
Premises any ordinary "For Lease" signs.
32.2 All activities of Lessor pursuant to this paragraph shall be
without abatement of rent, nor shall Lessor have any liability to Lessee for
the same.
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32.3 Lessor shall have the right to retain keys to the Premises and to
unlock all doors in or upon the Premises other than to files, vaults and
safes and in the case of emergency to enter the Premises by any reasonably
appropriate means, and any such entry shall not be deemed a forceable or
unlawful entry or detainer of the Premises or an eviction. Lessee waives any
charges for damages or injuries or interference with Lessee's property or
business in connection therewith.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common
Areas without first having obtained Lessor's prior written consent.
Notwithstanding anything to the contrary in this Lease, Lessor shall not be
obligated to exercise any standard of reasonableness in determining whether
to grant such consent. The holding of any auction on the Premises or Common
Areas in violation of this paragraph shall constitute a material default of
this Lease.
34. Signs. Lessee shall not place any sign upon the Premises or the Office
Building Project without Lessor's prior written consent. Under no
circumstances shall Lessee place a sign on any roof of the Office Building
Project.
35. Merger. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to
Lessor of any or all of such subtenancies.
36. Consents. Except for paragraphs 33 (auctions) and 34 (signs) hereof,
wherever in this Lease the consent of one party is required to an act of the
other party such consent shall not be unreasonably withheld or delayed.
37. Guarantor. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. Quiet Possession. Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Office Building Project.
39. Options.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary, (i)
during the time commencing from the date Lessor gives to Lessee a notice of
default pursuant to paragraph 13.1(c) or 13.1(d) and continuing until the
noncompliance alleged in said notice of default is cured, or (ii) during the
period of time commencing on the day after a monetary obligation to Lessor is
due from Lessee and unpaid (without any necessity for notice thereof to
Lessee) and continuing until the obligation is paid, or (iii) in the event
that Lessor has given to Lessee three or more notices of default under
paragraph 13.1(c), or paragraph 13.1(d), whether or not the defaults are
cured, during the 12 month period of time immediately prior to the time
that Lessee attempts to exercise the subject Option, (iv) if Lessee has
committed any non-curable breach, including without limitation those
described in paragraph 13.1(b), or is otherwise in default of any of the
terms, covenants or conditions of this Lease.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due
and timely exercise of the Option, if, after such exercise and during the
term of this Lease, (i) Lessee fails to pay to Lessor a monetary obligation
of Lessee for a period of thirty (30) days after such obligation becomes due
(without any necessity of Lessor to give notice thereof to Lessee), or (ii)
Lessee fails to commence to cure a default specified in paragraph 13.1(d)
within thirty (30) days after the date that Lessor gives notice to Lessee
or of such default and/or Lessee fails thereafter to diligently prosecute
said cure to completion, or (iii) Lessor gives to Lessee three or more
notices of default under paragraph 13.1(c), or paragraph 13.1(d), whether or
not the defaults are cured, or (iv) if Lessee has committed any non-curable
breach, including without limitation those described in paragraph
13.1(b), or is otherwise in default of any of the terms, covenants and
conditions of this Lease.
40. Security Measures--Lessor's Reservations.
40.1 Lessee hereby acknowledges that Lessor shall have no obligation
whatsoever to provide guard service or other security measures for the
benefit of the Premises or the Office Building Project. Lessee assumes all
responsibility for the protection of Lessee, its agents, and invitees and the
property of Lessee and of Lessee's agents and invitees from acts of third
parties. Nothing herein contained shall prevent Lessor, at Lessor's sole
option, from providing security protection for the Office Building Project or
any part thereof, in which event the cost thereof shall be included within
the definition of Operating Expenses, as set forth in paragraph 4.2(b).
40.2 Lessor shall have the following rights:
(a) To change the name, address or title of the Office Building
Project or building in which the Premises are located upon not less than 90
days prior written notice;
(b) To, at Lessee's expense, provide and install Building standard
graphics on the door of the Premises and such portions of the Common Areas as
Lessor shall reasonably deem appropriate;
(c) To permit any lessee the exclusive right to conduct any business
as long as such exclusive does not conflict with any rights expressly given
herein;
(d) To place such signs, notices or displays as Lessor reasonably
deems necessary or advisable upon the roof, exterior of the buildings or the
Office Building Project or on pole signs in the Common Areas.
40.3 Lessee shall not:
(a) Use a representation (photographic or otherwise) of the Building
or the Office Building Project or their name(s) in connection with Lessee's
business;
(b) Suffer or permit anyone, except in emergency, to go upon the
roof of the Building.
41. Easements.
41.1 Lessor reserves to itself the right, from time to time, to grant
such easements, rights and dedications that Lessor deems necessary or
desirable, and to cause the recordation of Parcel Maps and restrictions, so
long as such easements, rights, dedications, Maps and restrictions do not
unreasonably interfere with the use of the Premises by Lessee. Lessee shall
sign any of the aforementioned documents upon request of Lessor and failure
to do so shall constitute a material default of this Lease by Lessee without
the need for further notice to Lessee.
41.2 The obstruction of Lessee's view, air, or light by any structure
erected in the vicinity of the Building, whether by Lessor or third parties,
shall in no way affect this Lease or impose any liability upon Lessor.
42. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one party to the other under the
provisions hereof, the party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such
payment shall not be regarded as a voluntary payment, and there shall survive
the right on the part of said party to institute suit for recovery of such
sum. If it shall be adjudged that there was no legal obligation on the part
of said party to pay such sum or any part thereof, said party shall be
entitled to recover such sum or as much thereof as it was not legally
required to pay under the provisions of this Lease.
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43. Authority. If Lessee is a corporation, trust, or general or limited
partnership, Lessee, and each individual executing this Lease on behalf of
such entity represent and warrant that such individual is duly authorized to
execute and deliver this Lease on behalf of said entity. If Lessee is a
corporation, trust or partnership, Lessee shall, within thirty (30) days
after execution of this Lease, deliver to Lessor evidence of such authority
satisfactory to Lessor.
44. Conflict. Any conflict between the printed provisions, Exhibits or
Addenda of this Lease and the typewritten or handwritten provisions, if any,
shall be controlled by the typewritten or handwritten provisions.
45. No Offer. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to Lessee to lease.
This Lease shall become binding upon Lessor and Lessee only when fully
executed by both parties.
46. Lender Modification. Lessee agrees to make such reasonable modifications
to this Lease as may be reasonably required by an institutional lender in
connection with the obtaining of normal financing or refinancing of the
Office Building Project.
47. Multiple Parties. If more than one person or entity is named as either
Lessor or Lessee herein, except as otherwise expressly provided herein, the
obligations of the Lessor or Lessee herein shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or
Lessee, respectively.
49. Attachments. Attached hereto are the following documents which constitute
a part of this Lease:
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR
SUBMISSION TO YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE
ASSOCIATION OR BY THE REAL ESTATE BROKER OR ITS AGENTS OR
EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING THERETO;
THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL
COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
LESSOR LESSEE
12800 Riverside Drive Corporation TMP Worldwide
- ------------------------------------- --------------------------------------
By /s/ ROBERT M. KANNE By /s/ FREDERICK D. KLEIN
---------------------------------- -----------------------------------
Robert M. Kanne Frederick D. Klein
Its President Its Division President
-------------------------- ---------------------------
Lease Personally Guaranteed by
By /s/
ANDREW J. MCKELVEY
by
ROBERT M. KANNE, /s/
By Attorney ROBERT M. KANNE
---------------------------------- -----------------------------------
Andrew J. McKelvey Robert M. Kanne
(80%) (20%)
Its Its
-------------------------- ---------------------------
Executed at Executed at
------------------------- --------------------------
on on
---------------------------------- -----------------------------------
Address Address
----------------------------- ------------------------------
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For these forms write or call the American Industrial Real Estate
Association, 350 South Figueroa Street, Suite 275, Los Angeles, CA 90071,
(213) 667-8777.
- -C-1984-By American Industrial Real Estate Association. All rights reserved.
No part of these words may be reproduced in any form without permission in
writing.
<PAGE>
Exhibit 10.23
(part 2)
Amendment No. 1 to Lease Agreement
As of June 2, 1993
Reference is made to the Lease Agreement dated as of May 15, 1993 (the
"Lease") between 12800 Riverside Drive Corporation ("Lessor") and TMP Worldwide
Inc. ("Lessee"). For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Paragraph 1.6 of the Lease is amended to read in its entirety as
follows:
"1.6 Base Rent: $14,888 per month, payable on the 1st day of each
month per paragraph 4.1."
All capitalized terms used but not otherwise defined herein shall have
the meanings ascribed to them in the Lease. The terms of the Lease, as modified
by this Amendment, are hereby ratified and confirmed and shall remain in full
force and effect. This Amendment may be signed in counterparts.
LESSOR:
12800 RIVERSIDE DRIVE CORPORATION
By: /s/ Andrew J. McKelvey
----------------------------
Name: Andrew J. McKelvey
Title:
LESSEE:
TMP WORLDWIDE INC.
By: /s/ Thomas G. Collison
----------------------------
Name: Thomas G. Collison
Title: Vice President
<PAGE>
Exhibit 10.24
THIS INDENTURE made as of this 29th day of April, 1988, between
INTERNATIONAL DRIVE, L.P., a New Jersey limited partnership, having an office at
1259 Route 46, Parsippany, New Jersey (hereinafter called the "Lessor"), and
TELEPHONE MARKETING PROGRAMS, INC., a corporation, having an office at 1633
Broadway, New York, New York (hereinafter called the "Lessee").
ARTICLE ONE
TERM
SECTION 1.01. The Lessor, for and in consideration of the terms, covenants
and conditions herein contained, does hereby demise, lease and let to the
Lessee, and the Lessee does hereby hire and take from the Lessor, upon and
subject to the terms, covenants and conditions herein contained, those certain
premises including the land and building to be built thereon located in the
International Trade Center, Mt. Olive, New Jersey, as described in Exhibit "A"
annexed hereto (hereinafter called the "Demised Premises").
TO HAVE AND TO HOLD the Demised Premises for a term of ten years commencing
as set forth hereinafter and expiring ten years thereafter (such term is
hereinafter called the "Demised Term").
ARTICLE TWO
RENTAL
SECTION 2.01. The Lessee covenants and agrees to pay to the Lessor, promptly
when due, without notice or demand and without deduction or set-off of any
amount for any reason whatsoever, beginning upon the commencement date of this
Lease as set forth in Section 15.03 hereof, annual rent in the amount of
$528,000.00 payable in equal monthly installments of $44,000.00 in advance on
the first day of each month, except that the first month's rent shall be
prorated if this Lease commences on a day other than the 1st day of the month,
which first month's rent shall be payable prior to Lessee taking possession of
the Demised Premises.
<PAGE>
SECTION 2.02 All amounts payable under Section 2.01 of this Article, as
well as all other amounts payable by the Lessee to the Lessor under the terms
of this Lease, shall be paid at the office of the Lessor set forth above, or
at such other place as the Lessor shall from time to time designate by notice
to the Lessee.
ARTICLE THREE
SUBORDINATION
SECTION 3.01. This Lease is and shall be subject and subordinate to any and
all mortgages which now or will affect the Demised Premises and to all renewals,
modifications, consolidations, replacements and extensions thereof. This clause
shall be self-operative and no further instrument of subordination shall be
required by any mortgagee. Lessee, upon written request from Lessor, shall
execute a certificate confirming such subordination and Lessee hereby appoints
Lessor, as Lessee's attorney-in-fact, to execute such certificate for and on
behalf of Lessee.
ARTICLE FOUR
REAL ESTATE TAX PAYMENTS
SECTION 4.01. A. Lessee agrees to pay as Additional Rent during the
Demised Term any and all Real Estate Taxes (as hereinafter defined) imposed
on the land and the building which constitute the Demised Premises with
respect to every Tax Year (as hereinafter defined), or part thereof during
the Demised Term. At Lessor's option, an amount equal to all Real Estate
taxes shall be paid directly to Lessor, or to its mortgagee, at such monthly
or other intervals as Lessor or the mortgagee shall direct, who shall pay or
cause the Real Estate Taxes to be paid, or, if directed by Lessor, Lessee
shall pay all Real Estate Taxes directly to the proper government authority.
B. "Real Estate Taxes" shall mean the real estate taxes and assessments and
special assessments imposed upon the building and the land which constitute the
Demised Premises and any rights
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<PAGE>
or interests appurtenant to either. If at any time during the any Demised
Term the methods of taxation prevailing at the commencement of the Demised
Term shall be altered so that in lieu of or as an addition to or as a
substitute for the whole or any part of the taxes, assessments, levies,
impositions or charges now levied, assessed or imposed on real estate and the
improvements thereon, there shall be levied, assessed or imposed (i) a tax,
assessment, levy, imposition or charge wholly or partially as a capital levy
or otherwise on the rents received therefrom, or (ii) a tax, assessment,
levy, imposition or charge measured by or based in whole or in part upon the
Demised Premises and imposed upon Lessor, or (iii) a license fee or charge
measured by the rents payable by Lessee to Lessor, then all such taxes,
assessments, levies, impositions or charges, or the part thereof so measured
or based, shall be deemed to be included within the term "Real Estate Taxes"
for the purposes hereof. A copy of the applicable tax bill shall be
sufficient evidence of the amount of Real Estate Taxes.
C. The term "Tax Year" shall mean each twelve (12) month fiscal period or
calendar year during which Real Estate Taxes are assessed and/or collected,
including any portion of which occurs during the Demised Term.
ARTICLE FIVE
USE OF PREMISES
SECTION 5.01. The Lessee shall use and occupy the Demised Premises as a
warehouse and offices and the Lessee shall not use or occupy or permit the
Demised Premises to be used or occupied in any manner in violation of the
certificate of occupancy, if any, affecting the Demised Premises or make void or
voidable any insurance in force with respect thereto, or which may make it
impossible to obtain fire or other insurance thereon required to be furnished by
the Lessee hereunder, or which will cause structural injury to the buildings or
any part thereof, or which will constitute a public or private nuisance, or
which may
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<PAGE>
violate any present or future laws or rules and regulations of any governmental
authority having jurisdiction.
ARTICLE SIX
UTILITY CHARGES
SECTION 6.01. The Lessee agrees to pay or cause to be paid all charges for
water, sewer, electricity, light, power, cleaning, rubbish removal, snow
removal, telephone or other communication service or other utility or service
used, rendered or supplied to, upon or in connection with the Demised Premises
throughout the Demised Term, and to indemnify the Lessor and save it harmless
against any liability or damages on such account. The Lessee shall also at its
sole cost and expense procure or cause to be procured any and all necessary
permits, licenses or other authorizations required for the lawful and proper
use, occupation, operation and management of the Demised Premises and for the
lawful and proper installation and maintenance upon the Demised Premises of
wires, pipes, conduits, tubes and other equipment and appliances for use in
supplying any such service to or upon the Demised Premises.
SECTION 6.02 Lessee shall pay for heat and air conditioning at the Demised
Premises without cost to Lessor. All other charges and expenses of the operation
of the Demised Premises shall be paid by Lessee.
ARTICLE SEVEN
INDEMNIFICATION
SECTION 7.01. The Lessee covenants and agrees, at its sole cost and expense,
to indemnify and save harmless the Lessor against and from any and all claims by
or on behalf of any person, firm or corporation, arising from the conduct or
management of or from any work or thing whatsoever done in or about the Demised
Premises during the Demised Term, and further to indemnify and save the Lessor
harmless against and from any and all claims arising from any condition of any
building on the Demised
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Premises, or of any passageways or spaces therein or appurtenant thereto, or
arising from any breach or default on the part of the Lessee in the performance
of any covenant or agreement on the part of the Lessee to be performed pursuant
to the terms of this Lease, or arising from any act or negligence of the Lessee,
or any of its agents, contractors, servants, employees or licensees, or arising
from any accident, injury or damage whatsoever caused to any person, firm or
corporation (other than those caused by the Lessor or its servants and
employees) occurring during the Demised Term in or about the Demised Premises,
or upon or under the parking lots, driveways, sidewalks and the land adjacent
thereto, and from and against all costs, counsel fees, expenses and liabilities
incurred in or about any such claim, action or proceeding brought thereon; and
in case any action or proceeding be brought against the Lessor by reason of any
such claim, the Lessee upon notice from the Lessor covenants to resist or defend
such action or proceeding by counsel satisfactory to the Lessor.
ARTICLE EIGHT
MAINTENANCE, REPAIRS AND ALTERATIONS
SECTION 8.01. The Lessee shall, throughout the Demised Term, and at no
expense whatsoever to the Lessor, take good care of the Demised Premises and
make all repairs, structural and non-structural, interior and exterior,
necessary to keep the Demised Premises in good and lawful order and
condition. When used in this Article, the term "repairs" as applied to the
building and other improvements and to building equipment shall include all
alterations and improvements, replacements, restoration and/or renewals,
whether structural or non-structural, when necessary. The provisions and
conditions of Section 8.03 applicable to changes or alterations shall
similarly apply to repairs required to be made by the Lessee under this
Section. Except as otherwise provided elsewhere in this Lease, nothing herein
contained shall be construed to prevent the Lessee or any permitted
subtenant, sublessee, or other permitted occupant claiming under or through
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the Lessee from removing from the Demised Premises furniture, machinery and
equipment on the condition, however, that the Lessee shall, at its own cost and
expense, and it hereby agrees to, repair any and all damages to the Demised
Premises resulting from or caused by the removal thereof.
SECTION 8.02. The Lessee shall permit the Lessor and the authorized
representatives of the Lessor to enter the Demised Premises at all reasonable
times during usual business hours for the purpose of exhibiting or inspecting
the same and for making any necessary repairs to the Demised Premises and
performing any work therein that may be necessary to comply with any laws,
ordinances, rules, regulations or requirements of any public authority, or that
may be necessary to prevent waste or deterioration in connection with the
Demised Premises, which the Lessee is obligated, but has failed, to make,
perform or prevent, as the case may be. The Lessor shall not be liable for
inconvenience, annoyance, disturbance, loss of business or other damage of the
Lessee or any other occupant of the Demised Premises or part thereof, by reason
of making repairs or the performance of any work on the Demised Premises or on
account of bringing materials, supplies and equipment into or through the
Demised Premises during the course thereof, and the obligations of the Lessee
under this Lease shall not thereby be affected in any manner whatsoever.
SECTION 8.03. Lessee agrees that, without the prior written consent of
Lessor, it will make no alterations or improvements to the land or to the
building or buildings now or hereafter erected upon the Demised Premises. Any
alterations, enlargements and improvements ("alterations") in and to the Demised
Premises shall be made subject to the following provisions:
(a) The same shall be performed in a first-class, workmanlike manner;
(b) The Lessee shall cause plans and specifications for all such
alterations to be furnished to the Lessor prior to the commencement of
such alterations. Such plans and specifications shall be subject to
the Lessor's written approval. The Lessee further agrees that before
the commencement of any such alterations, it will file such plans and
specifications with, and obtain the approval
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thereof by, all municlpal or other governmental departments or
authorities having jurisdiction thereof and any mortgagee whose
consent is needed for such alterations. The originals of all such
approvals, authorizations, permits and consents of governmental
authorities and mortgagees shall be delivered to and retained by the
Lessor. The Lessor shall execute and deliver to the Lessee such
consents by the Lessor as may be required by any such departments or
authorities, it being understood, however, that any such consent or
consents by the Lessor shall not operate or be construed as a consent
by the Lessor for the purpose of filing any lien or making any charge
of any kind whatsoever against either the Lessor or the Demised
Premises;
(c) All such alteration work shall be done subject to, and in accordance
with, all applicable laws, rules, regulations, and other requirements
of all governmental authorities having jurisdiction thereof and of the
local Board of Fire Underwriters or of any similar body;
(d) The Lessee shall promptly pay and discharge all costs, expenses,
damages and other liabilities which may arise in connection with or
by reason of such alteration work.
(e) All such alterations made by the Lessee shall remain upon and be
surrendered with the Demised Premises at the expiration or other
termination of this Lease.
SECTION 8.04. This Lease is intended to be a "net lease" and the Lessee
agrees that it will pay all costs and expenses arising out of or in connection
with the use, operation, maintenance, repair and restoration of the Demised
Premises, except that the Lessee shall not be required to pay any debt service,
interest or principal payments on any mortgages of the Demised Premises made by
the Lessor.
ARTICLE NINE
REMOVAL OF LIENS
SECTION 9.01. The Lessee shall not suffer or permit any liens to stand
against the Demised Premises or any part thereof by reason of any work, labor,
services or materials done for, or supplied, or claimed to have been done for,
or supplied to, the Lessee or anyone holding the Demised Premises or any part
thereof through or under the Lessee. If any such lien shall at any time be filed
against the Demised Premises, the Lessee shall cause the same to be discharged
of record within twenty (20) days after the
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date of filing the same, by payment, deposit or bond. If the Lessee shall fail
to discharge any such lien within such period, then, in addition to any other
right or remedy of the Lessor, the Lessor may, but shall not be obligated to,
procure the discharge of the same either by paying the amount claimed to be due
by deposit in a court having jurisdiction or bonding, and/or the Lessor shall be
entitled, if the Lessor so elects, to compel the prosecution of an action for
the foreclosure of such lien by the lienor and to pay the amount of the
judgment, if any, in favor of the lienor with interest, costs and allowances.
Any amount paid or deposited by the Lessor for any of the aforesaid purposes,
and all legal and other expenses of the Lessor, including counsel fees, in
defending any such action or in or about procuring the discharge of such lien,
with all necessary disbursements in connection therewith, together with interest
thereon at the lower of fourteen percent (14%) per annum or the maximum rate
allowed by law, from the date of payment or deposit, shall become due and
payable forthwith by the Lessee to the Lessor, or, at the option of the Lessor,
shall be payable by the Lessee to the Lessor as additional rent, as hereinbefore
provided.
ARTICLE TEN
INSURANCE AND CASUALTY
SECTION 10.01. Lessee, at Lessee's sole cost and expense, at all times
during the Demised Term, shall maintain in full force and effect insurance of
the Demised Premises against fire and casualty loss in such amounts as shall be
sufficient as full replacement coverage of any loss against loss or damage by
fire and against such other risks, of a similar or dissimilar nature, as shall
be insurable against under present or future standard forms of fire and extended
coverage policies or as may be required by any mortgagee or the Lessor. Such
policies shall provide that, at the option of the mortgagee, the proceeds may be
utilized to reduce the mortgage indebtedness or may be held in a trust fund by
the mortgagee to be disbursed solely for repairs and
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restoration of the Demised Premises. Lessee shall also maintain in full force
and effect at all times during the Demised Terms, at Lessee's sole cost and
expense, comprehensive general public liability insurance which shall include
coverage against claims for bodily injury, including death, and property damage
occurring in, on or about the Demised Premises, such insurance to afford minimum
protection of not less than $3,000,000 in respect of bodily injury or death to
any one person, not less than $3,000,000 in respect of any one occurrence or
accident and not less than $1,000,000 in respect of property damage. All such
policies shall be written by insurance companies licensed to do business in the
State of New Jersey satisfactory to Lessor and any mortgagee and shall name
Lessor, all mortgagees and Lessee as parties insured and shall contain a
provision that such insurance may not be reduced or modified by the carrier
except by notice in writing to Lessor and all mortgagees given not less than
twenty (20) days prior to any such change. Lessee shall furnish to Lessor and
all mortgagees, on or prior to the commencement date of this Lease, a duplicate
original or certificate of insurance evidencing said coverage and shall furnish
to Lessor and all mortgagees, not less than twenty (20) days prior to the
expiration date of any such policy, evidence satisfactory to Lessor and such
mortgagees of the continuation of such insurance.
ARTICLE ELEVEN
CONDEMNATION
SECTION 11.01. In the event that the Demised Premises or any part thereof
shall be taken or condemned for public use and the Lessee shall have duly and
fully kept, performed and observed each and every covenant, on its part to be
kept, performed and observed, then in the event of such taking or condemnation
of the Demised Premises, or any part thereof, for public use, the accrued rent
shall be paid up to the time of the entry of the final order of condemnation,
and for the balance of the Demised Term a just
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proportion of the rent herein reserved shall be abated according to the nature
and extent of the injuries to the Demised Premises.
Subject to the foregoing, the amount of the award made for the taking of the
Demised Premises, or any part thereof, shall be paid to the Lessor or to its
mortgagees if required by the terms of the mortgages covering the Demised
Premises in accordance with the final determination of the condemnation
commissioners or other similar officials appointed for the purpose of making
such award and Lessee waives any claims thereto.
ARTICLE TWELVE
LESSOR'S RIGHT TO PERFORM LESSEE'S COVENANTS
SECTION 12.01. The Lessee covenants and agrees that if it shall at any time
fail to make any payment or perform any other act which the Lessee is obligated
to perform under this Lease, then the Lessor may, but shall not be obligated to
do so, after ten (10) days' notice to and demand upon the Lessee and without
waiving, or releasing the Lessee from, any obligations of the Lessee in this
Lease contained, make any such payment or perform any such act (unless Lessee
has commenced performance which cannot reasonably be completed within such time)
which the Lessee is obligated to perform under this Lease, in such manner and to
such extent as shall be necessary, and, in exercising any such rights, pay
necessary and incidental costs and expenses, employ counsel and incur and pay
reasonable attorneys' fees. All sums so paid by the Lessor and all necessary and
incidental costs and expenses in connection with the performance of any such act
by the Lessor, together with interest thereon at the lower of (i) fourteen
percent (14%) per annum or (ii) the maximum interest rate allowed by law from
the date of the making of such expenditure by the Lessor, shall be deemed
additional rent hereunder and, except as otherwise in this Lease expressly
provided, shall be payable to the Lessor on demand or at the option of the
Lessor may be added to any rent then due or thereafter becoming due under this
Lease.
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ARTICLE THIRTEEN
ESTOPPEL CERTIFICATES
SECTION 13.01. Lessee agrees at any time and from time to time, upon not
less than ten (10) days prior request by Lessor, to execute, acknowledge and
deliver to Lessor a statement in writing certifying that this Lease is
unmodified and in full force and effect (or, if there have been any
modifications that the same is in full force and effect as modified and stating
the modifications), and the dates to which rent and other charges have been paid
in advance, if any, it being intended that any such statement may be relied upon
by any prospective purchaser of the fee or mortgagee or assignee of any mortgage
of the Demised Premises.
ARTICLE FOURTEEN
DEFAULT PROVISIONS
SECTION 14.01. This Lease and the Demised Term are subject to the limitation
that if, at any time during the Demised Term, any one or more of the following
events (herein called an "event of default") shall occur, that is to say:
(a) if the Lessee shall make an assignment for the benefit of
its creditors; or
(b) if the Lessee files any petition or institutes any
proceedings under any act or acts, either as a bankrupt or an
insolvent seeking to be adjudicated a bankrupt, or to be
discharged from any or all of its debts, or to effect a plan of
reorganization, or for any other similar relief, or if any such
petition or proceedings are filed or taken against the Lessee, or
if any receiver or trustee for all or a substantial part of the
Demised Premises or of the Lessee shall be appointed by any
court, and any such petition or proceedings shall not be set
aside or dismissed or the appointment of said receiver revoked
within sixty (60) days; or
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(c) if the Lessee shall fail to pay any installment of the rent or
additional rent provided for in this Lease, or any part thereof, when
the same shall become due and payable; or
(d) if the Lessee shall fail to pay any other charge required
to be paid by the Lessee hereunder (other than the payment of
fixed rent and additional rental) and such failure shall
continue for thirty (30) days after notice thereof from the
Lessor to the Lessee; or
(e) if the Lessee shall fail to perform or observe any other
requirement of this Lease on the part of the Lessee to be performed or
observed, and such failure shall continue for thirty (30) days after
notice thereof from the Lessor to the Lessee, then upon the happening
of any one or more of the aforementioned events of default, and the
expiration of the period of time prescribed in any such notice, the
Lessor may give to the Lessee a notice (hereinafter called "notice of
termination") of intention to end the Demised Term at the expiration
of five (5) days from the date of service of such notice of
termination, and at the expiration of such five (5) days, this Lease
and the Demised Term, as well as all of the right, title and interest
of the Lessee hereunder, shall wholly cease and expire in the same
manner and with the same force and effect as if the date of expiration
of such five (5) day period were the date originally specified herein
for the expiration of this Lease and the Demised Term, and the Lessee
shall then quit and surrender the Demised Premises to the Lessor, but
the Lessee shall remain liable as hereinafter provided.
SECTION 14.02. Subject to applicable law, if this Lease shall be terminated
as in Section 14.01 hereof provided, the Lessor, or the Lessor's agents or
servants, may immediately or at any time thereafter re-enter the Demised
Premises and remove therefrom the Lessee, its agents, employees, servants,
licensees,
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any subtenants and other persons, firms or corporations, and all or any of its
or their property therefrom, by any suitable action or proceeding at law or by
force or otherwise, without being liable to indictment, prosecution or damages
therefor, and repossess and enjoy and re-let the Demised Premises, together with
all additions, alterations and improvements thereto.
SECTION 14.03. In case of any such termination, re-entry or dispossess by
summary proceedings or otherwise, the rent reserved hereunder and all other
charges required to be paid by the Lessee hereunder shall thereupon become due
and be paid up to the time of such termination, re-entry or dispossess, and the
Lessee shall also pay to the Lessor all expenses which the Lessor may then or
thereafter incur for legal expenses, attorneys' fees, brokerage commissions, and
all other costs paid or incurred by the Lessor for restoring the Demised
Premises. The Lessor shall also be entitled to collect and retain all payments
of any character then due or thereafter to become due to the Lessee arising from
the Demised Premises or any buildings or improvements thereon and hold and
collect from Lessee any net deficiency after reletting of the Demised Premises.
ARTICLE FIFTEEN
COMMENCEMENT OF TERM AND CONDITIONS PRECEDENT
SECTION 15.01. The land portion of the Demised Premises has been or will be
acquired by Lessor in accordance with a Contract of Sale, dated February 29,
1988, between New Jersey Foreign Trade Zone Venture, as Seller, and Andrew J.
McKelvey, as Purchaser, which contract has been or is being assigned to Lessor
(the "Contract of Sale"). A building and related facilities are to be built upon
such land in accordance with a Development Agreement, dated February 29, 1988,
between Andrew J. McKelvey and New Jersey Foreign Trade Zone Venture (the
"Development Agreement"), which has been or is being assigned to Lessor.
SECTION 15.02. This Lease is contingent upon the closing being held in
accordance with the Contract of Sale; and
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the construction of the Demised Premises as described in the Development
Agreement. Lessee acknowledges having received copies of the Contract of Sale
and Development Agreement. If such contingencies are not fulfilled, Lessor shall
give notice to Lessee, in which event this Lease shall be cancelled, of no
further force or effect, and neither party shall have any obligation each to the
other.
SECTION 15.03. This Lease shall commence upon ten (10) days notice from
Lessor to Lessee that the Demised Premises have been substantially completed in
accordance with the Development Agreement.
ARTICLE SIXTEEN
BROKER
SECTION 16.01. Each party does represent to the other that it has not
dealt with any broker in negotiating this transaction, and each does hereby
indemnify and agree to save the other harmless of and from any claim or
liability for brokerage commissions by any party claiming to have acted on its
behalf in this transaction.
ARTICLE SEVENTEEN
QUIET ENJOYMENT
SECTION 17.01. The Lessor covenants and agrees that the Lessee, its
permitted successors, permitted assigns and permitted sublessees upon paying the
rent herein reserved, and performing and observing the covenants, conditions and
agreements hereof upon the part of the Lessee to be performed and observed,
shall and may peaceably hold and enjoy the Demised Premises during the Demised
Term, without any interruption or disturbance from the Lessor, subject, however,
to the terms of this Lease and any mortgages affecting the Demised Premises.
This covenant shall be construed as running with the land to and against the
Lessor's successors in interest, and is not, nor shall it operate or be
construed as, a personal covenant of the Lessor, except to the extent of the
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Lessor's interest in the Demised Premises and only so long as such interest
shall continue, and thereafter this covenant shall be binding only upon such
successors in interest in the Demised Premises to the extent of their respective
interests in the Demised Premises, as and when they shall acquire the same, and
only so long as they shall retain such interest.
ARTICLE EIGHTEEN
SURRENDER OF PREMISES
SECTION 18.01. Upon the expiration or termination of the Demised Term, the
Lessee shall peacefully and quietly surrender the Demised Premises to the
Lessor, together with all alterations and replacements thereof then on the
Demised Premises, in good order, condition and repair, except for reasonable
wear and tear. Title to all of the Lessee's trade fixtures, furniture and
equipment (other than building equipment) installed in the Demised Premises
shall remain in the Lessee, and, upon expiration or other termination of this
Lease, the same may, and upon the demand of the Lessor shall, be removed, and
any resultant damage to the Demised Premises shall be repaired, by and at the
expense of the Lessee. If any of such trade fixtures, furniture and equipment is
not removed within thirty (30) days after Lessor's demand, all such trade
fixtures, furniture and equipment, shall, at the Lessor's option, be and become
the absolute property of Lessor.
ARTICLE NINETEEN
ASSIGNMENT, SUBLETTING AND MORTGAGING
SECTION 19.01. Lessee may not assign this Lease or sublet all or any portion
of the Demised Premises by operation of law or otherwise without the prior
written consent of Lessor and Lessor's mortgagees, except as provided for in
Section 19.02. Lessor agrees that it will not unreasonably withhold or delay its
consent to any such assignment or subletting.
SECTION 19.02. Anything contained in Section 19.01 to the contrary
notwithstanding, the Lessee may assign this Lease or
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sublet all or any portion of the Demised Premises to affiliates of the Lessee,
provided that Lessee remains liable pursuant to this Lease. For the purposes of
this Paragraph, "affiliates" shall mean companies or entities a) with common
ownership or control with Lessee, b) owned or controlled by Lessee, or c) owned
or controlled by any of the limited partners of Lessee.
SECTION 19.03. Any assignment of this Lease or subletting of all or a
portion of the Demised Premises shall be subject to the terms pertaining thereto
contained in any mortgage which is a lien against the Demised Premises. No
assignment of this Lease shall be deemed to release Lessee from its obligations
under this Lease.
SECTION 19.04. The Lessee shall not mortgage or otherwise encumber this
Lease or the Demised Term or the leasehold estate created hereunder or any
interest in the same without Lessor's prior written consent in each instance,
which consent may be withheld in Lessor's sole discretion for any or no reason.
ARTICLE TWENTY
NOTICES
SECTION 20.01. All notices, demands and requests by either party to the
other shall be in writing, and shall be sent by registered or certified mail, or
recognized overnight delivery service, postage prepaid, or hand delivered to the
party to receive such notice, demand or request at its address as given herein
or at such other address as it may have designated by notice similarly given.
Any notice, demand or request which shall be served upon the Lessor or the
Lessee in the manner aforesaid shall be deemed to have been served or given for
all purposes hereunder two (2) business days after the time such notice, demand
or request shall be mailed by United States registered or certified mail as
aforesaid, in any post office or branch post office regularly maintained by the
United States Government; one (1) business day if by overnight delivery; or the
day of personal delivery.
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ARTICLE TWENTY-ONE
INVALIDITY OF PARTICULAR PROVISIONS
SECTION 21.01. If any term or provision of this Lease or the application
thereof to any person or circumstance shall to any extent be invalid or
unenforceable, the remainder of this Lease, or the application of such term
or provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Lease shall be valid and be enforced to the fullest extent
permitted by law.
ARTICLE TWENTY-TWO
CUMULATIVE REMEDIES-WAIVER OR CHANGE
SECTION 22.01. Every term, condition, agreement or provision contained in
this Lease shall be deemed to be also a covenant.
SECTION 22.02. The specified remedies to which the Lessor may resort under
the terms of this Lease are cumulative and are not intended to be exclusive of
any other remedies or means of redress to which the Lessor may be lawfully
entitled in case of any breach or threatened breach by the Lessee of any
provision of this Lease.
SECTION 22.03. The failure of the Lessor to insist in any one or more cases
upon the strict performance of any of the terms, covenants, conditions,
provisions or agreements of this Lease or to exercise any option herein
contained shall not be construed as a waiver or a relinquishment for the future
of any such term, covenant, condition, provision, agreement or option. A receipt
and acceptance by the Lessor of rent or any other payment, or the acceptance of
performance of anything required by this Lease to be performed, with knowledge
of the breach of any term, covenant, condition, provision or agreement of this
Lease, shall not be deemed a waiver of such breach, nor shall any such
acceptance of rent in a lesser amount than is herein provided for (regardless of
any endorsement on any check or any statement in
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any letter accompanying any payment of rent) operate or be construed either as
an accord and satisfaction or in any manner other than as a payment on account
of the earliest rent then unpaid by the Lessee, and no waiver by the Lessor or
the Lessee of any term, covenant, condition, provision or agreement of this
Lease shall be deemed to have been made unless expressed in writing and signed
by the party to be charged.
SECTION 22.04. In addition to the other remedies in this Lease provided, the
Lessor shall be entitled to restraint by injunction of any violation or
attempted or threatened violation, of any of the terms, covenants, provisions or
agreements of this Lease.
SECTION 22.05. This Lease may not be changed orally, but only by agreement
in writing signed by the party against whom enforcement of the change,
modification or discharge is sought or by its agent.
ARTICLE TWENTY-THREE
MISCELLANEOUS
SECTION 23.01. The terms, conditions, covenants, provisions and agreements
herein contained shall be binding upon and inure to the benefit of the Lessor,
its successors and assigns, and shall be binding upon and inure to the benefit
of the Lessee, its permitted successors and permitted assigns.
SECTION 23.02. This Lease sets forth the entire agreement and understanding
of the parties with respect to the subject matter hereof. Any and all prior
discussions, negotiations, understandings and agreements are hereby merged
herein.
SECTION 23.03. The captions and headings throughout this Lease are for
convenience and reference only, and the words contained therein shall in no way
be held or deemed to define, limit, describe, explain, modify, amplify or add to
the interpretation, construction or meaning of any provisions of or the scope or
intent of this Lease nor in any way affect this Lease.
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IN WITNESS WHEREOF, the parties hereto have executed this Lease as the day
and year first written above.
INTERNATIONAL DRIVE, L.P., Lessor
By: MAPE, INC., General Partner
By: /s/ Andrew J. McKelvey
-----------------------------
TELEPHONE MARKETING PROGRAMS, INC., Lessee
By: /s/ Andrew J. McKelvey
-----------------------------
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Exhibit A
Situate in the Township of Mount Olive, Morris County, New Jersey.
Being part of Parcel 5 as the same is described in a deed from Rock Morris
Inc., A New Jersey Corporation and SMI Corp., A New Jersey Corporation to New
Jersey Foreign Trade Zone Venture, A New Jersey Partnership dated August 1,
1979 and recorded in The Morris County Clerk's Office in Deed Book 2515, Page
381 etc., and part of lands formerly owned by Consolidated Rail Corporation,
more particularly described as follows.
Beginning at a point in the southwesterly side line of International Drive
(formerly relocated Lozier Road) said point being the point of intersection
formed by the said southwesterly side line of said road with the fourth line of
Tract Two as the same is described in a deed from Lakeland Industrial Park,
Inc., to Public Service Electric and Gas Company by deed dated February 15, 1971
and recorded in The Morris County Clerk's Office in Deed Book 2167, Page 123
etc., and said point being the seventh corner of the above-mentioned Parcel 5
recorded in Deed Book 2515, Page 381 etc., and from said beginning point runs;
thence
(1) Along the seventh line of the same being also along the fourth
line of the said Tract Two recorded in Deed Book 2167, Page 123
etc., South 48 degrees 30 minutes and 30 seconds West 131.08 feet
to the fifth corner thereof, being also the eighth corner of the
above-mentioned Parcel 5 recorded in Deed Book 2515, Page 381
etc; thence
(1)
<PAGE>
(2) Along the eighth line of the same being also along the fifth
line of the said Tract Two recorded in Deed Book 2167, Page 123
etc., South 56 degrees 59 minutes and 30 seconds West 179.76 feet
to the sixth corner thereof, being also the ninth corner of the
above-mentioned Parcel 5 recorded in Deed Book 2515, Page 381
etc., and said point being also a point in the original
northeasterly right of way line of The Delaware, Lackawanna and
Western Railroad (Morris and Essex Division) now Conrail; thence
(3) Along the original right of way line of said railroad, being also
along the sixth line of the said tract recorded in Deed Book
2167, Page 123 etc., South 27 degrees 59 minutes and 12 seconds
East 200.77 feet to the beginning corner of the said Tract Two
recorded in Deed Book 2167, Page 123 etc., said point being also
the second corner of Parcel 4, as the same is described in the
aforesaid deed recorded in Deed Book 2515, Page 381 etc; thence
(4) Reversely and in a continuation of the second line of the said
Parcel 4 recorded in Deed Book 2515, Page 381 etc., being also
reversely and in a continuation of the first line of the said
Tract Two recorded in Deed Book 2167, Page 123 etc., South 56
degrees 59 minutes and 30 seconds West 43.69 feet to a point in
the new northeasterly right of way line of Consolidated Rail
Corporation; thence
(5) Along the new northeasterly right of way line of Consolidated
Rail Corporation North 27 degrees 49 minutes and 50 seconds West
787.60 feet to a point therein; thence
(6) Leaving the said new northeasterly right of way line of
Consolidated Rail Corporation North 57 degrees 48 minutes and 18
seconds East 307.58 feet to a point in the aforesaid
southwesterly side line of International Drive (formerly
relocated Lozier Road); thence
(7) Along the said southwesterly side line of International Drive
(formerly relocated Lozier Road) South 32 degrees 11 Minutes and
42 seconds East 560.73 feet TO THE PLACE OF BEGINNING.
SUBJECT TO easements, restrictions and other matters of record which affect
title, if any.
(2)
<PAGE>
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement"), dated as of
September 11, 1996, by and between TMP INTERACTIVE INC., a Delaware corporation
(the "Company"), and JEFFREY C. TAYLOR ("Employee").
PRELIMINARY RECITALS
A. In connection with (i) that certain Asset Purchase Agreement dated as
of November 10, 1995 (the "Adion Purchase Agreement"), by and among Adion, Inc.,
a Massachusetts corporation ("Adion"), Employee, HGI Acquisition Corp., a
Delaware corporation ("HGI"), and another party, providing for, among other
things, the acquisition of substantially all of the assets of Adion by HGI and
(ii) that certain Asset Purchase Agreement dated as of November 10, 1995 (the
"AIS Purchase Agreement"), by and among Adion Information Services, Inc., a
Massachusetts corporation ("AIS"), Employee, the Company, and another party,
providing for, among other things, the acquisition of substantially all of the
assets of AIS by the Company, Employee and the Company entered into an
Employment Agreement, dated as of November 10, 1995 (the "Prior Employment
Agreement").
B. Prior to the consummation of the transactions contemplated by the
Adion Purchase Agreement and the AIS Purchase Agreement, Adion and AIS were
engaged in the business of placing "help wanted" and other personnel recruitment
advertising in newspapers, magazines and other media (including but not limited
to the provision of such advertising through the Internet and other on-line
services), and providing related advertising and human resource communication
services (collectively, the "Business").
C. Prior to the consummation of the transactions contemplated by the
Adion Purchase Agreement and the AIS Purchase Agreement, Employee was an
employee of Adion and AIS since their respective inceptions, most recently
serving as their President, and has extensive knowledge and a unique
understanding of the Business and has longstanding business relationships with
many customers of Adion and AIS, who, subsequent to the consummation of the
transactions contemplated by the Adion Purchase Agreement and the AIS Purchase
Agreement, have been transacting business with the Company and HGI.
D. The Company has also become engaged in the yellow pages advertising
business, including but not limited to the provision of yellow pages advertising
through the Internet and on-line services (the "Yellow Pages Business").
E. Immediately prior to the consummation of the transactions contemplated
by the Adion Purchase Agreement and the AIS Purchase Agreement, Employee owned
287.50 shares of the outstanding common stock of Adion and 287.50 shares of the
outstanding common stock of AIS and Employee was and continues to be directly
benefiting from the transactions contemplated by the Adion Purchase Agreement
and the AIS Purchase Agreement. It was a condition to the execution, delivery
and consummation of the Adion Purchase Agreement and the AIS Purchase Agreement
that the Company and Employee enter into the Prior Employment Agreement and that
Employee agree to the Restrictive Covenants (as defined below) set forth herein.
<PAGE>
F. The parties wish to amend and restate the provisions of the Prior
Employment Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth in this
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. EMPLOYMENT.
1.1 ENGAGEMENT OF EMPLOYEE. The Company agrees to employ
Employee and Employee agrees to accept employment as Chief Executive Officer of
the Company, all in accordance with the terms and conditions of this Agreement.
1.2 DUTIES AND POWERS. During the Employment Period (as defined
below), Employee will serve as Chief Executive Officer of the Company and will
have such responsibilities, duties and authorities, and will render such
services of an executive and administrative character or act in such other
executive capacity for the Company and its affiliates as shall from time to time
be reasonably directed by the Company's board of directors (the "Board") or
Chairman. Employee shall devote Employee's best efforts, energies and abilities
and Employee's full business time, skill and attention to the business and
affairs of the Company. Employee shall perform the duties and carry out the
responsibilities assigned to Employee to the best of Employee's ability, in a
diligent, trustworthy, businesslike and efficient manner for the purpose of
advancing the business of the Company. Employee acknowledges that Employee's
duties and responsibilities will require Employee's full-time business efforts
and agrees that during the Employment Period Employee will not engage in any
other business activity or have any business pursuits or interests which
interfere or conflict with the performance of Employee's duties hereunder,
provided, that nothing in this SECTION 1.2 shall be deemed to prohibit Employee
from making Permitted Investments (as defined below).
1.3 EMPLOYMENT PERIOD. Employee's employment under this
Agreement shall begin on the date hereof and shall continue through and until
November 9, 1998 (the "Initial Employment Period"). Thereafter, the term of
this Agreement shall automatically be renewed for successive one year terms
(each, a "Renewal Period") unless either party shall give the other notice of
nonrenewal at least sixty (60) days prior to the expiration of the then current
Initial Employment Period or Renewal Period, as the case may be.
Notwithstanding anything to the contrary contained herein, the Initial
Employment Period and each Renewal Period are subject to termination pursuant to
SECTION 1.4 below. The Initial Employment Period and all Renewal Periods are
sometimes collectively referred to herein as the "Employment Period".
1.4 TERMINATION BY THE COMPANY. In addition to the termination
rights of the Company set forth in SECTION 1.3 hereof, the Company has the right
to terminate the Employment Period (and, consequently, Employee's employment
under this Agreement), by notice to Employee in writing at any time, (i) for
"Cause" or (ii) without Cause for any or no reason, subject to the provisions of
SECTION 2.2. Any such termination shall be effective upon the date of service
of such notice pursuant to SECTION 9.6.
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<PAGE>
"Cause" as used herein means the occurrence of any of the
following events:
(a) the willful failure or gross negligence of Employee to
perform Employee's duties or comply with reasonable directions of the Board
or the Chairman that continues after the Board or the Chairman has given
written notice to Employee specifying in reasonable detail the manner in
which Employee has failed to perform such duties or comply with such
directions;
(b) the determination by the Board in the exercise of its
reasonable judgment that Employee has committed an act or acts constituting
(i) dishonesty or disloyalty with respect to the Company or (ii) fraud;
(c) conviction of (i) a felony or (ii) any crime involving moral
turpitude;
(d) a material breach by Employee of any of the Restrictive
Covenants; or
(e) a material breach by Employee of any of the terms or
conditions of this Agreement (other than the Restrictive Covenants) that
continues after the Board or the Chairman given written notice to Employee
specifying in reasonable detail the manner in which Employee has breached
the Agreement.
1.5 TERMINATION BY EMPLOYEE. In addition to the termination
rights of Employee set forth in SECTION 1.3 hereof, Employee has the right to
terminate the Employment Period (and, consequently, Employee's employment under
this Agreement) (i) by prior written notice to the Company at any time for "Good
Reason" or (ii) by sixty (60) days prior written notice to the Company for any
or no reason (a "Voluntary Termination"). Notwithstanding anything to the
contrary contained herein, the Company may accelerate the effective date of a
Voluntary Termination to any date including, but not limited to, the date on
which notice is received by the Company. Following a notice of Voluntary
Termination, Employee agrees to fulfill Employee's duties hereunder and shall
cooperate fully in completion and turnover of all matters involving Employee
until such termination becomes effective, unless otherwise consented to by the
Company. "Good Reason" as used herein shall mean the Company materially
altering or reducing Employee's responsibilities, duties and authorities with
the Company in a manner inconsistent with the provisions of SECTION 1.2 hereof
(other than as a result of Employee's failure to perform Employee's duties and
responsibilities in accordance with this Agreement), which material alteration
or reduction (i) has not been consented to by Employee and (ii) continues after
Employee has given notice to the Company specifying in reasonable detail the
manner in which the Company has materially altered or reduced Employee's
responsibilities, duties and authorities with the Company in a manner
inconsistent with the provisions of SECTION 1.2 hereof (other than as a result
of Employee's failure to perform Employee's duties and responsibilities in
accordance with this Agreement).
1.6 AUTOMATIC TERMINATION. The Employment Period shall
automatically terminate upon Employee's death or Disability. Employee shall be
deemed to have
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<PAGE>
a "Disability" for purposes of this Agreement if Employee is unable to perform,
by reason of physical or mental incapacity, Employee's duties or obligations
under this Agreement, for a total period of 60 days in any 360-day period. The
Board shall determine, according to the facts then available, whether and when
the Disability of Employee has occurred. Such determination shall be made by
the Board in the exercise of reasonable discretion.
2. COMPENSATION AND BENEFITS.
2.1 SALARY. In consideration of Employee performing Employee's
duties under this Agreement and the Restrictive Covenants set forth herein,
during the Employment Period, the Company will pay Employee a base salary at a
rate of $125,000 per annum (the "Base Salary"), payable in accordance with the
Company's regular payroll policy for salaried employees. The Company shall also
perform an annual review of Employee's Base Salary based on the Employee's
performance of Employee's duties and the Company's other compensation policies,
it being understood that any adjustments in compensation shall be subject to the
sole discretion of the Company's Chairman and Board. If the Employment Period
is terminated pursuant to SECTION 1.4, SECTION 1.5 or SECTION 1.6 above, then
the Base Salary for any partial year will be prorated based on the number of
days elapsed in such year during which services were actually performed by
Employee. In addition, during the Employment Period Employee may also receive
certain bonuses from time to time pursuant to a bonus plan based on the
profitability of the Company and other criteria, all on terms and subject to
conditions which may from time to time be mutually agreed to by the Company and
Employee.
2.2 COMPENSATION AFTER TERMINATION.
(a) If the Employment Period or this Agreement is terminated (i)
by the Company for Cause, (ii) by Employee pursuant to a Voluntary
Termination, or (iii) through expiration of the Employment Period, then the
Company shall have no further obligations hereunder or otherwise with
respect to Employee's employment from and after the termination date
(except payment of Employee's Base Salary and benefits described in SECTION
2.3 hereof, in each case which have accrued through the date of termination
or expiration), and the Company shall continue to have all other rights
available hereunder (including, without limitation, all rights under
SECTIONS 3 AND 4 at law or in equity). If the Employment Period or this
Agreement is terminated by virtue of Employee's death or Disability, then
the Company shall have no further obligations hereunder or otherwise with
respect to Employee's employment from and after the termination date
(except payment of Employee's Base Salary and benefits described in SECTION
2.3 hereof through the date which is ninety (90) days after such
termination) and the Company shall continue to have all other rights
available hereunder (including, without limitation, all rights under
SECTIONS 3 AND 4 at law or in equity).
(b) If the Employment Period is terminated by the Company
without Cause or by Employee for Good Reason, Employee shall be entitled to
receive as severance pay (i) Employee's Base Salary hereunder for the
period of time which would have been remaining in the Initial Employment
Period or the Renewal Period, as the case may be,
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<PAGE>
payable in regular installments in accordance with the Company's general
payroll practices for salaried employees, and (ii) the $50,000 minimum
annual bonus described in the first sentence of SECTION 2.3(d) (prorated
for periods of less than a full year) for the period of time which would
have been remaining in the Initial Employment Period or the Renewal Period,
as the case may be, payable in regular installments in accordance with
SECTION 2.3(d), in each case less the consideration paid or payable for
Employee's services by any of Employee's future employers or otherwise
earned by Employee for Employee's services with respect to or during
periods for which Employee is entitled to severance under this SECTION
2.2(b).
2.3 OTHER BENEFITS.
(a) VACATION AND INSURANCE. During the Employment Period, the
Company will provide Employee four (4) weeks vacation per year (prorated
for periods of less than a full year), and will provide other employee
fringe benefits substantially comparable to the benefits which the Company
regularly provides for other key management employees, including
hospitalization and health and disability insurance to the extent offered
by the Company, and in amounts consistent with Company policy, for key
management employees as reasonably determined by the Board, it being
understood that 100% of any hospitalization and health insurance premiums
on the policies offered by the Company for the benefit of Employee and his
family shall be paid by the Company.
(b) BUSINESS EXPENSES. During the Employment Period, the
Company will reimburse Employee in accordance with Company policy for
Employee's normal out-of-pocket expenses incurred in the course of
performing Employee's duties hereunder. Employee shall provide the Company
with all receipts and documentation supporting such expenses as may
reasonably be requested by the Company.
(c) AUTOMOBILE EXPENSES. During the Employment Period, the
Company will reimburse Employee, or pay on Employee's behalf, the actual
costs of (i) the lease of a 1995 BMW 540i automobile or substantially
similar vehicle, (ii) gas, insurance and routine maintenance with respect
to such automobile, and (iii) gas with respect to any substitute for such
vehicle that Employee may from time to time utilize in lieu of such vehicle
(collectively, the "Automobile Expenses"). Notwithstanding the foregoing,
in no event shall the Automobile Expenses exceed in the aggregate $1,400
for any given month during the Employment Period.
(d) BONUSES. With respect to each calendar year of the
Employment Period, Employee shall be entitled to a bonus of $50,000
(prorated for periods of less than a full year, including, but not limited
to, the period between the date of this Agreement and December 31, 1995).
Notwithstanding the foregoing, if gross billings, net of taxes, of the
Company during the calendar year of the Employment Period (or the
Employment Period under the Prior Employment Agreement) commencing January
1, 1996 exceed $1,000,000 (but are less than $1,500,000), in lieu of the
foregoing $50,000 bonus for calendar 1996 Employee shall be entitled to a
bonus of $75,000 (prorated for periods of less than one
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<PAGE>
year), and if gross billings, net of taxes, of the Company during the
calendar year of the Employment Period (or the Employment Period under the
Prior Employment Agreement) commencing January 1, 1996 are $1,500,000 or
greater, in lieu of such $50,000 and $75,000 bonus, Employee shall be
entitled to a bonus of $100,000 (prorated for period of less than one
year). It is understood and agreed that the terms and conditions of any
bonuses in excess of the $50,000 minimum for the calendar years or portions
thereof during periods of the Employment Period commencing after calendar
1996 shall be determined by mutual agreement of the parties, provided,
however, that in no event shall such bonus be less than $50,000 for any
full calendar year. The Company shall pay the first $50,000 of bonuses to
which Employee may be entitled under this SECTION 2.3(d) in quarterly
installments in arrears, and the balance, if any, within 90 days of the end
of the applicable calendar year.
(e) RELOCATION. The Company agrees that the location of the
office at which Employee is based under this Agreement shall not be moved
outside the greater Boston, Massachusetts area without Employee's consent.
(f) MASTERS OF BUSINESS ADMINISTRATION. It is understood and
agreed that commencing no earlier than August 1996, Employee may embark on
the part-time pursuit of a masters of business administration degree,
provided that such endeavor does not interfere with Employee's obligations
hereunder, including but not limited to the obligations under SECTION 1.2
hereof. From August 1996 through the earlier of the termination or
expiration of the Employment Period or Employee's completion of the
requirements for such degree, the Company agrees to reimburse Employee, or
pay on Employee's behalf, the actual tuition and fees incurred by Employee
during such period relating to the pursuit of such degree.
2.4 TAXES, ETC. All compensation payable to Employee hereunder
is stated in gross amount and shall be subject to all applicable withholding
taxes, other normal payroll deductions and any other amounts required by law to
be withheld.
3. COVENANT NOT TO COMPETE.
3.1 EMPLOYEE'S ACKNOWLEDGMENT. Employee agrees and acknowledges
that in order to assure the Company and the Company's affiliates (as defined
below) that they will retain their respective value and that of the Business and
the Yellow Pages Business, it is necessary that Employee undertake not to
utilize the special knowledge of the Business and the Yellow Pages Business that
the Employee has or may acquire and Employee's relationships with customers and
suppliers to compete with the Company and its affiliates. Employee further
acknowledges that:
(a) from and after the consummation of the transactions
contemplated by the Adion Purchase Agreement and the AIS Purchase
Agreement, the Company has been engaged in the Business and in the Yellow
Pages Business;
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<PAGE>
(b) the Company's affiliates are engaged in the Business and the
Yellow Pages Business and may from time to time be engaged in other
business;
(c) Employee is one of a limited number of persons who helped
develop the Business of Adion and AIS and of the Company and its
affiliates;
(d) Employee has occupied a position of trust and confidence
with Adion and AIS prior to the consummation of the transactions
contemplated by the Adion Purchase Agreement and the AIS Purchase Agreement
and, during such period and during Employee's employment under the Prior
Employment Agreement and this Agreement, Employee has and will continue to
become familiar with the proprietary and confidential information of Adion
and AIS, the Company and the Company's affiliates;
(e) the agreements and covenants contained in this SECTION 3 are
essential to protect the Company, its affiliates and the goodwill of the
Business and the Yellow Pages Business and were a condition precedent to
the Company's willingness to consummate the transactions contemplated by
the Adion Purchase Agreement and the AIS Purchase Agreement and the
transactions contemplated by the Prior Employment Agreement and this
Agreement;
(f) the Company and its affiliates would be irreparably damaged
if Employee were to provide services to any person or entity in violation
of the provisions of this Agreement;
(g) the scope and duration of the Restrictive Covenants are
reasonably designed to protect a protectable interest of the Company and
its affiliates and are not excessive in light of the circumstances;
(h) Employee has a means to support Employee and Employee's
dependents, if any, other than by engaging in activities prohibited by this
SECTION 3; and
(i) the provisions of this SECTION 3 shall not in any way be
deemed to limit or modify the provisions of the Adion Purchase Agreement,
the AIS Purchase Agreement, the Noncompetition and Confidentiality
Agreement, dated as of the date hereof, among the Company, HGI and Employee
(the "Noncompetition Agreement") or any other confidentiality,
noncompetition and/or nonsolicitation agreements between Employee on the
one hand and the Company and/or one or more of its affiliates on the other
hand.
3.2 NON-COMPETE. Employee hereby agrees that for a period
commencing on the date hereof and ending two years following the termination or
expiration of Employee's employment with the Company (the "Restricted Period"),
except on behalf of the Company and its affiliates in accordance with this
Agreement, Employee shall not, directly or indirectly, as employee, agent,
consultant, stockholder, director, partner or in any other individual or
representative capacity, own, operate, manage, control, engage in, invest in or
participate in any manner in, act as a consultant or advisor to, render services
for (alone or in association with any
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<PAGE>
person, firm, corporation or entity), or otherwise assist any person or entity
that engages in or owns, invests in, operates, manages or controls any venture
or enterprise that directly or indirectly engages or proposes to engage in the
Business, the Yellow Pages Business or any other business in which the Company
or its affiliates are or become engaged at any time prior to the termination of
Employee's employment with the Company ("Other Business") anywhere in or into
the United States (it being understood that the Business, the Yellow Pages
Business and any Other Business are not limited to any particular region of the
United States and that such businesses may be engaged in effectively from any
location) (the "Territory"); provided, however, that nothing contained herein
shall be construed to prevent Employee from investing in the stock of any
competing corporation listed on a national securities exchange or traded in the
over-the-counter market, but only if Employee is not involved in the business of
said corporation and if Employee, Employee's associates (as such term is defined
in Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended), and Employee's affiliates collectively do not own more than an
aggregate of two percent of the stock of such corporation ("Permitted
Investments"). It is understood and agreed that the terms "Business," "Yellow
Pages Business" and "Other Business" encompass the recruitment advertising
business, yellow pages advertising business and any other business in which the
Company or its affiliates are or become engaged at any time prior to the
termination or expiration of Employee's employment, in and any and all forms and
through the use of any and all media, including but not limited to such
advertising or business provided through the Internet or through on-line
services. The foregoing reference to the Internet or to on-line services is
not, however, intended to preclude Employee from becoming involved in Internet
or on-line services or businesses that are not involved in the recruitment
advertising business, the yellow pages advertising business and any other
business in which the Company or its affiliates are or become engaged at any
time prior to the termination or expiration of Employee's employment. As used
in this Agreement, the term "affiliate" shall have the meaning ascribed to that
term in Rule 405 of the Securities Act of 1933, as amended, and shall include
each past and present affiliate of such person or entity. It is understood and
agreed that unless (i) the Employment Period has been terminated by the Company
without Cause or by Employee for Good Reason but the applicable period of time
for which Employee may be entitled to severance under the provisions of SECTION
2.2(b) above has not expired, or (ii) the Employment Period has been terminated
by the Company for Cause, Employee may, upon thirty (30) days written notice of
termination of the provisions of this SECTION 3.2, terminate the provisions of
this SECTION 3.2 (but not any other provisions of this Agreement, including but
not limited to the provisions of SECTIONS 3.3, 3.4 AND 4 hereof), unless within
such thirty day period the Company provides written notice to Employee electing
to extend the applicability of the provisions of SECTION 3.2 by confirming that
it will pay Employee, as severance, one-half (1/2) of Employee's Base Salary
and one-half (1/2) of the $50,000 minimum annual bonus described in SECTION
2.2(d) (prorated for periods of less than one year) for either (i) the period of
time from the date of delivery of Employee's notice until the end of the
Restricted Period or (ii) from the date of delivery of Employee's notice until
such date (which date may not be later than the last day of the Restricted
Period) as the Company may specify, in either case the Base Salary to be paid in
regular installments in accordance with the Company's general payroll practices
for salaried employees and the minimum bonus to be paid in accordance with
SECTION 2.2(d). In case the Company gives the foregoing notice of election, the
provisions of SECTION 3.2 shall continue to bind Employee for the period of time
that Employee is entitled to severance as specified in the Company's notice.
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<PAGE>
3.3 NON-SOLICITATION. Without limiting the generality of the
provisions of SECTION 3.2 above, Employee hereby agrees that during the
Restricted Period, except on behalf of the Company and its affiliates in
accordance with this Agreement, Employee will not, directly or indirectly, call
on, solicit, or participate as employee, agent, consultant, stockholder,
director, partner or in any other individual or representative capacity in any
business which calls on or solicits business from any person, firm, corporation
or other entity which is or was a customer or supplier of the Company or any of
the Company's affiliates during the Restricted Period, or is a "Prospective
Customer or Supplier" of the Company or any of the Company's affiliates, or from
any successor in interest to any such person, firm, corporation or other entity,
for the purpose of marketing, selling or providing any such party, or obtaining
from any such party, any services or products relating to the Business, the
Yellow Pages Business or any Other Business, or encouraging any such party to
terminate or otherwise alter his, her or its relationship with the Company or
any of the Company's affiliates. For purposes of this Agreement, "Prospective
Customer or Supplier" shall mean any party to whom the Company or any of the
Company's affiliates has made a personal presentation during the Restricted
Period for the purpose of developing a customer or supplier relationship.
3.4 INTERFERENCE WITH RELATIONSHIPS. During the Restricted
Period Employee shall not, directly or indirectly, as employee, agent,
consultant, stockholder, director, co-partner or in any other individual or
representative capacity, employ or engage, recruit, call on or solicit for
employment or engagement, any person who is or was during the Restricted Period
employed or engaged by the Company or any of its affiliates, or becomes employed
or engaged by the Company or any of its affiliates (during the Restricted
Period), or otherwise seek to influence or alter any such person's relationship
with the Company or any of its affiliates.
3.5 BLUE-PENCIL. If any court of competent jurisdiction shall
at any time deem the term of this Agreement or any particular Restrictive
Covenant too lengthy or the Territory too extensive, the other provisions of
this SECTION 3 shall nevertheless stand, the Restricted Period shall be deemed
to be the longest period permissible by law under the circumstances and the
Territory shall be deemed to comprise the largest territory permissible by law
under the circumstances. The court in each case shall reduce the Restricted
Period and/or Territory to permissible duration or size.
4. CONFIDENTIAL INFORMATION. During the term of this Agreement and
thereafter, Employee shall keep secret and retain in strictest confidence, and
shall not, without the prior written consent of the Board, furnish, make
available or disclose to any third party or use for the benefit of Employee or
any third party, any Confidential Information. As used in this SECTION 4,
"Confidential Information" shall mean any trade secret, proprietary or
confidential information relating to the business or affairs of the Company, the
Business, the Yellow Pages Business, any Other Business, or the Company's
affiliates, including but not limited to information relating to financial
statements, customer identities, potential customers, employees, suppliers,
servicing methods, equipment, programs, strategies and information, analyses,
profit margins or other trade secret, proprietary or confidential information
used by the Company or its affiliates, including, without limitation, computer,
software, hardware and related information; provided, however, that Confidential
Information shall not include any information which is in the public domain or
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becomes known in the industry through no wrongful act on the part of Employee.
Employee acknowledges that the Confidential Information is vital, sensitive,
confidential and proprietary to the Company and/or its affiliates.
5. EFFECT ON TERMINATION. If this Agreement or the Employment
Period expires or is terminated for any reason, then, notwithstanding such
termination, those provisions contained in SECTIONS 3, 4, 5, 6, 7 AND 8 hereof
shall remain in full force and effect.
6. REMEDIES. Employee acknowledges and agrees that the covenants
set forth in SECTIONS 3 AND 4 of this Agreement (collectively, the "Restrictive
Covenants") are reasonable and necessary for the protection of the business
interests of the Company and its affiliates, that irreparable injury will result
to the Company and its affiliates if Employee breaches any of the terms of the
Restrictive Covenants, and that in the event of Employee's actual or threatened
breach of any such Restrictive Covenants, the Company and its affiliates will
have no adequate remedy at law. Employee accordingly agrees that in the event
of any actual or threatened breach by Employee of any of the Restrictive
Covenants, the Company and its affiliates shall be entitled to injunctive
relief, specific performance and other equitable relief, without bond and
without the necessity of showing actual monetary damages, subject to hearing as
soon thereafter as possible. Nothing contained herein shall be construed as
prohibiting the Company and its affiliates from pursuing any other remedies
available to them for such breach or threatened breach, including but not
limited to the recovery of damages. It is understood and agreed that the
Restrictive Covenants set forth in this Agreement are in addition to, and not in
lieu of, any similar restrictions imposed upon Employee under the Adion Purchase
Agreement, the AIS Purchase Agreement, the Noncompetition Agreement and/or any
other confidentiality, noncompetition and/or nonsolicitation agreements between
Employee on the one hand and the Company and/or one or more of its affiliates on
the other hand, and that the termination or expiration of any of the Restrictive
Covenants hereunder shall not affect the duration, validity or enforceability of
any such similar restrictions set forth in the Adion Purchase Agreement, the AIS
Purchase Agreement, the Noncompetition Agreement and/or any other
confidentiality, noncompetition and/or nonsolicitation agreements between
Employee on the one hand and the Company and/or one or more of its affiliates on
the other hand.
7. INCOME TAX TREATMENT. Employee and the Company acknowledge that
it is the intention of the Company to deduct any and all amounts paid under
SECTION 2 and SECTION 3.2 hereof as ordinary and necessary business expenses for
income tax purposes. Employee agrees and represents that Employee will treat
all such amounts as required pursuant to all applicable tax laws and
regulations, and should Employee fail to report such amounts as required,
Employee will indemnify and hold the Company harmless from and against any and
all taxes, penalties, interest, costs and expenses, including reasonable
attorneys' and accounting fees and costs, which are incurred by Company directly
or indirectly as a result thereof.
8. REPRESENTATIONS OF EMPLOYEE. Employee represents and warrants
that Employee is free to enter into this Agreement and to perform the duties
required under this Agreement, and that there are no employment or consulting
contracts, restrictive covenants or other restrictions preventing the
performance of Employee's duties hereunder.
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9. MISCELLANEOUS.
9.1 ASSIGNMENT. No party hereto may assign or delegate any of
its rights, interests or obligations hereunder without the prior written consent
of the other party hereto, whether by operation of law or otherwise; provided,
however, that the Company shall have the right to assign all or any part of its
rights and obligations under this Agreement without the prior written consent of
Employee (i) to TMP Worldwide Inc., a Delaware corporation, Worldwide Classified
Inc., a Delaware corporation, McKelvey Enterprises, Inc., a New York
corporation, Telephone Marketing Programs Incorporated, a Delaware corporation,
or any successor to all or substantially all of the assets of any of the
foregoing entities, or any direct or indirect subsidiaries of any of the
foregoing, or (ii) in connection with the sale of all or a substantial portion
of the Company's assets. Except as otherwise expressly provided herein, all
covenants and agreements contained in this Agreement by or on behalf of any of
the parties hereto shall bind and inure to the benefit of the respective legal
representatives, heirs, successors and assigns of the parties hereto whether so
expressed or not.
9.2 ENTIRE AGREEMENT. Except as otherwise expressly set forth
herein, this Agreement sets forth the entire understanding of the parties with
respect to the subject matter hereof, and supersedes and preempts all prior oral
or written understandings and agreements with respect to the subject matter
hereof, including but not limited to the Prior Employment Agreement.
9.3 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
9.4 AMENDMENT; MODIFICATION. No amendment or modification of
this Agreement and no waiver by any party of the breach of any covenant
contained herein shall be binding unless executed in writing by the party
against whom enforcement of such amendment, modification or waiver is sought.
No waiver shall be deemed a continuing waiver or a waiver in respect of any
subsequent breach or default, either of a similar or different nature, unless
expressly so stated in writing.
9.5 GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Agreement shall be governed by,
the laws of the State of New York without giving effect to provisions thereof
regarding conflict of laws.
9.6 NOTICES. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been properly served if (a) delivered
personally, (b) delivered by courier, or (c) delivered by certified or
registered mail, return receipt requested and first class postage prepaid, in
each case to the parties at their addresses set forth below or such other
addresses as the recipient
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<PAGE>
party has specified by prior written notice to the sending party. All such
notices and communications shall be deemed received upon the actual delivery
thereof in accordance with the foregoing.
(a) If to Employee:
Jeffrey C. Taylor
80 Alpine Drive
Holliston, MA 01746
with a copy to:
Leland Law Associates
P.O. Box 750
20 South Street
Northborough, MA 01532
Attention: Roger Leland
(b) If to the Company:
TMP Interactive Inc.
2 Kendall Street
PO Box 586
Framingham, MA 01701
Attention: President
with a copy to:
TMP Interactive Inc.
c/o TMP Worldwide Inc.
1633 Broadway, 33rd Floor
New York, NY 10019
Attention: Andrew J. McKelvey
Thomas G. Collison
Myron F. Olesnyckyj
9.7 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same Agreement.
9.8 DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive
headings in this Agreement are inserted for convenience of reference only and
are not intended to be part of or to affect the meaning or interpretation of
this Agreement. The use of the word "including" in this Agreement shall be by
way of example rather than by limitation. The Preliminary Recitals set forth
above are incorporated by reference into this Agreement.
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<PAGE>
9.9 NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties hereto to express their
mutual interest, and no rule of strict construction will be applied against any
party hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
COMPANY:
TMP INTERACTIVE INC.
By: /s/ Andrew J. McKelvey
---------------------------
Name: Andrew J. McKelvey
Title: President
EMPLOYEE:
/s/ Jeffrey C. Taylor
------------------------------
Jeffrey C. Taylor
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<PAGE>
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(In Thousands, Except Per Share Amounts)
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
---------------------- --------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
Net income (loss)......... $( 4,626) $( 2,467) $ 3,229 $ 1,569 $ 229
Preferred stock dividends. (210) (210) (210) (105) (105)
------- ------ ----- ----- ----
Net income (loss)
applicable to common
and Class B common stock.$( 4,836) $( 2,677) $ 3,019 $ 1,464 $ 124
-------- ------- ------ ------- -----
-------- ------- ------ ------- -----
Weighted average number
of common, Class B common
and common equivalent
shares outstanding
(includes effect of
options granted
within one year
of offering)............. 17,776 19,230 19,518 19,518 19,638
------- ------ ------ ------ ------
------- ------ ------ ------ ------
Primary and fully
diluted net income
(loss) per share......... $( 0.27) $( 0.14) $ 0.15 $ 0.08 $ 0.01
-------- ------- ------ ------ ------
-------- ------- ------ ------ ------
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EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
TMP Worldwide Inc.
New York, New York
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated March 15, 1996, except for Note 15
(b) which is as of July 24, 1996, Note 15 (c) which is as of July 29, 1996, Note
15(d) which is as of August 1, 1996, Note 6 which is as of August 29, 1996 and
Notes 1 and 2 which are as of October , 1996, relating to the consolidated
financial statements of TMP Worldwide Inc. and Subsidiaries, our report dated
July 25, 1996 relating to the financial statements of Rodgers & Associates
Advertising, Inc., which are contained in that Prospectus, and of our report
dated March 15, 1996, relating to the schedule which is contained in Part II of
the Registration Statement.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO SEIDMAN, LLP
New York, New York
September 20, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
TMP Worldwide Inc.
New York, New York
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated July 30, 1996, relating to the
consolidated financial statements of Neville Jeffress Australia Pty Limited and
Subsidiaries, which is contained in that Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO NELSON PARKHILL
Sydney, Australia
September 20, 1996
