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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 000-21571
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TMP WORLDWIDE INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 13-3906555
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
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1633 BROADWAY, 33RD FLOOR, NEW YORK, NEW YORK 10019
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(212) 977-4200
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.001 per share
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes /x/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /x/
The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $346,863,036 as of the close of business on
March 20, 1998.
The number of shares of Common Stock, $.001 par value, outstanding as of
March 20, 1998 was 26,125,107.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement to be used in
connection with its Annual Meeting of Stockholders to be held on May 27, 1998,
are incorporated by reference into Part III of this report.
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ITEM 1. BUSINESS
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 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
leading provider of Internet content. The Company's clients include more than 70
of the Fortune 100 and more than 285 of the Fortune 500 companies. The Company's
growth strategy is to continue to pursue consolidation opportunities in its core
advertising businesses and to leverage its client base and its approximately
2,200 sales, marketing and customer service personnel to expand its
Internet-based businesses. For the year ended December 31, 1997, the Company's
gross billings were $1.1 billion, commissions and fees were $237.4 million, net
income was $9.6 million and EBITDA was $41.0 million.(1)
TMP is the world's largest yellow page advertising agency, generating
approximately $457.5 million in gross billings for the year ended December 31,
1997. TMP is also one of the world's largest recruitment advertising agencies,
generating approximately $573.2 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. A substantial part of the Company's growth
has been achieved through acquisitions. From January 1, 1993 through December
31, 1997, TMP completed 52 acquisitions with estimated annual gross billings of
$732 million(2) including, in August 1997, the acquisition of Austin Knight
Limited and subsidiaries ('Austin Knight'), for approximately $47.2 million net
of approximately $11.5 million of cash acquired relating to the sale in July
1997 of real property by Austin Knight. For the year ended September 30, 1996,
Austin Knight had annual gross billings of approximately $214.0 million. Austin
Knight was the largest recruitment advertising agency in the United Kingdom and
the fifth largest agency in the U.S. With the acquisition of Austin Knight, the
Company strengthened its position as the third largest recruitment advertising
agency in the U.S. and has become the largest agency in the U.K. 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 sites, including The Monster Board(Registered),
Online Career Center(Service Mark), Be the Boss(Service Mark) and
MedSearch(Service Mark), which collectively contain approximately 180,000 job
listings and career opportunities. 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.
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(1) As used in this Report, 'gross billings' refers 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, which operates in one business segment, 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. Earnings before interest, income taxes,
depreciation and amortization ('EBITDA') is presented to provide additional
information about the Company's ability to meet its future debt service,
capital expenditures and working capital requirements and is one of the
measures which determines the Company's ability to borrow under its credit
facility. EBITDA should not be considered in isolation or as a substitute
for operating income, cash flows from operating activities and other income
or cash flow statement data prepared in accordance with generally accepted
accounting principles or as a measure of the Company's profitability or
liquidity.
(2) Gross billings with respect to companies acquired by the Company refer to
the Company's estimate of the acquired companies' annual gross billings.
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INDUSTRY OVERVIEW
The Yellow Page Advertising Market. Yellow page directories have been
published in the U.S. since at least the 1890's 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 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, 1997, total spending on yellow page
advertisements in the U.S. was $11.4 billion. Of this amount, approximately $9.7
billion was spent by local accounts and approximately $1.7 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 1997,
the market grew at a compound average rate of approximately 6.2%.
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 1997, the U.S.
market grew at a compound annual growth rate of approximately 12%. Classified
readership by job seekers has remained constant over the last ten years and
approximately 85% 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 internationally '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 the year ended December
31, 1997, total spending on advertisements globally in the recruitment
classified advertisement section of newspapers was approximately $12 billion.
Agencies which place recruitment advertising are paid commissions generally
equal to 15% of recruitment advertising gross billings.
Internet. The Internet is an increasingly significant global medium for
communications, content and commerce. An industry trade publication estimates
that the number of worldwide Web users was approximately 112 million as of
February 1998. Growth in Internet usage has been fueled by a number of factors,
including the availability of a growing number of useful products and services,
the large and growing installed base of personal computers in the workplace and
home, advances in the performance and speed of personal computers and modems,
improvements in network infrastructure, easier and cheaper access to the
Internet and increased awareness of the Internet among businesses and consumers.
The increasing functionality, accessibility and overall usage of the
Internet and online services have made them an attractive commercial medium.
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, distributed to a large number of consumers on a
real-time basis, and accessed by users at any time. Industry publications
indicate that the historical and projected adoption
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of online/Internet services represents a faster rate of penetration than
occurred with traditional media, such as radio, broadcast television and cable
television.
TMP'S YELLOW PAGE BUSINESS
TMP entered the yellow page business in 1967 and has grown to become the
largest yellow page advertising agency in the world based on yellow page gross
billings. For the year ended December 31, 1997, the Company had worldwide yellow
page gross billings of approximately $457.5 million. With approximately 30% of
the U.S. national yellow page market, TMP is approximately three times larger
than its nearest competitor, based on yellow page gross billings. The Company's
growth in yellow pages has been driven in part by acquisitions. Since January 1,
1994, TMP has completed the acquisition of four yellow page businesses 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 consisting of focus groups made up
of yellow page users and yellow page user pollings. The principal aims of this
program are client retention and sales growth. TMP believes that its focus on
customer service has enabled it to maintain its client retention rate, year to
year, in excess of 90%.
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 results 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 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 1996 Midas yellow page
program.
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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, franchisors 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 Internet-based service offerings.
The following are some of TMP's larger yellow page accounts:
Beneficial Management
Corporation
Bridgestone/Firestone Inc.
Columbia/HCA Healthcare Corp.
Culligan International Company
Ford Motor Company
Hallmark Cards, Inc.
H&R Block Tax Services Inc.
ITT Industries Inc.
Kohler Co.
Mail Boxes Etc.
MCI Telecommunications
Corporation
Midas International Corporation
Pizza Hut Inc.
PRIMESTAR Partners L.P.
Ryder
Sears, Roebuck & Co.
ServiceMaster
Sharp Electronics Corp.
Siemens Rohm--AG
Communications
Terminix International L.P.
United Van Lines, Inc.
York Heating and Air
Conditioning
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 is offering 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 has sold nine Dealer
Locator products.
The Company believes that the Dealer Locator concept could be appropriate
for certain of its yellow page clients. For example, the Company has adapted
Dealer Locator technology to create for The America Board of Medical
Specialities the CertifiedDoctor Web Site (http://www.certifieddoctor.org).
CertifiedDoctor allows consumers to search for board certified physicians by
specialty and geographic area and also provides doctors' educational
information.
TMP'S RECRUITMENT ADVERTISING BUSINESS
TMP entered the recruitment advertising business in 1993 with the
acquisition of the business of Bentley, Barnes & Lynn, Inc. and has grown both
through acquisitions and internally. Through March 20, 1998, the Company has
acquired 41 recruitment advertising agencies. For the year ended December 31,
1997, TMP had recruitment advertising gross billings of $573.2 million. In
addition to its offices in the United States, the Company has 47 locations
outside the United States. The Company also maintains relationships with 16
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. Further, the Company believes that as
employers find it more difficult to attract qualified employees, they will
increasingly seek out agencies that can implement national and, in some cases,
global recruitment strategies.
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
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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.
In the U.S., the Company receives commissions generally equal to 15% of
recruitment advertising gross billings. Outside of the U.S., where,
collectively, the Company derives the majority of its recruitment advertising
commissions and fees, TMP's commission rates for recruitment advertising vary,
ranging from approximately 10% in Australia to 15% in Canada and the United
Kingdom. In the U.S., 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 for the year ended December 31, 1997.
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:
British Telecom
Charles Schwab & Co. Inc.
Cigna Corp.
Commonwealth Bank of Australia
Compaq Computer Corp.
Darden Restaurants Inc.
Federated Department Stores Inc.
Gateway 2000
Genentech Inc.
Glaxo-Wellcome
Good Guys Inc.
Hewitt Associates
International Business Machines Corp.
Morgan Stanley, Dean Witter, & Co.
Motorola Inc.
Nike
Office Max Inc.
Pizza Hut Inc.
Price Waterhouse LLP
Queensland State Government
Renault UK
Sun Microsystems Inc.
Sybase Inc.
Target Stores Inc.
TGI Friday's Inc.
University of Melbourne
Vencor, Inc.
The Company is leveraging its size and service offerings to attract new and
larger clients. 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 sites including The Monster
Board(Registered), Online Career Center(Service Mark), Be the Boss(Service Mark)
and MedSearch(Service Mark). Each of these Web sites consists of a database of
employment opportunities and a variety of other value added features.
Collectively, TMP's career hubs contain approximately 180,000 job and other
career opportunities. TMP believes that it offers the most current career
opportunities on the Web, with the majority of its listings less than 60 days
old. The Company intends to continue to build and expand its portfolio of
product offerings through both internal development and acquisitions.
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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 since print media need not be
purchased. 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.
The Monster Board(Registered) (http://www.monster.com), launched in April
1994, is one of PC Magazine's top 100 Web sites (February 1998) and receives
more unique visitors than any other career Web site, as reported by Media Metrix
in their January 1998 PC Meter survey. It was also one of the first 1,000
commercial Web sites out of the more than 1,000,000 which currently exist. As of
March 20, 1998, The Monster Board(Registered) listed approximately 30,000 jobs
offered by approximately 5,300 employers. Clients of The Monster
Board(Registered) include Nike, Blockbuster Entertainment Inc., McDonald's,
CompuServe, Deloitte & Touche, and Dell Computer Corporation. According to
Nielson Media Research Internet Profiles Corporation ('I/AUDIT'), The Monster
Board(Registered) averaged approximately 70,000 visits daily (the gross number
of occasions on which a user looked up a site) in January 1998 with the average
length of each visit exceeding ten minutes. Job seekers can search The Monster
Board(Registered)'s database of employment opportunities by location, job
category and/or keyword. Keyword Search allows a user to enter specific keywords
to match skills, job titles or other requirements. The Monster
Board(Registered)'s latest service, the Personal Job Search Agent, is a unique
service that continuously seeks to find the desired job for the job seeker. Job
seekers can sign up for this free service on the site by creating a simple
personal profile indicating the industry and location in which they want to work
and any job-specific keywords. The Personal Job Search Agent then continually
scans the entire Monster Board job database for opportunities that match the
requirements, and delivers the leads to job seekers' desktops - even while they
are off-line. As of March 20, 1998, The Monster Board(Registered) contained over
580,000 Personal Job Search Agent profiles. In addition, job seekers can post
their resume free of charge on Resume City, The Monster Board(Registered)'s
database of resumes. Resume City can be searched, using key word searches, by
prospective employers, who pay for the service. This service also enables job
seekers to easily transmit their resume to prospective employers electronically.
Resume City currently contains over 290,000 resumes.
Online Career Center(Service Mark) (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. According to I/AUDIT, in January 1998, OCC averaged
approximately 35,000 visits daily with the average length of visit being
approximately eight minutes. 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), job seekers can place their resumes on-line. At March 20,
1998, OCC listed approximately 150,000 jobs for a broad client base including
Allied Signal, Andersen Consulting, Bank America Corp., Eli Lilly and Co., Levi
Strauss & Co., and Salomon Smith Barney. 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. Similar to The Monster Board(Registered), OCC also employs agent
technology. OCC's pricing structure is membership-based rather than
volume-based, consistent with its 'less frills' market positioning.
MedSearch(Service Mark) (http://www.medsearch.com) is a leading Internet
Web site for the healthcare industry. Launched in May 1994, MedSearch(Service
Mark) attracts healthcare professionals and many of North America's largest
health care providers, including Blue Cross/Blue Shield of Massachusetts, Baxter
Healthcare Corp., Henry Ford Health System, Mayo Clinics & Hospitals and Vencor,
Inc. MedSearch(Service Mark) offers detailed employer profiles, resume postings,
discussion groups, career and industry information, and direct links
to numerous healthcare resources on the Internet. MedSearch(Service Mark)
provides access to job listings which can be searched by location, discipline or
by key word.
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Be the Boss(Service Mark) (http://www.betheboss.com) focuses on the
franchising industry. Be the Boss(Service Mark) 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, Mail
Boxes Etc., Service Master, Subway and 7-Eleven. In addition, Be the
Boss(Service Mark) provides extensive resources to the prospective franchisee
including sound clips and articles on franchising, interactive financial
worksheets and links to other entrepreneurs' resources on the Web. Be the
Boss(Service Mark) 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) 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) 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) is
TMP's premium general recruitment product and is therefore populated with a
variety of value-added features including:
Monster Entry Level. A segment of The Monster Board(Registered)
targeted to the college and entry-level job seekers. Monster Entry Level
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.
Monster HR. Monster HR 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.
Monster Careers. 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) has been tailored to reflect the local customs and terminology
of the U.S., Canada, the United Kingdom, the Netherlands and Australia.
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. As of March 20, 1998, the
Company had 35 strategic alliances. The Company's strategic alliances generally
center on The Monster Board(Registered) and include:
America Online. TMP and America Online have formed a strategic
alliance which provides to The Monster Board(Registered) and OCC
advertising positions on America Online's Employment Classifieds Area.
USA Today. TMP and USA Today have introduced on USA Today Online, a
general interest news site on the Internet, a classifieds area featuring
employment, real estate and automotive listings. This alliance gives to USA
Today Online's daily viewers the chance to search one of the most extensive
classified advertisement databases available on the Web.
NBC. With the launch of NBC's Interactive Neighborhood, NBC is
providing its affiliates with a premium content package that includes
business, weather and leisure activities. The Monster Board(Registered) is
the exclusive provider of career information as part of this premium
package. The relationship gives The Monster Board(Registered) an
opportunity to provide its services through the Web sites of 215 NBC
affiliates and 11 NBC owned and operated stations.
MCI. MCI Telecommunications, Inc. entered into an agreement with TMP
to open an exclusive online classifieds area featuring employment listings
and career related information from The Monster Board(Registered). This
site can be accessed from all MCI web sites.
7
<PAGE>
Advertising Age. The Ad Age Group is a strong marketing partner with
the following leading publications: Advertising Age, Advertising Age
International, Business Marketing and Creativity, as well as Ad Age's Web
site, AdAge.com (http://www.adage.com). In January 1997, TMP created a
cobranded career service known as The Advertising Age/The Monster
Board(Registered) Job Bank. This alliance permits the Company to expand its
jobs database, while targeting advertising into market niches.
Comcast. As a large cable provider and a partner in the @Home
broadband initiative, Comcast is a valuable partner in interactive media.
The recent launch of InYourTown.com, a site developed by Comcast, gives The
Monster Board(Registered) the opportunity to be the default career center
in key cities and secures a strong local presence while leveraging the
Comcast brand and user base. As interactive media evolves to broadband and
interactive television, Comcast offers the ability to migrate Web
capabilities to the new platforms.
Excite, Inc., Excite, Inc., an Internet media company offering the
Web's first free online service, and TMP have established a two year
strategic marketing relationship whereby The Monster Board(Registered) and
OCC are the premier providers of co-branded jobs and career related
information for the Excite Careers & Education Channel. Excite users now
have direct access to the job listings, personal job search agents,
resume-building and posting capabilities, company profiles and valuable
advice on managing a career available through The Monster Board(Registered)
and OCC.
Yahoo!, Inc. Yahoo!, Inc., the world's single largest Internet
navigation guide, and TMP have established a strategic agreement whereby
The Monster Board(Registered) and OCC are featured in the employment
section of Yahoo! Classifieds. Users of Yahoo! Classifieds have direct
access to the job listings, personal job search agents, resume-building and
posting capabilities, company profiles and valuable advice on managing a
career available through The Monster Board(Registered) and OCC.
USWest. The USWest local initiative, DiveIn, is a significant player
in the race to provide local content. The site leverages USWest's and
Continental Cable's user base and brands to provide information in strong
USWest and Continental Cable markets. The Monster Board(Registered) is the
default career center for each of these sites providing a strong local
presence and local and regional traffic.
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) became
the official career site for Gartner Group's Web site www.gartner.com. This
alliance serves to continue to reinforce The Monster Board's brand name
while driving volume to The Monster Board(Registered)'s jobs database.
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). Further, resumes posted on The Monster Board(Registered)
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).
In addition, The Monster Board(Registered) maintains other strategic
alliances. Collectively, its alliances were responsible for approximately 38% of
The Monster Board(Registered)'s job searches in January 1998.
The Monster Board(Registered) utilizes Digital Equipment Corporation's
Alpha 8400s to provide commercial-grade Web service to an expanding Internet
user-base. The Monster Board(Registered) is currently co-located at BBN Planet
and connected to two 100 megabit/second feeds. An Oracle(Trademark) database is
incorporated to store resumes and jobs. Oracle(Trademark) also allows The
Monster Board(Registered) 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(Trademark) server is installed to ensure the speed and
reliability of The Monster Board(Registered) and to add the ability to handle
encrypted credit card transactions over the Web. The Monster Board(Registered)
continues to leverage new technology innovations to provide increased service
and efficiencies to job seekers and clients.
8
<PAGE>
SALES AND MARKETING
TMP has over 2,200 employees focused on its sales, marketing and customer
service efforts world-wide. The Company has divided its sales, marketing and
customer service staff into two groups: (i) new business generation
(approximately 220 employees) and (ii) existing client relationships maintenance
and improvement (approximately 2,000 employees). In 1997, the Company's new net
client wins have estimated annual gross billings of approximately $68 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. 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 to 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 285 of the Fortune 500 companies. No one
client accounts for more than 5% of the Company's annual commissions and fees.
The Company has 62 sales, marketing and customer service offices located in the
United States and 53 offices in the rest of the world. The Company also
maintains relationships with 16 international recruitment advertising agencies
throughout the world, further enhancing the Company's ability to reach qualified
job candidates.
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 three 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,
and JWT Specialized Communications, a subsidiary of the WPP Group USA, Inc. The
Company also competes with hundreds of Internet content providers.
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).' The Company
also asserts common law protection on certain names and marks that it has used
in connection with its business activities.
9
<PAGE>
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. The FTC has never brought any actions against the Company.
There can be no assurance that 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.
10
<PAGE>
EMPLOYEES
At February 28, 1998, the Company employed approximately 3,300 people, of
whom approximately 2,000 were client services personnel, approximately 220 were
sales and marketing personnel and approximately 350 were creative and graphics
personnel. The remainder of the Company's personnel are information systems,
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.
COMPANY HISTORY
The Company is the successor to the businesses formerly 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 was Andrew J. McKelvey. On December 9, 1996, Old TMP
merged into McKelvey Enterprises, Inc. Thereafter, WCI merged into McKelvey
Enterprises, Inc. McKelvey Enterprises, Inc. then merged into Telephone
Marketing Programs Incorporated. Such mergers are collectively referred to as
the 'Mergers.' In addition, Mr. McKelvey sold or contributed his interest in
five other entities to the Company. Pursuant to the Mergers, Telephone Marketing
Programs Incorporated changed 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. In December 1996,
the Company completed the initial public offering of an aggregate of 4,147,408
shares of Common Stock at a purchase price of $14.00 per share in an
underwritten public offering managed by Morgan Stanley & Co. Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation and Ladenburg Thalmann & Co.
Inc. In addition, certain stockholders sold an aggregate of 652,592 shares of
Common Stock in such offering. The net proceeds to the Company of this offering
were used to repay debt and to redeem preferred stock. In September 1997, the
Company completed the secondary public offering of an aggregate of 2,400,000
shares of Common Stock at a purchase price of $23.00 per share in an
underwritten public offering managed by Morgan Stanley & Co. Incorporated,
Goldman, Sachs & Co., BT Alex. Brown Incorporated, Montgomery Securities and
Ladenburg Thalmann & Co. Inc. In addition, certain stockholders sold an
aggregate of 1,600,000 shares of Common Stock in such offering. The net proceeds
to the Company from this offering, including $12.2 million paid to the Company
by certain stockholders, were used to repay debt, including debt incurred to
fund the purchase of Austin Knight.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- --------------------------------------------------
<S> <C> <C>
Andrew J. McKelvey........................... 63 Chairman of the Board, CEO and Director
Thomas G. Collison........................... 58 Vice Chairman and Secretary
James J. Treacy.............................. 40 Chief Operating Officer and Executive Vice
President
Paul M. Camara............................... 50 Executive Vice President--
Creative/Sales/Marketing
Jeffrey C. Taylor............................ 37 Executive Vice President--Interactive
George R. Eisele............................. 61 Executive Vice President of TMP Worldwide Direct
and Director
Karen L. MacPherson.......................... 43 Executive Vice President--Recruitment Division
Stuart J. McKelvey........................... 31 Senior Vice President--Yellow Page Division
Roxane Previty............................... 38 Chief Financial Officer
Myron F. Olesnyckyj.......................... 36 Vice President--General Counsel
</TABLE>
11
<PAGE>
Andrew J. McKelvey founded the Company in 1967, and has served as Chairman
of the Board and CEO 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. Andrew J. McKelvey is the father of Stuart J. McKelvey.
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.
James J. Treacy joined the Company in June 1994 as chief executive officer
of the recruitment division. In April 1996, Mr. Treacy was named Executive Vice
President--Finance and Strategy. In February 1998, Mr. Treacy, in addition to
his then current position, was named to the position of Chief Operating Officer.
Prior to joining the Company, Mr. Treacy was Senior Vice President--Western
Hemisphere Treasurer for the WPP Group USA, Inc. Prior thereto, 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.
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 the 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) in April 1994. He attended the University of
Massachusetts.
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.
Karen L. MacPherson joined the Company in August 1994 in connection with
its acquisition of CALA H.R.C. Ltd, (Canada), where she was employed. From
August 1994 until May 1996 she served as chief executive officer of the
Company's Canadian recruitment division, and from June 1996 through February
1998 she served as chief executive officer of the Company's Australian
recruitment division. She was named to her current position in February 1998.
Ms. MacPherson holds a B.A. from the University of Prince Edward Island.
Stuart J. McKelvey joined The Monster Board(Registered) as a project
manager in March 1996 and became a senior project manager in October 1996. He
was named to his current position in March 1998. Mr. McKelvey holds a B.A. from
Stetson University. Stuart J. McKelvey is the son of Andrew J. McKelvey.
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.
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.
ITEM 2. 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
approximately $108,000 and escalate during the term of the lease.
The Company also has leases covering local offices throughout the United
States and in the foreign countries where it has operations.
12
<PAGE>
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.
ITEM 3. 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.
On February 19, 1998, a class action complaint was filed against the
Company by five former employees. The claims brought by the plaintiffs in the
complaint are that the Company (a) misclassified the named plaintiffs and
purported class members as exempt from the overtime requirements of California
wage and hour law and failed to pay them overtime wages, (b) failed to pay
accrued but unused vacation days at the time of termination, and (c) failed to
pay accrued but unused personal days at the time of termination. The plaintiffs
purport to represent a class of 450 former and current employees who are
similarly situated. The Company intends to vigorously defend the claims brought
by the plaintiffs and on March 18, 1998, the Company responded to the complaint
by filing an answer denying all allegations. Management presently believes that
the disposition of these claims will not have a material adverse effect on the
Company's financial position, operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Common Stock is quoted on the Nasdaq National Market under the symbol
'TMPW.' The following table sets forth for the periods indicated the high and
low reported sale prices per share for the Common Stock as reported by the
Nasdaq National Market.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 HIGH LOW
- ---------------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
First Quarter..................................................................... $ 22.00 $ 12.88
Second Quarter.................................................................... $ 24.25 $ 17.00
Third Quarter..................................................................... $ 25.63 $ 19.00
Fourth Quarter.................................................................... $ 28.75 $ 15.00
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 HIGH LOW
- ---------------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Fourth Quarter (Commencing December 12, 1996)..................................... $ 14.25 $ 12.50
</TABLE>
The number of stockholders of record of Common Stock on March 20, 1998 was
315. On March 20, 1998, the last reported sale price of the Common Stock as
reported by the Nasdaq National Market was $27.88.
DIVIDENDS
The Company has never paid cash dividends on its Common Stock and does not
anticipate paying any cash dividends on its Common Stock in the foreseeable
future; it intends to retain its earnings to finance the expansion of its
business and for general corporate purposes. Any payment of dividends will be at
the discretion of the Company's Board of Directors and will depend upon the
earnings, financial condition, capital requirements, level of indebtedness,
contractual restrictions with respect to payment of dividends and other factors.
The Company's revolving credit agreement restricts the payment of dividends
without the prior written consent of the lenders.
13
<PAGE>
ISSUANCE OF UNREGISTERED SECURITIES
In 1997, the Company, in connection with the acquisition of three
companies, issued 110,883 shares of unregistered Common Stock, with an aggregate
value of approximately $2.2 million at the respective closing dates. These
securities were issued in reliance upon exemption from registration provided by
Section 4(2) of the Securities Act.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
---------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Commissions and fees.............................. $ 237,417 $162,631 $123,907 $ 86,165 $ 73,791
Operating expenses:
Salaries and related costs...................... 121,313 80,291 58,329 45,758 37,747
Office and general.............................. 82,712 60,101 43,432 30,316 29,824
Amortization of intangibles..................... 6,160 4,440 3,237 3,264 2,471
Special compensation(1)......................... -- 52,019 -- -- --
Restructuring charges........................... -- -- -- -- 1,318
Total operating expenses.......................... 210,185 196,851 104,998 79,338 71,360
Operating income (loss)........................... 27,232 (34,220) 18,909 6,827 2,431
Other income (expense):
Interest expense, net(2)........................ (8,772) (14,265) (10,894) (9,178) (7,652)
Other, net...................................... (90) (164) 150 (146) (386)
Income (loss) before provision (benefit) for
income taxes, minority interests and equity in
earnings (losses) of affiliates................. 18,370 (48,649) 8,165 (2,497) (5,607)
Provision (benefit) for income taxes............ 8,571 3,270 4,222 (333) (1,322)
Net income (loss) applicable to common and Class B
common stockholders............................. 9,500 (52,449) 3,019 (2,677) (4,836)
Net income (loss) per common and Class B common
share:
Basic........................................... $ .39 $ (2.72) $ .16 $ (.14) $ (.27)
Diluted......................................... $ .38 $ (2.72) $ .15 $ (.14) $ (.27)
Weighted average shares outstanding:
Basic........................................... 24,243 19,299 19,064 19,064 17,610
Diluted......................................... 24,735 19,299 19,355 19,064 17,610
PRO FORMA INCOME DATA(3):
Pro forma net income applicable to common and
Class B common stockholders..................... $ 2,173
Pro forma net income per common and Class B common
share:
Basic........................................... $ .11
Diluted......................................... $ .11
Weighted average shares outstanding:
Basic........................................... 19,299
Diluted......................................... 19,732
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
---------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT NUMBER OF EMPLOYEES AND OFFICES)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Gross Billings:
Yellow page advertising......................... $ 457,519 $434,728 $429,176 $363,656 $336,714
Recruitment advertising......................... 573,152 308,147 166,508 54,872 8,338
Internet(4)..................................... 19,640 6,659 392 -- --
---------- -------- -------- -------- --------
Total Gross Billings.............................. $1,050,311 $749,534 $596,076 $418,528 $345,052
---------- -------- -------- -------- --------
---------- -------- -------- -------- --------
Total operating expenses as a percentage of
commissions and fees............................ 88.5% 89.1%(5) 84.7% 92.1% 96.7%
Number of employees............................... 3,300 2,000 1,400 1,200 970
Number of offices................................. 115 78 50 40 30
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
---------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets.................................... $ 288,363 $212,650 $180,516 $134,313 $122,168
Current liabilities............................... 282,496 224,577 186,247 146,124 135,033
Total assets...................................... 495,206 331,753 258,094 198,965 168,424
Long-term liabilities............................. 115,852 70,799 88,070 72,008 49,694
Minority interests................................ -- 3,082 3,105 3,153 3,121
Redeemable preferred stock........................ -- 2,000 2,000 2,000 2,000
Total stockholders' equity (deficit).............. 96,858 31,295 (21,328) (24,320) (21,424)
</TABLE>
- ------------------
(1) Special compensation consists of a non-cash, non-recurring charge of
approximately $52.0 million for special management compensation resulting
from the issuance of approximately 3.6 million shares of Common Stock of the
Company to stockholders of predecessor companies of the Company in exchange
for their shares in those companies which they had received for nominal or
no consideration, as employees or as management of businesses financed
substantially by the principal stockholder of the Company and, accordingly,
were not considered to have made substantive investments for their minority
shares. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations--The year ended December 31, 1997 compared to the year
ended December 31, 1996' and '--The year ended December 31, 1996 compared to
the year ended December 31, 1995' and Note 1 to the Company's Consolidated
Financial Statements.
(2) Interest expense for 1996 includes a $2.6 million non-cash, non-recurring
charge to reflect the exercise of a warrant issued in connection with the
Company's financing agreement. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations--The year ended December 31,
1997 compared to the year ended December 31, 1996' and '--The year ended
December 31, 1996 compared to the year ended December 31, 1995' and Note 7
to the Company's Consolidated Financial Statements.
(3) Pro forma net income is net income after adjusting for (i) a non-cash,
non-recurring charge of $52.0 million that reflects the value of shares
issued in connection with the acquisitions of minority interests in
predecessors of the Company and (ii) a non-cash, non-recurring charge of
$2.6 million that reflects the value of stock issued upon the exercise of a
warrant in connection with the Company's initial public offering. See Notes
(1) and (2) above, 'Management's Discussion and Analysis of Financial
Condition and Results of Operations-- The year ended December 31, 1997
compared to the year ended December 31, 1996' and '--The year ended December
31, 1996 compared to the year ended December 31, 1995' and Notes 1 and 7 to
the Company's Consolidated Financial Statements.
(4) Represents fees earned in connection with yellow page, recruitment and other
advertisements placed on the Internet.
(5) Operating expenses as a percentage of commissions and fees for the year
ended December 31, 1996 excludes the special compensation charge of $52.0
million.
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Statements in this Annual Report on Form 10-K concerning the Company's
business outlook or future economic performance, anticipated profitability,
gross billings, commissions and fees, expenses or other financial items and
statements concerning assumptions made or exceptions as to any future events,
conditions, performance or other matters are 'forward-looking statements' as
that term is defined under the federal securities laws. Forward-looking
statements are subject to risks, uncertainties and other factors which would
cause actual results to differ materially from those stated in such statements.
Such risks, uncertainties and factors include, but are not limited to, (i) the
uncertain acceptance of the Internet and the Company's Internet content, (ii)
that the Company has grown rapidly and there can be no assurance that the
Company will continue to be able to grow profitably or manage its growth, (iii)
risks associated with acquisitions, (iv) competition, (v) the Company's
quarterly operating results have fluctuated in the past and are expected to
fluctuate in the future, (vi) the Company's business experiences seasonality,
(vii) the loss of services of certain key individuals could have a material
adverse effect on the Company's business, financial condition or operating
results, (viii) the Company has entered into certain transactions with
affiliated parties and (ix) the control of the Company by Andrew J. McKelvey.
OVERVIEW
A substantial part of the Company's growth has been achieved through
acquisitions. For the period January 1, 1995 through December 31, 1997, the
Company has completed 40 acquisitions with estimated annual gross billings of
approximately $600 million. Given the significant number of acquisitions in each
of the last three years, the results of operations from period to period may not
necessarily be 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. Generally,
the payment terms with yellow page clients require payment to the Company prior
to the date payment is due to publishers. The payment terms with recruitment
advertising clients typically require payment when payment is due to publishers.
Historically, the Company has not experienced substantial problems with unpaid
accounts.
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. The amounts reported in the fourth quarters of 1997,
1996 and 1995 were $2.0 million, $3.5 million and $4.2 million, respectively.
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. Outside of the U.S., where, collectively, the Company
derives the majority of its recruitment advertising commissions and fees, 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, which include in Europe, fee-
based search and selection services, whereby the Company identifies and screens
candidates for hiring by clients based on criteria established by such clients.
The Company also earns fees for recruitment advertisements and related services
placed on its career oriented Web sites on the Internet. Collectively, these
services resulted in aggregate commissions and fees equal to approximately 21%
of recruitment advertising gross billings.
Primarily as a result of acquisitions made from January 1, 1995 through
December 31, 1997, the Company's commissions and fees increased from $123.9
million in 1995 to $237.4 million in 1997. The 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
16
<PAGE>
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 1995
primarily due to headcount increases as a result of acquisitions and hiring to
support gross billings growth. Salaries and related costs increased $63.0
million to $121.3 million for the year ended December 31, 1997 from $58.3
million for the year ended December 31, 1995, a 108.0% increase, supporting a
$454.2 million or a 76.2% increase in gross billings over the same period. When
measured as a percent of billings, salaries and related costs for the year ended
December 31, 1997 were 11.6%, up slightly from 9.8% for the comparable 1995
period. Salaries and related costs include total payroll and associated benefits
as well as payroll taxes, sales commissions, recruitment fees and training
costs.
Office and general expenses increased $39.3 million to $82.7 million for
the year ended December 31, 1997 from $43.4 million for the year ended December
31, 1995, a 90.4% 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. When measured as a percent of
billings, office and general costs for the year ended December 31, 1997 were
7.9%, up slightly from 7.3% for the comparable 1995 period. 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 non-compete arrangements with the principals
of acquired companies. This acquisition related amortization was $6.2 million,
$4.4 million and $3.2 million for the years ended December 31, 1997, 1996 and
1995, respectively.
Special compensation for the year ended December 31, 1996, reflects a
non-cash, non-recurring charge of approximately $52.0 million resulting from the
issuance of approximately 3.6 million shares of common stock of the Company to
stockholders of predecessor companies of the Company in exchange for their
shares in those companies, because they had received such shares for nominal or
no consideration as employees or as management of such companies and,
accordingly, were not considered to have made substantive investments for their
shares.
Net interest expense includes interest: (i) on loans made by the Company's
primary lender under its financing agreement with such lender, (ii) to certain
vendors, (iii) on capitalized lease obligations, (iv) on net amounts payable to
the holders of seller financed notes and (v) on a term loan related to the
purchase of certain transportation equipment. In addition, 1996 interest expense
includes a non-recurring charge of approximately $2.6 million to reflect, upon
exercise of the warrant issued in connection with the Company's financing
agreement, the difference between the value of the stock issued at the initial
public offering price of $14.00 per share and the value recorded for the warrant
when it was originally issued.
17
<PAGE>
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>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
GROSS BILLINGS:
Yellow page advertising.................................................. $ 457,519 $434,728 $429,176
Recruitment advertising.................................................. 573,152 308,147 166,508
Internet(1).............................................................. 19,640 6,659 392
---------- -------- --------
Total.................................................................... $1,050,311 $749,534 $596,076
---------- -------- --------
---------- -------- --------
COMMISSIONS AND FEES:
Yellow page advertising.................................................. $ 95,768 $ 94,545 $ 87,456
Recruitment advertising.................................................. 123,048 61,427 36,059
Internet(1).............................................................. 18,601 6,659 392
---------- -------- --------
Total.................................................................... $ 237,417 $162,631 $123,907
---------- -------- --------
---------- -------- --------
COMMISSIONS AND FEES AS A PERCENTAGE OF GROSS BILLINGS:
Yellow page advertising.................................................. 20.9% 21.7% 20.4%
Recruitment advertising.................................................. 21.5% 19.9% 21.7%
Internet(1).............................................................. 94.7% 100.0% 100.0%
Total.................................................................... 22.6% 21.7% 20.8%
EBITDA(2).................................................................. $ 41,001 $ 26,201 $ 24,978
Cash provided operating activities......................................... $ 15,155 $ 8,151 $ 6,706
Cash used in investing activities.......................................... $ (70,262) $(28,988) $(13,778)
Cash provided by financing activities...................................... $ 60,146 $ 19,016 $ 7,432
</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 is presented to provide additional information about the Company's
ability to meet its future debt service, capital expenditures and working
capital requirements and is one of the measures which determines the
Company's ability to borrow under its credit facility. EBITDA should not be
considered in isolation or as a substitute for operating income, cash flows
from operating activities and other income or cash flow statement data
prepared in accordance with generally accepted accounting principles or as a
measure of the Company's profitability or liquidity. EBITDA for the
indicated periods is calculated as follows (after excluding for 1996 the
non-cash, non-recurring special compensation charge of $52.0 million and the
non-cash, non-recurring interest charge of $2.6 million):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
EBITDA CALCULATION 1997 1996 1995
- -------------------------------------------------------------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Net income.................................................... $ 9,623 $ 2,383 $ 3,229
Interest, net............................................... 8,772 11,662 10,894
Income tax expense.......................................... 8,571 3,270 4,222
Depreciation and amortization............................... 14,035 8,886 6,633
-------- -------- --------
EBITDA........................................................ $ 41,001 $ 26,201 $ 24,978
-------- -------- --------
-------- -------- --------
</TABLE>
18
<PAGE>
THE YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996
Gross billings for the year ended December 31, 1997 were $1.1 billion, a
$300.8 million or 40.1% increase when compared to gross billings for the year
ended December 31, 1996. Approximately 78% of this growth was attributable to
acquisitions and approximately 22% was attributable to net new clients and
increases in spending by existing clients.
Commissions and fees increased to $237.4 million for the year ended
December 31, 1997 from $162.6 million for the year ended December 31, 1996, an
increase of 46.0%. This reflects increases, as compared to the prior year
period, in commissions and fees for (a) recruitment advertising of $61.6 million
or 100.3%, (b) yellow page advertising of $1.2 million or 1.3% and (c) Internet
of $11.9 million or 179.3%. A substantial portion of the increase in commissions
and fees derived from recruitment advertising was due to acquisitions, including
$9.2 million from Austin Knight, acquired August 1997, 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 an acquisition offset by lower publisher incentives
and the full year effect of accounts lost and resigned in 1996. Fees derived
from Internet were generated from placements of Internet advertising. The
Internet revenue increase reflects the continued customer acceptance of the
Company's Internet products both from the Company's existing clients as well as
new clients and price increases on certain products.
Salaries and related costs increased $41.0 million to $121.3 million for
the year ended December 31, 1997. As a percent of commissions and fees, salaries
and related costs increased to 51.1% for the year ended December 31, 1997 from
49.4% for the year ended December 31, 1996. This increase was primarily due to
additional staff required to service increased recruitment advertising billings,
increased sales staffing for Internet, and generally higher salary and related
costs as a percentage of commissions and fees for European operations.
Office and general expenses increased $22.6 million to $82.7 million for
the year ended December 31, 1997. As a percent of commissions and fees, office
and general expenses decreased to 34.8% for the year ended December 31, 1997
from 37.0% for the year ended December 31, 1996. This decrease was primarily due
to consolidation of offices, which slowed the growth of office related expenses,
and to increased growth in recruitment advertising commissions and fees combined
with the relatively fixed nature of some of these expenses.
Amortization of intangibles was $6.2 million for the year ended December
31, 1997 compared to $4.4 million for the year ended December 31, 1996. The
increase is due to the Company's continued growth through acquisitions. As a
percentage of commissions and fees, amortization of intangibles was 2.6% and
2.7% for the years ended December 31, 1997 and 1996, respectively.
For 1996, special compensation of $52.0 million consists of a non-cash,
non-recurring charge that reflects the value of shares issued in connection with
the acquisition of the minority interests in predecessors of the Company because
the stockholders had received such shares for nominal or no consideration and,
accordingly, were not considered to have made a substantive investment for their
shares. The value of such shares was based on the per share initial public
offering price of $14.00 for the Company's Common Stock.
After adjusting for the 1996 special compensation charge, operating income
increased $9.4 million to $27.2 million for the year ended December 31, 1997 as
compared with an adjusted operating income of $17.8 million for the year ended
December 31, 1996. The increase was primarily due to increased recruitment
advertising and Internet billings. Excluding the fees earned and direct
operating expenses related to the Company's introduction of its Internet
business (net charges of $4.1 million for 1997 and $1.9 million for 1996)
operating income increased approximately $11.7 million to $31.4 million for the
year ended December 31, 1997 and, as a percent of commissions and fees,
increased to 14.3% for the year ended December 31, 1997 from 12.6% for the year
ended December 31, 1996. The lower percent for 1996 was primarily due to costs
in connection with the consolidation of the recruitment advertising
acquisitions.
Net interest expense decreased $5.5 million to $8.8 million for the year
ended December 31, 1997 as compared to $14.3 million for the year ended December
31, 1996. This decrease in interest expense is due primarily to the repayment of
a portion of the debt with the net cash proceeds of the Company's initial public
and secondary offerings. In addition, in 1996 there was a $2.6 million non-cash,
non-recurring charge to reflect, upon
19
<PAGE>
exercise of a warrant issued in connection with the Company's financing
agreement, the value of the stock issued at the Company's initial public
offering price of $14.00 per share and the value recorded for the warrant when
it was originally issued. The Company's effective interest rate was 10.0% for
the year ended December 31, 1997 compared with 11.0% for the year ended December
31, 1996.
Taxes on income increased $5.3 million to $8.6 million for the year ended
December 31, 1997 from $3.3 million for the year ended December 31, 1996
primarily due to higher pre-tax income. The effective tax rate for the year
ended December 31, 1997 was 46.7% compared with 54.7% for the year ended
December 31, 1996, which is based on income before income taxes after pro forma
adjustments for special compensation of $52.0 million and $2.6 million in
interest expense as described above. These effective tax rates are higher than
the U.S. Federal statutory rate of 34.0% primarily due to nondeductible expenses
of approximately $2.9 million and $1.7 million and state taxes of $1.1 million
and $.4 million for 1997 and 1996, respectively. In addition, the higher 1996
tax rate, when compared with the 1997 rate, reflects the Company's inability in
1996 to offset profits at certain subsidiaries with losses incurred by others.
The net income applicable to common and Class B common stockholders was
$9.5 million for the year ended December 31, 1997, or $.38 per diluted share,
compared with net income on a pro forma basis of $2.2 million, or $.11 per
diluted share, after adjusting for the special compensation and interest charges
for the year ended December 31, 1996.
THE YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER 31, 1995
Gross billings for the year ended December 31, 1996 were $749.5 million, a
$153.5 million or 25.7% increase compared to the year ended December 31, 1995.
More than half of this growth was attributable to acquisitions.
Commissions and fees increased to $162.6 million for the year ended
December 31, 1996 from $123.9 million for the year ended December 31, 1995, an
increase of 31.3%. This increase was due to increases, as compared to the prior
year period, of $25.4 million or 70.4% in commissions and fees derived from
recruitment advertising, $7.1 million or 8.1% in commissions and fees derived
from yellow page advertising and a $6.3 million increase in fees derived from
Internet business. A substantial portion of the increase in commissions and fees
derived from recruitment advertising was due to acquisitions, including $11.2
million from Neville Jeffress, acquired July 1996, 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. Fees derived from Internet
were 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 $22.0 million to $80.3 million for the
year ended December 31, 1996. As a percent of commissions and fees, salaries and
related costs increased to 49.4% for the year ended December 31, 1996 from 47.1%
for the year ended December 31, 1995. This increase was primarily due to
additional staff required to service increased gross billings, a higher
percentage for costs related to Neville Jeffress and severance and temporary
help expenses related to the consolidation of the recruitment advertising
acquisitions. Internet staffing also increased by $2.8 million to $3.0 million,
which is 45.1% of Internet commissions and fees.
Office and general expenses increased $16.7 million to $60.1 million for
the year ended December 31, 1996. As a percent of commissions and fees, office
and general expenses increased to 37.0% for the year ended December 31, 1996
from 35.1% for the year ended December 31, 1995. This increase was primarily due
to increased advertising of approximately $1.9 million, primarily related to the
Company's introduction of The Monster Board(Registered), general expenses
related to higher gross billings, professional consulting fees for the
establishment of Internet services and airplane related travel costs.
Amortization of intangibles was $4.4 million for the year ended December
31, 1996 compared to $3.2 million for the year ended December 31, 1995. The
increase was due to the Company's continued growth through acquisitions. As a
percentage of commissions and fees, amortization of intangibles was 2.7% and
2.6% for the years ended December 31, 1996 and 1995, respectively.
20
<PAGE>
Special compensation of $52.0 million consists of a non-cash, non-recurring
charge that reflects the value of shares issued in connection with the
acquisition of the minority interests in predecessors of the Company because the
stockholders had received such shares for nominal or no consideration and,
accordingly, were not considered to have made a substantive investment for their
shares. The value of such shares was based on the per share initial public
offering price of $14.00 for the Company's Common Stock.
After adjusting for the special compensation charge, operating income
declined $1.1 million to $17.8 million for the year ended December 31, 1996 as
compared with operating income of $18.9 million for the year ended December 31,
1995. The decline was primarily due to increased advertising expenses of $2.5
million for the Company's Internet business. Excluding the fees earned and
direct operating expenses related to the Company's introduction of its Internet
business (net charges of $1.9 million for 1996 and $0.4 million for 1995)
operating income increased approximately $0.4 million to $19.7 million for the
year ended December 31, 1996 but, as a percent of commissions and fees, declined
to 12.6% for the year ended December 31, 1996 from 15.6% for the year ended
December 31, 1995. This decline in operating income as a percent of commissions
and fees was primarily due to costs in connection with the consolidation of the
recruitment advertising acquisitions.
Net interest expense increased $3.4 million to $14.3 million for the year
ended December 31, 1996 as compared to $10.9 million for the year ended December
31, 1995. This increase in interest expense is due primarily to (i) a $2.6
million non-cash, non-recurring charge to reflect, upon exercise of a warrant
issued in connection with the Company's financing agreement, the value of the
stock issued at the Company's per share initial public offering price of $14.00
per share and the value recorded for the warrant when it was originally issued,
(ii) higher debt balances for working capital needs and (iii) acquisition
financing, partially offset by lower borrowing costs and the repayment of a
portion of the debt with the net cash proceeds of the Company's initial public
offering. The Company's effective interest rate was 11.0% for the year ended
December 31, 1996 compared with 11.1% for the year ended December 31, 1995.
Taxes on income decreased $0.9 million to $3.3 million for the year ended
December 31, 1996 from $4.2 million for the year ended December 31, 1995
primarily due to lower pre-tax income. The effective tax rate for the year ended
December 31, 1996 on income before income taxes after pro forma adjustments for
special compensation of $52.0 million and $2.6 million in interest expense
described above of 54.7% was higher than the U.S. Federal statutory rate of
34.0% primarily due to nondeductible expenses of approximately $1.7 million and
approximately $.5 million in interest computed on a receivable from the
Company's principal stockholder. The effective tax rate for the year ended
December 31, 1995 was 51.7%, lower than the 1996 rate due to lower nondeductible
expenses for 1995.
On a pro forma basis, after adjusting for the special compensation charge
and the special interest charge, the net income applicable to common and Class B
common stockholders was $2.2 million for the year ended December 31, 1996
compared with net income of $3.0 million for the year ended December 31, 1995,
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 operating activities, equity offerings in
1997 and 1996, long-term borrowings in 1997 and 1996, capital leases and vendor
financing in 1996 and 1995. In December 1996, the Company completed the initial
public offering of an aggregate of 4,147,408 shares of Common Stock at a
purchase price of $14.00 per share in an underwritten public offering managed by
Morgan Stanley & Co. Incorporated, Donaldson, Lufkin & Jenrette Securities
Corporation and Ladenburg Thalmann & Co. Inc. In the initial public offering,
certain stockholders sold an additional aggregate of 652,592 shares of Common
Stock. The net proceeds to the Company from the initial public offering of $50.8
million were used to repay debt and, in early 1997, to repay accounts payable
and to redeem preferred stock. In September 1997, the Company completed the
secondary public offering of an aggregate of 2,400,000 shares of Common Stock at
a purchase price of $23.00 per share in an underwritten public offering managed
by Morgan Stanley & Co. Incorporated,
21
<PAGE>
Goldman, Sachs & Co., BT Alex. Brown Incorporated, Montgomery Securities and
Ladenburg Thalmann & Co. Inc. In addition, certain stockholders sold an
aggregate of 1,600,000 shares of Common Stock in such offering. The net proceeds
to the Company from this offering of $63.4 million, including $12.2 million paid
to the Company by certain stockholders, were used to repay debt, including debt
incurred to fund the purchase of Austin Knight.
Net cash provided by operating activities for the years ended December 31,
1997, 1996 and 1995 was $15.2 million, $8.2 million and $6.7 million,
respectively. The increase in cash from operating activities for 1997 over 1996
was primarily due to increased net income partially offset by higher payments of
accounts payable, including amounts to substantially repay vendor financed
payables. The increase in cash from operating activities for 1996 over 1995 was
primarily due to improved accounts receivable collection partially offset by
greater payments of accounts payable and accrued liabilities.
Net cash used in investing activities for the years ended December 31,
1997, 1996 and 1995 was $70.3 million, $29.0 million and $13.8 million,
respectively. During 1997, with funds received from their sale of shares
included with the Company's secondary public offering, the Principal Stockholder
and certain stockholders repaid $12.2 million to the Company. Payments for
purchases of business acquisitions were $63.4 million in 1997, including $47.2
million for Austin Knight, $23.8 million in 1996 and $11.3 million in 1995.
Capital expenditures, primarily for computer equipment and furniture and
fixtures, were $11.5 million, $6.9 million and $5.0 million for the years ended
December 31, 1997, 1996 and 1995, respectively. In addition, in 1997, the
Company acquired certain transportation equipment and made capital improvements
for a total of $6.8 million, replacing the transportation equipment sold during
1996 for $6.1 million, and simultaneously entered into a $7.8 million financing
agreement to fund the purchase and provide additional operating funds. In
December 1996, the Company sold certain transportation equipment for $6.1
million receiving a note for $2.7 million and retained $1.2 million in cash,
after payment of related debt. The Company estimates that its expenditures for
computer equipment and software, furniture and fixtures and leasehold
improvements will be approximately $22.0 million for 1998.
EBITDA increased $14.8 million to $41.0 million for the year ended December
31, 1997 from $26.2 million for the year December 31, 1996. Excluding fees
earned and direct operating expenses related to the Company's introduction of
its Internet business, EBITDA increased $16.3 million to $44.0 million or 59.0%
for the year ended December 31, 1997 compared to the year ended December 31,
1996, and as a percent of commissions and fees increased to 20.1% for the year
ended December 31, 1997 as compared to 17.7% for the year ended December 31,
1996 due to a higher operating profit. For the year ended December 31, 1996,
EBITDA increased $1.2 million to $26.2 million or 4.9% as compared to the year
ended December 31, 1995. As a percent of commissions and fees, EBITDA declined
to 16.1% for the year ended December 31, 1996 from 20.2% for the year ended
December 31, 1995 primarily due to a higher percentage of costs related to
Neville Jeffress and severance and temporary help expenses related to
consolidation of the recruitment advertising acquisitions.
The Company's financing activities include equity offerings, borrowings and
repayments under its financing agreement and payments on (i) installment notes,
principally to finance acquisitions, and (ii) capital leases. In the fourth
quarter of 1996, the Company completed its initial public offering of 4,147,408
shares of Common Stock for net proceeds to the Company of $50.8 million and in
the third quarter of 1997, the Company completed its secondary public offering
of 2,400,000 shares of Common Stock for net proceeds to the Company (excluding
the repayment of $12.2 million to the Company by certain stockholders) of $51.2
million. With a portion of the proceeds received from its initial public
offering, the Company, in January 1997, redeemed all of the shares of the
cumulative preferred stock issued by a subsidiary, reported as a minority
interest, and its previously issued preferred stock for approximately $3.1
million and $2.1 million, respectively. Such redemptions included approximately
$100,000 each of premiums. The Company's financing activities provided net cash
of $60.1 million, $19.0 million and $7.4 million in 1997, 1996 and 1995,
respectively. In November, 1997 the Company amended its financing agreement with
BNY Financial Corporation to provide for borrowings up to $175 million under a
revolving credit facility. Such facility has been used to finance the Company's
acquisitions and for working capital requirements. As of December 31, 1997,
there was $95.8 million outstanding under such facility. As of February 28,
1998, there was approximately $69 million available under such facility. The
Company believes it will be able to fund its short-term cash needs through funds
from operations, its credit facilities in the United States, the United Kingdom,
Canada and Australia and, to a lesser extent, equipment
22
<PAGE>
leases. The financing agreement with BNY Financial Corporation terminates on
June 27, 2001 and currently bears interest at 7.5% per annum. The interest rate
of the financing agreement is determined pursuant to a formula whereby the
interest rate, at the Company's option, is either (i) the prime rate less 1% or
(ii) the Federal Funds rate less 1/2 of 1% or (iii) LIBOR plus 1 1/2%. 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 contains criteria on the maintenance of
certain financial statement amounts and ratios.
Part of the Company's acquisition strategy is to pay, over time, a portion
of the purchase price of certain acquisitions through seller financed notes.
Accordingly, such notes are included in long term debt, are generally payable
over five years and totaled $9.5 million at December 31, 1997.
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 agreements and the net proceeds of its recent
secondary public offering and access to public equity and debt markets, will
provide it with liquidity to meet its current forseeable cash needs for at least
the next year. However, if the Company determines that conditions are favorable,
the Company would consider additional corporate finance transactions.
YEAR 2000 ISSUE
Many exisiting computer programs use only two digits to identify a year in
the date field. These programs do not consider the impact of the upcoming change
in the century. If not corrected, many computer applications could fail or
create erroneous results by the Year 2000. Internally, the Company has assessed
its Year 2000 computer issues. The Company estimates that it will have to spend
approximately $1 million during 1998 and 1999 to make its major U.S. and
Canadian computer systems, and some non-critical programs, Year 2000 compliant.
The Company will continue to test applications and believes that solutions will
be implemented timely. The Company's foreign operations have also identified
their critical computer systems. As the Company expands its operations in Europe
through acquisitions, it is consolidating back office functions and
standardizing computer systems. As part of this process the Company will upgrade
to a Year 2000 compliant computer system for its foreign subsidiaries.
FLUCTUATIONS OF QUARTERLY RESULTS
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 factor. See Note 2 to the Company's
Consolidated Financial Statements.
23
<PAGE>
The following table sets forth summary quarterly unaudited financial
information for 1997 and 1996, excluding nonrecurring special compensation and
interest charges for 1996 (in millions, except share and per share amounts):
<TABLE>
<CAPTION>
1997 QUARTERS
--------------------------------------------------
MARCH JUNE SEPTEMBER DECEMBER
31, 30, 30, 31,
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Commissions and fees:
Yellow page advertising...................................... $ 19.7 $ 23.0 $ 28.6 $ 24.4
Recruitment advertising...................................... 22.5 27.1 33.4 40.0
Internet..................................................... 3.8 4.5 4.7 5.7
-------- ------- ------------ -----------
Total commissions and fees..................................... $ 46.0 $ 54.6 $ 66.7 $ 70.1
-------- ------- ------------ -----------
-------- ------- ------------ -----------
Operating income............................................... $ 5.0 $ 6.0 $ 10.3 $ 5.9
Net income applicable to common and Class B common
stockholders................................................. $ 1.5 $ 1.9 $ 4.1 $ 2.1
Net income per common and Class B common share:
Basic........................................................ $ .06 $ .08 $ .17 $ .08
Diluted...................................................... $ .06 $ .08 $ .17 $ .08
Weighted average shares outstanding (in thousands):
Basic........................................................ 23,467 23,490 23,978 26,061
Diluted...................................................... 23,789 23,995 24,533 26,571
</TABLE>
<TABLE>
<CAPTION>
1996 QUARTERS
--------------------------------------------------
MARCH JUNE SEPTEMBER DECEMBER
31, 30, 30, 31,
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Commissions and fees:
Yellow page advertising...................................... $ 20.4 $ 23.0 $ 27.8 $ 23.3
Recruitment advertising...................................... 12.7 12.2 18.5 18.0
Internet..................................................... .9 1.5 1.9 2.4
-------- ------- ------------ -----------
Total commissions and fees..................................... $ 34.0 $ 36.7 $ 48.2 $ 43.7
-------- ------- ------------ -----------
-------- ------- ------------ -----------
Operating income (loss)........................................ $ 3.7 $ 3.1 $ 3.3 $ (44.3)
Net income (loss) applicable to common and Class B common
stockholders................................................. $ (0.1 ) $ 0.3 $ (0.9) $ (51.8)
Net income (loss) per common and Class B common share:
Basic........................................................ $ (.01 ) $ .02 $ (.04) $ (2.61)
Diluted...................................................... $ (.01 ) $ .02 $ (.04) $ (2.61)
Weighted average shares outstanding (in thousands):
Basic........................................................ 19,199 19,169 18,973 19,853
Diluted...................................................... 19,199 19,617 18,973 19,853
Pro forma operating income..................................... $ 3.9 $ 7.1
Pro forma net income (loss) applicable to common and Class B
common stockholders.......................................... $ (0.1) $ 2.3
Pro forma net income (loss) per common and Class B common
share:
Basic........................................................ $ (.01) $ .11
Diluted...................................................... $ (.01) $ .11
Weighted average shares outstanding (in thousands):
Basic........................................................ 18,973 19,853
Diluted...................................................... 18,973 20,241
</TABLE>
Earnings per share calculations for each quarter include the weighted
average effect for the quarter; therefore, the sum of the quarters may not equal
the full year earnings per share amount, which reflects the
24
<PAGE>
weighted average effect on an annual basis. In addition, diluted earnings per
share calculations for each quarter include the effect of stock options and
warrants, when dilutive to the quarter.
During the three months ended December 31, 1996 the Company received one
time fees of $150, $175, and $220 for a research study, executive search
services and for assisting in the procurement of bank financing, respectively.
The research study fee is included as a reduction of Office and General
Expenses, the executive search fee is included in Commissions and Fees and the
loan procurement fee is included in Other Income in the accompanying Statement
of Operations for the year ended December 31, 1996.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of TMP Worldwide Inc. and
Subsidiaries are filed as part of this report.
TMP WORLDWIDE INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS...................................................... 26
CONSOLIDATED FINANCIAL STATEMENTS:
Balance sheets as of December 31, 1997 and 1996....................................................... 27
Statements of operations for the years ended December 31, 1997, 1996 and 1995......................... 28
Statements of stockholders' equity (deficit) for the years ended December 31, 1997, 1996 and 1995..... 29
Statements of cash flows for the years ended December 31, 1997, 1996 and 1995......................... 30
Notes to consolidated financial statements............................................................ 31-47
SCHEDULE II--Valuation and qualifying accounts for the years ended December 31, 1997, 1996 and 1995..... 53
</TABLE>
All other schedules are omitted because the required information is either
inapplicable or is included in the consolidated financial statements or the
notes thereto.
25
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
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, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for each of the three years in the period ended December 31, 1997. 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, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
New York, New York
March 20, 1998
26
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................... $ 5,937 $ 898
Accounts receivable, net................................................................ 255,527 191,728
Work-in-process......................................................................... 15,554 14,542
Prepaid and other....................................................................... 11,345 5,482
-------- --------
Total current assets................................................................. 288,363 212,650
Receivable from Principal Stockholder, net................................................ -- 11,413
Property and equipment, net............................................................... 37,760 20,562
Deferred income taxes..................................................................... 4,922 9,325
Intangibles, net.......................................................................... 159,465 73,975
Other assets.............................................................................. 4,696 3,828
-------- --------
$495,206 $331,753
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................................ $203,172 $182,129
Accrued expenses and other current liabilities.......................................... 35,300 20,065
Accrued restructuring costs............................................................. 16,801 --
Deferred revenue........................................................................ 7,992 3,398
Deferred income taxes................................................................... 10,782 9,818
Current portion of long-term debt....................................................... 8,449 9,167
-------- --------
Total current liabilities............................................................ 282,496 224,577
Long-term debt, less current portion...................................................... 115,852 70,799
-------- --------
Total liabilities.................................................................... 398,348 295,376
-------- --------
Minority interests........................................................................ -- 3,082
-------- --------
Redeemable preferred stock................................................................ -- 2,000
-------- --------
Commitments and contingencies.............................................................
Stockholders' equity:
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--12,495,626 and 8,605,436, shares, respectively.......................... 12 8
Class B common stock, $.001 par value, authorized 39,000,000 shares; issued and
outstanding--13,587,541 and 14,787,541 shares, respectively.......................... 14 15
Additional paid-in capital.............................................................. 163,753 106,803
Foreign currency translation adjustment................................................. (510) 380
Deficit................................................................................. (66,411) (75,911)
-------- --------
Total stockholders' equity........................................................... 96,858 31,295
-------- --------
$495,206 $331,753
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Commissions and fees................................................. $ 237,417 $ 162,631 $ 123,907
----------- ----------- -----------
Operating expenses:
Salaries and related costs......................................... 121,313 80,291 58,329
Office and general................................................. 82,712 60,101 43,432
Amortization of intangibles........................................ 6,160 4,440 3,237
Special compensation............................................... -- 52,019 --
----------- ----------- -----------
Total operating expenses......................................... 210,185 196,851 104,998
----------- ----------- -----------
Operating income (loss).......................................... 27,232 (34,220) 18,909
----------- ----------- -----------
Other income (expense):
Interest expense................................................... (10,978) (14,598) (11,249)
Interest income.................................................... 2,206 333 355
Other, net......................................................... (90) (164) 150
----------- ----------- -----------
(8,862) (14,429) (10,744)
----------- ----------- -----------
Income (loss) before provision for income taxes, minority interests
and equity in earnings (losses) of affiliates...................... 18,370 (48,649) 8,165
Provision for income taxes........................................... 8,571 3,270 4,222
----------- ----------- -----------
Income (loss) before minority interests and equity in earnings
(losses) of affiliates............................................. 9,799 (51,919) 3,943
Minority interests................................................... 143 434 435
Equity in earnings (losses) of affiliates............................ (33) 114 (279)
----------- ----------- -----------
Net income (loss).................................................... 9,623 (52,239) 3,229
Preferred stock dividends............................................ (123) (210) (210)
----------- ----------- -----------
Net income (loss) applicable to common and Class B common
stockholders....................................................... $ 9,500 $ (52,449) $ 3,019
----------- ----------- -----------
----------- ----------- -----------
Net income (loss) per common and Class B common share:
Basic.............................................................. $ .39 $ (2.72) $ .16
----------- ----------- -----------
----------- ----------- -----------
Diluted............................................................ $ .38 $ (2.72) $ .15
----------- ----------- -----------
----------- ----------- -----------
Weighted average shares outstanding:
Basic.............................................................. 24,243 19,299 19,064
----------- ----------- -----------
----------- ----------- -----------
Diluted............................................................ 24,735 19,299 19,355
----------- ----------- -----------
----------- ----------- -----------
Pro forma:
Historical net loss applicable to common and Class B common
stockholders..................................................... $ (52,449)
Pro forma adjustment for special compensation...................... 52,019
Pro forma adjustment for interest.................................. 2,603
-----------
Pro forma net income applicable to common and Class B common
stockholders..................................................... $ 2,173
-----------
-----------
Pro forma net income per common and Class B common share:
Basic.............................................................. $ .11
-----------
-----------
Diluted............................................................ $ .11
-----------
-----------
Weighted average shares outstanding:
Basic.............................................................. 19,299
-----------
-----------
Diluted............................................................ 19,732
-----------
-----------
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CLASS B
COMMON STOCK, COMMON STOCK,
$.001 PAR VALUE $.001 PAR VALUE ADDITIONAL
------------------- ------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995......................................... 4,276,869 $ 4 14,787,541 $ 15 $ 655
Foreign currency translation adjustment........................ -- -- -- -- --
Dividends on preferred stock................................... -- -- -- -- --
Net income..................................................... -- -- -- -- --
---------- ------ ---------- ------ ----------
Balance, December 31, 1995....................................... 4,276,869 4 14,787,541 15 655
Stock repurchase agreements.................................... -- -- -- -- 1,172
Issuance of common stock for purchase of minority interest in
subsidiary................................................... 159,231 -- -- -- 1,055
Issuance of common stock as compensation....................... 142,740 -- -- -- 20
Repurchase and cancellation of common stock.................... (481,284) -- -- -- (675)
Issuance of common stock for purchase of minority interest
in subsidiary................................................ 46,350 -- -- -- 672
Issuance of common stock....................................... 4,147,408 4 -- -- 50,779
Issuance of common stock in connection with the exercise of
options...................................................... 85,354 -- -- -- 347
Issuance of common stock in connection with exercise of
warrant...................................................... 228,768 -- -- -- 2,603
Foreign currency translation adjustment........................ -- -- -- -- --
Dividends on preferred stock................................... -- -- -- -- --
Special compensation........................................... -- -- -- -- 50,175
Net loss....................................................... -- -- -- -- --
---------- ------ ---------- ------ ----------
Balance, December 31, 1996....................................... 8,605,436 8 14,787,541 15 106,803
Issuance of common stock in connection with the exercise of
options...................................................... 49,766 -- -- -- 643
Tax benefit of stock options exercised......................... -- -- -- -- 175
Capital contribution from Principal Stockholder................ -- -- -- -- 275
Issuance of common stock in connection with acquisitions....... 135,028 1 -- -- 3,136
Issuance of common stock for purchase of an equity interest in
a subsidiary................................................. 61,848 -- -- -- 1,000
Conversion of shares........................................... 1,200,000 1 (1,200,000) (1) --
Issuance of common stock....................................... 2,400,000 2 -- -- 51,166
Issuance of common stock for matching contribution to 401(k)
plan......................................................... 43,548 -- -- -- 555
Foreign currency translation adjustment........................ -- -- -- -- --
Dividend and redemption premium on preferred stock............. -- -- -- -- --
Net income..................................................... -- -- -- -- --
---------- ------ ---------- ------ ----------
Balance, December 31, 1997....................................... 12,495,626 $ 12 13,587,541 $ 14 $163,753
---------- ------ ---------- ------ ----------
---------- ------ ---------- ------ ----------
<CAPTION>
FOREIGN CURRENCY TOTAL
TRANSLATION STOCKHOLDERS'
ADJUSTMENT DEFICIT EQUITY (DEFICIT)
---------------- -------- ----------------
<S> <C> <C> <C>
Balance, January 1, 1995......................................... $ 2 $(24,996) $(24,320)
Foreign currency translation adjustment........................ (27) -- (27)
Dividends on preferred stock................................... -- (210) (210)
Net income..................................................... -- 3,229 3,229
------ -------- ----------------
Balance, December 31, 1995....................................... (25) (21,977) (21,328)
Stock repurchase agreements.................................... -- -- 1,172
Issuance of common stock for purchase of minority interest in
subsidiary................................................... -- -- 1,055
Issuance of common stock as compensation....................... -- -- 20
Repurchase and cancellation of common stock.................... -- (1,485) (2,160)
Issuance of common stock for purchase of minority interest
in subsidiary................................................ -- -- 672
Issuance of common stock....................................... -- -- 50,783
Issuance of common stock in connection with the exercise of
options...................................................... -- -- 347
Issuance of common stock in connection with exercise of
warrant...................................................... -- -- 2,603
Foreign currency translation adjustment........................ 405 -- 405
Dividends on preferred stock................................... -- (210) (210)
Special compensation........................................... -- -- 50,175
Net loss....................................................... -- (52,239) (52,239)
------ -------- ----------------
Balance, December 31, 1996....................................... 380 (75,911) 31,295
Issuance of common stock in connection with the exercise of
options...................................................... -- -- 643
Tax benefit of stock options exercised......................... -- -- 175
Capital contribution from Principal Stockholder................ -- -- 275
Issuance of common stock in connection with acquisitions....... -- -- 3,137
Issuance of common stock for purchase of an equity interest in
a subsidiary................................................. -- -- 1,000
Conversion of shares........................................... -- -- --
Issuance of common stock....................................... -- -- 51,168
Issuance of common stock for matching contribution to 401(k)
plan......................................................... -- -- 555
Foreign currency translation adjustment........................ (890) -- (890)
Dividend and redemption premium on preferred stock............. -- (123) (123)
Net income..................................................... -- 9,623 9,623
------ -------- ----------------
Balance, December 31, 1997....................................... $ (510) $(66,411) $ 96,858
------ -------- ----------------
------ -------- ----------------
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)..................................................... $ 9,623 $ (52,239) $ 3,229
--------- --------- ---------
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization of property and equipment............ 7,875 4,446 3,396
Amortization of intangibles........................................ 6,160 4,440 3,237
Provision for doubtful accounts.................................... 3,580 3,131 2,850
Special compensation............................................... -- 52,019 --
Interest expense for shares issued upon exercise of warrant........ -- 2,603 --
Provision for deferred income taxes................................ 5,155 1,573 3,005
Minority interests................................................. 143 434 435
Other.............................................................. (90) 100 522
Changes in assets and liabilities, net of effects from purchases of
businesses:
Increase in accounts receivable, net............................... (2,537) (5,048) (30,256)
Increase in work-in-process........................................ (57) (36) (1,510)
Increase in prepaid and other...................................... (1,115) (909) (425)
(Increase) decrease in other assets................................ (868) (161) 430
Increase (decrease) in accounts payable, accrued expenses and other
current liabilities.............................................. (12,714) (2,202) 21,793
--------- --------- ---------
Total adjustments................................................ 5,532 60,390 3,477
--------- --------- ---------
Net cash provided by operating activities........................ 15,155 8,151 6,706
--------- --------- ---------
Cash flows from investing activities:
Payments pursuant to notes and advances to Principal Stockholder...... (3,064) (12,878) (613)
Repayments from Principal Stockholder................................. 14,477 7,994 2,271
Capital expenditures.................................................. (18,276) (6,857) (4,954)
Payments for purchases of businesses, net of cash acquired............ (63,399) (23,755) (11,324)
Proceeds from sale of assets.......................................... -- 6,115 7
Repayments from affiliates............................................ -- 393 835
--------- --------- ---------
Net cash used in investing activities............................ (70,262) (28,988) (13,778)
--------- --------- ---------
Cash flows from financing activities:
Payments on capitalized leases........................................ (2,594) (2,386) (1,064)
Capital contribution from Principal Stockholder....................... 275 -- --
Borrowings under line of credit and proceeds from issuance of
long-term debt..................................................... 702,747 471,092 540,333
Repayments under line of credit and principal payments on long-term
debt............................................................... (686,086) (497,646) (531,144)
Distribution to minority interests.................................... -- (457) (483)
Net proceeds from stock issuance...................................... 51,165 50,783 --
Repurchase of common stock............................................ -- (2,160) --
Redemption of minority interest (including premium)................... (3,133) -- --
Redemption of preferred stock (including premium)..................... (2,105) -- --
Dividends on preferred stock.......................................... (123) (210) (210)
--------- --------- ---------
Net cash provided by financing activities........................ 60,146 19,016 7,432
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents.................... 5,039 (1,821) 360
Cash and cash equivalents, beginning of year............................ 898 2,719 2,359
--------- --------- ---------
Cash and cash equivalents, end of year.................................. $ 5,937 $ 898 $ 2,719
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
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'). Immediately prior to the reorganization,
the Principal Stockholder owned 100% of the common stock of MEI (which owned
approximately 86% of the common stock of Old TMP) and approximately 33% of the
common stock of WCI. In addition to his approximately 33% ownership of WCI, the
Principal Stockholder had voting proxy on the remaining outstanding shares of
WCI.
WCI was organized in 1993 to sell recruitment advertising. On December 9,
1996, Old TMP, which sells yellow page advertising, merged into MEI. Thereafter,
WCI merged into MEI, MEI then merged into Telephone Marketing Programs
Incorporated and MEI acquired the outstanding minority interest of a subsidiary
(the 'Mergers'). Concurrent with the Mergers, Telephone Marketing Programs
Incorporated changed its name to TMP Worldwide Inc.
Due to the control of these companies by the Principal Stockholder, the
companies have been consolidated on a retroactive basis in a manner similar to a
pooling-of-interests, the interests previously owned by the Principal
Stockholder are carried at predecessor basis, and in December 1996 (i) goodwill
in the amount of approximately $1.6 million was recorded for the issuance of
271,278 shares of common stock of the Company to Old TMP stockholders who had
been previously issued shares of Old TMP in exchange for their minority
interests in certain operating subsidiaries in which they were original owners
and, accordingly, were considered to have made a substantive investment, and is
based on an initial public offering price of $14.00 per share, less
approximately $2.2 million previously recorded on the issuance of these shares,
and (ii) special compensation in the amount of approximately $52.0 million was
recorded for the issuance of 3,584,790 shares of common stock of the Company to
Old TMP, WCI and the MEI subsidiary stockholders in exchange for their shares in
those companies which they had received for nominal or no consideration, as
employees or as management of businesses financed substantially by the Principal
Stockholder and, accordingly, were not considered to have made substantive
investments for their minority shares, and is based on an initial public
offering price of $14.00 per share. The minority stockholders of Old TMP had
received compensation in lieu of their share of earnings of Old TMP in exchange
for waiving their rights to such earnings, and WCI and the MEI subsidiary had
cumulative losses. Accordingly, no amounts were attributable to these minority
interests in the accompanying consolidated financial statements.
The accompanying consolidated financial statements reflect the shares of
the Company that were 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.
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.
31
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
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.................................................................. 8-32
Furniture and equipment..................................................................... 4-8
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 three to thirty years on a straight-line basis.
Long-Lived Assets
Long-lived assets, such as ongoing client relationships, goodwill and
property and equipment, are evaluated for impairment when events or changes in
circumstances indicate that the carrying amount 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. No impairment losses have been incurred
through December 31, 1997.
Foreign Currency Translation and Transactions
The financial position and results of operations of the Company's foreign
subsidiaries 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'
equity (deficit). Gains and losses resulting from foreign currency transactions
are included in other income (expense).
Revenue Recognition and Work-In-Process
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.
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
32
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
page advertising results are also affected by commissions earned for volume
placements for the year, which are typically reported in the fourth quarter.
Amounts reported in the three months ended December 31, 1997, 1996 and 1995 for
commissions on volume placements were $2.0 million, $3.5 million and $4.2
million, respectively. 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.
Direct operating costs 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, Europe and the Pacific Rim. 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, other current assets, accounts
payable 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 1996 carrying
amounts for minority interests and redeemable preferred stock approximated fair
value based on appraisals. (See Notes 9 and 10.) The fair value of the
receivable from the Principal Stockholder could not be determined. (See Note 14
(B).)
Stock-Based Compensation
The Company accounts for its stock option awards under the intrinsic value
based method of accounting prescribed by Accounting Principles Board Opinion No.
25, 'Accounting for Stock Issued to Employees.' Under the intrinsic value based
method, compensation cost is the excess, if any, of the quoted market price of
the stock at grant date or other measurement date over the amount an employee
must pay to acquire the stock. The Company makes pro forma disclosures of net
income and earnings per share as if the fair value based method of accounting
had been applied as required by Statement of Financial Accounting Standards
('SFAS') 123, 'Accounting for Stock-Based Compensation.'
33
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Earnings Per Share
During 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, 'Earnings per Share,' which provides for
the calculation of 'basic' and 'diluted' earnings per share. This Statement is
effective for financial statements issued for periods ending after December 15,
1997. Basic earnings per share includes no dilution and is computed by dividing
income available to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per share reflect, in
periods in which they have a dilutive effect, the effect of common shares
issuable upon exercise of stock options and warrants. As required by the
Statement all periods presented have been restated to comply with the provisions
of SFAS No. 128.
A reconciliation of shares used in calculating basic and diluted earnings
per common and Class B common share follows (in thousands):
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------- ---------
<S> <C> <C>
December 31, 1997:
Basic......................................................................... 24,243
Effect of assumed conversion of stock options................................. 492
----------
Diluted....................................................................... 24,735
----------
----------
December 31, 1996:
Basic......................................................................... 19,299 19,299
Effect of assumed conversion of stock options................................. -- 216
Effect of assumed conversion of warrant....................................... -- 217
---------- ---------
Diluted....................................................................... 19,299 19,732
---------- ---------
---------- ---------
December 31, 1995:
Basic......................................................................... 19,064
Effect of assumed conversion of stock options................................. 62
Effect of assumed conversion of warrant....................................... 229
----------
Diluted....................................................................... 19,355
----------
----------
</TABLE>
Statements of Cash Flows
For purposes of the statement 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 cash equivalents. The Company has
determined that the effect of foreign exchange rate changes on cash flows is not
material.
Effect of Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 ('SFAS No. 130'), Reporting Comprehensive
Income, which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity except those resulting from investments by
owners and distributions to owners. Among other disclosures, SFAS No. 130
requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. Results of operations and financial position will be
unaffected by implementation of this new standard.
34
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132 ('SFAS No. 132'). Employers'
Disclosures about Pensions and Other Postretirement Benefits, which standardizes
the disclosure requirements for pensions and other postretirement benefits. The
adoption of SFAS No. 132 in 1998 is not expected to materially impact the
Company's current discloures.
NOTE 3--ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Trade........................................................................... $250,785 $185,594
Earned commissions(a)........................................................... 14,491 13,166
-------- --------
265,276 198,760
Less: Allowance for doubtful accounts........................................... 9,749 7,032
-------- --------
Accounts receivable, net...................................................... $255,527 $191,728
-------- --------
-------- --------
</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, 1997 and 1996 are recorded
as accounts receivable of $75,058 and $70,594, respectively, and the related
advertising costs are recorded as accounts payable of $60,567 and $57,428,
respectively.
NOTE 4--PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Buildings and improvements...................................................... $ 916 $ 944
Furniture and equipment......................................................... 57,696 41,656
Leasehold improvements.......................................................... 5,467 3,728
Transportation equipment........................................................ 9,094 301
-------- --------
73,173 46,629
Less: Accumulated depreciation and amortization................................. 35,413 26,067
-------- --------
Property and equipment, net................................................... $ 37,760 $ 20,562
-------- --------
-------- --------
</TABLE>
Furniture and equipment includes equipment under capital leases at December
31, 1997 and 1996 with a cost of $12,514 and $6,074, respectively, and
accumulated amortization of $5,128 and $2,531, respectively.
During 1997, the Company acquired certain transportation equipment and made
capital improvements thereto for a total of $6,800 and simultaneously entered
into a $7,800 financing agreement (see Note 8) to fund the purchase and provide
additional funds.
NOTE 5--BUSINESS ACQUISITIONS
The Company has acquired 40 businesses (primarily recruitment advertising
businesses) between January 1, 1995 and December 31, 1997 including, on August
26, 1997, all of the outstanding stock of Austin Knight Limited and subsidiaries
('Austin Knight') for approximately $47,200 net of approximately $11,500 of cash
acquired relating to the sale, in July 1997, of real property by Austin Knight
and on July 2, 1996, all of the outstanding shares of Neville Jeffress Australia
Pty Limited ('Neville Jeffress'). Austin Knight had
35
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 5--BUSINESS ACQUISITIONS--(CONTINUED)
commissions and fees of approximately $47,600 for the year ended September 30,
1996, and Neville Jeffress had commissions and fees of approximately $24,000 for
the year ended June 30, 1996. The total amount of cash paid and promissory notes
and Common Stock of the Company issued for these acquisitions was approximately
$74,500, $25,400 and $26,700 for 1997, 1996 and 1995, respectively. In 1997, the
shares of Common Stock issued by the Company in connection with certain of the
above mentioned acquisitions was 135,028. The 1997 amount is net of
approximately $11,500 of cash acquired with Austin Knight. These acquisitions
have been accounted for under the purchase method of accounting and accordingly,
operations of these businesses have been included in the consolidated financial
statements from their acquisition dates.
In connection with the above described acquisitions, the Company assumed
liabilities which were recorded as part of the purchase price and which include
costs for restructuring of the acquired businesses. The present value of such
costs relate primarily to assumed contractual obligations on leased facilities
that will be closed ($11,170), leases for which the contracted payments exceed
current market costs ($783) and relocation and other employee costs associated
with restructurings ($4,848). Of such costs, $833 were charged against the
reserve during 1997.
The summarized unaudited pro forma results of operations set forth below
for the years ended December 31, 1997 and 1996 assume the acquisitions in 1997
and 1996 occurred as of the beginning of the year of acquisition and the
beginning of the preceding year.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1997 1996
--------- --------
<S> <C> <C>
Commissions and fees.......................................................... $ 285,254 $261,113
Net income (loss) applicable to common and Class B common stockholders........ $ 9,973 $(50,948)
Net income (loss) per common and Class B common share:
Basic....................................................................... $ .41 $ (2.65)
Diluted..................................................................... $ .40 $ (2.65)
Pro forma net income applicable to common and Class B common
stockholders(1)............................................................. $ 3,674
Pro forma net income per common and Class B common share:
Basic....................................................................... $ .19
Diluted..................................................................... $ .19
</TABLE>
The pro forma results of operations are not necessarily indicative of what
actually would have occurred if the acquisitions had been completed at the
beginning of each of the years presented, nor are the results of operations
necessarily indicative of the results that will be attained in the future.
- ------------------
(1) Excludes special compensation and interest charges in the amounts of $52,019
and $2,603, respectively.
36
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 6--INTANGIBLES, NET
Intangibles, net consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, AMORTIZATION
-------------------- PERIOD
1997 1996 (YEARS)
-------- -------- ------------
<S> <C> <C> <C>
Client lists, net of accumulated amortization of $4,370 and
$3,715, respectively........................................... $ 10,083 $ 8,913 5 to 30
Covenants not to compete, net of accumulated amortization of
$2,036 and $1,713, respectively................................ 2,188 1,336 3 to 6
Excess of cost of investments over fair value of net assets
acquired, net of accumulated amortization of $10,651 and
$6,428, respectively........................................... 146,397 62,947 10 to 30
Other, net of accumulated amortization of $2,103 and $1,709,
respectively................................................... 797 779 4 to 10
-------- --------
$159,465 $ 73,975
-------- --------
-------- --------
</TABLE>
NOTE 7--FINANCING AGREEMENT
The Company obtains its primary financing from a financial institution
under a five-year financing agreement as amended and restated on June 27, 1996,
and as further amended on November 14, 1997, 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, as amended,
provides for borrowings of up to $175,000 at an interest rate of either: (a)
prime rate less 1% or, (b) Federal Funds rate less 1/2 of 1% or, (c) LIBOR plus
1 1/2%, 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, make future capital expenditures,
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
1/8% fee on any unused portion of the commitment and a declining fixed
termination fee of $2,000, $1,000 and $500 for the annual periods ended June 30,
1998, 1999, and 2000, respectively.
At December 31, 1997, the prime rate, Federal Funds rate and one month
LIBOR were 8.50%, 6.00% and 5.72%, respectively, and borrowings outstanding were
at a weighted average interest rate of 7.62%.
In October 1993, the Company issued a warrant to the lender to purchase one
percent of the issued and outstanding common stock of the Company (as defined in
the agreement) for an exercise price of $.01 per share. The warrant was
independently appraised at $600, which amount was being amortized over the
remaining term of the original financing agreement of 30 months from October
1993 until December 1996, when the warrant was exercised. At that time, the
unamortized balance was expensed. In addition, in December 1996, upon the
exercise of such warrant there was an additional interest charge of $2,603 to
reflect the difference between the value of the stock issued (228,768 shares) at
the initial public offering price of $14.00 per share and the original amount
recorded.
37
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 8--LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1996
-------- -------
<S> <C> <C>
Borrowings under financing agreement (see Note 7)................................... $ 95,800 $59,495
Borrowings under financing agreements, interest payable at rates varying from 5% to
9.2%, and collateralized by assets in certain foreign countries................... 3,339 3,776
Acquisition notes payable in annual and monthly installments through 1997 with
interest at 8.5%.................................................................. -- 3,374
Other acquisition notes payable, noninterest bearing, interest imputed at 6.7% to
8.0%, in varying installments through 2001........................................ 9,461 7,153
Capitalized lease obligations, payable with interest from 9% to 15%, in varying
installments through 2001......................................................... 7,245 4,058
Term note payable in sixty consecutive monthly installments from July 1997 through
June 2002, collateralized by transportation equipment and with interest at 8.43%
for the first 36 months. Thereafter the interest rate will be based on two year
U.S. Treasury Notes............................................................... 7,760 --
Notes payable, in varying monthly installments maturing through 2001, with interest
at rates ranging from 7.5% to 8.5%................................................ 696 2,110
-------- -------
124,301 79,966
Less: Current portion............................................................... 8,449 9,167
-------- -------
$115,852 $70,799
-------- -------
-------- -------
</TABLE>
The noncurrent portion of long-term debt matures as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
1999.............................................................................. $ 6,519
2000.............................................................................. 3,762
2001.............................................................................. 96,512*
2002.............................................................................. 7,513
Thereafter........................................................................ 1,546
------------
$115,852
------------
------------
</TABLE>
- ------------------
* Of this amount, $95,800 is subject to automatic one year extentions. See Note
7.
NOTE 9--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 book
value of these shares of approximately $3,000, which approximates the redemption
price, is included in minority interest in the consolidated balance sheet at
December 31, 1996. These shares were redeemed in January 1997 for a total of
$3,133, which included a redemption premium of $133.
NOTE 10--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. These shares were redeemed in January 1997 for a total of $2,105, which
included a redemption premium of $105.
38
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 11--STOCKHOLDERS' EQUITY
(A) COMMON AND CLASS B COMMON STOCK
Common and Class B common stock have indentical rights except that each
share of Class B common stock is entitled to ten votes and is convertible, at
any time, at the option of the stockholder into one share of common stock.
(B) STOCK OPTIONS
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 both 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 (amended to
1,800,000 on June 25, 1997) 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 (amended to 150,000 on June 25, 1997).
On January 3, 1996, options to purchase, at an exercise 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, an aggregate of 296,640 shares of common stock were
granted to officers, employees and consultants of the Company. Such options vest
at the rate of 25% per year commencing one year after the date of grant. As of
December 31, 1997, 13,010 options were cancelled, 7,266 options were exercised
and, of the outstanding options, 63,641 options were exercisable and will expire
ten years from the date of grant.
On January 6, 1997 options to purchase, at an exercise price of $12.88 per
share, the market price on the date of grant, an aggregate of approximately
1,203,737 shares of common stock were granted to officers and employees of the
Company and options for 74,611 shares were subsequently cancelled. Of such
options, options for approximately 29,000 shares of common stock vest at the
rate at 25% per year beginning one year from the date of grant and the balance
of these options were vested at December 31, 1997 and are exercisable after
January 5, 1999. Such options will expire ten years from date of grant.
On April 3, 1997, options to purchase, at an exercise price of $17.25 per
share, the market price on the date of grant, 8,400 shares of common stock were
granted to an officer of the Company. Such options vested as of December 31,
1997, are exercisable after January 5, 1999 and will expire ten years from the
date of grant.
On June 18, 1997, options to purchase, at an exercise price of $19.00 per
share, the market price on the date of grant, 28,256 shares of common stock were
granted to officers and employees of the Company. Options for 2,388 shares were
subsequently cancelled. Generally, such options were vested as of December 31,
1997, are exercisable after January 5, 1999, and will expire ten years from the
date of grant.
On August 28, 1997 options to purchase, at an exercise price of $20.00 per
share, the market price on the date of grant, 35,000 shares of common stock were
granted to various Austin Knight officers and individuals. Such options
generally vest at the rate of 25% per year commencing one year after the date of
grant and will expire ten years from the date of grant. At December 31, 1997,
none of these options were exercisable.
39
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 11--STOCKHOLDERS' EQUITY--(CONTINUED)
On December 12, 1997, options to purchase, at an exercise price of $15.00
per share, the market price on the date of grant, an aggregate of approximately
700,000 shares of common stock were granted to officers and employees of the
Company, subject to stockholder approval of an increase in the number of shares
authorized under the Plan to 3,000,000 from 1,800,000. Such options vest at the
rate of 25% per year commencing one year after the date of grant and will expire
ten years from the date of grant. At December 31, 1997 none of these options
were exercisable.
In January 1996, the Company also adopted a stock option plan for
nonemployee directors (the 'Directors' Plan'), pursuant to which options to
acquire a maximum aggregate of 180,000 shares of common stock may be granted to
nonemployee 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 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 nonemployee director. Half of these options vested on the date of the grant
and the balance vests in two equal annual installments commencing one year after
the date of grant. Such options will expire ten years from the date of grant. In
September 1996, options to purchase an aggregate of 33,750 shares 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. Such options will expire ten years from
the date of grant. In December 1996, 11,250 of the options granted to a director
in September 1996 were cancelled and options to purchase 125,000 shares of
common stock were granted at an exercise price of $14.00 (the initial public
offering price). Of the total, 50,000 of such options vested on the closing of
the initial public offering. In April 1997, in connection with this former
director's resignation, the Company agreed that an additional 12,500 of such
stock options would vest on June 1, 1997 and the unvested options totalling,
62,500 were cancelled. All options previously vested expire on December 9, 2006.
On October 7, 1997, a newly appointed director of the Company was granted
options to purchase 11,250 shares of common stock at $23.625 per share, the
market price on the date of grant. Half of these options vested on the date of
the grant and the balance vests in two equal annual installments commencing one
year after the date of grant. Such options will expire ten years from the date
of grant. For options granted to all directors, at December 31, 1997, 50,938 of
the outstanding options were exercisable and 42,500 were exercised.
The Company applies Accounting Principles Board Opinion No. 25, 'Accounting
for Stock Issued to Employees' (APB 25) and related Interpretations in
accounting for its employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of SFAS 123. The
weighted average fair values of options granted during 1997 and 1996 were $7.10
and $5.93, respectively. The fair value for these options was estimated at the
date of grant using a Black-Scholes option pricing model with the following
weighted average assumptions; risk-free interest rates of approximately 6.5% and
6.1% in 1997 and 1996 respectively; volatility factor of the expected market
price of the Company's common stock of 27% and 25% in 1997 and 1996,
respectively; and a weighted average expected life of the option of 8 years in
both 1997 and 1996.
40
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 11--STOCKHOLDERS' EQUITY--(CONTINUED)
Under the accounting provisions of SFAS 123, the Company's net income and
earnings per share would have been reduced to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
1997 1996
------ --------
<S> <C> <C>
Net income (loss) applicable to common and Class B common stockholders............. $4,384 $(53,062)
Net income (loss) per common and Class B common share
Basic............................................................................ $ .18 $ (2.75)
Diluted.......................................................................... $ .18 $ (2.75)
Net income applicable to common and Class B common stockholders reflecting special
adjustments(1)................................................................... $ 1,560
Net income per common and Class B common share reflecting special adjustments(1):
Basic............................................................................ $ .08
Diluted.......................................................................... $ .08
</TABLE>
- ------------------
(1) Excluding special compensation of $52,019 and non-recurring interest charges
of $2,603.
A summary of the status of the Company's two fixed stock option plans as of
December 31, 1997 and 1996, and changes during the years ending on those dates
is presented.
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
-------------------------- ------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- -------------- ------- --------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year............................... 448,334 $ 9.07 -- --
Granted........................................................ 1,986,643 13.91 466,640 $ 9.15
Exercised...................................................... (49,766) 12.92 -- --
Forfeited/cancelled............................................ (145,453) 13.20 (18,306) 11.17
--------- -------
Outstanding at end of year..................................... 2,239,758 13.01 448,334 9.07
--------- -------
--------- -------
Options exercisable at year-end................................ 114,579 $ 9.85 66,875 $13.38
Weighted average fair value of options granted during the
year......................................................... $ 7.10 $ 5.93
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1997.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------------------- -----------------------------------
NUMBER WEIGHTED AVERAGE NUMBER WEIGHTED
EXERCISE OUTSTANDING AT REMAINING WEIGHTED AVERAGE EXERCISABLE AT AVERAGE
PRICES DECEMBER 31, 1997 CONTRACTUAL LIFE EXERCISE PRICE DECEMBER 31, 1997 EXERCISE PRICE
-------- ----------------- ---------------- ---------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 6.65 287,614 8.0(year) $ 6.65 72,079 $ 6.65
14.00 42,500 8.9 14.00 36,875 14.00
12.88 1,129,126 9.0 12.88 -- --
19.00 25,868 9.6 19.00 -- --
17.25 8,400 9.3 17.25 -- --
20.00 35,000 9.8 20.00 -- --
15.00 700,000 9.9 15.00 -- --
23.63 11,250 9.8 23.63 5,625 23.63
----------------- -----------------
2,239,758 114,579 $ 9.85
----------------- -----------------
----------------- -----------------
</TABLE>
In connection with an acquisition in 1995, the Company issued options to
acquire shares of the Company's common stock in exchange for an obligation of
the Company incurred in connection with this acquisition. Such options, for
85,354 shares, were exercised upon the closing of the public offering based on
the initial public offering price of $14.00 per share.
41
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 12--PROVISION (BENEFIT) FOR INCOME TAXES
The components of income (loss) before the provision (benefit) for income
taxes, minority interests and equity in earnings (losses) of affiliates are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Domestic.............................................................. $ 9,175 $(50,323) $ 6,955
Foreign............................................................... 9,195 1,674 1,210
-------- -------- -------
Total income (loss) before provision (benefit) for income taxes,
minority interests and equity in earnings (losses) of
affiliates....................................................... $ 18,370 $(48,649) $ 8,165
-------- -------- -------
-------- -------- -------
</TABLE>
The provision (benefit) for income taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Current tax provision:
U.S. Federal............................................................. $ 220 $ 66 $ 87
State and local.......................................................... 1,219 922 320
Foreign.................................................................. 2,197 709 810
------ ------ ------
Total current......................................................... 3,636 1,697 1,217
------ ------ ------
Deferred tax provision (benefit):
U.S. Federal............................................................. 2,689 1,740 2,051
State and local.......................................................... 739 (321) 535
Foreign.................................................................. 1,507 154 419
------ ------ ------
Total deferred........................................................ 4,935 1,573 3,005
------ ------ ------
Total provision....................................................... $8,571 $3,270 $4,222
------ ------ ------
------ ------ ------
</TABLE>
The tax effects of temporary differences that give rise to the Company's
deferred tax asset (liability) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1996
-------- -------
<S> <C> <C>
Current deferred tax assets (liabilities):
Earned commissions............................................................. $ (5,796) $(5,266)
Allowance for doubtful accounts................................................ 3,901 2,813
Work-in-process................................................................ (6,222) (5,817)
Accrued expenses and other liabilities......................................... (2,665) (1,548)
-------- -------
Total current deferred tax liability........................................ (10,782) (9,818)
-------- -------
Noncurrent deferred tax assets (liabilities):
Property and equipment......................................................... (980) (801)
Intangibles.................................................................... (654) (453)
Accrued expenses and other liabilities......................................... (2,235) --
Tax loss carryforwards......................................................... 8,791 10,579
-------- -------
Total noncurrent deferred tax asset......................................... 4,922 9,325
-------- -------
Net deferred tax liability....................................................... $ (5,860) $ (493)
-------- -------
-------- -------
</TABLE>
At December 31, 1997, the Company has net operating loss carryforwards for
U.S. Federal tax purposes of approximately $23,300 which expire through 2011.
The Company has concluded that, based on expected future
42
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 12--PROVISION (BENEFIT) FOR INCOME TAXES--(CONTINUED)
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 for income taxes differs from the amount computed using the
Federal statutory income tax rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
------ -------- ------
<S> <C> <C> <C>
Provision (benefit) at Federal statutory rate............................ $6,246 $(16,541) $2,776
State income taxes, net of Federal income tax effect..................... 752 216 514
Nondeductible expenses................................................... 992 685 419
Nondeductible special charge............................................. -- 18,571 --
Interest imputed on receivable from principal stockholder................ -- 216 198
Losses for which no tax benefits are available........................... -- 45 503
Foreign income taxes at other than the Federal statutory rate............ 522 26 149
Other.................................................................... 59 52 (337)
------ -------- ------
Income tax provision..................................................... $8,571 $ 3,270 $4,222
------ -------- ------
------ -------- ------
</TABLE>
Provision has not been made for U.S. or additional foreign taxes on
undistributed earnings of foreign subsidiaries. Such earnings have been and will
continue to be reinvested but could become subject to additional tax if they
were remitted as dividends, or 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, 1997, the
cumulative amount of reinvested earnings was approximately $10,000.
NOTE 13--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, 1997 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1998............................................................................... $ 3,191 $14,072
1999............................................................................... 2,911 12,602
2000............................................................................... 1,755 10,953
2001............................................................................... 271 8,034
2002............................................................................... 9 6,065
Thereafter......................................................................... -- 18,384
------- ---------
8,137 $70,110
---------
---------
Less: Amount representing interest................................................. 892
-------
Present value of minimum lease payments............................................ 7,245
Less: Current portion.............................................................. 2,658
-------
$ 4,587
-------
-------
</TABLE>
43
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 13--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Rent and related expenses under operating leases amounted to $11,948,
$10,856, and $7,735 for the years ended December 31, 1997, 1996 and 1995,
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 two to five years in length, with one
for a term of fifteen years and two providing aggregate annual lifetime payments
of approximately $135.
Effective November 15, 1996, the Company entered into an employment
agreement with its Principal Stockholder for a term ending on November 14, 2001.
The agreement provides for automatic renewal for successive one year terms
unless either party notifies the other to the contrary at least 90 days prior to
its expiration. Under the agreement, the Principal Stockholder is entitled to a
base salary of $1,500 per year and mandatory bonuses of $375 per quarter. Such
bonuses were waived by the Principal Stockholder for 1996 and 1997 and
accordingly, no charge for these bonuses was incurred in those years. The
agreement also provides that the Company will pay the Principal Stockholder his
base salary and mandatory bonuses for the remaining term of the agreement in the
event he is terminated for reasons other than cause.
The above agreements provide for the following aggregate annual payments:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
1998............................................................................ $ 4,879
1999............................................................................ 4,349
2000............................................................................ 4,263
2001............................................................................ 4,002
2002............................................................................ 522
Thereafter...................................................................... 1,716
------------
$ 19,731
------------
------------
</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 $626, $600 and $584 for the years ended
December 31, 1997, 1996 and 1995, respectively.
Outside of the United States, the Company has employee benefit plans in the
countries in which it operates. For 1997, costs for these plans were $1,264.
In addition, the Company had 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, 1997, 1996
and 1995. The plan was terminated during 1997.
(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.
On February 19, 1998, a class action complaint was filed against the
Company by five former employees. The claims brought by the plaintiffs in the
complaint are that the Company (a) misclassified the named plaintiffs
44
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 13--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
and purported class members as exempt from the overtime requirements of
California wage and hour law and failed to pay them overtime wages, (b) failed
to pay accrued but unused vacation days at the time of termination, and (c)
failed to pay accrued but unused personal days at the time of termination. The
plaintiffs purport to represent a class of 450 former and current employees who
are similarly situated. The Company intends to vigorously defend the claims
brought by the plaintiffs and on March 18, 1998 responded to the complaint by
filing an answer denying all allegations. Management presently believes that the
disposition of these claims will not have a material adverse effect on the
Company's financial position, operations or liquidity.
In June 1997, a settlement of $275, which was paid by the Principal
Stockholder under an indemnity agreement with the Company, was made relating to
a November 1996 action of a former employee against Old TMP, WCI and the
Principal Stockholder. The complaint alleged, among other things, that the
defendants breached purported contractual obligations pursuant to which the
former employee was entitled to an ownership interest in the Company's
recruitment advertising business.
(E) OTHER
(i) The Company is contingently liable on a note of the Principal
Stockholder in the amount of approximately $1,600.
(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, 1997 is
approximately $5,627 based on the formula.
NOTE 14--RELATED PARTY TRANSACTIONS
(A) The Company had receivables from certain of its stockholders
aggregating $761 and $500 at December 31, 1996 and 1995, respectively. During
1997, the outstanding balances were repaid.
(B) The Company had net receivables from its Principal Stockholder of
$11,413 and $6,530 at December 31, 1996 and 1995, respectively. Prior to January
1, 1997 such amounts were noninterest-bearing. As of January 1, 1997 interest
was charged on the unpaid balance at the prime rate. During 1997, the
outstanding balances were repaid.
(C) In August 1996, the Company entered into an agreement whereby it
acquired the minority interest of a subsidiary for 46,350 shares of common
stock. Such shares, valued at $672, were recorded as special compensation
because the stockholder had received his shares in the subsidiary for no
consideration and, accordingly, was not considered to have made a substantive
investment for his shares.
(D) The Company charged management and other fees to affiliates for
services provided of approximately $788, $602 and $873 for the years ended
December 31, 1997, 1996 and 1995, respectively. Such fees are reflected as a
reduction of salaries and related costs in the accompanying consolidated
statements of operations.
(E) In January 1994, the Company acquired a 50% interest in an agency
selling real estate advertising. In connection with this acquisition, the
Company agreed to provide the agency with certain office and administrative
services which amounted to $321 for the nine months ended September 30, 1997 at
which time the arrangement was terminated. Payments of $875 and $725 were made
in the years ended December 31, 1996 and 1995, 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, provided 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 was exercised
in February 1997 and 61,848 shares of common stock were issued to these
stockholders pursuant to the above agreement. Simultaneously, the Company
transferred to such stockholders
45
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 14--RELATED PARTY TRANSACTIONS--(CONTINUED)
50% of its interest in the agency, thus retaining a 25% interest and terminated
its obligation to provide office and administrative services effective October
1, 1997.
(F) 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.
(G) 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 $863. 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 15--GEOGRAPHIC AND OTHER DATA
The Company is engaged in one line of business, the placing of advertising
in various media. Its operations are conducted in several geographic regions:
North America, the Pacific Rim (Australia, New Zealand, and Japan) and Europe.
The following is a summary of the Company's operations by geographic segment, as
of and for the years ended December 31, 1997 and 1996. Geographic segments were
not material for 1995.
<TABLE>
<CAPTION>
NORTH AMERICA PACIFIC RIM EUROPE TOTAL
------------- ----------- ------- --------
<S> <C> <C> <C> <C>
December 31, 1997
Commissions and fees........................................ $ 165,118 $20,347 $51,952 $237,417
Income before taxes, minority interests and equity in
earnings of affiliates................................... 11,215 1,697 5,458 18,370
Identifiable assets......................................... 381,834 22,469 90,903 495,206
December 31, 1996
Commissions and fees........................................ $ 144,853 $11,757 $ 6,021 $162,631
Income (loss) before taxes, minority interests
and equity in earnings of affiliates..................... (49,159)* (381) 891 (48,649)*
Identifiable assets......................................... 266,336 39,244 26,173 331,753
</TABLE>
- ------------------
* Includes noncash, non-recurring special compensation and interest expense of
$52,019 and $2,603, respectively.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information, (SFAS 131)
which supersedes SFAS No. 14, Financial Reporiting for Segments of a Business
Enterprise. SFAS 131 establishes standards for the way that public companies
report information about operating segments in annual financial statements and
requires reporting of selected information about operating segments in interim
financial statements issued to the public. It also establishes standards for
disclosures regarding products and services, geographic areas and major
customers. SFAS 131 defines operating segments as components of a company about
which separate financial information is available and that is evaluated
regularly by the chief operating decision maker in deciding how to allocate
resources and in assessing performance.
SFAS 131 is effective for financial statements for periods beginning after
December 15, 1997 and requires comparative information for earlier years to be
restated. Because of the relatively recent issuance of this standard, management
has been unable to fully evaluate the impact, if any, it may have on future
financial statement
46
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 15--GEOGRAPHIC AND OTHER DATA--(CONTINUED)
disclosures. Results of operations and financial position, however, will be
unaffected by implementation of this standard.
During the three months ended December 31, 1996 the Company received one
time fees of $150, $175, and $220 for a research study, executive search
services and for assisting in the procurement of bank financing, respectively.
The research study fee is included as a reduction of Office and General
Expenses, the executive search fee is included in Commissions and Fees and the
loan procurement fee is included in Other Income in the accompanying Statement
of Operations for the year ended December 31, 1996.
NOTE 16--SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and income taxes amounted to the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Interest.................................................................... $12,966 $11,389 $10,601
Income taxes................................................................ 1,860 936 589
</TABLE>
In conjunction with business acquisitions, the Company used cash as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Fair value of assets acquired, excluding cash.............................. $125,567 $52,731 $37,260
Less: Liabilities assumed and created upon acquisition..................... 62,168 28,976 25,936
-------- ------- -------
Net cash paid.............................................................. $ 63,399 $23,755 $11,324
-------- ------- -------
-------- ------- -------
Capital lease obligations incurred.............................................. $ 5,781 $ 4,873 $ 766
-------- ------- -------
-------- ------- -------
</TABLE>
47
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
The information set forth under the caption 'Proposal No. 1--Election of
Directors' in the Company's definitive Proxy Statement to be used in connection
with the 1998 Annual Meeting of Stockholders is incorporated herein by
reference.
Executive Officers
See 'Part I--Executive Officers of the Company.'
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption 'Executive Compensation' in the
Company's definitive Proxy Statement to be used in connection with the 1998
Annual Meeting of Stockholders is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption 'Principal Stockholders' in the
Company's definitive Proxy Statement to be used in connection with the 1998
Annual Meeting of Stockholders is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the captions 'Compensation Committee
Interlocks and Insider Participation' and 'Certain Transactions' in the
Company's definitive Proxy Statement to be used in connection with the 1998
Annual Meeting of Stockholders is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 10-K
(A) DOCUMENT LIST
1. Financial Statements
The financial statements of the Company filed herewith are set forth in
Part II, Item 8 of this Report.
2. Financial Statement Schedules
The following financial statement schedule and opinion thereon are filed as
a part of this Report:
Schedule II--Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore have
been omitted.
48
<PAGE>
3. Exhibits Required by Securities and Exchange Commission Regulation S-K
(a) The following exhibits are filed as part of this report or are
incorporated herein by reference (Exhibit Nos. 10.1, 10.3, 10.4, 10.5, 10.6,
10.25, 10.26 and 10.27 are management contracts, compensatory plans or
arrangements):
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
2.1 -- Agreement relating to the Entire Issued Share Capital of Austin Knight Limited, dated July 1997,
between AK Warranty and Indemnity Limited and TMP Worldwide Inc.*
3.1 -- Certificate of Incorporation.**
3.2 -- Bylaws.**
4.1 -- Form of Common Stock Certificate.**
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 and 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>
49
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------------------------------
<S> <C> <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 Jeffrey C. Taylor.**
10.26 -- Employment Agreement, dated November 18, 1996, between TMP Worldwide Inc. and James J. Treacy.**
10.27 -- Employment Agreement, dated November 15, 1996, between TMP Worldwide Inc. and Andrew J. McKelvey.**
10.28 -- Warrant Agreement, dated October 13, 1993, between TMP Worldwide Inc. and BNY Financial Corporation,
as amended by an amendment dated December 31, 1995.**
10.29 -- Form of Option Agreement, dated as of January 1, 1995, relating to options issued to shareholders
and/or principals of Kidd, Schneider & Dersch, Inc.**
10.30 -- Amendment No. 3 to Amended and Restated Accounts Receivable Management and Security Agreement, dated
as of May 15, 1997, between BNY Financial Corporation and TMP Worldwide Inc.*
10.32 -- Management Agreement, dated June 1, 1997, between Dir-Ad Services Inc./Les Services Dir-Ad Inc. and
TMP Worldwide Ltd.*
10.33 -- Second Amended and Restated Accounts Receivable Management and Security Agreement, dated as of
November 14, 1997, between BNY Financial Corporation and TMP Worldwide Inc.
21 -- Subsidiaries of the Company.*
23.1 -- Consent of BDO Seidman, LLP.
27.1 -- Financial Data Schedule--Year ended December 31, 1997
27.2 -- Restated Financial Data Schedule--Nine months ended September 30, 1997
27.3 -- Restated Financial Data Schedule--Six months ended June 30, 1997
27.4 -- Restated Financial Data Schedule--Three months ended March 31, 1997
27.5 -- Restated Financial Data Schedule--Year ended December 31, 1996
27.6 -- Restated Financial Data Schedule--Nine months ended September 30, 1996
27.7 -- Restated Financial Data Schedule--Six months ended June 30, 1996
27.8 -- Restated Financial Data Schedule--Three months ended March 31, 1996
27.9 -- Restated Financial Data Schedule--Year ended December 31, 1995
</TABLE>
50
<PAGE>
(b) Reports on Form 8-K.
(i) A Form 8-K, dated October 21, 1997, was filed with respect to the
issuance of 16,460 shares of Common Stock to Lorraine Jones in connection
with an acquisition. The shares were issued pursuant to Regulation S.
(ii) A Form 8-K, dated November 8, 1997, was filed with respect to the
issuance of 36,087 shares, 27,814 shares and 5,632 shares of Common Stock
to Eric Petco, Antoine Farisano and Carole Lonhienne, respectively, in
connection with an acquisition. The shares were issued pursuant to
Regulation S.
(c) Exhibits.
See (3)(a)above.
- ------------------
* Incorporated by reference to Exhibits to the Registration Statement on Form
S-1 (Registration No. 333-31657).
** Incorporated by reference to Exhibits to the Registration Statement on Form
S-1 (Registration No. 333-12471).
51
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TMP Worldwide Inc.
New York, New York
The audits referred to in our report dated March 20, 1998 relating to the
consolidated financial statements of TMP Worldwide Inc. and subsidiaries, which
is contained in Item 8 of the Form 10-K, included the audit of the financial
statement schedule listed in the accompanying index. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion on the financial statement schedule based upon our
audits.
In our opinion the financial statement schedule presents fairly, in all material
respects, the information set forth therein.
BDO SEIDMAN, LLP
New York, New York
March 30, 1998
52
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN C--
COLUMN B ADDITIONS
-------- -------------------- COLUMN E
BALANCE CHARGED --------
AT TO CHARGED BALANCE
COLUMN A BEGINNING COSTS TO COLUMN D AT
- ----------------------------------------------- OF AND OTHER -------- END OF
DESCRIPTIONS PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ----------------------------------------------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995
Allowance for doubtful accounts.............. $2,018 $2,850 -- $1,003 $3,865
Year ended December 31, 1996
Allowance for doubtful accounts.............. $3,865 $3,131 $ 2,111(1) $2,075 $7,032
Year ended December 31, 1997
Allowance for doubtful accounts.............. $7,032 $3,580 $ 1,931(1) $2,794 $9,749
</TABLE>
- ------------------
(1) Initial reserves of acquired companies.
53
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
TMP WORLDWIDE INC.
By: ______/s/ Andrew J. McKelvey______
Andrew J. McKelvey
Chairman of the Board and President
March 25, 1998
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ----------------------------------------------- ---------------
<S> <C> <C>
/s/ Andrew J. McKelvey Chairman of the Board, President and Director March 25, 1998
- ------------------------------------------ (principal executive officer)
Andrew J. McKelvey
/s/ Thomas G. Collison Vice Chairman (principal financial officer) March 25, 1998
- ------------------------------------------
Thomas G. Collison
/s/ Roxane Previty Chief Financial Officer (principal March 25, 1998
- ------------------------------------------ accounting officer)
Roxane Previty
/s/ George R. Eisele Director March 25, 1998
- ------------------------------------------
George R. Eisele
/s/ John R. Gaulding Director
- ------------------------------------------
John R. Gaulding
/s/ Michael Kaufman Director
- ------------------------------------------
Michael Kaufman
/s/ John Swann Director
- ------------------------------------------
John Swann
</TABLE>
54
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
2.1 -- Agreement relating to the Entire Issued Share Capital of Austin Knight Limited, dated July 1997,
between AK Warranty and Indemnity Limited and TMP Worldwide Inc.*
3.1 -- Certificate of Incorporation.**
3.2 -- Bylaws.**
4.1 -- Form of Common Stock Certificate.**
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 and 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>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------------------------------
<S> <C> <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 Jeffrey C. Taylor.**
10.26 -- Employment Agreement, dated November 18, 1996, between TMP Worldwide Inc. and James J. Treacy.**
10.27 -- Employment Agreement, dated November 15, 1996, between TMP Worldwide Inc. and Andrew J. McKelvey.**
10.28 -- Warrant Agreement, dated October 13, 1993, between TMP Worldwide Inc. and BNY Financial Corporation,
as amended by an amendment dated December 31, 1995.**
10.29 -- Form of Option Agreement, dated as of January 1, 1995, relating to options issued to shareholders
and/or principals of Kidd, Schneider & Dersch, Inc.**
10.30 -- Amendment No. 3 to Amended and Restated Accounts Receivable Management and Security Agreement, dated
as of May 15, 1997, between BNY Financial Corporation and TMP Worldwide Inc.*
10.32 -- Management Agreement, dated June 1, 1997, between Dir-Ad Services Inc./Les Services Dir-Ad Inc. and
TMP Worldwide Ltd.*
10.33 -- Second Amended and Restated Accounts Receivable Management and Security Agreement, dated as of
November 14, 1997, between BNY Financial Corporation and TMP Worldwide Inc.
21 -- Subsidiaries of the Company.*
23.1 -- Consent of BDO Seidman, LLP.
27.1 -- Financial Data Schedule--Year ended December 31, 1997
27.2 -- Restated Financial Data Schedule--Nine months ended September 30, 1997
27.3 -- Restated Financial Data Schedule--Six months ended June 30, 1997
27.4 -- Restated Financial Data Schedule--Three months ended March 31, 1997
27.5 -- Restated Financial Data Schedule--Year ended December 31, 1996
27.6 -- Restated Financial Data Schedule--Nine months ended September 30, 1996
27.7 -- Restated Financial Data Schedule--Six months ended June 30, 1996
27.8 -- Restated Financial Data Schedule--Three months ended March 31, 1996
27.9 -- Restated Financial Data Schedule--Year ended December 31, 1995
</TABLE>
<PAGE>
(b) Reports on Form 8-K.
(i) A Form 8-K, dated October 21, 1997, was filed with respect to the
issuance of 16,460 shares of Common Stock to Lorraine Jones in connection
with an acquisition. The shares were issued pursuant to Regulation S.
(ii) A Form 8-K, dated November 8, 1997, was filed with respect to the
issuance of 36,087 shares, 27,814 shares and 5,632 shares of Common Stock
to Eric Petco, Antoine Farisano and Carole Lonhienne, respectively, in
connection with an acquisition. The shares were issued pursuant to
Regulation S.
(c) Exhibits.
See (3)(a)above.
- ------------------
* Incorporated by reference to Exhibits to the Registration Statement on Form
S-1 (Registration No. 333-31657).
** Incorporated by reference to Exhibits to the Registration Statement on Form
S-1 (Registration No. 333-12471).
<PAGE>
SECOND AMENDED AND RESTATED ACCOUNTS RECEIVABLE
MANAGEMENT AND SECURITY AGREEMENT
This Second Amended and Restated Accounts Receivable
Management and Security Agreement is made as of November 14, 1997 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 Amended and Restated
Accounts Receivable Management and Security Agreement made as of June 27, 1996
(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 $86,480,779
(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 Ancillary Agreements 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.
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).
<PAGE>
"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.
"Alternate Currencies" shall mean collectively, (i)
Sterling, Canadian Dollars and Australian Dollars and (ii) such other
currencies as shall be requested by Borrower to be an Alternate Currency
hereunder subject to the approval of Agent and all of the Lenders in their
sole and absolute discretion; (each, an "Alternate Currency").
"Alternate Currency Base Rate" shall mean, with respect to
Sterling Loans, the U.K. Base Rate; with respect to Canadian Loans, the
Canadian Prime Rate; with respect to Australian Loans, the Australian Base
Rate and with respect to all other Alternate Currency Loans, the base
commercial lending rate of interest charged by commercial banks as publicly
announced by a bank located in the applicable country and selected by Agent in
its sole discretion 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.
"Alternate Currency Base Rate Loans" shall mean an Alternate
Currency Loan which bears interest at the Alternate Currency Base Rate.
"Alternate Currency Equivalent" shall mean with respect to
any Alternate Currency, on any date of determination thereof, the amount of
such Alternate Currency which could be purchased with the amount of Dollars
involved in such computation at the spot rate at which such Alternate Currency
may be exchanged into Dollars as determined by the Bank as of
2
<PAGE>
11:00 a.m. (London time) on such date of determination thereof for delivery
two Business Days later, which such determination shall be made on the basis
of the spot exchange rate then being quoted by the Bank to its corporate
customers with comparable credit status to Borrower.
"Alternate Currency Loan" shall mean a Loan denominated in
an Alternate Currency.
"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, the U.K. Security Documents, the U.K.
Credit Agreement, the Canadian Security Documents, the Canadian Credit
Agreement or to the transactions contemplated hereby or thereby.
"Annual Minimum" means $450,000,000.
"Applicable Margin" means, with respect to Alternate Base
Rate Loans, LIBO Rate Loans, Canadian Loans and Sterling Loans, the
percentages which, when added to or subtracted from the Alternate Base Rate,
the LIBO Rate, the Canadian Prime Rate or the U.K. Base Rate, as the case may
be, comprise the Contract Rate.
"Austin Knight" shall mean Austin Knight Limited, a company
organized under the laws of the United Kingdom.
"Australian Base Rate" shall mean the base commercial
lending rate of interest charged by commercial banks as publicly announced by
a bank located in Australia and selected by Agent in its sole discretion 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.
"Australian Dollars" shall mean the lawful money of Australia.
"Australian Facility" shall mean a credit facility which may
be provided by Agent (or, at the direction of Agent, by another BNY Company)
in its sole discretion, pursuant to which Agent or such BNY Company provides
Loans to Borrowers' Australian Subsidiaries in an amount not to exceed a
Dollar Equivalent of $15,000,000 pursuant to a lending facility in form and
substance satisfactory to Borrower and Agent or a BNY Company and which
facility may be structured as a new lending facility or as an assumption, at
the direction of Agent, by a BNY Company of the existing loan facility
currently in place with Scottish Pacific Bank and which shall provide for
loans at a rate of interest equal to at least (i) 3.95% in excess of the
interest rate per annum from time to time publicized by the Scottish Pacific
Bank as its 30-day bill rate or (ii) Australian Base Rate.
"Australian Loans" shall mean Loans denominated and payable
in Australian Dollars.
"Australian Subsidiary" shall mean any Subsidiary of
Borrower which is formed under the laws of Australia.
3
<PAGE>
"Australian Subsidiary Obligations" shall mean all
indebtedness and obligations of Borrower's Australian Subsidiaries under the
Australian Facility.
"Bank" means The Bank of New York.
"BNY Canada" shall mean BNY Financial Corporation - Canada.
"BNY Company" shall mean, individually and collectively, Agent, BNY, BNY UK,
BNY - Canada or any Affiliate thereof.
"BNY Overadvances" shall have the meaning set forth in
Section 2(c).
"BNY UK" shall mean BNY Financial Ltd.
"Borrowing Base Certificate" shall mean the certificates and
assignment schedule duly executed and delivered by an officer of Borrower to
Agent appropriately completed and in substantially the form attached as
Exhibit 1.2 hereto.
"Borrower on a Consolidated Basis" means the combination in
accordance with GAAP of (i) the consolidation in accordance with GAAP of the
accounts and other items of Borrower and its consolidated Subsidiaries (ii)
the combination in accordance with GAAP of the accounts and other items of all
Scheduled Affiliates (other than as included in preceding clause (i)).
"Borrowing Notice" shall have the meaning set forth in the
Section 4 hereof.
"Business Day" shall mean with respect to (i) Sterling
Loans, any day on which commercial banks are open for domestic and
international business, including dealings in Dollar deposits in London,
England or New York, New York, (ii) Canadian Loans, any day other than a day
on which commercial banks in Toronto, Canada are authorized or required by law
to close, (iii) Alternate Currency Loans other than Sterling Loans and
Canadian Loans, any day other than a day on which commercial banks in the
applicable country are authorized or required by law to close and (iv) all
other loans, any day other than a day on which commercial banks in New York
are authorized or required by law to close.
"Cala" shall mean Cala H.R.C., Ltd., a company organized
under the laws of Canada.
"Calendar Year" shall mean each twelve month period
beginning on January 1 and ending on December 31.
"Canadian Borrowers" shall mean TMP Canada, Cala and Dir-Ad.
"Canadian Collateral" shall mean substantially all of the
assets (both real and personal) of Borrower and each of its Subsidiaries
located in Canada and described in the Canadian Security Documents.
4
<PAGE>
"Canadian Credit Agreement" shall mean the Accounts
Receivable Management and Security Agreement dated March 13, 1995 entered into
by BNY-Canada with TMP Canada and Cala, as amended, supplemented, restated or
replaced from time to time, pursuant to which BNY-Canada funds Canadian Loans
to the Canadian Borrowers, and all other agreements executed in connection
therewith.
"Canadian Dollars" shall mean the lawful money of Canada.
"Canadian Loans" shall mean Loans denominated and payable in
Canadian Dollars.
"Canadian Prime Rate" shall mean the interest rate per annum
from time to time publicized by The Toronto-Dominion Bank as its prime rate,
such rate to be adjusted automatically, without notice, on the effective date
if 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.
"Canadian Receivables" means and includes all of any
Canadian Subsidiary's now owned or hereafter acquired accounts and contract
rights, instruments, insurance proceeds, documents, chattel paper, letters of
credit and each Canadian Subsidiary'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 Canadian Subsidiary, all proceeds thereof and all files in which any
Canadian Subsidiary has any interest whatsoever containing information
identifying or pertaining to any of a Canadian Subsidiary's Receivables,
together with all of such Canadian Subsidiary's rights to any merchandise
which is represented thereby, and all of such Canadian Subsidiary's right,
title, security and guaranties with respect to each Canadian Receivable,
including, without limitation, all rights of stoppage in transit, replevin and
reclamation and all rights as an unpaid vendor.
Canadian Security Documents" shall mean each agreement
executed by a Canadian Subsidiary in favor of BNY Canada pursuant to which BNY
Canada is granted a Lien or hypothec upon the Canadian Collateral as security
for the Canadian Subsidiary Obligations.
"Canadian Subsidiaries" shall mean TMP Canada, Cala and
Dir-Ad.
"Canadian Subsidiary Obligations" shall have the meaning
given to the term "OBLIGATIONS" under the Canadian Credit Agreement.
"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 Borrower or a Scheduled Affiliate or sale of all or substantially
all of the property or assets of Borrower or a Scheduled Affiliate other than
the sale of substantially all of the assets of Chalam Advertising) which
results in a transfer of control of 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 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
5
<PAGE>
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 November 14, 1997 or such other date as
may be agreed upon by the parties hereto.
"Collateral" means and includes
(A) all Inventory;
(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.
6
<PAGE>
"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 Lender purchases and
assumes a portion of the obligation of Lenders to make Loans under this
Agreement.
"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) the sum of the LIBO Rate plus the
Applicable Margin with respect to LIBO Rate Loans, as applicable, (iii) the
sum of the Canadian Prime Rate plus the Applicable Margin with respect to
Canadian Loans made to Borrower or (iv) the sum of the U.K. Base Rate plus the
Applicable Margin with respect to Sterling Loans made to Borrower.
"Contract Year" means the twelve month period beginning on
the Closing Date or on the anniversary of the Closing Date in any year.
"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.
"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
7
<PAGE>
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 no later than the first month following the
"closing date" for submission of advertisements or the first month following
the "publication date" of such advertisements, as applicable 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.
"Dilution" means, 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 deductions and credit memos issued for such period.
"Dir-Ad" shall mean Dir-Ad Inc., a company organized under
the laws of Canada.
"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.
"Dollar Equivalent" shall mean, on any date of determination
thereof, the amount of Dollars which could be purchased with the amount of the
relevant Alternate Currency at the spot rate then being offered by the Bank to
its corporate customers with comparable credit status to Borrower at which
Dollars may be exchanged into the applicable Alternate Currency as shall be
determined by Agent.
"Dollar Loans" means Loans denominated and payable in Dollars.
"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 Canadian Receivables" shall mean Eligible
Receivables consisting of Canadian Receivables.
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"Eligible Receivables" means and includes each Receivable
and Affiliate Receivable (1) (x) for which BNY performs accounts receivable
management with respect thereto or (y) which is a U.K. Receivable or Canadian
Receivable (but only to the extent such Receivables would otherwise conform
with the applicable eligibility criteria under the U.K. Credit Agreements and
Canadian Credit Agreement, respectively), 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 another Financial Party 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 which has been received by Agent or, in Agent's sole
discretion, has been sent to but not yet received by 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 not in
the United States, Canada or the United Kingdom, the services which gave rise
to such Receivable or Affiliate Receivable were provided after receipt by
Borrower or any other Financial Party 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 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 other Financial Party; (k) it is payable to Borrower or any other
Financial Party; (l) if the Receivable or Affiliate Receivable arises out of a
sale to any Person to which Borrower or any other Financial Party is indebted,
the amount of such indebtedness, and any anticipated indebtedness, may in
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 any other Financial Party and the
United States, any state, or any department, agency or instrumentality of any
of them, Borrower or any other Financial Party 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 any other Financial Party; (p)
(i) such Affiliate Receivable arises out of a sale or rendition of services by
a Financial Party that (x) has executed
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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 Agent,
including, without limitation, a certificate of ownership executed by the
Secretary of Borrower with respect to Andrew McKelvey's share ownership of
Borrower and each other Financial Party) that Andrew McKelvey, Borrower or the
applicable Guarantor is the majority owner of the applicable Financial Party;
(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.
"Eligible U.K. Receivables" shall mean Eligible Receivables
consisting of U.K. Receivables.
"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. "Equipment" shall not include that certain Dassault-Breguet Falcon 50
jet aircraft (Reg. No. N22TZ) owned by CVY International, LLC, a wholly-owned
subsidiary of Volando, Inc. (a wholly-owned subsidiary of Borrower).
"Equity Event" shall mean the receipt of cash proceeds by
Borrower resulting from a public offering of the capital stock or debt of any
Financial Party after the date hereof.
"Event of Default" means the occurrence of any of the events
set forth in paragraph 18.
"Existing Ancillary Agreements" 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 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 and any Scheduled Affiliate.
"Fiscal Quarter" means each quarterly accounting period of
Borrower during any Fiscal Year.
"Foreign Indebtedness" means Indebtedness (other than
Indebtedness owed to Lenders or their Affiliates) incurred by a Financial
Party which is not a Domestic Person.
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"Foreign Losses" shall mean the aggregate of all monetary
losses whatsoever which any BNY Company may suffer or incur by reason of a
Foreign Subsidiary's failure to observe or perform in full all of their
Foreign Subsidiary Obligations however arising, including but not limited to
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses, fees or disbursements of any kind or nature whatsoever
and/or all liabilities of a BNY Company to a Foreign Subsidiary and/or third
parties arising out of or related to any Foreign Subsidiary Credit Agreements
"Foreign Subsidiary Credit Agreements" shall mean any and
all agreements evidencing Foreign Subsidiary Obligations.
"Foreign Subsidiary Obligations" shall mean all Indebtedness
owing to a BNY Company by any Subsidiary of Borrower which is not a Domestic
Person, including, without limitation, all U.K. Subsidiary Obligations,
Canadian Subsidiary Obligations and Australian Subsidiary Obligations.
"Formula Amount" shall have the meaning set forth in
paragraph 2(b).
"GAAP" means generally accepted accounting principles,
practices and procedures in the United States of America 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) the Amended
and Restated Guaranties and Guaranties described on Exhibit 1(C) which are
executed by each Guarantor in favor of Agent and (ii) 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 biphenyls, petroleum and
petroleum products, methane, hazardous materials, hazardous wastes,
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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 have the meaning set forth in
Section 4(c) hereof.
"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 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" and "Lenders" means the persons identified as
"Lenders" and listed on the signature pages of this Agreement, together with
their successors and assigns.
"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).
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"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 Rate" shall mean, relative to any day for the then
current Interest Period relating to any LIBO Rate Loan, the rate of interest
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 LIBO Rate Loan.
"LIBO Rate Loan" shall mean the Loans or any portion thereof
bearing interest at a rate of interest determined by reference to the LIBO
Rate.
"Loan Sale" shall have the meaning set forth in Section
5(b)(iii).
"Loans" means the Revolving Credit Advances (including
Alternate Currency Loans), 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 at any time, $175,000,000 less
the outstanding balance of Foreign Subsidiary Obligations.
"Media Billing Receivables" means Receivables which require
delivery to the customer of a copy of the advertisement which appears in the
directory publication.
"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
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<PAGE>
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.
"Obligations" shall also include all Canadian Subsidiary Obligations and U.K.
Subsidiary Obligations.
"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).
"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
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<PAGE>
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 a Financial
Party has 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 and Unbilled Media Billing Receivables; provided, however, that
the maximum amount of Revolving Credit Advances outstanding at any time
against Unbilled 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 Persons which are
listed on Schedule 1(B) and which are Guarantors hereunder as well as those
Scheduled Affiliates that hereafter become Guarantors and Scheduled Affiliates
hereunder upon written notice to Agent and execution of all necessary
documentation by such Scheduled Affiliate.
"Secondary Equity Event" shall mean the receipt of cash
proceeds by Original Owner and/or Borrower in an amount not less than
$50,000,000 resulting from a secondary public offering of the capital stock of
Borrower.
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<PAGE>
"Settlement Date" means (i) with respect to Canadian
Receivables, three (3) Business Days after the day on which the applicable
Canadian Receivable is actually collected by Agent, (ii) three (3) Business
Days after (a) with respect to U.K. Receivables, the date of receipt of the
funds in the bank account of BNY Financial Limited in the case of a U.K.
Receivable paid in cash or by bank credit transfer or (b) the date of
collection of such U.K. Receivables from the drawee or acceptor thereof, in
the case of a U.K. Receivable paid by check or other instrument and (iii) with
respect to all other Receivables and Affiliate Receivables, two (2) Business
Days after the day on which the applicable Receivable or Affiliate Receivable
(to the extent payable to a Scheduled Affiliated domiciled in the United
States of America) is actually collected by Agent.
"Sterling" and the sign "(pound)" mean the lawful currency
of the United Kingdom.
"Sterling Loans" means Loans denominated and payable in
Sterling.
"Stock Pledge Agreement" shall have the meaning set forth in
Section 12(z) hereof.
"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.
"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 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) 40% of
the amount of all of the assets of Borrower on a Consolidated Basis and any
excess shall not be included in the calculation of Tangible Net Worth.
"Term" means the Closing Date through and including June 26,
2001, 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.
"TMP Canada" shall mean TMP Worldwide Ltd., an Ontario
corporation.
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<PAGE>
"U.K. Base Rate" shall mean the base commercial lending rate
of Lloyds Bank Place., as publicly announced in London, England 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.
"U.K. Collateral" shall mean substantially all of the assets
(both real and personal) of Borrower and each of its Subsidiaries located in
the United Kingdom and described in the U.K. Security Documents.
"U.K. Credit Agreements" shall mean the Invoice Discounting
Agreements between each of the U.K. Subsidiaries and BNY UK pursuant to which
BNY UK makes Sterling Loan accommodations to the U.K. Subsidiaries and all
other agreements executed in connection therewith.
"U.K. Guaranty" shall mean the guaranty issued by Borrower
or a Guarantor of the obligations of the U.K. Subsidiaries to BNY UK under the
U.K. Credit Agreement.
"U.K. Receivables" means and includes all of each U.K.
Subsidiary's now owned or hereafter acquired accounts and contract rights,
instruments, insurance proceeds, documents, chattel paper, letters of credit
and each U.K. Subsidiary'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 U.K.
Subsidiary, all proceeds thereof and all files in which any U.K. Subsidiary
has any interest whatsoever containing information identifying or pertaining
to any of a U.K. Subsidiary's Receivables, together with all of such U.K.
Subsidiary's rights to any merchandise which is represented thereby, and all
of such U.K. Subsidiary's right, title, security and guaranties with respect
to each U.K. Receivable, including, without limitation, all rights of stoppage
in transit, replevin and reclamation and all rights as an unpaid vendor.
"U.K. Security Documents" shall mean each of the debentures
executed by each U.K. Subsidiary in favor of Agent pursuant to which BNY UK is
granted a Lien upon the U.K. Collateral as security for the U.K.
Subsidiary Obligations.
"U.K. Subsidiaries shall mean Austin Knight, TMP UK,
Lonsdale Advertising Services Limited and MSL International Limited.
"U.K. Subsidiary Obligations" shall have the meaning given
to the term "Obligations" under the U.K. Credit Agreement.
"Volume" shall have the meaning set forth in Section 5(e)(ii).
"Unbilled Media Billing Receivables" shall mean Media
Billing Receivables which constitute Eligible Receivables except that they
have not been documented by an invoice.
"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.
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(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 with respect to all Receivables and Affiliate Receivables (excluding
U.K. Receivables but including Receivables of any U.S. Subsidiary of any U.K.
Subsidiary). 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 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. Upon an Event of Default and
during the continuance thereof, BNY for itself and not in its capacity as
Agent may, in its sole discretion, perform the accounts receivable management
and record keeping services described herein with respect to U.K. Receivables
as described herein.
(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
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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".
Revolving Credit Advances may be (i) Dollar Loans in which
case they may be made as one or more (A) Alternate Base Rate Loans, (B) LIBO
Rate Loans or (C) any combination thereof or (ii) in Agent's discretion,
Alternate Currency Loans, in which case they shall be made as one or more
Alternate Currency Base Rate Loans, provided, however, in no event shall the
aggregate outstanding principal balance of (A) Sterling Loans to Borrower
(determined on the basis of the Dollar Equivalent of each Sterling Loan)
exceed $50,000,000 less the outstanding balance of U.K. Subsidiary
Obligations, (B) Canadian Loans to Borrower (determined on the basis of the
Dollar Equivalent of each Canadian Loan) exceed $10,000,000 less the
outstanding balance of Canadian Subsidiary Obligations, (C) Australian Loans
to Borrower (determined on the basis of the Dollar Equivalent of each
Australian Loan) exceed $15,000,000 less the outstanding balance of Australian
Subsidiary Obligations. In no event shall Alternate Currency Loans plus U.K.
Subsidiary Obligations plus Canadian Subsidiary Obligations plus Australian
Subsidiary Obligations (each determined on the basis of the Dollar Equivalent
thereof) exceed a Dollar Equivalent amount equal to 50% of the outstanding
amount of Revolving Credit Advances or such amount as Agent in its sole
discretion deems acceptable.
(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 Agent's gross negligence or willful misconduct), including
Collateral believed to be eligible in fact 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 Agent without
Lenders' consent for up to two weeks after discovering the unintentional
overadvance, provided that 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 Agent in
its sole discretion which shall not cause the Obligations to exceed the
borrowing formulas by the lesser of (1) 10% of the amount permitted to be
borrowed under Section 2(b) or (2) $10,000,000 at any one time outstanding,
and (Y) voluntary overadvances made by BNY in its sole discretion ("BNY
Overadvances") which shall (A) be designated by BNY as a BNY Overadvance, (B)
be due and payable to BNY on demand (subject to the last sentence of this
Section (c)), (C) not exceed $7,500,000 at any time outstanding, (D) be
secured by the Collateral on a basis junior to all other Obligations of
Borrower hereunder and (E) not
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result in the then aggregate Revolving Credit Advances outstanding exceeding
the Maximum Loan Amount. Any such Permitted Overadvances in excess of
$2,500,000 (other than with respect to a BNY Overadvance) may remain
outstanding for no more than any sixty (60) 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.
(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
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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 had been issued. The
maximum amount of outstanding Letters of Credit hereunder and under the U.K.
Credit Agreement and the Canadian Credit Agreement shall not exceed
$10,000,000 (or the Alternate Currency Equivalent) 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 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, nor 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 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.
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(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 deliver 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 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, Agent shall
promptly notify each Lender and upon Agent's demand each Lender shall pay to
Agent such Lender's proportionate share of such unreimbursed disbursement
together with such Lender's proportionate share of Agent's unreimbursed costs
and expenses relating to such unreimbursed disbursement. Upon receipt by Agent
of a repayment from Borrower of any amount disbursed by Agent for which Agent
had already been reimbursed by the Lenders, 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) 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.
(r) Borrower shall use the proceeds of the Loans to provide
for its and its Subsidiaries' working capital needs and general corporate
purposes.
3. Repayment of Loans.
(a) Subject to the provisions of the last three paragraphs
of Section 2(b) and 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.
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(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 Agent on behalf of the Lenders, in each case on or prior to 1:00 P.M.,
New York time, in Dollars, with respect to Dollar Loans and in the applicable
Alternate Currency or the Dollar Equivalent with respect to Alternate Currency
Loans and in immediately available funds.
(c) Unless 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
Agent, Agent may (but shall not be obligated to) assume that such Lender shall
make such amount available to Agent and, in reliance upon such assumption,
make available to Borrower a corresponding amount. Agent will promptly notify
Borrower of its receipt of any such notice from a Lender. If such amount is
made available to Agent on a date after a Lender Settlement Date, such Lender
shall pay to 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 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 Agent. A certificate of
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 Agent by such Lender within three (3)
Business Days after such Lender Settlement Date, 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 Agent's right to such recovery shall not prejudice or
otherwise adversely affect Borrower's rights (if any) against such Lender.
(d) If on any date that the Dollar Equivalent is required to
be calculated pursuant to Section 35 the aggregate amount of Loans shall
exceed the Formula Amount, Borrower shall prepay the Loans in an aggregate
principal amount such that immediately after giving effect thereto, the
aggregate amount of Loans shall not exceed the Formula Amount. In addition, if
on any date that the Dollar Equivalent is required to be calculated pursuant
to Section 35, the outstanding principal balance of (i) Alternate Currency
Loans (including Sterling Loans and Canadian Loans) (determined on the basis
of the Dollar Equivalent thereof) shall exceed a Dollar Equivalent amount
equal to fifty percent (50%) of the outstanding amount of Revolving Credit
Advances, (ii) Sterling Loans (determined on the basis of the Dollar
Equivalent thereof) shall exceed $50,000,000, (iii) Canadian Loans (determined
on the basis of the Dollar Equivalent thereof) shall exceed $10,000,000 or
(iv) Australian Loans (determined on the basis of the Dollar Equivalent
thereof) shall exceed $15,000,000, Borrower shall prepay such Alternate
Currency Loans in an aggregate principal amount such that immediately after
giving effect thereto, the outstanding principal balance of the Alternate
Currency Loans, Sterling Loans and Canadian Loans (determined on the basis of
the Dollar Equivalent thereof) shall not exceed the limits set forth in
subsections (i), (ii), (iii) and (iv) above. Agent may increase each of the
limits set forth in subsections (i), (ii), (iii) and (iv) above in the
exercise of its sole discretion provided that at the time of such increase and
after giving effect to any additional Alternate Currency Loans, the
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outstanding balance of Alternate Currency Loans does not exceed a Dollar
Equivalent amount equal to fifty percent (50%) of the outstanding amount of
Revolving Credit Advances.
4. Procedure for Revolving Credit Advances.
(a) Borrower may, by telephonic notice (or at Agent's
request by written notice) to Agent ("Borrowing Notice"), request a borrowing
of Revolving Credit Advances prior to 1:00 P.M. New York time (i) on the
Business Day of its request to incur, on that day, a Dollar Loan and (ii) at
least one (1) Business Day prior to the date of its request to incur an
Alternate Currency Loan. The Borrowing Notice shall specify (i) the date of
the proposed borrowing (which shall be a Business Day), (ii) that portion of
the Revolving Credit Advances then being requested which are to be (A) Dollar
Loans and, if so, whether such borrowing is to consist of one or more
Alternate Base Rate Loans, LIBO Rate Loans or a combination thereof or (B) as
Alternate Currency Loans and, if so, whether such borrowing is to consist of a
Sterling Loan, Canadian Loan, an Alternate Currency Loan other than a Sterling
Loan or a Canadian Loan or a combination thereof and (iii) the amount to be
borrowed.
(b) Alternate Currency Loans shall be made at Agent's sole
discretion and, notwithstanding the provisions of (a) above, (i) any request
for an Alternate Currency Loan not constituting either a Sterling Loan, a
Canadian Loan or an Australian Loan shall be made upon three (3) days advance
written notice to Agent and Lenders, (ii) Borrower and Agent may establish an
alternative procedure in the United Kingdom for the requesting and making of
Sterling Loans and (iii) Agent shall not be obligated to accept Borrower's
request for (a) Sterling Loan at any time that the U.K. Subsidiaries shall
have the right to request an advance under the U.K. Credit Agreement or (b) a
Canadian Loan at any time that the Canadian Subsidiaries shall have the right
to request an advance under the Canadian Credit Agreement or (c) if
applicable, an Australian Loan at any time that the Australian Subsidiaries
shall have the right to request an advance under the Australian Facility. All
Revolving Credit Advances shall be disbursed in the currency in which such
Loan is to be made from whichever office or other place Agent may designate
from time to time by notice to Borrower and, together with any and all other
Obligations of Borrower to Lenders, shall be charged to Borrower's account on
Agent's books. The proceeds of each Revolving Credit Advance made by the
Lenders shall be made available to Borrower on the day so requested. Any and
all Obligations due and owing hereunder may be charged to Borrower's account
and shall constitute Revolving Credit Advances.
(c) Notwithstanding the provisions of (a) above, in the
event Borrower desires to obtain a LIBO 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 to be borrowed, which amount on the date of such Loan
shall be an integral multiple of $500,000, and (iii) the duration of the first
Interest Period therefor. "Interest Periods" for LIBO Rate Loans shall be for
one, two or three months. No LIBO Rate Loan shall be made available to
Borrower during the continuance of a Default or an Event of Default.
(d) Each Interest Period of a LIBO Rate Loan shall commence
on the date such LIBO Rate Loan is made and shall end on such date as Borrower
may elect as set forth in (c)(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 LIBO 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 LIBO Rate Loan by its notice of borrowing given to Agent pursuant to
Section 4(a) or by its notice of conversion given to Agent pursuant to Section
4(e), as the case may be. Borrower shall elect the duration of each succeeding
Interest Period by giving irrevocable written notice to 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 LIBO Rate Loan. If 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(e) hereinbelow.
(e) Provided that no Event of Default shall have occurred
and be continuing, Borrower may, on the last Business Day of the then current
Interest Period applicable to any outstanding LIBO Rate Loan, or Alternate
Base Rate Loan, convert any such loan into a loan of another type in the same
aggregate principal amount provided that any conversion of a LIBO Rate Loan
shall be made only on the last Business Day of the then current Interest
Period applicable to such LIBO Rate Loan. If Borrower desires to convert a
loan, it shall give Agent not less than three (3) Business Days' prior written
notice to convert from an Alternate Base Rate Loan to a LIBO Rate Loan or one
(1) Business Day's prior written notice to convert from a LIBO Rate Loan to an
Alternate Base Rate Loan, specifying the date of such conversion, the loans to
be converted and if the conversion is from an Alternate Base Rate Loan to any
other type of loan, the duration of the first Interest Period therefor. After
giving effect to each such conversion, there shall not be outstanding more
than seven (7) LIBO Rate Loans, in the aggregate.
(f) At its option and upon three (3) Business Days'
prior written notice, Borrower may prepay the LIBO Rate Loans 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 LIBO Rate Loan is required or
permitted on a date other than the last Business Day of the then current
Interest Period with respect thereto, Borrower shall indemnify Agent and
Lenders therefor in accordance with Section 4(g) hereof. A certificate as to
any additional amounts payable pursuant to the foregoing sentence submitted by
Agent or any Lender to Borrower shall be conclusive absent manifest error.
(g) Borrower shall indemnify Agent and Lenders and
hold 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, conversion of or any default by Borrower in the payment of the
principal of or interest on any LIBO Rate Loan or failure by Borrower to
complete a borrowing of, a prepayment of or conversion of or to a LIBO Rate
Loan after notice
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thereof has been given, including (but not limited to) any interest payable by
Agent or Lenders to lenders of funds obtained by it in order to make or
maintain its LIBO Rate Loans hereunder.
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 and at the end of each Interest Period with
respect to 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 Agent's option interest shall be
payable at the Default Rate.
(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) minus one
percent (-1.0%) with respect to Alternate Base Rate Loans, (b) one and one
half percent (1.5%) with respect to LIBO Rate Loans, (c) zero percent (0%)
with respect to Canadian Loans and (d) one and one half percent (1.5%) with
respect to Sterling Loans.
(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
$175,000,000, Borrower shall pay to Agent, for the ratable benefit of Lenders,
a fee at a rate per annum equal to one-eighth of one percent (1/8%) of the
amount by which $175,000,000 exceeds such average daily unpaid balance. Such
fee shall be calculated on the basis of a year of
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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) Agent's Fee. In addition to the fee described
in subsection (b)(i) above, 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 and
Foreign Subsidiary Obligations) hereunder during any calendar month is less
than $175,000,000, Borrower shall pay to Agent, for its account only, a fee at
a rate per annum equal to one-eighth of one percent (1/8%) of the amount by
which BNY's Commitment Percentage of $175,000,000 exceeds BNY's Commitment
Percentage of the 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 and shall not be subject to proration.
(iii) Intentionally Omitted.
(iv) U.K. Collateral Monitoring Fee. For conducting
collateral monitoring in the United Kingdom, Borrower shall pay Agent a
collateral monitoring fee equal to (pound)7,500 per month commencing on
October 1, 1997 and on the first day of each month thereafter.
(v) Collateral Agent Fee. Borrower shall pay Agent
an annual collateral agent fee of $15,000 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. 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.
(vi) 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. For
purposes of calculating any fees payable hereunder any amount which is
denominated in a currency other than Dollars shall be valued based on the
Dollar Equivalent.
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(vii) 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 Borrower may have outstanding Permitted Overadvances of not more than
$5,000,000) when 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 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.
(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.
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(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 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) In consideration of the accounts receivable
management and bookkeeping services to be provided by BNY hereunder, 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 (including, at BNY's discretion, upon the occurrence and during
the continuance of an Event of Default, U.K. 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,
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Borrower shall in that event pay BNY .15% of the gross face amount of
each 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 in the event 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.
(g) Withholding Taxes; Non-US Transferees.
(i) All sums payable by any Financial Party under
this Agreement shall be paid in full without set off or counterclaim and free
and clear of and without any deduction or withholding for or on account of,
any present or future withholding or similar taxes.
(ii) If any Financial Party shall be required by
law to make any such deduction or withholding from any payment for the account
of Lender, then such Financial Party will ensure that such deduction or
withholding does not exceed the minimum legal liability therefor and will
forthwith pay to Agent or any Lender such additional amount as will result in
the receipt by Agent or such Lender of the full amount which would otherwise
have been receivable hereunder had no such deduction or withholding been made.
(iii) If a Financial Party pays any additional
amount referred to in sub-clause (ii) above ("tax payment") to Agent or any
Lender pursuant to the clause and Agent or such Lender, in its absolute
discretion, effectively obtains a refund of that tax payment ("tax
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credit") which it is able to identify as being attributable to that tax
payment, then if it can, do so without prejudicing the retention of that tax
credit, Agent or such Lender shall reimburse such Financial Party such
proportion of that tax credit as it determines will leave it (after such
reimbursement) in no better or worse position than if that tax payment had not
been required. Agent or such Lender shall have complete discretion as to (a)
whether to claim any tax credit (and, if so, the extent, order and manner of
such claim) and (b) whether any amount is due from it hereunder (and, if so,
the amount and time of payment). Neither Agent nor any Lender shall be obliged
to disclose any information regarding its tax affairs and computations.
(iv) Each Lender (or Transferee) that is not a
citizen or resident of the United States of America, a corporation,
partnership or other entity created or organized in or under the laws of the
United States of America (or any jurisdiction thereof), or any estate or trust
that is subject to federal income taxation regardless of the source of its
income (a "Non-U.S. Lender") shall deliver to Borrower and Agent (or, in the
case of a Participant, to the Lender from which the related participation
shall have been purchased) two copies of either U.S. Internal Revenue Service
Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming
exemption from U.S. federal withholding tax under Section 871 (h) or 881(c) of
the Code with respect to payments of "portfolio interest", a Form W-8, or any
subsequent versions thereof or successors thereto (and, if such Non-U.S.
Lender delivers a Form W-8, an annual certificate representing that such
Non-U.S. Lender is not a "bank" for purposes of Section 881(c) of the Code, is
not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of
the Code) of Borrower and is not a controlled foreign corporation related to
Borrower (within the meaning of Section 864(d)(4) of the Code)), properly
completed and duly executed by such Non-U.S. Lender claiming complete
exemption from U.S. federal withholding tax on all payments by Borrower under
this Agreement and the other Ancillary Agreements. Such forms shall be
delivered by each Non-U.S. Lender on or before the date it becomes a party to
this Agreement) or, in the case of any Participant, on or before the date such
Participant purchases the related participation). In addition, each Non-U.S.
Lender shall deliver such forms promptly upon the obsolescence or invalidity
of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender
shall promptly notify Borrower at any time it determines that it is no longer
in a position to provide any previously delivered certificate to Borrower (or
any other form of certification adopted by the U.S. taxing authorities for
such purpose).
(v) In the event that Agent shall have determined
that any applicable tax law, treaty or governmental regulation, or any change
therein or in the interpretation or application thereof, or compliance by any
Lender necessitates an amendment, modification or supplement to this
Agreement, Borrower will cooperate with Agent in completing any such
amendment, modification or supplement.
5A. (a) Conditions to Initial Loans. Notwithstanding any
other provisions contained in this Agreement, the agreement of Agent and
Lenders to make the initial Loans requested to be made on the Closing Date is
subject to the satisfaction, or waiver by Agent, immediately prior to or
concurrently with the making of such Loans, of the following conditions
precedent:
(1) Loan Agreement. Agent shall have received
counterparts of this Agreement signed by each of the parties hereto.
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(2) Closing Documents. Agent shall have received,
in form and substance satisfactory to Agent, executed Guaranties, U.K.
Guaranties, Guaranty Security Agreements, Stock Pledge Agreements, U.K.
Security Documents, Canadian Security Documents and all other Ancillary
Agreements (to the extent not currently existing), each in form and substance
satisfactory to Lenders;
(3) Filings, Registrations and Recordings. Each
document (including, without limitation, any Uniform Commercial Code financing
statement) required by this Agreement, any Ancillary Agreement or under law or
reasonably requested by Agent to be filed, registered or recorded in order to
create, in favor of Agent, a perfected security interest in or lien upon the
Collateral shall have been properly filed, registered or recorded in each
jurisdiction in which the filing, registration or recordation thereof is so
required or requested, and Agent shall have received an acknowledgment copy,
or other evidence satisfactory to it, of each such filing, registration or
recordation and satisfactory evidence of the payment of any necessary fee, tax
or expense relating thereto;
(4) Corporate Proceedings of Borrower. Agent shall
have received a copy of the resolutions in form and substance reasonably
satisfactory to Agent, authorizing (i) the execution, delivery and performance
of this Agreement and any related agreements (collectively the "Documents")
and (ii) the granting by Borrower and Guarantors of the security interests in
and liens upon the Collateral in each case certified by the Secretary or an
Assistant Secretary of Borrower or the applicable Guarantor as of the Closing
Date; and, such certificate shall state that the resolutions thereby certified
have not been amended, modified, revoked or rescinded as of the date of such
certificate;
(5) Incumbency Certificates of Borrower. Agent
shall have received a certificate of the Secretary or an Assistant Secretary
of Borrower and each Guarantor, dated the Closing Date, as to the incumbency
and signature of the officers of Borrower and such Guarantor executing this
Agreement or any Ancillary Agreement, any certificate or other documents to be
delivered by it pursuant hereto, together with evidence of the incumbency of
such Secretary or Assistant Secretary;
(6) Certificates. Agent shall have received a copy
of the Articles or Certificate of Incorporation of Borrower and each
Guarantor, and all amendments thereto, certified by the Secretary of State or
other appropriate official of its jurisdiction of incorporation together with
copies of the By-Laws of Borrower and such Guarantor;
(7) Good Standing Certificates. Agent shall have
received good standing certificates for Borrower and Guarantors dated not more
than 10 days prior to the Closing Date, issued by the Secretary of State or
other appropriate official of Borrower's and each Guarantor's jurisdiction of
incorporation and each jurisdiction where the conduct of Borrower's and each
Guarantor's business activities or the ownership of its properties
necessitates qualification;
(8) Legal Opinion. Agent shall have received the
executed legal opinions of Donovan Leisure Newton & Irvine, counsel to
Borrower, each in form and substance satisfactory to Agent which shall cover
such matters incident to the transactions contemplated by
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this Agreement and related agreements as Agent may reasonably require and
Borrower hereby authorizes and directs such counsel to deliver such opinions
to Agent and the Lenders;
(9) No Litigation. (i) No litigation, investigation
or proceeding before or by any arbitrator or governmental authority shall be
continuing or threatened against Borrower or against the officers or directors
of Borrower (A) in connection with the Documents or any of the transactions
contemplated thereby and which, in the reasonable opinion of Agent, is deemed
material or (B) which if adversely determined, could, in the reasonable
opinion of Agent, have a Material Adverse Effect; and (ii) no injunction,
writ, restraining order or other order of any nature materially adverse to
Borrower or the conduct of its business or inconsistent with the due
consummation of the transactions contemplated by this Agreement shall have
been issued by any governmental authority;
(10) Fees. Agent shall have received all fees
(including all accrued fees and reasonable fees and expenses of counsel)
payable to Agent and the Lenders on or prior to the Closing Date Agent shall
have the option to charge Borrower's account for such fees.
(11) Payment Instructions. Agent shall have
received written instructions from Borrower directing the application of
proceeds of the initial Loans made pursuant to this Agreement;
(12) Consents. Agent shall have received any and
all governmental and third party consents necessary to permit the effectuation
of the transactions contemplated by this Agreement, the Ancillary Agreements
and the Austin Knight Acquisition Documentation; and, Agent shall have
received such consents and waivers of such third parties as might assert
claims with respect to the Collateral (including the Foreign Collateral), as
Agent and its counsel shall deem necessary;
(13) No Adverse Material Change. (i) Since June 30,
1997, there shall not have occurred (x) any material adverse change in the
condition, financial or otherwise, operations, properties or prospects of
Borrower or any Guarantor, (y) no material damage or destruction to any of the
Collateral nor any material depreciation in the value thereof and (z) no
event, condition or state of facts which could have a Material Adverse Effect
and (ii) no representations made or information supplied to Agent or any
Lender shall have been proven to be inaccurate or misleading in any material
respect;
(14) Closing Certificate. Agent shall have received
a closing certificate signed by the Chief Financial Officer of Borrower dated
as of the date hereof, stating that (i) all representations and warranties set
forth in this Agreement and the Other Documents are true and correct on and as
of such date, (ii) Borrower is on such date in compliance with all the terms
and provisions set forth in this Agreement and the other Documents and (iii)
on such date no Default or Event of Default has occurred or is continuing;
(15) 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 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
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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.
(16) 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.
(17) Amendment to Canadian Security Documents.
TMP's Canadian Subsidiaries and BNY Canada shall have entered into a Second
Amendment to Accounts Receivable Management and Security Agreement and each of
the Canadian Subsidiaries shall have executed guaranties of the obligations
and such hypothecs, agreements and documents deemed appropriate by Agent and
its counsel.
(18) Stock Pledge Agreements. Borrower shall have
delivered a pledge of shares, pursuant to stock pledge agreements satisfactory
to Agent, of one hundred percent (100%) of the issued and outstanding shares
of TMP U.K. Borrower shall use its best efforts, consistent with applicable
tax law, to provide a pledge of one hundred percent (100%) the issued and
outstanding shares of TMP Canada and 3055078 Canada Inc.
(19) Other. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement shall be satisfactory in form and
substance to Agent, the Lenders and their counsel.
(b) 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(b), 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.
(1) 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 or 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.
(2) No Event of 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.
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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 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):
(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.
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(c) that 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
and provided the proceeds of any such dispositions which exceed $250,000 in
the aggregate during any fiscal year (x) are used or committed to be used to
acquire replacement Equipment which is subject to Agent's first priority
security interest (subject to Permitted Liens as described in clause (vi) of
the definition thereof) and which has a fair market value not less than the
Equipment which was disposed or transferred or (y) to the extent not so used
or committed to be used, 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 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
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(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 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. Notwithstanding the
foregoing, Borrower shall deliver to Agent (at a location in the United
Kingdom to be identified in the applicable U.K. Credit Agreement) each day as
and for the prior day, a Borrowing Base Certificate with respect to U.K
Receivables updated to reflect the most recent sales and collections of
Borrower and U.K. Subsidiaries with respect to U.K. 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,
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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 ninety (90)
days after the end of each fiscal year of the Financial Parties (one hundred
five (105) days with respect to those Subsidiaries in which Borrower does not
own more that 50% of its issued shares) and, 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) Scheduled
Affiliates (without duplication) on a combining and combined 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 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 forty five (45) days 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) Scheduled Affiliates (without duplication) on a
consolidating 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.
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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 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 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 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 receives any notice of violation,
request for information or notification that it is potentially responsible for
39
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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 Borrower shall, within five (5) Business Days, give written notice of
same to Agent detailing facts and circumstances of which 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 Agent to protect its security interest in the Collateral
and is not intended to create nor shall it create any obligation upon 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, Agent may, but without the obligation to do so, for the
sole purpose of protecting 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 Agent (or such third
parties as directed by 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 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 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 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 except to the extent such
loss, liability, damage and expense is attributable to any Hazardous Discharge
resulting from actions on the part of Agent. Borrower's obligations under this
paragraph 12(e) shall arise upon the discovery of the presence of any
Hazardous Substances on 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. 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;
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(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 salable 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 is reasonably likely to materially and adversely affect
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 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
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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; (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; (iv) make advances,
loans or extensions of credit to any Person other than (a) loans, advances or
extensions of credit to any Person other than (x) another Financial Party or
(y) to Affiliates which, in the case of Affiliates which are not Scheduled
Affiliates, shall not exceed in the aggregate outstanding at any one time
$5,000,000 or (z) to wholly owned Subsidiaries of one or more Financial
Parties which, for all such Subsidiaries except those Subsidiaries to which
loans, advances or extensions of credit are now outstanding (and then only as
to the amount now outstanding), shall not exceed in the aggregate outstanding
at any one time after the date hereof $25,000,000 and (b) an advance to
National Media Holding Company, Inc. in the original principal sum of
$5,000,000; (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 or Foreign
Subsidiaries 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 Agent incurred by
foreign Affiliates or foreign Subsidiaries 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, (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
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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 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 (A) $10,000,000 in cash and
$10,000,000 in unsecured note obligations during the period commencing on the
Closing Date and continuing through December 31, 1997, and (B) $20,000,000 in
the aggregate in cash and in unsecured note obligations during any other
fiscal year, (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, provided that Borrower shall make no Acquisition
following the occurrence and during the continuance of an Event of Default or
if an Event of Default would result after giving effect 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
------ ------
9/30/97 through 12/30/98 85,000,000
12/31/98 through 12/30/99 100,000,000
12/31/99 through 12/30/00 120,000,000
12/31/00 and at all times thereafter 140,000,000
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 expenditures made by
Borrower pursuant to Section 8(a) hereof) in excess of (i) $12,500,000 during
the fiscal year ended December 31, 1997, (ii) $10,000,000 during the fiscal
year ended December 31, 1998 and (iii) $6,000,000 during any fiscal year
thereafter;
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(q) it shall not at any time permit any deficit in its
Working Capital or Domestic Working Capital to be more than the following
amounts at the end of each fiscal quarter during the following periods:
Period Amount
------ ------
9/30/97 through 12/30/98 ($ 125,000,000)
12/31/98 through 12/30/99 ($ 110,000,000)
12/31/99 through 12/30/00 ($ 110,000,000)
12/31/00 and at all times thereafter ($ 100,000,000)
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 not less than the following ratios at the end of
each fiscal quarter during the following periods;
Date Ratio
---- -----
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
01/01/01 and at all times thereafter 1.00 to 1.00
(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 (i) 2.0 to 1.0 for
each fiscal quarter through and including the fiscal quarter ending December
31, 1997 and (ii) 3.0 to 1.0 for each fiscal quarter thereafter;
(t) Borrower on a Consolidated Basis will not incur a loss
before taxes of more than (i) $1,500,000 for any six month period ending the
last day of any calendar month and (ii) $2,000,000 for any three month period
ending the last day of any calendar month;
(t-1) the amount of Foreign Indebtedness (excluding Foreign
Indebtedness payable to BNY, an affiliate of BNY or to BNY as agent for other
financial institutions) outstanding at any time shall not exceed an amount
equal to twenty-five percent (25%) of the Tangible Net Worth of Borrower on a
Consolidated Basis as of such date;
(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
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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) furnish Agent with (x) copies of all policies and upon Agent's
request 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 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 Borrower will be more than 30 days past
due;
(y) Borrower will cause each of (i) its Scheduled Affiliates
and Domestic Subsidiaries, (ii) the Scheduled Affiliates and Domestic
Subsidiaries of Andrew McKelvey, (iii) each Guarantor and (iv) any other
Scheduled Affiliate or Domestic Subsidiary of any Financial Party, to execute
and deliver to Agent a Guaranty Agreement and Guaranty Security Agreement;
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(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) 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 from customers provided such notes have been
delivered to Agent as additional Collateral and (G) investments not in excess
of $5,000,000 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;
(bb) 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;
(cc) 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 it sole
discretion);
(dd) Borrower covenants that BNY UK (or its affiliates)
shall be Borrower's and its U.K. Subsidiaries' sole working capital lender in
the United Kingdom;
(ee) Borrower covenants that BNY (or its affiliates) shall
be Borrower's and its Canadian Subsidiaries' sole working capital lender in
Canada;
(ff) Borrower shall use its best efforts to obtain landlord,
mortgagee or warehouseman agreements satisfactory to Agent with respect to all
premises leased by Borrower at which Inventory and books and records are
located and with respect to which such an agreement is not currently in place;
(gg) Not later than 120 days from the Closing Date, Borrower
shall either (i) cause TMP Australia Pty Ltd. to reincorporate in a territory
in Australia which does subject Borrower to a stamp duty in connection with
the pledge of shares of stock owned by Borrower of such company not later than
120 days from the Closing Date and deliver to Agent a pledge (pursuant to a
Pledge Agreement in form and substance satisfactory to Agent) of one hundred
percent (100%) of the issued and outstanding stock of TMP Australia or (ii)
deliver to Agent a pledge (pursuant to a Pledge Agreement in form and
substance satisfactory to Agent) of one
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hundred percent (100%) of the issued and outstanding shares of a newly formed
holding company of TMP Australia and Borrower's other Australian Subsidiaries.
(hh) Borrower shall not enter into foreign currency exchange
contracts involving an aggregate notional amount in excess of an amount equal
to 150% of the amount of capital expenditures permitted to be made in
accordance with section 12(m) or 12 (p) hereof, provided that Borrower shall
not enter into any foreign currency contract upon the occurrence and during
the continuation of an Event of Default; and
(ii) Within nine months from the Closing Date, Borrower
shall cause its invoices to its Customers or agreements with, representing at
least 90% of all of its Customers, to contain a notation to the effect that
Borrower is acting as a principal and not as such Customer's agent vis-a-vis
publishers.
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, 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
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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 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 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 Loans with
the prior written consent of Agent and one or
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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 such further documents and do such further acts and things in
order to effectuate the foregoing. Notwithstanding anything hereinabove to the
contrary, no Lender shall sell, assign or transfer its rights hereunder to any
Purchasing Lender unless such Lender has first given Agent thirty (30) days
prior written notice, during which period Agent shall have the option to
repurchase from such Lender its rights under this Agreement on the same basis
as provided to the proposed Purchasing Lender. If Agent exercises its option,
the parties shall execute a Commitment Transfer Supplement and the transferor
Lender shall be released from its obligations under the Agreement to the
extent provided in such Commitment Transfer Supplement. In addition, in the
event there shall occur a material adverse change in the financial condition
or affairs of any Lender, Agent shall have the right to repurchase such
Lender's rights under the Agreement in the manner described above.
(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 Borrower or any Lender at any reasonable time and
from time to time upon reasonable prior notice. Agent shall receive a
processing fee in the amount of $3,500 payable by the 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
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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"). 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:
Termination occurs between: Fee
--------------------------- ---
Closing Date through June 30, 1998 $2,000,000
July 1, 1998 through June 30, 1999 $1,000,000
July 1, 1999 through June 30, 2000 $ 500,000
July 1, 2000 through June 30, 2001 0
(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
due when required hereunder;
(b) failure to pay any taxes in excess of $100,000 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
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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 $1,000,000 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 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 either orally or 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
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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
the foregoing and the occurrence of any of the foregoing shall have a material
adverse impact on 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 $2,500,000 in
the aggregate during any fiscal year of Borrower or any interest therein,
except as permitted herein;
(n) Intentionally Omitted;
(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 $1,000,000;
(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) there shall occur a Change of Control;
(s) 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 or procedures employed by the media
industry, which shall have an adverse impact on Borrower and its operations;
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(t) 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 payable 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.
(u) Any of Borrowers 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.
(v) 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;
(w) 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 calculations to take into account the addition of new
customers during such fiscal year);
(x) At any time following the occurrence of a Secondary
Equity Event, Andrew McKelvey shall be indebted to Borrower for money borrowed
in an aggregate gross amount in excess of $8,000,000 or in excess of
$1,000,000 after giving effect to offsetting amounts due from Borrower to
Andrew McKelvey; or
(y) If Borrower and/or any Scheduled Affiliates shall
default in any of their obligations to any newspaper publisher or yellow pages
publisher which shall cause Borrower or such Affiliate to be unable to
complete orders from customers in accordance with applicable purchase orders.
(z) There should occur a default or an event of default
under the Canadian Credit Agreement, or any Canadian Security Agreement, or
the UK Credit Agreement or any UK Security Agreement.
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 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 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
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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 a commercially reasonable manner as Agent, in its sole
discretion, deems advisable. In addition, upon the occurrence of an Event of
Default, Borrower shall pledge, and shall cause its direct or indirect
Subsidiaries to pledge to Agent the issued shares of any such direct or
indirect Subsidiary as may be required by Agent as additional security for the
Obligations. 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;
provided that all payments, other than payments with respect to the repayment
of BNY Overadvances made in accordance with Section 2(c) hereof, shall be
applied pro rata according to the respective Commitment Percentages of the
Lenders. 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.
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.
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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
provided that UK Receivables shall be directed to such location as may be
required pursuant to the applicable UK Credit Agreement. 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 Agent: BNY Financial Corporation
1290 Avenue of the Americas
New York, New York 10104
Attention: Robert Grbic
Frank Rinaldi, Esq.
Frank Imperato
Telephone: (212) 408-7292
Telecopier: (212) 408-4384
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 Borrower: TMP Worldwide Inc.
1633 Broadway, 33rd Floor
New York, New York 10019
Attention: Thomas G. Collison, Vice Chairman
and Myron F. Olesnyckyj, Vice
President and General Counsel
Telephone: (212) 977-5400
55
<PAGE>
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 (EXCEPT TO THE
EXTENT THAT THE LAWS OF THE SELECTED FORUM REQUIRE ASSERTION OR LOSS OR
FORFEITURE THEREOF) 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
Ancillary Agreements contain the entire understanding between 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 hereinafter made shall have
no force and effect unless in writing, signed by Borrower's, 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
56
<PAGE>
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, Agent with the consent in writing
of the Required Lenders, and 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 Borrower, for the purpose of adding or
deleting any provisions or otherwise changing, varying or waiving in any
manner the rights of the Lenders, Agent or Borrower thereunder or the
conditions, provisions or terms thereof or waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
provided, however, that Agent may, without the consent of any Lender, enter
into any supplemental agreement to amend the fees described in Section 5(b)
hereof; and provided, further 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 $2,500,000, provided that consent of
all Lenders shall be required for the release of any Collateral to the extent
such release results in or would result in an overadvance.
(vi) change the rights and duties of Agent.
Any such supplemental agreement shall apply equally to each of the Lenders and
shall be binding upon Borrower, the Lenders, Agent and all future holders of
the Obligations. In the case of any waiver, Borrower, 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 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.
57
<PAGE>
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 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
58
<PAGE>
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 Agent and
each payment by Borrower on account of Revolving Credit Advances shall be
applied first to those Revolving Credit Advances made by 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, Agent and the Lenders
shall make certain payments as follows: (I) if the aggregate amount of new
Revolving Credit Advances made by 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 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, Agent shall submit to each Lender a certificate with respect to payments
received and Loans made during the Week immediately preceding such Lender
Settlement Date. Such certificate of Agent shall be conclusive in the absence
of manifest error.
(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.
59
<PAGE>
(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
and its Subsidiaries in connection with the making and the continuance of the
Loans hereunder or the loans made under the Foreign Subsidiary Credit
Agreements (the "Foreign Loans") and the taking or not taking of any action in
connection herewith or therewith, 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 the Foreign Loans or at any time or
times thereafter except as shall be provided by Borrower or a Subsidiary of
Borrower pursuant to the terms hereof and thereof. 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, any Ancillary Agreement or any Foreign
Subsidiary Credit Agreement, or of the financial condition of Borrower or any
Subsidiary, 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 any Foreign Subsidiary
Credit Agreement 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 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.
60
<PAGE>
(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,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from Agent's gross (but not mere) negligence or
willful misconduct.
(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 or any Foreign
Subsidiary Credit 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.
(m)(1) 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 Foreign Subsidiary Obligations be deemed to
have irrevocably purchased an undivided risk
participation (the "Risk
61
<PAGE>
Participation") in all such outstanding Foreign
Subsidiary Obligations. The Risk Participation
shall be payable from time to time by each Lender
to Agent on demand following receipt of notice by
such Lender of (i) the incurrence by a BNY Company
of Foreign Losses and the amount thereof or (ii)
the occurrence of an event of default under the
applicable Foreign Subsidiary Credit Agreement
(each, a "Payment Event"). Prior to the occurrence
of a Payment Event (the "Risk Participation
Period"), Agent shall pay each Lender an amount
calculated at a rate per annum equal to one and one
quarter percent (1 1/4%) on its pro rata share of
the outstanding amount of Foreign Subsidiary
Obligations as at the end of each month (the "Risk
Participation Fee"), payable by Agent five (5)
Business Days following the end of such month. Such
fee shall be calculated on the basis of a year of
such number of days as is provided in the
applicable Foreign Subsidiary Credit Agreement. In
addition to the Risk Participation Fee, each Lender
shall be entitled to receive its pro rata share of
all additional fees paid to a BNY Company for
amending or waiving the terms of any Foreign
Subsidiary Credit Agreements. Other than the Risk
Participation Fee and the foregoing amendment fee,
no Lenders shall be entitled to any other fees
relating to the purchase of the Risk Participation.
Agent's obligation to pay the foregoing fees shall
terminate upon the occurrence of a Payment Event.
(2) Following payment by any Lender of its Risk
Participation as provided above, such Lender shall
be entitled to receive its pro rata share of
outstanding Foreign Subsidiary Obligations
consisting of principal, interest and fees as
prescribed in the applicable Foreign Subsidiary
Credit Agreement, provided, however, that such
Lender shall not be entitled to any interest or
fees which are specifically designated in such
agreement to be payable to a BNY Company as "agent"
under the applicable Foreign Subsidiary Credit
Agreement. The foregoing payments of principal,
interest and fees shall be payable to each Lender
as and when paid to Agent or another BNY Company
(whether directly from Borrower or a Subsidiary of
Borrower or under any guarantee or as respects any
collateral). Any determination by Agent or any
other BNY Company as to the allocation of any
payment or otherwise to the Foreign Subsidiary
Obligations or to the interest, principal, fees or
any other amount payable in respect of the Foreign
Subsidiary Credit Agreements shall be final and
conclusive absent manifest error.
(3) Each Lender's Risk Participation shall continue
until the last to occur of any of the following
events: (A) the BNY Companies cease to be obligated
to make loans to Borrowers' foreign Subsidiaries in
accordance with the Foreign Subsidiary Credit
Agreements; (B) no Foreign Subsidiary Obligations
remain outstanding or (C) all Persons (other than
Borrower or any of its foreign Subsidiaries) have
been fully reimbursed for all payments made under
or relating to such Foreign Subsidiary Obligations.
The obligation of each Lender to make payments to
Agent and of Agent to make payments to the Lender
in accordance with the provisions of this
62
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subsection (m) shall be absolute and unconditional.
All payments to be made hereunder by any Lender to
Agent shall be made without any set-off, deduction
withholding or retention whatsoever. To the extent
that any Lender makes or is obliged to make any
such deduction, withholding or retention such
Lender shall forthwith make such further payment to
Agent as may be required so that Agent receives in
aggregate a sum equal to the payment which should
have been made by Agent hereunder if such
deduction, withholding or retention had not been
made.
(4) Agent and the applicable BNY Company will have the
exclusive right to manage, perform and enforce the
terms of the Foreign Subsidiary Credit Agreements
and to exercise and enforce all privileges and
rights exercisable or enforceable by it thereunder,
for the joint benefit of the applicable BNY Company
and each other Lender, according to Agent's and
such BNY Company's discretion and the exercise of
its business judgment. Agent and the applicable BNY
Company may, in its sole discretion and without the
consent of the other Lenders amend or modify the
Foreign Subsidiary Credit Agreement, or waive its
rights thereunder; provided, however, that no such
amendment or waiver shall, without the consent of
all the Lenders, (i) increase the maximum loan
amount under the applicable Foreign Subsidiary
Credit Agreement or (ii) extend the maturity of any
note or the due date for any amount payable
thereunder, or decrease the rate of interest or
reduce any fee payable by a Foreign Subsidiary to a
BNY Company pursuant to the applicable Foreign
Subsidiary Credit Agreement (other than interest or
fees which are specifically designated in such
agreement to be payable to a BNY Company as "agent"
under the applicable Foreign Subsidiary Credit
Agreement, in which event no consent shall be
required).
35. Determination of Dollar Equivalent. For purposes of this
Agreement, the Dollar Equivalent of each Alternate Currency Loan designated in
an Alternate Currency shall be recalculated (i) on each borrowing of an
Alternate Currency Loan, (ii) on each date that the Maximum Loan Amount or the
Formula Amount is reduced and (iii) on the last Business Day of each month.
The Dollar Equivalent for each Alternate Currency Loan shall remain in effect
until the same is recalculated by Agent as provided above and notice of such
recalculation is sent to Borrower. Agent shall promptly notify Borrower and
the Lenders of each such determination of the Dollar Equivalent for each
Alternate Currency Loan.
36. European Monetary Union. It is hereby acknowledged that
during the term of this Agreement the United Kingdom may adopt a single
European currency as its lawful currency in place of Sterling as part of the
anticipated European Economic and Monetary Union. It is hereby acknowledged
and agreed that "Sterling", as defined herein, shall include any such
successor currency and that conversion into such successor currency shall be
made at the official rate of conversion on the date on which Sterling is so
replaced, and that the denomination of the original currency shall be retained
hereunder for so long as it is legally permissible. It is hereby
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<PAGE>
further acknowledged and agreed that the provisions of this Agreement relating
to Sterling Loans shall remain in full force and effect upon such conversion,
and that neither the introduction of a single European currency, the
replacement of Sterling thereby, the fixing of the official rate of
conversion, nor any economic consequences resulting therefrom shall give rise
to any right to terminate, contest, cancel, modify or renegotiate the
provisions of this Agreement.
37. 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.
38. 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.
[INTENTIONAL END OF PAGE; SIGNATURE PAGE FOLLOWS]
64
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as
of the day and year first above written.
TMP WORLDWIDE INC.
By: _______________________________
Name: Thomas Collison
Title: Vice President
BNY FINANCIAL CORPORATION,
as Agent and as Lender
By: _______________________________
Name: _____________________________
Title: ____________________________
Commitment Percentage: ________
DEUTSCHE FINANCIAL SERVICES HOLDING
CORPORATION, as Lender
By: _______________________________
Name: _____________________________
Title: ____________________________
Commitment Percentage: ________
BANK POLSKA KASA OPIEKI, S.A.,
as Lender
By: _______________________________
Name: _____________________________
Title: ____________________________
Commitment Percentage: ________
<PAGE>
SCHEDULES
Schedule A - Proposed Mergers
Lenders consent to and waive the following proposed mergers:
Target Acquisition Corp. into Borrower
Directory Services International Corporation into Borrower
BMS Acquisition Corp. into Borrower
HGI Acquisition Corp. into Borrower
Rogers Acquisition Corp. into Borrower
YPMS Acquisition Corp. into Borrower
BBL Acquisition Corp into Borrower
Woodward Direct, Inc. into Woodward, Inc.
Woodward, Inc into Borrower
BTD Acquisition, Inc into Interdict Inc.
CPC Acquisition Corp. into Interdirect, Inc.
Interdirect, Inc into Borrower
Online Career Management, Inc. into Volando, Inc
<PAGE>
Schedule 1(A)
Permitted Liens
Schedule 1(B)
Scheduled Affiliates
General Directory Advertising Services, Inc.,
a Delaware corporation
M.S.I. - Market Support International, Inc., a
New Jersey corporation
<PAGE>
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
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
TMP Worldwide Inc.
New York, New York
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of the previously filed Registration Statements (No.
333-17743) and (No. 333-18937) of TMP Worldwide Inc. of our report dated March
20, 1998, relating to the consolidated financial statements of TMP Worldwide
Inc. and subsidiaries appearing in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.
/s/ BDO SEIDMAN, LLP
-----------------
New York, New York
March 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 5,937
<SECURITIES> 0
<RECEIVABLES> 265,276
<ALLOWANCES> 9,749
<INVENTORY> 0
<CURRENT-ASSETS> 288,363
<PP&E> 73,173
<DEPRECIATION> 35,413
<TOTAL-ASSETS> 495,206
<CURRENT-LIABILITIES> 282,496
<BONDS> 115,852
<COMMON> 26
0
0
<OTHER-SE> 96,832
<TOTAL-LIABILITY-AND-EQUITY> 495,206
<SALES> 237,417
<TOTAL-REVENUES> 237,417
<CGS> 0
<TOTAL-COSTS> 206,605
<OTHER-EXPENSES> 90
<LOSS-PROVISION> 3,580
<INTEREST-EXPENSE> 8,772
<INCOME-PRETAX> 18,370
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,623
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,623
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.38
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,513
<SECURITIES> 0
<RECEIVABLES> 270,925
<ALLOWANCES> 8,502
<INVENTORY> 0
<CURRENT-ASSETS> 289,609
<PP&E> 66,012
<DEPRECIATION> 30,634
<TOTAL-ASSETS> 481,892
<CURRENT-LIABILITIES> 287,041
<BONDS> 100,542
<COMMON> 26
0
0
<OTHER-SE> 93,675
<TOTAL-LIABILITY-AND-EQUITY> 481,892
<SALES> 167,343
<TOTAL-REVENUES> 167,343
<CGS> 0
<TOTAL-COSTS> 143,715
<OTHER-EXPENSES> 50
<LOSS-PROVISION> 2,327
<INTEREST-EXPENSE> 6,434
<INCOME-PRETAX> 14,818
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,546
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,546
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.30
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,264
<SECURITIES> 0
<RECEIVABLES> 210,841
<ALLOWANCES> 7,332
<INVENTORY> 0
<CURRENT-ASSETS> 228,549
<PP&E> 60,330
<DEPRECIATION> 28,762
<TOTAL-ASSETS> 374,048
<CURRENT-LIABILITIES> 219,680
<BONDS> 116,088
<COMMON> 24
0
0
<OTHER-SE> 37,821
<TOTAL-LIABILITY-AND-EQUITY> 374,048
<SALES> 100,619
<TOTAL-REVENUES> 100,619
<CGS> 0
<TOTAL-COSTS> 88,111
<OTHER-EXPENSES> (3)
<LOSS-PROVISION> 1,507
<INTEREST-EXPENSE> 4,048
<INCOME-PRETAX> 6,956
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,418
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,418
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,196
<SECURITIES> 0
<RECEIVABLES> 217,710
<ALLOWANCES> 7,051
<INVENTORY> 0
<CURRENT-ASSETS> 234,797
<PP&E> 50,207
<DEPRECIATION> 27,624
<TOTAL-ASSETS> 362,689
<CURRENT-LIABILITIES> 220,375
<BONDS> 108,132
<COMMON> 24
0
0
<OTHER-SE> 33,724
<TOTAL-LIABILITY-AND-EQUITY> 362,689
<SALES> 45,983
<TOTAL-REVENUES> 45,983
<CGS> 0
<TOTAL-COSTS> 40,479
<OTHER-EXPENSES> 6
<LOSS-PROVISION> 509
<INTEREST-EXPENSE> 1,797
<INCOME-PRETAX> 3,192
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,510
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,510
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 898
<SECURITIES> 0
<RECEIVABLES> 198,760
<ALLOWANCES> 7,032
<INVENTORY> 0
<CURRENT-ASSETS> 212,650
<PP&E> 46,629
<DEPRECIATION> 26,067
<TOTAL-ASSETS> 331,753
<CURRENT-LIABILITIES> 224,577
<BONDS> 70,799
<COMMON> 23
2,000
0
<OTHER-SE> 31,272
<TOTAL-LIABILITY-AND-EQUITY> 331,753
<SALES> 162,631
<TOTAL-REVENUES> 162,631
<CGS> 0
<TOTAL-COSTS> 193,720
<OTHER-EXPENSES> 164
<LOSS-PROVISION> 3,131
<INTEREST-EXPENSE> 14,265
<INCOME-PRETAX> (48,649)
<INCOME-TAX> 0
<INCOME-CONTINUING> (52,239)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (52,239)
<EPS-PRIMARY> (2.72)
<EPS-DILUTED> (2.72)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,297
<SECURITIES> 0
<RECEIVABLES> 203,412
<ALLOWANCES> 4,913
<INVENTORY> 0
<CURRENT-ASSETS> 255,480
<PP&E> 42,045
<DEPRECIATION> 24,307
<TOTAL-ASSETS> 335,447
<CURRENT-LIABILITIES> 248,399
<BONDS> 102,809
4,899
0
<COMMON> 19
<OTHER-SE> (23,893)
<TOTAL-LIABILITY-AND-EQUITY> 335,447
<SALES> 118,870
<TOTAL-REVENUES> 118,870
<CGS> 0
<TOTAL-COSTS> 105,709
<OTHER-EXPENSES> 32
<LOSS-PROVISION> 3,123
<INTEREST-EXPENSE> 8,600
<INCOME-PRETAX> 1,406
<INCOME-TAX> 0
<INCOME-CONTINUING> (539)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (539)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,122
<SECURITIES> 0
<RECEIVABLES> 166,092
<ALLOWANCES> 3,876
<INVENTORY> 0
<CURRENT-ASSETS> 190,270
<PP&E> 32,918
<DEPRECIATION> 19,103
<TOTAL-ASSETS> 277,299
<CURRENT-LIABILITIES> 204,126
<BONDS> 88,204
4,227
0
<COMMON> 19
<OTHER-SE> (22,451)
<TOTAL-LIABILITY-AND-EQUITY> 277,299
<SALES> 70,663
<TOTAL-REVENUES> 70,663
<CGS> 0
<TOTAL-COSTS> 61,918
<OTHER-EXPENSES> (450)
<LOSS-PROVISION> 1,993
<INTEREST-EXPENSE> 5,833
<INCOME-PRETAX> 1,369
<INCOME-TAX> 0
<INCOME-CONTINUING> 229
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 229
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,612
<SECURITIES> 0
<RECEIVABLES> 168,724
<ALLOWANCES> 3,392
<INVENTORY> 0
<CURRENT-ASSETS> 194,656
<PP&E> 31,020
<DEPRECIATION> 18,098
<TOTAL-ASSETS> 267,625
<CURRENT-LIABILITIES> 188,438
<BONDS> 95,216
4,899
0
<COMMON> 19
<OTHER-SE> (24,092)
<TOTAL-LIABILITY-AND-EQUITY> 267,625
<SALES> 33,988
<TOTAL-REVENUES> 33,988
<CGS> 0
<TOTAL-COSTS> 29,027
<OTHER-EXPENSES> (14)
<LOSS-PROVISION> 1,295
<INTEREST-EXPENSE> 2,699
<INCOME-PRETAX> 981
<INCOME-TAX> 0
<INCOME-CONTINUING> (66)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (66)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,719
<SECURITIES> 0
<RECEIVABLES> 159,585
<ALLOWANCES> 3,865
<INVENTORY> 0
<CURRENT-ASSETS> 180,516
<PP&E> 29,162
<DEPRECIATION> 17,225
<TOTAL-ASSETS> 258,094
<CURRENT-LIABILITIES> 186,247
<BONDS> 88,070
2,000
0
<COMMON> 19
<OTHER-SE> (21,347)
<TOTAL-LIABILITY-AND-EQUITY> 258,094
<SALES> 123,907
<TOTAL-REVENUES> 123,907
<CGS> 0
<TOTAL-COSTS> 102,148
<OTHER-EXPENSES> (150)
<LOSS-PROVISION> 2,850
<INTEREST-EXPENSE> 10,894
<INCOME-PRETAX> 8,165
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,229
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,229
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.15
</TABLE>
