<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 8, 1998
REGISTRATION NO. 333-46929
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
YOUNG & RUBICAM INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7311 13-1493710
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
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285 MADISON AVENUE
NEW YORK, NEW YORK 10017
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
STEPHANIE W. ABRAMSON, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL
YOUNG & RUBICAM INC.
285 MADISON AVENUE
NEW YORK, NEW YORK 10017
(212) 210-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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PETER H. DARROW, ESQ. MARK C. SMITH, ESQ.
CLEARY, GOTTLIEB, STEEN & HAMILTON SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
ONE LIBERTY PLAZA 919 THIRD AVENUE
NEW YORK, NEW YORK 10006 NEW YORK, NEW YORK 10022
(212) 225-2000 (212) 735-3000
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------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
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========================================================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.01 par value............................... $430,000,000 $23,600(2)
- ------------------------------------------------------------------------------------------------------------------------
Preferred Share Purchase Rights(3)..........................
- ------------------------------------------------------------------------------------------------------------------------
Total....................................................... $430,000,000 $23,600(2)
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
(2) $103,250 of registration fee was previously paid by the registrant.
(3) Rights initially will trade together with the Common Stock. The value
attributable to the Rights, if any, is reflected in the market price of the
Common Stock.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus; one to be
used in connection with an offering in the United States and Canada (the "U.S.
Prospectus") and one to be used in connection with a concurrent international
offering outside the United States and Canada (the "International Prospectus").
The U.S. Prospectus and the International Prospectus will be identical in all
respects except for the front cover pages, the back cover pages and an
additional page for the International Prospectus. The form of the U.S.
Prospectus is included herein; the form of the front cover page of the
International Prospectus follows the front cover page of the U.S. Prospectus,
the form of the back cover page of the International Prospectus follows the back
cover page of the U.S. Prospectus and the form of additional page for the
International Prospectus follows the "Available Information" section of the U.S.
Prospectus.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 8, 1998
PROSPECTUS
, 1998
16,600,000 SHARES
YOUNG & RUBICAM INC.
COMMON STOCK
Of the 16,600,000 shares of Common Stock, par value $.01 per share (the
"Common Stock"), of Young & Rubicam Inc. ("Y&R" or the "Company") offered
hereby, 13,280,000 shares are initially being offered in the United States and
Canada (the "U.S. Offering") by the underwriters of the U.S. Offering named
herein (the "U.S. Underwriters") and 3,320,000 shares are initially being
offered in a concurrent international offering outside the United States and
Canada (the "International Offering," and together with the U.S. Offering, the
"Offerings") by the managers of the International Offering named herein (the
"International Managers"). The initial public offering price and the per share
underwriting discounts and commissions will be identical for each of the
Offerings. Of the 16,600,000 shares of Common Stock offered hereby, 6,666,667
shares are being sold by the Company and 9,933,333 shares are being sold by
certain selling stockholders (the "Selling Stockholders"). The Company will not
receive any of the proceeds from the sale of shares of Common Stock by the
Selling Stockholders. See "Principal and Selling Stockholders."
Prior to the Offerings, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price of the
Common Stock offered pursuant to the Offerings will be between $21.00 and $24.00
per share. For information relating to the factors to be considered in
determining the initial public offering price, see "Underwriting."
Application has been made to list the Common Stock on the New York Stock
Exchange under the symbol "YNR."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES
OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS(2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................... $ $ $ $
Total(3)..................... $ $ $ $
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(1) The Company and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters and the International Managers (collectively, the
"Underwriters") against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses estimated at $ which will be paid by the
Company.
(3) Certain non-management Selling Stockholders have granted to the U.S.
Underwriters an option, exercisable within 30 days of the date hereof, to
purchase up to an aggregate of 2,490,000 additional shares of Common Stock
at the Price to the Public less Underwriting Discounts and Commissions,
solely to cover over-allotments, if any. If the option is exercised in full,
the total Price to the Public, Underwriting Discounts and Commissions,
Proceeds to the Company and Proceeds to the Selling Stockholders will be
$ , $ , $ and $ , respectively. See
"Underwriting."
The shares of Common Stock offered hereby are being offered by the several
U.S. Underwriters when, as and if delivered to and accepted by the U.S.
Underwriters against payment therefor and subject to various prior conditions,
including their right to reject orders in whole or in part. It is expected that
delivery of share certificates representing the Common Stock will be made in New
York, New York on or about , 1998.
JOINT GLOBAL COORDINATORS AND JOINT BOOK-RUNNING MANAGERS
DONALDSON, LUFKIN & JENRETTE BEAR, STEARNS & CO. INC.
SECURITIES
CORPORATION
------------------------------
FURMAN SELZ
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
[INTERNATIONAL COVER PAGE]
SUBJECT TO COMPLETION, DATED APRIL 8, 1998
PROSPECTUS
, 1998
16,600,000 SHARES
YOUNG & RUBICAM INC.
COMMON STOCK
Of the 16,600,000 shares of Common Stock, par value $.01 per share (the
"Common Stock"), of Young & Rubicam Inc. ("Y&R" or the "Company") offered
hereby, 3,320,000 shares are initially being offered outside the United States
and Canada (the "International Offering") by the managers of the International
Offering named herein (the "International Managers") and 13,280,000 shares are
initially being offered in a concurrent offering in the United States and Canada
(the "U.S. Offering," and together with the International Offering, the
"Offerings") by the underwriters of the U.S. Offering named herein (the "U.S.
Underwriters"). The initial public offering price and the per share underwriting
discounts and commissions will be identical for each of the Offerings. Of the
16,600,000 shares of Common Stock offered hereby, 6,666,667 shares are being
sold by the Company and 9,933,333 shares are being sold by certain selling
stockholders (the "Selling Stockholders"). The Company will not receive any of
the proceeds from the sale of shares of Common Stock by the Selling
Stockholders. See "Principal and Selling Stockholders."
Prior to the Offerings, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price of the
Common Stock offered pursuant to the Offerings will be between $21.00 and $24.00
per share. For information relating to the factors to be considered in
determining the initial public offering price, see "Underwriting."
Application has been made to list the Common Stock on the New York Stock
Exchange under the symbol "YNR."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES
OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS(2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................... $ $ $ $
Total(3)..................... $ $ $ $
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(1) The Company and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters and the International Managers (collectively, the
"Underwriters") against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses estimated at $ which will be paid by the
Company.
(3) Certain non-management Selling Stockholders have granted to the U.S.
Underwriters an option, exercisable within 30 days of the date hereof, to
purchase up to an aggregate of 2,490,000 additional shares of Common Stock
at the Price to the Public less Underwriting Discounts and Commissions,
solely to cover over-allotments, if any. If the option is exercised in full,
the total Price to the Public, Underwriting Discounts and Commissions,
Proceeds to the Company and Proceeds to the Selling Stockholders will be
$ , $ , $ and $ , respectively. See
"Underwriting."
The shares of Common Stock offered hereby are being offered by the several
International Managers when, as and if delivered to and accepted by the
International Managers against payment therefor and subject to various prior
conditions, including their right to reject orders in whole or in part. It is
expected that delivery of share certificates representing the Common Stock will
be made in New York, New York on or about , 1998.
JOINT GLOBAL COORDINATORS AND JOINT BOOK-RUNNING MANAGERS
DONALDSON, LUFKIN & JENRETTE BEAR, STEARNS INTERNATIONAL LIMITED
INTERNATIONAL
------------------------------
FURMAN SELZ
GOLDMAN SACHS INTERNATIONAL
SALOMON SMITH BARNEY INTERNATIONAL
<PAGE> 5
[PHOTOGRAPH OF A MAGAZINE OPEN TO A PAGE CONTAINING A PRINT ADVERTISEMENT FOR
YOUNG & RUBICAM INC.]
[FOLD-OUT PAGE]
[PHOTOGRAPH OF KEYS OF COMPUTER KEYBOARD VERY CLOSE-UP PREDOMINANTLY IN GREEN. A
QUESTION MARK, SEMICOLON, COLON AND COMMA ARE IDENTIFIABLE.]
[FOLD-OUT PAGE]
[PHOTOGRAPH OF PRINTING PRESS ROLLER OF TYPEWRITTEN NUMBERS AND SYMBOLS VERY
CLOSE-UP PREDOMINANTLY IN PURPLE. THE NUMBERS 3, 4, 5, 6, 7, 8 AND 9 AND A PLUS
SIGN ARE REPEATED IN ROWS ON THE PAGE.]
<PAGE> 6
This Prospectus, information included in future filings by the Company with
the United States Securities and Exchange Commission (the "Commission"), and
information contained in written material, press releases and oral statements
issued by or on behalf of the Company contain, or may contain, statements that
constitute forward-looking statements. These statements appear in a number of
places in this Prospectus and include statements regarding the intent, belief or
current expectations of the Company or its officers (including statements
preceded by, followed by or that include forward-looking terminology such as
"may," "will," "should," "believes," "expects," "anticipates," "estimates,"
"continues" or similar expressions or comparable terminology, including the
negative thereof) with respect to various matters. These forward-looking
statements include statements in the "Business -- Industry Overview,"
" -- Industry Trends" and " -- Strategy" sections of this Prospectus relating to
trends in the advertising and marketing and communications industries, including
with respect to anticipated advertising expenditures (and the growth thereof) in
the world's advertising markets, as well as statements relating to the Company's
performance in the "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business" sections of this Prospectus. It is
important to note that the Company's actual results could differ materially from
those anticipated in these forward-looking statements depending on, among other
important factors, (i) revenues received from clients, including pursuant to
incentive compensation arrangements entered into by the Company with certain
clients, (ii) gains or losses of clients and client business and projects, as
well as changes in the marketing and communications budgets of clients, (iii)
the overall level of economic activity in the principal markets in which the
Company conducts business and other trends affecting the Company's financial
condition or results of operations, (iv) the impact of competition in the
marketing and communications industry and (v) the Company's liquidity and
financing plans. All forward-looking statements in this Prospectus are based on
information available to the Company on the date hereof. In addition, the
matters set forth under the caption "Risk Factors" in the Prospectus constitute
cautionary statements identifying important factors with respect to such
forward-looking statements, including certain risks and uncertainties, that
could cause actual results to differ materially from those in such
forward-looking statements.
Information regarding worldwide advertising expenditures, historical and
projected growth in advertising expenditures and comparative rankings of the
size of Young & Rubicam Inc., its affiliates, subsidiaries and operating units
has been obtained from industry sources, principally Advertising Age,
McCann-Erickson Report, O'Dwyer's PR Services Report, Med Ad News and Design
Week. All information regarding comparative size rankings is based on 1996
billings or revenues.
References in this Prospectus to the years 1993, 1994, 1995, 1996 and 1997
are, unless the context otherwise requires, to the Company's fiscal years ended
December 31.
Young & Rubicam, Y&R, Young & Rubicam Advertising, Y&R Advertising,
Wunderman Cato Johnson, WCJ, The Chapman Agency, The Bravo Group,
Burson-Marsteller, Marsteller Advertising, Cohn & Wolfe, Landor Associates,
Sudler & Hennessey, BrandAsset Valuator, Brand Dialogue, The Media Edge and The
Mead Point Group are trademarks of the Company. Other trademarks referenced
herein are trademarks of their respective legal owners.
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERINGS,
AND MAY BID FOR, AND PURCHASE, SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Company's consolidated financial
statements and notes thereto (the "Consolidated Financial Statements"),
appearing elsewhere in this Prospectus. Except as otherwise indicated herein,
the information in this Prospectus (i) assumes an initial public offering price
of $22.50 per share of Common Stock, the mid-point of the range set forth on the
cover page of this Prospectus, (ii) reflects a stock dividend of 14 shares of
Common Stock payable for each share of Common Stock outstanding as of the date
of effectiveness of the Registration Statement of which this Prospectus is a
part, payable on such date (the "Stock Split"), (iii) reflects the
effectiveness, upon the closing of the Offerings, of an Amended and Restated
Certificate of Incorporation and Amended and Restated By-Laws of Young & Rubicam
Inc. and (iv) assumes that the U.S. Underwriters' over-allotment option is not
exercised. Unless otherwise indicated, all references to the "Company" and "Y&R"
refer to Young & Rubicam Inc., its predecessors and its consolidated
subsidiaries, including Young & Rubicam L.P.
THE COMPANY
Young & Rubicam Inc. is the fifth largest consolidated marketing and
communications organization in the world. Since its founding 75 years ago, Y&R
has evolved from a single New York-based advertising agency to a diversified
global marketing and communications company operating in 128 cities in 76
countries worldwide as of December 31, 1997. The Company operates through such
internationally recognized market leaders as Young & Rubicam Advertising
(full-service advertising), Wunderman Cato Johnson (direct marketing and sales
promotion), Burson-Marsteller (perception management and public relations),
Landor Associates (branding consultation and design services) and Sudler &
Hennessey (healthcare communications). Y&R's revenues in 1997 were approximately
$1.4 billion, having grown at a compound annual rate of 12.9% from 1995 to 1997.
Through multi-disciplinary, client-focused teams, Y&R provides clients with
global access to fully integrated marketing and communications solutions. Among
Y&R's approximately 5,500 client accounts are a number of large multinational
organizations, including AT&T, Citibank, Colgate-Palmolive, Ford and Philip
Morris. Y&R has maintained long-standing relationships with many of its clients,
with the average length of relationship for the top 20 clients exceeding 20
years.
Y&R's mission is to be its clients' most valued business partner in
building, leveraging, protecting and managing clients' brands for both
short-term results and long-term growth. Consistent with its mission, Y&R has
developed an organizational and management structure designed to meet the
diverse needs of its large global clients as well as the more specialized needs
of its other clients. The Company's strategy combines this organizational and
management structure with the aggressive pursuit of new business opportunities
and continued investment in Y&R's business, personnel and superior consumer
knowledge.
In late 1992, Y&R created the Key Corporate Account ("KCA") program to
enhance the coordination of services sought by clients from both a global
coverage as well as an integrated solutions perspective. KCAs are large global
client accounts that, as a group, contribute the greatest share of Y&R's
revenues and profits, and are served on a multinational basis by two or more of
Y&R's businesses. Y&R currently designates 42 of its client accounts as KCAs.
Revenues from the KCAs, as a group, increased by 14.6% in 1997, and accounted
for approximately 45.5% and 46.1% of consolidated revenues in 1996 and 1997,
respectively. In order to further strengthen client relationships and reward Y&R
for meeting or exceeding certain performance targets, Y&R is working with KCAs
to adopt incentive compensation arrangements that align Y&R's compensation with
its performance and its clients' business performance.
As part of Y&R's client focus, Peter A. Georgescu, Chairman and Chief
Executive Officer of Y&R, John P. McGarry, Jr., President of Y&R, Edward H.
Vick, Chief Operating Officer of Y&R and the Chairman and Chief Executive
Officer of Young & Rubicam Advertising, and Thomas D. Bell, Jr., Executive Vice
President of Y&R and President and Chief Executive Officer of Burson-Marsteller,
all retain ongoing responsibilities for individual KCAs in addition to their
managerial roles.
3
<PAGE> 8
INDUSTRY TRENDS
The marketing and communications industry encompasses a wide range of
services used to develop and deliver messages to both broad and targeted
audiences through multiple communications channels. Several significant trends
are changing the dynamics of the marketing and communications industry,
including the following:
Growth in United States Marketing and Communications Markets. Advertising
expenditures in the United States have continued to grow, increasing from
approximately $140 billion in 1993 to approximately $175 billion in 1996.
Growth in International Marketing and Communications Markets. Since 1986,
non-U.S. advertising expenditures have grown more rapidly than U.S.
expenditures, and according to industry sources, have increased from
approximately 44% of worldwide expenditures in 1986 to approximately 55% in
1996.
Investment in Brand Development. Over the last several years, advertisers
have focused on the image or brand identity of their organizations, products and
services in an effort to differentiate themselves from competitors and increase
brand loyalty.
Demand for Integrated Service Offerings. Demand has increased for globally
integrated marketing and communications solutions as companies seek consistent
and effective delivery of their messages through multiple communications
channels and across a variety of geographic markets.
Increased Emphasis on Targeted Marketing. The desire of companies to reach
their target audiences and quantify the effectiveness of their communications
has resulted in greater demand for customized direct marketing methods, such as
database marketing, infomercials, in-store promotions and interactive programs.
STRATEGY
Y&R's strategy consists of the following key components:
Increase Penetration of Key Corporate Accounts. Y&R believes that
significant opportunities exist to increase its share of KCA marketing and
communications expenditures by leveraging its global network to provide
integrated services to KCAs. In recent years, Y&R has successfully increased its
share of the marketing and communications expenditures of certain KCAs. KCAs
also have increased their use of multiple services offered by Y&R over the same
period. During 1997, Y&R's 20 largest clients used the capabilities of an
average of five of the Company's marketing and communications services.
Develop New Client Relationships. The Company believes that there are
significant opportunities for future revenue and profit growth by providing
services to new clients in targeted industry sectors and to those clients
seeking to build and maintain global, regional and local brands. Y&R has
successfully used its integrated and global approach as an effective tool in
winning new business.
Leverage Existing Global Network. With a worldwide presence in 76
countries, the Company believes that it is well positioned to continue to
benefit from the trend towards the globalization of client marketing and
communications needs and the consolidation of such needs with a single
international service provider.
Capitalize on Existing Capabilities. Y&R intends to continue the
development of its existing capabilities into more visible and accessible client
services. For example, Y&R recently launched a new unit, Brand Dialogue, by
combining the existing interactive capabilities of Young & Rubicam Advertising
and Wunderman Cato Johnson in the United States, Latin America, Europe and
Asia/Pacific.
Utilize Superior Consumer Knowledge and Brand Insights. To assist its
clients in building, leveraging, protecting and managing their brands, Y&R has
developed and is maintaining extensive knowledge of consumer brand perceptions.
For example, Y&R has developed BrandAsset Valuator ("BAV"), a proprietary
database that reflects the perceptions of over 95,000 consumers in 32 countries
on five continents. The Company believes that BAV is the first global consumer
study that provides an empirically derived model for how brands gain and lose
their strength over time.
4
<PAGE> 9
Cultivate Creative Excellence. Y&R intends to continue emphasizing the
importance of creative marketing and communications. Y&R has created numerous
memorable marketing and communications programs for clients, including "The
Softer Side of Sears," "Everybody Needs a Little KFC," "It's All Within Your
Reach" for AT&T, "The Document Company" for Xerox and "Be All That You Can Be"
for the United States Army, as well as identity and design assignments,
including the creation of corporate identities, for Lucent Technologies,
Netscape and the 2002 Salt Lake City Olympics.
Improve Operating Efficiencies. The Company believes that opportunities
exist to improve operating efficiencies in order to expand margins and increase
future profitability. For example, Y&R has implemented initiatives which have
both improved productivity and reduced compensation expense as a percentage of
consolidated revenues.
Expand Capabilities Through Acquisitions. In order to add new
capabilities, enhance its existing capabilities and expand the geographic scope
of its operations, Y&R regularly evaluates and intends to pursue appropriate
acquisition opportunities.
THE RECAPITALIZATION
From the time of its founding until 1996, Y&R was wholly owned by its
employees. In December 1996, Y&R consummated a recapitalization (the
"Recapitalization"). The purpose of the Recapitalization was to realign the
ownership of the Company with those senior employees who would most actively
lead Y&R's future growth, to establish an equity-based incentive program to
motivate current and future employees and to enhance Y&R's ability to make
strategic investments in people, services and products. In connection with the
Recapitalization, predecessor companies of Y&R acquired, canceled or exchanged
all outstanding equity units, issued new shares of Common Stock and granted
certain restricted stock awards and options to acquire shares of Common Stock to
approximately 325 employees. In addition, at the time of the consummation of the
Recapitalization, Hellman & Friedman Capital Partners III, L.P., H&F Orchard
Partners III, L.P. and H&F International Partners III, L.P. (collectively, the
"H&F Investors"), and six other investors not affiliated with the Company
(together with the H&F Investors, the "Recapitalization Investors") and certain
employees and former employees of Y&R contributed an aggregate of $242 million
to the Company in exchange for shares of Common Stock and options to acquire
additional shares of Common Stock.
The Company's principal executive office is located at 285 Madison Avenue,
New York, New York 10017, and its telephone number is (212) 210-3000.
5
<PAGE> 10
THE OFFERINGS
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Common Stock offered by:
The Company.......................... 6,666,667 shares
The Selling Stockholders............. 9,933,333 shares
--------------------
Total........................... 16,600,000 shares
Common Stock offered:
U.S. Offering........................ 13,280,000 shares
International Offering............... 3,320,000 shares
--------------------
Total........................... 16,600,000 shares
Common Stock to be outstanding after the
Offerings............................... 66,866,707 shares(1)
</TABLE>
Dividend Policy................ The Company expects to commence the
declaration and payment of a regular
quarterly cash dividend in the last quarter
of 1998. See "Dividend Policy."
Use of Proceeds................ The net proceeds to be received by the
Company from the Offerings are estimated to
be approximately $139,500,000 after deducting
underwriting discounts and commissions and
estimated offering expenses payable by the
Company. The Company intends to use such net
proceeds to repay a portion of the borrowings
outstanding under the term loan portion of
its existing credit facilities. See
"Management's Discussion and Analysis of
Financial Condition and Results of
Operations -- Liquidity and Capital
Resources." The Company will not receive any
of the proceeds from the sale of shares of
Common Stock by the Selling Stockholders. See
"Use of Proceeds."
Proposed New York Stock
Exchange Symbol................ "YNR"
- ---------------------------
(1) As of the date hereof, the number of shares of Common Stock outstanding
excludes (i) an aggregate of 28,964,130 shares reserved for issuance upon
the exercise of outstanding options under the Young & Rubicam Holdings Inc.
Management Stock Option Plan (under which no additional awards will be made)
and the Young & Rubicam Inc. 1997 Incentive Compensation Plan (collectively,
the "Stock Option Plans") at a weighted average exercise price of $6.99 per
share and (ii) an aggregate of 2,598,105 shares reserved for issuance upon
the exercise of outstanding options issued to certain of the
Recapitalization Investors at a weighted average exercise price of $7.67 per
share. The number of shares of Common Stock outstanding includes an
aggregate of 9,231,105 shares of Restricted Stock (as defined herein)
allocated to employees as of the date of consummation of the Offerings. See
"Management -- Executive Compensation" and "Capitalization." All of such
shares are subject to 180-day lock-up agreements following the Offerings.
See "Shares Eligible for Future Sale."
RISK FACTORS
Prior to making an investment in the Common Stock offered hereby,
prospective purchasers of the Common Stock should take into account the specific
risks set forth under "Risk Factors" as well as the other information set forth
in this Prospectus.
6
<PAGE> 11
SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1995 1996 1997
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................ $1,085,494 $1,222,139 $ 1,382,740
Compensation expense, including employee
benefits(1)...................................... 672,026 730,261 836,150
General and administrative expenses(1).............. 356,523 391,617 463,936
Recapitalization-related charges(2)................. -- 315,397 --
Other operating charges(2).......................... 31,465 17,166 11,925
---------- ---------- -----------
Operating expenses............................... 1,060,014 1,454,441 1,312,011
---------- ---------- -----------
Income (loss) from operations....................... 25,480 (232,302) 70,729
Net income (loss)................................... 820 (238,311) (23,938)
Basic and diluted loss per common share(3).......... $ (.51)
Weighted average shares outstanding(3).............. 46,949,355
Supplemental loss per common share(4)............... $ (.37)
OTHER OPERATING DATA:
EBITDA(1)(5)........................................ $ 72,972 $ 147,221 $ 139,375
Net cash provided by operating activities........... 79,809 178,064 224,511
Net cash used in investing activities............... 45,821 76,094 67,142
Net cash used in financing activities............... 50,025 12,614 98,667
Capital expenditures................................ 42,096 51,792 51,899
International revenues as a % of total
revenues(6)...................................... 54.7% 53.3% 52.2%
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
--------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(10) AS ADJUSTED(11)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets(7)..................................... $1,528,019 $1,528,019 $1,613,176
Total debt(8)....................................... 351,051 351,051 211,551
Mandatorily redeemable equity securities(9)......... 508,471 -- --
Total (deficit) equity.............................. (661,714) (153,243) 71,414
</TABLE>
- ------------------------------
(1) For a discussion of charges included in compensation expense, including
employee benefits, and general and administrative expenses, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."
(2) For a discussion of Recapitalization-related and other operating charges,
see Notes 4 and 6 to the Consolidated Financial Statements.
(3) Basic net loss per common share for 1997 was computed by dividing the net
loss by the weighted average number of common shares outstanding during the
period. The weighted average number of common shares outstanding excludes
11,086,950 shares of Common Stock held by the Restricted Stock Trust (as
defined herein), as such shares vest upon the consummation of an initial
public offering, or the six-month anniversary thereof, a condition which
was not satisfied at December 31, 1997. Diluted net loss per common share
for 1997 was computed in the same manner as basic net loss per common share
since the inclusion of potential common shares would be antidilutive.
At December 31, 1997, the Company had outstanding options to purchase
31,013,205 shares of Common Stock, with a weighted average exercise price
of $6.84, that could potentially dilute basic earnings per share in the
future. These options were excluded from the computation of diluted net
loss per common share because the effect for 1997 would be antidilutive. In
addition, at December 31, 1997, a maximum of 11,086,950 shares of Common
Stock held by the Restricted Stock Trust would vest and be dilutive as a
result of the consummation of the Offerings. See "Management -- Executive
Compensation -- The Restricted Stock Plan and Trust Agreement" and Notes 3,
15 and 21 to the Consolidated Financial Statements.
Earnings per share for 1995 and 1996 cannot be computed because the
Company's capital structure prior to the Recapitalization consisted of both
common shares and limited partnership units in predecessor entities. See
Note 4 to the Consolidated Financial Statements.
(4) The supplemental loss per common share was computed by dividing the
supplemental loss of $19,587 by the supplemental common shares of
53,616,022. The supplemental loss of $19,587 has been computed by adjusting
the historical net loss for 1997 to reflect the following: (i) additional
interest cost, net of the related tax benefit, of $1,410 (computed
utilizing an interest rate and statutory tax rate of 7.0% and 41.0%,
respectively) associated with the $161,700 of Recapitalization-related
borrowings under the Company's existing credit facilities, which occurred
on March 18, 1997, as if such borrowings had occurred as of January 1, 1997
and (ii) the reduction in interest cost, net of tax, of $5,761 (computed
utilizing an interest rate and statutory tax rate of 7.0% and 41.0%,
respectively), associated with $139,500 of the net proceeds of the
Offerings to the Company, which is expected to be utilized to
7
<PAGE> 12
repay a portion of the outstanding borrowings under the term loan portion
of the Company's existing credit facilities, as if the debt repayment had
occurred as of January 1, 1997.
The supplemental shares of 53,616,022 were computed by adding the 6,666,667
shares of Common Stock offered by the Company to the 46,949,355 weighted
average shares outstanding as of December 31, 1997. See "Capitalization."
Based upon an assumed initial public offering price of $22.50, the
consummation of the Offerings will give rise to a non-recurring, non-cash,
pre-tax charge of $207,700 ($122,543 net of the related tax benefit
assuming a statutory tax rate of 41.0%) arising from the vesting of the
aggregate of 9,231,105 shares of Restricted Stock allocated to employees as
of the date of the consummation of the Offerings. The determination of
supplemental loss for 1997 does not give effect to this charge due to its
non-recurring nature. See "Management -- Executive Compensation -- The
Restricted Stock Plan and Trust Agreement" and Note 15 to the Consolidated
Financial Statements.
(5) EBITDA is defined as income (loss) from operations before depreciation and
amortization, other non-cash charges and Recapitalization-related charges.
EBITDA is presented because it is a widely accepted financial indicator and
is generally consistent with the definition used for covenant purposes
contained in the Company's existing credit facilities; however, EBITDA may
not be comparable to other registrants' calculation of EBITDA or similarly
titled items. EBITDA should not be considered as an alternative to net
income (loss) as a measure of operating results in accordance with
generally accepted accounting principles or as an alternative to cash flows
as a measure of liquidity. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Results of Operations."
EBITDA for 1996 and 1997 is before $11,096 and $11,925, respectively, of
non-cash charges primarily related to impairment write-downs which are
included in other operating charges. See Notes 4 and 6 to the Consolidated
Financial Statements.
(6) International revenues include all revenues earned outside the United
States.
(7) Total assets as of December 31, 1997 (actual, pro forma and pro forma as
adjusted) include net deferred tax assets of $157,024, $75,135 of which
relate to net operating loss ("NOL") carryforwards of approximately
$140,409 for U.S. tax purposes and approximately $69,231 for foreign tax
purposes. See Note 9 to the Consolidated Financial Statements.
(8) Total debt includes current and non-current loans and installment notes.
See Notes 13 and 14 to the Consolidated Financial Statements.
(9) From the date of consummation of the Recapitalization and through the date
of consummation of the Offerings, all outstanding shares of Common Stock,
exclusive of shares of Common Stock held in the Restricted Stock Trust, are
redeemable, subject to certain restrictions, at the option of the
stockholder. Accordingly, all such shares of Common Stock have been
recorded at their redemption values and classified as Mandatorily
Redeemable Equity Securities in the Company's historical balance sheets at
December 31, 1996 and 1997, respectively. See Notes 2, 15 and 16 to the
Consolidated Financial Statements.
(10) The pro forma December 31, 1997 balance sheet reflects the termination of
the redemption feature and subsequent reclassification of Mandatorily
Redeemable Equity Securities, as discussed in Note (9) above, to
stockholders' deficit. See "Capitalization" and Notes 2, 15 and 16 to the
Consolidated Financial Statements.
(11) The pro forma as adjusted balance sheet reflects the following: (i) an
increase in total assets of $85,157, resulting from the tax benefits
arising from the compensation charge associated with the vesting of the
Restricted Stock as further described in Note (4) above; (ii) a decrease in
total debt resulting from the sale by the Company of 6,666,667 shares of
Common Stock in the Offerings and the application of $139,500 of the net
proceeds to the Company to repay a portion of the outstanding borrowings
under the term loan portion of the Company's existing credit facilities;
and (iii) a $224,657 increase in total equity resulting from the $139,500
net proceeds to the Company from the Offerings and $85,157 resulting from
the vesting of Restricted Stock upon consummation of the Offerings as
discussed in (i) above. See "Capitalization."
8
<PAGE> 13
RISK FACTORS
A prospective investor should consider carefully all of the information
contained in this Prospectus before deciding whether to purchase the Common
Stock offered hereby and, in particular, the following factors.
RECENT HISTORY OF NET LOSSES
The Company reported a net loss for 1996 and 1997 of $238.3 million and
$23.9 million, respectively. In addition, the Company expects to report a net
loss for 1998 resulting from charges relating to the Offerings. The Company
expects to recognize a non-cash compensation charge of approximately $208
million in connection with the vesting of the Restricted Stock upon consummation
of the Offerings. The Company also expects to enter into a new revolving credit
facility to become effective upon completion of the Offerings, and as a result
expects to write off approximately $6.5 million, which represents the
unamortized portion of capitalized charges relating to the Company's existing
$700 million senior secured credit facilities (the "Credit Facilities"), which
will be repaid and replaced with net proceeds to the Company from the Offerings
and borrowings under the new revolving credit facility.
COMPETITION
The marketing and communications industry is highly competitive. Y&R's
principal competitors are large multinational marketing and communications
companies, as well as numerous smaller agencies that operate in one or more
countries or local markets. Y&R must compete with such other companies and
agencies to maintain existing client relationships and to obtain new clients and
assignments. Some clients, such as U.S. governmental agencies, require agencies
to compete for business at mandatory intervals. Principal competitive factors
include an agency's creative reputation, knowledge of media, financial controls,
geographical coverage and diversity, relationships with clients and quality and
breadth of services. Recently, traditional advertising agencies have also been
competing with major consulting firms which have developed practices in
marketing and communications, and with smaller companies such as systems
integrators, database marketing and modeling companies and telemarketers, which
are offering technological solutions to marketing and communications issues
faced by clients.
Representation of a client does not necessarily mean that all advertising
or public relations for that client is handled by one agency. Many large
multinational companies are served by a number of agencies within the marketing
and communications industry. In many cases, clients' conflicts policies or
desires to be served by multiple agencies result in one or more global agency
networks representing a client only for a portion of its marketing and
communications needs or only in particular geographic areas. In addition, the
ability of agencies within marketing and communications organizations to acquire
new clients or additional assignments from existing clients may be limited by
the conflicts policy followed by many clients not to permit agencies to perform
similar services for competing products or companies. Y&R's principal
international competitors are holding companies for more than one global
advertising agency network, which, in some situations, may permit separate
agency networks within such holding companies to perform services for competing
products or for products of competing companies. The Company has one global
advertising agency network, and accordingly Y&R's ability to compete for new
advertising assignments and, to a lesser extent, other marketing and
communications assignments, may be limited by these conflicts policies. Industry
practices in other areas of the marketing and communications business reflect
similar concerns with respect to client relationships. See
"Business -- Competition."
TREND TOWARDS CONSOLIDATION OF GLOBAL ACCOUNTS WITH GLOBAL AGENCIES
The Company believes that large multinational companies will seek to
consolidate their accounts with one organization that can fulfill their
marketing and communications needs worldwide. There can be no assurance that the
Company will continue to benefit from this trend towards consolidation of global
accounts. In addition, this trend towards consolidation of global accounts
requires companies seeking to compete effectively in the international marketing
and communications industry to make significant investments in additional
offices and personnel around the world and in new and improved technology for
linking such offices
9
<PAGE> 14
and people. Y&R's international network of employees and offices are linked by
computer networks which require significant capital expenditures for
maintenance, expansion and upgrades. To the extent that Y&R's competitors may
have broader geographic scope or greater financial resources to invest in
additional offices, personnel or technology, such competitors may be better able
than Y&R to take advantage of an opportunity for the consolidation of a global
account. In such event, Y&R's prospects, business, financial condition and
results of operations could be adversely affected.
CONCENTRATION OF REVENUES FROM A LIMITED NUMBER OF LARGE CLIENTS
A relatively small number of clients contributes a significant percentage
of Y&R's consolidated revenues. In 1997, Y&R's 20 largest clients contributed
approximately 40.5% of consolidated revenues, its three largest clients
contributed approximately 18.6% of consolidated revenues and its largest client,
Ford Motor Company, contributed approximately 10.0% of consolidated revenues.
Based upon Y&R's strategy of increasing its penetration of existing large
clients, it is possible that Y&R's dependence on revenues from such clients will
increase in the future. Most of Y&R's agreements with U.S.-based clients are
cancelable on 90 days' notice, and its agreements with non-U.S. clients
typically are cancelable on 90 to 180 days' notice. In addition, clients
generally are able to reduce marketing and communications spending or cancel
projects at any time for any reason. There can be no assurance that any of Y&R's
clients will continue to utilize Y&R and its services to the same extent, or at
all, in the future. A significant reduction in the marketing and communications
spending by, or the loss of one or more of, Y&R's largest clients, if not
replaced by new client accounts or an increase in business from existing
clients, would have a material adverse effect on Y&R's prospects, business,
financial condition and results of operations. See "Business."
CLIENT TURNOVER; DEVELOPMENT OF NEW CLIENTS
The success of a marketing and communications organization depends on its
continuing ability to attract and retain clients. Y&R has approximately 5,500
client accounts worldwide. Although historically Y&R has had long-term
relationships with many of its largest clients, clients may move their
advertising and other communications assignments from agency to agency, or may
divide their assignments among two or more agencies, with relative ease. In
addition, the perception management and public relations business, as well as
the branding consultation and design business, are principally project-based and
require new assignments in order to maintain and increase revenues. As is
typical in the marketing and communications industry, Y&R has lost or resigned
client accounts and assignments for a variety of reasons, including conflicts
with newly acquired clients. Although typically Y&R has been able to replace
such client and revenue losses with new clients and assignments, there can be no
assurance that Y&R will continue to be successful in replacing clients or in
replacing revenues when a client significantly reduces the amount of work given
to Y&R. The failure to maintain existing clients or attract new clients could
have a material adverse effect on Y&R's prospects, business, financial condition
and results of operations. See "Business."
CYCLICAL INDUSTRY
The marketing and communications industry is cyclical because it is subject
to downturns in general economic conditions and changes in client business and
marketing budgets. There can be no assurance that the Company's prospects,
business, financial condition and results of operations would not be materially
adversely affected by a downturn in general economic conditions in one or more
markets or changes in client business and marketing budgets. See "Business."
CURRENCY RISK
The Company's Consolidated Financial Statements are denominated in U.S.
dollars. Y&R derived approximately 52.2% of its revenues from operations outside
of the United States in 1997. Currency fluctuations may give rise to translation
gains or losses when financial statements of foreign operating units are
translated into U.S. dollars. Significant strengthening of the U.S. dollar
against other major foreign currencies could have a material adverse effect on
Y&R's results of operations. With limited exceptions, Y&R does not
10
<PAGE> 15
actively hedge its foreign currency exposure. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
CONTROL OF Y&R
Substantially all of Y&R's Common Stock is owned by employee equityholders
(the "Management Investors") and the Recapitalization Investors. See
"Management." All Common Stock held at any time by Management Investors is
deposited in a voting trust (the "Management Voting Trust") which is controlled
by eight members of Y&R's senior management, in their capacities as voting
trustees (the "Voting Trustees"). Upon consummation of the Offerings, the
Management Voting Trust will hold voting power over approximately 54.2% of the
outstanding shares of Common Stock (assuming the exercise of all currently
vested options). As a result, the Management Voting Trust will be able to
exercise substantial control over any matters requiring the vote of
stockholders, including the election of Directors. Furthermore, the vote of
Peter A. Georgescu (or any other person duly elected Chief Executive Officer of
Y&R with the prior approval of the Management Voting Trust) will bind the
Management Voting Trust unless he (or his successor) is outvoted by the vote of
six of the other Voting Trustees. As a result of the foregoing, Peter A.
Georgescu (or any such successor) will be able to exercise a significant degree
of control over business decisions affecting Y&R. The Management Voting Trust
will remain in existence following consummation of the Offerings but will
terminate no later than 24 months after the consummation of the Offerings. See
"Description of Capital Stock -- The Management Voting Trust Agreement." In the
event that, following the termination of the Management Voting Trust, management
of the Company continues to own collectively a significant percentage of the
outstanding shares of Common Stock, management acting together would be able to
exercise a significant degree of control over business decisions affecting Y&R.
Upon consummation of the Offerings, the H&F Investors are expected to
beneficially own an aggregate of approximately 34.6% of the outstanding shares
of Common Stock (assuming the exercise of all currently vested options). As a
result of their stock ownership, the H&F Investors currently are, and upon
consummation of the Offerings will be, able to influence matters requiring the
vote of stockholders, including the election of Directors. In addition, pursuant
to the Amended Stockholders' Agreement (as defined herein), the H&F Investors
will have the right to nominate and have elected two members of the Company's
Board of Directors (the "Board" or the "Company Board") for so long as they
continue to hold, in the aggregate, at least 10% of the Outstanding Shares (as
defined in the Amended Stockholders' Agreement), and one member of the Board for
so long as they continue to hold, in the aggregate, at least 5% of the
Outstanding Shares. Should the Management Voting Trust and the H&F Investors act
together, they would be able to elect the members of the Board and exercise a
controlling influence over the business and affairs of the Company. In addition,
the Management Voting Trust and the H&F Investors could, acting together, delay
or prevent a change in control of the Company. See "-- Certain Anti-Takeover
Effects" and "Description of Capital Stock -- The Stockholders' Agreement."
DEPENDENCE ON KEY PERSONNEL
The Company's ability to maintain its competitive position is dependent on
the services of its senior management. The loss of the services of one or more
members of senior management could have a material adverse effect on the
Company. In addition, the success of Y&R has been, and will continue to be,
highly dependent upon the skills of its creative, research, media and account
personnel and practice group specialists, and their relationships with clients.
Employees generally are not subject to contracts of employment and are,
therefore, typically able to move within the industry with relative ease.
Although the Management Voting Trust Agreement (as defined herein) and certain
stock option and restricted stock agreements contain non-competition and
non-solicitation covenants, there can be no assurance that such provisions will
be effective in helping Y&R retain qualified personnel or that Y&R would not be
adversely affected by the failure to retain such personnel.
If Y&R were unable to continue to attract and retain additional key
personnel, or if it were unable to retain and motivate its existing key
personnel, its prospects, business, financial condition and results of
11
<PAGE> 16
operations would be materially adversely affected. See "Management" and
"Description of Capital Stock -- The Management Voting Trust Agreement."
RISKS OF MULTINATIONAL OPERATIONS
The Company conducts business in various developing countries in Asia,
Latin America, Eastern Europe and Africa, where the systems and bodies of
commercial law and trade practices arising thereunder are evolving. Commercial
laws in such countries are often vague, arbitrary, contradictory, inconsistently
administered and retroactively applied. Under such circumstances, it is
difficult for the Company to determine with certainty at all times the exact
requirements of such local laws. If the Company consistently were unable to
remain in compliance with local laws in such developing countries, it could have
a material adverse impact on Y&R's prospects, business, results of operations
and financial condition. In addition, the global nature of the Company's
operations poses various challenges to the Company's management and its
financial, accounting and other systems which, if not satisfactorily met, could
have a material adverse impact on the Company's prospects, business, financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Results of Operations."
TERMS OF CERTAIN INDEBTEDNESS
The Company's Credit Facilities contain certain financial and operating
covenants and require the Company to achieve or maintain certain financial
ratios and net worth requirements, and restrict the Company's ability to incur
additional indebtedness, sell assets, redeem equity, pay cash dividends, make
acquisitions and take other specified actions. The Company's obligations under
the Credit Facilities are secured by a security interest in certain domestic
assets, including its headquarters building in New York, all of the capital
stock of the direct and indirect domestic subsidiaries of the Company and 66.7%
of the capital stock of the Company's first-tier non-U.S. subsidiaries. A
portion of the net proceeds to the Company from the Offerings are expected to be
used to repay a portion of the borrowings outstanding under the term loan
portion of the Credit Facilities. The Company expects to enter into a $400
million unsecured revolving credit facility (the "New Facility") to become
effective upon the consummation of the Offerings, and has received an executed
commitment letter for an aggregate of $150 million of the $400 million total
from two commercial banks. The New Facility is expected to contain certain
financial and operating restrictions and covenant requirements. Consummation of
the New Facility is subject to execution of definitive documentation and a
number of other closing conditions, and there can be no assurance that the
Company will be successful in consummating such Facility.
Outstanding borrowings under the Credit Facilities, which aggregated $330.6
million at December 31, 1997, bear interest at rates that fluctuate with changes
in certain prevailing market interest rates. Any increase in interest rates
would adversely affect Y&R's net income and the cash flow available after debt
service to fund operations and expansion. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
ACQUISITION STRATEGY RISKS
Y&R's business strategy includes increasing its share of clients' marketing
expenditures by adding to or enhancing its existing marketing and communications
capabilities, and expanding its geographic reach. Y&R intends to implement this
strategy in part by making acquisitions. There can be no assurance that the
Company will be successful in identifying appropriate acquisition candidates or
consummating acquisitions on terms satisfactory to Y&R, or that any newly
acquired companies will be successfully integrated into Y&R's existing global
network. The Company may use Common Stock (which could result in dilution to
purchasers of Common Stock offered hereby) or may incur indebtedness (which may
be long-term), expend cash or use a combination thereof for all or part of the
consideration to be paid in future acquisitions. While the Company regularly
evaluates potential acquisition opportunities, it has no present commitments,
agreements or understandings with respect to any material acquisition. See
"Business."
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<PAGE> 17
THIRD PARTY LIABILITY
Y&R from time to time may be, or may be joined as, a defendant in
litigation brought against its clients by third parties, including, without
limitation, claims brought by such clients' competitors, regulatory bodies or
consumers, alleging that advertising claims made with respect to such client's
products or services are false, deceptive or misleading, that such clients'
products are defective or injurious or that marketing and communications
materials created for such clients infringe on the proprietary rights of third
parties. If, in such circumstances, Y&R is not insured under the terms of the
insurance policies with its insurers or is not indemnified under the terms of
its agreements with such clients (or such indemnification is unavailable) with
respect to such claims, then the damages, costs, expenses or attorneys' fees
arising from any such claims could have an adverse effect on Y&R's prospects,
business, results of operations and financial condition. In addition, Y&R's
contracts with clients sometimes require it to indemnify clients for claims
brought by competitors or others claiming that advertisements or other
communications infringe on intellectual property rights. Although Y&R maintains
an insurance program, including insurance for advertising agency liability,
there can be no assurance that such insurance will be available, or will be
sufficient to cover any claim if available, in the event a significant adverse
claim is made. In the opinion of management, none of the existing claims and
legal actions to which the Company currently is a party is expected to have a
material adverse effect on the Company.
YEAR 2000 RISK
The Company is conducting a comprehensive review of its computer systems to
identify all software applications that could be affected by the inability of
many existing computer systems to process time-sensitive data accurately beyond
the year 1999 (referred to as the "Year 2000" issue). The Company intends to
modify or replace all affected systems for compliance with the Year 2000 issue
and is also monitoring the adequacy of the processes and progress of third-party
vendors of systems that may be affected by the Year 2000 issue. Y&R is dependent
on third-party computer systems and applications, particularly with respect to
such critical tasks as accounting, billing and buying, planning and paying for
media, as well as on its own computer systems. While Y&R believes its process is
designed to be successful, because of the complexity of the Year 2000 issue and
the interdependence of organizations using computer systems, there can be no
assurance that Y&R's efforts, or those of third parties with whom Y&R interacts,
will be satisfactorily completed in a timely fashion. Failure to satisfactorily
address the Year 2000 issue could have a material adverse effect on Y&R's
prospects, business, financial condition and results of operations. The costs of
the Company's Year 2000 project have not been determined but are not expected to
have a material adverse effect on the Company. However, there can be no
assurance that Y&R will not experience cost overruns or delays in connection
with its plan for replacing or modifying systems, which could have a material
adverse effect on Y&R's prospects, business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Year 2000 Compliance."
DIVIDEND POLICY
Although the Company intends to commence the declaration and payment of a
regular quarterly cash dividend in the last quarter of 1998, the Company's
ability to pay dividends will depend upon, among other factors, the Company's
results of operations, financial condition and capital requirements. In
addition, the covenants under the Credit Facilities currently prohibit Y&R from
the declaration and payment of cash dividends. The terms of the New Facility,
which the Company expects to enter into upon consummation of the Offerings, are
expected to permit the payment of cash dividends except in the event of a
continuing default under the credit agreement. Any cash dividend is therefore
contingent upon the consummation of the New Facility, which is subject to
execution of definitive documentation and a number of other closing conditions,
and there can be no assurance that the Company will be successful in
consummating such Facility. See "Dividend Policy."
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<PAGE> 18
BENEFIT TO EXISTING STOCKHOLDERS
The initial public offering price of the shares of Common Stock to be sold
in the Offerings is substantially in excess of the net tangible book value per
share, which results in a benefit to existing stockholders of the Company. See
"-- Immediate and Substantial Dilution" and "Dilution." Consummation of the
Offerings will result in the vesting of the Company's Restricted Stock, which
will provide a substantial benefit to management stockholders who have been
allocated shares of Restricted Stock. In addition, consummation of the Offerings
will result in the elimination of the Company's right to redeem shares of Common
Stock held by Management Investors upon their termination of employment. See
"The Company -- The Recapitalization" and "Description of Capital Stock -- The
Stockholders' Agreement."
IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price of the Common Stock is substantially in
excess of the net tangible book value per share. As a result, purchasers of
Common Stock in the Offerings will experience immediate and substantial dilution
of $23.18 per share. See "Dilution."
ABSENCE OF PRIOR MARKET FOR COMMON STOCK
Prior to the Offerings, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market for the
Common Stock will develop or will continue if it develops. The initial public
offering price of the Common Stock will be determined by negotiations between
the Company and representatives of the Underwriters and may not be indicative of
the market price of the Common Stock following the Offerings. See
"Underwriting." The market price of the Common Stock could be subject to
significant fluctuations in response to various factors and events, including
the liquidity of the market for the Common Stock, differences between the
Company's actual financial or operating results and those expected by investors
and analysts, changes in analysts' recommendations or projections, marketing and
communications budgets of clients, new statutes or regulations or changes in
interpretations of existing statutes and regulations affecting the Company's
business, changes in general economic or market conditions and broad market
fluctuations.
POSSIBLE ADVERSE IMPACT ON SHARE PRICE OF SHARES ELIGIBLE FOR FUTURE SALE
Following the Offerings, the Company will have 66,866,707 shares of Common
Stock outstanding. Of these, 20,481,355 shares will be freely transferable by
persons other than "affiliates" of the Company without restriction or further
registration under the Securities Act. The remaining 46,385,352 outstanding
shares of Common Stock will be "restricted securities" within the meaning of
Rule 144 under the Securities Act or securities issued and sold pursuant to
Regulation S under the Securities Act and subject to transfer restrictions.
Following the Offerings and subject to certain 180-day lock-up agreements
described herein, certain of the Recapitalization Investors will have demand and
piggyback registration rights with respect to an aggregate of 22,198,985 shares
of Common Stock. In addition, beginning 90 days after the date of this
Prospectus, such shares will be eligible for sale in the public market without
registration under the Securities Act, subject to compliance with the resale
volume limitations and other restrictions of Rule 144 under the Securities Act.
Subject to certain 180-day lock-up agreements described herein, and beginning 90
days after the date of this Prospectus, shares of Common Stock held by
Management Investors will be eligible for sale in the public market without
registration under the Securities Act, subject to compliance with the resale
volume limitations and other restrictions of Rule 144 under the Securities Act.
Future sales of the Common Stock, or the perception that such sales could occur,
could adversely affect prevailing market prices for the Common Stock. See
"Shares Eligible for Future Sale" and "Underwriting."
CERTAIN ANTI-TAKEOVER EFFECTS
Certain provisions of the Company's Amended and Restated Certificate of
Incorporation (the "Company's Charter") and the Company's Amended and Restated
By-Laws (the "Company's By-Laws"), which will become effective upon consummation
of the Offerings, and of the Delaware General Corporation Law
14
<PAGE> 19
(the "DGCL") may have the effect of delaying, deterring or preventing a change
in control of the Company not approved by the Company Board. These provisions
include (i) a classified Board, (ii) a requirement that no action required or
permitted to be taken at any annual or special meeting of stockholders may be
taken without a meeting, (iii) a requirement that special meetings of
stockholders be called only by the Chairman of the Board or the Company Board,
(iv) advance notice requirements for stockholder proposals and nominations, (v)
limitations on the ability of stockholders to amend, alter or repeal certain
provisions of the Company's Charter and the Company's By-Laws, (vi)
authorization for the Company Board to issue without stockholder approval
preferred stock with such terms as the Board may determine and (vii)
authorization for the Company Board to consider the interests of clients and
other customers, creditors, employees and other constituencies of the Company
and its subsidiaries and the effect upon communities in which the Company and
its subsidiaries do business, in evaluating proposed corporate transactions.
With certain exceptions, Section 203 of the DGCL ("Section 203") imposes certain
restrictions on mergers and other business combinations between the Company and
any holder of 15% or more of the Company's Common Stock (other than the H&F
Investors and their permitted transferees, who have been exempted from these
restrictions by the Company Board). In addition, the Company has adopted a
stockholder rights plan that will become effective upon consummation of the
Offerings (the "Rights Plan") under which the H&F Investors and their permitted
transferees will have the benefit of certain exceptions. The Rights Plan is
designed to protect stockholders in the event of an unsolicited offer and other
takeover tactics which, in the opinion of the Company Board, could impair the
Company's ability to represent stockholder interests. The provisions of the
Rights Plan may render an unsolicited takeover of the Company more difficult or
less likely to occur or might prevent such a takeover.
These provisions of the Company's Charter and the Company's By-Laws, the
DGCL and the Rights Plan, together with the control of 54.2% of the outstanding
shares of Common Stock by the Management Voting Trust upon consummation of the
Offerings (assuming the exercise of all currently vested options) could
discourage potential acquisition proposals and could delay or prevent a change
in control of the Company, although such proposals, if made, might be considered
desirable by a majority of the Company's stockholders. Such provisions could
also make it more difficult for third parties to remove and replace the members
of the Company Board. Moreover, these provisions could diminish the
opportunities for a stockholder to participate in certain tender offers,
including tender offers at prices above the then-current market price of the
Company's Common Stock, and may also inhibit increases in the market price of
the Company's Common Stock that could result from takeover attempts or
speculation. In addition, certain options issued to employees of the Company
contain change in control provisions that could have the effect of delaying,
deterring or preventing a change in control of the Company. See
"Management -- Executive Compensation -- 1997 ICP -- Acceleration of Vesting"
and "Description of Capital Stock -- Anti-Takeover Effects of Certain Provisions
of the Charter, the By-Laws, the Rights Plan and Delaware Law."
15
<PAGE> 20
THE COMPANY
GENERAL
Since its founding 75 years ago by John Orr Young, an account executive,
and Raymond Rubicam, a copywriter, Y&R has evolved from a single New York-based
advertising agency to a diversified global marketing and communications
organization. In its early years, the Company grew its core advertising business
by either opening additional offices in the United States and abroad, or by
acquiring established local agencies and fully integrating them into the Company
under the Y&R name. By the early 1970s, the Company had established a network of
approximately 40 Young & Rubicam Advertising agency offices in the United States
and 22 other countries.
In 1973, Y&R began to expand its capabilities beyond traditional general
advertising by acquiring well-established leaders in other marketing and
communications disciplines. Y&R began this diversification with its acquisitions
of Wunderman Ricotta & Kline (the predecessor to Wunderman Worldwide), a direct
marketing firm, and Sudler & Hennessey, a healthcare communications specialist.
In 1976, the Company added the sales promotion firm, Cato Johnson Associates,
which was merged with Wunderman Worldwide in 1992 to form Wunderman Cato
Johnson. Y&R continued implementing its diversification strategy with its
acquisitions of Burson-Marsteller, a public relations company, in 1979 and
Landor Associates, a branding consultation and strategic design firm, in 1989.
Y&R has been successful in integrating the diverse capabilities of these
companies, which the Company believes enables it to better serve clients'
marketing and communications needs on a global basis.
The Company's principal executive office is located at 285 Madison Avenue,
New York, New York 10017, and its telephone number is (212) 210-3000.
THE RECAPITALIZATION
From the time of its founding until 1996, Y&R was wholly owned by its
employees. In December 1996, Y&R consummated the Recapitalization. The purpose
of the Recapitalization was to realign the ownership of the Company with those
senior employees who would most actively lead Y&R's future growth, to establish
an equity-based incentive program to motivate current and future employees and
to enhance its ability to make strategic investments in people, services and
products. In connection with the Recapitalization, predecessor companies of Y&R
acquired for cash, canceled or exchanged all then outstanding equity and
equity-based compensation units, including shares of common stock, limited
partnership interests, options to acquire shares of common stock and limited
partnership interests, and growth participation units (collectively, the
"Predecessor Units"). In place of the Predecessor Units, the Company issued new
shares of Common Stock and granted certain restricted stock awards and options
to acquire shares of Common Stock to approximately 325 employees. In addition,
at the time of consummation of the Recapitalization, an aggregate of $242
million was contributed to the Company in exchange for an aggregate of
31,566,345 shares of Common Stock and options to acquire an additional aggregate
of 2,598,105 shares of Common Stock. The Recapitalization Investors contributed
an aggregate of $231.7 million in exchange for 30,228,195 shares of Common Stock
and options to purchase an additional 2,598,105 shares of Common Stock and are
selling an aggregate of 7,831,473 shares of Common Stock in the Offerings, and
55 Management Investors contributed an aggregate of $10.3 million in exchange
for 1,338,150 shares of Common Stock and no options, of which 223,065 shares of
Common Stock were received by four Management Investors who are selling an
aggregate of 443,205 shares of Common Stock in the Offerings. See "Principal and
Selling Stockholders."
Upon consummation of the Recapitalization, the H&F Investors were granted
registration rights as well as the right to nominate and have elected three
members of the Company Board and to designate jointly with the Management Voting
Trust two additional members of the Company Board. See "Risk Factors -- Control
of Y&R," "Management -- Executive Compensation" and "-- Officers and Directors,"
"Shares Eligible for Future Sale" and "Description of Capital Stock -- The
Management Voting Trust Agreement."
In connection with the Recapitalization, the Company entered into the $700
million Credit Facilities, a portion of the proceeds of which were used to
prepay the Company's indebtedness under its previous credit facilities.
Recapitalization-related borrowings under the Credit Facilities totalled $361.7
million, $200.0
16
<PAGE> 21
million of which was borrowed on December 12, 1996 and $161.7 million of which
was borrowed on March 18, 1997.
At the time of the Recapitalization, Y&R adopted certain incentive
compensation plans, including the Young & Rubicam Holdings Inc. Management Stock
Option Plan (the "Management Stock Option Plan") and the Young & Rubicam
Holdings Inc. Restricted Stock Plan (the "Restricted Stock Plan"), designed to
attract, retain and motivate key employees. The Management Stock Option Plan
provides for the grant of options to purchase Common Stock. At the time of the
Recapitalization, non-qualified options to purchase 16,823,565 shares of Common
Stock of Y&R were granted to certain members of Y&R management in consideration
of their surrender for cancellation of all or a portion of their outstanding
options to purchase equity units of predecessor companies of Y&R (the "Rollover
Options"). The Rollover Options were immediately vested and exercisable upon
grant. Each Rollover Option has an exercise price of $1.92 per share. In
addition to the Rollover Options, immediately following the closing of the
Recapitalization, non-qualified options with exercise prices of $7.67 per share
with respect to 5,200,590 shares of Common Stock were granted to certain key
employees of Y&R (the "Closing Options"). Each Closing Option became exercisable
immediately upon grant with respect to 40% of the shares subject thereto and
will become exercisable (i) on the third anniversary of its grant date with
respect to 30% of such shares and (ii) on the fifth anniversary of its grant
date with respect to the remaining 30% of such shares. See
"Management -- Executive Compensation -- Management Stock Option Plan."
Pursuant to the Restricted Stock Plan, Y&R issued a total of 11,086,950
shares of Common Stock to a trust (the "Restricted Stock Trust") established by
Y&R for allocation to key employees of Y&R. Of such amount, as of the date of
consummation of the Offerings, 9,231,105 shares of Common Stock will have been
allocated to employees pursuant to the Restricted Stock Plan ("Restricted
Stock"). The Restricted Stock Plan provides that such shares will vest and be
distributed to each such employee upon the six-month anniversary of the
consummation of the Offerings, subject to the power of the Board of Directors to
accelerate the vesting and distribution date to the consummation of the
Offerings. The Board of Directors has so accelerated the vesting and
distribution date, subject to the ability of the holders to sell such number of
shares of Restricted Stock in the Offerings necessary to fund the personal tax
liabilities associated with the vesting and distribution thereof. In addition,
in the event the Restricted Stock does not vest upon consummation of the
Offerings, the Restricted Stock will vest and be distributed upon certain change
of control events and upon certain other events described in the Restricted
Stock Plan, provided that in all cases each such employee is then still employed
by Y&R. Certain of such shares of Restricted Stock will be placed in a deferral
trust upon vesting thereof and the holders will have such shares distributed to
them from such deferral trust at specified times in the future. See
"Management -- Executive Compensation."
All shares of Common Stock (including all shares of Common Stock issued
upon the exercise of options) held by current or former members of Y&R
management and all shares of Common Stock held in the Restricted Stock Trust are
required to be deposited in the Management Voting Trust, the Voting Trustees of
which have the power to vote all shares of Common Stock held by it. The voting
rights of the Management Voting Trust are exercised by eight members of Y&R
senior management in their capacities as Voting Trustees. The Management Voting
Trust will remain in existence following consummation of the Offerings but will
terminate no later than 24 months after the consummation of the Offerings. See
"Shares Eligible for Future Sale" and "Description of Capital Stock -- The
Management Voting Trust Agreement."
17
<PAGE> 22
USE OF PROCEEDS
The net proceeds to the Company from the Offerings, assuming an initial
public offering price of $22.50 per share, the midpoint of the range set forth
on the cover page of this Prospectus (after deducting applicable underwriting
discounts and commissions and estimated offering expenses payable by the
Company), are estimated to be approximately $139.5 million. The Company intends
to use such net proceeds to repay a portion of the borrowings outstanding under
the term loan portion of the Credit Facilities. The Company will not receive any
of the proceeds from the sale of shares of Common Stock by the Selling
Stockholders. As of December 31, 1997, there was an aggregate of $330.6 million
outstanding under the term loan, which bore interest at a rate of 6.875% per
annum. The term loan portion of the Credit Facilities is repayable in quarterly
installments which commenced on September 30, 1997 with final maturity on March
31, 2003. The proceeds of the term loan portion of the Credit Facilities were
received by the Company in December 1996 and March 1997 and were used by the
Company primarily to prepay indebtedness, to repurchase equity units from
certain employees and to repay certain expenses in connection with the
Recapitalization.
DIVIDEND POLICY
Since the consummation of the Recapitalization, the Company has not
declared or paid any cash or other dividends on its Common Stock (other than the
Stock Split). The Company expects to commence the declaration and payment of a
regular quarterly cash dividend in the last quarter of 1998. However, any
determination to pay dividends will be at the discretion of the Company Board
and will depend upon, among other factors, the Company's results of operations,
financial condition, capital requirements and contractual restrictions pursuant
to the Company's Credit Facilities. The covenants under the Company's existing
Credit Facilities currently prohibit Y&R from declaring and paying cash
dividends; any cash dividend is therefore contingent upon a renegotiation or
refinancing of the existing Credit Facilities in order to remove such
restriction. The Company has received a commitment letter in respect of the New
Facility, which the Company expects to enter into effective upon the
consummation of the Offerings, which New Facility would replace the Credit
Facilities. The New Facility is expected to contain certain financial and
operating restrictions and covenant requirements, and is expected to permit the
payment of cash dividends except in the event of a continuing default under the
credit agreement. The New Facility is subject to execution of definitive
documentation and a number of other closing conditions, and there can be no
assurance that the Company will be successful in consummating such Facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
18
<PAGE> 23
CAPITALIZATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following table sets forth the Company's consolidated cash and cash
equivalents, current portion of installment notes and loans payable and
capitalization as of December 31, 1997 on (i) an actual basis; (ii) a pro forma
basis giving effect to the termination of the redemption feature and subsequent
reclassification of the Mandatorily Redeemable Equity Securities to
stockholders' deficit upon consummation of the Offerings; and (iii) a pro forma
as adjusted basis giving further effect to the sale of 6,666,667 shares of
Common Stock offered by the Company hereby and the application of the estimated
net proceeds therefrom as described in "Use of Proceeds" and the non-recurring,
non-cash, after-tax compensation charge resulting from the vesting of Restricted
Stock.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-----------------------------------
PRO PRO FORMA
ACTUAL FORMA AS ADJUSTED
<S> <C> <C> <C>
Cash and cash equivalents................................... $ 160,263 $ 160,263 $ 160,263
========= ========= =========
Current portion of installment notes and loans payable...... 13,996 13,996 13,996
========= ========= =========
Long-term debt:
Installment notes payable................................. 6,503 6,503 6,503
Loans payable:
Term loan facility(1).................................. 299,000 299,000 159,500
Revolving credit facility.............................. 31,552 31,552 31,552
--------- --------- ---------
Total long-term debt.............................. 337,055 337,055 197,555
--------- --------- ---------
Mandatorily Redeemable Equity Securities:
Common Stock, $.01 par value, 250,000,000 shares
authorized; 50,658,180 shares issued and outstanding
(actual) and no shares issued and outstanding (pro
forma and pro forma as adjusted)(2).................... 508,471 -- --
--------- --------- ---------
Stockholders' deficit:
Cumulative Preferred Stock:
Money Market Preferred Stock -- variable dividend;
liquidating value of $7.67 per share; one-tenth of
one vote per share; 10,000,000 shares authorized; no
shares issued and outstanding........................ -- -- --
Cumulative Participating Junior Preferred
Stock -- $ dividend; liquidating value of
$100.00 per share; 100 votes per share; 2,500,000
shares authorized (pro forma as adjusted); no shares
issued and outstanding (pro forma as adjusted)(3).... -- -- --
Common Stock, $.01 par value, 250,000,000 shares
authorized (actual and pro forma); 250,000,000 shares
authorized (pro forma as adjusted); 11,086,950 shares
issued and outstanding (actual); 61,745,130 shares
issued and outstanding (pro forma) and 66,555,952
shares issued and outstanding (pro forma as
adjusted)(2)(4)(5)..................................... 111 617 665
Capital surplus(2)(5)..................................... 23,613 531,578 741,991
Accumulated deficit(6).................................... (522,866) (522,866) (645,409)
Cumulative translation adjustment......................... (16,577) (16,577) (16,577)
Pension liability adjustment.............................. (706) (706) (706)
--------- --------- ---------
Subtotal.................................................. (516,425) (7,954) 79,964
Common stock in treasury.................................... (8,550) (8,550) (8,550)
Unearned compensation-Restricted Stock(5)................... (136,739) (136,739) --
--------- --------- ---------
Total stockholders' (deficit) equity.............. (661,714) (153,243) 71,414
--------- --------- ---------
Total capitalization.............................. $ 183,812 $ 183,812 $ 268,969
========= ========= =========
</TABLE>
19
<PAGE> 24
- ------------------------------
(1) The pro forma as adjusted column reflects the application of $139,500 of
estimated net proceeds to the Company from the Offerings to repay a portion
of the borrowings outstanding under the term loan portion of the Credit
Facilities.
(2) From the date of consummation of the Recapitalization and through the date
of consummation of the Offerings, all outstanding shares of Common Stock,
exclusive of shares of Common Stock held in the Restricted Stock Trust, are
redeemable, subject to certain restrictions, at the option of the
stockholder. Accordingly, all such shares of Common Stock have been recorded
at their redemption values and classified as Mandatorily Redeemable Equity
Securities in the Company's historical balance sheets at December 31, 1996
and 1997, respectively. The pro forma December 31, 1997 balance sheet
reflects the reclassification of the $508,471 carrying value of Mandatorily
Redeemable Equity Securities to stockholders' deficit in connection with the
termination of the redemption feature upon consummation of the Offerings, of
which $506 is attributable to the par value of the 50,658,180 common shares
and the remaining $507,965 is attributable to capital surplus. See Notes 2,
15 and 16 to the Consolidated Financial Statements.
(3) Reflects the authorization of 2,500,000 shares of Cumulative Participating
Junior Preferred Stock which is effective upon the closing of the Offerings.
See "Description of Capital Stock -- Rights Plan."
(4) Excludes 31,013,205 shares of Common Stock issuable upon exercise of options
outstanding at a weighted average exercise price of $6.84 at December 31,
1997. See "Management -- Executive Compensation."
(5) Pro forma as adjusted common stock and capital surplus reflect an increase
of $48 and $210,413, respectively, for the following: (i) a $139,500
increase resulting from the issuance of 6,666,667 newly issued shares of
Common Stock in the Offerings (of the $139,500 net increase in stockholders'
equity, $67 is attributable to Common Stock for the par value of the
6,666,667 shares issued with the remaining $139,433 increasing capital
surplus); (ii) a $207,700 increase resulting from the vesting of the
9,231,105 shares of Restricted Stock (based upon an assumed initial public
offering price of $22.50 per share) allocated to employees as of the date of
consummation of the Offerings (of the $207,700 aggregate increase to Common
Stock and capital surplus, $92 is attributable to Common Stock for the par
value of the 9,231,105 shares vested and $207,608 is attributable to capital
surplus); and (iii) the elimination of the unearned compensation included as
a component of stockholders' equity resulting from recognition of the
Restricted Stock compensation charge (discussed in Note (6) below) in
connection with the vesting of such awards upon consummation of the
Offerings (this charge results in a $111 decrease in Common Stock (par value
of the 11,086,950 shares of Common Stock held by the Restricted Stock Trust
outstanding at December 31, 1997) and a decrease in capital surplus of
$136,628).
(6) Reflects the vesting of the aggregate 9,231,105 shares of Restricted Stock
allocated to employees as of the consummation of the Offerings and the
resulting non-recurring, non-cash, after-tax compensation charge estimated
at $122,543 (at an assumed initial public offering price of $22.50 per
share) as an increase in the accumulated deficit herein. The charge to
compensation expense will occur upon consummation of the Offerings. See
"Management -- Executive Compensation -- The Restricted Stock Plan and Trust
Agreement" and Note 15 to the Consolidated Financial Statements.
20
<PAGE> 25
DILUTION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
As of December 31, 1997, after giving effect to the termination of the
redemption feature of the Mandatorily Redeemable Equity Securities upon the
consummation of the Offerings, the Company had a pro forma deficit in net
tangible book value of $269,880, or $4.37 per share of Common Stock based upon
61,745,130 pro forma shares of Common Stock outstanding. The deficit in pro
forma net tangible book value per share is determined by dividing the pro forma
deficit in net tangible book value of the Company (total tangible assets less
total liabilities) on such date by the number of pro forma shares of Common
Stock outstanding as of such date. After giving effect to the sale by the
Company of the 6,666,667 shares of Common Stock offered hereby and after
deducting underwriting discounts and commissions and estimated offering expenses
payable by the Company, the Company's pro forma as adjusted deficit in net
tangible book value as of December 31, 1997 would have been $45,223 or $.68 per
share of Common Stock. This represents an immediate decrease in the deficit in
the pro forma net tangible book value of $3.69 per share to existing
stockholders and immediate dilution of $23.18 per share to new investors
purchasing shares of Common Stock in the Offerings. The following table
illustrates dilution to new investors on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $22.50
Pro forma deficit in net tangible book value per share
before the Offerings................................... $4.37
Decrease in deficit in pro forma net tangible book value
per share attributable to new investors................ $3.69
-----
Pro forma as adjusted deficit in net tangible book value per
share after the Offerings................................. $ .68
------
Dilution per share to new investors......................... $23.18
======
</TABLE>
The following table sets forth, as of the date of this Prospectus, a
comparison of the number of shares of Common Stock owned by the existing
stockholders and the new investors, the total consideration paid and the average
price per share paid by the Company's existing stockholders and new investors
purchasing shares of Common Stock from the Company in the Offerings.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)............... 60,200,040 90% $273,676 65% $ 4.55
New investors(1)....................... 6,666,667 10 150,000 35 22.50
----------- --- -------- ---
Total........................ 66,866,707 100% $423,676 100%
=========== === ======== ===
</TABLE>
- ------------------------------
(1) Sales of Common Stock by the Selling Stockholders in the Offerings will
reduce the number of shares of Common Stock held by existing stockholders to
50,266,707, or approximately 75% of the total shares of Common Stock
outstanding after the Offerings and will increase the number of shares held
by new investors to 16,600,000, or approximately 25% of the total shares of
Common Stock outstanding after the Offerings. See "Principal and Selling
Stockholders."
The foregoing tables exclude (i) an aggregate of 28,964,130 shares of
Common Stock reserved for issuance upon exercise of outstanding options under
the Stock Option Plans and (ii) an aggregate of 2,598,105 shares reserved for
issuance upon the exercise of outstanding options issued to certain of the
Recapitalization Investors. See "Management -- Executive
Compensation -- Management Stock Option Plan" and "-- 1997 ICP."
21
<PAGE> 26
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following selected consolidated balance sheet data and consolidated
statement of operations data as of and for the years 1993 through 1997 have been
derived from the Company's audited annual consolidated financial statements,
including the consolidated balance sheets at December 31, 1996 and 1997 and the
related consolidated statements of operations and of cash flows for the three
years ended December 31, 1997 and the notes thereto appearing elsewhere in this
Prospectus. The selected consolidated financial data set forth below should be
read in conjunction with, and are qualified in their entirety by reference to,
the Consolidated Financial Statements and related notes thereto appearing
elsewhere in this Prospectus. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................ $905,770 $959,275 $1,085,494 $1,222,139 $1,382,740
Compensation expense, including employee
benefits(1)................................... 583,723 594,322 672,026 730,261 836,150
General and administrative expenses(1).......... 312,083 323,087 356,523 391,617 463,936
Recapitalization-related charges(2)............. -- -- -- 315,397 --
Other operating (income) charges(2)............. (11,714) 4,507 31,465 17,166 11,925
-------- -------- ---------- ---------- ----------
Operating expenses............................ 884,092 921,916 1,060,014 1,454,441 1,312,011
-------- -------- ---------- ---------- ----------
Income (loss) from operations................... 21,678 37,359 25,480 (232,302) 70,729
Interest income................................. 10,646 12,100 9,866 10,269 8,454
Interest expense................................ (17,958) (23,027) (27,441) (28,584) (42,879)
-------- -------- ---------- ---------- ----------
Income (loss) before income taxes............... 14,366 26,432 7,905 (250,617) 36,304
Income tax provision (benefit).................. 8,583 12,998 9,130 (20,611) 58,290
-------- -------- ---------- ---------- ----------
5,783 13,434 (1,225) (230,006) (21,986)
Equity in net income (loss) of unconsolidated
companies..................................... 102 4,740 5,197 (9,837) 342
Minority interest in net (income) loss of
consolidated subsidiaries..................... (1,271) (2,742) (3,152) 1,532 (2,294)
-------- -------- ---------- ---------- ----------
Income after taxes and before accounting
changes....................................... 4,614 15,432 820 (238,311) (23,938)
Cumulative effect of accounting changes (net of
tax benefit of $3,400)........................ (5,100) -- -- -- --
-------- -------- ---------- ---------- ----------
Net (loss) income............................... $ (486) $ 15,432 $ 820 $ (238,311) $ (23,938)
======== ======== ========== ========== ==========
Basic and diluted loss per common share(3)...... $ (.51)
Weighted average shares outstanding(3).......... 46,949,355
Supplemental loss per common share(4)........... $ (.37)
OTHER OPERATING DATA:
EBITDA(1)(5).................................... $ 59,282 $ 77,662 $ 72,972 $ 147,221 $ 139,375
Net cash provided by operating activities....... 15,426 43,314 79,809 178,064 224,511
Net cash used in investing activities........... 34,226 49,941 45,821 76,094 67,142
Net cash (provided by) used in financing
activities.................................... (41,644) 30,705 50,025 12,614 98,667
Capital expenditures............................ 25,241 33,196 42,096 51,792 51,899
International revenues as a % of total
revenues(6)................................... 51.7% 53.6% 54.7% 53.3% 52.2%
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------------------------------
1997 1997
1993 1994 1995 1996 ACTUAL PRO FORMA(11)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)(7).... $100,519 $ 72,651 $ 27,827 $ (196,509) $ (106,169) $ (106,169)
Total assets(8)................. 998,808 1,118,846 1,226,581 1,598,812 1,528,019 1,528,019
Total debt(9)................... 197,929 256,032 230,831 267,238 351,051 351,051
Mandatorily Redeemable Equity
Securities(10)................ -- -- -- 363,264 508,471 --
Total equity (deficit).......... 123,661 69,982 (55,485) (480,033) (661,714) (153,243)
</TABLE>
22
<PAGE> 27
- ------------------------------
(1) For a discussion of charges included in compensation expense, including
employee benefits, and general and administrative expenses, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."
(2) For a discussion of Recapitalization-related and other operating charges,
see Notes 4 and 6 to the Consolidated Financial Statements.
(3) Basic net loss per common share for 1997 was computed by dividing the net
loss by the weighted average number of common shares outstanding during the
period. The weighted average number of common shares outstanding excludes
11,086,950 shares of Common Stock held by the Restricted Stock Trust, as
such shares vest upon the consummation of an initial public offering, or
the six-month anniversary thereof, a condition which was not satisfied at
December 31, 1997. Diluted net loss per common share for 1997 was computed
in the same manner as basic net loss per common share since the inclusion
of potential common shares would be antidilutive.
At December 31, 1997, the Company had outstanding options to purchase
31,013,205 shares of Common Stock with a weighted average exercise price of
$6.84 that could potentially dilute basic earnings per share in the future.
These options were excluded from the computation of diluted net loss per
common share because the effect for 1997 would be antidilutive. In
addition, at December 31, 1997, a maximum of 11,086,950 shares of Common
Stock held by the Restricted Stock Trust would vest and be dilutive as a
result of the consummation of the Offerings. See "Management -- Executive
Compensation -- The Restricted Stock Plan and Trust Agreement" and Notes 3,
15 and 21 to the Consolidated Financial Statements.
Earnings per share for 1995 and 1996 cannot be computed because the
Company's capital structure prior to the Recapitalization consisted of both
common shares and limited partnership units in predecessor entities. See
Note 4 to the Consolidated Financial Statements.
(4) The supplemental loss per common share was computed by dividing the
supplemental loss of $19,587 by the supplemental shares of 53,616,022. The
supplemental loss of $19,587 has been computed by adjusting the historical
net loss for 1997 to reflect the following: (i) additional interest cost,
net of the related tax benefit of $1,410 (computed utilizing an interest
rate and statutory tax rate of 7.0% and 41.0% respectively), associated
with the $161,700 of Recapitalization-related borrowings under the
Company's Credit Facilities, which occurred on March 18, 1997, as if such
borrowings had occurred as of January 1, 1997 and (ii) the reduction in
interest cost, net of tax, of $5,761 (computed utilizing an interest rate
and statutory tax rate of 7.0% and 41.0% respectively) associated with
$139,500 of the net proceeds of the Offerings to the Company, which is
expected to be utilized to repay a portion of the outstanding borrowings
under the term loan portion of the Company's Credit Facilities, as if the
debt repayment had occurred as of January 1, 1997.
The supplemental shares of 53,616,022 were computed by adding the 6,666,667
shares of Common Stock offered by the Company to the 46,949,355 weighted
average shares outstanding as of December 31, 1997. See "Capitalization."
Based upon an assumed initial public offering price of $22.50, the
consummation of the Offerings will give rise to a non-recurring, non-cash,
pre-tax charge of $207,700 ($122,543 net of the related tax benefit
assuming a statutory tax rate of 41.0%) arising from the vesting of the
aggregate of 9,231,105 shares of Restricted Stock allocated to employees as
of the date of the consummation of the Offerings. The determination of
supplemental loss for 1997 does not give effect to this charge due to its
non-recurring nature. See "Management -- Executive Compensation -- The
Restricted Stock Plan and Trust Agreement" and Note 15 to the Consolidated
Financial Statements.
(5) EBITDA is defined as income (loss) from operations, before depreciation and
amortization, other non-cash charges and Recapitalization-related charges.
EBITDA is presented because it is a widely accepted financial indicator and
is generally consistent with the definition used for covenant purposes
contained in the Company's existing credit facilities; however, EBITDA may
not be comparable to other registrants' calculation of EBITDA or similarly
titled items. EBITDA should not be considered as an alternative to net
income (loss) as a measure of operating results in accordance with
generally accepted accounting principles or as an alternative to cash flows
as a measure of liquidity. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Results of Operations."
EBITDA for 1996 and 1997 are before $11,096 and $11,925, respectively, of
non-cash charges primarily related to impairment write-downs which are
included in other operating charges. See Notes 4 and 6 to the Consolidated
Financial Statements.
(6) International revenues include all revenues earned outside the United
States.
(7) Working capital deficit as of December 31, 1996 includes approximately
$161,700 of accruals related to the Recapitalization which were paid in
1997 through long-term borrowings. Working capital deficit as of December
31, 1997 is the result of improved collection of accounts receivable and
use of cash to repay short-term borrowings under the Company's Credit
Facilities during 1997. See the Consolidated Statements of Cash Flows and
Note 4 to the Consolidated Financial Statements.
(8) Total assets as of December 31, 1997 (actual and pro forma) include net
deferred tax assets of $157,024, $75,135 of which relate to NOL
carryforwards of approximately $140,409 for U.S. tax purposes and
approximately $69,231 for foreign tax purposes. See Note 9 to the
Consolidated Financial Statements.
(9) Total debt includes current and non-current loans and installment notes.
See Notes 13 and 14 to the Consolidated Financial Statements.
(10) From the date of consummation of the Recapitalization and through the date
of consummation of the Offerings, all outstanding shares of Common Stock,
exclusive of shares of Common Stock held in the Restricted Stock Trust, are
redeemable, subject to certain restrictions, at the option of the
stockholder. Accordingly, all such shares of Common Stock have been
recorded at their redemption values and classified as Mandatorily
Redeemable Equity Securities in the Company's historical balance sheets at
December 31, 1996 and 1997, respectively. See Notes 2, 15 and 16 to the
Consolidated Financial Statements.
(11) The pro forma December 31, 1997 balance sheet reflects the termination of
the redemption feature and subsequent reclassification of Mandatorily
Redeemable Equity Securities, as discussed in Note (10) above, to
stockholders' equity. See "Capitalization" and Notes 2, 15 and 16 to the
Consolidated Financial Statements.
23
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements.
OVERVIEW
Y&R is the fifth largest marketing and communications organization in the
world, with integrated services in advertising, direct marketing and sales
promotion, perception management and public relations, branding consultation and
design services, and healthcare communications. Y&R's revenues were
approximately $1.4 billion in 1997, having grown at a compound annual rate of
12.9% from 1995 to 1997.
Y&R's revenues consist principally of commissions and fees received by the
Company from its clients. Commissions are derived using a negotiated percentage
of an advertiser's media and production spending through Y&R. Fees are based on
hours spent and costs incurred by agency staff plus a negotiated mark-up.
Commission revenue is recognized primarily when media placements appear on
television, on radio or in print, and when labor and production costs are
billed. Fee revenue is recognized when services are rendered.
Y&R has also implemented certain incentive-oriented compensation
arrangements with several clients to further strengthen client relationships and
reward Y&R for superior performance. These incentive arrangements create a range
of compensation which could result in either higher or lower revenues and
operating margins than a more traditional commission or fee arrangement.
Incentive levels are determined with reference to agreed upon operating,
performance and other benchmarks, with respect to both clients' businesses as
well as Y&R's performance. Although incentive arrangements did not materially
impact Y&R's revenues in 1997, management believes that additional clients may
request that Y&R institute incentive compensation arrangements in the future.
Y&R's revenues are diversified across geographic regions, various sectors
of the economy and among many clients. In 1997, approximately 47.8% of Y&R's
revenues were derived from its U.S. operations, with approximately 34.2% coming
from its European operations and the rest divided among its operations in Latin
America, Australia/New Zealand, Asia, Canada and Africa. For the years 1995,
1996 and 1997, the Company's revenue from any one country, other than the United
States, has not exceeded 10% of the Company's consolidated revenues. The United
Kingdom, Germany, Brazil, France, Australia, the Netherlands, Italy, Canada and
Switzerland represent the Company's largest sources of revenues by country
(other than the United States).Y&R represents clients in various industries,
including automotive, consumer packaged goods, financial services, food and
beverage, government services and telecommunications. Y&R's revenues are
diversified across its approximately 5,500 client accounts, with the largest
client and the top 20 clients accounting for approximately 10.0% and 40.5%,
respectively, of revenues in 1997.
Y&R has two principal categories of operating expenses: compensation
expense and general and administrative expenses. Y&R's largest expense is
compensation, which includes the salaries, bonuses and benefits of all
employees, as well as fees paid to freelance contractors. General and
administrative expenses principally consist of facilities' costs, depreciation,
amortization, new business costs, travel expenses and professional fees.
From the time of its founding until 1996, Y&R was wholly owned by its
employees. As further described in Note 4 to the Consolidated Financial
Statements, in December 1996, Y&R consummated the Recapitalization, which
resulted in the recording of a pre-tax charge of $315.4 million in 1996. In
connection with the Recapitalization, the Company issued Restricted Stock. Based
upon an assumed initial offering price of $22.50, the consummation of the
Offerings will give rise to a non-recurring, non-cash, pre-tax charge of $207.7
million ($122.5 million net of the related tax benefit assuming a statutory tax
rate of 41.0%) from the vesting of an aggregate of 9,231,105 shares of
Restricted Stock allocated to employees as of the date of consummation of the
Offerings.
24
<PAGE> 29
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
derived from the Company's consolidated statements of operations and the
percentages of revenue represented by such items. Totals may not add due to
rounding.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------
% OF % OF % OF
1995 REVENUES 1996 REVENUES 1997 REVENUES
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Revenues................................ $1,085.5 100.0% $1,222.1 100.0% $1,382.7 100.0%
Compensation expense, including employee
benefits.............................. 672.0 61.9% 730.3 59.8% 836.2 60.5%
General and administrative expenses..... 356.5 32.8% 391.6 32.0% 463.9 33.6%
Recapitalization-related charges........ -- 0.0% 315.4 25.8% -- 0.0%
Other operating charges................. 31.5 2.9% 17.2 1.4% 11.9 0.9%
------- --------- ------- --------- ------- ---------
Income (loss) from operations........... 25.5 2.3% (232.3) (19.0%) 70.7 5.1%
Net income (loss)....................... $ 0.8 0.1% ($238.3) (19.5%) ($ 23.9) (1.7%)
======= ========= ======= ========= ======= =========
EBITDA.................................. $ 73.0 6.7% $ 147.2 12.0% $ 139.4 10.1%
</TABLE>
1997 COMPARED TO 1996
Consolidated worldwide revenues for 1997 increased by 13.1% to $1,382.7
million from $1,222.1 million in 1996. Consolidated U.S. revenues for 1997
increased by 15.8% to $661.3 million from $571.1 million in 1996. Consolidated
international revenues for 1997 increased by 10.8% to $721.4 million from $651.0
million in 1996. Of the worldwide revenue increase, 13.6% was due to organic
growth (including net new business gains and higher net revenues from existing
clients) and 3.0% was due to the acquisition of majority interests in
investments previously accounted for under the equity method. Such increases
were partially offset by a 3.5% decline related to a strengthening (on average)
of the U.S. dollar against foreign currencies. New business was generated from
new client accounts such as Campbell's Soup, Citibank, Merck and United
Airlines.
Compensation expense for 1997 increased by 14.5% to $836.2 million from
$730.3 million in 1996. Compensation expense for 1997 increased as a percentage
of revenues to 60.5% from 59.8% in 1996. The growth in compensation expense was
generally in line with revenue growth and also included a $12.3 million charge
primarily for deferred compensation awards granted to senior executives in 1997.
General and administrative expenses for 1997 increased by 18.5% to $463.9
million from $391.6 million in 1996. General and administrative expenses
increased as a percentage of revenues to 33.6% in 1997 from 32.0% in 1996. The
higher rate of growth in general and administrative expenses compared to
revenues was primarily attributable to a $25.5 million write-off of accounts
receivable, costs billable to clients and other capitalized costs recorded in
1997 with respect to the operations of Burson-Marsteller in Europe and Asia. The
write-offs in Europe were primarily related to Burson-Marsteller's
implementation of a new management information system in 1997 which resulted in
delayed and inaccurate billing of certain clients and necessitated the creation
of additional reserves against accounts receivable and costs billable to
clients. The write-offs in Asia were attributable to the Company's evaluation of
Burson-Marsteller's recent operating performance in Asia and the determination
that Burson-Marsteller was unlikely to collect certain accounts receivable and
costs billable to clients. As a result of its analysis of the circumstances
which led to these write-offs, the Company has made management changes at
Burson-Marsteller in Europe and Asia and implemented additional financial
control and reporting requirements for these operations, including strengthening
controls and procedures regarding regional billing and collection practices.
In 1997, the Company had income from operations of $70.7 million compared
to a loss from operations of $232.3 million in 1996, primarily due to the
Recapitalization-related charges of $315.4 million. Income from operations in
1997 included $47.6 million of depreciation expense, $9.1 million of goodwill
amortization and $11.9 million of other operating charges for asset impairment
write-downs principally related to certain
25
<PAGE> 30
operations in the United States, Africa, Latin America and Europe. As a result,
EBITDA for 1997 was $139.4 million.
Net interest expense (interest expense net of interest income) increased by
$16.1 million in 1997 compared to 1996. The increase was primarily due to higher
average borrowing levels in 1997 as a result of the Recapitalization in December
1996. The net proceeds to the Company from the Offerings are expected to be used
to repay a portion of the borrowings under the term loan portion of the Credit
Facilities. Therefore, the Company expects to have lower average borrowing
levels in 1998.
The effective income tax rate for 1997 was 160.6%. The primary difference
between the U.S. statutory tax rate and Y&R's effective tax rate in 1997
resulted from incremental foreign taxes arising from losses outside the United
States which provided little or no tax benefit. The effective income tax rate
for 1996 was a benefit of 8.2%. This reflects the tax benefit from the
Recapitalization-related charges partially offset by foreign income taxed at
rates greater than the U.S. statutory rate. See Note 9 to the Consolidated
Financial Statements.
Net income of unconsolidated companies was $0.3 million in 1997 compared to
a loss of $9.8 million in 1996. A $9.3 million charge to write down an
Australian equity investment was recorded in 1996.
Minority interest in net loss of consolidated subsidiaries increased $3.8
million in 1997 compared to 1996, primarily reflecting the minority interest
share of charges for asset impairment write-downs relating to an Italian
operation in 1996.
Net loss for 1997 was $23.9 million compared to a net loss of $238.3
million in 1996, primarily as a result of charges recorded in connection with
the Recapitalization.
1996 COMPARED TO 1995
Consolidated worldwide revenues for 1996 increased by 12.6% to $1,222.1
million from $1,085.5 million in 1995. Consolidated U.S. revenues for 1996
increased by 16.0% to $571.1 million from $492.3 million in 1995. Consolidated
international revenues for 1996 increased by 9.7% to $651.0 million from $593.2
million in 1995. Of the worldwide revenue increase, 12.9% was attributable to
organic growth (including net new business gains and higher net revenues from
existing clients) and 0.7% was due to businesses acquired. Such increases were
partially offset by a 1.0% decline related to a strengthening (on average) of
the U.S. dollar against foreign currencies. New business was generated from new
client accounts such as Blockbuster Video, Equal, Ericsson, H&R Block and
Novell.
Compensation expense for 1996 increased by 8.7% to $730.3 million from
$672.0 million in 1995. Compensation expense decreased as a percentage of
revenues to 59.8% in 1996 from 61.9% in 1995. Such decrease primarily reflects
productivity improvements resulting from selected staff reductions in connection
with a productivity improvement plan implemented by the Company at the end of
1995.
General and administrative expenses for 1996 increased by 9.8% to $391.6
million from $356.5 million in 1995. General and administrative expenses
decreased as a percentage of revenues to 32.0% in 1996 from 32.8% in 1995,
primarily due to improved cost controls.
Recapitalization-related expenses of $315.4 million were incurred in 1996,
primarily related to the cancellation of the Company's former equity-based
compensation and stock option plans. See Note 4 to the Consolidated Financial
Statements.
In 1996, the Company recorded a $17.2 million charge for asset impairment
write-downs for certain European and Latin American operations. In 1995, the
Company recorded a restructuring charge of $24.4 million in connection with a
productivity improvement plan and charges of $7.1 million, primarily to dispose
of certain non-strategic European agencies.
In 1996, the Company had a loss from operations of $232.3 million compared
to income from operations of $25.5 million in 1995. The loss from operations of
$232.3 million in 1996 included $42.0 million of depreciation expense, $11.0
million of goodwill amortization, $315.4 million of Recapitalization-related
26
<PAGE> 31
charges and $11.1 million of non-cash, non-recurring operating charges
principally for asset impairment write-downs for certain operations in Europe
and Latin America. As a result, EBITDA for 1996 was $147.2 million.
Net interest expense (interest expense net of interest income) increased by
$0.7 million in 1996 compared to 1995. The increase was primarily due to $2.9
million in prepayment penalties relating to the repayment, in connection with
the Recapitalization, of $100 million of 7.01% senior notes and $40 million of
8.75% senior notes. Excluding these prepayment penalties, net interest expense
in 1996 decreased by $2.2 million versus 1995, resulting from lower average
interest rates combined with lower average borrowing levels in 1996. See Note 4
to the Consolidated Financial Statements.
The effective income tax rate for 1996 was a benefit of 8.2%. This reflects
the tax benefit for the Recapitalization-related charges partially offset by
foreign income taxed at rates greater than the U.S. statutory rate. The
effective income tax rate for 1995 was 115.5%. The primary difference between
the statutory tax rate and Y&R's effective tax rate in 1995 resulted from
foreign income taxed at rates greater than the U.S. statutory rate. See Note 9
to the Consolidated Financial Statements.
Net loss of unconsolidated companies was $9.8 million in 1996 compared to
income of $5.2 million in 1995. A $9.3 million charge to write down an
Australian equity investment as well as lower earnings reported by the Company's
joint ventures with Dentsu, Inc. contributed to the net loss in 1996.
Minority interest in net loss of consolidated subsidiaries decreased $4.7
million in 1996 compared to 1995, reflecting the minority interest share of
charges for asset impairment write-downs relating to an Italian operation in
1996.
Net loss for 1996 was $238.3 million compared to net income of $0.8 million
in 1995, primarily as a result of charges recorded in connection with the
Recapitalization.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has financed its working capital, capital
expenditures, acquisitions and equity repurchases from cash generated from
operations and third party borrowings.
Cash and cash equivalents at December 31, 1997 increased by 45.5% to $160.3
million from $110.2 million at December 31, 1996. For 1997, the Company
generated operating cash flows of $224.5 million which represented a 26.1%
increase in operating cash flows versus 1996. The Company achieved an
improvement in net cash flow from operating activities due, in part, to
increased focus on cash flow management, including improvements in the timing of
billings and the relationship between the collection of accounts receivable and
the payment of obligations to media and other suppliers. Operating cash flows
and third-party borrowings were used for capital expenditures, acquisition
requirements and equity repurchases.
Investing activities in 1997 included $51.9 million for capital
expenditures and $11.3 million for acquisitions. The majority of capital
expenditures were for technology-related purchases, while the remaining
expenditures were for leasehold improvements, furniture and equipment. The $11.3
million for acquisitions primarily consisted of increases in investments in
equity affiliates in the United States, Europe, Latin America and Australia/New
Zealand. Capital expenditures are estimated to be approximately $72.5 million
for 1998 primarily for real estate and information technology, with the increase
over 1997 primarily related to leasehold improvements in London, New York and
Paris.
In December 1996, Y&R consummated the Recapitalization. Pursuant to the
Recapitalization, all of the Company's outstanding equity and equity-related
units and options to purchase such units were either acquired for cash
consideration or cancelled and exchanged for new equity interests or options to
purchase new equity interests. The Recapitalization was financed by $242 million
contributed by the Recapitalization Investors and by borrowings under the Credit
Facilities. The Credit Facilities consist of a six and one-half year $400
million term loan and a six and one-half year $300 million revolving credit
facility. As a result of the timing of Recapitalization-related payments, net
cash used in financing activities increased from $12.6 million in 1996 to
$98.7 million in 1997.
27
<PAGE> 32
At December 31, 1997, the Company had $330.6 million in outstanding
indebtedness under the Credit Facilities. The Company expects to fund its
payments of principal and interest under the Credit Facilities with internally
generated funds and from various external sources including additional
financings and the sale of Common Stock by the Company in the Offerings.
At December 31, 1997, the Company recorded a net deferred tax asset of
$157.0 million, $75.1 million of which related to net operating loss ("NOL")
carryforwards of approximately $140.4 million for U.S. tax purposes which expire
in the year 2012 and approximately $69.2 million of NOL carryforwards for
foreign tax purposes with carryforward periods ranging from one year to an
indefinite time. The available net deferred tax assets principally resulted from
compensation payments made in connection with the Recapitalization. Based upon
an assumed initial public offering price of $22.50, the consummation of the
Offerings will give rise to a non-recurring, non-cash, pre-tax charge of $207.7
million, which will generate additional tax benefits to the Company estimated at
$85.2 million.
As required by the Credit Facilities, the Company has entered into interest
rate exchange agreements with off-balance sheet risk in order to reduce its
exposure to changes in interest rates on its variable rate long-term debt. As of
December 31, 1997, the Company had obtained interest rate protection agreements
with respect to $275.0 million of indebtedness, which effectively changed the
Company's interest rate under the Credit Facilities to fixed rate borrowings.
The interest rate protection agreements mature at various times through 2001.
The Company's Consolidated Financial Statements are denominated in U.S.
dollars. In 1997, Y&R derived approximately 52.2% of its revenues from
operations outside of the United States. Currency fluctuations may give rise to
translation gains or losses when financial statements of foreign operating units
are translated into U.S. dollars. Significant strengthening of the U.S. dollar
against other major foreign currencies could have a material adverse effect on
Y&R's results of operations. Most of the Company's revenues are billed in the
same currency as the costs incurred to support the revenues, thereby reducing
exposure to currency fluctuations. The Company typically does not hedge foreign
currency profits into U.S. dollars, believing that over time the costs of a
hedging program would outweigh any benefit of greater predictability in the
Company's U.S. dollar-denominated profits. However, the Company selectively
hedges some positions where management believes it is economically beneficial to
do so, and bases its foreign subsidiary capitalization, debt and dividend
policies on minimizing currency risk. The Company also seeks, through pricing
and other means, to anticipate and avoid economic currency losses.
Management believes cash flows from operations coupled with availability
under the New Facility are adequate to support its short-term cash requirements
for capital expenditures, repayment of debt and maintenance of working capital.
The Company anticipates that future cash flows from operations plus funds from
various external sources including the New Facility and additional financings
will be adequate to support the long-term cash requirements as presently
contemplated.
The Company expects to prepay certain non-negotiable subordinated payment
obligations of approximately $15.2 million on June 30, 1998 using available cash
or borrowings under the New Facility. The non-negotiable subordinated payment
obligations were incurred by the Company in connection with the termination of
employment of certain former employee stockholders. Such payment obligations are
repayable at the Company's election in four annual installments and bear
interest at a rate equal to the applicable United States federal rate in effect
under Section 1274(d) of the Internal Revenue Code of 1986, as amended.
The Company expects to commence the declaration and payment of a regular
quarterly cash dividend in the last quarter of 1998. However, any determination
to pay dividends will be at the discretion of the Company Board and will depend
upon, among other factors, the Company's results of operations, financial
condition, capital requirements and contractual restrictions pursuant to the
Company's Credit Facilities. The covenants under the Company's existing Credit
Facilities currently prohibit Y&R from declaring and paying cash dividends; any
cash dividend is therefore contingent upon a renegotiation or refinancing of the
existing Credit Facilities in order to remove such restriction. The Company has
received a commitment letter in respect of the New Facility which would replace
the Credit Facilities and the Company expects to enter into the New Facility
effective upon the consummation of the Offerings. The New Facility is expected
to contain certain
28
<PAGE> 33
financial and operating restrictions and covenant requirements, and is expected
to permit the payment of cash dividends except in the event of a continuing
default under the credit agreement. The New Facility is subject to execution of
definitive documentation and a number of other closing conditions, and there can
be no assurance that the Company will be successful in consummating the New
Facility.
SEASONALITY
The Company's revenues generally reflect the media buying patterns of
advertisers and are concentrated in the second and fourth quarters of the year.
YEAR 2000 COMPLIANCE
The Company is conducting a comprehensive review of its computer systems to
identify all software applications that could be affected by the inability of
many existing computer systems to process time-sensitive data accurately beyond
the year 1999 (referred to as the "Year 2000" issue). The Company intends to
modify or replace all affected systems for compliance with the Year 2000 issue.
The Company is also monitoring the adequacy of the processes and progress of
third-party vendors of systems that may be affected by the Year 2000 issue. Y&R
is dependent on third-party computer systems and applications, particularly with
respect to such critical tasks as accounting, billing and buying, planning and
paying for media, as well as on its own computer systems. While Y&R believes its
process is designed to be successful, because of the complexity of the Year 2000
issue and the interdependence of organizations using computer systems, it is
possible that Y&R's efforts, or those of third parties with whom Y&R interacts,
will not be satisfactorily completed in a timely fashion. Failure to
satisfactorily address the Year 2000 issue could have a material adverse effect
on Y&R's prospects, business, financial condition and results of operations.
The costs of Y&R's Year 2000 project have not been determined but are not
expected to have a material adverse effect on the Company. However, there can be
no assurance that Y&R will not experience cost overruns or delays in connection
with its plan for replacing or modifying systems, which could have a material
adverse effect on Y&R's prospects, business, financial condition and results of
operations.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130") and Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS 131"), were issued. In February 1998, Statement of
Financial Accounting Standards No. 132, "Employers' Disclosures about Pensions
and Other Postretirement Benefits" -- ("SFAS 132"), was issued. The Company
anticipates that the adoption of SFAS 130, SFAS 131 and SFAS 132 will not have a
significant effect on its 1998 financial statements. See Note 2 to the
Consolidated Financial Statements.
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BUSINESS
GENERAL
Young & Rubicam Inc. is the fifth largest consolidated marketing and
communications organization in the world. Since its founding 75 years ago, Y&R
has evolved from a single New York-based advertising agency to a diversified
global marketing and communications company operating in 128 cities in 76
countries worldwide as of December 31, 1997. The Company operates through such
internationally recognized market leaders as Young & Rubicam Advertising
(full-service advertising), Wunderman Cato Johnson (direct marketing and sales
promotion), Burson-Marsteller (perception management and public relations),
Landor Associates (branding consultation and design services) and Sudler &
Hennessey (healthcare communications), along with smaller complementary business
units, including The Bravo Group (multi-cultural marketing and communications),
Brand Dialogue (digital interactive branding and digital commerce), The Chapman
Agency (direct marketing) and The Media Edge (media planning, buying and
placement services). Y&R's revenues in 1997 were approximately $1.4 billion,
having grown at a compound annual rate of 12.9% from 1995 to 1997.
Through multi-disciplinary, client-focused teams, Y&R provides clients with
global access to fully integrated marketing and communications solutions. Among
Y&R's approximately 5,500 client accounts are a number of large multinational
organizations, including AT&T, Citibank, Colgate-Palmolive, Ford and Philip
Morris. Y&R has maintained long-standing relationships with many of its clients,
with the average length of relationship for the top 20 clients exceeding 20
years.
Y&R's mission is to be its clients' most valued business partner in
building, leveraging, protecting and managing clients' brands for both
short-term results and long-term growth. Consistent with its mission, Y&R has
developed an organizational and management structure designed to meet the
diverse needs of its large global clients as well as the more specialized needs
of its other clients. The Company's strategy combines this organizational and
management structure with the aggressive pursuit of new business opportunities
and continued investment in Y&R's business, personnel and superior consumer
knowledge. Y&R further seeks to fulfill its mission by providing clients with
superior creative services and extensive research capabilities, including access
to Y&R's proprietary research tool, BrandAsset Valuator.
In late 1992, Y&R created the Key Corporate Account ("KCA") program to
enhance the coordination of services sought by clients from both a global
coverage as well as an integrated solutions perspective. KCAs are large global
client accounts that, as a group, contribute the greatest share of Y&R's
revenues and profits, and are served on a multinational basis by two or more of
Y&R's businesses. Y&R currently designates 42 of its client accounts as KCAs.
Revenues from the KCAs, as a group, increased by 14.6% in 1997, and accounted
for approximately 45.5% and 46.1% of consolidated revenues in 1996 and 1997,
respectively. In order to further strengthen client relationships and reward Y&R
for meeting or exceeding certain performance targets, Y&R is working with KCAs
to adopt incentive compensation arrangements that align Y&R's compensation with
its performance and its clients' business performance.
As part of Y&R's client focus, Peter A. Georgescu, Chairman and Chief
Executive Officer of Y&R, John P. McGarry, Jr., President of Y&R, Edward H.
Vick, Chief Operating Officer of Y&R and Chairman and Chief Executive Officer of
Young & Rubicam Advertising, and Thomas D. Bell, Jr., Executive Vice President
of Y&R and President and Chief Executive Officer of Burson-Marsteller, all
retain ongoing responsibilities for individual KCAs in addition to their
managerial roles.
INDUSTRY OVERVIEW
The marketing and communications industry encompasses a wide range of
services used to develop and deliver messages to both broad and targeted
audiences through multiple communication channels. The industry includes
traditional advertising services as well as other marketing and communications
services such as direct marketing and sales promotion, public relations,
branding consultation and design services, new media marketing and other
specialized services.
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Traditional advertising services include the development and planning of
marketing and branding campaigns; the creative design and production of
advertisements; the planning and buying of time and/or space in a variety of
media, including broadcast and cable television, radio, newspapers, general
interest/ specialty magazines, billboards and the internet; and the provision of
consumer, product and other market research to clients on an ongoing basis.
According to industry sources, growth in advertising expenditures has
accelerated in recent years following the economic recession in the early 1990s,
and worldwide advertising expenditures totaled approximately $387 billion in
1996. Industry sources have predicted that worldwide advertising spending will
grow approximately 6% in 1998.
Direct marketing and sales promotion incorporate a broad range of services,
including direct mail and direct response television advertising (using
toll-free 800 numbers), inbound and outbound telemarketing and database
marketing. Sales promotion includes the planning, design and implementation of
merchandising and sales promotions as well as design and implementation of
targeted interactive campaigns. Industry sources have estimated a growth rate in
1998 of approximately 10% for both direct marketing and sales promotion.
Perception management and public relations address clients' external
corporate or brand positioning, public image and relations with key external
constituencies. Functions provided by public relations firms include corporate
communications, public affairs, lobbying, crisis management, issue advertising
and internal, consumer grassroots communications.
Branding consultation and design services encompass a range of services to
create, build and revitalize clients' brands. Among these services are corporate
identity, package design, retail design and branded environments, verbal
branding and nomenclature systems, corporate literature and interactive
branding.
New media marketing services include interactive marketing campaigns and
strategic consulting services, the design of internet websites, banners and home
pages, the development of corporate intranets and digital commerce applications.
INDUSTRY TRENDS
Several significant trends are changing the dynamics of the marketing and
communications industries, including the following:
GROWTH IN UNITED STATES MARKETING AND COMMUNICATIONS MARKETS. According to
industry sources, advertising expenditures in the United States have continued
to grow, increasing from approximately $140 billion in 1993 to approximately
$175 billion in 1996. In industries such as telecommunications, where regulatory
developments have encouraged increased competition among industry participants,
a growing number of companies have sought to establish and enhance their brand
images through comprehensive marketing and communications programs. In the
healthcare industry, recent regulatory changes that eased restrictions on
direct-to-consumer communications by pharmaceutical companies have also resulted
in significant additional marketing and communications expenditures.
GROWTH OF INTERNATIONAL MARKETING AND COMMUNICATIONS MARKETS. The
globalization of markets and the deregulation of certain sectors of
international markets have led to growth in demand for marketing and
communications services by large corporate clients. An increasing number of
companies are expanding globally and, where appropriate, are seeking consistent
brand images and market positions for their products throughout the world. At
the same time, however, companies continue to rely on their marketing and
communications advisors to tailor their regional and local marketing approach to
the demands, tastes and desires of the local marketplace. As international
markets have expanded, particularly the markets in the Asia/Pacific and Latin
American regions, non-U.S. advertising expenditures have grown more rapidly than
U.S. expenditures. According to industry sources, non-U.S. advertising
expenditures have increased from approximately 44% of worldwide expenditures in
1986 to approximately 55% in 1996.
INVESTMENT IN BRAND DEVELOPMENT. In the 1980s, many advertisers focused
their marketing campaigns on promotional advertising that emphasized price
competition, often reducing brand loyalty. Over the last several years, however,
advertisers have focused on the image or brand identity of their organizations,
products and services in an effort to differentiate themselves from competitors
and increase brand loyalty. This
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emphasis on brand development has increased the demand for delivery of
consistent messages and, as a result, companies are seeking marketing and
communications organizations which are able to coordinate resources across
multiple disciplines, geographies and media.
DEMAND FOR INTEGRATED SERVICE OFFERINGS. Increasingly, certain clients are
turning to large marketing and communications organizations to provide
integrated services across multiple disciplines. Such clients are seeking
integrated services to ensure a consistent brand presence and maximize the
effectiveness of their messages around the world, better coordinate their
marketing activities and simplify and strengthen their relationships with their
marketing partners. The demand for globally-integrated services has led to the
creation of a small number of global marketing and communications companies,
including Y&R, which strive to provide their clients with a full range of
services in each of the local markets in which their clients operate. In
addition, a substantial number of clients continue to require access to
specialized service providers. Y&R has over 20 years of experience in organizing
its companies to address this client need.
INCREASED EMPHASIS ON TARGETED MARKETING. The desire of companies to reach
their target audiences and quantify the effectiveness of their communications
has resulted in greater demand for customized direct marketing methods, such as
database marketing, infomercials, in-store promotions and interactive programs.
These techniques enable companies to quantify the success of their campaigns and
monitor the return on investment of their marketing expenditures through such
mechanisms as response rate tracking. The desire to create more targeted
marketing has been enhanced by the emergence of new media which permits more
interactive methods of customizing and delivering messages. In certain
developing economies, the technology infrastructure is improving, indicating
increased potential for database marketing and communications.
STRATEGY
Y&R's strategy consists of the following key components:
INCREASE PENETRATION OF KEY CORPORATE ACCOUNTS. Y&R believes that
significant opportunities exist to increase its share of KCA marketing and
communications expenditures by leveraging its global network to provide
integrated services to KCAs. Y&R has successfully increased its share of the
marketing and communications expenditures of certain KCAs over the past few
years. For example, Y&R has significantly expanded its relationship with Ford,
winning new assignments in Brazil, Germany, Canada and the United States for
Young & Rubicam Advertising, Wunderman Cato Johnson, Landor Associates and Brand
Dialogue. KCAs also have increased their use of multiple services offered by Y&R
over the same period. During 1997, Y&R's 20 largest clients used the
capabilities of an average of five of the Company's marketing and communications
services.
Y&R has implemented a team concept for certain KCAs which utilize
advertising, direct marketing and other marketing and communications services
offered by Y&R. Each client team aligns Y&R employees from separate disciplines
within the Company around KCAs and offers incentives to these employees to
provide the highest quality service to the client without regard to Y&R's own
internal corporate structure. In addition, Y&R seeks to improve KCA satisfaction
by retaining independent consultants to conduct third-party audits with clients
which measure Y&R's performance on a variety of criteria. Y&R intends to use
this objective information to identify strengths, weaknesses and opportunities
within KCA relationships.
DEVELOP NEW CLIENT RELATIONSHIPS. The Company believes that there are
significant opportunities for future revenue and profit growth by providing
services to new clients in targeted industry sectors and to those clients
seeking to build and maintain global, regional and local brands. Y&R has
successfully used its integrated and global approach as an effective tool in
winning new business. Y&R's win of the global Citibank account in August 1997
exemplifies the success of this strategy. Management believes that the
acquisition of this new business was due, in part, to Y&R's ability to
coordinate advertising and direct marketing activities for Citibank around the
world. The Company believes that Citibank consolidated its advertising and
direct marketing accounts with Y&R in order to establish a consistent brand
identity around the world. In addition to Citibank, during the last 18 months,
Y&R has won new business from clients including United Airlines and Campbell's
Soup, both of whom were designated as KCAs.
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LEVERAGE EXISTING GLOBAL NETWORK. With a worldwide presence in 76
countries (including 14 countries where Y&R is represented by non-equity
affiliations with local partners), the Company believes that it is well
positioned to continue to benefit from the trend towards the globalization of
client marketing and communications needs and the consolidation of such needs
with a single international service provider. For example, in late 1995,
Colgate-Palmolive consolidated its global advertising with Y&R, enabling
Colgate-Palmolive to replace multiple campaigns created by various local
agencies with a single campaign coordinated by Y&R's global network, while
providing substantial cost savings to Colgate-Palmolive.
CAPITALIZE ON EXISTING CAPABILITIES. Y&R intends to continue the
development of its existing capabilities into more visible and accessible client
services. For example, in 1997, Y&R launched a new unit, Brand Dialogue, to
serve its clients in the areas of digital interactive branding and digital
commerce and in the development and implementation of various interactive
strategies, including website design, creation and production. To create this
integrated unit, Y&R combined the existing interactive capabilities of Young &
Rubicam Advertising and Wunderman Cato Johnson in the United States, Latin
America, Europe and Asia/ Pacific. Management believes that Brand Dialogue
represents a growth opportunity for Y&R, and the Company intends to make
significant investments in new and emerging technologies to capitalize on these
opportunities.
In addition, in July 1997, the Company consolidated the United States media
planning, buying and placement capabilities of Young & Rubicam Advertising,
Wunderman Cato Johnson and The Media Edge (a media company acquired by Y&R in
1996) under The Media Edge name. With this consolidation, Y&R created a major
United States media agency with approximately $3 billion in media billings,
thereby enhancing its ability to negotiate effectively and secure discounts for
media purchases on behalf of its clients. The Company believes that The Media
Edge will provide a variety of media alternatives in various markets to existing
and future clients. Y&R plans to continue to identify and leverage strengths and
capabilities that can provide further differentiation for the Company and that
can evolve into businesses that generate incremental revenues and profits.
UTILIZE SUPERIOR CONSUMER KNOWLEDGE AND BRAND INSIGHTS. To assist its
clients in building, leveraging, protecting and managing their brands, Y&R has
developed and is maintaining extensive knowledge of consumer brand perceptions.
In 1994, Y&R launched BrandAsset Valuator ("BAV"), a proprietary database of
consumer perceptions for building and managing brands. In its first two phases,
in 1994 and the second half of 1997, the BAV project involved the gathering of
information on approximately 10,000 brands, including over 9,000 local and
regional brands and 550 global brands. BAV provides an understanding of how
consumers evaluate brands, how brands evolve over time and how brands are
managed successfully. The Company believes that BAV, in which the Company has
made significant investments over the past five years, is the first global
consumer study that provides an empirically derived model for how brands gain
and lose their strength. The Company further believes that BAV, which reflects
the perceptions of over 95,000 consumers in 32 countries in the Americas,
Europe, Asia, Australia and Africa, is the most extensive database of
information concerning consumer perceptions of brands. Management believes that
Y&R's comprehensive research capabilities, including BAV, have become a
significant factor in attracting new clients and winning new assignments from
existing clients. The Company plans to continue to invest in BAV, and believes
that knowledge of consumers' changing perceptions of brands will continue to
provide Y&R with a significant competitive advantage.
CULTIVATE CREATIVE EXCELLENCE. Y&R intends to continue emphasizing the
importance of creative marketing and communications. The creative leadership of
Y&R has been recognized over the years through the receipt of various industry
awards, including Cannes Lions and Clio Awards for excellence in television and
print advertising, EFFIES (awards for effective advertising) and a number of
other awards for direct marketing and design services. Y&R also has created
numerous memorable marketing and communications programs for clients, including
"The Softer Side of Sears," "Everybody Needs a Little KFC," "It's All Within
Your Reach" for AT&T, "The Document Company" for Xerox, and "Be All That You Can
Be" for the United States Army, as well as identity and design assignments,
including the creation of corporate identities, for Lucent Technologies,
Netscape and the 2002 Salt Lake City Olympics.
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IMPROVE OPERATING EFFICIENCIES. The Company believes that opportunities
exist to further improve operating efficiencies in order to expand margins and
increase future profitability. For example, Y&R has implemented initiatives
which have both improved productivity and reduced compensation expense as a
percentage of consolidated revenues.
EXPAND CAPABILITIES THROUGH ACQUISITIONS. In order to add new
capabilities, enhance its existing capabilities and expand the geographic scope
of its operations, Y&R regularly evaluates and intends to pursue appropriate
acquisition opportunities. Management believes that significant opportunities
exist to expand its businesses. Historically, in order to expand capabilities
beyond traditional advertising, Y&R has acquired well-established leaders in
other marketing and communications disciplines. More recently, the Company has
acquired smaller niche agencies or companies to enhance existing capabilities or
expand geographic coverage.
OPERATIONS
The Company's operations are aligned under two senior executives. Young &
Rubicam Advertising and Wunderman Cato Johnson, along with the smaller
complementary business units, Brand Dialogue, The Bravo Group, The Chapman
Agency and The Media Edge, report to Edward H. Vick, Chief Operating Officer of
the Company, as well as Chairman and Chief Executive Officer of Young & Rubicam
Advertising. As appropriate, Young & Rubicam Advertising and Wunderman Cato
Johnson work in partnership to service those clients who demand integrated
advertising and direct marketing capabilities. Burson-Marsteller, Landor
Associates, Sudler & Hennessey and Cohn & Wolfe report to Thomas D. Bell, Jr.,
Executive Vice President of the Company, as well as President and Chief
Executive Officer of Burson-Marsteller.
YOUNG & RUBICAM ADVERTISING. Young & Rubicam Advertising is one of the
world's leading full-service consumer advertising agencies, offering expertise
in creative development, consumer research and marketing, and media buying and
planning. In 1996, Young & Rubicam Advertising was ranked by industry sources as
the ninth largest advertising agency based in the United States.
Young & Rubicam Advertising has had a number of recent new business wins.
In August 1997, Citibank consolidated its worldwide advertising and direct
marketing business with Y&R. In addition, since 1995, Young & Rubicam
Advertising has won substantial new business from Colgate-Palmolive, United
Airlines and Campbell's Soup. In June 1997, Young & Rubicam Advertising extended
its long-term relationship with the United States Army, an account which is
subject to a government-mandated review every five years. In October 1997, Young
& Rubicam Advertising won the assignment to develop a campaign for Census 2000,
the first unified, paid advertising campaign undertaken by the United States
Bureau of the Census. Young & Rubicam Advertising also continues to expand
relationships with existing clients, including creating AT&T's corporate
branding campaign, and together with Wunderman Cato Johnson, developing the
campaign for the launches of Sears' Home Services Division, the Navigator
sport-utility vehicle for Ford's Lincoln-Mercury division in the United States
and the Puma, Ka and Galaxy automobiles for Ford in selected international
markets.
Young & Rubicam Advertising has long been involved in various public
interest and public service efforts. Young & Rubicam Advertising handles public
service accounts for The National Urban League, The United Negro College Fund
and, through its work with the Ad Council, is launching a series of programs to
benefit children throughout the United States and, separately, to assist
battered women.
Young & Rubicam Advertising operates in 91 cities in 61 countries
worldwide, in the Americas, Europe and Africa. Young & Rubicam Advertising
services clients through the Dentsu, Young & Rubicam Partnerships across
Asia/Pacific.
DENTSU, YOUNG & RUBICAM PARTNERSHIPS. The Dentsu, Young & Rubicam
Partnerships ("DY&R") are a network of full-service advertising agencies that
provide Young & Rubicam Advertising with access to major markets across the
Asia/Pacific region. DY&R was created as a joint venture between Y&R and Dentsu,
Inc. ("Dentsu") in 1991. In 1996, Dentsu ranked as the fourth largest marketing
and communications organization in the world and the largest marketing and
communications organization based in Asia/Pacific. DY&R is a series of local
ventures in which Y&R typically has a 50% interest, and is jointly managed and
operated by
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Y&R and Dentsu. To maximize local brand equity and minimize conflicts, DY&R
operates under different brand names and management in each of its three
regions -- Asia, Australia/New Zealand and the United States. DY&R primarily
services major clients of Dentsu and Y&R in Asia, including Y&R's KCAs, but also
has its own local clients in each region. In Asia/Pacific, DY&R has recently won
regional business from Fuji and Citibank and has been awarded additional work
from Ford, Sony, Ericsson and Cadbury-Schweppes in specific markets. DY&R
operates in 27 cities in 16 countries across Asia/Pacific and the United States,
where it operates as The Lord Group.
WUNDERMAN CATO JOHNSON. Wunderman Cato Johnson ("WCJ") is one of the
world's leading behavior-driven marketing and communications companies.
Behavior-driven marketing and communications are designed to assist clients in
producing immediate sales and building brand and customer equity. WCJ addresses
its clients' marketing objectives through direct marketing, sales promotion,
television commercials and infomercials, customer loyalty programs, relationship
marketing programs, database development and management, merchandising,
entertainment and sports marketing, lead generation and new product launches.
WCJ focuses on converting "consumers" to "customers" and mass markets to
individual relationships. WCJ seeks to motivate behavior by focusing on
identifying and acquiring the most valuable customer prospects for clients,
building loyalty among its clients' most profitable customers and managing the
customer's interactions with the brand, the trade and the sales force.
WCJ provides services to KCAs such as AT&T, DuPont, Ford, Taco Bell and the
United States Postal Service. Recent new business projects include the creation
of a global promotion for Ericsson, and, together with Young & Rubicam
Advertising, the launches of the Sears Home Services Division and the Navigator
for Ford's Lincoln-Mercury division.
WCJ was created by the 1992 merger of Wunderman Worldwide, a direct
marketing company acquired by Y&R in 1973, and Cato Johnson Associates, a sales
promotion company acquired by Y&R in 1976. Headquartered in New York, WCJ
operates in 49 cities in 32 countries worldwide. WCJ also has major database
facilities in Europe and Latin America.
OTHER CAPABILITIES. Brand Dialogue specializes in digital interactive
branding and digital commerce. Brand Dialogue's primary offerings consist of:
(i) web advertising, including the design, creation and production of worldwide
websites, banners, home pages and comprehensive interactive campaigns; (ii)
digital commerce applications; (iii) the development of corporate intranets to
improve communications and productivity within and among a defined set of users;
and (iv) interactive marketing consulting services. Brand Dialogue has obtained
new business from both existing Y&R KCAs and other clients, as well as new
clients. During 1997, Brand Dialogue won notable and varied assignments from
clients such as AT&T, Citibank, Ford, United Airlines, the United States Postal
Service and Xerox.
The Bravo Group ("Bravo") creates multi-cultural marketing and
communications programs targeted to the fast-growing U.S. Hispanic community.
Bravo's multi-disciplinary services include advertising, promotion and event
marketing, public relations, research and direct marketing. Bravo provides
services for selected KCAs including American Home Products-Whitehall, AT&T,
Campbell's Soup, Clorox, Kraft and the United States Postal Service.
The Chapman Agency ("Chapman") is a specialized direct marketing agency
which provides a range of services in the United States primarily to the
telecommunications, financial services, technology and healthcare industries.
Chapman focuses on communications designed to build individual relationships
with individual customers, and works with its clients to maximize customer
profitability and build enduring brands over time. Chapman is also involved in
both the development and application of database marketing and communications
techniques. Chapman provides services to Bristol-Myers Squibb, Dow Jones, DuPont
and SmithKline Beecham.
The Media Edge provides integrated media planning, buying and placement
services for both Young & Rubicam Advertising and WCJ. In addition, The Media
Edge provides planning and buying of both traditional and direct response media.
Management believes that The Media Edge is positioned to act as an independent
full-service media provider, offering a range of media-related services to
clients other than those of Young & Rubicam Advertising and WCJ, as well as to
smaller independent advertising and communica-
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tions agencies. The Company believes that these capabilities will enable The
Media Edge to take advantage of opportunities presented by the trend of clients
separating media responsibility assignments from other advertising services.
During 1997, The Media Edge won significant new business, including a number of
agency of record assignments (a preferred media provider designation) and media
research and modeling assignments, from clients such as International Distillers
and Vintners (Grand Metropolitan), Monsanto, Ore-Ida (Heinz), and Revlon. In
addition, The Media Edge recently expanded its relationship with Sears and
retained its long-term relationship with the Irish Tourist Board.
BURSON-MARSTELLER. Burson-Marsteller is one of the world's leading
international perception management, public relations and public affairs
companies. It provides a comprehensive range of perception management
capabilities to its clients, including issues analysis, crisis management,
consumer and business marketing and research, corporate communications, investor
relations and public affairs advocacy. The perception management process begins
with a statement of the desired business results and then identifies current and
targeted perceptions, as well as different approaches to create the desired
mindset with key audiences.
Burson-Marsteller believes a shift is occurring in the perception
management and public relations field, away from a focus on executional delivery
based upon a client's specific instructions and towards a more consultative and
interactive relationship. To that end, in 1996 and 1997, Burson-Marsteller
implemented a client-focused practice structure in the United States. This
client-focused practice structure has replaced the traditional geographic
organizational model in the United States and helps ensure the firm's
professional client teams have the experience and insight required to provide
clients with the in-depth capabilities and knowledge to meet their needs. In
Europe and Asia, Burson-Marsteller intends to maintain a primarily geographic
organizational model and to implement, where feasible, elements of a
client-focused practice structure. Burson-Marsteller's functional and industry
practice areas currently include corporate, healthcare, marketing, advertising,
media, public affairs, strategic consulting and technology. Burson-Marsteller's
resources include three kinds of specialists: (i) industry specialists who are
experienced in specific fields; (ii) practice specialists who are experienced in
specific perception management, public relations and public affairs disciplines;
and (iii) creative and media specialists who are skilled in using a variety of
techniques and different technologies to deliver messages with impact.
Burson-Marsteller serves as counselor to a diverse body of clients ranging
from major corporations, business associations and professional organizations to
governmental bodies and non-profit institutions. During the last 18 months,
Burson-Marsteller has undertaken significant assignments for Qualcomm, Sun
Microsystems and Unilever. In addition, Burson-Marsteller has expanded and
strengthened relationships with existing clients such as Andersen Consulting,
Johnson & Johnson and Philip Morris.
Burson-Marsteller was founded in 1953 and was acquired by Y&R in 1979.
Burson-Marsteller is head-quartered in New York and operates in 46 cities in 36
countries around the world. The Burson-Marsteller network also includes Black,
Kelly, Scruggs & Healey Inc., a lobbying and public affairs firm based in
Washington D.C., Marsteller Advertising, which specializes in corporate,
business-to-business and issues advertising campaigns, with offices in New York,
Chicago, Pittsburgh and London, and The Mead Point Group, a small, strategic
consulting firm located in Greenwich, Connecticut.
LANDOR ASSOCIATES. Landor Associates ("Landor") is one of the world's
leading branding consultancies and strategic design firms. Landor creates,
builds and revitalizes clients' brands and helps position these brands for
continued success. Landor's branding and identity consultants, designers and
researchers work with clients on a full range of branding and identity projects,
including corporate identity, packaging and brand identity systems, retail
design and branded environments, interactive branding and design, verbal
branding and nomenclature systems, corporate literature, brand extensions and
new brand development.
Landor has broad international experience across various industries, and
clients include automobile manufacturers, banks and financial institutions,
commercial airlines, communications and information companies, consumer
products, entertainment industry concerns, hotels, major industrials, packaged
goods companies and petroleum retailers.
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Landor has gained substantial new business momentum during the last 18
months, and has been awarded corporate identity assignments for the 2002 Salt
Lake City Olympics, Lucent Technologies and Delta Airlines; package design
assignments for Frito-Lay and Kellogg's; and branded environment assignments for
Taco Bell, Pizza Hut and Sears. In addition, Landor has expanded relationships
with existing clients. During 1996, Landor was retained by Coors Beer (as sole
supplier) to design packaging, and more recently this assignment expanded to
include verbal branding. In addition, during 1997, Landor worked to develop the
name and corporate identity for Visteon, a Ford subsidiary that supplies
component parts to the automotive industry.
Landor was founded in 1941 and was acquired by Y&R in 1989. Landor is
headquartered in San Francisco and operates in 15 cities in 11 countries
worldwide, including multidisciplinary consulting and design studios in New
York, Seattle, Mexico City, Hamburg, London, Paris, Hong Kong and Tokyo.
SUDLER & HENNESSEY. Sudler & Hennessey ("S&H") is one of the world's
leading healthcare communications firms, developing strategic promotional and
educational programs for a wide spectrum of healthcare brands. S&H creates
advertising, direct marketing and sales promotion programs for prescription
drugs and over-the-counter medications. In addition, S&H provides strategic
consultancy and communications support in the areas of managed care, medical
devices and equipment, nutrition, veterinary medicine and general healthcare.
Communications programs produced by S&H on behalf of its largely pharmaceutical
industry client base are directed to a wide range of healthcare professionals as
well as patients and their support networks.
S&H's medical education division, IntraMed, develops continuing educational
programming on behalf of its pharmaceutical and consumer care clients. These
educational efforts bring credible third-party support to healthcare
professionals as well as patient educational communications.
The healthcare communications industry experienced significant growth
during 1997, due both to a dramatic increase in direct-to-consumer healthcare
communications and numerous new product introductions. S&H has capitalized on
this growth, winning significant new business around the world, including
product launch assignments from Abbott Laboratories, Merck, Roche and Zeneca.
S&H was founded in 1941 and was acquired by Y&R in 1973. S&H is
headquartered in New York and operates in 16 cities in 11 countries in North
America, Europe and Asia/Pacific.
COHN & WOLFE. Cohn & Wolfe is a full-service public relations firm that
provides creative, results-driven services to its clients. Cohn & Wolfe helps
its clients establish and communicate corporate and brand identity, launch new
products and expand sales. Areas of expertise include consumer marketing, sports
publicity and issues management, as well as healthcare, information technology
and business-to-business communications. Current clients include Eli Lilly,
Reebok, Deloitte & Touche, SmithKline Beecham, Phillip Morris, Sony, NEC and the
United States Postal Service.
Cohn & Wolfe was founded in 1970 and was acquired by Burson-Marsteller in
1984. Cohn & Wolfe operates in 12 cities in 11 countries in North America,
Europe and Australia.
COMPETITION
The marketing and communications industry is highly competitive. Y&R's
principal competitors in the advertising, direct marketing and perception
management and public relations businesses are large multinational marketing and
communications companies, as well as numerous smaller agencies that operate only
in the United States or in one or more countries or local markets. Y&R must
compete with such other companies and agencies to maintain existing client
relationships and to obtain new clients and assignments. Some clients, such as
U.S. governmental agencies, require agencies to compete for business at
mandatory intervals. Principal competitive factors include an agency's creative
reputation, knowledge of media, financial controls, geographical coverage and
diversity, relationships with clients and quality and breadth of services.
Recently, traditional advertising agencies have also been competing with major
consulting firms which have developed practices in marketing and communications,
and with smaller companies such as systems integrators, database marketing and
modeling companies and telemarketers, which offer technological solutions to
marketing and communications issues faced by clients. In addition, the trend
towards consolidation of global accounts requires companies seeking to compete
effectively in the international marketing and
37
<PAGE> 42
communications industry to make significant investments in additional offices
and personnel around the world and in new and improved technology for linking
such offices and people.
United States clients typically may cancel contracts with agencies upon 90
days' notice, and non-U.S. clients typically also may cancel contracts with
agencies on 90 to 180 days' notice. However, Y&R believes that clients may find
it increasingly difficult to terminate relationships with agencies which
represent their brands on a global basis because of the complexity of
coordinating creative, media and non-media services. In addition, clients
generally remain able to move from one agency to another with relative ease. As
is typical in the marketing and communications industry, Y&R has lost or
resigned client accounts and assignments for a variety of reasons, including due
to conflicts with newly acquired clients. Although Y&R typically has replaced
such losses with new clients and assignments, there can be no assurance that Y&R
will continue to be successful in replacing clients that may leave Y&R or in
replacing revenues when a client significantly reduces the amount of work given
to Y&R.
Representation of a client does not necessarily mean that all advertising
or public relations for that client are handled by one agency. Many large
multinational companies are served by a number of agencies within the marketing
and communications industry. In many cases, clients' conflicts policies or
desire to be served by multiple agencies result in one or more global agency
networks representing a client only for a portion of its marketing and
communications needs or only in particular geographic areas. In addition, the
ability of agencies within marketing and communications organizations to acquire
new clients or additional assignments from existing clients may be limited by
the conflicts policy followed by many clients not to permit agencies to perform
similar services for competing products or companies. Y&R's principal
international competitors are holding companies for more than one global
advertising agency network, which, in some situations, may permit separate
agency networks within such holding companies to perform services for competing
products or for products of competing companies. The Company has one global
advertising agency network, and accordingly, Y&R's ability to compete for new
advertising assignments and, to a lesser extent, other marketing and
communications assignments may be limited by these conflicts policies. Industry
practices in other areas of the marketing and communications business reflect
similar concerns with respect to client relationships.
REGULATION
The regulation of advertising takes several forms. The primary source of
governmental regulation in the United States is the Federal Trade Commission
("FTC") which is charged with administering the Federal Trade Commission Act
(the "FTC Act"). The FTC Act covers a wide range of practices involving false,
misleading and unfair advertising. In the event of violations of federal laws
and regulations, the FTC may seek cease and desist orders, may impose monetary
penalties and may require other remedies. The Federal Food and Drug
Administration, the Federal Communications Commission and other agencies also
have regulatory authority that affects the advertising business. In addition,
many state and local governments have adopted statutes and regulations similar
in scope to the FTC Act and the regulations thereunder.
Self-regulatory activities have become significant in the advertising
business. The Council of Better Business Bureaus has created the National
Advertising Division and the National Advertising Review Board which review and
process possible violations of proper business conduct through advertising. The
national television networks and various other media have also adopted strict
and extensive regulations governing the advertising that they will accept for
broadcast or publication. Trade associations in certain industries publish
advertising guidelines for their members and, in addition, various consumer
groups have been and continue to be powerful advocates of increased regulation
of advertising.
Advertising is also subject to regulation in countries other than the
United States in which Y&R and its affiliates do business. Y&R has developed
internal review procedures to help ensure that its work product, as well as that
of its affiliates, is in compliance with standards of accuracy, fair disclosure
and ethical proprieties, including those established by federal, state and local
laws and regulations and the pre-clearance procedures of the broadcast media.
In addition, as an international organization Y&R is subject to the Foreign
Corrupt Practices Act (the "FCPA"). The FCPA imposes civil and criminal fines
and penalties on companies and individuals which violate its anti-bribery and
other provisions.
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<PAGE> 43
EMPLOYEES
Y&R has approximately 13,000 employees (including part-time employees)
worldwide. None of Y&R's U.S. employees are covered by collective bargaining
agreements. Management believes that the Company's relations with employees are
good.
PRINCIPAL PROPERTIES
Y&R owns its headquarters office building at 285 Madison Avenue, New York,
New York. Y&R has granted a mortgage on such property to the lenders under the
Credit Facilities. Y&R leases other offices and space for its facilities in New
York City and elsewhere throughout the world. The following table sets forth
certain information relating to Y&R's principal properties:
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE LEASE
LOCATION USE FOOTAGE EXPIRATION
<S> <C> <C> <C>
285 Madison Avenue, Young & Rubicam Advertising, Brand 370,000 N/A (owned)
New York, New York Dialogue and corporate headquarters
230 Park Avenue South, Burson-Marsteller, Chapman, Bravo and 340,500 1/22/06
New York, New York Landor
Gallus Park, Young & Rubicam Advertising, WCJ, 154,000 4/26/04
Frankfurt, Germany Burson-Marsteller and Sudler &
Hennessey
Greater London House, Young & Rubicam Advertising, WCJ and 80,000 5/31/13
London, U.K. Sudler & Hennessey
200 Renaissance Center, Young & Rubicam Advertising and WCJ 96,000 11/30/99
Detroit, Michigan
675 Avenue of the Americas, WCJ 92,500 6/30/03
New York, New York
49-59 Avenue Andre Morizet, Young & Rubicam Advertising and WCJ 65,000 12/31/98
Paris, France
One South Wacker Drive, Young & Rubicam Advertising, WCJ and 63,000 11/30/99
Chicago, Illinois Landor
100 First Plaza, Young & Rubicam Advertising, WCJ, 63,000 5/11/03
San Francisco, California Burson-Marsteller and Bravo
1801 K Street N.W., Burson-Marsteller and Cohn & Wolfe 60,000 10/31/06
Washington, D.C.
295 Madison Avenue, Young & Rubicam Advertising 51,500 12/31/03
New York, New York
</TABLE>
Y&R's planned capital expenditures for 1998 include expenditures for
leasehold improvements of facilities which, when completed, are expected to
result in a configuration of owned and leased facilities which Y&R believes will
be adequate for its current and anticipated purposes. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
LEGAL PROCEEDINGS
Y&R is involved from time to time in various claims and legal actions
incident to its operations, both as plaintiff and defendant. In the opinion of
management, none of these existing claims is expected to have a material adverse
effect on the Company.
39
<PAGE> 44
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
executive officers and Directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Peter A. Georgescu..... 58 Chief Executive Officer of the Company and Chairman of the
Board
Alan J. Sheldon........ 56 Vice Chairman and Managing Director of the Company
John P. McGarry, Jr.... 58 President of the Company
Edward H. Vick......... 53 Chief Operating Officer of the Company, Chairman and Chief
Executive Officer of Young & Rubicam Advertising and
Director
Thomas D. Bell, Jr. ... 48 Executive Vice President of the Company, President and Chief
Executive Officer of Burson-Marsteller and Director
Stephanie W. Executive Vice President and General Counsel of the Company
Abramson............. 53
Michael J. Dolan....... 51 Vice Chairman and Chief Financial Officer of the Company and
Director
F. Warren Hellman...... 63 Director
Philip U. Director
Hammarskjold......... 33
Richard S. Bodman...... 60 Director
Alan D. Schwartz....... 47 Director
John F. McGillicuddy... 67 Director
</TABLE>
The business address of each of the Company's executive officers and
Directors is 285 Madison Avenue, New York, New York 10017.
PETER A. GEORGESCU Mr. Georgescu has been Chairman and Chief Executive
Officer of Young & Rubicam Inc. since 1994. He has been a Director of the
Company since 1980. Mr. Georgescu's career at Y&R spans 34 years with top
management experience both in the United States and Europe. Prior to becoming
Chairman, Mr. Georgescu was President of the Company for four years. Mr.
Georgescu joined Young & Rubicam New York in 1963 as a trainee and has held
various positions in research, account management and marketing in New York,
Chicago and Amsterdam. Mr. Georgescu is a member of the Board of Directors of
Briggs and Stratton Company.
ALAN J. SHELDON Mr. Sheldon has been Vice Chairman and Managing Director
of Young & Rubicam Inc. since July 1996. Mr. Sheldon was a Director of the
Company from 1988 to February 1998. From 1994 to 1996, he was Chief Operating
Officer of Young & Rubicam Advertising. Mr. Sheldon was also Chief Financial
Officer of Young & Rubicam Europe from 1993 to 1994, after serving as Executive
Vice President and General Manager of Young & Rubicam Inc. since 1990. Mr.
Sheldon joined Y&R in 1968 in Corporate Finance and subsequently served in
several senior positions at Y&R and Young & Rubicam Advertising.
JOHN P. MCGARRY, JR. Mr. McGarry has been President of the Company since
April 1996. Prior to assuming his present post, he held several positions at Y&R
including Chairman and Chief Executive Officer of Young & Rubicam Advertising,
President and Chief Executive Officer of Young & Rubicam Advertising North
America, President and Chief Executive Officer of Young & Rubicam USA, and
President of Young & Rubicam New York. Mr. McGarry joined Y&R in 1965.
EDWARD H. VICK Mr. Vick has been Chief Operating Officer of the Company
since November 1997 and Chairman and Chief Executive Officer of Young & Rubicam
Advertising since April 1996. He has been a Director of the Company since
February 1998. Mr. Vick joined Young & Rubicam New York as its President and
Chief Executive Officer in February 1994. He began his career with Benton &
Bowles and was a Senior Vice President of Ogilvy & Mather. From 1985 to 1991, he
was President of Ammirati & Puris and, in 1991, was President and Chief
Executive Officer of Levine, Huntley, Vick and Beaver. In 1992, Mr. Vick came to
Y&R as President and Chief Executive Officer of Landor.
40
<PAGE> 45
THOMAS D. BELL, JR. Mr. Bell has been Executive Vice President of the
Company since 1995 and President and Chief Executive Officer of
Burson-Marsteller since 1995. He has been a Director of the Company since
February 1998. From 1994 to 1995, Mr. Bell served as Vice Chairman of Gulfstream
Aerospace Corporation. Prior thereto, Mr. Bell was Vice Chairman and Chief
Operating Officer of Burson-Marsteller from 1991 to 1994. Before initially
joining Burson-Marsteller in 1989, Mr. Bell held senior positions in business
and government. Mr. Bell is a member of the Board of Directors of Gulfstream
Aerospace Corporation, Lincoln National Corporation and Lincoln Life & Annuity
of New York.
STEPHANIE W. ABRAMSON Ms. Abramson has been Executive Vice President and
General Counsel of the Company since 1995. Ms. Abramson was a Director of the
Company from 1995 until February 1998. From 1980 until joining Y&R in 1995, she
was a partner with Morgan, Lewis & Bockius LLP.
MICHAEL J. DOLAN Mr. Dolan has been Vice Chairman and Chief Financial
Officer and a Director of the Company since July 1996. Prior thereto, from 1991
to 1996, he was President and Chief Executive Officer of the joint venture,
Snack Ventures Europe, between PepsiCo Foods International ("PFI") and General
Mills. Mr. Dolan also served PFI as Senior Vice President, Operations. From 1987
to 1991, Mr. Dolan was with Peter Kiewet Sons, Inc. ("PKS"), a construction and
mining conglomerate. While at PKS, he served as Corporate Executive Vice
President for Continental Can Company when it was acquired and restructured by
PKS.
F. WARREN HELLMAN Mr. Hellman has been a Director of the Company since
December 1996. Mr. Hellman is Chairman of Hellman & Friedman L.L.C. ("Hellman &
Friedman"), a private investment company he founded in 1984. Prior thereto, Mr.
Hellman was President and a Director of Lehman Brothers, as well as head of its
Investment Banking Division, and Chairman of Lehman Corporation (a closed-end
investment company). Mr. Hellman serves on the Company Board as a representative
of Hellman & Friedman. Mr. Hellman is a member of the Board of Directors of Levi
Strauss & Co., Franklin Resources, Inc., Il Fornaio (America) Corp., MobileMedia
Corporation and PowerBar Inc., as well as a number of private and venture-backed
companies.
PHILIP U. HAMMARSKJOLD Mr. Hammarskjold has been a Director of the Company
since December 1996. Mr. Hammarskjold is a Managing Director of Hellman &
Friedman. Prior to joining Hellman & Friedman in 1992, Mr. Hammarskjold was
employed by Dominquez Barry Samuel Montagu in Australia and by Morgan Stanley &
Co. in New York. Mr. Hammarskjold serves on the Company Board as a
representative of Hellman & Friedman. Mr. Hammarskjold is a member of the Board
of Directors of The Covenant Group, Inc.
RICHARD S. BODMAN Mr. Bodman has been a Director of the Company since
April 1998. Mr. Bodman has been Managing General Partner of AT&T Ventures, LLC
("AT&T Ventures"), a company which manages a venture capital pool investing in
early stage businesses related to telecommunications and information technology
since May 1996. Prior to joining AT&T Ventures, from 1990 until May 1996, Mr.
Bodman was Senior Vice President for Corporate Strategy & Development and a
member of the Management Executive Committee of AT&T. Mr. Bodman is a member of
the Board of Directors of Reed Elsevier plc, Tyco International, Inc. and ISS
Group.
ALAN D. SCHWARTZ Mr. Schwartz has been a Director of the Company since
December 1996. Mr. Schwartz is Executive Vice President and Head of the
Investment Banking Department at Bear, Stearns & Co. Inc. He is also a member of
the Executive Committee of the parent company, The Bear Stearns Companies Inc.
Mr. Schwartz joined Bear Stearns in 1976. Mr. Schwartz is a member of the Board
of Directors of Unique Casual Restaurants, Inc.
JOHN F. MCGILLICUDDY Mr. McGillicuddy has been a Director of the Company
since May 1997. Mr. McGillicuddy was the Chairman and Chief Executive Officer of
Chemical Banking Corporation from 1992 to 1993 and Chairman and Chief Executive
Officer of Manufacturers Hanover Corporation and Manufacturers Hanover Trust
Company from 1979 to 1991. Mr. McGillicuddy is a member of the Board of
Directors of UAL Corporation, USX Corporation and Southern Peru Copper
Corporation.
41
<PAGE> 46
The Company intends that the Board will continue to be comprised of a
majority of Directors who are independent of management.
Upon the completion of the Offerings, the Board will be divided into three
classes, as nearly equal in number as is possible, serving staggered three-year
terms so that the Directors' initial terms will expire at the annual meetings of
the Company's stockholders held in 1999, 2000 and 2001, respectively. At each
annual meeting of the Company's stockholders, successors to the class of
Directors whose term expires at such meeting will be elected to serve for
three-year terms and until their successors are elected and qualified. Messrs.
Hellman, Schwartz and Vick will be Class I Directors, with terms expiring in
1999. Messrs. Dolan, Georgescu and Hammarskjold will be Class II Directors, with
terms expiring in 2000. Messrs. Bell, Bodman and McGillicuddy will be Class III
Directors, with terms expiring in 2001.
The H&F Investors will have the right to nominate and elect two members of
the Board for so long as they continue to hold in the aggregate at least 10% of
the Outstanding Shares (as defined in the Stockholders' Agreement) and one
member of the Board for so long as they continue to hold in the aggregate at
least 5% of the Outstanding Shares. See "Description of Capital Stock -- The
Stockholders' Agreement."
COMMITTEES
The Compensation Committee of Y&R consists of Messrs. Georgescu,
Hammarskjold and Schwartz, Chairman. The Compensation Committee reviews the
compensation of officers of Y&R and makes recommendations to the Board regarding
such compensation and reviews and administers the Restricted Stock Plan and the
Stock Option Plans. Following the consummation of the Offerings, the
Compensation Committee will be comprised entirely of Directors who are
independent of management.
The Audit Committee of Y&R consists of Messrs. Georgescu, McGillicuddy and
Hellman, Chairman. The Audit Committee is responsible for reviewing any
transactions (other than compensation arrangements) between Y&R and its
executive officers and Directors, the plans for and results of audits of Y&R,
and the results of any internal audits, compliance with any written policies and
procedures and the adequacy of Y&R's systems of internal accounting controls.
The Audit Committee also considers annually the qualifications of Y&R's
independent auditors. Following the consummation of the Offerings, the Audit
Committee will be comprised entirely of Directors who are independent of
management.
The Board may create such other committees as it may determine from time to
time.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Y&R's Amended and Restated Certificate of Incorporation and Amended and
Restated Bylaws contain provisions indemnifying the Directors and executive
officers of Y&R to the fullest extent permitted by law. Section 102(b)(7) of the
Delaware General Corporation Law provides that Delaware corporations may include
in their certificates of incorporation a provision eliminating or limiting the
personal liability of Directors to the corporation or its stockholders for
monetary damages for breach of their fiduciary duty including acts constituting
gross negligence, except under certain circumstances, including breach of the
Director's duty of loyalty, acts or omissions not in good faith or involving
intentional misconduct or a knowing violation of law or any transaction from
which the Director derived improper personal benefit. The Company's Amended and
Restated Certificate of Incorporation provides that Y&R's Directors are not
liable to it or its stockholders for monetary damages for breach of their
fiduciary duties, subject to the exceptions specified by Delaware law.
COMPENSATION OF DIRECTORS
The Company compensates only those members of the Board who are not
employees of the Company for their attendance and participation as Directors.
During 1997, Alan D. Schwartz and John C. McGillicuddy each received $50,000 as
an annual stipend for serving as a member of the Board and each, along with
42
<PAGE> 47
Richard S. Bodman, will receive $50,000 in 1998. Messrs. Hellman and
Hammarskjold each waived such fee in 1997 and have indicated that they intend to
waive it in the future. Out-of-pocket expenses for attendance at meetings of the
Board are reimbursed for all members.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company to the Chief Executive Officer and the four other most highly
compensated executive officers who were serving as executive officers on
December 31, 1997 (collectively, the "named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------- -----------------------
RESTRICTED SECURITIES ALL
NAME AND STOCK UNDERLYING OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) AWARDS(2) OPTIONS COMPENSATION(3)
<S> <C> <C> <C> <C> <C> <C>
Peter A. Georgescu................ 1997 $950,000 $598,500 -- -- $ 8,000
Chairman and Chief Executive
Officer, Young & Rubicam Inc.
Edward H. Vick.................... 1997 $700,000 $272,250 $740,000 172,500 $ 8,199
Chairman and Chief Executive
Officer, Young & Rubicam
Advertising
John P. McGarry, Jr. ............. 1997 $730,000 $297,000 -- -- $ 8,000
President, Young & Rubicam Inc.
Thomas D. Bell, Jr. .............. 1997 $575,000 $168,750 -- 176,550 $ 8,000
President and Chief Executive
Officer, Burson-Marsteller
Michael J. Dolan.................. 1997 $550,000 $198,000 $555,000 150,000 $10,190
Vice Chairman and Chief
Financial Officer, Young &
Rubicam Inc.
</TABLE>
- ------------------------------
(1) The named executive officers were awarded annual cash bonuses under the Key
Corporation Managers Bonus Plan, which bonuses were generally based on the
Company's achievement of target levels of operating profit and EBITA
(earnings before interest, taxes and amortization), each as defined in such
plan, as well as the achievement of individual objectives. The Company
intends to grant future annual cash bonuses under the 1997 ICP based on
substantially similar Company and individual performance criteria.
(2) The total number and value of shares of Restricted Stock held by the named
executive officers under the Restricted Stock Plan at December 31, 1997
(based on the value of the Common Stock as of December 31, 1997 as
determined by the Company Board, based upon the valuation opinion of an
independent investment bank, taking into account that prior to the
Offerings, the Company was privately held and that the shares were subject
to contractual transfer restrictions) are as follows: Mr.
Georgescu -- 430,440 shares ($5,308,760); Mr. Vick -- 339,405 shares
($4,185,995); Mr. McGarry -- 155,850 shares ($1,922,150); Mr.
Bell -- 284,790 shares ($3,512,410); and Mr. Dolan -- 305,865 shares
($3,772,335). The Company Board has elected to accelerate the vesting of the
Restricted Stock to the date on which the Offerings are consummated,
provided there is sufficient market demand for the sale by the Management
Investors of a sufficient number of shares of Restricted Stock to fund their
personal tax liabilities associated with the vesting of the Restricted
Stock. Accordingly, assuming sufficient demand for such shares exists, all
Restricted Stock awarded to the named executive officers will vest and be
distributed to the recipients or a deferral trust, as the case may be, upon
the consummation of the Offerings. If the Restricted Stock does not vest
upon the consumma-
43
<PAGE> 48
tion of the Offerings, then it will vest upon the earlier of (i) the
six-month anniversary of the consummation of the Offerings; (ii) if
occurring during the six-month period following the Offerings, termination
of employment without cause, voluntary termination of employment with the
Company's written approval, death, permanent disability or, in certain
cases, retirement from the Company; (iii) a change of control of the
Company; or (iv) the occurrence of any other event determined by the
Compensation Committee with the written consent of the Management Voting
Trust. Dividends on Restricted Stock are paid on the same basis as ordinary
dividends on the Common Stock and may be distributed to the holders of such
Restricted Stock. 60,000 shares and 45,000 shares of Restricted Stock,
respectively, of Messrs. Vick and Dolan's Restricted Stock awards were
granted to them in December 1997 and are required to be placed in a deferral
trust upon vesting thereof pursuant to the Deferred Compensation Plan. Such
deferral trust will hold the shares prior to their distribution to Messrs.
Vick and Dolan which will occur with respect to 33 1/3% of the shares on
January 15, 2001, with respect to an additional 33 1/3% of the shares on
January 15, 2002, and with respect to the remaining 33 1/3% of the shares on
January 15, 2003. Certain of the named executive officers have voluntarily
elected under the Deferred Compensation Plan to have their Restricted Stock
placed in a deferral trust upon vesting thereof, and to have such shares
distributed to them from such deferral trust at specified times in the
future.
(3) "All other compensation" for 1997 consisted of the Company's contribution
of: (i) $8,000 on behalf of each of the named executive officers as matching
contributions under the Young & Rubicam Employees' Savings Plan ("Savings
Plan") and (ii) an additional $199 and $2,190 on behalf of Mr. Vick and Mr.
Dolan, respectively, as matching contributions under the Company's Education
Incentive Plan (pursuant to which U.S. employees may elect to have limited
amounts of compensation, together with a Company match, invested in a group
annuity insurance contract for purposes of meeting their children's future
education costs). See "-- Savings Plan."
During 1997, stock option grants covering 11,469,150 shares in the
aggregate were awarded to 442 employees under the Company's Stock Option Plans.
The option grants in 1997 for the named executive officers are shown in the
following table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
----------------------------------------------------- --------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Peter A. Georgescu.......... -- -- -- -- -- --
Edward H. Vick.............. 172,500(1) 1.5% $12.33 12/17/07 $1,337,973 $3,390,687
John P. McGarry, Jr......... -- -- -- -- -- --
Thomas D. Bell, Jr.......... 176,550(2) 1.5% $12.33 12/17/07 $1,369,387 $3,470,295
Michael J. Dolan............ 150,000(1) 1.3% $12.33 12/17/07 $1,163,455 $2,948,424
</TABLE>
- ------------------------------
(1) These represent non-qualified options granted under the 1997 ICP. Such
options have a ten-year term and will become exercisable with respect to
33 1/3% of the shares subject to any such option on December 31, 2000, with
respect to an additional 33 1/3% of such shares on December 31, 2001 and
with respect to the remaining 33 1/3% of such shares on December 31, 2002.
These options will become fully exercisable with respect to 100% of the
shares subject thereto upon a change in control of the Company (as defined
in the 1997 ICP) or termination of employment due to death or disability.
Upon termination of employment for any other reason, the portion of any such
option that was not exercisable at such time will expire.
44
<PAGE> 49
(2) This represents a non-qualified option granted under the 1997 ICP. Such
option has a ten-year term and will become exercisable nine years and nine
months from the date of grant, unless Burson-Marsteller, Landor Associates,
Sudler & Hennessey and Cohn & Wolfe achieve a targeted operating profit
budget commitment for the year ending December 31, 1998, in which case it
will become exercisable with respect to 33 1/3% of the shares subject to
such option on December 31, 2000, with respect to an additional 33 1/3% of
such shares on December 31, 2001 and with respect to the remaining 33 1/3%
of such shares on December 31, 2002. This option will become fully
exercisable with respect to 100% of the shares subject thereto upon a change
in control of the Company (as defined in the 1997 ICP) or termination of
employment due to death or disability. Upon termination of employment for
any other reason, the portion of such option that was not exercisable at
such time will expire.
The exercise of options during 1997, number of options held and their value
at year-end for the named executive officers are shown in the following table:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR END FISCAL YEAR END
ACQUIRED ON VALUE -------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C> <C> <C>
Peter A. Georgescu......... -- -- --/-- --/--
Edward H. Vick............. -- -- 895,245(1)/172,500(2) $9,325,469/--
John P. McGarry, Jr........ 241,110 $1,386,383 --/-- --/--
Thomas D. Bell, Jr. ....... -- -- 1,165,215(1)/176,550(3) $12,137,656/--
Michael J. Dolan........... -- -- 104,340(4)/306,525(5) $486,948/$730,422
</TABLE>
- ------------------------------
(1) This represents a Rollover Option granted under the Management Stock Option
Plan (see "-- Management Stock Option Plan").
(2) See footnote (1) to the option grant table on the preceding page.
(3) See footnote (2) to the option grant table on the preceding page.
(4) This represents a Closing Option granted under the Management Stock Option
Plan (see "-- Management Stock Option Plan").
(5) This represents (i) with respect to 150,000 shares, a non-qualified option
granted under the 1997 ICP with the terms set forth in footnote (1) to the
option grant table on the preceding page and (ii) with respect to 156,525
shares, a Closing Option granted under the Management Stock Option Plan (see
"-- Management Stock Option Plan").
MANAGEMENT STOCK OPTION PLAN. At the time of the Recapitalization, the
Compensation Committee granted an aggregate of 16,823,565 Rollover Options to
certain members of management of Y&R in consideration of their surrender for
cancellation of all or a portion of their outstanding options to purchase equity
units of predecessor companies of Y&R, as well as an aggregate of 5,200,590
Closing Options pursuant to the Management Stock Option Plan. The Rollover
Options were immediately vested and exercisable upon grant. Each Rollover Option
has an exercise price of $1.92 per share of Common Stock subject to such
Rollover Option, with certain limited exceptions outside the United States, and
has a term of five years with respect to 50% of the shares subject thereto and a
term of seven years with respect to the other 50%. Each Closing Option became
exercisable immediately with respect to 40% of the shares subject thereto and
will become exercisable (i) on the third anniversary of its grant date with
respect to 30% of such shares and (ii) on the fifth anniversary of its grant
date with respect to the remaining 30% of such shares. The exercise price for
the Closing Options is $7.67 per share of Common Stock. Since the time of the
Recapitalization, the Compensation Committee granted an aggregate of 1,891,200
additional options with the same terms and conditions as the Closing Options
(such options, together with the Closing Options, the "Executive Options").
Through March 31, 1998, an aggregate of 653,505 Rollover Options were exercised
and the underlying shares repurchased by the Company and an aggregate of 413,400
Executive Options were forfeited, all in connection
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with the termination of the employment of the option holder. In addition,
through March 31, 1998, an aggregate of 4,238,250 shares of Common Stock were
issued upon exercise of Rollover Options and an aggregate of 323,295 shares of
Common Stock were issued upon exercise of Executive Options through March 31,
1998.
Executive Options will not be exercisable after the expiration of ten years
from the date of grant of such Executive Option. Upon termination of employment
for any reason, all Rollover Options and all Executive Options that are then
exercisable will remain exercisable for 30 days and will then be canceled if not
exercised. All Executive Options that have not yet become exercisable will be
canceled immediately on termination of employment.
Among other powers, the Compensation Committee has the authority to
accelerate the right to exercise any or all of the Executive Options, provided
that with respect to the period during which the Recapitalization Investors own
at least 20% of the Outstanding Shares (the "Extended Consent Period"), such
action shall only be effective with the written consent of the Recapitalization
Investors unless such acceleration involves only the waiver of any terms or
conditions not expressly provided for by the Management Stock Option Plan.
No employee may be granted a Rollover Option or Executive Option under the
Management Stock Option Plan unless he or she is or becomes a party to the
Stockholders' Agreement and the Management Voting Trust Agreement, so long as
those agreements are in effect. The Rollover Options and Executive Options are
transferable only by will or intestate succession and upon such a transfer the
transferee must agree to be bound by the Management Stock Option Plan and to
execute any other agreement which the Compensation Committee may prescribe,
including any supplements to the Stockholders' Agreement and Management Voting
Trust Agreement
The Compensation Committee, with the written consent of the
Recapitalization Investors during the Extended Consent Period, and the
Management Voting Trust may at any time terminate the Management Stock Option
Plan or any Rollover Options or Executive Options then outstanding. Upon the
termination of an outstanding Rollover Option or Executive Option, Y&R would pay
cash consideration for each share underlying such Rollover Option or Executive
Option equal to the value of a share of Common Stock less the exercise price per
share and any applicable withholding taxes or other similar charges. The
Compensation Committee may amend the Management Stock Option Plan and the terms
and conditions of the Rollover Options and the Executive Options with the
written consent of the Recapitalization Investors (during the Extended Consent
Period with respect to any amendment accelerating the right to exercise any or
all of the Executive Options or any other amendment improving the terms of the
Rollover Options or Executive Options unless such acceleration or amendment
involves the waiver or amendment of any terms or conditions not expressly
provided for by the Management Stock Option Plan) and the Management Voting
Trust, provided that no amendment may impair the rights of a holder of a
Rollover Option or Executive Option without such holder's consent and that no
amendment may increase the aggregate number of shares of Common Stock which may
be issued pursuant to Rollover Options and Executive Options granted under the
Management Stock Option Plan or change the definition of employees eligible for
grants without the approval of the stockholders of Y&R. However, the
Compensation Committee is authorized to make certain adjustments to the
Management Stock Option Plan and any outstanding Rollover Options or Executive
Options in the event of a change in the capitalization of Y&R due to certain
corporate events specified in the Management Stock Option Plan.
Under U.S. tax law, the exercise of any Rollover Option or Executive Option
will be a taxable event for U.S. taxpayers, and Y&R will have withholding
obligations. For purposes of U.S. federal income tax, upon exercise, a holder
will be deemed to have received ordinary income in an amount equal to the
difference between the exercise price of the Rollover Option or Executive
Option, as the case may be, and the fair market value of the shares of Common
Stock received on exercise, and, generally, the Company will be entitled to a
tax deduction in an amount equal to the amount of ordinary income realized by
the holder. In order to exercise either a Rollover Option or Executive Option,
the employee will also need to pay the exercise price. Under the Management
Stock Option Plan, upon exercise of a Rollover Option or Executive Option, the
employee may pay the exercise price either in cash or, subject to the approval
of the Compensation
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Committee, by (i) delivering a number of shares of Common Stock already owned by
such employee with the appropriate value or (ii) a recourse note to Y&R with
such terms and conditions as the Compensation Committee may require, including a
pledge of the related shares. Further, upon such exercise of a Rollover or
Executive Option, the employee may pay the withholding taxes or other similar
charges which are incurred in connection with such exercise by the same methods
and subject to the same approvals as for the payment of the exercise price or,
in addition, subject to the approval of the Compensation Committee, by having
Y&R withhold a number of shares of Common Stock of the appropriate value from
those to be distributed upon such exercise. Moreover, if the Compensation
Committee consents, the employee may have a number of shares of Common Stock
either withheld from those to be distributed upon exercise or delivered to Y&R
with the appropriate value to satisfy the estimated total taxes and charges that
would be incurred by the employee as a result of such exercise.
The Company has adopted a new incentive compensation plan that has
superseded the Management Stock Option Plan with respect to all future grants of
options. See "-- 1997 ICP" below.
THE RESTRICTED STOCK PLAN AND TRUST AGREEMENT. Pursuant to the Restricted
Stock Plan, upon consummation of the Recapitalization, Y&R issued a total of
11,086,950 shares of Common Stock to the Restricted Stock Trust. Common Stock
held in the Restricted Stock Trust may be granted as Restricted Stock by the
Compensation Committee pursuant to the Restricted Stock Plan. Immediately after
closing of the Recapitalization, the Compensation Committee allocated an
aggregate of 6,172,440 shares of Restricted Stock to certain key employees.
Since the time of the Recapitalization, the Compensation Committee has further
allocated an aggregate of 2,528,865 shares of Restricted Stock through December
31, 1997, including 1,832,235 shares of Restricted Stock in December 1997. An
aggregate of 254,385 shares of Restricted Stock has been forfeited since the
Recapitalization as a result of the termination of the employment of the
Restricted Stock grantee. In January 1998, the Compensation Committee allocated
an aggregate of 368,595 shares of Restricted Stock to members of senior
management, including to each of the named executive officers. Such allocations
were made to the recipients in lieu of target bonus increases and/or salary
increases in 1997 and 1998. In 1998, the Compensation Committee also allocated
an additional 415,590 shares of Restricted Stock under the Restricted Stock
Plan. Upon any such award, an account is established in the Restricted Stock
Trust for such employee and the appropriate number of shares of Restricted Stock
is allocated to such account.
The Company has elected to accelerate the vesting of the Restricted Stock
to the date on which the Offerings are consummated and the amounts held in each
such employee's account in the Restricted Stock Trust will be distributed to
such employees on such date, provided there is sufficient market demand for the
sale by the Management Investors of a sufficient number of shares of Restricted
Stock to fund their personal tax liabilities associated with the vesting of the
Restricted Stock. If the Restricted Stock does not vest upon the consummation of
the Offerings, then it will vest upon the earlier of (i) the six-month
anniversary of the consummation of the Offerings; (ii) if occurring during the
six-month period following the Offerings, termination of employment without
cause, voluntary termination of employment with the Company's written approval,
death, permanent disability or, in certain cases, retirement from the Company;
(iii) a change of control of the Company; or (iv) the occurrence of any other
event determined by the Compensation Committee with the written consent of the
Management Voting Trust. With respect to any award granted within six months of
a vesting event outlined above, the Compensation Committee may provide that such
award will not vest upon such vesting event. Restricted Stock awards may also be
subject to other conditions as may be prescribed by the Compensation Committee
in the agreement evidencing such awards.
Shares of Restricted Stock granted in December 1997 will vest as described
above, and recipients of such 1,832,235 shares of Restricted Stock, as a
condition to such grant, will be required to place such shares in a deferral
trust upon vesting (subject to the claims of the creditors of the Company in the
event of its insolvency) pursuant to the Deferred Compensation Plan. Such
deferral trust will hold the shares prior to their distribution to such
recipients which will occur with respect to 33 1/3% of the shares on January 15,
2001, with respect to an additional 33 1/3% of the shares on January 15, 2002
and with respect to the remaining 33 1/3% of the shares on January 15, 2003.
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Upon termination of employment for any reason an employee will forfeit all
unvested Restricted Stock granted to him or her without consideration on the
date of such termination.
Dividends payable in cash with respect to Restricted Stock awarded to an
employee may be remitted to such employee (less any applicable withholding tax
or other similar changes) as the Compensation Committee, in its sole discretion,
may determine. Any non-cash dividend with respect to Restricted Stock shall
remain in the Restricted Stock Trust and shall be credited to the account of the
employee to whom any such Restricted Stock has been awarded. While the
Management Voting Trust Agreement is in effect, all Restricted Stock shall be
delivered to the Management Voting Trust and voted in accordance with the
provisions of the Management Voting Trust Agreement. After the Management Voting
Trust Agreement is no longer in effect, each employee who has been awarded
Restricted Stock shall be entitled to instruct the trustee of the Restricted
Stock Trust as to the voting of such Restricted Stock held in his account.
Restricted Stock as to which no voting instructions are received by the trustee
or which have not been granted to any employee shall be voted by the trustee pro
rata in accordance with the vote of the Restricted Stock which has been granted
as to which voting instructions have been given.
Among other powers, the Compensation Committee shall have the authority to
accelerate the vesting of all awards and the release of the related Restricted
Stock.
No employee may be granted an award of Restricted Stock under the
Restricted Stock Plan unless he or she is or becomes a party to the
Stockholders' Agreement and the Management Voting Trust Agreement, so long as
those agreements are in effect. Subject to the following sentence, Restricted
Stock granted to an employee and held in the Restricted Stock Trust is not
transferable and any attempt to transfer such Restricted Stock may lead to its
forfeiture without consideration. Restricted Stock which vests as a result of
the death of the employee during the six-month period after an initial public
offering may be transferred by will or intestate succession and upon such a
transfer the transferee must agree to be bound by the Restricted Stock Plan and
to execute any other agreement which the Compensation Committee may prescribe,
including any supplements to the Stockholders' Agreement and Management Voting
Trust Agreement.
The Compensation Committee, with the written consent of the Management
Voting Trust, may at any time terminate the Restricted Stock Plan or any awards
of Restricted Stock then outstanding. Upon the termination of the Restricted
Stock Plan or of an outstanding award of Restricted Stock, the Compensation
Committee may, with the written consent of the Management Voting Trust, either
declare that a vesting event has occurred and release Restricted Stock to
employees or cause Y&R to pay an amount in cash equal to the value of the
Restricted Stock subject to such terminated award minus any applicable
withholding taxes or other similar charges. Within two years of any such
termination of the Restricted Stock Plan, the Compensation Committee shall
distribute any unawarded Restricted Stock remaining in the Restricted Stock
Trust to such employees as it may designate. In no event shall any Restricted
Stock revert to Y&R as a result of the termination of the Restricted Stock Plan
or any award of Restricted Stock. The Compensation Committee may amend the
Restricted Stock Plan and the terms and conditions of any awards of Restricted
Stock with the written consent of the Management Voting Trust, provided that no
amendment may impair the rights of a holder of any such award without such
holder's consent. However, the Compensation Committee is authorized to make
certain adjustments to the Restricted Stock Plan and any outstanding awards of
Restricted Stock in the event of a change in the capitalization of Y&R due to
certain corporate events specified in the Restricted Stock Plan.
Under U.S. tax law, the vesting and distribution of the Restricted Stock
will be a taxable event for U.S. taxpayers, and Y&R will have withholding
obligations. For purposes of U.S. federal income tax, an award holder will be
deemed to have received ordinary income in an amount equal to the fair market
value of the shares of Common Stock received and, generally, the Company will be
entitled to a tax deduction in an amount equal to the amount of ordinary income
realized by the award holder. Under the Restricted Stock Plan, upon the vesting
and receipt of Restricted Stock, the employee may pay the withholding taxes or
other similar charges either in cash or, subject to the approval of the
Compensation Committee, by (i) delivering a number of shares of Common Stock
already owned by such employee with the appropriate value, (ii) a recourse note
to Y&R with such terms and conditions as the Compensation Committee may require,
including
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a pledge of the related shares or (iii) having a number of shares of Restricted
Stock of the appropriate value withheld from those to be distributed. Moreover,
if the Compensation Committee consents, the employee may have a number of shares
of Common Stock either withheld from those to be distributed or delivered to Y&R
with the appropriate value to satisfy the estimated total taxes and charges that
would be incurred by the employee as a result of such vesting and distribution.
The Company has adopted a new incentive compensation plan that has amended
and restated the Restricted Stock Plan with respect to all grants made
subsequent to March 31, 1998. See "-- 1997 ICP" below. In order to assist the
Company and its affiliates in meeting various cash compensation obligations of
the Company and its affiliates, the Company has amended the agreement governing
the Restricted Stock Trust to provide for cash distributions to be made from the
Restricted Stock Trust to pay salaries and for the benefit of participants in
various annual bonus programs as the Compensation Committee may direct, and to
permit the trustee of the Restricted Stock Trust to require the Company to
purchase unallocated shares of Common Stock held therein such that proceeds from
the sale are sufficient to make such salary and bonus payments. Pursuant to such
amendment, the Company will repurchase the remaining 1,855,845 unallocated
shares of Common Stock in the Restricted Stock Trust upon the consummation of
the Offerings.
1997 ICP. In December 1997, the Company adopted the 1997 Incentive
Compensation Plan (the "1997 ICP"). The 1997 ICP has superseded the Management
Stock Option Plan and has amended and restated the Restricted Stock Plan (the
Management Stock Option Plan and the Restricted Stock Plan (prior to such
amendment and restatement), the "Preexisting Plans"), although all awards
granted prior to the adoption of the 1997 ICP, and any grants of Restricted
Stock made after such adoption but on or prior to March 31, 1998, will remain
outstanding in accordance with their terms and be subject to the terms of the
Preexisting Plans.
The Board believes that attracting and retaining key employees is essential
to the Company's growth and success. In addition, the Board believes that the
long-term success of the Company is enhanced by a competitive and comprehensive
compensation program, which may include tailored types of incentives designed to
motivate and reward such persons for outstanding service, including awards that
link compensation to applicable measures of the Company's performance and the
creation of stockholder value. Such awards should enable the Company to attract
and retain key employees and enable such persons to acquire and/or increase
their proprietary interest in the Company and thereby align their interests with
the interests of the Company's stockholders. In addition, the Board believes
that the Compensation Committee should be given as much flexibility as possible
to provide for annual and long-term incentive awards contingent on performance.
The Company granted non-qualified options to employees to purchase an
aggregate of 9,577,950 shares of Common Stock in December 1997 under the 1997
ICP. Such options have an exercise price equal to $12.33 per share, which
represents the fair market value of the Common Stock as of the date of grant
(which takes into account that prior to the Offerings, the Company was privately
held and that the shares were subject to contractual transfer restrictions, but
does not give effect to the applicable put and call provisions of the
Stockholders' Agreement). These options will expire if not exercised ten years
after the date of grant and will be fully exercisable with respect to 33 1/3% of
the shares subject to such option on December 31, 2000, with respect to an
additional 33 1/3% of such shares on December 31, 2001, and with respect to the
remaining 33 1/3% of such shares on December 31, 2002. Out of the options
granted in December 1997, options to purchase 975,600 and 176,550 shares of
Common Stock, respectively, granted to employees of Burson-Marsteller will not
become exercisable until nine years and nine months from the date of their
grant, unless Burson-Marsteller or the group of Burson-Marsteller, Landor
Associates, Sudler & Hennessey and Cohn & Wolfe, as the case may be, achieves a
targeted operating profit budget commitment for the year ending December 31,
1998, in which case the vesting schedule set forth in the previous sentence will
apply to such options. All of these options will become fully exercisable with
respect to 100% of the shares subject thereto upon a change in control of the
Company (as defined in the 1997 ICP) or termination of employment due to death
or disability. Upon termination of employment for any other reason, the portion
of any such option that was not exercisable at such time will expire.
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The following is a description of the material features of the 1997 ICP.
Types of Awards. The terms of the 1997 ICP provide for grants of stock
options, stock appreciation rights ("SARs"), restricted stock, deferred stock,
other stock-related awards, and performance or annual incentive awards that may
be settled in cash, stock or other property ("Awards").
Shares Subject to the 1997 ICP; Annual Per-Person Limitations. Under the
1997 ICP, the total number of shares of the Common Stock reserved and available
for delivery to participants in connection with Awards is (i) 19,125,000, plus
(ii) the number of shares of Common Stock subject to awards under Preexisting
Plans that become available (generally due to cancellation or forfeiture) after
the effective date of the 1997 ICP; provided, however, that the total number of
shares of Common Stock with respect to which incentive stock options ("ISOs")
may be granted shall not exceed one million. Any shares of Common Stock
delivered under the 1997 ICP may consist of authorized and unissued shares or
treasury shares.
The 1997 ICP imposes individual limitations on the amount of certain Awards
in order to comply with Section 162(m) of the Internal Revenue Code (the
"Code"). Under these limitations, during any fiscal year the number of options,
SARs, shares of restricted stock, shares of deferred stock, shares of Common
Stock issued as a bonus or in lieu of other obligations, and other stock-based
Awards granted to any one participant must not exceed 200,000 shares for each
type of such Award, subject to adjustment in certain circumstances. In addition,
the maximum cash amount that may be earned as a final annual incentive award or
other annual cash Award in respect of any fiscal year by any one participant and
the maximum cash amount that may be earned as a final performance award or other
cash Award in respect of a performance period other than an annual period by any
one participant may not exceed $10 million. The Company intends for Awards
granted to "covered employees (as defined in Section 162(m)) under the 1997 ICP
to qualify as "performance-based compensation" (as defined in Section 162(m) and
regulations thereunder) for purposes of Section 162(m) to the extent such Awards
may otherwise be subject thereto.
The Compensation Committee is authorized to adjust the number and kind of
shares subject to the aggregate share limitations and annual limitations under
the 1997 ICP and subject to outstanding Awards (including adjustments to
exercise prices and number of shares of options and other affected terms of
Awards) in the event that a dividend or other distribution (whether in cash,
shares, or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, or
share exchange, or other similar corporate transaction or event affects the
Common Stock so that an adjustment is determined by the Compensation Committee
to be appropriate. The Compensation Committee is also authorized to adjust
performance conditions and other terms and conditions of Awards in response to
these kinds of events or in response to changes in applicable laws, regulations,
or accounting principles or in view of any other circumstances deemed relevant
by the Compensation Committee; provided that no such adjustment may be made if
and to the extent if would cause Awards to "covered employees" intended to so
qualify to fail to qualify as "performance-based compensation" for purposes of
Section 162(m) of the Code.
Eligibility. Executive officers and other officers and employees of the
Company or any affiliate, including any such person who may also be a director
of the Company, and each other person who provides services to the Company or
any affiliate shall be eligible to be granted Awards under the 1997 ICP. An
affiliate of the Company for this purpose includes any entity required to be
aggregated with the Company under Section 414 of the Code and any 10% owned
joint venture or partnership of the Company or an affiliate.
Administration. The 1997 ICP is administered by the Compensation Committee
except to the extent the Board elects to administer the 1997 ICP. Subject to the
terms and conditions of the 1997 ICP, the Compensation Committee is authorized
to select participants, determine the type and number of Awards to be granted
and the number of shares of Common Stock to which Awards will relate, specify
times at which Awards will be exercisable or settleable (including performance
conditions that may be required as a condition thereof), set other terms and
conditions of such Awards, prescribe forms of Award agreements, interpret and
specify rules and regulations relating to the 1997 ICP, and make all other
determinations that may be necessary or advisable for the administration of the
1997 ICP. The 1997 ICP provides that Compensation Committee members shall not be
personally liable, and shall be fully indemnified, in connection with any
action, determination, or interpretation taken or made in good faith under the
1997 ICP.
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Stock Options and SARs. The Compensation Committee is authorized to grant
stock options, including both ISOs that can result in potentially favorable tax
treatment to the participant and non-qualified stock options (i.e., options not
qualifying as ISOs), and SARs entitling the participant to receive the excess of
the fair market value of a share of Common Stock on the date of exercise over
the grant price of the SAR. The exercise price per share subject to an option
and the grant price of an SAR is determined by the Compensation Committee, but
must not be less than the fair market value of a share of Common Stock on the
date of grant (except to the extent of in-the-money awards or cash obligations
surrendered by the participant at the time of grant). The maximum term of each
option or SAR, the times at which each option or SAR will be exercisable, and
provisions requiring forfeiture of unexercised options or SARs at or following
termination of employment generally is fixed by the Compensation Committee,
except no option or SAR may have a term exceeding ten years. Options may be
exercised by payment of the exercise price in cash, Common Stock, outstanding
Awards, or other property (possibly including notes or obligations to make
payment on a deferred basis) having a fair market value equal to the exercise
price, as the Compensation Committee may determine from time to time. Methods of
exercise and settlement and other terms of the SARs are determined by the
Compensation Committee.
Restricted and Deferred Stock. The Compensation Committee is authorized to
grant restricted stock and deferred stock. Restricted stock is a grant of Common
Stock which may not be sold or disposed of, and which may be forfeited in the
event of certain terminations of employment and/or failure to meet certain
performance requirements prior to the end of a restricted period as specified by
the Compensation Committee. A participant granted restricted stock generally has
all of the rights of a shareholder of the Company, including the right to vote
the shares and to receive dividends thereon, unless otherwise determined by the
Compensation Committee. An Award of deferred stock confers upon a participant
the right to receive shares or cash (or a combination) at the end of a specified
deferral period, subject to possible forfeiture of the Award in the event of
certain terminations of employment and/or failure to meet certain performance
requirements prior to the end of a specified period (which period need not
extend for the entire duration of the deferral period). Prior to settlement, an
Award of deferred stock carries no voting or dividend rights or other rights
associated with share ownership, although dividend equivalents may be granted,
as discussed below.
Dividend Equivalents. The Compensation Committee is authorized to grant
dividend equivalents conferring on participants the right to receive cash,
shares, other Awards, or other property equal in value to dividends paid on a
specific number of shares, or other periodic payments. Dividend equivalents may
be granted on a free-standing basis or in connection with another Award, may be
paid currently or on a deferred basis, and, if deferred, may be deemed to have
been reinvested in additional shares, Awards, or other investment vehicles
specified by the Compensation Committee.
Bonus Stock and Awards in Lieu of Cash Obligations. The Compensation
Committee is authorized to grant shares as a bonus free of restrictions, or to
grant shares or other Awards in lieu of obligations to pay cash or deliver other
property under the 1997 ICP or other plans or compensatory arrangements, subject
to such terms as the Compensation Committee may specify.
Other Stock-Based Awards. The 1997 ICP authorizes the Compensation
Committee to grant Awards that are denominated or payable in, valued by
reference to, or otherwise based on or related to shares. Such Awards might
include convertible or exchangeable debt securities, other rights convertible or
exchangeable into shares, purchase rights for shares, Awards with value and
payment contingent upon performance of the Company or any other factors
designated by the Compensation Committee, and Awards valued by reference to the
book value of shares or the value of securities of or the performance of
specified affiliates. The Compensation Committee determines the terms and
conditions of such Awards, including consideration to be paid to exercise Awards
in the nature of purchase rights, the period during which Awards will be
outstanding, and forfeiture conditions and restrictions on Awards.
Performance Awards, Including Annual Incentive Awards. The right of a
participant to exercise or receive a grant or settlement of an Award, and the
timing thereof, may be subject to such performance conditions as may be
specified by the Compensation Committee (measurable over performance periods of
up to 10 years). In addition, the 1997 ICP authorizes specific annual incentive
awards, which represent a
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conditional right to receive cash, shares or other Awards upon achievement of
preestablished performance goals during a specified one-year period. Performance
awards and annual incentive awards granted to persons the Compensation Committee
expects will, for the year in which a deduction arises, be among the Chief
Executive Officer and four other most highly compensated executive officers,
will, if so intended by the Compensation Committee, be subject to provisions
that should qualify such Awards as "performance-based compensation" not subject
to the limitation on tax deductibility by the Company under Code Section 162(m).
The performance goals to be achieved as a condition of payment or
settlement of a performance award or annual incentive award will consist of (i)
one or more business criteria and (ii) a targeted level or levels of performance
with respect to each such business criteria as specified by the Committee. In
the case of performance awards intended to meet the requirements of Code Section
162(m), the business criteria used must be one of those specified in the 1997
ICP, although for other participants the Compensation Committee may specify any
other criteria. The business criteria specified in the 1997 ICP are: (1)
earnings per share; (2) increase in revenues; (3) cash flow; (4) cash flow
return on investment; (5) return on net assets, return on assets, return on
investment, return on capital, return on equity; (6) economic value added; (7)
operating margin; (8) net income, net income before taxes, operating profits,
earnings before interest, taxes and amortization, earnings before interest,
taxes, depreciation and amortization; (9) total shareholder return; (10) ratio
of staff cost to revenues or gross margin; and (11) any of the above goals as
compared to the performance of a published or special index deemed applicable by
the Compensation Committee including, but not limited to, the Standard & Poor's
500 Stock Index or a group of comparator companies.
In granting annual incentive or performance awards, the Compensation
Committee shall establish a performance goal or goals and may establish unfunded
award "pools," the amounts of which will be based upon the achievement of such
performance goal or goals using one or more of the business criteria described
in the preceding paragraph. During the first 90 days of a fiscal year or
performance period, the Compensation Committee will determine who will
potentially receive annual incentive or performance awards for that fiscal year
or performance period, either out of the pool or otherwise, and the amounts
potentially payable with respect thereto. After the end of each fiscal year or
performance period, the Compensation Committee will determine the amount, if
any, of the pool and the maximum amount of potential annual incentive or
performance awards payable to each participant in the pool, or the amount of any
potential annual incentive or performance award otherwise payable to a
participant. The Compensation Committee may, in its discretion, determine that
the amount payable as a final annual incentive or performance award will be
increased or reduced from the amount of any potential Award, but may not
exercise discretion to increase any such amount in the case of an Award intended
to qualify under Code Section 162(m).
Subject to the requirements of the 1997 ICP, the Compensation Committee
will determine other performance award and annual incentive award terms,
including the required levels of performance with respect to the business
criteria, the corresponding amounts payable upon achievement of such levels of
performance, termination and forfeiture provisions, and the form of settlement.
Other Terms of Awards. Awards may be settled in the form of cash, Common
Stock, other Awards, or other property, in the discretion of the Compensation
Committee. The Compensation Committee may require or permit participants to
defer the settlement of all or part of an Award in accordance with such terms
and conditions as the Compensation Committee may establish, including payment or
crediting of interest or dividend equivalents on deferred amounts, and the
crediting of earnings, gains, and losses based on deemed investment of deferred
amounts in specified investment vehicles. The Compensation Committee is
authorized to place cash, shares, or other property in trusts or make other
arrangements to provide for payment of the Company's obligations under the 1997
ICP. The Compensation Committee may condition any payment relating to an Award
on the withholding of taxes and may provide that a portion of any shares or
other property to be distributed will be withheld (or previously acquired shares
or other property surrendered by the participant) to satisfy withholding and
other tax obligations. Awards granted under the 1997 ICP generally may not be
pledged or otherwise encumbered and are not transferable except by will or by
the laws of descent and distribution, or to a designated beneficiary upon the
participant's death, except that the Compensation Committee may, in its
discretion, permit transfers for estate planning or other purposes.
52
<PAGE> 57
Awards under the 1997 ICP are generally granted without a requirement that
the participant pay consideration in the form of cash or property for the grant
(as distinguished from the exercise), except to the extent required by law. The
Compensation Committee may, however, grant Awards in exchange for other Awards
under the 1997 ICP, awards under other plans of the Company, or other rights to
payment from the Company, and may grant Awards in addition to and in tandem with
such other Awards, awards, or rights as well.
The Compensation Committee may cancel or rescind Awards, or require
repayment of any profits resulting from Awards, if the participant fails to
comply with certain restrictive or other covenants set forth in the 1997 ICP
and/or an Award agreement.
Acceleration of Vesting. The Compensation Committee may, in its
discretion, accelerate the exercisability, the lapsing of restrictions, or the
expiration of deferral or vesting periods of any Award, and such accelerated
exercisability, lapse, expiration and vesting shall occur automatically in the
case of a "change in control" of the Company except to the extent otherwise
provided in the Award agreement. In addition, the Compensation Committee may
provide that the performance goals relating to any performance-based award will
be deemed to have been met upon the occurrence of any change in control. "Change
in control" is defined in the 1997 ICP to include (i)(x) any person (other than
the Company, certain companies owned by the stockholders of the Company or any
employee benefit plans of the Company) becoming the beneficial owner of
securities representing 40% or more of the combined voting power of the
Company's then outstanding securities and (y) so long as the Management Voting
Trust is still in existence, representing a greater percentage of the combined
voting power of the Company's then outstanding securities than is represented by
securities held by the Management Voting Trust, provided, that all shares of
Common Stock subject to vested options under the 1997 ICP and the Management
Stock Option Plan (not including options which would vest on such change in
control) are counted as outstanding securities of the Company; (ii) during a
two-year period, individuals who constitute the Board at the start of such
period, and any new director whose election or nomination for election to the
Board was approved by a vote of at least two-thirds of the directors then in
office who either were directors at the start of such period or whose election
or nomination was previously so approved (excluding directors whose elections
were as a result of certain proxy contests or who were designated by any entity
who had entered into a change in control agreement with the Company), ceasing to
constitute a majority of the Board; (iii) the consummation of a merger or
consolidation of the Company with another entity which would result in either
(A) the voting securities of the Company outstanding immediately prior to such
merger or consolidation failing to represent (either by remaining outstanding or
being converted into voting securities of the surviving or resulting entity) 40%
or more of the combined voting power of the surviving or resulting entity
outstanding immediately after such merger or consolidation or (B)(I) the voting
securities of the Company outstanding immediately prior to such merger or
consolidation continuing to represent at least 40% but less than 60% of the
combined voting power of the surviving or resulting entity outstanding
immediately after such merger or consolidation and (II) as a result of such
merger or consolidation, there is an acceleration of the vesting or
exercisability of any material amount of, or material percentage of, outstanding
stock options or other stock awards granted by the entity with which such merger
or consolidation is taking place or any of its affiliates; (iv) the stockholders
of the Company approve a plan or agreement for the sale or disposition of all or
substantially all of the consolidated assets of the Company (other than a sale
or disposition immediately after which such assets will be owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of common stock of the Company immediately prior
thereto) in which case the Board shall determine the effective date of the
change in control; or (v) any other event which the Board determines, in its
discretion, would materially alter the structure of the Company or its
ownership. A change in control will also be deemed to have occurred immediately
prior to the consummation of (i) a tender offer for securities of the Company
representing more than 50% of the combined voting power of the Company's then
outstanding securities in which there is not disclosed an intention to follow
the consummation of the tender offer with a merger, reorganization,
consolidation, share exchange or similar transaction or (ii) a tender offer for
securities of the Company representing any percentage of the combined voting
power of the Company's then outstanding securities in which there is disclosed
an intention to follow the consummation of the tender offer with a merger,
reorganization, consolidation, share exchange or similar transaction in which
the value of the consideration to
53
<PAGE> 58
be offered for such securities is lower than the value of the consideration
offered for such securities in the tender offer (as determined by the Board at
the time) in order to allow holders of previously unexercisable Options the
opportunity to participate therein with respect to shares underlying such
Options.
Amendment and Termination of the 1997 ICP. The Board may amend, alter,
suspend, discontinue, or terminate the 1997 ICP or the Compensation Committee's
authority to grant Awards without the consent of shareholders or participants,
except shareholder approval must be obtained for any amendment or alteration if
required by law or regulation or under the rules of any stock exchange or
automated quotation system on which the shares are then listed or quoted and
participant consent must be obtained if such action would materially and
adversely affect the rights of a participant under an outstanding Award.
Shareholder approval will not be deemed to be required under laws or
regulations, such as those relating to ISOs, that condition favorable treatment
of participants on such approval, although the Board may, in its discretion,
seek shareholder approval in any circumstance in which it deems such approval
advisable. Thus, shareholder approval will not necessarily be required for
amendments that might increase the cost of the 1997 ICP or broaden eligibility.
The Committee may amend, alter, suspend, discontinue or terminate any
outstanding Award or Award agreement, except as otherwise provided in the 1997
ICP. Participant consent must be obtained if such action would materially and
adversely affect the rights of a participant under such Award. Notwithstanding
the foregoing, the Compensation Committee may terminate any outstanding Award in
whole or in part, provided that upon such termination the Company pays to such
Participant (i) with respect to an option (whether or not exercisable) or
portion thereof, an amount in cash for each share of Common Stock subject to
such option or portion thereof being terminated equal to the excess, if any, of
(a) the value at which a share of Common Stock received pursuant to the exercise
of such option would have been valued by the Company at that time for purposes
of determining applicable withholding taxes or other similar charges, over
(b) the sum of the exercise price per share of such option and applicable
withholding taxes and other similar charges, and (ii) with respect to any other
type of Award, an amount in Common Stock or cash (as determined by the
Compensation Committee in its sole discretion) equal to the value of such Award
or portion thereof being terminated as of the date of termination (assuming the
acceleration of the exercisability of such Award or portion thereof, the lapsing
of any restrictions on such Award or portion thereof or the expiration of any
deferral or vesting period of such Award or portion thereof) as determined by
the Compensation Committee in its sole discretion.
Federal Income Tax Implications. The following is a summary description of
the federal income tax consequences generally arising with respect to Awards
under the 1997 ICP.
The grant of an option or SAR will create no tax consequences for the
participant or the Company. A participant will not generally recognize taxable
income upon exercising an ISO (except that the alternative minimum tax may
apply). Upon exercising an option other than an ISO, the participant must
generally recognize ordinary income equal to the difference between the exercise
price and fair market value of the freely transferable and nonforfeitable shares
acquired on the date of exercise. Upon exercising an SAR, the participant must
generally recognize ordinary income equal to the cash or the fair market value
of the freely transferable and nonforfeitable shares received.
Upon a disposition of shares acquired upon exercise of an ISO before the
end of the applicable ISO holding periods, the participant must generally
recognize ordinary income equal to the lesser of (i) the fair market value of
the shares at the date of exercise of the ISO minus the exercise price, or (ii)
the amount realized upon the disposition of the ISO shares minus the exercise
price. Otherwise, a participant's disposition of shares acquired upon the
exercise of an option (including an ISO for which the ISO holding periods are
met) or SAR generally will result in short-term or long-term capital gain or
loss measured by the difference between the sale price and the participant's tax
basis in such shares (the tax basis generally being the exercise price plus any
amount previously recognized as ordinary income in connection with the exercise
of the option or SAR).
The Company generally will be entitled to a tax deduction equal to the
amount recognized as ordinary income by the participant in connection with an
option or SAR. The Company generally is not entitled to a tax deduction relating
to amounts that represent a capital gain to a participant. Accordingly, the
Company will not
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<PAGE> 59
be entitled to any tax deduction with respect to an ISO if the participant holds
the shares for the ISO holding periods prior to disposition of the shares.
With respect to Awards granted under the 1997 ICP that result in the
payment or issuance of cash or shares or other property that is either not
restricted as to transferability or not subject to a substantial risk of
forfeiture, the participant must generally recognize ordinary income equal to
the cash or the fair market value of shares or other property received. Thus,
deferral of the time of payment or issuance will generally result in the
deferral of the time the participant will be liable for income taxes with
respect to such payment or issuance. The Company generally will be entitled to a
deduction in an amount equal to the ordinary income recognized by the
participant.
With respect to Awards involving the issuance of shares or other property
that is restricted as to transferability and subject to a substantial risk of
forfeiture, the participant must generally recognize ordinary income equal to
the fair market value of the shares or other property received at the first time
the shares or other property becomes transferable or is not subject to a
substantial risk of forfeiture, whichever occurs earlier. A participant may
elect to be taxed at the time of receipt of shares or other property rather than
upon lapse of restrictions on transferability or substantial risk of forfeiture,
but if the participant subsequently forfeits such shares or property, the
participant would not be entitled to any tax deduction, including as a capital
loss, for the value of the shares or property on which he previously paid tax.
The participant must file such election with the Internal Revenue Service within
30 days of the receipt of the shares or other property. The Company generally
will be entitled to a deduction in an amount equal to the ordinary income
recognized by the participant.
Awards that are granted, accelerated or enhanced upon the occurrence of a
change in control may give rise, in whole or in part, to "excess parachute
payments" within the meaning of Section 280G of the Code and, to such extent,
will be non-deductible by the Company and subject to a 20% excise tax by the
participant.
DEFERRED COMPENSATION PLAN. In December 1997, the Company also adopted the
Deferred Compensation Plan in order to permit certain members of a select group
of management or highly compensated employees of the Company and its affiliates
to defer receipt of specified portions of compensation (either cash, stock or
stock-based compensation) and to have such deferred amounts treated as if
invested in specified investment vehicles, all in accordance with the terms of
the Deferred Compensation Plan. Amounts deferred under the Deferred Compensation
Plan will be distributed to a participant as soon as practicable after the date
or dates (including upon the occurrence of specified events), and in such number
of installments, as may be elected by the participant or earlier in the case of
Retirement, Disability or a Change in Control (as defined in the 1997 ICP). The
Deferred Compensation Plan will be "unfunded". However, the Compensation
Committee has authorized the creation of a trust to aid in meeting the Company's
obligations thereunder. Such trust will be subject to the claims of the
creditors of the Company in the event of the Company's insolvency.
CAREER CASH BALANCE PLAN (THE "CCB PLAN"). The CCB Plan is a defined
benefit plan available to all employees of the Company and its participating
affiliates. Subject to certain limitations, most vested retirement benefits
available under the CCB Plan are insured by the Pension Benefit Guaranty
Corporation. The Company pays the full cost of the benefit provided under the
CCB Plan. Eligible retired employees may begin receiving full CCB Plan benefits
at or after age 60 if he or she had at least five years of service.
Alternatively a reduced benefit is payable at age 55 at the election of the
participant. Under the CCB Plan, effective July 1, 1996, the Company annually
credits to each participant's account 3.2% of the participant's salary. Salary
is defined to include base salary or wages and excludes bonus, overtime,
commissions and other special compensation. The Company will credit to each
account interest equal to the average 1-year U.S. Treasury Bill interest rate
for the month of November for the previous calendar year, rounded up to the
nearest tenth of a percent, up to a maximum average of $150,000, multiplied by
the number of benefit years (equal to twelve months of service or 2,280 hours).
If the present value of the earned benefit at the time of termination is less
than $3,500, the participant receives a lump sum distribution from the Company.
If the earned benefit is greater than $3,500, the cash balance account is
payable as a lump sum in cash or as an annuity (under certain circumstances) to
the participant for reinvestment in other qualified plans prior to
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<PAGE> 60
retirement at the participant's election, or for distribution upon retirement.
CCB Plan benefits are not reduced by Social Security benefits. Loans cannot be
taken from the CCB Plan.
The estimated annual benefits payable upon retirement at normal retirement
age for the named executive officers are as follows: Mr. Georgescu -- $18,756,
Mr. Vick -- $3,384, Mr. McGarry -- $18,756, Mr. Bell -- $4,632, and Mr.
Dolan -- $1,152.
SAVINGS PLAN. The Savings Plan is a defined contribution plan to which
employees may make contributions after one hour of service with the Company and
to which the Company will make matching contributions on behalf of employees who
have completed at least 1,000 hours of service with the Company. Eligible
employees may choose to save up to 15% of their base pay and up to 10% of their
additional pay (e.g., overtime, bonus, etc.) in any calendar year. Eligible
employees can elect the amount of base pay they want to contribute to the
Savings Plan through payroll deductions and can elect to save with before-tax
and/or after-tax dollars. The Company matches employee contributions
dollar-for-dollar at year-end up to the first 5% of annual base pay, provided
the eligible participant is employed at year-end. Savings Plan accounts
(consisting of employee contributions, Company contributions and earnings) grow
on a tax-deferred basis. Such accounts can be invested by the participant in any
of the investment options made available by the Company from time to time.
SELECTED EXECUTIVE RETIREMENT INCOME PLAN ("SERIP"). The SERIP is a
supplemental executive retirement arrangement for selected members of senior
management under separate contracts with the Company. Subject to certain
non-competition and non-solicitation provisions, cash payments in a fixed annual
amount varying as to each individual will be made to a participant whose rights
have vested in accordance with his agreement when such participant's employment
terminates or when he reaches a specified age (typically 60), whichever occurs
later. Payments are made for the balance of the participant's life and, if fewer
than ten annual payments are made during the participant's life, his beneficiary
will receive the balance of the payments until ten annual payments are made. The
Company's obligations to participants under the SERIP are subordinate in right
of payment to its obligations to senior lenders and certain other creditors.
The estimated annual benefits payable upon retirement at normal retirement
age for the named executive officers are as follows: Mr.
Georgescu -- $1,050,000, Mr. Vick -- $300,000, Mr. McGarry -- $200,000, Mr.
Bell -- none, and Mr. Dolan -- none.
THE YOUNG & RUBICAM PROFIT SHARING PLAN (INACTIVE) (THE "PROFIT SHARING
PLAN"). The Profit Sharing Plan is a defined contribution plan which has been
inactive since 1975 and is being continued only for the benefit of current and
former employees (and their beneficiaries) who still have Profit Sharing Plan
account balances. Participants can direct the investment of their Profit Sharing
Plan account balances in any of the investment options made available by the
Company from time to time. Certain named executive officers have accrued
benefits under the Profit Sharing Plan but no additional accruals have been made
for their accounts since 1975. The Company recently merged the Profit Sharing
Plan into the Savings Plan.
EMPLOYMENT AND TERMINATION OF EMPLOYMENT ARRANGEMENTS. The Company and
Michael Dolan entered into a letter agreement, as amended, regarding Mr. Dolan's
principal terms of employment with the Company as Vice Chairman and Chief
Financial Officer. This letter agreement entitles Mr. Dolan to an annual base
salary and eligibility for a bonus under the Key Corporation Managers Bonus Plan
as well as to the same perquisites and benefits under Company policies as other
employees of the same rank. This letter agreement also provides that if Mr.
Dolan should die while in the employ of the Company prior to the consummation of
an initial public offering, the Company will treat as vested all shares of
Restricted Stock and options to purchase Common Stock to the extent necessary to
realize a value of $1,500,000 to Mr. Dolan.
Under the Management Voting Trust Agreement, Y&R has agreed to give each
Management Investor, including each named executive officer, six months
severance pay upon termination of employment for any reason other than for
cause, but each Management Investor is required to waive any possible right to
more than six months severance pay (and any claims for damages under any
employment agreement). Upon termination of the Management Voting Trust, in the
event of termination of employment, the named
56
<PAGE> 61
executive officers may be eligible to receive severance pay of up to 13 weeks
base salary (based upon length of service) pursuant to a severance plan
previously established for U.S. employees of the Company.
The Management Voting Trust has the unqualified right and power to vote and
to execute consents with respect to all shares of Common Stock held by the
Management Voting Trust. The voting rights of the Management Voting Trust will
be exercised by certain members of senior management of Y&R, as Voting Trustees.
The Voting Trustees are Peter A. Georgescu, Stephanie W. Abramson, Thomas D.
Bell, Jr., Michael J. Dolan, Mitchell Kurz, John P. McGarry, Jr., Alan J.
Sheldon and Edward H. Vick. So long as Peter A. Georgescu (or a successor Chief
Executive Officer elected with the approval of the Management Voting Trust) is a
Voting Trustee, his (or such successor's) decision will be binding unless he is
outvoted by a super majority of the other Voting Trustees. If at any time there
is no Chief Executive Officer, or if the Chief Executive Officer was not
approved in advance by the Management Voting Trust, a majority vote of the
Voting Trustees will constitute the action of the Management Voting Trust. The
foregoing voting procedures will also apply to the election of Voting Trustees.
Executive officers are appointed by, and serve at the discretion of, the
Company Board.
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<PAGE> 62
CERTAIN TRANSACTIONS
Upon consummation of the Recapitalization, certain of the Recapitalization
Investors were granted an approval right over a number of specified fundamental
corporate actions, and were granted the right to nominate and have elected three
members of the Company Board. After the Offerings, such approval right will
terminate, and the H&F Investors will retain the right to nominate and have
elected (i) two members of the Board for so long as such investors continue to
hold, in the aggregate, at least 10% of the Outstanding Shares and (ii) one
member of the Board for so long as the H&F Investors continue to hold, in the
aggregate, at least 5% of the Outstanding Shares.
In addition, certain of the Recapitalization Investors have demand and
piggyback registration rights with respect to the Common Stock they hold. Such
Recapitalization Investors have the right to have shares they hold included in
any public offering of Common Stock made by the Company, and after the
Offerings, such Recapitalization Investors will have certain demand registration
rights to require the Company to register for resale shares of Common Stock held
by the Recapitalization Investors. See "Shares Eligible for Future Sale."
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<PAGE> 63
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock and options to purchase Common Stock as of March
31, 1998 and as adjusted to reflect the sale of 16,600,000 shares of Common
Stock in the Offerings, including beneficial ownership by (i) each person who is
known by the Company to own beneficially 5% or more of the outstanding shares of
any class of the Common Stock, (ii) each of the Company's Directors and named
executive officers, (iii) all Directors and executive officers as a group and
(iv) the Selling Stockholders. Amounts shown under the headings "Shares" include
the numbers of shares of Common Stock subject to vested options, which are also
shown under the heading "Vested Options." The information in the table assumes
that all shares of Restricted Stock vest within 60 days. The information in the
table below has been calculated in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as amended. Except as indicated in the
footnotes to the table, the persons named in the table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where applicable.
The address of each of the Selling Stockholders other than the H&F Investors is
c/o the Company at 285 Madison Avenue, New York, New York 10017. The address of
the H&F Investors is c/o Hellman & Friedman L.L.C., One Maritime Plaza, San
Francisco, California 94111.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERINGS AFTER OFFERINGS
------------------------------------- SHARES BEING ----------------------------------------
NAME SHARES VESTED OPTIONS PERCENT OFFERED SHARES VESTED OPTIONS PERCENT
<S> <C> <C> <C> <C> <C> <C> <C>
Management Voting
Trust(1).................. 46,088,355 14,260,665 60.4% 2,101,860 43,986,495 14,260,665 54.2%
Hellman & Friedman Capital
Partners III, L.P......... 28,961,100 2,311,590 45.0 7,004,684 21,956,416 2,311,590 31.7%
H&F Orchard Partners III,
L.P....................... 2,109,060 168,270 3.4 510,481 1,598,579 168,270 2.4%
H&F International Partners
III, L.P.................. 631,770 50,400 1.0 150,925 480,845 50,400 *
BearTel Corp. .............. 260,865 -- * 63,160 197,705 -- *
Peter A. Georgescu(2)....... 1,783,560 -- 2.9 -- 1,783,560 -- 2.7%
Edward H. Vick (2).......... 1,495,290 895,245 2.4 156,465 1,338,825 895,245 2.0%
Thomas D. Bell, Jr.(2)...... 1,463,655 1,165,215 2.3 167,130 1,296,525 1,165,215 1.9%
John P. McGarry, Jr.(2)..... 1,155,450 -- 1.9 141,810 1,013,640 0 1.5%
Michael J. Dolan(2)......... 419,631 104,346 * -- 419,631 104,346 *
Richard S. Bodman........... -- -- * -- -- -- *
Philip U. Hammarskjold(3)... -- -- * -- -- *
F. Warren Hellman(4)........ -- -- * -- -- *
John F. McGillicuddy........ 869 -- * -- 869 -- *
Alan D. Schwartz(5)......... -- -- * -- -- *
All directors and executive
officers as a group....... 7,708,509 2,190,894 12% 517,665 7,190,844 2,190,894 10.4%
Stephanie W. Abramson(2).... 475,353 26,088 * 7,260 468,093 26,088 *
American Media Management,
Inc. ..................... 130,440 -- * 35,556 94,884 50,400 *
Frank Anfield............... 368,520 21,465 * 40,005 328,515 21,465 *
Matt Asinari................ 156,525 26,085 * 73,050 83,475 26,085 *
Jean-Marc Bara.............. 304,080 -- * 73,455 230,625 0 *
Stephen Baum................ 21,600 -- * 12,090 9,510 0 *
Ted Bell.................... 827,820 334,065 1.3% 79,635 748,185 334,065 1.1%
Bill Borrelle............... 17,025 -- * 7,305 9,720 0 *
Roger Chiocchi.............. 79,140 25,875 * 2,160 76,980 25,875 *
Michael Claes............... 47,550 24,360 * 7,305 40,245 24,360 *
Neil Clark.................. 91,305 52,170 * 21,915 69,390 52,170 *
Don Cogman.................. 423,030 191,775 * 16,665 406,365 191,775 *
Janet Coombs................ 178,770 104,355 * 31,590 147,180 104,355 *
Cindy Giller................ 9,780 -- * 5,475 4,305 -- *
H. Irving Grousbeck......... 260,865 -- * 66,667 194,198 -- *
Barbara Jack................ 600,750 395,565 1.0% 3,960 596,790 395,565 *
Paul Jandreau-Smith......... 153,525 85,725 * 15,915 137,610 85,725 *
William Johnston............ 82,605 60,000 * 1,875 80,730 60,000 *
Christopher Komisarjevsky... 153,420 109,575 * 2,640 150,780 109,575 *
Philippe Krakowsky.......... 64,560 26,085 * 18,270 46,290 26,085 *
</TABLE>
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<PAGE> 64
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERINGS AFTER OFFERINGS
------------------------------------- SHARES BEING ----------------------------------------
NAME SHARES VESTED OPTIONS PERCENT OFFERED SHARES VESTED OPTIONS PERCENT
<S> <C> <C> <C> <C> <C> <C> <C>
Kurt Krauss................. 21,600 -- * 12,090 9,510 -- *
Stephanie Kugelman.......... 473,355 88,485 * 25,530 447,825 88,485 *
Mitchell Kurz(2)............ 1,397,745 589,455 2.2% 210,825 1,186,920 589,455 1.7%
Jay Kushner................. 100,500 42,000 * 25,200 75,300 42,000 *
Anthony Manson.............. 21,030 -- * 9,135 11,895 -- *
Thomas McQueeney............ 195,660 -- * 36,525 159,137 -- *
William Melzer.............. 532,605 434,790 * 47,220 485,385 434,790 *
Craig Middleton............. 242,310 26,085 * 77,010 165,300 26,085 *
Fernan Montero.............. 980,535 -- 1.6% 64,065 916,470 -- 1.4%
James O'Malley.............. 26,610 13,560 * 7,305 19,305 13,560 *
Steve Oroho................. 217,590 112,605 * 825 216,765 112,605 *
Stewart Owen................ 268,365 119,265 * 67,335 201,030 119,265 *
Graham Phillips............. 52,170 -- * 29,220 22,950 -- *
Dan Plouffe................. 7,500 -- * 4,200 3,300 -- *
Tim Pollak.................. 955,080 -- 1.5% 91,305 863,775 -- 1.3%
Hans-Henrik Rasmussen....... 118,110 -- * 52,230 65,880 -- *
Ken Rietz................... 135,150 117,390 * 9,945 125,205 117,390 *
Ilene Rosenthal............. 21,360 17,385 * 2,130 19,230 17,385 *
Michael Samet............... 328,740 14,625 * 101,145 227,595 14,625 *
Carol Schautz............... 117,315 -- * 15,450 101,865 -- *
Matthew Schetlick........... 118,485 60,870 * 32,265 86,220 60,870 *
Nico Schou.................. 22,965 -- * 9,210 13,755 -- *
Alan Sheldon(2)............. 902,535 -- 1.5% 45,000 857,535 -- 1.2%
Barbara Smith............... 62,625 10,440 * 7,305 55,320 10,440 *
Stanley Stefanski........... 675,285 111,675 1.1% 150,690 524,595 111,675 *
Clay Timon.................. 603,735 521,745 1.0% 40,875 562,861 521,745 *
Joanne Zaiac................ 179,010 -- * 41,854 137,156 -- *
</TABLE>
- ------------------------------
* Less than one percent.
(1) "Beneficial Ownership Prior to Offerings" includes 11,086,950 shares held
in the Restricted Stock Trust and "Beneficial Ownership After Offerings"
includes 9,231,105 shares held in the Restricted Stock Trust, which shares
are also subject to the Management Voting Trust. Beneficial ownership by
the Management Voting Trust includes an aggregate of 2,101,860 shares
offered hereby by Management Investors who are Selling Stockholders, which
shares are held by the Management Voting Trust. Other than the shares
offered by the H&F Investors, BearTel Corp., H. Irving Grousbeck and
American Media Management, Inc., all shares offered by Selling Stockholders
are held by the Management Voting Trust. Such shares will be delivered out
of the Management Voting Trust upon consummation of the Offerings.
(2) This amount does not include any of the 46,088,355 shares held in the
Management Voting Trust in excess of the amount reported above, which the
stockholder may be deemed to beneficially own as a result of such
stockholder's position as a Voting Trustee of the Management Voting Trust.
The stockholder disclaims beneficial ownership of any such shares in excess
of the amount reported above.
(3) Excludes 31,701,930 shares beneficially owned by the H&F Investors. The
stockholder is a Managing Director of Hellman & Friedman.
(4) Excludes 31,701,930 shares beneficially owned by the H&F Investors. The
stockholder is Chairman of Hellman & Friedman, the ultimate general partner
of the H&F Investors.
(5) Excludes 260,865 shares held by BearTel Corp., a company affiliated with
Bear, Stearns & Co. Inc., of which Mr. Schwartz is an executive officer.
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<PAGE> 65
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized to issue 250,000,000 shares of Common Stock, par
value $0.01 per share (the "Common Stock"), and 10,000,000 shares of Preferred
Stock, without par value (the "Preferred Stock"). As of March 31, 1998, and
after giving effect to the Stock Split, the Company's issued and outstanding
capital stock consisted of 60,200,040 shares of issued and outstanding Common
Stock and 87 shares of issued and outstanding Money Market Preferred Stock.
Based upon shares outstanding as of March 31, 1998, the Company estimates that
immediately after the closing of the Offerings there will be an aggregate of
66,866,707 shares of Common Stock issued and outstanding, 30,702,450 shares of
Common Stock will be issuable upon exercise of outstanding options, 87 shares of
Money Market Preferred Stock will be issued and outstanding and no other shares
of Preferred Stock will be issued and outstanding. All of the Company's issued
and outstanding capital stock has been fully paid.
The following description of the Company's capital stock does not purport
to be complete and is subject to and qualified in its entirety by the Company's
Charter and By-Laws, which are included as exhibits to the Registration
Statement of which this Prospectus forms a part, and by the provisions of
applicable Delaware law.
The Company's Charter and By-Laws contain certain provisions that are
intended to enhance the likelihood of continuity and stability in the
composition of the Board and which may have the effect of delaying, deferring,
or preventing a future takeover or change in control of the Company unless such
takeover or change in control is approved by the Board.
COMMON STOCK
The holders of Common Stock will be entitled to one vote for each share on
all matters voted on by stockholders, and the holders of such shares, together
with the holders of shares of Money Market Preferred Stock (as described
herein), will possess all voting power, except as otherwise required by law or
as provided in the Company's Charter. Holders of Common Stock who are employees
of Y&R or its affiliates are subject to the provisions of the Management Voting
Trust and the Stockholders' Agreement. See "-- The Management Voting Trust
Agreement" and "The Stockholders' Agreement." The holders of Common Stock will
not have cumulative voting rights. Holders of Common Stock will not have any
preemptive right to subscribe for or purchase any kind or class of securities of
the Company. Holders of Common Stock will have no subscription, conversion or
redemption rights, and will not be subject to further calls or assessments.
Subject to any preferential or other rights of any outstanding series of
Preferred Stock that may be designated by the Company Board, the holders of
Common Stock will be entitled to such dividends, if any, as may be declared from
time to time by the Company Board. The Company's Credit Facilities contain
restrictive covenants that limit the Company's ability to pay cash dividends or
make certain stock repurchases above certain permitted limits without the prior
written consent of the lenders. The New Facility, which the Company expects to
enter into effective upon the consummation of the Offerings, is expected to
permit the payment of cash dividends except in the event of a continuing default
under the credit agreement. See "Dividend Policy." In the event of the
liquidation, dissolution or winding up of the Company, holders of Common Stock
will be entitled to receive on a pro rata basis any assets of the Company
remaining after provision for payment of creditors and after payment of any
liquidation preferences to holders of Preferred Stock.
PREFERRED STOCK
The Company is authorized to issue 10,000,000 shares of Preferred Stock.
The Board has the authority to establish and designate series of the Preferred
Stock and, except with respect to the Money Market Preferred Stock, to fix the
number of shares constituting each such series, to fix the designations and the
relative rights, preferences and limitations of the shares of each such series
and the variations in the relative rights, preferences and limitations as
between such series, and to increase and decrease the number of shares
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constituting each such series. See "-- Authorized But Unissued Capital Stock"
and "-- Anti-Takeover Effects of Certain Provisions of the Charter, the By-Laws,
the Rights Plan and Delaware Law -- Preferred Stock."
The Company's Charter designates an initial series of Preferred Stock,
consisting of 50,000 shares, as the Money Market Preferred Stock. Holders of
Money Market Preferred Stock are entitled to receive, subject to declaration by
the Board, certain cumulative cash dividends which are payable quarterly and
calculated with reference to the interest rate for the three-month London
interbank deposit market. On or after December 12, 2001, any Money Market
Preferred Stock issued and outstanding for five years may, at the option of the
Board and subject to providing holders with notice of redemption, be redeemed by
the Company at a redemption price per share of $115.00 (together with all
accrued and unpaid dividends thereon). Redeemed Money Market Preferred Stock may
be reissued by the Board as shares of such series or as shares of any other
series of Preferred Stock. Money Market Preferred Stock are not convertible,
have a liquidation preference of $115.00 per share (together with all accrued
and unpaid dividends thereon) and have voting rights equal to one-tenth of one
vote for each share of Money Market Preferred Stock.
Effective upon the closing of the Offerings, in connection with the Rights
Plan, the Company's Charter will authorize a series of Preferred Stock
designated Cumulative Participating Junior Preferred Stock (the "Junior
Preferred Stock"), consisting of 2,500,000 shares. For a description of the
Rights Plan and the Junior Preferred Stock, see "-- Rights Plan" and
"-- Anti-Takeover Effects of Certain Provisions of the Charter, the By-Laws, the
Rights Plan and Delaware Law."
AUTHORIZED BUT UNISSUED CAPITAL STOCK
Based on the calculations set forth above, the Company estimates that,
following the completion of the Offerings, it will have approximately
183,133,293 shares of authorized but unissued Common Stock (including an
aggregate of 28,964,130 shares reserved for issuance upon the exercise of
options under the Stock Option Plans and 2,598,105 shares reserved for issuance
upon the exercise of options issued to certain of the Recapitalization Investors
and 9,999,913 shares of authorized but unissued Preferred Stock (including the
2,500,000 shares designated as Junior Preferred Stock and 49,913 shares
designated as Money Market Preferred Stock). Delaware law does not require
stockholder approval for the issuance of authorized shares. However, the listing
requirements of the New York Stock Exchange, which apply so long as the Common
Stock remains listed on such exchange, require prior stockholder approval of
certain issuances, including issuances of shares bearing voting power equal to
or exceeding 20% of the pre-issuance outstanding voting power or pre-issuance
outstanding number of shares of Common Stock. These additional shares could be
used for a variety of corporate purposes, including future public offerings to
raise additional capital or to facilitate corporate acquisitions. The Company
currently does not have any plans to issue additional shares of Common Stock or
Preferred Stock other than in connection with employee compensation plans. See
"Management -- Executive Compensation." One of the effects of the existence of
unissued and unreserved Common Stock and Preferred Stock may be to enable the
Board of the Company to issue shares to persons friendly to current management,
which issuance could render more difficult or discourage an attempt to obtain
control of the Company by means of a merger, tender offer, proxy contest or
otherwise, and thereby protect the continuity of the Company's management and
possibly deprive the stockholders of the opportunity to sell their shares of
Common Stock at prices higher than prevailing market prices. Such additional
shares also could be used to dilute the stock ownership of persons seeking to
obtain control of the Company pursuant to the operation of the Rights Plan,
which is discussed below. See "-- Anti-Takeover Effects of Certain Provisions of
the Charter, the By-Laws, the Rights Plan and Delaware Law."
THE MANAGEMENT VOTING TRUST AGREEMENT
Pursuant to the Management Voting Trust Agreement, the Management Investors
and the Restricted Stock Trust are required to deposit with the Management
Voting Trust all shares of Common Stock and all shares of Money Market Preferred
Stock acquired by them prior to the termination of the Management Voting Trust
(including Common Stock acquired upon the exercise of options, distributions
from the
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Restricted Stock Trust or otherwise). Common Stock sold in the public market by
Management Investors and the Restricted Stock Trust will be withdrawn from, and
delivered free of, the Management Voting Trust.
The Management Voting Trust will have the unqualified right and power to
vote and to execute consents with respect to all shares of Common Stock and all
shares of Money Market Preferred Stock held by the Management Voting Trust. The
voting rights of the Management Voting Trust are exercised by certain members of
senior management of Y&R, in their capacities as voting trustees (the "Voting
Trustees"). The current Voting Trustees are Peter A. Georgescu, Stephanie W.
Abramson, Thomas D. Bell, Jr., Michael J. Dolan, Mitchell Kurz, John P. McGarry,
Jr., Alan J. Sheldon and Edward H. Vick (each of whom is currently a member of
the senior management of Y&R). So long as Peter A. Georgescu (or a successor
Chief Executive Officer elected with the approval of the Management Voting
Trust) is a Voting Trustee, any action (i) approved in writing or at a meeting
by Peter A. Georgescu (or such successor) and any two other Voting Trustees and
(ii) any action approved over the objection of Peter A. Georgescu (or such
successor) at a meeting of the Voting Trustees by an aggregate vote of Voting
Trustees equal to not less than the total number of Voting Trustees then in
office minus two, shall constitute the action of, and shall be binding upon, the
Management Voting Trust (unless there shall be fewer than seven Voting Trustees
then in office, in which event any action under clause (ii) shall require the
vote of all the Voting Trustees other than Peter A. Georgescu (or such
successor)). The foregoing voting procedures will also apply to the election and
removal of Voting Trustees, to proposals to increase or decrease the number of
Voting Trustees and to proposals to amend the foregoing voting procedures.
The Management Voting Trust will terminate at such time that (i) no person
(including the Recapitalization Investors and the Management Voting Trust) is
the owner of more than 20% of the Outstanding Shares, (ii) the number of shares
of Common Stock held by the Management Voting Trust is less than 10% of the
Outstanding Shares or (iii) the Voting Trustees determine to terminate the
Management Voting Trust. Pursuant to an irrevocable unanimous written consent of
the Voting Trustees, the Management Voting Trust will terminate 24 months after
the consummation of the Offerings, assuming no earlier termination in accordance
with its terms.
The Management Voting Trust has issued and will issue voting trust
certificates ("Voting Trust Certificates") representing the shares of Common
Stock and Money Market Preferred Stock deposited with it. The Voting Trust
Certificates will be subject to the transfer restrictions set forth in the
Amended Stockholders' Agreement. See "-- The Stockholders' Agreement."
Y&R has agreed to assume all liability and indemnify and defend all Voting
Trustees and their successors, assigns, agents and servants from any and all
losses incurred or asserted against any Voting Trustees relating to their
administration of the Management Voting Trust, unless there is clear and
convincing evidence that such losses were proximately caused by an act or
omission that was not taken in good faith or not reasonably believed to be in
the best interest of Y&R and the Management Investors as a group. See
"Management -- Limitation of Liability and Indemnification."
Under the Management Voting Trust Agreement and certain stock option and
restricted stock agreements, each of the Management Investors is subject to
certain non-competition, non-solicitation, confidentiality and notice
requirements in connection with the termination of such person's employment.
They include the following: (i) for one year after termination of employment, a
Management Investor may not work for any competitor of Y&R on the account of any
client of Y&R or any of its affiliates with whom such Management Investor had a
direct relationship or as to which such Management Investor had a significant
supervisory responsibility or otherwise was significantly involved at any time
during the two years prior to termination; (ii) for six months after termination
of employment, (a) a Management Investor with principally corporate type job
responsibilities that do not principally involve client service related
functions may not work for a principal competitor of Y&R or any of its
affiliates in any substantially similar role as that held with Y&R or any of its
affiliates during the two years prior to termination, and (b) a Management
Investor with principally client service related responsibilities may not work
for a competitor of Y&R or its affiliates on the account of any substantial
competitor (or directly for such competitor) of any client of Y&R or any of its
affiliates for whom such Management Investor had substantial responsibility
during the two years prior to
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termination; (iii) for one year after termination of employment, a Management
Investor may not (a) directly or indirectly solicit or hire, or assist in the
soliciting or hiring of, any person employed by Y&R or any of its affiliates as
of the date of termination or any person who was then being recruited by Y&R or
any of its subsidiaries or (b) induce any such employee to terminate his or her
employment with Y&R or any of its affiliates; (iv) a Management Investor shall
keep confidential information of Y&R, its affiliates and their clients learned
during his or her employment and (v) a Management Investor shall give six weeks
written notice prior to voluntary termination unless a shorter period is
approved by the Company.
Y&R has agreed, under the Management Voting Trust Agreement, to give each
Management Investor six months severance pay upon termination of employment for
any reason other than for cause (as defined), and each Management Investor is
required to waive any possible right to more than six months' severance pay (or
similar compensation) (and any claims for damages under any employment
agreement). Y&R has the right under the Stockholders' Agreement to offset
against any payments to be made in connection with the purchase of securities
from a Management Investor in connection with his or her termination of
employment (i) any severance or similar obligations to be paid to such
Management Investor in excess of or in addition to six months severance pay
required to be made under applicable law despite such Management Investor's
waiver of entitlement thereto, as provided in the Management Voting Trust
Agreement) and (ii) any damages or expenses incurred as a result of any
malfeasance by such Management Investor or a breach by such Management Investor
of the covenants described in the preceding paragraph.
THE STOCKHOLDERS' AGREEMENT
In connection with the Recapitalization, the Recapitalization Investors,
the Management Investors, the Restricted Stock Trust, the Management Voting
Trust and Y&R entered into a stockholders' agreement (the "Stockholders'
Agreement") with respect to the restrictions on transferability of shares of
Common Stock and related Voting Trust Certificates, and with respect to the
management of Y&R.
Upon consummation of the Offerings, the Stockholders' Agreement will be
terminated as to certain parties and the H&F Investors, the Management
Investors, the Restricted Stock Trust, the Management Voting Trust and Y&R will
enter into an amended and restated stockholders' agreement (the "Amended
Stockholders' Agreement").
RIGHT TO NOMINATE DIRECTORS. Under the Amended Stockholders' Agreement,
the H&F Investors will have the right to nominate and have elected two members
of the Company Board for so long as they continue to hold, in the aggregate, at
least 10% of the Outstanding Shares, and one member of the Board for so long as
they continue to hold, in the aggregate, at least 5% of the Outstanding Shares.
Outstanding Shares is defined in the Stockholders' Agreement to include all
shares of Common Stock subject to vested options (not including options which
would vest on a change in control).
TRANSFER RESTRICTIONS. Under the Amended Stockholders' Agreement, the
transfer restrictions described below will apply. Purported transfers in
violation of these restrictions will be null and void.
H&F Investors may not transfer shares of Common Stock, options to purchase
Common Stock or other voting capital stock, (i) prior to termination of the
Management Voting Trust (which will occur no later than the second anniversary
of the consummation of the Offerings), if at least 20% of the Outstanding Shares
are then subject to the Management Voting Trust, to any party who as a result
thereof would (together with its affiliates) own a percentage of the Outstanding
Shares which is greater than the percentage then subject to the Management
Voting Trust, or (ii) after such termination of the Management Voting Trust and
(A) prior to the first anniversary of such termination, to any party who as a
result thereof would (together with its affiliates) own a percentage of the
Outstanding Shares which is greater than the greater of (1) 20% and (2) the
percentage of the Outstanding Shares subject to the Management Voting Trust upon
termination thereof (the "Termination Percentage") less 5% and (B) from and
after the first anniversary of such termination until December 12, 2002, to any
party who as a result thereof would (together with its affiliates) own a
percentage of the Outstanding Shares which is greater than the greater of (1)
20% and (2) the Termination Percentage less 10%, unless, in any such case (A)
Y&R fails to arrange for the sale of such shares to a third party for the
benefit of the H&F Investors at a price to the H&F Investors not less than the
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price proposed to be paid by the proposed transferee and (B) the Management
Voting Trust (or, following its termination, the Company) consents to the
proposed transfer, which consent may not be unreasonably withheld.
Prior to termination of the Management Voting Trust, proposed transfers of
shares of Common Stock, options to purchase Common Stock or other voting capital
stock by Management Investors (other than transfers by will or intestate
succession) to any party who as a result thereof (together with its affiliates)
would own more than 20% of the Outstanding Shares are subject to a right of
first refusal by each of Y&R and the H&F Investors, exercisable in that order.
CERTAIN TRANSFER RESTRICTIONS
The following transfer restrictions apply to shares of Common Stock issued
to Management Investors pursuant to Regulation S under the Securities Act, but
will not apply to shares of Common Stock sold in the Offerings. Under the
Company's By-Laws, any direct or indirect sale, transfer, assignment, pledge,
hypothecation or other encumbrance or disposition (a "Transfer") of legal or
beneficial ownership of any stock heretofore or hereafter issued and sold by the
Company pursuant to Regulation S under the Securities Act of 1933, as amended
(the "Securities Act"), may be made only (i) pursuant to an effective
registration statement under the Securities Act or (ii) pursuant to a
transaction that is exempt from, or not subject to, the registration
requirements of the Securities Act. Neither the Company nor any employee or
agent of the Company shall record any Transfer prohibited by the preceding
sentence, and the purported transferee of such a prohibited Transfer (the
"Purported Transferee") shall not be recognized as a securityholder of the
Company for any purpose whatsoever in respect of the security or securities that
are the subject of the prohibited Transfer. The Purported Transferee shall not
be entitled, with respect to such securities, to any rights of a securityholder
of the Company, including without limitation, in the case of securities that are
Common Stock, the right to vote such Common Stock or to receive dividends or
distributions in respect thereof, if any. All certificates representing
securities subject to the transfer restrictions set forth in this Article V
shall bear a legend to the effect that the securities represented by such
certificates are subject to such restrictions, unless and until the Company
determines in its sole discretion that such legend may be removed consistent
with applicable law.
NO PREEMPTIVE RIGHTS
No holder of any class of stock of the Company has any preemptive right to
subscribe for or purchase any kind or class of securities of the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is The Bank of New
York.
RIGHTS PLAN
The Company has adopted the Rights Plan and has entered into a Rights
Agreement (the "Rights Agreement"), dated as of , 1998, between the
Company and The Bank of New York, as Rights Agent (the "Rights Agent"). In
connection with the Rights Plan, the Board has declared a dividend distribution
of one Right for each share of Common Stock outstanding immediately prior to
consummation of the Offerings and after the Stock Split. The dividend is payable
immediately prior to consummation of the Offerings. The Company will distribute
one associated Right with each share of Common Stock distributed in the
Offerings. The terms of the Rights are set forth in the Rights Agreement. The
Company's Charter authorizes the Board to adopt a stockholder rights plan such
as the Rights Plan.
Each Right entitles the registered holder under certain circumstances to
purchase from the Company one one-hundredth of a share of Junior Preferred Stock
at a purchase price of $ , subject to adjustment (the "Purchase
Price"). The Purchase Price shall be payable in cash or by certified check or
bank draft.
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Junior Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of Junior Preferred Stock will be entitled to a minimum
preferential quarterly dividend payment of $1.00 per share but will be entitled
to an aggregate dividend of 100 times the dividend declared per share of Common
Stock. In the event of liquidation, the holders of shares of Junior Preferred
Stock will be entitled to a minimum preferential liquidation payment of $100 per
share, plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment. Each share of
Junior Preferred Stock will have 100 votes, voting together with the Common
Stock and the Money Market Preferred Stock and, in the event of certain dividend
arrearages, will also have the right to elect one director voting as a class. In
the event of any merger, consolidation or other transaction in which shares of
Common Stock are exchanged, each share of Junior Preferred Stock will be
entitled to receive 100 times the amount received per share of Common Stock.
These rights are protected by customary anti-dilution provisions. Because of the
nature of their dividend, liquidation and voting rights, the value of the
one-one-hundredth interest in a share of Junior Preferred Stock purchasable upon
exercise of each Right should approximate the value of one share of Common
Stock.
Until the close of business on the earlier of (i) the tenth business day
after the Stock Acquisition Date (as defined below) and (ii) the tenth business
day (or such later day as may be determined by action of the Company Board prior
to such time as any person becomes an Acquiring Person (as defined below)) after
the date of the commencement by any person (other than any Company Entity (as
defined below)) of, or the first public announcement of the intent of any person
(other than any Company Entity) to commence (which intention to commence remains
in effect for five business days after such announcement), a tender or exchange
offer the consummation of which would result in any person becoming an Acquiring
Person (the earlier of the dates referred to in clauses (i) and (ii) above being
herein referred to as the "Distribution Date"), the Rights will be evidenced by
the certificates representing shares of Common Stock and no separate Right
Certificates (as defined below) will be issued or distributed. All shares of
Common Stock outstanding as of the Record Date or issued prior to the earlier of
the Distribution Date or the Expiration Date will be issued with Rights.
The term "Stock Acquisition Date" means the time and day of the first
public announcement (which includes, without limitation, the filing of a report
pursuant to the Exchange Act) by the Company or an Acquiring Person indicating
that an Acquiring Person has become such.
The term "Acquiring Person" means (i) any person (other than the H&F
Investors and other than any Permitted H&F 15% Transferee (as defined below))
who or which, together with all affiliates and associates of such person,
acquires beneficial ownership (as defined in the Rights Agreement) of 15% or
more of the then outstanding shares of Common Stock (other than as a result of
an Approved Offer (as defined below)), or (ii) the H&F Investors if, after the
Offerings, the H&F Investors, together with all of their affiliates and
associates, acquire beneficial ownership of any additional shares of Common
Stock such that following such acquisition (A) the H&F Investors beneficially
own in excess of 15% of the then outstanding shares of Common Stock and (B) if
the Management Voting Trust is then in existence, following such acquisition the
H&F Investors beneficially own a greater percentage of the Diluted Shares
Outstanding than the percentage of the Diluted Shares Outstanding subject to the
Management Voting Trust at the time of such acquisition (it being understood
that neither sales by, nor termination of, the Management Voting Trust will
trigger this provision absent a subsequent acquisition of beneficial ownership
of additional shares by the H&F Investors or any of their affiliates or
associates) or (iii) any Permitted H&F 15% Transferee if contemporaneously with
or subsequent to the transfer from the H&F Investors that resulted in such
person becoming a Permitted H&F 15% Transferee, such Permitted H&F 15%
Transferee, together with all affiliates and associates of such Permitted 15%
H&F Transferee, acquires beneficial ownership of any additional shares;
provided, however, that (1) a person shall not become an Acquiring Person if
such person, together with all of its affiliates and associates, becomes the
beneficial owner of 15% or more (in the case of clause (i) above) of the then
outstanding shares of Common Stock as a result of a reduction in the number of
shares of Common Stock outstanding due to the repurchase of shares of Common
Stock by the Company, unless and until such time as such person purchases or
otherwise becomes (as a result of actions taken by such person or any of its
affiliates or associates) the beneficial owner of any additional shares of
Common Stock; (2) the term "Acquiring
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Person" shall not include any Company Entity; and (3) the term "Acquiring
Person" shall not include any person who or which, together with all affiliates
and associates of such person, becomes the beneficial owner of 15% or more of
the then outstanding shares of Common Stock (in the case of clause (i) above) or
any additional shares of Common Stock (in the case of clauses (ii) and (iii)
above) but who acquired beneficial ownership of shares of Common Stock
inadvertently, and such person promptly (and in any event within 10 business
days after being so requested by the Company) enters into an irrevocable
commitment satisfactory to the Company Board promptly (and in any event within
20 business days or such shorter period as shall be determined by the Company
Board) to divest, and thereafter promptly divests as required by such
commitment, sufficient shares of Common Stock so that such person, together with
all of its affiliates and associates, ceases to be a beneficial owner of 15% or
more of the then outstanding shares of Common Stock (in the case of clause (i)
above) or any additional shares of Common Stock (in the case of clauses (ii) and
(iii) above).
The term "Company Entity" means any of the Company, any wholly owned
subsidiary of the Company, any employee benefit plan or employee stock plan of
the Company or any wholly owned subsidiary of the Company, any person or entity
holding shares of Common Stock which was organized, appointed or established by
the Company or any such wholly owned subsidiary for or pursuant to the terms of
any such plan, the Management Voting Trust, the Restricted Stock Trust, the
trustees under the Management Voting Trust or the Restricted Stock Trust, any
affiliate or associate of the Management Voting Trust or the Restricted Stock
Trust or any trustee under either such trust and any group that includes the
Management Voting Trust, the Restricted Stock Trust, any trustee under either
such trust or any affiliate or associate thereof.
The term "Permitted H&F 15% Transferee" means any person who is a Permitted
H&F Transferee (as defined below) who or which, immediately after the transfer
from the H&F Investors that resulted in such person becoming a Permitted H&F
Transferee, together with all affiliates and associates of such person, is the
beneficial owner of 15% or more of the then outstanding shares of Common Stock.
The term "Permitted H&F Transferee" means any person that acquires
beneficial ownership of shares of Common Stock from the H&F Investors pursuant
to a transfer that is either not restricted under, or occurs in compliance with,
the transfer restrictions applicable to the H&F Investors set forth in the
Amended Stockholders' Agreement.
The term "Approved Offer" means a tender offer or exchange offer for all
the outstanding shares of Common Stock which is at a price and on terms
approved, prior to the acceptance for payment of shares under such tender or
exchange offer, by the Company Board.
The term "Diluted Shares Outstanding" as of any given time means the sum of
(a) the number of shares of Common Stock then issued and outstanding (including
all shares of Common Stock held in the Restricted Stock Trust) and (b) the
number of shares of Common Stock issuable upon exercise of the (1) HFCP Options
(as defined in the Amended Stockholders' Agreement) and the Rollover Options and
(2) all other options, warrants and rights to acquire, and the conversion of any
securities convertible into, shares of Common Stock, to the extent such rights
to acquire shares of Common Stock are then exercisable. For purposes of clause
(ii)(B) of the definition of "Acquiring Person" above, when calculating the
percentage of the Diluted Shares Outstanding owned by the H&F Investors or the
Management Voting Trust, as the case may be, the H&F Investors or the Management
Voting Trust, as the case may be, shall be deemed to own all shares of Common
Stock beneficially owned by them assuming the exercise of all of their options,
warrants and rights to acquire, and the conversion by them of any securities
convertible into, shares of Common Stock to the extent, but only to the extent,
such rights to acquire shares of Common Stock are then exercisable by them. For
purposes of calculating the percentage of Diluted Shares Outstanding owned by
the Management Voting Trust, the Management Voting Trust shall be deemed to own
all shares of Common Stock (including all shares of Common Stock required to be
deposited thereunder upon exercise of vested options) then subject to the
Management Voting Trust.
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the Common Stock. Certificates
representing shares of Common Stock issued after the Record Date
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and prior to the earlier of the Distribution Date and the Expiration Date will
contain a legend incorporating the Rights Agreement by reference. Until the
Distribution Date, the surrender for transfer of any of the certificates
representing shares of Common Stock outstanding as of the Record Date or issued
prior to the Distribution Date will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate and the number
of Rights associated with each share of Common Stock will be proportionately
adjusted in the event of any dividend in Common Stock on the Common Stock or
subdivision, combination or reclassification of the Common Stock. In the event
that the Company purchases or acquires any shares of Common Stock after the
Record Date but prior to the Distribution Date, any Rights associated with such
shares of Common Stock shall be deemed canceled and retired so that the Company
shall not be entitled to exercise any Rights associated with the shares of
Common Stock which are no longer outstanding. As soon as practicable following
the Distribution Date, separate certificates evidencing the Rights ("Rights
Certificates") will be mailed to holders of record of Common Stock as of the
close of business on the Distribution Date and such separate Rights Certificates
alone will evidence the Rights. The Rights are not exercisable until the
Distribution Date. The Rights will expire at the close of business on May 31,
2008, unless they have previously expired in connection with an Approved Offer
(as described in the Rights Agreement) or they are exchanged for shares of
Common Stock or have been previously redeemed by the Company as described below.
Immediately upon the Stock Acquisition Date, proper provision shall be made
so that each holder of a Right will thereafter have the right to receive, upon
exercise, Common Stock (or, in certain circumstances, cash, property or other
securities of the Company) having a preexisting market value (as of shortly
before the Stock Acquisition Date), equal to two times the then current Purchase
Price of the Right. Notwithstanding any of the foregoing, following the
occurrence of the Stock Acquisition Date, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person and certain related parties will become null and void.
To illustrate the rights described in the preceding paragraph, at a
Purchase Price of $ per Right, each Right not owned by an Acquiring Person
(or by certain related parties) following an event set forth in the preceding
paragraph would entitle its holder to purchase Common Stock (or other
consideration, as noted above) with a preexisting market value of $ for
$ . Assuming that the Common Stock has a preexisting market value of
$ at such time, the holder of each Right would be entitled to purchase six
shares of Common Stock for $ .
In the event that, at any time following the Stock Acquisition Date, (i)
the Company is acquired in a merger or other business consolidation transaction,
(ii) the Company is the surviving corporation in a merger or other business
consolidation with any person and the Common Stock is changed into or exchanged
for stock or other securities of any other person or cash or any other property
(other than, in the case of any transaction described in (i) or (ii), a merger
or consolidation which would result in all of the voting securities of the
Company outstanding immediately prior thereto continuing to represent all of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation and holders of such securities
not having changed as a result of such merger or consolidation) or (iii) 50% or
more of the Company's assets or earning power is sold or transferred, each
holder of a Right (except Rights that previously have been voided as set forth
above) shall thereafter have the right to receive, upon exercise, common stock
of the acquiring company having a market value equal to two times the then
current Purchase Price of the Right.
The Purchase Price payable, and the fraction of a share of Junior Preferred
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Junior Preferred Stock (prior to the Distribution Date) or the Common Stock,
(ii) if holders of the Junior Preferred Stock are granted certain rights or
warrants to subscribe for Junior Preferred Stock or convertible securities at
less than the current market price of the Junior Preferred Stock, or (iii) upon
the distribution to holders of the Junior Preferred Stock of evidences of
indebtedness or assets (excluding regular quarterly cash dividends below certain
levels or dividends payable in shares of Junior Preferred Stock) or of
subscription rights or warrants (other than those referred to above).
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With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. In addition, to the extent that the Company does not have sufficient
shares of Common Stock issuable upon exercise of the Rights following the Stock
Acquisition Date, the Company may, under certain circumstances, reduce the
Purchase Price. No fractional shares of Junior Preferred Stock (other than
fractions which are integral multiples of one one-hundredth) will be issued and,
in lieu thereof, an adjustment in cash will be made based on the market price of
the Junior Preferred Stock or the Common Stock on the last trading date prior to
the date of exercise.
At any time until the Stock Acquisition Date, the Company may redeem the
Rights in whole, but not in part, at a price of $0.01 per Right (payable in
cash, shares of Common Stock or other consideration deemed appropriate by the
Board). Immediately upon the action of the Board ordering redemption of the
Rights, the Rights will terminate and thereafter the only right of the holders
of Rights will be to receive the $0.01 redemption price. In addition, at any
time after the Stock Acquisition Date, the Board may elect to exchange all or
part of the then-outstanding and exercisable Rights (other than Rights that have
become null and void as described above) for one share of Company Common Stock.
Both the redemption price and the exchange rate are subject to adjustment.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) or for common stock of an
acquiring company as set forth above.
Any of the provisions of the Rights Agreement may be amended by the Board
prior to the Stock Acquisition Date. After the Stock Acquisition Date, the
provisions of the Rights Agreement may be amended by the Board in order to cure
any ambiguity, to correct any defects or inconsistencies, to make changes which
do not adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person) or to shorten or lengthen any time period
under the Rights Agreement; provided, however, that no amendment to adjust the
time period governing redemption or to modify the ability (or inability) of the
Board to redeem the Rights shall be made at such time when the Rights are not
redeemable.
As long as the Rights are attached to the Common Stock, the Company will
issue one Right for each share of Common Stock issued prior to the Distribution
Date so that all such shares will have attached Rights. Two million five hundred
thousand shares of Junior Preferred Stock will initially be reserved for
issuance upon exercise of the Rights.
The Rights have certain anti-takeover effects. See "-- Anti-Takeover
Effects of Certain Provisions of the Charter, the By-Laws, the Rights Plan and
Delaware Law."
The foregoing summary of certain terms of the Rights is qualified in its
entirety by reference to the Rights Agreement, which is filed as an exhibit to
the Registration Statement and is incorporated herein by reference.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CHARTER, THE BY-LAWS, THE
RIGHTS PLAN AND DELAWARE LAW
The Company's Charter, the Company's By-Laws, the Rights Plan and the DGCL
contain certain provisions that could make more difficult the acquisition of
control of the Company by means of a tender offer, open market purchases, a
proxy contest or otherwise. Set forth below is a description of such provisions
in the Company's Charter, the Company's By-Laws, the Rights Plan and the DGCL.
The following description is intended as a summary only and is qualified in its
entirety by reference to the Company's Charter, the Company's By-Laws and the
Rights Agreement, the forms of which are included as exhibits to the
Registration Statement of which this Information Statement forms a part, and to
the DGCL. Upon consummation of the Offerings, the Management Voting Trust will
hold approximately 54.2% of the outstanding shares of Common Stock (assuming the
exercise of all currently vested options), which could discourage potential
acquisition proposals and could delay or prevent a change in control of the
Company. See "Description of Capital Stock -- The Management Voting Trust
Agreement."
CLASSIFIED BOARD OF DIRECTORS; REMOVAL OF DIRECTORS. The Company's Charter
provides that the number of Directors shall be not less than five nor more than
fifteen, with the exact number of Directors to be
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determined from time to time by a majority of the entire Board. The Directors
shall be divided into three classes, as nearly equal in number as is possible,
serving staggered three-year terms so that Directors' initial terms will expire
at the annual meeting of the Company's stockholders held in 1999, 2000 and 2001,
respectively. Starting with the 1999 annual meeting of the Company's
stockholders, one class of Directors will be elected each year for a three-year
term. See "Management."
The Company believes that a classified Board will help to assure the
continuity and stability of the Board and the Company's business strategies and
policies, since a majority of the Directors at any given time will have had
prior experience as Directors of the Company. The Company believes that this in
turn will permit the Board to represent more effectively the interests of
stockholders.
With a classified Board, at least two annual meetings of stockholders,
instead of one, will generally be required to effect a change in a majority of
the members of the Board. As a result, the classification of the Board of the
Company may discourage proxy contests for the election of Directors, unsolicited
tender offers or purchases of a substantial block of the Common Stock because it
could prevent an acquirer from obtaining control of the Board in a relatively
short period of time. In addition, pursuant to the DGCL and the Company's
Charter, a Director may be removed only for cause and only by the affirmative
vote of holders of not less than 80% of the outstanding shares of Common Stock
entitled to vote thereon. As a result, a classified Board delays stockholders
who do not agree with the policies of the Board from replacing Directors, unless
they can demonstrate that the Directors should be removed for cause and obtain
the requisite vote. Such a delay may help ensure that the Company Board, if
confronted with a proxy contest or an unsolicited proposal for an extraordinary
corporate transaction, will have sufficient time to review the proposal and
appropriate alternatives to the proposal and to act in what it believes is the
best interest of the Company's stockholders.
FILLING VACANCIES ON THE BOARD. The Company's Charter provides that,
subject to the rights of holders of any shares of Preferred Stock, any vacancy
in the Board that results from an increase in the number of Directors may be
filled only by a majority of the Directors then in office, provided that a
quorum is present, and any other vacancy may be filled by a majority of the
Directors then in office, even if less than a quorum, or by the sole remaining
Director. Accordingly, these provisions could temporarily prevent any
stockholder from obtaining majority representation on the Board by enlarging the
Board and filling the new Directorships with its own nominees.
WRITTEN CONSENTS AND SPECIAL MEETINGS. The Company's Charter provides that
no action required or permitted to be taken at any annual or special meeting of
stockholders may be taken by stockholders of the Company except at such a
meeting of stockholders. The Company's By-Laws provide that special meetings of
stockholders may be called only by the Chairman of the Board or the Company
Board. Stockholders are not permitted to call a special meeting or to require
that the Board call a special meeting of stockholders. Moreover, the business
permitted to be conducted at any special meeting of stockholders is limited to
the purpose or purposes specified in the written notice of such meeting. The
provisions of the Company's Charter prohibiting action by written consent
without a meeting and the provisions of the Company's By-Laws governing the
calling of and matters considered at special meetings may have the effect of
delaying consideration of a stockholder proposal until the next annual meeting.
These provisions would also prevent the holders of a majority of the voting
power of the outstanding shares of stock entitled to vote generally in the
election of Directors from using the written consent procedure to take
stockholder action and from taking action by written consent without giving all
the stockholders entitled to vote on a proposed action the opportunity to
participate in determining such proposed action at a meeting.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND PROPOSALS. The
Company's By-Laws establish an advance notice provision with regard to the
nomination, other than by or at the direction of the Board, of candidates for
election as Directors, or the bringing before any annual meeting of any
stockholder proposal (the "Notice of Meeting Provision").
The Notice of Meeting Provision provides that, subject to any rights of
holders of any Preferred Stock, business other than that proposed by the Board
may be transacted and candidates for Director other than those selected by the
Board may be nominated at the annual meeting only if the Secretary of the
Company has received a written notice identifying such business or candidates
and providing specified additional information not less than ninety nor more
than one hundred twenty days before the first Tuesday in June (or, if the Board
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has set a different date for the annual meeting, not less than ninety nor more
than one hundred twenty days before such other date or, if such other date has
not been publicly disclosed or announced at least one hundred five days in
advance, then not less than fifteen days after such public disclosure or
announcement). In addition, not more than ten days after receipt by the
sponsoring stockholder of the Secretary's written request, the sponsoring
stockholder must provide the Secretary with such additional information as the
Secretary may reasonably require.
By requiring advance notice of nominations by stockholders, the Notice of
Meeting Provision will afford the Board a meaningful opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the Board, to inform the stockholders about such qualifications. By
requiring advance notice of proposed business, the Notice of Meeting Proposal
Provision will provide the Board with a meaningful opportunity to inform
stockholders, prior to such meeting, of any business proposed to be conducted at
such meeting, together with any recommendation or statement of the Board's
position as to action to be taken with respect to such business, so as to enable
stockholders better to determine whether they desire to attend such a meeting or
to grant a proxy to the Board as to the disposition of any such business.
Although the Company's By-Laws do not give the Board any power to approve or
disapprove stockholder nominations for the election of Directors or proposals
for action, they may have the effect of precluding a contest for the election of
Directors or the consideration of stockholder proposals if the proper procedures
are not followed, and of discouraging or deterring a third party from conducting
a solicitation of proxies to elect its own slate of Directors or to approve its
proposal without regard to whether consideration of such nominees or proposals
might be harmful or beneficial to the Company and its stockholders.
RESTRICTIONS ON AMENDMENT. The Company's Charter provides that the
approval of holders of at least 80% of the voting power entitled to vote
generally in the election of Directors, voting together as a single class, is
required to adopt any charter provision inconsistent with or to alter, amend or
repeal the provisions of the Company's Charter classifying the Board; governing
the removal of directors; establishing the minimum and maximum number of members
of the Board; eliminating the ability of stockholders to act by written consent;
authorizing the Board to consider the interests of clients and other customers,
creditors, employees and other constituencies of the Corporation and its
subsidiaries and the effect upon communities in which the Corporation and its
subsidiaries do business, in evaluating proposed corporate transactions;
establishing the Board's authority to issue, without a vote or any other action
of the stockholders, any or all authorized shares of stock of the Corporation,
securities convertible into or exchangeable for any authorized shares of stock
of the Corporation and warrants, options or rights to purchase, subscribe for or
otherwise acquire shares of stock of the Corporation for any such consideration
and on such terms as the Board in its discretion lawfully may determine; and
authorizing that the By-Laws of the Corporation may establish procedures
regulating the submission by stockholders of nominations and proposals for
consideration at meetings of stockholders of the Corporation. In addition, the
Company's Charter provides that the approval of the Board or the affirmative
vote of the holders of 80% of the voting power entitled to vote generally in the
election of Directors, voting together as a single class, is required to alter,
amend or repeal the above provisions of the Company's Charter or to adopt any
provision of the Charter inconsistent with such provisions or to alter, amend or
repeal certain provisions of the Company's By-Laws or to adopt any provision of
the By-Laws inconsistent with such provisions.
PREFERRED STOCK. Subject to the Company's Charter and applicable law, the
authority of the Company Board with respect to each series of Preferred Stock,
excluding the Money Market Preferred Stock, includes but is not limited to the
authority to generally determine the following: the designation of such series,
the number of shares initially constituting such series and whether to increase
or decrease such number of shares, dividend rights and rates, terms of
redemption and redemption prices, liquidation preferences, voting rights,
conversion rights, whether a sinking fund will be provided for the redemption of
the shares of such series (and, if so, the terms and conditions thereof) and
whether a purchase fund shall be provided for the shares of such series (and, if
so, the terms and conditions thereof).
The Company believes that the availability of the Preferred Stock will
provide increased flexibility in structuring possible future financings and
acquisitions and in meeting other corporate needs that might arise. Having such
authorized shares available for issuance will allow the Company to issue shares
of Preferred Stock without the expense and delay of a special stockholders'
meeting. The authorized shares of Preferred Stock, as
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well as shares of Common Stock, will be available for issuance without further
action by the stockholders, unless such action is required by applicable law or
the rules of any stock exchange on which the Company's securities may be listed.
Although the Board has no current intention to do so, it would have the power
(subject to applicable law) to issue a series of Preferred Stock that could,
depending on the terms of such series, impede the completion of a merger, tender
offer or other takeover attempt. For instance, subject to applicable law, such
series of Preferred Stock might impede a business combination by including class
voting rights that would enable the holder to block such a transaction. The
Board will make any determination to issue such shares based on its judgment as
to the best interests of the Company and its stockholders. The Board, in so
acting, could issue Preferred Stock having terms which could discourage an
acquisition attempt or other transaction that some, or a majority, of the
stockholders might believe to be in their best interest or in which stockholders
might receive a premium for their stock over the then market price of such
stock. See "-- Rights Plan."
OTHER CONSIDERATIONS. Article XII of the Company's Charter generally
provides that, in determining whether to take or refrain from taking corporate
action on any matter, including proposing any matter to the stockholders of the
Company, the Company Board may, but shall not be obligated to, take into account
the interests of clients and other customers, creditors, employees and other
constituencies of the Company and its subsidiaries and the effect upon
communities in which the Company and its subsidiaries do business.
CERTAIN EFFECTS OF THE RIGHTS PLAN. The Rights Plan is designed to protect
stockholders of the Company in the event of unsolicited offers to acquire the
Company and other coercive takeover tactics which, in the opinion of the Board,
could impair its ability to represent stockholder interests. The provisions of
the Rights Agreement may render an unsolicited takeover of the Company more
difficult or less likely to occur or might prevent such a takeover, even though
such takeover may offer the Company's stockholders the opportunity to sell their
stock at a price above the then prevailing market rate and may be favored by a
majority of the Company's stockholders. See "-- Rights Plan." The Company's
Charter authorizes the Board to adopt a stockholder rights plan.
DELAWARE BUSINESS COMBINATION STATUTE. The terms of Section 203 of the
DGCL apply to the Company. With certain exceptions, Section 203 generally
prohibits an "interested stockholder" from engaging in a broad range of
"business combination" transactions, including mergers, consolidations and sales
of 10% or more of a corporation's assets, with a Delaware corporation for three
years following the date on which such person became an interested stockholder
unless (i) the transaction that results in the person's becoming an interested
stockholder or the business combination is approved by the board of directors of
the corporation before the person becomes an interested stockholder, (ii) upon
consummation of the transaction which results in the stockholder becoming an
interested stockholder, the interested stockholder owns 85% or more of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by persons who are directors and also officers
and shares owned by certain employee stock plans, or (iii) on or after the date
the person becomes an interested stockholder, the business combination is
approved by the corporation's board of directors and by holders of at least
two-thirds of the corporation's outstanding voting stock, excluding shares owned
by the interested stockholder, at a meeting of stockholders. Under Section 203,
an "interested stockholder" is generally defined as any person (and the
affiliates and associates of any such person), other than the corporation and
any direct or indirect majority-owned subsidiary, that is (a) the owner of 15%
or more of the outstanding voting stock of the corporation or (b) an affiliate
or associate of the corporation and was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder. The restrictions contained in
Section 203 do not apply to a corporation that so provides in an amendment to
its certificate of incorporation or by-laws passed by a majority of its
outstanding voting shares, but such stockholder action generally does not become
effective for 12 months following its adoption and would not apply to persons
who were already interested stockholders at the time of the amendment. The
Company's Charter and Company's By-Laws do not exclude the Company from the
restrictions imposed under Section 203, but the Company's Charter provides that
in no case shall the H&F Investors or any person who is a Permitted H&F
Transferee, regardless of the total percentage of the Company's Common Stock or
other voting stock owned by the H&F Investors or such person, be deemed an
interested stockholder for any purpose under Section 203 whatsoever.
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Under certain circumstances, Section 203 makes it more difficult for a
person who would be an "interested stockholder" to effect various business
combinations with a corporation for a three-year period. The provisions of
Section 203 may encourage companies interested in acquiring the Company to
negotiate in advance with the Company Board, because the stockholder approval
requirement would be avoided if the Board approves either the business
combination or the transaction which results in the stockholder becoming an
interested stockholder. Such provisions also may have the effect of preventing
changes in the Board. It is further possible that such provisions could make it
more difficult to accomplish transactions which stockholders may otherwise deem
to be in their best interests.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offerings, there has been no market for the Common Stock and
there is no assurance that a significant public market for the Common Stock will
develop or be sustained after the Offerings. Sales of substantial amounts of
Common Stock in the public market following the Offerings could adversely affect
the market price of the Common Stock and could impair the Company's future
ability to raise capital through the sale of its equity securities.
Upon the closing of the Offerings, the Company will have outstanding
66,866,707 shares of Common Stock. Of these shares, approximately (i) 20,481,355
shares will be freely tradeable by persons, other than "affiliates" of the
Company, without restriction under the Securities Act of 1933, as amended (the
"Securities Act"); (ii) 45,480,927 shares will be "restricted" securities,
within the meaning of Rule 144 under the Securities Act, and may not be sold in
the absence of registration under the Securities Act unless an exemption from
registration is available, including the exemption provided by Rule 144; and
(iii) 904,425 shares will be subject to transfer restrictions pursuant to
Regulation S under the Securities Act.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated),
including any affiliate of the Company, who has beneficially owned restricted
securities for at least one year (including the holding period of any prior
owner except an affiliate of the Company) would be entitled to sell within any
three-month period, a number of shares that does not exceed the greater of: (i)
one percent of the number of Common Stock then outstanding (approximately
668,667 shares immediately after the Offerings); or (ii) the average weekly
trading volume of the Common Stock during the four calendar weeks preceding the
filing of a Form 144 with respect to such sale. Sales under Rule 144 are also
subject to certain manner of sale and notice requirements and to the
availability of current public information about the Company. Under Rule 144(k),
a person who is not deemed to have been an affiliate of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned restricted
securities for at least two years (including the holding period of any prior
owner except an affiliate of the Company), is entitled to sell such shares
without complying with the manner of sale, public information requirements,
volume limitations or notice requirements of Rule 144. Sale of shares by
affiliates of the Company will continue to be subject to such volume
limitations, and manner of sale, notice and public information requirements.
Each of the Company, all of the Management Investors, the Directors, and
the Recapitalization Investors, including the Selling Stockholders, who
collectively are the beneficial owners of an aggregate of 50,266,707 shares of
Common Stock and hold vested options to acquire an aggregate of 16,858,770
shares of Common Stock have agreed, subject to certain exceptions not to (i)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers all or a portion of the economic consequences associated with the
ownership of any Common Stock (regardless of whether any of the transactions
described in clause (i) or (ii) is to be settled by the delivery of Common
Stock, or such other securities, in cash or otherwise), without the prior
written consent of Donaldson, Lufkin & Jenrette Securities Corporation and Bear,
Stearns & Co. Inc. (and, in the case of Management Investors, the Company), for
a period of 180 days after the date of this Prospectus. In addition, during such
period, the Company has also agreed not to file any registration statement with
respect to, and the Company's executive officers and Directors, and certain
other stockholders, including the Selling Stockholders, have agreed not to make
any demand for, or exercise any right with respect to, the registration of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation and Bear, Stearns & Co. Inc. See
"Underwriting."
REGISTRATION RIGHTS AGREEMENT
In connection with the Recapitalization, Y&R, the Recapitalization
Investors and the Management Voting Trust entered into a Registration Rights
Agreement in favor of the Recapitalization Investors and, to the extent
necessary to permit a Management Investor to pay taxes when such sales would not
otherwise be
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permitted, the Management Investors, under which registration rights are
available after the consummation of the Offerings. Pursuant to the Registration
Rights Agreement, effective upon consummation of the Offerings, the Company has
granted (i) the Recapitalization Investors the right to require, subject to the
terms and conditions set forth therein, the Company to register shares of Common
Stock held by them for sale in accordance with their intended method of
disposition thereof and (ii) the Management Voting Trust the right to require,
subject to the terms and conditions set forth therein, the Company to register
such number of shares of Common Stock as is necessary to permit Management
Investors to pay taxes as a result of the exercise by such Management Investors
of Rollover Options or Closing Options or the vesting of Restricted Stock
awarded to such Management Investors (each a "demand registration"), provided
that in the case of the Management Voting Trust no such request may be made
without the consent of the Company. Subject to certain limitations, the
Recapitalization Investors may request up to four demand registrations and the
Management Voting Trust may request up to two demand registrations. The Company
will not be required to effect any demand registration if (i) the aggregate
market value of the shares of Common Stock proposed to be registered is less
than $100 million or (ii) such demand registration is requested by the
Recapitalization Investors or the Management Voting Trust within six months of
the effective date of a prior demand registration requested by the
Recapitalization Investors or the Management Voting Trust, respectively. The
Company may postpone the filing of a demand registration for up to 60 days in
certain circumstances.
In addition, the Company has granted the Recapitalization Investors and the
Management Voting Trust (to the extent of such number of shares of Common Stock
as is necessary to permit Management Investors to pay taxes as a result of the
exercise by such Management Investors of Rollover Options or Closing Options or
the vesting of Restricted Stock awarded to such Management Investors) the right,
subject to certain exceptions, to participate in registrations of Common Stock
initiated by the Company on its own behalf or on behalf of any other stockholder
(a "piggy-back registration"). The Recapitalization Investors and the Management
Voting Trust (on behalf of those Management Investors that are Selling
Stockholders) have exercised these piggy-back registration rights in connection
with the Offerings.
The Registration Rights Agreement provides that if requested by the
managing underwriter(s) of any underwritten offering of shares of Common Stock,
the Recapitalization Investors and the Management Voting Trust will agree, on
the same terms applicable to officers and directors of the Company, not to
effect any public sale or distribution of any shares of Common Stock for a
period of up to 180 days following and 15 days prior to the date of the final
prospectus contained in the registration statement filed in connection with such
offering. See "Underwriting."
The Company is required to pay expenses incurred by it and the reasonable
fees and disbursements of one counsel to the selling stockholders under the
Registration Rights Agreement in connection with the demand and piggy-back
registrations under the Registration Rights Agreement. In connection with any
registration under the Registration Rights Agreement, the Company has agreed to
indemnify the Recapitalization Investors against certain liabilities, including
liabilities under the Securities Act, and to contribute to certain payments they
may be required to make. The Registration Rights Agreement will terminate on
December 12, 2011.
CERTAIN U.S. TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of Common Stock by a
person that, for U.S. federal income tax purposes, is not a U.S. Person (a
"non-U.S. holder"). For purposes of this Section a "U.S. Person" means a citizen
or resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, an estate the income of which is subject to United States
federal income taxation regardless of its source or a trust if (i) a U.S. court
is able to exercise primary supervision over the trust's administration and (ii)
one or more United States persons have the authority to control all of the
trust's substantial decisions, and the term "United States" means the U.S. of
America (including the States and the District of Columbia). The discussion does
not consider specific facts and circumstances that may be relevant to a
particular non-U.S. holder's tax position. Accordingly, each non-U.S. holder is
urged to consult its own tax advisor with respect to the U.S. tax consequences
of the ownership
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and disposition of Common Stock, as well as any tax consequences that may arise
under the laws of any state, municipality, foreign country or other taxing
jurisdiction.
DIVIDENDS
Dividends paid to a non-U.S. holder of Common Stock ordinarily will be
subject to withholding of U.S. federal income tax at a 30 percent rate, or at a
lower rate under an applicable income tax treaty that provides for a reduced
rate of withholding. However, if the dividends are effectively connected with
the conduct by the holder of a trade or business within the United States, then
the dividends will be exempt from the withholding tax described above and
instead will be subject to U.S. federal income tax on a net income basis.
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to U.S. federal income tax
in respect of gain realized on a disposition of Common Stock, provided that (a)
the gain is not effectively connected with a trade or business conducted by the
non-U.S. holder in the United States and (b) in the case of a non-U.S. holder
who is an individual and who holds the Common Stock as a capital asset, such
holder is present in the United States for less than 183 days in the taxable
year of the sale and other conditions are met.
FEDERAL ESTATE TAXES
Common Stock owned or treated as being owned by a non-U.S. holder at the
time of death will be included in such holder's gross estate for U.S. federal
estate tax purposes, unless an applicable estate tax treaty provides otherwise.
U.S. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
U.S. information reporting requirements and backup withholding tax will not
apply to dividends paid on Common Stock to a non-U.S. holder address outside the
United States, except that with regard to payments made after December 31, 1998,
a Non-U.S. Holder will be entitled to such an exemption only if it provides a
Form W-8 (or satisfies certain documentary evidence requirements for
establishing that it is a non-United States person) or otherwise establishes an
exemption. As a general matter, information reporting and backup withholding
also will not apply to a payment of the proceeds of a sale of Common Stock
effected outside the United States by a foreign office of a foreign broker.
However, information reporting requirements (but not backup withholding) will
apply to a payment of the proceeds of a sale of Common Stock effected outside
the United States by a foreign office of a broker if the broker (i) is a U.S.
person, (ii) derives 50 percent or more of its gross income for certain periods
from the conduct of a trade or business in the United States, or (iii) is a
"controlled foreign corporation" as to the United States, or (iv) with respect
to payments made after December 31, 1998, is a foreign partnership that, at any
time during its taxable year is 50 percent or more (by income or capital
interest) owned by U.S. persons or is engaged in the conduct of a U.S. trade or
business, unless the broker has documentary evidence in its records that the
holder is a non-U.S. holder and certain conditions are met, or the holder
otherwise establishes an exemption. Payment by a United States office of a
broker of the proceeds of a sale of Common Stock will be subject to both backup
withholding and information reporting unless the holder certifies its non-United
States status under penalties of perjury or otherwise establishes an exemption.
76
<PAGE> 81
UNDERWRITING
Subject to the terms and conditions of an Underwriting Agreement, dated
, 1998 (the "Underwriting Agreement"), the U.S. Underwriters named
below (the "U.S. Underwriters"), who are represented by Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ"), Bear, Stearns & Co. Inc. ("Bear
Stearns"), Furman Selz LLC, Goldman, Sachs & Co. and Smith Barney Inc. (the
"U.S. Representatives"), and the International Managers named below (the
"International Managers" and, together with the U.S. Underwriters, the
"Underwriters"), who are represented by Donaldson, Lufkin & Jenrette
International ("DLJ International"), Bear, Stearns International Limited, Furman
Selz LLC, Goldman Sachs International and Smith Barney Inc. are acting as
representatives (the "International Representatives" and, together with the U.S.
Representatives, the "Representatives"), have severally agreed to purchase from
the Company and the Selling Stockholders the respective number of shares of
Common Stock set forth opposite their names below.
<TABLE>
<CAPTION>
NUMBER
U.S. UNDERWRITERS OF SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.........
Bear, Stearns & Co. Inc. ...................................
Furman Selz LLC.............................................
Goldman, Sachs & Co. .......................................
Smith Barney Inc............................................
----------
Subtotal............................................... 13,280,000
==========
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS SHARES
<S> <C>
Donaldson, Lufkin & Jenrette International..................
Bear, Stearns International Limited.........................
Furman Selz LLC.............................................
Goldman Sachs International.................................
Smith Barney Inc............................................
---------
Subtotal...............................................
=========
Total............................................. 3,320,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock
offered hereby are subject to approval by their counsel of certain legal matters
and to certain other conditions. The Underwriters are obligated to purchase and
accept delivery of all the shares of Common Stock offered hereby (other than
those shares covered by the over-allotment option described below) if any are
purchased.
The Underwriters initially propose to offer the shares of Common Stock in
part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus and in part to certain dealers (including the
Underwriters) at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may re-allow, to certain
other dealers a concession not in excess of $ per share. After the
initial offering of the Common Stock, the public offering price and other
selling terms may be changed by the Representatives at any time without notice.
The Underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority.
The H&F Investors, H. Irving Grousbeck and America Media Management, Inc.
have granted to the U.S. Underwriters an option, exercisable within 30 days
after the date of this Prospectus, to purchase, from time to time, in whole or
in part, up to an aggregate of 2,490,000 additional shares of Common Stock at
the initial public offering price less underwriting discounts and commissions.
The U.S. Underwriters may exercise such option solely to cover over-allotments,
if any, made in connection with the Offerings. To the extent that the U.S.
Underwriters exercise such option, each U.S. Underwriter will become obligated,
subject to certain
77
<PAGE> 82
conditions, to purchase its pro rata portion of such additional shares based on
such U.S. Underwriter's percentage underwriting commitment in the U.S. portion
of the Offerings as indicated in the preceding table.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.
Each of the Company, all of the Management Investors, the directors and the
Recapitalization Investors (including the Selling Stockholders) has agreed,
subject to certain exceptions, not to (i) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other arrangement that transfers all or a portion of the
economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise) for a period of 180 days after the date of this Prospectus
without the prior written consent of DLJ and Bear Stearns (and, in the case of
Management Investors, the Company). In addition, during such period, the Company
has also agreed not to file any registration statement with respect to, and each
of its executive officers, directors and certain stockholders of the Company
(including the Selling Stockholders) has agreed not to make any demand for, or
exercise any right with respect to, the registration of any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock without the prior written consent of DLJ and Bear Stearns.
Prior to the Offerings, there has been no established trading market for
the Common Stock. The initial public offering price for the shares of Common
Stock offered hereby will be determined by negotiation between the Company and
the Representatives. The factors to be considered in determining the initial
public offering price include the history of and the prospects for the industry
in which the Company competes, the past and present operations of the Company,
the prospects for future earnings of the Company, the recent market prices of
securities of generally comparable companies and the general condition of the
securities markets at the time of the Offerings.
Application has been made to list the Common Stock on the New York Stock
Exchange (the "NYSE"). In order to meet the requirements for listing the Common
Stock on the NYSE, the U.S. Underwriters have undertaken to sell lots of 100 or
more shares to a minimum of 2,000 beneficial owners.
Pursuant to an Agreement Between U.S. Underwriters and International
Managers (the "Intersyndicate Agreement"), each U.S. Underwriter has represented
and agreed that, with certain exceptions, (i) it is not purchasing any shares of
Common Stock offered hereby for the account of anyone other than a United States
or Canadian Person (as defined below) and (ii) it has not offered or sold, and
will not offer or sell, directly or indirectly, any shares of Common Stock
offered hereby or distribute any prospectus relating to such shares of Common
Stock outside the United States or Canada or to anyone other than a United
States or Canadian Person. Pursuant to the Intersyndicate Agreement, each
International Manager has represented and agreed that, with certain exceptions,
(i) it is not purchasing any shares of Common Stock offered hereby for the
account of any United States or Canadian Person and (ii) it has not offered or
sold, and will not offer or sell, directly or indirectly, any shares of Common
stock offered hereby or distribute any prospectus relating to such shares of
Common Stock in the United States or Canada or to any United States or Canadian
Person. With respect to any Underwriter that is both a U.S. Underwriter and an
International Manager, the foregoing representations and agreements (i) made by
it in its capacity as a U.S. Underwriter apply only to it in its capacity as a
U.S. Underwriter and (ii) made by it in its capacity as an International Manager
apply only to it in its capacity as an International Manager. The foregoing
limitations do not apply to stabilization transactions and to certain other
transactions specified in the Intersyndicate Agreement. As used herein, "United
States or Canadian Person" means any individual who is resident in the United
States or Canada, or any corporation, pension, profit-sharing or other trust or
other entity organized under or governed by the laws of the United States or
Canada or of any political subdivision thereof (other than the foreign branch of
any United States or
78
<PAGE> 83
Canadian Person), and includes any United States or Canadian branch of a person
other than a United States or Canadian Person.
Pursuant to the Intersyndicate Agreement, sales may be made between the
syndicates of U.S. Underwriters and International Managers of such number of
shares of Common Stock offered hereby as may be mutually agreed. Unless
otherwise determined by the Representatives, the per share price of any shares
of Common Stock so sold shall be the initial public offering price set forth on
cover page hereof, in United States dollars, less an amount not greater than the
per share amount of the concession to dealers set forth above.
Pursuant to the Intersyndicate Agreement, each U.S. Underwriter has
represented and agreed that (i) it has not offered or sold and will not offer or
sell, directly or indirectly, any shares of Common Stock offered hereby in any
province or territory of Canada or to, or for the benefit of, any resident of
any province or territory of Canada in contravention of the securities laws
thereof and (ii) without limiting the generality of the foregoing, any offer or
sale of such shares of Common Stock in Canada will be made only pursuant to an
exemption from the requirement to file a prospectus in the province or territory
of Canada in which such offer or sale is made. Each U.S. Underwriter has further
agreed to send to any dealer who purchases from it any shares of Common Stock
offered hereby a notice stating in substance that by purchasing such shares of
Common Stock such dealer represents and agrees that (i) it has not offered or
sold and will not offer or sell, directly or indirectly, any of such shares of
Common Stock in any province or territory of Canada or to, or for the benefit
of, any resident of any province or territory of Canada in contravention of
securities laws thereof, (ii) any offer or sale of such shares of Common Stock
in Canada will be made only pursuant to an exemption from the requirement to
file a prospectus in the province or territory of Canada in which such offer or
sale is made and (iii) it will send to any other dealer to whom it sells any of
such shares of Common Stock a notice containing substantially the same statement
as is contained in this sentence.
Pursuant to the Intersyndicate Agreement, each International Manager has
represented and agreed that (i) it has not offered or sold and, prior to the
date six months after the closing date for the sale of shares of Common Stock to
the International Managers pursuant to the Underwriting Agreement, will not
offer or sell, any shares of Common Stock offered hereby to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995; (ii) it
has complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the shares
of Common Stock offered hereby in, from or otherwise involving the United
Kingdom; and (iii) it has only issued or passed on and will only issue or pass
on in the United Kingdom any document received by it in connection with the
Offerings to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
or is a person to whom the document may otherwise lawfully be issued or passed
on.
Pursuant to the Intersyndicate Agreement, each International Manager has
further represented and agreed that it has not offered or sold and will not
offer or sell, directly or indirectly, any shares of Common Stock acquired in
connection with the distribution contemplated hereby in Japan or to or for the
account of any resident thereof, except for offers or sales to Japanese
International Managers or dealers and except pursuant to an exemption from the
registration requirements of the Securities and Exchange Law of Japan and
otherwise in compliance with applicable provisions of Japanese law. Each
International manager has further agreed to send to any dealer who purchases
from it any shares of Common Stock offered hereby a notice stating in substance
that by purchasing such shares of Common Stock such dealer represents and agrees
that (i) it has not offered or sold and will not offer or sell, directly or
indirectly, any of such shares on Common Stock in Japan or to or for the account
of any resident thereof, except for offers or sales to Japanese International
Managers or dealers and except pursuant to an exemption from the registration
requirements of the Securities and Exchange Law of Japan and otherwise in
compliance with applicable provisions of Japanese law and (ii) it will send to
any other dealer to whom it sells any of such shares of Common Stock a notice
containing substantially the same statement as is contained in this sentence.
79
<PAGE> 84
Other than in the United States, no action has been taken by the Company,
the Selling Stockholders or the Underwriters that would permit a public offering
of the shares of Common Stock offered hereby in any jurisdiction where action
for that purpose is required. The shares of Common Stock offered hereby may not
be offered or sold, directly or indirectly, nor may this Prospectus or any other
offering material or advertisements in connection with the offer and sale of any
such shares of Common Stock be distributed or published in any jurisdiction,
except under circumstances that will result in compliance with the applicable
rules and regulations of such jurisdiction. Persons into whose possession this
Prospectus comes are advised to inform themselves about and to observe any
restrictions relating to the Offerings and the distribution of this Prospectus.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any shares of Common Stock offered hereby in any jurisdiction in
which such an offer or a solicitation is unlawful.
In connection with the Offerings, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may overallot the Offerings,
creating a syndicate short position. The Underwriters may bid for and purchase
shares of Common Stock in the open market to cover such syndicate short position
or to stabilize the price of the Common Stock. In addition, the underwriting
syndicate may reclaim selling concessions from syndicate members, if DLJ
repurchases previously distributed Common Stock in syndicate covering
transactions, in stabilization transactions or otherwise or if DLJ receives a
report that indicates that the clients of such syndicate members have "flipped"
the Common Stock. These activities may stabilize or maintain the market price of
the Common Stock above independent market levels. The Underwriters are not
required to engage in these activities, and may end any of these activities at
any time.
830,000 of the shares offered hereby have been reserved for sale to certain
employees of the Company and its majority-owned subsidiaries, certain clients
and certain other persons designated by the Company ("Eligible Participants"),
in each case to the extent permitted by applicable law. The price per share of
the shares to be sold to Eligible Participants will be the same as the price to
the public in the Offerings. The maximum investment of any Eligible Participant
may be limited by the Company in its sole discretion. This program is being
administered by DLJ or DLJ International or, where required by applicable law, a
locally licensed or authorized broker-dealer. It is currently anticipated that
the number of shares to be sold under this program will not exceed 5% of the
number of shares of Common Stock offered in connection with the Offerings.
Bear Stearns from time to time performs investment banking and other
financial services for the Company and its affiliates for which Bear Stearns may
receive advisory or transaction fees, as applicable, plus out-of-pocket
expenses, of the nature and in amounts customary in the industry for such
services. Alan D. Schwartz, an Executive Vice President and Head of the
Investment Banking Department of Bear Stearns, is a member of the Company Board.
BearTel Corp., a company affiliated with Bear Stearns, is a Selling Stockholder
in the Offerings. See "Principal and Selling Stockholders."
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Cleary, Gottlieb, Steen & Hamilton, New York, New York.
Certain legal matters in connection with the Offerings will be passed upon for
the Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New
York.
EXPERTS
The consolidated financial statements as of December 31, 1996 and 1997 and
for each of the three years in the period ended December 31, 1997 included in
this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on authority of said firm as
experts in auditing and accounting.
80
<PAGE> 85
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (including all amendments thereto, the "Registration Statement"), of which
this Prospectus forms a part, covering the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto, certain items of which are omitted as
permitted by the rules and regulations of the Commission. Statements made in
this Prospectus as to the contents of any contract or other document are not
necessarily complete and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in its entirety by such
reference.
Following the Offerings, the Company will become subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended, and in
accordance therewith will be required to file reports and other information with
the Commission. The Registration Statement (including exhibits), as well as such
reports and other information, when so filed, can be inspected without charge
and copied, at prescribed rates, at the public reference facilities maintained
by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; and at the
regional offices of the Commission at 7 World Trade Center, Suite 1300, New
York, New York 10048 and at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such material may be obtained from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates or at the Commission's web site at
http.//www.sec.gov. Such reports and other information may also be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005, once the Common Stock have been approved for listing.
The Company will furnish its stockholders annual reports and unaudited
quarterly reports for the first three quarters of each fiscal year. Annual
reports will include audited consolidated financial statements prepared in
accordance with U.S. generally accepted accounting principles. The financial
statements included in the annual reports will be examined and reported upon,
with an opinion expressed, by the Company's independent auditors.
81
<PAGE> 86
[ADDITIONAL PAGE FOR INTERNATIONAL PROSPECTUS]
ADDITIONAL INFORMATION
The following information is required pursuant to the United Kingdom Public
Offers of Securities 1995 Regulations. A copy of this document, which comprises
a prospectus prepared in accordance with the Public Offers of Securities
Regulations 1995, has been delivered to the Registrar of Companies in England
and Wales in accordance with Regulation 4(2) of those Regulations.
RESPONSIBILITY
The Directors of the Company accept responsibility for the information
contained in this document. To the best knowledge and belief of such persons
(who have taken all reasonable care to ensure that such is the case), such
information is in accordance with the facts and does not omit anything likely to
affect the import of such information.
INCORPORATION AND PURPOSE
The Company was incorporated as a corporation with limited liability under
the laws of the State of Delaware in October 1996 under the name "Young &
Rubicam Inc." The Company's Charter provides that the purposes for which the
Company is formed are to engage in any lawful act or activity for which
corporations may be organized and incorporated under the General Corporation Law
of the State of Delaware.
THE OFFER
The Offering in the United Kingdom will commence on April , 1998 and will
remain open until the date on which the Registration Statement is declared
effective by the Commission. DLJ International will contact Eligible
Participants in the United Kingdom to arrange for the sale of shares of Common
Stock offered hereby. Eligible Participants may choose which specified number of
shares of Common Stock they wish to purchase on the share reservation form to be
provided to them by DLJ International. DLJ International will provide
information on setting up the appropriate account with them for payment and
delivery of shares of Common Stock, which is expected to occur on or about
, 1998.
IF YOU ARE IN THE UNITED KINGDOM AND ARE IN ANY DOUBT ABOUT THE CONTENTS OF
THIS DOCUMENT YOU SHOULD CONSULT A PERSON AUTHORIZED UNDER THE FINANCIAL
SERVICES ACT 1986 WHO SPECIALIZES IN ADVISING ON THE ACQUISITION OF SHARES AND
OTHER SECURITIES.
82
<PAGE> 87
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets as of December 31, 1996 and
1997...................................................... F-3
Consolidated Statements of Operations for the three years
ended December 31, 1997................................... F-4
Consolidated Statements of Cash Flows for the three years
ended December 31, 1997................................... F-5
Consolidated Statements of Changes in Equity (Deficit) for
the three years ended December 31, 1997................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 88
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Young & Rubicam Inc.
The stock dividend described in Note 20 to the financial statements has not been
consummated at April 7, 1998. When it has been consummated, we will be in a
position to furnish the following report:
"In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of cash flows and of changes
in equity (deficit) present fairly, in all material respects, the financial
position of Young & Rubicam Inc. and its subsidiaries at December 31, 1996
and 1997, and the results if 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. 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 of these statements in accordance with generally
accepted auditing standards which 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, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above."
Price Waterhouse LLP
New York, New York
February 19, 1998
F-2
<PAGE> 89
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
DECEMBER 31, 1997
------------------------ ------------
PRO FORMA
1996 1997 (SEE NOTE 2)
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................. $ 110,180 $ 160,263 $ 160,263
Accounts receivable, net of allowance for doubtful
accounts of $9,849 and $14,125 at December 31, 1996 and
1997, respectively...................................... 847,653 790,342 790,342
Costs billable to clients................................. 78,723 50,479 50,479
Other receivables......................................... 50,302 35,218 35,218
Deferred income taxes..................................... 78,732 32,832 32,832
Prepaid expenses and other assets......................... 17,102 16,891 16,891
Due from employees........................................ 2,340 1,098 1,098
---------- ---------- ----------
Total Current Assets................................ 1,185,032 1,087,123 1,087,123
---------- ---------- ----------
NONCURRENT ASSETS
Property and equipment, net............................... 129,088 125,014 125,014
Deferred income taxes..................................... 79,411 124,192 124,192
Goodwill, less accumulated amortization of $64,062 and
$80,166 at December 31, 1996 and 1997, respectively..... 131,511 116,637 116,637
Equity in net assets of and advances to unconsolidated
companies............................................... 25,219 26,393 26,393
Due from employees........................................ 705 300 300
Other assets.............................................. 47,846 48,360 48,360
---------- ---------- ----------
Total Noncurrent Assets............................. 413,780 440,896 440,896
---------- ---------- ----------
Total Assets........................................ $1,598,812 $1,528,019 $1,528,019
========== ========== ==========
CURRENT LIABILITIES
Loans payable............................................. $ 36,282 $ 10,765 $ 10,765
Accounts payable.......................................... 805,710 811,162 811,162
Installment notes payable -- related parties.............. 24,874 3,231 3,231
Accrued expenses and other liabilities.................... 247,816 273,011 273,011
Accrued payroll and bonuses............................... 252,487 65,458 65,458
Income taxes payable...................................... 14,372 29,665 29,665
---------- ---------- ----------
Total Current Liabilities........................... 1,381,541 1,193,292 1,193,292
---------- ---------- ----------
NONCURRENT LIABILITIES
Loans payable............................................. 206,082 330,552 330,552
Installment notes payable -- related parties.............. -- 6,503 6,503
Deferred compensation -- related parties.................. 17,887 31,077 31,077
Other liabilities......................................... 104,502 112,851 112,851
---------- ---------- ----------
Total Noncurrent Liabilities........................ 328,471 480,983 480,983
---------- ---------- ----------
Commitments and Contingencies (Note 18)
Minority Interest........................................... 5,569 6,987 6,987
---------- ---------- ----------
MANDATORILY REDEEMABLE EQUITY SECURITIES
Common stock, par value $.01 per share;
authorized -- 250,000,000 shares at December 31, 1996
and 1997 (actual and pro forma); issued and
outstanding -- 47,382,330 shares, 50,658,180 shares and
0 shares at December 31, 1996 (actual), December 31,
1997 (actual) and pro forma December 31, 1997,
respectively............................................ 363,264 508,471 --
---------- ---------- ----------
STOCKHOLDERS' DEFICIT
Money Market Preferred Stock -- Cumulative variable
dividend; liquidating value of $7.67 per share;
one-tenth of one vote per share; 10,000,000 shares
authorized December 31, 1996 and 1997 (actual and pro
forma); 0 shares issued and outstanding (actual and pro
forma).................................................. -- -- --
Common stock, par value $.01 per share; authorized
250,000,000 shares at December 31, 1996 and 1997 (actual
and pro forma); issued and outstanding -- 11,086,950
shares at December 31, 1996 and 1997 (actual) and
61,745,130 shares pro forma December 31, 1997........... 111 111 617
Capital surplus........................................... 106,825 23,613 531,578
Accumulated deficit....................................... (498,928) (522,866) (522,866)
Cumulative translation adjustment......................... (2,322) (16,577) (16,577)
Pension liability adjustment.............................. (719) (706) (706)
---------- ---------- ----------
(395,033) (516,425) (7,954)
Common stock in treasury, at cost; 0 shares at December
31, 1996 and 1,115,160 shares at December 31, 1997
(actual and pro forma).................................. -- (8,550) (8,550)
Unearned compensation -- Restricted Stock................. (85,000) (136,739) (136,739)
---------- ---------- ----------
Total Stockholders' Deficit......................... (480,033) (661,714) (153,243)
---------- ---------- ----------
Total Liabilities, Mandatorily Redeemable Equity
Securities and Stockholders' Deficit.............. $1,598,812 $1,528,019 $1,528,019
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 90
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995 1996 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
Revenues............................................... $1,085,494 $1,222,139 $1,382,740
Compensation expense, including employee benefits...... 672,026 730,261 836,150
General and administrative expenses.................... 356,523 391,617 463,936
Recapitalization-related charges....................... -- 315,397 --
Other operating charges................................ 31,465 17,166 11,925
---------- ---------- ----------
Operating expenses..................................... 1,060,014 1,454,441 1,312,011
---------- ---------- ----------
Income (loss) from operations.......................... 25,480 (232,302) 70,729
Interest income........................................ 9,866 10,269 8,454
Interest expense....................................... (27,441) (28,584) (42,879)
---------- ---------- ----------
Income (loss) before income taxes...................... 7,905 (250,617) 36,304
Income tax provision (benefit)......................... 9,130 (20,611) 58,290
---------- ---------- ----------
(1,225) (230,006) (21,986)
Equity in net income (loss) of unconsolidated
companies............................................ 5,197 (9,837) 342
Minority interest in net (income) loss of consolidated
subsidiaries......................................... (3,152) 1,532 (2,294)
---------- ---------- ----------
Net income (loss)...................................... $ 820 $ (238,311) $ (23,938)
========== ========== ==========
Basic and diluted loss per common share (Note 3)....... $ (.51)
==========
Weighted average shares outstanding (Note 3)........... 46,949,355
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 91
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $ 820 $(238,311) $ (23,938)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Recapitalization-related charges............................ -- 315,397 --
Depreciation and amortization............................... 47,492 53,030 56,721
Other operating charges..................................... 24,360 11,096 11,925
Deferred income tax expense................................. (14,866) (59,671) (384)
Equity in net (income) loss of unconsolidated companies..... (5,197) 9,837 (342)
Dividends from unconsolidated companies..................... 2,101 2,691 2,728
Minority interest in net income (loss) of consolidated
subsidiaries.............................................. 3,152 (1,532) 2,294
Change in assets and liabilities, excluding effects from
acquisitions, dispositions, recapitalization and foreign
exchange:
Accounts receivable......................................... (44,156) (209,518) 42,144
Costs billable to clients................................... (19,637) 7,784 25,622
Other receivables........................................... 5,462 (2,883) 13,930
Prepaid expenses and other assets........................... (1,922) 5,342 (876)
Due from employees.......................................... (453) 3,434 1,145
Accounts payable............................................ 58,635 256,460 18,547
Accrued expenses and other liabilities...................... 7,368 (7,565) 25,621
Accrued payroll and bonuses................................. (90) 3,192 2,179
Income taxes payable........................................ 2,383 4,263 19,352
Deferred compensation....................................... 10,921 4,950 13,052
Other liabilities........................................... 2,188 11,225 9,457
Other....................................................... 1,248 8,843 5,334
-------- --------- ---------
Net cash provided by operating activities................... 79,809 178,064 224,511
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment......................... (42,096) (51,792) (51,899)
Acquisitions, net of cash acquired.......................... (5,298) (23,887) (11,281)
Investment in net assets of and advances to unconsolidated
companies................................................. (189) (775) (5,640)
Proceeds from notes receivable.............................. 1,762 360 1,678
-------- --------- ---------
Net cash used in investing activities....................... (45,821) (76,094) (67,142)
-------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans payable, long-term...................... -- 319,282 226,770
Repayment of loans payable, long-term....................... (29,743) (252,496) (105,870)
Proceeds from loans payable, short-term, net................ 11,052 27,849 20,103
Deferred financing costs.................................... -- (9,157) --
Recapitalization cash contributions......................... -- 242,007 --
Recapitalization payments................................... -- (323,920) (247,789)
Payments of non-recapitalization deferred compensation...... (15,243) (13,886) (961)
Proceeds (loans) due from employees, net.................... 1,145 2,262 (157)
Common stock/LPUs issued.................................... 9,732 4,163 10,390
Common stock/LPUs repurchased............................... (21,647) (8,971) (1,500)
Dividends paid on preferred and common stock................ (491) (696) --
(Dividends paid to) capital contributions from minority
shareholders.............................................. (1,770) 1,652 347
Distributions to limited partners........................... (3,060) (703) --
-------- --------- ---------
Net cash used in financing activities....................... (50,025) (12,614) (98,667)
-------- --------- ---------
Effect of exchange rate changes on cash and cash
equivalents............................................... 1,148 (822) (8,619)
-------- --------- ---------
Net (decrease) increase in cash and cash equivalents........ (14,889) 88,534 50,083
Cash and cash equivalents, beginning of period.............. 36,535 21,646 110,180
-------- --------- ---------
Cash and cash equivalents, end of period.................... $ 21,646 $ 110,180 $ 160,263
======== ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid............................................... $ 30,161 $ 28,612 $ 39,986
======== ========= =========
Income taxes paid........................................... $ 20,350 $ 20,732 $ 25,020
======== ========= =========
NONCASH INVESTING ACTIVITY
Common Stock issued in acquisitions......................... -- -- $ 1,126
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 92
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
<TABLE>
<CAPTION>
RETAINED AND
LIMITED UNDISTRIBUTED
NON-VOTING VOTING PARTNERS' EARNINGS COMMON
PREFERRED COMMON COMMON CONTRIBUTED CAPITAL (ACCUMULATED STOCK IN RESTRICTED
STOCK STOCK STOCK EQUITY SURPLUS DEFICIT) TREASURY STOCK
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1994................. $ 63 $ 4,000 $ -- $ 946 $ 53,006 $ 29,616 $ 3,298 $ --
==== ======= ===== ======= ========= ========= ======= =========
Net income............. -- -- -- -- -- 820 -- --
Dividends paid......... -- -- -- -- -- (491) -- --
Common stock/Limited
Partnership Units
issued............... 28 -- -- 1,359 12,237 183 (72) --
Limited Partnership
Units
repurchased/capital
distributions........ -- -- -- (4,000) -- (6,733) -- --
Common Stock
repurchased.......... (25) -- -- -- (10,051) (5,759) 91 --
Capitalization of tax
benefits of options
exercised............ -- -- -- -- 29 -- -- --
Equityholder loans..... -- -- -- 4,231 1,882 -- -- --
---- ------- ----- ------- --------- --------- ------- ---------
BALANCE AT DECEMBER 31,
1995................. $ 66 $ 4,000 $ -- $ 2,536 $ 57,103 $ 17,636 $ 3,317 $ --
==== ======= ===== ======= ========= ========= ======= =========
Net loss............... -- -- -- -- -- (238,311) -- --
Dividends paid......... -- -- -- -- -- (696) -- --
Common stock/Limited
Partnership Units
issued............... 3 -- -- 4,067 13,269 -- (61) --
Limited Partnership
Units
repurchased/capital
distributions........ -- -- -- (2,370) -- (3,329) -- --
Common stock
repurchased.......... (2) -- -- -- (14,699) (8,863) 123 --
Recapitalization
redemptions.......... (67) (3,900) -- (1,534) (36,435) (265,365) (3,379) --
Recapitalization
issuances............ -- -- 427 -- 326,590 -- -- (85,000)
Recapitalization
exchanges............ -- (100) 158 (2,914) 122,732 -- -- --
Mandatorily Redeemable
Equity Securities.... -- -- (474) -- (362,790) -- -- --
Equityholder loans..... -- -- -- 215 1,055 -- -- --
---- ------- ----- ------- --------- --------- ------- ---------
BALANCE AT DECEMBER 31,
1996................. $ -- $ -- $ 111 $ -- $ 106,825 $(498,928) $ -- $ (85,000)
==== ======= ===== ======= ========= ========= ======= =========
Net loss............... -- -- -- -- -- (23,938) -- --
Common stock issued.... -- -- -- -- 1,501 -- -- --
Common stock
repurchased.......... -- -- -- -- -- -- (8,550) --
Unearned
compensation --
Restricted Stock..... -- -- -- -- 51,739 -- -- (51,739)
Common stock options
exercised............ -- -- 44 -- 8,711 -- -- --
Accretion of
Mandatorily
Redeemable Equity
Securities........... -- -- (44) -- (145,163) -- -- --
---- ------- ----- ------- --------- --------- ------- ---------
BALANCE AT DECEMBER 31,
1997................. $ -- $ -- $ 111 $ -- $ 23,613 $(522,866) $(8,550) $(136,739)
==== ======= ===== ======= ========= ========= ======= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 93
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- OPERATIONS AND BASIS OF PRESENTATION:
NATURE OF OPERATIONS: Young and Rubicam Inc. (the "Company") is a global
marketing and communications enterprise with integrated services in advertising,
perception management and public relations, identity and design, sales
promotion, direct marketing and healthcare communications. The Company operates
in the U.S., Canada, Europe, Latin America and Asia/Pacific as well as through
certain affiliations in other parts of the world.
BASIS OF PRESENTATION: On December 12, 1996, the Company effected a
recapitalization (the "Recapitalization"). As the equity holders prior to the
Recapitalization retained control of the Company, the financial statements
reflect the consolidated financial position, results of operations and cash
flows of the Company on a continuous basis (see Note 4).
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of the Company, a Delaware corporation, and all subsidiaries in
which it holds a controlling interest, including a Delaware Limited Partnership,
Young & Rubicam L.P. (the "LP"). Investments in affiliates in which the Company
owns more than 20% but less than or equal to 50% of the voting interest are
accounted for under the equity method. All significant intercompany transactions
are eliminated.
UNAUDITED PRO FORMA BALANCE SHEET: The unaudited pro forma balance sheet at
December 31, 1997 has been presented after giving effect to the termination of
the redeemable feature and subsequent reclassification of the Mandatorily
Redeemable Equity Securities to stockholders' deficit concurrent with the
closing of the contemplated initial public offering (see Note 16).
CASH EQUIVALENTS: The Company considers all highly liquid instruments with
an initial maturity of three months or less at the time of purchase to be cash
equivalents.
REVENUE RECOGNITION: Revenue from advertising and related services is
comprised of commissions and fees derived from billings to clients for media and
production activities. Public relations, sales promotion and other services are
generally billed on the basis of negotiated fees. Commission revenue is
recognized primarily when media placements appear on television, on radio or in
print, and when labor and production costs are billed. Fee revenue is recognized
when services are rendered.
BENEFIT PLANS: The Company maintains a noncontributory defined benefit
pension plan for all full-time U.S. employees. The Company also contributes to
government mandated plans and maintains various noncontributory retirement plans
at certain foreign subsidiaries in accordance with local laws and customs. The
Company also maintains deferred compensation plans and has made appropriate
provisions for future payments due under these plans.
DEPRECIATION AND AMORTIZATION: Depreciation and amortization are computed
using the straight-line method over the estimated useful life of the respective
asset. Leasehold improvements are amortized over the shorter of their estimated
useful life or the remaining term of the lease. Goodwill is amortized on a
straight-line basis generally over twenty to forty years.
INCOME TAXES: In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes", deferred tax assets
and liabilities are determined based on differences between the financial
reporting and the tax basis of assets and liabilities and are measured by
applying enacted tax rates and laws to taxable years in which such differences
are expected to reverse. The Company's practice is to provide currently for
taxes that will be payable upon remittance of foreign earnings of subsidiaries
and affiliates to the extent that such earnings are not considered to be
indefinitely reinvested.
STOCK-BASED COMPENSATION: SFAS No. 123, "Accounting for Stock-Based
Compensation", ("SFAS 123") encourages entities to account for employee stock
options or similar equity instruments using a
F-7
<PAGE> 94
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
fair value approach for all such plans. However, it also allows an entity to
continue to measure compensation costs for those plans using the method
prescribed by Accounting Principles Bulletin ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees." The Company has elected to continue to account
for such plans under the provisions of APB Opinion No. 25 and has included, in
Note 17, the required SFAS 123 pro forma disclosures of net income (loss) and
earnings (loss) per share as if the fair value-based method of accounting had
been applied.
FOREIGN CURRENCY TRANSLATION: Assets and liabilities of certain non-U.S.
subsidiaries are translated at current exchange rates, and related revenues and
expenses are translated at average exchange rates in effect during the period.
Resulting translation adjustments are recorded as a component of stockholders'
deficit in the accompanying Consolidated Balance Sheets. Financial results of
non-U.S. subsidiaries in countries with highly inflationary economies are
translated using a combination of current and historical exchange rates and any
translation adjustments are included in net income (loss) along with all
transaction gains and losses for the period.
DERIVATIVE FINANCIAL INSTRUMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Derivative financial instruments are used by the Company principally in the
management of its interest rate and foreign currency exposures. The Company does
not hold or issue derivative financial investments for trading purposes. Gains
and losses on hedges of existing assets and liabilities are included in the
carrying amounts of those assets and liabilities and are ultimately recognized
in income as part of those carrying amounts. Gains and losses related to hedges
of firm commitments are also deferred and included in the basis of the
transaction when it is completed. Amounts to be paid or received under interest
rate swap agreements are accrued as interest and are recognized over the life of
the swap agreements as an adjustment to interest expense.
LONG-LIVED ASSETS: In accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
("SFAS 121") management reviews long-lived assets and the related intangible
assets for impairment whenever events or changes in circumstances indicate the
carrying amount of such assets may not be recoverable. Recoverability of these
assets is determined by comparing the forecasted undiscounted net cash flows of
the operation to which the assets relate, to the carrying amount including
associated intangible assets of such operation. If the operation is determined
to be unable to recover the carrying amount of its assets, then intangible
assets are written down first, followed by the other long-lived assets of the
operation, to fair value. Fair value is determined based on discounted cash
flows or appraised values, depending upon the nature of the assets.
CONCENTRATIONS OF CREDIT RISK: The Company's clients are engaged in various
businesses located primarily in North America, Europe, Latin America and
Asia/Pacific. The Company performs ongoing credit evaluations of its clients.
Reserves for credit losses are maintained at levels considered adequate by
management. The Company invests its excess cash in deposits with major banks and
in money market securities. These securities typically mature within 90 days and
bear minimal risk. Additionally, due to the Company's strategy, the Company is
dependent upon a relatively small number of clients who contribute a significant
percentage of revenues. The Company's largest client accounted for approximately
9%, 9%, and 10% of consolidated revenues for the years ended December 31, 1995,
1996 and 1997, respectively.
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.
RECENT ACCOUNTING PRONOUNCEMENTS: In June 1997, SFAS No. 130, "Reporting
Comprehensive Income", ("SFAS 130") was issued. SFAS 130 establishes standards
for the reporting of comprehensive income and its components. It requires all
items that are required to be recognized as components of comprehensive income
be reported in a financial statement that is displayed with the same prominence
as other income statement
F-8
<PAGE> 95
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
information. SFAS 130 is effective for financial statements for periods
beginning after December 15, 1997. Reclassification of financial statements for
earlier periods presented for comparative purposes is required upon adoption.
In June 1997, SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information", ("SFAS 131") was issued. SFAS 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in annual
financial statements and in interim financial reports issued to shareholders.
SFAS 131 is effective for financial statements for periods beginning after
December 15, 1997.
In February 1998, SFAS No. 132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits", ("SFAS 132") was issued. SFAS 132 revises
disclosures about pensions and other postretirement benefit plans. SFAS 132 is
effective for financial statements for periods beginning after December 15,
1997. Restatement of disclosures for earlier periods provided for comparative
purposes is required upon adoption.
The Company anticipates that the adoption of SFAS 130, SFAS 131 and SFAS
132 will not have a significant effect on its 1998 financial statements.
NOTE 3 -- NET LOSS PER COMMON SHARE:
The Company computes earnings (loss) per share in accordance with SFAS No.
128, "Earnings Per Share".
Basic net loss per share was computed by dividing net loss by the
weighted-average number of common shares outstanding during the period. In
computing basic net loss per share, the Company's 11,086,950 shares of
restricted stock were excluded from the weighted average number of common shares
outstanding as such shares vest upon the six-month anniversary of an initial
public offering or the six-month anniversary thereof, a condition which was not
satisfied at December 31, 1997. Diluted net loss per share for the period was
computed in the same manner as basic net loss per share since the Company
experienced a net loss for the period and therefore including potential common
shares would be antidilutive.
There are 31,013,205 common stock options that could potentially dilute
basic earnings (loss) per share in the future that were excluded from the
computation of diluted net loss per share because the effect would be
antidilutive. In addition, there exists 11,086,950 shares of Restricted Stock,
which would also be potentially dilutive upon the occurrence of the Company's
contemplated initial public offering which is further described in Note 21.
Earnings per share for the years ended December 31, 1996 and 1995 cannot be
computed because the Company's capital structure prior to the 1996
Recapitalization consisted of both common shares and Limited Partnership Units
in Predecessor entities (see Note 4).
NOTE 4 -- RECAPITALIZATION:
On December 12, 1996, a recapitalization (the "Recapitalization") was
effected of Young & Rubicam Inc., a New York corporation (the "Predecessor
Company") whereby (a) the Predecessor Company, Young & Rubicam Holdings Inc.
("Holdings"), or subsidiaries of the Predecessor Company (i) acquired 2,058,678
of the 2,458,102 outstanding shares of Predecessor Company common stock for an
amount equal to $115 per share less the principal and accrued interest of any
outstanding loans relating to such shares (which loans were thereby repaid),
(ii) acquired 760,232 of the 1,869,682 outstanding Limited Partnership Units of
the LP ("LPUs") together with any related subordinated promissory notes of the
Predecessor Company for an amount equal to $115 per LPU less the principal and
accrued interest of any outstanding loans relating to such LPUs (which loans
were thereby repaid); (iii) canceled 332,636 of the 690,249 common stock options
and 596,448 of the 1,600,414 LPU options (collectively, the "Nonrollover
Options") and all outstanding Growth
F-9
<PAGE> 96
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Participation Units ("GPUs") for cash consideration of $115 per unit less the
aggregate option exercise price and (iv) exchanged for, or canceled in
consideration of, the remaining outstanding common stock, LPUs and options on
common stock and LPUs held by certain members of the management of the
Predecessor Company (the "Management Investors") for 15,815,985 shares of
Holdings common stock and 16,823,565 options on common stock of Holdings
("Rollover Options"); (b) Hellman & Friedman Capital Partners III, L.P. ("HFCP")
and certain other investors contributed $242 million in cash to Holdings in
exchange for 31,566,345 shares of Holdings common stock at a price of $7.67 per
share ($115 per share prior to the stock dividend which is further described in
Note 20) and 2,598,105 options to purchase additional shares of Holdings common
stock at $7.67 per share ($115 per share prior to the stock dividend which is
further described in Note 20)(the "HFCP Options" -- see Note 17), and (c) Senior
Secured Credit Facilities of $700 million (the "Credit Facilities") were
arranged (see Note 14).
Common stock, LPUs, Nonrollover Options on common stock and LPUs and GPUs
held by non U.S.-based equity holders were acquired or canceled prior to
December 31, 1996. Payment for previously tendered Nonrollover options and GPUs
of $161.7 million (included as a component of accrued payroll and bonuses at
December 31, 1996) held by U.S. based equity holders occurred on March 18, 1997.
Following the closing of the Recapitalization, Holdings was merged with and
into the Predecessor Company. As a result of the merger, the 1,391 outstanding
shares of Predecessor Company preferred stock were each converted into the right
to receive par value $50 in cash. On December 31, 1996, the Predecessor Company
then merged into Young & Rubicam Inc., a Delaware corporation (the "Company").
Under the Stockholders' Agreement, the Management Investors are required to
deposit all Company common stock currently held or acquired in the future into a
voting trust (the "Management Voting Trust") under which all rights to vote such
shares are assigned to certain members of the Company's senior management as
voting trustees. In the event that HFCP holds greater than 49% of Company common
stock, HFCP is required to transfer those shares in excess of 49% to a separate
voting trust (the "HFCP Voting Trust") with the Chief Executive Officer of the
Company as voting trustee, provided that the Company is not in default under
certain terms of the Credit Facilities.
As the equity holders of the Predecessor Company retained control of the
Company, the transaction has been reported as a recapitalization. The financial
statements reflect the financial position, results of operations and cash flows
of the Company and the Predecessor Company on a continuous basis. The excess of
the Predecessor common stock and LPUs repurchase transaction amount over the
stated amount of the Predecessor common stock and LPUs repurchased has been
reported as a distribution to equity holders and charged to limited partners'
contributed equity, capital surplus and accumulated deficit.
As a result of the Recapitalization, the Company recorded charges of $315.4
million, primarily related to compensation. A summary of the significant
Recapitalization and related charges include the following:
(1) The cancellation of 1,244,647 GPUs outstanding for cash
consideration of $115 per unit. Compensation expense of $83.1 million
represents the difference between the cash consideration paid to GPU
holders and the amount of previously accrued compensation under the
original terms of the GPU plan.
(2) The cancellation of 929,084 Nonrollover Options for cash
consideration. The cash consideration and the associated compensation
expense of $66.6 million represents the difference between the transaction
price of $115 and the $40.2 million aggregate exercise price of the
Nonrollover Options.
(3) Cancellation of the remaining outstanding options and award of
Rollover Options to acquire 16,823,565 shares of Company common stock at an
exercise price of $1.92 ($28.75 per share prior to the stock split which is
further described in Note 20) per share, with certain limited exceptions
outside of the U.S. As a result of the change in the terms of the former
stock option plan, which resulted in a new measurement date, the Company
recognized compensation expense of $96.7 million representing the
F-10
<PAGE> 97
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
difference between the transaction price per Rollover Option of $7.67 ($115
per share prior to the stock split which is further described in Note 20)
and the aggregate exercise price of the Rollover Options.
(4) Professional fees and other charges amounted to approximately $69
million.
NOTE 5 -- EQUITY IN NET ASSETS OF UNCONSOLIDATED COMPANIES:
<TABLE>
<CAPTION>
1995 1996 1997
---------------- ----------------- -----------------
EQUITY
EQUITY EQUITY EQUITY EQUITY EQUITY IN NET
OWNERSHIP IN NET IN NET IN NET IN NET IN NET INCOME
INTEREST ASSETS INCOME ASSETS INCOME ASSETS (LOSS)
AFFILIATE (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Dentsu, Y&R Partnerships........ 50% $16,957 $ 534 $12,954 $(9,181) $17,510 $ 2,587
J.M.C. Creatividad Orientada
(Venezuela)................... 49% 4,509 1,315 2,471 (2,038) 953 (1,515)
Prolam (Chile).................. 30% 3,106 968 2,656 262 2,851 825
Eco S.A. (Guatemala)............ 40% 1,864 372 2,134 26 2,206 96
Cresswell, Munsell, Fultz &
Zirbel........................ 33% 1,245 524 1,635 624 1,922 508
National Public Relations
(Canada)...................... 22% 414 333 607 204 647 98
ViceVersa (Uruguay)............. 35% 652 401 883 224 -- --
Other........................... 50% or less 8,618 750 1,879 42 304 (2,257)
------- ------ ------- ------- ------- -------
$37,365 $5,197 $25,219 $(9,837) $26,393 $ 342
======= ====== ======= ======= ======= =======
</TABLE>
The summarized financial information below represents an aggregation of the
Company's unconsolidated companies.
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
EARNINGS DATA
Revenues................................................. $234,891 $238,810 $207,668
Income from operations................................... 29,398 22,132 13,768
Net income (loss)........................................ 14,984 (16,097) 4,347
Company's equity in net earnings (loss).................. $ 5,197 $ (9,837) $ 342
======== ======== ========
BALANCE SHEET DATA
Current assets........................................... $361,451 $348,325 $321,372
Noncurrent assets........................................ 54,954 33,996 40,147
Current liabilities...................................... 335,490 323,406 287,101
Noncurrent liabilities................................... 18,902 11,683 13,215
Equity................................................... 62,013 47,232 61,203
Company's equity in net assets........................... $ 37,365 $ 25,219 $ 26,393
======== ======== ========
</TABLE>
NOTE 6 -- ACQUISITIONS, DISPOSITIONS AND OTHER OPERATING CHARGES:
In 1995, the Predecessor Company increased its ownership interests in
advertising agencies in Holland (from 49% to 70%) and Spain (from 49% to 77%),
as well as a public relations firm in Belgium (from 40% to 85%). In addition,
the Predecessor Company acquired the remaining 40% interest in an advertising
agency in the Czech Republic, the remaining 25% interest in an agency in
Hungary, the remaining 20% interest in a direct marketing operation in South
Africa and the remaining 10% interest in an advertising agency, also in South
Africa. The purchase price of these investments was $5.4 million. Other regional
investment activity
F-11
<PAGE> 98
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
took place in Latin America in 1995, with increased ownership interests in
advertising agencies in Guatemala (from 25% to 40%) and Uruguay (from 20% to
35%).
In 1995, the D,Y&R Partnerships also acquired a 40% interest in an
advertising agency in India (Y&R's effective ownership is 20%). The cost of this
investment to Y&R was $2.2 million.
A wholly owned public relations subsidiary in Canada was merged in 1995
with another Canadian public relations firm. The Company has a 22% interest in
the merged operation.
In 1995, the Predecessor Company approved a productivity improvement plan
which resulted in the elimination of 500 positions throughout its worldwide
operations. The Predecessor Company recorded a charge in 1995 of $24.4 million
to cover the expected severance, benefits and social law costs which were paid
during 1996 relating to this staff reduction.
Also in 1995, losses of $7.1 million were recorded primarily to cancel a
long-term agreement with a service provider as well as to dispose of certain
non-strategic European agencies. The aforementioned charges are included in
other operating charges in the accompanying Consolidated Statement of
Operations.
In 1996, the Predecessor Company acquired substantially all of the assets
of one advertising agency and one media buying agency in the United States and
acquired the remaining 28% equity interest in an advertising agency in
Switzerland. In addition, the Predecessor Company increased its ownership
interests in three advertising agencies in Europe. Other regional activity took
place in Korea where the Company acquired a 25% equity interest in a public
relations agency. The purchase price of these investments was $26.8 million.
In 1996, a $17.2 million charge was recorded for asset impairment
writedowns principally related to certain operations in Europe and Latin
America.
In 1997, the Company acquired the remaining 60% equity interest in an
advertising agency in France and a 51% equity interest in an advertising agency
in Brazil. In addition, the Company increased its ownership interests in one
advertising agency in Latin America and one agency in Europe. The Company also
acquired substantially all of the assets of one public relations agency and
acquired a 70% equity interest in a German public relations agency and the
remaining 49% equity interest in a Japanese public relations agency. The
purchase price of these investments was $14.7 million.
Effective January 1, 1997, the Company acquired an additional 37.5% equity
interest in the former Australian and New Zealand joint ventures with Dentsu. In
consideration for this additional equity interest, the Company contributed to
Dentsu, 12.5% of its equity interest in its advertising and direct marketing
agencies in Australia and New Zealand.
In 1997, an $11.9 million charge was recorded for asset impairment
writedowns principally related to certain operations in the U.S., Africa, Latin
America and Europe.
NOTE 7 -- PROPERTY AND EQUIPMENT:
Property and equipment are recorded at cost and are comprised of the
following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
USEFUL LIVES 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Land and buildings............ 20-40 years $ 31,901 $ 29,716
Furniture, fixtures and
equipment................... 3-10 years 220,728 235,836
Leasehold improvements........ Shorter of 10 years or life of lease 78,414 77,804
Automobiles................... 3-5 years 6,315 6,609
-------- --------
337,358 349,965
-------- --------
Less -- Accumulated
depreciation and
amortization................ 208,270 224,951
-------- --------
$129,088 $125,014
======== ========
</TABLE>
F-12
<PAGE> 99
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During 1995, 1996 and 1997, depreciation expense amounted to $38.2 million,
$42.0 million and $47.6 million, respectively.
NOTE 8 -- CERTAIN LIABILITIES:
Accrued expenses and other liabilities include $71.3 million and $41.0
million of bank overdrafts as of December 31, 1996 and 1997, respectively.
Accrued payroll and bonuses are comprised of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1996 1997
(IN THOUSANDS)
<S> <C> <C>
Accrued costs -- Recapitalization........................... $161,700 $ --
Accrued payroll and bonuses................................. 90,787 65,458
-------- -------
$252,487 $65,458
======== =======
</TABLE>
NOTE 9 -- INCOME TAXES:
The components of income (loss) before income taxes are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic........................................... $(22,957) $(242,578) $12,304
Foreign............................................ 30,862 (8,039) 24,000
-------- --------- -------
Total.............................................. $ 7,905 $(250,617) $36,304
======== ========= =======
</TABLE>
The following summarizes the provision (benefit) for income taxes:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
CURRENT:
Federal.......................................... $ 1,295 $ 16,993 $ 18,195
State and local.................................. 2,138 3,921 4,220
Foreign.......................................... 20,563 18,146 36,259
-------- -------- --------
23,996 39,060 58,674
-------- -------- --------
DEFERRED:
Federal.......................................... (7,548) (51,363) 7,547
State and local.................................. (2,811) (22,111) 2,472
Foreign.......................................... (4,507) 13,803 (10,403)
-------- -------- --------
(14,866) (59,671) (384)
-------- -------- --------
Provision (benefit) for income taxes............... $ 9,130 $(20,611) $ 58,290
======== ======== ========
</TABLE>
F-13
<PAGE> 100
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The reconciliation of the United States statutory rate to the effective
rate is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
PERCENT OF INCOME (LOSS) BEFORE TAXES 1995 1996 1997
<S> <C> <C> <C>
United States statutory rate................................ 35.0% (35.0)% 35.0%
Federal tax savings attributable to limited partnership
structure................................................. (27.6) -- --
State and local income taxes, net of federal tax effect..... (7.1) (4.5) 17.1
Foreign income taxed greater than the United States
statutory rate............................................ 64.2 15.2 107.2
Change in valuation allowance and related components........ 11.5 5.9 (13.1)
Amortization of goodwill.................................... 14.3 2.1 8.5
Travel, entertainment and other non-deductible expenses..... 19.7 8.4 6.2
Other, net.................................................. 5.5 (0.3) (0.3)
----- ----- -----
Consolidated effective rate................................. 115.5% (8.2)% 160.6%
===== ===== =====
</TABLE>
The Company's share of the undistributed earnings of foreign subsidiaries
not included in its consolidated Federal income tax return that could be subject
to additional income taxes if remitted, was approximately $49.5 million at
December 31, 1997. No provision has been recorded for the U.S. or foreign taxes
that could result from the remittance of such undistributed earnings since the
earnings are permanently reinvested outside the U.S. and it is not practicable
to estimate the amount of such taxes. Withholding taxes of approximately $6.4
million would be payable upon remittance of all previously unremitted earnings
at December 31, 1997.
The components of the Company's net deferred income tax assets are:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1996 1997
(IN THOUSANDS)
<S> <C> <C>
Bad debt reserve............................................ $ 1,785 $ 3,118
Accrued expenses and other.................................. 5,195 --
Net operating loss carryforwards............................ 7,377 32,797
Deferred compensation....................................... 76,170 1,172
-------- --------
90,527 37,087
Valuation allowance......................................... (11,795) (4,255)
-------- --------
Current portion............................................. 78,732 32,832
-------- --------
Deferred compensation....................................... 42,646 40,650
Depreciable and amortizable assets.......................... 26,671 30,561
Long-term leases............................................ 7,351 7,436
Postretirement benefits..................................... 3,570 3,654
Other non-current items..................................... 810 11,989
Net operating loss carryforwards............................ 10,259 42,338
Tax credit carryforwards.................................... -- 3,658
-------- --------
91,307 140,286
Valuation allowance......................................... (11,896) (16,094)
-------- --------
Non-current portion......................................... 79,411 124,192
-------- --------
Net deferred income tax assets.............................. $158,143 $157,024
======== ========
</TABLE>
The Company's net deferred income tax assets arise from temporary
differences which represent the cumulative deductible or taxable amounts
recorded in the financial statements in different years than
F-14
<PAGE> 101
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recognized in the tax returns. The majority of the temporary differences result
from expenses accrued for financial reporting purposes which are not deductible
for tax purposes until actually paid and net operating losses.
The net operating loss ("NOL") carryforwards represent the benefit recorded
for U.S., state and local, and foreign NOLs. At December 31, 1997, the Company
had approximately $140.4 million of NOL carryforwards for U.S. tax purposes
which expire in the year 2012 and approximately $69.2 million of NOL
carryforwards for foreign tax purposes with carryforward periods ranging from
one year to an indefinite time. The Company had approximately $3.2 million of
alternative minimum tax credits which are not subject to expiration and $0.4
million of foreign tax credits which expire in the year 2001.
The Company is required to provide a valuation allowance against deferred
income tax assets when it is more likely than not that some or all of the
deferred tax assets will not be realized. A valuation allowance of $13.5 million
was recorded at December 31, 1994. The valuation allowance increased $0.9
million to $14.4 million at December 31, 1995, increased $9.3 million to $23.7
million at December 31, 1996 and decreased $3.3 million to $20.4 million at
December 31, 1997. The valuation allowances represent a provision for
uncertainty as to the realization of certain deferred tax assets, including net
operating loss carryforwards in certain jurisdictions. The Company has
concluded, that based upon expected future results, it is more likely than not
that the net deferred tax asset balance will be realized.
NOTE 10 -- WORLDWIDE OPERATIONS:
Financial information by geographic area is as follows:
<TABLE>
<CAPTION>
UNITED STATES EUROPE OTHER TOTAL
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1995
Revenues............................ $ 492,265 $411,283 $181,946 $1,085,494
(Loss) income from operations....... (7,695) 14,899 18,276 25,480
Identifiable assets................. 511,779 499,335 215,467 1,226,581
1996
Revenues............................ $ 571,155 $444,644 $206,340 $1,222,139
(Loss) income from operations....... (239,201) (3,627) 10,526 (232,302)
Identifiable assets................. 819,828 533,318 245,666 1,598,812
1997
Revenues............................ $ 661,367 $472,225 249,148 $1,382,740
(Loss) income from operations....... 42,816 29,527 (1,614) 70,729
Identifiable assets................. 687,462 582,424 258,133 1,528,019
</TABLE>
Foreign currency transactions and remeasurement losses resulting from
operations in highly inflationary economies are included in general and
administrative expenses. These amounts were comprised of the following:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER
31,
----------------------------
1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Foreign currency transaction losses...................... $1,101 $ 887 $1,344
Remeasurement losses resulting from operations in highly
inflationary economies................................. 1,156 1,653 2,603
------ ------ ------
$2,257 $2,540 $3,947
====== ====== ======
</TABLE>
F-15
<PAGE> 102
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11 -- EMPLOYEE BENEFITS:
The Company has a defined benefit pension plan ("the Plan") that covers all
full-time U.S. employees upon commencement of employment. Contributions to the
Plan are based upon current costs and prior service costs. Both costs are
actuarially computed and the latter are amortized over the average remaining
service period. Effective July 1, 1996, the Predecessor Company amended the
Plan. Benefits credited to each employee's account under the Plan are based on
3.2% of the employee's annual compensation up to $150,000. The Plan also credits
each employee's account with interest equal to the average one year U.S.
Treasury Bill interest rate multiplied by the account balance at the beginning
of the year. Subject to certain limitations, most vested retirement benefits
available under the Plan are insured by the Pension Benefit Guaranty Corporation
("PBGC"). The Company is in compliance with the minimum funding standards
required by the Employee Retirement Income Security Act of 1974 ("ERISA").
In connection with the Recapitalization transaction, the Company
contributed an additional $12.5 million to the Plan on December 23, 1996,
pursuant to an agreement with the PBGC. Total contributions made in 1996 and
1997 were $18.9 million and $6.6 million, respectively.
The Company also agreed to make future contributions to the Plan in an
amount required to cause the credit balance at the end of each Plan year to be
at least equal to the required credit balance of $12.5 million plus interest.
The Company is not required to make any payment that would not be deductible
under Internal Revenue Code section 404. The Company's credit balance
maintenance requirement terminates when the Company's debt obtains specified
rating levels (or, if there are no such ratings from certain major ratings
agencies, when the Company meets a fixed charge coverage ratio test), but in no
event earlier than December 31, 2001. In addition, such credit balance
maintenance requirements terminate if the Plan's unfunded benefit liabilities
are zero at the end of two consecutive Plan years.
The Company also contributes to government mandated plans and maintains
various noncontributory retirement plans at certain foreign subsidiaries, some
of which are considered to be defined benefit plans for accounting purposes.
A summary of the components of net periodic pension cost for the defined
benefit plans is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------
1995 1996 1997
---------------------------- ---------------------------- ----------------------------
U.S. NON-U.S. TOTAL U.S. NON-U.S. TOTAL U.S. NON-U.S. TOTAL
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Service costs for benefits
earned during the
period.................. $ 2,774 $ 717 $ 3,491 $ 2,834 $ 674 $ 3,508 $ 2,671 $ 550 $ 3,221
Interest costs on
projected benefit
obligation.............. 8,074 946 9,020 8,488 893 9,381 8,804 789 9,593
Actual return on plan
assets.................. (15,960) -- (15,960) (11,070) -- (11,070) (15,558) -- (15,558)
Net amortization and
deferral................ 9,390 182 9,572 5,668 188 5,856 6,862 150 7,012
-------- ------ -------- -------- ------ -------- -------- ------ --------
Net periodic pension cost
of the plans............ $ 4,278 $1,845 $ 6,123 $ 5,920 $1,755 $ 7,675 $ 2,779 1,489 4,268
======== ====== ======== ======== ====== ======== ======== ====== ========
</TABLE>
F-16
<PAGE> 103
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The funded status of the defined benefit plans is summarized as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------------
1996 1997
------------------------------ ------------------------------
U.S. NON-U.S. TOTAL U.S. NON-U.S. TOTAL
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value of accumulated benefit
obligation including vested benefits of
$119,093 and $134,491 at December 31, 1996
and 1997, respectively...................... $111,921 $ 10,350 $122,271 $126,975 $ 9,557 $136,532
-------- -------- -------- -------- -------- --------
Projected benefit obligation.................. 114,710 12,198 126,908 130,036 10,753 140,789
Plan assets at fair value, primarily fixed
income and equity securities................ 114,264 -- 114,264 129,421 -- 129,421
-------- -------- -------- -------- -------- --------
Projected benefit obligation in excess of plan
assets...................................... (446) (12,198) (12,644) (615) (10,753) (11,368)
Unrecognized net transition (asset)
obligation.................................. (225) 644 419 (164) 471 307
Unrecognized prior service benefit............ (2,953) -- (2,953) (2,542) -- (2,542)
Unrecognized net loss......................... 12,811 1,813 14,624 16,352 1,260 17,612
Additional liability.......................... -- (719) (719) -- (706) (706)
-------- -------- -------- -------- -------- --------
(Accrued) prepaid pension costs for defined
benefit plans............................... $ 9,187 $(10,460) $ (1,273) $ 13,031 $ (9,728) $ 3,303
======== ======== ======== ======== ======== ========
</TABLE>
Assumptions used were:
<TABLE>
<CAPTION>
1995 1996 1997
---------------- ---------------- ----------------
U.S. NON-U.S. U.S. NON-U.S. U.S. NON-U.S.
<S> <C> <C> <C> <C> <C> <C>
Discount and settlement rate........................ 7.5% 6.5%-8.5% 8.0% 7.0%-8.0% 7.25% 6.5%-7.0%
Rate of increase in compensation levels............. 7.0% 3.5%-5.5% 5.5% 3.5%-5.0% 5.0% 3.5%-5.0%
Expected long-term rate of return on assets......... 9.0% N/A 9.0% N/A 9.0% N/A
</TABLE>
In 1996 and 1997, the Company recorded liabilities of $0.7 million for the
portion of its unfunded pension liabilities that had not been recognized as
expense and an adjustment to equity of $0.7 million.
Contributions to other foreign defined contribution plans were $5.9
million, $6.2 million and $7.5 million in 1995, 1996 and 1997, respectively.
The Company also has an employee savings plan that qualifies as a deferred
salary arrangement under section 401(k) of the Internal Revenue Code. Under the
plan, participating U.S. employees may defer a portion of their pre-tax earnings
up to the Internal Revenue Service annual contribution limit. The Company
currently matches 100% of each employee's contribution up to a maximum of 5% of
the employee's earnings up to $150,000. Amounts expensed by the Company for its
contributions to the plan were $6.4 million, $7.0 million and $7.8 million in
1995, 1996 and 1997, respectively. Prior to the Recapitalization, the Company's
contribution was made through the issuance of the Company's common stock. All of
the shares of common stock held in the Plan were purchased by Holdings as part
of the Recapitalization. Subsequent to the Recapitalization, matching
contributions are satisfied in cash.
NOTE 12 -- DEFERRED COMPENSATION:
The Predecessor Company maintained a non-qualified deferred compensation
plan for its key executives, the Growth Participation Plan. Participation in the
plan was at the discretion of management. Awards of growth participation units
("GPUs") granted under the plan generally vested at the rate of 20% per year. As
a result of the Recapitalization, all GPUs (whether fully or partially vested)
were canceled for cash consideration of $115 per unit (see Note 4).
The Company maintains other deferred cash incentive plans which are either
tied to operating performance or contractual deferred compensation agreements.
The costs of these compensation plans are
F-17
<PAGE> 104
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
expensed currently. At December 31, 1996 and 1997, included in other non-current
liabilities were deferred compensation liabilities of $17.9 million and $31.1
million, respectively.
NOTE 13 -- INSTALLMENT PAYMENT OBLIGATIONS:
Prior to 1997, the Company issued installment notes payable to former
equityholders of the Predecessor Company which arose out of the repurchase of
Common Stock and LPUs upon termination of employment. Installment notes were
paid in five annual installments, the first of which was payable 90 days
following termination of employment. In connection with the Recapitalization,
all foreign installment notes outstanding at December 12, 1996 were assumed and
repaid. The remaining current installment notes of $24.9 million at December 31,
1996 were repaid in the first quarter of 1997.
Effective in 1997 and pursuant to the Stockholders' Agreement, the Company
may, at its election, pay for shares purchased from Management Investors
pursuant to a call or put at the applicable call price or the applicable put
price in up to four equal installments. The first such installment is payable in
cash upon the applicable payment date (generally the June 30 or December 31
closest in time following termination of employment) and the remaining
installments are evidenced by a non-negotiable document from the Company to the
Management Investor. At December 31, 1997, current and non-current installment
notes of $3.2 million and $6.5 million, respectively, were payable to former
Management Investors.
Interest accrues and is payable annually with each installment payment at a
rate equal to the applicable federal rate in effect as published by the Internal
Revenue Service, compounded semi-annually. For 1997, the interest rate ranged
from 5.68% to 6.14%.
NOTE 14 -- LOANS PAYABLE:
Short Term: The Company's short term loans payable are primarily advances
under bank lines of credit and generally bear interest at prevailing market
rates. The Company's current loans payable of $36.3 million and $10.8 million
include the short-term portion of long-term loans payable of $14.7 million and
$1.2 million at December 31, 1996 and 1997 respectively.
Long-term loans payable are comprised of the following at December 31:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------
1996 1997
(IN THOUSANDS)
<S> <C> <C>
Senior Secured Credit Facilities..................................... $219,282 $330,552
Capital lease obligations............................................ 611 404
Other borrowings..................................................... 859 818
-------- --------
220,752 331,774
Less -- Current portion.............................................. 14,670 1,222
-------- --------
$206,082 $330,552
======== ========
</TABLE>
In connection with the Recapitalization, in December 1996, the Company
entered into Senior Secured Credit Facilities (the "Credit Facilities")
amounting to $700 million with a group of banks arranged by Bank of America,
with The Bank of New York, Citibank N.A., Credit Lyonnais and Wachovia Bank as
managing agents. The Credit Facilities consist of a six and one-half year $400
million term loan and a six and one-half year $300 million revolving credit
facility. The term loan is available in two drawings of $200 million each: the
first drawdown occurred in December 1996, while the second drawdown occurred on
March 18, 1997. The Credit Facilities are secured by a perfected first priority
security interest in all of the Company's tangible and intangible assets. The
Company pays a commitment fee ranging from 0.20% to 0.50% on the unused portion
of the total Credit Facilities. The Credit Facilities include several credit
sensitive pricing options (LIBOR, Base
F-18
<PAGE> 105
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Rate Loans, Fronted Loans and Swing Line Loans), letter of credit issuances and
a $175 million multi-currency subfacility. The applicable interest rate was
6.915% and 6.875% at December 31, 1996 and 1997, respectively.
The Credit Facilities contain various covenants which contain interest,
fixed charge, and debt coverage ratios, the maintenance of minimum net worth and
limitations on the amount of debt, liens, asset sales, dividends and
acquisitions. Deferred financing costs of $9.2 million were capitalized and are
being amortized over the six and one-half year term of the Credit Facilities.
The Company is required to enter into interest rate protection agreements
with respect to $100 million of the initial drawdown and $100 million of the
second drawdown.
In December 1996, the Company entered into a two year $50 million notional
principal amount interest rate floored-swap, and pays, on a quarterly basis,
fixed interest equal to 6.00% and receives interest based on floating
three-month LIBOR. If LIBOR is less than 5.00%, the Company receives the
difference between 5.00% and the three-month LIBOR. This agreement expires
December 29, 1998.
In January 1997, the Company entered into a one year $50 million notional
principal amount interest rate cap. The interest rate cap resulted in the
Company receiving quarterly, the difference between the amount that three-month
LIBOR exceeded the cap rate of 6.25%. This agreement expired January 27, 1998.
In February 1997, the Company entered into a four year $50 million notional
principal amount interest rate swap. The interest rate swap will result in the
Company paying, on a quarterly basis, fixed interest equal to 6.11% and
receiving interest based on floating three month LIBOR. This four year interest
rate swap agreement expires February 20, 2001.
In March 1997, the Company entered into a two year $50 million notional
principal amount interest rate floored-swap, and pays, on a quarterly basis,
fixed interest equal to 6.36% and receives interest based on floating
three-month LIBOR. If LIBOR is less than 5.00%, the Company receives the
difference between 5.00% and the three-month LIBOR. This agreement expires March
24, 1999.
In April 1997, the Company entered into a one year $50 million notional
principal amount interest rate cap. The interest rate cap will result in the
Company receiving quarterly, the difference between the amount that three-month
LIBOR exceeds the cap rate of 6.50%. This agreement expires May 1, 1998.
In June 1997, the Company entered into a four year $25 million notional
principal amount interest rate swap. The interest rate swap will result in the
Company paying, on a quarterly basis, fixed interest equal to 6.365% and
receiving interest based on floating three-month LIBOR. This four year interest
rate swap agreement expires June 18, 2001.
In February 1996, the Predecessor Company entered into a 10-year, $100
million, 7.01% Senior Note transaction with a group of insurance companies. The
proceeds were used to reduce the Revolving Credit Agreement borrowings. This
note was repaid by proceeds from the Credit Facilities. A prepayment penalty of
$1.8 million was paid in 1996 and is included as a component of interest
expense.
In June 1996, the Predecessor Company entered into a $150 million, five
year Revolving Credit Agreement. The Company paid a facility fee ranging from
0.125% to 0.30% on the full amount of the committed facility. This agreement
included several pricing options (LIBOR, Bid Loans and Swing Line Loans), letter
of credit issuances and multi-currency borrowing options. This Revolving Credit
Agreement was repaid by proceeds from the Credit Facilities.
In June 1994, the Predecessor Company entered into a $225 million, three
year Revolving Credit Agreement. The Company paid a facility fee ranging from
0.20% to 0.375% on the full amount of the committed facility. This revolving
credit agreement included several pricing options (LIBOR, Bid Loans and
F-19
<PAGE> 106
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Swing Line Loans), letter of credit issuances and multicurrency borrowing
options. The Revolving Credit Agreement was replaced by the five year Revolving
Credit Agreement entered into in June 1996.
In October 1991, the Predecessor Company arranged a seven year $40 million,
8.75% Senior Note transaction with the Prudential Insurance Company. This note
was repaid by proceeds from the Credit Facilities. A prepayment penalty of $1.1
million was paid in 1996 and is included as a component of interest expense.
In January 1991, the Predecessor Company entered into a five year, $20
million notional principal amount interest rate swap. The Predecessor Company
paid, on a semi-annual basis, fixed interest rate equal to 8.485% and received
interest based on floating six-month LIBOR. This agreement expired January 22,
1996.
At December 31, 1997, the Company had $690 million in availability under
its commercial lines of credit ($449 million in the U.S. and $241 million
outside the U.S.). Unused commercial lines of credit at December 31, 1997 were
$349 million. The Company paid commitment fees of approximately $0.9 million on
the unused portion of the U.S. credit lines and varying fees on the foreign
credit lines. At December 31, 1996, the Company had $802 million in availability
under its commercial lines of credit ($540 million in the U.S. and $262 million
outside the U.S.). Unused commercial lines of credit at December 31, 1996 were
$560 million. The Company paid commitment fees of approximately $0.1 million on
the unused portion of the U.S. credit lines and varying fees on the foreign
credit lines.
Repayment requirements on long-term loans existing at December 31, 1997 are
as follows:
<TABLE>
<CAPTION>
TOTAL
(IN THOUSANDS)
<S> <C>
1998......................................................... $ 1,222
1999......................................................... 50,250
2000......................................................... 68,750
2001......................................................... 71,250
2002......................................................... 84,583
Thereafter................................................... 55,719
------------
$331,774
============
</TABLE>
F-20
<PAGE> 107
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15 -- EQUITY:
The following schedule summarizes the changes in the number of outstanding
shares of preferred stock, common stock, LPUs and treasury stock:
<TABLE>
<CAPTION>
VOTING LIMITED
PREFERRED COMMON NON-VOTING PARTNERSHIP COMMON STOCK
STOCK STOCK COMMON STOCK UNITS IN TREASURY
<S> <C> <C> <C> <C> <C>
BALANCE 12/31/94............ 1,252 -- 16,000,000 2,465,729 13,190,263
------ ---------- ----------- ---------- -----------
Issued...................... 563 -- -- 43,000 (289,970)
Repurchased................. (491) -- -- (476,719) 365,779
------ ---------- ----------- ---------- -----------
BALANCE 12/31/95............ 1,324 -- 16,000,000 2,032,010 13,266,072
------ ---------- ----------- ---------- -----------
Issued...................... 67 -- -- 83,993 (215,907)
Repurchased................. -- -- -- (246,321) 491,733
Recapitalization............ (1,391) 58,469,280 (16,000,000) (1,869,682) (13,541,898)
------ ---------- ----------- ---------- -----------
BALANCE 12/31/96............ -- 58,469,280 -- -- --
------ ---------- ----------- ---------- -----------
Issued...................... -- 4,391,010 -- -- --
Repurchased................. -- (1,115,160) -- -- 1,115,160
------ ---------- ----------- ---------- -----------
BALANCE 12/31/97............ -- 61,745,130 -- -- 1,115,160
====== ========== =========== ========== ===========
</TABLE>
The preferred stock of the Predecessor Company was owned by members of the
Predecessor Company's Board of Directors. The Predecessor Company had the right
to reacquire the preferred stock when the holder ceased to be a member of the
Board of Directors.
On December 12, 1996, all outstanding Predecessor Company equity was
purchased for cash or exchanged for Company common stock pursuant to the
Recapitalization. In addition, all outstanding Predecessor Company options were
canceled for cash consideration or the award of Company options and all
outstanding GPUs were canceled for cash consideration (see Note 4). In addition,
all treasury shares were retired.
In connection with the consummation of the Recapitalization in December
1996, the Company created a class of preferred stock designated as Money Market
Preferred Stock (the "Money Market Preferred"). The Money Market Preferred
carries a variable rate dividend and are redeemable at the Company's election
for $7.67 per share following the fifth anniversary of the issuance thereof. At
December 31, 1996 and 1997, 10,000,000 shares of Money Market Preferred were
authorized. No shares of Money Market Preferred were issued or outstanding at
December 31, 1996 and 1997.
In connection with the Recapitalization, the Company also issued 11,086,950
shares of common stock ("Restricted Shares") to a trust ("Restricted Stock
Trust"). All Restricted Shares held in the Restricted Stock Trust are deposited
in the Management Voting Trust. Any employee awarded Restricted Shares under the
plan will become vested in the Restricted Shares on the earlier of (i) a change
of control event (as defined); (ii) the consummation of an initial public
offering or the six month anniversary following an initial public offering if,
in connection with the offering, the holders are unable to sell such Restricted
Shares; and (iii) upon any other event as determined by the Compensation
Committee of the Board of Directors with the written consent of the HFCP
Investors, if prior to an initial public offering, and the Management Voting
Trust. The Company has recorded unearned compensation of $85 million and $136.7
million, representing the fair value of the Restricted Shares at December 31,
1996 and 1997, respectively. Compensation expense will be recognized when
vesting becomes probable and will be equal to the fair value of the common stock
at the time that the Restricted Shares become vested. At December 31, 1996 and
1997, a total of 11,086,950 shares were outstanding and held in the Restricted
Stock Trust.
F-21
<PAGE> 108
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16 -- MANDATORILY REDEEMABLE EQUITY SECURITIES:
Concurrent with the Recapitalization, the Company entered into a
Stockholders' agreement which includes both put rights and calls on the
Company's common stock. The Company has the right to purchase shares and the
stockholder has the right to cause the Company to purchase such shares at
certain times and subject to certain conditions. The put provision becomes
enforceable upon termination of employment for Management Investors and upon the
six-year anniversary of the Recapitalization for HFCP. The carrying value of the
mandatorily redeemable equity securities held by the Management Investors is
equivalent to the redemption value of $7.67 and $12.33 at December 31, 1996 and
1997, respectively. The carrying value of the Mandatorily Redeemable Equity
Securities for common shares held by HFCP is being accreted to redemption value
over the six year period from the date of the Recapitalization. Accordingly, the
carrying value of Mandatorily Redeemable Equity Securities held by HFCP was
$7.67 and $8.47 at December 31, 1996 and 1997, respectively.
The accretion from carrying value to redemption value for the respective
periods is reflected as a charge to capital surplus. Both the calls and puts
terminate upon the earlier occurrence of an initial public offering or such time
as the Common Stock is listed for trading on a national securities exchange.
NOTE 17 -- OPTIONS:
Under the Company's 1992 Stock Option Plan, options to purchase an
aggregate of 8,000,000 shares of common stock, at a price not less than the
prior year-end book value, as defined, could be granted to key employees. The
Predecessor Company also had an LPU Option Plan with substantially the same
terms as the common stock option plan. In accordance with the Recapitalization
(as discussed below), all prior option plans were terminated.
In connection with the Recapitalization, the shareholders approved a stock
option plan (the "Stock Option Plan") which allowed the Board of Directors to
grant to employees of the Company options to purchase up to 33,173,565 shares of
Company common stock. The Stock Option Plan governs both the Rollover Options
and certain other executive options (the "Executive Options").
The Rollover Options were granted at the closing of the Recapitalization
(see Note 4) and were immediately vested and exercisable. Each Rollover Option
has an exercise price of $1.92 per share, with certain limited exceptions
outside of the U.S. 50% of the Rollover Options have a term of five years and
the remaining 50% have a term of seven years. In connection with the issuance of
the Rollover Options, the Company recognized compensation expense of $96.7
million (see Note 4).
At the closing of the Recapitalization, the Board of Directors granted to
employees 5,200,590 options to purchase shares of Company common stock at $7.67
per share (the "Closing Options"). The Closing Options vest as follows: 40% on
the grant date, 30% on the third anniversary of the grant date and 30% on the
fifth anniversary of the grant date.
Pursuant to the Stock Option Plan, the Board of Directors had the right to
grant additional options (the "Additional Options") to purchase up to 2,974,410
shares of Company common stock plus any shares that became available through the
cancellation of unexercised Executive Options. Through December 31, 1997,
Additional Options to purchase 1,891,200 shares of Company common stock had been
granted, each at $7.67 per share. As a result, during 1997 the Company
recognized a compensation charge of $1.3 million representing the difference
between the estimated fair market value of Company common stock and the exercise
price of $7.67 on date of grant in accordance with the applicable vesting
provisions of the Additional Options.
Additionally, at the closing of the Recapitalization, the Company issued
options to HFCP (see Note 4) to purchase 2,598,105 shares of Company common
stock at $7.67 per share which were exercisable
F-22
<PAGE> 109
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
immediately and expire on the seventh anniversary of the closing. The HFCP
Options are not governed under the Stock Option Plan.
In December 1997, the Company adopted the Young & Rubicam Inc. 1997
Incentive Compensation Plan (the "Incentive Compensation Plan" or "ICP"). The
ICP superseded the Stock Option Plan and amended and restated the Restricted
Stock Plan (the Stock Option Plan and the Restricted Stock Plan (prior to such
amendment and restatement), (the "Preexisting Plans"), although all awards
granted prior to the adoption of the ICP, and any grants of Restricted Stock
made after such adoption but on or prior to March 31, 1998, will remain
outstanding in accordance with their terms and will be subject to the terms of
the Preexisting Plans.
The ICP provides for grants of stock options, stock appreciation rights
("SARS"), Restricted Stock, deferred stock, other stock-related awards, and
performance or annual incentive awards that may be settled in cash, stock or
other property ("Awards"). Under the ICP, the total number of shares of Company
common stock reserved and available for delivery to participants in connection
with Awards is 19,125,000, plus the number of shares of Company common stock
subject to awards under the Preexisting Plans that become available (generally
due to cancellation or forfeiture) after the effective date of the ICP;
provided, however that the total number of shares of Company common stock with
respect to which incentive stock options ("ISO") may be granted shall not exceed
15,000,000. Any shares of Company common stock delivered under the ICP may
consist of authorized and unissued shares or treasury shares.
The Board of Directors is authorized to grant stock options, including both
incentive stock options, non-qualified stock options, and SARS entitling the
participant to receive the excess of the fair market value of a share of common
stock on the date of exercise over the grant price of the SAR. The exercise
price per share subject to an option and the grant price of a SAR is determined
by the Board of Directors, but must not be less than the fair market value of a
share of common stock on the date of grant. The maximum term of each option or
SAR, the times at which each option or SAR will be exercisable, and provisions
requiring forfeiture of unexercised options or SARS at or following termination
of employment generally is fixed by the Board of Directors, except no option or
SAR may have a term exceeding ten years.
The Board of Directors may, at its discretion, accelerate the
exercisability, the lapsing of restrictions, or the expiration of deferral or
vesting periods of any award, and such accelerated exercisability, lapse,
expiration and vesting shall occur automatically in the case of a "change in
control" of the Company except to the extent otherwise provided in the award
agreement. In addition, the Board of Directors may provide that the performance
goals relating to any performance-based awards will be deemed to have been met
upon the occurrence of any change in control.
In December 1997, the Company granted options to employees to purchase an
aggregate of 9,577,950 shares of Company common stock at $12.33 per share, the
fair market value of such common stock as of the date of grant. Each such option
will expire if not exercised ten years after the date of grant and will be fully
exercisable on the fifth anniversary of the date of grant if the recipient
remains an employee of the Company or an affiliate as of such date; provided,
however, that in the event that the Company completes an initial public offering
of its common stock prior to December 31, 1999, the exercisability of 33 1/3% of
the shares subject to any such option will accelerate to December 31, 2000, if
the recipient remains an employee of the Company or an affiliate as of December
31, 2000, and an additional 33 1/3% of the shares subject to any such option
will accelerate to December 31, 2001, if the recipient remains an employee of
the Company or an affiliate as of December 31, 2001. Of the 9,577,950 options
granted in December 1997, options to purchase 1,152,150 shares of common stock
will not become exercisable until nine years and nine months from the date of
grant, unless certain 1998 operating targets are met, in which case the vesting
schedule described above will apply.
The Company has adopted SFAS No. 123, "Accounting for Stock-Based
Compensation", ("SFAS 123"). In accordance with the provisions of SFAS 123, the
Company applies APB Opinion No. 25,
F-23
<PAGE> 110
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and related interpretations in accounting for its plans. If the Company had
elected to recognize compensation expense based upon the fair value at the grant
date for awards under its plans consistent with the methodology prescribed by
SFAS 123, the Company's SFAS 123 net loss would be increased by $1.3 million and
$9.4 million for 1995 and 1996 and the net loss and net loss per common share
would be increased by $6.3 million and $.13, respectively, for 1997.
These SFAS 123 pro forma amounts may not be representative of future
disclosures since the estimated fair value of stock options is amortized to
expense over the vesting period, and additional options may be granted in future
years. The fair value for these options was estimated at the date of grant using
the Black-Scholes option-pricing model with the following assumptions for the
period ended December 31, 1995, 1996 and 1997, respectively:
ADDITIONAL OPTIONS
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Expected term.......................... 2-10 years 5-10 years 10 years
Risk-free rate......................... 5.41%-7.22% 5.92%-6.61% 5.59%-7.12%
Dividend yield......................... 0% 0% 0%
Expected volatility.................... 0% 0% 0%
</TABLE>
The weighted-average fair value and weighted average exercise price of
options granted prior to the Recapitalization for which the exercise price
equals the fair value of Company common stock on the grant date was $11.23 and
$44.65 in 1995, respectively, and $13.28 and $47.14, in 1996, respectively. The
weighted-average fair value and weighted-average exercise price of options
granted on and subsequent to the Recapitalization for which the exercise price
equals the fair value of Company common stock on the grant date was $3.69 and
$7.67 in 1996, respectively, and $5.28 and $12.33 in 1997, respectively.
The weighted-average fair value and weighted-average exercise price of
options granted for which the exercise price was less than the fair value of
Company common stock on the grant date was $6.30 and $1.97 in 1996, respectively
and $6.76 and $7.67 in 1997, respectively. There were no option issuances prior
to the Recapitalization for which the exercise price was less than the estimated
fair value of Company common stock on the date of grant.
The Black-Scholes option valuation model was developed for use in
estimating the weighted-average fair value of traded options which have no
vesting restrictions and are fully transferable. Because the Company's employee
stock options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in managements opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options.
F-24
<PAGE> 111
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Transactions involving options are summarized as follows:
<TABLE>
<CAPTION>
OPTIONS WEIGHTED-AVERAGE
OUTSTANDING EXERCISE PRICE
<S> <C> <C>
JANUARY 1, 1995............................................. 1,633,110 $40.51
Granted................................................... 1,197,722 44.72
Exercised................................................. (144,400) 34.26
Cancellations............................................. (260,324) 40.17
---------- ------
DECEMBER 31, 1995........................................... 2,426,108 42.99
---------- ------
Granted................................................... 284,773 47.14
Exercised................................................. (252,278) 41.94
Cancellations............................................. (167,940) 42.83
Recapitalization cancellations............................ (2,290,663) 43.64
Recapitalization grants................................... 24,622,260 3.76
---------- ------
DECEMBER 31, 1996........................................... 24,622,260 3.76
---------- ------
Granted................................................... 11,469,150 11.56
Exercised................................................. (4,250,790) 2.19
Cancellations............................................. (827,415) 4.50
---------- ------
DECEMBER 31, 1997........................................... 31,013,205 6.84
========== ======
</TABLE>
The following information is as of December 31, 1997:
<TABLE>
<S> <C> <C> <C>
Number outstanding................................... 12,312,690 9,122,565 9,577,950
------------- ---------- ---------
Weighted-average contractual life, in years.......... 6 10 10
Weighted-average exercise price...................... $ 1.92 $ 7.67 $ 12.33
------------- ---------- ---------
Number exercisable................................... 12,312,690 4,930,305 0
------------- ---------- ---------
Weighted-average exercise price...................... $ 1.92 $ 7.67 $ 12.33
------------- ---------- ---------
</TABLE>
The following information is as of December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C> <C>
Range of Exercise Prices............................... $35.85-$44.65 $ 1.92 $ 7.67
------------- ---------- ---------
Number outstanding..................................... 2,426,108 16,823,565 7,798,695
------------- ---------- ---------
Weighted-average contractual life, in years............ 5 6 10
Weighted-average exercise price........................ $ 42.96 $ 1.92 $ 7.67
------------- ---------- ---------
Number exercisable..................................... 544,004 16,823,565 4,678,335
------------- ---------- ---------
Weighted-average exercise price........................ $ 40.92 $ 1.92 $ 7.67
------------- ---------- ---------
</TABLE>
NOTE 18 -- LITIGATION, COMMITMENTS AND CONTINGENT LIABILITIES:
The Company has performed, and continues to perform, services for clients
in a wide range of businesses, including tobacco products manufacturers. As a
result, the Company may from time to time be joined as a defendant in litigation
brought against its clients and others by third parties, including its
competitors, governmental and regulatory bodies, or consumers, alleging that
advertising claims made through the Company with respect to such clients'
products are false, deceptive or misleading; that such clients products are
defective, injurious or pose some manner of threat to the public generally; or
that marketing or communications materials created for such clients infringe
upon the proprietary rights of third parties.
F-25
<PAGE> 112
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's practice is to attempt to minimize such potential liabilities
through insurance coverage and/or indemnification provisions in its agreements
with clients and others.
Recently, the Company was named as a defendant in an action brought by a
county government against tobacco products manufacturers (including a current
and a former client of the Company) and others alleging that, because the
Company performed advertising and other professional services for such clients,
the Company is liable for damages for health and other claims. While this action
is in its early stages and the allegations against the Company have not been
made with specificity, the Company believes it has meritorious defenses to the
claims and intends to contest them vigorously.
The Company is named as party in litigation matters which arise in the
ordinary course of its business, including claims by former employees for money
damages and other relief based upon the circumstances or consequences of their
separation from employment. The Company believes that it has meritorious
defenses to these claims, and is contesting such claims vigorously. In addition,
the Company is covered by insurance with respect to some of such claims.
Accordingly, the Company does not expect such matters to have a material adverse
effect on its consolidated financial position, results of operations or cash
flows.
Net rental expense was $62.4 million, $62.9 million, and $74.4 million in
1995, 1996 and 1997, respectively. Future minimum rental commitments as of
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1998................................................... $ 62,863
1999................................................... 54,525
2000................................................... 42,924
2001................................................... 40,162
2002................................................... 39,119
Thereafter............................................. 108,437
</TABLE>
Certain leases contain renewal options calling for increased rentals.
Others contain certain escalation clauses relating to taxes and other operating
expenses.
At December 31, 1996, the Company had outstanding guarantees of $18.6
million in support of credit lines of unconsolidated companies. At December 31,
1997, the Company had outstanding guarantees of $7.6 million in support of
credit lines of unconsolidated companies.
The Company and its corporate affiliates conduct business in various
developing countries in Asia, Africa, Latin America and Eastern Europe, where
the systems and bodies of commercial law and trade practices arising thereunder
are in a continuing state of evolution. Commercial laws in such countries are
often vague, arbitrary, contradictory, inconsistently administered and
retroactively applied. Under such circumstances, it is difficult for the Company
to determine with certainty at all times the exact requirements of such local
laws. Nevertheless, the Company believes that any difficulty in compliance with
local laws in such developing countries will not have a materially adverse
impact on the consolidated financial position, results of operations or cash
flows of the Company.
NOTE 19 -- FAIR VALUE OF FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES:
At December 31, 1996 and 1997, the carrying value of the Company's
financial instruments approximated fair value in all material respects.
The Company entered into interest rate exchange agreements with off-balance
sheet risk in order to reduce its exposure to changes in interest rates on its
variable rate long-term debt. These interest rate exchange agreements included
interest rate swaps, interest rate floors and interest rate caps. At December
31, 1996 and 1997, the notional amount of these agreements was $50 million and
$275 million, respectively (see
F-26
<PAGE> 113
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Note 14). The fair value, which has been estimated based upon quotations from
independent third party banks, approximated the notional amount at December 31,
1996 and 1997.
The Company enters into forward foreign exchange contracts to hedge certain
assets and liabilities which are recorded in a currency different from that in
which they settle. The purpose of these contracts is almost exclusively to hedge
intercompany transactions. The Company's forward foreign exchange contracts do
not create exchange rate risk because gains and losses on these contracts
generally offset losses and gains on the foreign currency denominated
intercompany transactions. The gains and losses on these positions are deferred
and included in the basis of the transaction upon settlement. The terms of these
contracts are generally a one month maturity. The tables below summarize the
Company's forward foreign exchange contracts outstanding at December 31, 1996
and 1997. The "buy" amounts represent the U.S. dollar equivalent of commitments
to purchase the respective currency, and the "sell" amounts represent the U.S.
dollar equivalent of commitments to sell the respective currency.
<TABLE>
<CAPTION>
1996 COMPANY BUYS COMPANY SELLS
(IN THOUSANDS)
<S> <C> <C>
Canadian Dollar............................................. $ -- $8,399
Italian Lira................................................ 4,524 --
Swiss Franc................................................. 5,934 --
Japanese Yen................................................ 6,199 --
------- ------
$16,657 $8,399
======= ======
</TABLE>
<TABLE>
<CAPTION>
1997 COMPANY BUYS COMPANY SELLS
(IN THOUSANDS)
<S> <C> <C>
German Deutschemark......................................... $ -- $13,318
Italian Lira................................................ -- 3,901
Swedish Krona............................................... -- 1,268
Swiss Franc................................................. 6,849 --
Japanese Yen................................................ 5,975 --
------- -------
$12,824 $18,487
======= =======
</TABLE>
Management believes the risk of incurring losses due to credit risk and
foreign exchange would not have a material adverse impact on the consolidated
financial position, results of operations or cash flows of the Company.
NOTE 20 -- SUBSEQUENT EVENT -- COMMON STOCK DIVIDEND
On April 6, 1998, the Board of Directors declared a stock dividend of 14
shares of common stock payable for each share of common stock outstanding on the
effective date of the Company's planned initial public offering (see note 21).
Common stock and accumulated deficit reflected in the historical balance sheets
at December 31, 1996 and 1997 have been restated to reflect the common stock
dividend. The number of common shares the Company is authorized to issue was
also increased from 10 million to 250 million and the number of authorized
preferred shares, none of which have been issued, was increased from 50,000 to
10 million.
All references in the consolidated financial statements to shares, share
prices, per share data, including stock option and stock option plan
information, for periods after the 1996 Recapitalization are reflected on a post
dividend basis. All references in the historical financial statements to common
shares and Limited Partnership Units in Predecessor entities including option
and option plan information are reflected on a pre-dividend basis.
F-27
<PAGE> 114
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 21 -- PUBLIC OFFERING AND RELATED TRANSACTIONS SUBSEQUENT TO THE DATE OF
THE INDEPENDENT ACCOUNTANTS REPORT (UNAUDITED)
OFFERING: On February 26, 1998, the Company filed a Registration Statement
on Form S-1. Total proceeds to be raised in connection with the public offering
are estimated at $430 million, comprised of approximately $150 million raised
from the sale of newly issued common shares and approximately $280 million
raised from common shares to be sold from certain selling stockholders. The
Company intends to use the estimated net proceeds from the sale of newly issued
common shares to repay borrowings under the term loan portion of its Credit
Facilities. The Company will not receive any of the net proceeds from the sale
of common stock by the selling stockholders.
NEW DEBT FACILITY: On March 10, 1998, the Company secured a best efforts
commitment (the "Commitment") from Citibank N.A. and the Bank of America
National Trust and Savings Association to arrange a syndicate of lenders to
participate in a 5 year, $400 million multicurrency revolving credit facility
(the "Facility"). The Commitment is subject to, among other things, the receipt
of commitments from other lenders to provide not less than $250 million and the
consummation of the initial public offering resulting in not less than $100
million of cash proceeds to the Company. Under the proposed terms of the
Facility, interest charged on loans will include base rate, Eurodollar and
Eurocurrency rates, plus applicable margins tied to the leverage ratio ranging
from 0.04% to 0.05%.
RESTRICTED STOCK: In March 1998, the Company amended the Restricted Stock
Trust agreement which will result in the redemption of 1,855,845 of the
11,086,950 shares of common stock previously held in the Restricted Stock Trust
upon consummation of the initial public offering. Based upon an assumed initial
public offering price of $22.50, the consummation of the offering will give rise
to a non-recurring, non-cash, pre-tax charge of $207.7 million arising from the
vesting of the aggregate 9,231,105 shares of Restricted Stock.
F-28
<PAGE> 115
[PHOTOGRAPH OF OLD-FASHIONED
HANDWRITING ON HEAVY PAPER
VERY CLOSE-UP PREDOMINANTLY
IN ORANGE AND YELLOW.
NO PARTICULAR WORDS
CAN BE IDENTIFIED.]
F-29
<PAGE> 116
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE UNDERWRITERS OR ANY OTHER
PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
AN IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 9
The Company........................... 16
Use of Proceeds....................... 18
Dividend Policy....................... 18
Capitalization........................ 19
Dilution.............................. 21
Selected Consolidated Financial
Data................................ 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 24
Business.............................. 30
Management............................ 40
Certain Transactions.................. 58
Principal and Selling Stockholders.... 59
Description of Capital Stock.......... 61
Shares Eligible for Future Sale....... 74
Certain U.S. Tax Consequences to Non-
United States Holders............... 75
Underwriting.......................... 77
Legal Matters......................... 80
Experts............................... 80
Available Information................. 81
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
16,600,000 SHARES
[LOGO]
YOUNG & RUBICAM INC.
COMMON STOCK
------------------------
PROSPECTUS
------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
FURMAN SELZ
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
, 1998
======================================================
<PAGE> 117
[INTERNATIONAL BACK COVER PAGE]
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE UNDERWRITERS OR ANY OTHER
PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
AN IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 9
The Company........................... 16
Use of Proceeds....................... 18
Dividend Policy....................... 18
Capitalization........................ 19
Dilution.............................. 21
Selected Consolidated Financial
Data................................ 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 24
Business.............................. 30
Management............................ 40
Certain Transactions.................. 58
Principal and Selling Stockholders.... 59
Description of Capital Stock.......... 61
Shares Eligible for Future Sale....... 74
Certain U.S. Tax Consequences to Non-
United States Holders............... 75
Underwriting.......................... 77
Legal Matters......................... 80
Experts............................... 80
Available Information................. 81
Additional Information................ 82
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
16,600,000 SHARES
[LOGO]
YOUNG & RUBICAM INC.
COMMON STOCK
------------------------
PROSPECTUS
------------------------
DONALDSON, LUFKIN & JENRETTE
INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
FURMAN SELZ
GOLDMAN SACHS INTERNATIONAL
SALOMON SMITH BARNEY INTERNATIONAL
, 1998
======================================================
<PAGE> 118
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the Common Stock being registered, other than
underwriting discounts and commissions:
<TABLE>
<S> <C>
SEC registration fee........................................ $126,850
NASD filing fee............................................. 30,500
New York Stock Exchange listing fee......................... *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Printing and engraving expenses............................. *
Registrar and transfer agent's fee.......................... *
Miscellaneous............................................... *
--------
Total............................................. $ *
========
</TABLE>
- ------------------------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article XI of Y&R's Amended and Restated Certificate of Incorporation
provides substantially as follows:
Section 1. Elimination of Certain Liability of Directors. A director of
the Company shall not be personally liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit.
Section 2. Indemnification and Insurance.
(a) Right to indemnification. Each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Company or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Company to the fullest extent authorized by
the General Corporation Law of the State of Delaware, as the same exists or may
hereafter be amended but, in the case of any such amendment, to the fullest
extent permitted by law, only to the extent that such amendment permits the
Company to provide broader indemnification rights than said law permitted the
Company to provide prior to such amendment), against all expense, liability and
loss (including, without limitation, attorneys' fees, judgments, fines, amounts
paid or to be paid in settlement, and excise taxes or penalties arising under
the Employee Retirement Income Security Act of 1974) reasonably incurred or
suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in paragraph (b)
hereof, the Company shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the Board of Directors of
the Company. The right to indemnification conferred in this
II-1
<PAGE> 119
Section shall be a contract right and shall include the right to be paid by the
Company the expenses incurred in defending any such proceeding in advance of its
final disposition; provided, however, that, if the General Corporation Law of
the State of Delaware requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the Company of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Section or otherwise. The Company may, by action of the Board of Directors,
provide indemnification to employees and agents of the Company with the same
scope and effect as the foregoing indemnification of directors and officers.
(b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of
this Section is not paid in full by the Company within thirty days after a
written claim has been received by the Company, the claimant may at any time
thereafter bring suit against the Company to recover the unpaid amount of the
claim and, if successful in whole or in part, the claimant shall be entitled to
be paid also the expense of prosecuting such claim. It shall be a defense to any
such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to the Company)
that the claimant has not met the standards of conduct which make it permissible
under the General Corporation Law of the State of Delaware for the Company to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Company. Neither the failure of the Company (including
its Board of Directors, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the General Corporation
Law of the State of Delaware, nor an actual determination by the Company
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
(c) Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, By-law, agreement, vote of stockholders or
disinterested directors or otherwise.
(d) Insurance. The Company may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Company or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Company would
have the power to indemnify such person against such expense, liability or loss
under the General Corporation Law of the State of Delaware.
Section 5 of the Management Voting Trust Agreement provides substantially
as follows:
The Company hereby agrees to assume liability for and does hereby
indemnify, protect, save and hold harmless the Voting Trustees and their
successors, assigns, agents and servants to the full extent lawful from and
against any and all liabilities, obligations, losses, damages, penalties, taxes,
claims, actions, suits, costs, expenses or disbursements (including legal fees
and expenses) of any kind and nature whatsoever ("Losses") that may be imposed,
incurred by or asserted against the Voting Trustees or any of them individually
in any way relating to or arising under the Management Voting Trust Agreement or
the enforcement of any of the terms thereof or in any way relating to or arising
out of the administration of the trusts created thereby or the action or
inaction of the Management Voting Trust thereunder, unless the Company shall
sustain the burden of proving by clear and convincing evidence that such Losses
were proximately caused by an act or omission on the part of such Voting Trustee
or Voting Trustees that was not taken in good faith or that was not reasonably
believed to be in or not opposed to the best interests of the Company and the
Management Investors as a group. The Company shall advance to any Voting Trustee
all reasonable expenses in connection with litigation arising under the
Management Voting Trust Agreement or the enforcement of any of the terms
II-2
<PAGE> 120
thereof or in any way relating to or arising out of the administration of the
trusts created thereby or the action or inaction of the Management Voting Trust
thereunder, including, but not limited to, expenses in connection with
litigation in which such Voting Trustee purports to seek to enforce any portion
of the Management Voting Trust Agreement. A Voting Trustee shall be required to
execute an undertaking agreeing to repay the Company the amount so advanced in
the event it is ultimately determined that such Voting Trustee is not entitled
to indemnification with respect to such Losses, but the Voting Trustee shall not
be required to give a bond or any security for the advancement of such expenses.
To the extent insurance is available on commercially reasonable terms, the
Company will procure and maintain (for the benefit of the Company and the Voting
Trustees) insurance covering the Voting Trustees at least to the extent their
conduct would give rise to indemnification under the Management Voting Trust
Agreement. The provisions contained in this indemnification section shall
survive the termination of the Management Voting Trust Agreement.
The Restricted Stock Plan and the Management Stock Option Plan each provide
that no member of the Compensation Committee of the Company Board or of the
Company Board shall be liable for any action or determination made in good faith
with respect to such plan or any grant under such plan. The Restricted Stock
Plan and the Management Stock Plan each provide that to the fullest extent
permitted by law, the Company shall indemnify and save harmless each person made
or threatened to be made a party to any civil or criminal action or proceeding
by reason of the fact that such person, or such person's testator or intestate,
is or was a member of the Compensation Committee of the Company Board. The 1997
ICP Plan provides that no member of the Compensation Committee or any officer or
employee of the Company or an affiliate acting at the direction or on behalf of
the Compensation Committee shall be personally liable for any action or
determination taken or made in good faith with respect to the 1997 ICP Plan, and
shall, to the extent permitted by law, be fully indemnified and protected by the
Company with respect to any such action or determination.
Y&R also carries liability insurance covering officers and directors.
Pursuant to the proposed form of Underwriting Agreement, the Underwriters
have agreed to indemnify the directors and officers of Y&R in certain
circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In December 1996, in connection with the Recapitalization, Y&R (i) issued
and sold 30,228,195 shares of Common Stock to the Recapitalization Investors and
one entity affiliated with an independent member of the Board for cash
consideration of $231,749,495, (ii) issued and sold 17,154,135 shares of Common
Stock to 182 employees in exchange for a combination of cash, notes, shares of
common stock, $.25 par value, of Young & Rubicam Inc., a New York corporation,
and limited partnership units of Young & Rubicam L.P., a Delaware limited
partnership, (iii) granted 16,823,565 Rollover Options to its employees in
consideration of the surrender for cancellation of all or a portion of their
outstanding employee options, and (iv) granted 5,200,590 Executive Options to
its employees without consideration pursuant to the Management Stock Option
Plan.
In August 1997, two members of management of the Company purchased an
aggregate of 12,900 shares of Common Stock for an aggregate purchase price of
$98,900. In October 1997, four members of management of the Company purchased an
aggregate of 36,000 shares of Common Stock for an aggregate purchase price of
$276,000. In November 1997, the Company purchased additional equity interests in
two of its Argentine subsidiaries using an aggregate of 91,320 shares of Common
Stock as part of the consideration therefor.
During 1997, management investors whose employment with the Company was
terminated exercised Rollover Options to purchase an aggregate of 463,065 shares
of Common Stock at $1.92 per share, or an aggregate of $887,541. All of such
shares of Common Stock were repurchased by the Company pursuant to the call
provisions of the Stockholders Agreement at a price equal to $7.67 per share.
In December 1997, the Company issued and sold 4,250,790 shares of Common
Stock to its employees for an aggregate amount of $9,314,483 pursuant to the
exercise of Rollover Options and Executive Options.
II-3
<PAGE> 121
All of the sales of Y&R securities described above were deemed to be exempt
from the registration requirements under the Securities Act pursuant to Section
4(2) thereof, and in reliance on Rule 701 promulgated under Section 3(b) thereof
and Regulation D and Regulation S thereunder. Each recipient of such securities
represented in each transaction such recipient's intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the share
certificates issued in such transactions.
ITEM 16. EXHIBITS.
(a) Exhibits
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement*.............................
3.1 Amended and Restated Certificate of Incorporation of
Registrant*.................................................
3.2 Amendment to Amended and Restated Certificate of
Incorporation of Registrant*
3.3 Amended and Restated Bylaws of Registrant*..................
3.4 Form of Amended and Restated Certificate of Incorporation of
Registrant to become effective upon the closing of the
Offerings under the Registration Statement*.................
3.5 Form of Amended and Restated Bylaws of Registrant to become
effective upon the closing of the Offerings under the
Registration Statement*.....................................
4.1 Specimen Certificate of Common Stock of Registrant*.........
4.2 Excerpt from form of Amended and Restated Certificate of
Incorporation of Registrant to become effective upon the
closing of the Offerings under the Registration
Statement*..................................................
4.3 Rights Agreement dated as of , 1998*..............
4.4 Form of Certificate of Designation for Registrant's
Cumulative Participating Junior Preferred Stock*............
5.1 Opinion of Cleary, Gottlieb, Steen & Hamilton, counsel to
the Registrant, as to the legality of the shares of Common
Stock being registered*.....................................
9.1 Management Voting Trust Agreement, dated as of December 12,
1996+.......................................................
9.2 Young & Rubicam Inc. Restricted Stock Trust Agreement, dated
as of December 12, 1996+....................................
10.1 $700,000,000 Credit and Guarantee Agreement, dated as of
December 12, 1996...........................................
10.2 Amended and Restated Stockholders' Agreement, dated as of
, 1998*...................................................
10.3 Contribution Agreement dated October 30, 1996+..............
10.4 Young & Rubicam Holdings Inc. Restricted Stock Plan+........
10.5 Young & Rubicam Holdings Inc. Management Stock Option
Plan+.......................................................
10.6 Young & Rubicam Inc. 1997 Incentive Compensation Plan*......
10.7 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of December 19, 1997, with Peter
Georgescu+..................................................
10.8 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of January 1, 1995, with Peter Georgescu+....
10.9 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of January 1, 1986, with Peter Georgescu+....
10.10 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of December 19, 1997, with John McGarry+.....
10.11 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of January 1, 1986, with John McGarry+.......
10.12 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of December 31, 1994, with John McGarry+.....
</TABLE>
II-4
<PAGE> 122
<TABLE>
<C> <S>
10.13 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of December 19, 1997, with Edward Vick+......
10.14 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of January 1, 1995, with Edward Vick+........
10.15 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of December 19, 1997 with Alan J.
Sheldon+....................................................
10.16 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of January 1, 1995 with Alan Sheldon+........
10.17 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of January 1, 1988 with Alan Sheldon+........
10.18 Registration Rights Agreement, dated as of December 12,
1996+.......................................................
10.19 Letter Agreement dated as of October 16, 1997 by and between
Young & Rubicam Inc. and Michael J. Dolan+..................
10.20 Letter Agreement dated June 28, 1996 by and between Young &
Rubicam Inc. and Michael J. Dolan+..........................
10.21 Lease agreement for 230 Park Avenue South...................
10.22 H&F Option Agreement, dated as of December 12, 1996, among
Y&R Holdings, Y&R Inc., Y&R Inc., and H&F Capital Partners
III, L.P.+..................................................
10.23 H&F Option Agreement, dated as of December 12, 1996, among
Y&R Holdings, Y&R Inc., Y&R Inc., and H&F Orchard Partners
III, L.P.+..................................................
10.24 Form of Young & Rubicam Inc. Key Corporation Managers Bonus
Plan*.......................................................
10.25 Amendment No. 1 to Restricted Stock Trust Agreement dated as
of March 13, 1998*..........................................
10.26 Young & Rubicam Inc. Deferred Compensation Plan*............
10.27 Young & Rubicam Inc. Grantor Trust Agreement*...............
21.1 List of Subsidiaries*.......................................
23.1 Consent of Price Waterhouse LLP.............................
23.2 Consent of Cleary, Gottlieb, Steen & Hamilton (included in
opinion to be filed as Exhibit 5.1)*........................
24.1 Powers of Attorney (included on signature pages)+...........
</TABLE>
- ------------------------------
* To be filed by amendment.
+ Previously filed.
(b) Financial Statement Schedules
Schedule II -- Young & Rubicam Inc. and Subsidiary Companies Valuation and
Qualifying Accounts and Reserves.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a
II-5
<PAGE> 123
court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of
such issue.
(b) (1) That for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(c) To provide to the underwriters at the closing specified in the
underwriting agreement, certificates in such denominations and registered
in such names as required by the underwriters to permit prompt delivery
each to purchaser.
II-6
<PAGE> 124
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York, on April 8, 1998.
YOUNG & RUBICAM INC.
By: /s/ STEPHANIE W. ABRAMSON
------------------------------------
Name: Stephanie W. Abramson
Title: General Counsel and
Executive Vice President
POWER OF ATTORNEY
We, the undersigned officers and directors of Young & Rubicam Inc., hereby
severally and individually constitute and appoint Michael J. Dolan, Stephanie W.
Abramson and Alan D. Sheldon and each of them, the true and lawful
attorneys-in-fact and agents of each of us to execute in the name, place and
stead of each of us (individually and in any capacity stated below) (i) any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
or instruments necessary or advisable in connection therewith, and (ii) a
Registration Statement, and any and all amendments thereto, relating to the
offering covered hereby filed pursuant to Rule 462(b) under the Securities Act
of 1933, with the Securities and Exchange Commission, each of said attorneys-in-
fact and agents to have the power to act with or without the others and to have
full power and authority to do and perform in the name and on behalf of each of
the undersigned every act whatsoever necessary or advisable to be done in and
about the premises, as fully to all intents and purposes as any of the
undersigned might or could do in person, and we hereby ratify and confirm our
signatures as they may be signed by our said attorneys-in-fact and agents or
each of them to any and all such amendments and instruments.
This Power of Attorney may be executed in multiple counterparts, each of
which shall be deemed an original, but which taken together shall constitute one
instrument.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board April 8, 1998
- ----------------------------------------------------- and Chief Executive
Peter A. Georgescu Officer (principal
executive officer)
* Vice Chairman, Chief April 8, 1998
- ----------------------------------------------------- Financial Officer
Michael J. Dolan and Director
(principal financial
officer)
* Senior Vice President, April 8, 1998
- ----------------------------------------------------- Finance (principal
Kevin Lavan accounting officer)
* Chief Operating April 8, 1998
- ----------------------------------------------------- Officer and Director
Edward H. Vick
</TABLE>
II-7
<PAGE> 125
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Executive Vice April 8, 1998
- ----------------------------------------------------- President and
Thomas D. Bell, Jr. Director
* Director April 8, 1998
- -----------------------------------------------------
F. Warren Hellman
/s/ RICHARD S. BODMAN Director April 8, 1998
- -----------------------------------------------------
Richard S. Bodman
* Director April 8, 1998
- -----------------------------------------------------
Philip U. Hammarskjold
* Director April 8, 1998
- -----------------------------------------------------
Alan D. Schwartz
* Director April 8, 1998
- -----------------------------------------------------
John F. McGillicuddy
</TABLE>
*By: /s/ STEPHANIE W. ABRAMSON
---------------------------------
Name: Stephanie W. Abramson,
Title: Attorney-in-Fact
II-8
<PAGE> 126
SCHEDULE II
YOUNG AND RUBICAM INC. AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
---------------------------------
BALANCE AT CHARGED TO COSTS CHARGED TO BALANCE
DESCRIPTION BEGINNING AND EXPENSES OTHER ACCOUNTS DEDUCTIONS AT END
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year ended December 31, 1995
Allowance for Doubtful Accounts...... $ 8,284 $ 8,352 -- $ 5,110 $11,526
======= ======= === ======= =======
Year ended December 31, 1996
Allowance for Doubtful Accounts...... $ 11,526 $ 11,411 -- $ 13,088 $ 9,849
======= ======= === ======= =======
Year ended December 31, 1997
Allowance for Doubtful Accounts...... $ 9,849 $ 14,269 -- $ 9,993 $14,125
======= ======= === ======= =======
</TABLE>
S-1
<PAGE> 127
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement*.............................
3.1 Amended and Restated Certificate of Incorporation of
Registrant*.................................................
3.2 Amendment to Amended and Restated Certificate of
Incorporation of Registrant*................................
3.3 Amended and Restated Bylaws of Registrant*..................
3.4 Form of Amended and Restated Certificate of Incorporation of
Registrant to become effective upon the closing of the
Offerings under the Registration Statement*.................
3.5 Form of Amended and Restated Bylaws of Registrant to become
effective upon the closing of the Offerings under the
Registration Statement*.....................................
4.1 Specimen Certificate of Common Stock of Registrant*.........
4.2 Excerpt from form of Amended and Restated Certificate of
Incorporation of Registrant to become effective upon the
closing of the Offerings under the Registration Statement*..
4.3 Form of Rights Agreement to be entered into upon the closing
of the Offerings under the Registration Statement*..........
4.4 Form of Certificate of Designation for Registrant's
Cumulative Participating Junior Preferred Stock*............
5.1 Opinion of Cleary, Gottlieb, Steen & Hamilton, counsel to
the Registrant, as to the legality of the shares of Common
Stock being registered*.....................................
9.1 Management Voting Trust Agreement, dated as of December 12,
1996+.......................................................
9.2 Young & Rubicam Inc. Restricted Stock Trust Agreement, dated
as of December 12, 1996+....................................
10.1 $700,000,000 Credit and Guarantee Agreement, dated as of
December 12, 1996...........................................
10.2 Amended and Restated Stockholders' Agreement, dated as of
, 1998*...................................................
10.3 Contribution Agreement dated October 30, 1996+..............
10.4 Young & Rubicam Holdings Inc. Restricted Stock Plan+........
10.5 Young & Rubicam Holdings Inc. Management Stock Option
Plan+.......................................................
10.6 Young & Rubicam Inc. 1997 Incentive Compensation Plan*......
10.7 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of December 19, 1997, with Peter
Georgescu+..................................................
10.8 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of January 1, 1995, with Peter Georgescu+....
10.9 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of January 1, 1986, with Peter Georgescu+....
10.10 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of December 19, 1997, with John McGarry+.....
10.11 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of January 1, 1986, with John McGarry+.......
10.12 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of December 31, 1994, with John McGarry+.....
10.13 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of December 19, 1997, with Edward Vick+......
10.14 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of January 1, 1995, with Edward Vick+........
</TABLE>
<PAGE> 128
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<C> <S> <C>
10.15 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of December 19, 1997 with Alan J.
Sheldon.+...................................................
10.16 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of January 1, 1995 with Alan Sheldon.+.......
10.17 Young & Rubicam Inc. Select Executive Retirement Income
Plan, dated as of January 1, 1988 with Alan Sheldon.+.......
10.18 Registration Rights Agreement, dated as of December 12,
1996+.......................................................
10.19 Letter Agreement dated as of October 16, 1997 by and between
Young & Rubicam Inc. and Michael J. Dolan+..................
10.20 Letter Agreement dated June 28, 1996 by and between Young &
Rubicam Inc. and Michael J. Dolan+..........................
10.21 Lease agreement for 230 Park Avenue South...................
10.22 H&F Option Agreement, dated as of December 12, 1996, among
Y&R Holdings, Y&R Inc., Y&R Inc., and H&F Capital Partners
III, L.P.+..................................................
10.23 H&F Option Agreement, dated as of December 12, 1996, among
Y&R Holdings, Y&R Inc., Y&R Inc., and H&F Orchard Partners
III, L.P.+..................................................
10.24 Form of Young & Rubicam Inc. Key Corporation Managers Bonus
Plan*.......................................................
10.25 Amendment No. 1 to Restricted Stock Trust Agreement dated as
of March 13, 1998*..........................................
10.26 Young & Rubicam Inc. Deferred Compensation Plan*............
10.27 Young & Rubicam Inc. Grantor Trust Agreement*...............
21.1 List of Subsidiaries*.......................................
23.1 Consent of Price Waterhouse LLP.............................
23.2 Consent of Cleary, Gottlieb, Steen & Hamilton (included in
opinion to be filed as Exhibit 5.1)*........................
24.1 Powers of Attorney (included on signature pages)............
</TABLE>
- ------------------------------
* To be filed by amendment.
+ Previously filed.
<PAGE> 1
Exhibit 10.1
EXECUTION COPY
================================================================================
YOUNG & RUBICAM HOLDINGS INC.,
YOUNG & RUBICAM INC., a New York corporation,
YOUNG & RUBICAM INC., a Delaware corporation,
YOUNG & RUBICAM L.P.,
THE SUBSIDIARY BORROWERS
FROM TIME TO TIME PARTIES HERETO
--------------------------------------------------------------
$700,000,000
CREDIT AND GUARANTEE AGREEMENT
December 12, 1996
--------------------------------------------------------------
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
AS ADMINISTRATIVE AGENT
BANK OF AMERICA INTERNATIONAL LIMITED
AS EUROPEAN PAYMENT AGENT
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS..................................................... 1
1.1 Defined Terms................................................... 1
1.2 Other Definitional Provisions................................... 27
SECTION 2. AMOUNT AND TERMS OF TERM COMMITMENTS............................ 28
2.1 Term Loans...................................................... 28
2.2 Procedure for Term Loan Borrowing............................... 28
SECTION 3. AMOUNT AND TERMS OF REVOLVING COMMITMENTS....................... 29
3.1 Revolving Commitments........................................... 29
3.2 Procedure for Revolving Borrowing............................... 29
3.3 L/C Commitment.................................................. 30
3.4 Procedure for Issuance of Letters of Credit..................... 31
3.5 Letter of Credit Fees, Commissions and Other Charges............ 31
3.6 L/C Participations.............................................. 32
3.7 Letter of Credit Reimbursement Obligations...................... 33
3.8 Obligations Absolute............................................ 34
3.9 Letter of Credit Payments....................................... 34
3.10 Letter of Credit Applications.................................. 34
3.11 Swing Line Commitment.......................................... 34
3.12 Procedure for Swing Line Borrowing............................. 35
SECTION 4. AMOUNT AND TERMS OF FRONTED OFFSHORE LOANS...................... 36
4.1 Fronted Offshore Currency Subfacility........................... 36
4.2 Procedure for Fronted Offshore Loan Borrowings.................. 36
4.3 Fronted Offshore Loans Fees, Commissions and Other Charges...... 37
4.4 Participations.................................................. 37
SECTION 5. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT ... 39
5.1 Commitment Fees................................................. 39
5.2 Termination or Reduction of Commitments......................... 39
5.3 Repayment of Loans; Evidence of Debt............................ 39
5.4 Optional and Mandatory Prepayments.............................. 41
5.5 Offshore Currency Spot Rate..................................... 44
5.6 Conversion and Continuation Options............................. 45
5.7 Maximum Number of Tranches...................................... 46
5.8 Interest Rates and Payment Dates................................ 46
5.9 Computation of Interest and Fees................................ 46
5.10 Inability to Determine Interest Rate........................... 47
5.11 Pro Rata Treatment and Payments................................ 48
5.12 Illegality..................................................... 49
<PAGE> 3
Page
----
5.13 Requirements of Law............................................ 49
5.14 Taxes.......................................................... 50
5.15 Indemnity...................................................... 52
5.16 Change of Lending Office....................................... 52
5.17 Subsidiary Borrowers........................................... 52
SECTION 6. REPRESENTATIONS AND WARRANTIES.................................. 52
6.1 Financial Condition............................................. 53
6.2 No Change....................................................... 53
6.3 Existence; Compliance with Law.................................. 54
6.4 Corporate Power; Authorization; Enforceable Obligations......... 54
6.5 No Legal Bar.................................................... 54
6.6 No Material Litigation.......................................... 54
6.7 No Default...................................................... 55
6.8 Ownership of Property; Liens.................................... 55
6.9 Intellectual Property........................................... 55
6.10 No Burdensome Restrictions..................................... 55
6.11 Taxes.......................................................... 55
6.12 Federal Regulations............................................ 55
6.13 ERISA.......................................................... 56
6.14 Investment Company Act; Other Regulations...................... 56
6.15 Subsidiaries................................................... 56
6.16 Purpose of Loans............................................... 56
6.17 Environmental Matters.......................................... 56
6.18 Regulation H................................................... 57
6.19 Accuracy of Information........................................ 58
6.20 Security Documents............................................. 58
6.21 Solvency....................................................... 58
6.22 Continuing Letters of Credit................................... 58
SECTION 7. CONDITIONS PRECEDENT............................................ 59
7.1 Conditions to Initial Extension of Credit....................... 59
7.2 Conditions to Term Loans on Second Drawdown Date................ 64
7.3 Conditions to Each Extension of Credit.......................... 64
7.4 Each Subsidiary Borrower Credit Event........................... 65
SECTION 8. AFFIRMATIVE COVENANTS........................................... 65
8.1 Financial Statements............................................ 65
8.2 Certificates; Other Information................................. 66
8.3 Payment of Obligations.......................................... 67
8.4 Conduct of Business and Maintenance of Existence................ 67
8.5 Maintenance of Property; Insurance.............................. 67
8.6 Inspection of Property; Books and Records; Discussions.......... 67
8.7 Notices......................................................... 68
- ii -
<PAGE> 4
Page
----
8.8 Environmental Laws.............................................. 68
8.9 Further Assurances.............................................. 69
8.10 Additional Collateral.......................................... 69
8.11 Acquisition of Remaining Equity Interests and Completion
of Recapitalization; Consummation of Holdings Merger
and Partnership Merger...................................... 70
8.12 Interest Rate Protection....................................... 70
SECTION 9. NEGATIVE COVENANTS.............................................. 70
9.1 Financial Condition Covenants................................... 71
9.2 Limitation on Indebtedness...................................... 71
9.3 Limitation on Liens............................................. 73
9.4 Limitation on Guarantee Obligations............................. 74
9.5 Limitation on Fundamental Changes............................... 74
9.6 Limitation on Sale of Assets.................................... 75
9.7 Limitation on Dividends......................................... 75
9.8 Limitation on Capital Expenditures.............................. 76
9.9 Limitation on Investments, Loans and Advances................... 77
9.10 Limitation on Transactions with Affiliates..................... 77
9.11 Limitation on Sales and Leasebacks............................. 78
9.12 Limitation on Changes in Fiscal Year........................... 78
9.13 Limitation on Negative Pledge Clauses.......................... 78
9.14 Limitation on Lines of Business................................ 78
9.15 Limitation on Business of Summit............................... 78
SECTION 10. EVENTS OF DEFAULT.............................................. 78
SECTION 11. GUARANTEE...................................................... 81
11.1 Guarantee...................................................... 81
11.2 No Subrogation, Contribution, Reimbursement or Indemnity....... 82
11.3 Amendments, etc. with respect to the Obligations; Waiver
of Rights................................................... 82
11.4 Guarantee Absolute and Unconditional........................... 83
11.5 Reinstatement.................................................. 84
SECTION 12. THE ADMINISTRATIVE AGENT....................................... 84
12.1 Appointment.................................................... 84
12.2 Delegation of Duties........................................... 85
12.3 Exculpatory Provisions......................................... 85
12.4 Reliance by Administrative Agent............................... 85
12.5 Notice of Default.............................................. 85
12.6 Non-Reliance on Administrative Agent and Other Lenders......... 86
12.7 Indemnification................................................ 86
12.8 Administrative Agent in Its Individual Capacity................ 87
12.9 Successor Administrative Agent................................. 87
- iii -
<PAGE> 5
Page
----
SECTION 13. MISCELLANEOUS.................................................. 87
13.1 Amendments and Waivers......................................... 87
13.2 Notices........................................................ 88
13.3 No Waiver; Cumulative Remedies................................. 89
13.4 Survival of Representations and Warranties..................... 89
13.5 Payment of Expenses and Taxes.................................. 90
13.6 Successors and Assigns; Participations and Assignments......... 90
13.7 Adjustments; Set-off........................................... 93
13.8 Counterparts................................................... 93
13.9 Severability................................................... 93
13.10 Integration................................................... 93
13.11 GOVERNING LAW................................................. 93
13.12 Submission To Jurisdiction; Waivers........................... 94
13.13 Acknowledgements.............................................. 94
13.14 WAIVERS OF JURY TRIAL......................................... 94
13.15 Confidentiality............................................... 94
13.16 Conversion of Currencies...................................... 95
13.17 Joint and Several Obligations................................. 95
13.18 Release of Lien on Receivables................................ 95
13.19 Release of Lien on New York Real Property..................... 96
13.20 Recordation of Mortgages...................................... 96
- iv -
<PAGE> 6
Annexes:
Annex A Pricing Grid
Schedules:
Schedule 1.1(a) Lenders, Issuing Banks, Commitments and Addresses
Schedule 6.1 Certain Transactions
Schedule 6.2 Changes
Schedule 6.8 Real Property
Schedule 6.11 Tax Liens
Schedule 6.13 ERISA Events
Schedule 6.15 Subsidiaries
Schedule 6.20 Filing Jurisdictions
Schedule 6.22 Continuing Letters of Credit
Schedule 8.11 Exceptions to Completion of Recapitalization
Schedule 9.2(e) Existing Indebtedness
Schedule 9.2(j) Subordination Terms and Conditions
Schedule 9.3(f) Existing Liens
Schedule 9.4(a) Existing Guarantee Obligations
Exhibits:
Exhibit A Form of Addendum
Exhibit B Form of Borrowing Subsidiary Agreement
Exhibit C Form of Borrowing Subsidiary Termination
Exhibit D Form of Fronting Lender Addendum
Exhibit E Form of Parent Borrower Mortgage
Exhibit F Form of Parent Borrower Pledge Agreement
Exhibit G Form of Parent Borrower Security Agreement
Exhibit H Form of Subsidiaries Guarantee
Exhibit I Form of Subsidiaries Pledge Agreement
Exhibit J Form of Subsidiaries Security Agreement
Exhibit K [Intentionally Omitted]
Exhibit L Form of Swing Line Loan Participation Certificate
Exhibit M Form of Revolving Note
Exhibit N Form of Term Note
Exhibit O Form of Swing Line Note
Exhibit P Form of Fronted Loan Note
Exhibit Q Form of Borrower Closing Certificate
Exhibit R-1 Form of Opinion of Wachtell, Lipton, Rosen & Katz
Exhibit R-2 Form of Opinion of General Counsel
Exhibit R-3 Form of Opinion of Foreign Counsel
Exhibit S Form of Compliance Certificate
Exhibit T Form of Assignment and Acceptance
- v -
<PAGE> 7
CREDIT AND GUARANTEE AGREEMENT, dated as of December 12, 1996, among
YOUNG & RUBICAM HOLDINGS INC., a New York corporation ("Y&R Holdings"), YOUNG &
RUBICAM INC., a New York corporation ("Y&R Inc. (New York)"), YOUNG & RUBICAM
INC., a Delaware corporation ("Y&R Inc. (Delaware)"), YOUNG & RUBICAM L.P., a
Delaware limited partnership ("Y&R LP"; collectively with Y&R Holdings, Y&R Inc.
(New York) and Y&R Inc. (Delaware), the "Parent Borrowers"), the Subsidiary
Borrowers (as hereinafter defined) from time to time parties to this Agreement,
the several banks and other financial institutions from time to time parties to
this Agreement (collectively, the "Lenders"; individually, a "Lender"), BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association,
as Administrative Agent (as hereinafter defined) for the Lenders, and BANK OF
AMERICA INTERNATIONAL LIMITED, a bank organized under the laws of England, as
European Payment Agent (in such capacity, the "European Payment Agent").
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"Acquisition": as to any Person, the acquisition (in a single
transaction or a series of related transactions) by such Person of (a) at
least 50% of the outstanding Capital Stock of any other Person, (b) all or
substantially all of the assets of any other Person or (c) assets
constituting one or more business units or divisions of any other Person.
"Addendum": an instrument, substantially in the form of Exhibit A,
by which a Lender becomes a party to this Agreement.
"Adjustment Date": the second Business Day following receipt by the
Administrative Agent of (a) the financial statements required to be
delivered pursuant to subsection 8.1(a) or 8.1(b), as the case may be, for
the most recently completed fiscal period, commencing with the fiscal
quarter ending September 30, 1997, and (b) the compliance certificate
required to be delivered pursuant to subsection 8.2(b) with respect to
such financial statements.
"Administrative Agent": BofA, in its capacity as the agent for the
Lenders under this Agreement and the other Loan Documents.
"Administrative Agent's Payment Office": (a) in respect of payments
in Dollars, the address for payments set forth in subsection 13.2 or such
other address as the Administrative Agent may from time to time specify in
accordance with subsection 13.2, and (b) in the case of payments in any
Eligible Offshore Currency, such address as the Administrative Agent may
from time to time specify in accordance with subsection 13.2.
"Affiliate": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. For purposes of this
definition, "control" of a Person means the power, directly or indirectly,
either to (a) vote 10% or more of the securities having ordinary voting
power for the election of directors of such Person or (b) direct or cause
the direction of the management and policies of
<PAGE> 8
2
such Person, whether by contract or otherwise.
"Agent-Related Persons": BofA and any successor agent pursuant to
subsection 12.9, together with their respective Affiliates (including, in
the case of BofA, the Arranger), and the officers, directors, employees,
agents and attorneys-in-fact of such Persons and Affiliates.
"Aggregate Outstanding R/C Extensions of Credit": at any time, the
amount equal to the sum of (a) the aggregate principal amount (or the
Dollar Equivalent thereof, in the case of Revolving Offshore Loans) of all
Revolving Loans then outstanding, (b) the aggregate principal amount of
all Swing Line Loans then outstanding, (c) the Dollar Equivalent of the
aggregate principal amount of all Fronted Offshore Loans then outstanding
and (d) the aggregate amount (or the Dollar Equivalent thereof, in the
case of Letters of Credit issued in Offshore Currencies) of all L/C
Obligations then outstanding.
"Aggregate Revolving Commitment": $300,000,000, as such amount may
be reduced from time to time pursuant to the terms of this Agreement.
"Aggregate Term Commitment": $400,000,000, as such amount may be
reduced from time to time pursuant to the terms of this Agreement.
"Agreement": this Credit and Guarantee Agreement, as amended,
supplemented or otherwise modified from time to time.
"Agreement Currency": as defined in subsection 13.16(b).
"Applicable Creditor": as defined in subsection 13.16(b).
"Applicable Debt Level Status": (a) from the Closing Date to but not
including the Second Drawdown Date and without regard to the Debt Level
Status actually in effect during such period, Debt Level 4 Status, (b)
from and including the Second Drawdown Date to but not including the first
Adjustment Date and without regard to the Debt Level Status actually in
effect during such period, Debt Level 5 Status and (c) thereafter for the
period commencing on and including any Adjustment Date and ending on the
day immediately preceding the next succeeding Adjustment Date, the Debt
Level Status determined to be in effect on the Adjustment Date which is
the first day of such period, provided, however, that, if the financial
statements required to be delivered pursuant to subsection 8.1(a) or
8.1(b) in respect of any fiscal period ending on or after September 30,
1997, or the certificate required to be delivered in connection therewith
pursuant to subsection 8.2(b), are not delivered when due, then during the
period from the date upon which such financial statements and/or
certificates were required to be delivered until two Business Days
following the date upon which such statements and/or certificates actually
are delivered, the applicable Debt Level Status shall be Debt Level 6
Status.
"Applicable Margin": on any day and as to any Type of Loan (other
than Fronted Offshore Loans), the applicable rate per annum for such Type
of Loan set forth on Annex A opposite the Applicable Debt Level Status in
effect on such day.
"Applicable Rate": on any day as to the commitment fees payable
pursuant to subsection 5.1, the applicable rate per annum set forth on
Annex A opposite the Applicable Debt Level Status in effect on such day.
<PAGE> 9
3
"Application": an application, in such form as the relevant Issuing
Bank may specify from time to time, requesting such Issuing Bank to open a
Letter of Credit.
"Arranger": BA Securities, Inc., a Delaware corporation.
"Assignee": as defined in subsection 13.6(c).
"Available Revolving Commitment": at any time, the amount equal to
the excess, if any, of (a) the Aggregate Revolving Commitment at such time
over (b) the Aggregate Outstanding R/C Extensions of Credit at such time.
"Available Term Commitment": at any time, the amount equal to the
excess, if any, of (a) the Aggregate Term Commitment at such time over (b)
the aggregate principal amount of the Term Loans of the Term Lenders
theretofore made.
"Banking Day": (a) with respect to any borrowings, disbursements and
payments in respect of and calculations and interest rates pertaining to
Base Rate Loans, any Business Day, (b) with respect to any borrowings,
disbursements and payments in respect of and calculations, interest rates
and Interest Periods pertaining to Eurodollar Loans, any Business Day
which is also a day on which dealings are carried on in the London
interbank market, (c) with respect to any disbursements and payments in
respect of and calculations, interest rates and Interest Periods
pertaining to any Revolving Offshore Loan, any Business Day which is also
a day on which commercial banks are open for foreign exchange business in
London, England, and on which dealings in the relevant Offshore Currency
are carried on in the applicable offshore foreign exchange interbank
market in which disbursement of or payment in such Offshore Currency will
be made or received hereunder and (d) with respect to any borrowings,
disbursements and payments in and calculations, interest rates and
Interest Periods pertaining to any Fronted Offshore Loan, any Business Day
which is also a day on which commercial banks are open for in, and on
which dealings in the relevant Fronted Offshore Currency are carried on
in, the location of the Fronting Lender's Payment Office with respect to
such Fronted Offshore Currency.
"Base Rate": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greater of (a) the
Reference Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the
Federal Funds Effective Rate for any reason, including the inability or
failure of the Administrative Agent to obtain sufficient quotations in
accordance with the terms hereof, the Base Rate shall be determined
without regard to clause (b) of the first sentence of this definition
until the circumstances giving rise to such inability no longer exist. Any
change in the Base Rate due to a change in the Reference Rate or the
Federal Funds Effective Rate shall be effective on the effective day of
such change in the Reference Rate or the Federal Funds Effective Rate,
respectively.
"Base Rate Loans": Revolving Loans or Term Loans the rate of
interest applicable to which is based upon the Base Rate.
"Base Year": as defined in subsection 5.4(f).
"BofA": Bank of America National Trust and Savings Association, a
national banking
<PAGE> 10
4
association.
"Borrowers": the collective reference to the Parent Borrowers and
the Subsidiary Borrowers.
"Borrowing Date": any Banking Day specified in a notice pursuant to
subsection 2.2, 3.2, 3.12 or 4.2 as a date on which a Borrower requests a
Lender to make a Loan hereunder.
"Borrowing Subsidiary Agreement": a Borrowing Subsidiary Agreement,
substantially in the form of Exhibit B.
"Borrowing Subsidiary Termination": a Borrowing Subsidiary
Termination, substantially in the form of Exhibit C.
"Business": as defined in subsection 6.17.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in Chicago, New York City or San Francisco are
authorized or required by law to close.
"Calculation Date": with respect to each Offshore Currency, the
fifteenth and last day of each calendar month (or, if such day is not a
Business Day, the next succeeding Business Day), provided that (a) the
second Banking Day preceding each Borrowing Date with respect to any
Offshore Currency Loans in an Offshore Currency shall also be a
"Calculation Date" with respect to such Offshore Currency and (b) the
second Banking Day preceding the date of issuance of a Letter of Credit
denominated in an Eligible Offshore Currency shall also be a "Calculation
Date" with respect to such Eligible Offshore Currency.
"Capital Expenditures": as defined in subsection 9.8.
"Capital Stock": any and all shares, interests, participation or
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any of the
foregoing.
"Cash Collateral Account": as defined in subsection 5.4(c).
"Cash Equivalents": (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured by
the United States Government or any agency thereof, (b) certificates of
deposit and eurodollar time deposits with maturities of one year or less
from the date of acquisition and overnight bank deposits of any Lender or
of any commercial bank having capital and surplus in excess of
$500,000,000, (c) repurchase obligations of any Lender or of any
commercial bank satisfying the requirements of clause (b) of this
definition, having a term of not more than 30 days with respect to
securities issued or fully guaranteed or insured by the United States
Government, (d) commercial paper of a domestic issuer rated at least A-2
by Standard and Poor's Rating Group ("S&P") or P-2 by Moody's Investors
Service, Inc. ("Moody's"), (e) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political
subdivision or taxing authority of any such state, commonwealth or
territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or
foreign government (as the case may be) are rated at least A by S&P or A
by
<PAGE> 11
5
Moody's, (f) securities with maturities of one year or less from the date
of acquisition backed by standby letters of credit issued by any Lender or
any commercial bank satisfying the requirements of clause (b) of this
definition or (g) shares of money market mutual or similar funds which
invest exclusively in assets satisfying the requirements of clauses (a)
through (f) of this definition.
"Casualty Event": with respect to any property of any Person, the
receipt by such Person of insurance proceeds, or proceeds of a
condemnation award or other compensation in connection with any loss of or
damage to, or any condemnation or other taking of, such property.
"Change of Control": (a) the H&F Group shall cease to be the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
more than 20% (on a fully-diluted basis) of the outstanding shares of
Capital Stock of the Company or the aggregate votes represented by such
shares of Capital Stock, (b) the H&F Group and the Management Investors
shall cease to be the "beneficial owners" (as defined in Rule 13d-3 under
the Exchange Act) of more than 51% (on a fully-diluted basis) in the
aggregate of the outstanding shares of Capital Stock of the Company or the
aggregate votes represented by such shares of Capital Stock, (c) the H&F
Group and the Management Investors shall cease to collectively have the
right to appoint a majority of the members of the board of directors of
the Company, or (d) the Company shall cease directly or indirectly to own
all the Capital Stock, acquired pursuant to the Recapitalization, of Y&R
LP (so long as Y&R LP shall remain in existence) or, until the Holdings
Merger, Y&R Inc. (New York).
"Clients": as defined in the definition of Y&R Agent Subsidiary.
"Closing Date": the date (which must be on or prior to December 31,
1996) on which the conditions precedent set forth in subsection 7.1 shall
be satisfied.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": all assets of the Loan Parties, now owned or
hereinafter acquired, upon which a Lien is purported to be created by any
Security Document.
"Commitment": with respect to any Lender, such Lender's Term
Commitment and/or Revolving Commitment, as the case may be; collectively,
as to all the Lenders, the "Commitments".
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Company within the
meaning of Section 4001 of ERISA or is part of a group which includes the
Company and which is treated as a single employer under Section 414 of the
Code.
"Company": Y&R Holdings, provided that, (a) upon the consummation of
the Holdings Merger, Y&R Inc. (New York) shall be the "Company" for all
purposes of this Agreement and the other Loan Documents and (b) upon the
consummation of the Company Merger, Y&R Inc. (Delaware) shall be the
"Company" for all purposes of this Agreement and the other Loan Documents.
"Company Merger": the merger of Y&R Inc. (New York) with and into
Y&R Inc. (Delaware), with Y&R Inc. (Delaware) as the surviving
corporation.
<PAGE> 12
6
"Consolidated": when used in connection with any term (which is not
otherwise defined), means such term as it applies to any Person and its
Subsidiaries on a consolidated basis in accordance with GAAP, after
eliminating all intercompany items.
"Continuing Letter of Credit": each letter of credit that is listed
on Schedule 6.22.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Contribution Agreement": the Agreement and Plan of Contribution,
dated October 30, 1996, among Y&R Inc. (New York), Y&R LP, Y&R Holdings,
Y&R Inc. (Delaware), the Young & Rubicam Restricted Stock Trust (as
defined therein) and the HFCP Investors, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with
subsection 7.1(d).
"Control": the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" have meanings correlative
thereto.
"Cost of Funds": with respect to any Offshore Currency, the rate of
interest determined by the Administrative Agent or the relevant Fronting
Lender in respect thereof (which determination shall be conclusive absent
manifest error) to be the cost to the Administrative Agent or such
Fronting Lender of obtaining funds denominated in such Offshore Currency
for the period or, if applicable, the relevant Interest Period or Periods
during which any relevant amount in such Offshore Currency is outstanding.
"Debt": of any Person at any date and without duplication, (a) all
indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than (i) current trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices, (ii) deferred rent and deferred
employee compensation incurred in the ordinary course of business and
(iii) Indebtedness permitted pursuant to subsection 9.2(j)), (b) any other
indebtedness of such Person which is evidenced by a note, bond, debenture
or similar instrument, (c) all obligations of such Person under Financing
Leases, (d) all obligations of such Person in respect of letters of credit
and acceptances issued or created for the account of such Person, (e) all
liabilities of the types described in clauses (a) through (d) of this
definition secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for the
payment thereof and (f) all Guarantee Obligations of such Person in
respect of liabilities of the types described in clauses (a) through (e)
of this definition of another Person. The Debt of any Person shall include
the Debt of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefor
as a result of such Person's ownership interest in or other relationship
with such entity, except to the extent the terms of such Debt provide that
such Person is not liable therefor.
"Debt Coverage Ratio": as of the last day of any fiscal quarter of
the Company, the ratio of (a) Consolidated Debt of the Company as of the
last day of such fiscal quarter to (b) Proportionate EBITDA of the Company
for the period of four consecutive fiscal quarters ended on the last day
of such fiscal quarter.
<PAGE> 13
7
"Debt Level Status": the existence of Debt Level 1 Status, Debt
Level 2 Status, Debt Level 3 Status, Debt Level 4 Status, Debt Level 5
Status or Debt Level 6 Status, as the case may be.
"Debt Level 1 Status": exists on an Adjustment Date if the Debt
Coverage Ratio as of the last day of the period covered by the financial
statements relating to such Adjustment Date is less than 2.00 to 1.00.
"Debt Level 2 Status": exists on an Adjustment Date if the Debt
Coverage Ratio as of the last day of the period covered by the financial
statements relating to such Adjustment Date is greater than or equal to
2.00 to 1.00 but less than 2.50 to 1.00.
"Debt Level 3 Status": exists on an Adjustment Date if the Debt
Coverage Ratio as of the last day of the period covered by the financial
statements relating to such Adjustment Date is greater than or equal to
2.50 to 1.00 but less than 3.00 to 1.00.
"Debt Level 4 Status": exists on an Adjustment Date if the Debt
Coverage Ratio as of the last day of the period covered by the financial
statements relating to such Adjustment Date is greater than or equal to
3.00 to 1.00 but less than 3.50 to 1.00.
"Debt Level 5 Status": exists on an Adjustment Date if the Debt
Coverage Ratio as of the last day of the period covered by the financial
statements relating to such Adjustment Date is greater than or equal to
3.50 to 1.00 but less than 4.00 to 1.00.
"Debt Level 6 Status": exists on an Adjustment Date if the Debt
Coverage Ratio as of the last day of the period covered by the financial
statements relating to such Adjustment Date is greater than or equal to
4.00 to 1.00.
"Default": any of the events specified in Section 10, whether or not
any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Designated Lenders": as defined in subsection 7.1(a).
"Direct Foreign Subsidiary": any Foreign Subsidiary all or a portion
of the Capital Stock of which is owned by the Company or one or more
Domestic Subsidiaries of the Company.
"Divestiture": as to any Person, the sale, transfer or other
disposition by such Person (in a single transaction or a series of related
transactions) of (a) the Capital Stock of any Subsidiary of such Person,
if, following such sale, transfer or other disposition, such Subsidiary
ceases to be a Subsidiary of such Person, (b) all or substantially all of
the assets of such Person and (c) assets constituting one or more business
units of such Person.
"Dollar Equivalent": at any time as to any amount denominated in an
Offshore Currency, the equivalent amount in Dollars as determined by the
Administrative Agent at such time on the basis of the Spot Rate for the
purchase of Dollars with such Offshore Currency on the most recent
Calculation Date for such Offshore Currency.
"Dollars" and "$": the lawful currency of the United States of
America.
<PAGE> 14
8
"Domestic Operating Subsidiary": any Operating Subsidiary which is a
Domestic Subsidiary.
"Domestic Subsidiary": any Operating Subsidiary of the Company
organized under the laws of any jurisdiction within the United States.
"EBITDA": as to any Person for any period, the amount equal to
Consolidated Net Income of such Person for such period excluding
non-operating gains or losses, plus, in each case to the extent deducted
in determining such Consolidated Net Income of such person for such
period, the sum of the following: (a) Consolidated Interest Expense of
such Person for such period, (b) Consolidated provision for income taxes
of such Person for such period, (c) Consolidated depreciation and
amortization expense of such Person for such period, (d) foreign exchange
non-cash losses associated with hyperinflationary countries, (e)
Consolidated non-cash compensation expenses attributable to stock, stock
options, restricted stock, and Related Equity Securities, (f) Consolidated
cash compensation expenses attributable to repurchases of such stock,
stock options, restricted stock and Related Equity Securities, (g)
Consolidated expenses or reserves directly associated with the
Recapitalization, (h) any amounts in respect of the minority interest of
any other Person in such Person for such period, (i) expenses or reserves
associated with (1) the sale of the New York Real Property, including the
relocation or consolidation of individuals and offices located in New York
City (whether or not occupying the New York Real Property) in connection
with, or in anticipation of, such sale, or (2) the relocation or
consolidation of individuals and offices located in New York City,
currently occupying more than 300,000 square feet (such sale and/or
relocation being referred to as the "New York Real Estate Consolidation"),
including in each case all expenses of renovating office space, (j) EBITDA
(as defined herein) for such fiscal period of any other Person which is
not wholly-owned by such Person, but which such Person reports on a
consolidated basis in accordance with GAAP, and (k) equity losses from any
other Person which is partially but not wholly-owned by such Person and
which is not consolidated for such period, minus, in each case to the
extent added in determining such Consolidated Net Income of such Person to
such Period, (i) foreign exchange non-cash gains associated with
hyperinflationary countries, (ii) any amounts in respect of the minority
interest of any other Person in such Person for such period, (iii) EBITDA
(as defined herein) for such fiscal period of any other Person which is
not wholly-owned by such Person, but which such Person reports on a
consolidated basis in accordance with GAAP, and (iv) equity gains from any
other Person which is partially but not wholly-owned by such Person and
which is not consolidated for such period. If such Person or any of its
Consolidated Subsidiaries consummates an Acquisition or Divestiture during
such period, EBITDA (and all amounts included in the calculation thereof,
including, but not limited to, Net Income and Interest Expense) for such
period shall be computed assuming that such Acquisition or Divestiture, as
the case may be, had occurred (and any Indebtedness incurred or repaid in
connection with such Acquisition or Divestiture had been incurred or
repaid) on the first day of such period.
"Eligible L/C Currency": each of the lawful currencies of Canada
(Canadian Dollar), the Republic of France (French Franc), the Federal
Republic of Germany (German Mark), the Republic of Italy (Italian Lira)
and the United Kingdom of Great Britain and Northern Ireland (British
Pounds Sterling).
"Eligible Offshore Currency": each of the lawful currencies of the
Republic of France (French Franc), the Federal Republic of Germany (German
Mark) and the United Kingdom of
<PAGE> 15
9
Great Britain and Northern Ireland (British Pounds Sterling).
"Environmental Laws": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements
of Law (including common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of human health or
the environment, as now or may at any time hereafter be in effect.
"Equity Interests": the collective reference to the Capital Stock of
Y&R Inc. (New York) and Y&R LP.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan or a Revolving Offshore Loan, the aggregate (without
duplication) of the rates (expressed as a decimal fraction, rounded
upwards to the nearest 1/100 of 1%) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities"
in Regulation D of such Board) maintained by a member bank of such System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
(rounded upwards to the nearest 1/32 of 1%) equal to the rate at which
BofA is offered Dollar deposits at or about 8:00 A.M., San Francisco time,
two Banking Days prior to the beginning of such Interest Period in the
interbank eurodollar market where the eurodollar and foreign currency and
exchange operations in respect of its Eurodollar Loans are then being
conducted for delivery on the first day of such Interest Period for the
number of days comprised therein and in an amount comparable to the amount
of its Eurodollar Loan to be outstanding during such Interest Period.
"Eurodollar Loans": Revolving Loans or Term Loans the rate of
interest applicable to which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
The Eurodollar Rate shall be adjusted automatically as to all Eurodollar
Loans then outstanding as of the effective date of any change in the
Eurocurrency Reserve Requirements.
"European Payment Agent": as defined in the Preamble to this
Agreement.
"Event of Default": any of the events specified in Section 10,
provided that any requirement for the giving of notice, the lapse of time,
or both, or any other condition, has been satisfied.
<PAGE> 16
10
"Excess Cash Flow": for any fiscal year of the Company, commencing
with the fiscal year ending December 31, 1997, without duplication, the
excess of (a) the sum of (i) EBITDA of the Company for such fiscal year,
(ii) the amount of any refund received by the Company and its Subsidiaries
during such fiscal year on income taxes paid by the Company and its
Subsidiaries to the extent not included in EBITDA of the Company for such
fiscal year, (iii) without duplication of amounts added pursuant to this
clause (iii) or clause (iv) below, cash dividends, cash interest and other
similar cash payments received by the Company and its Subsidiaries during
such fiscal year in respect of investments to the extent not included in
EBITDA of the Company for such fiscal year (including from all Persons
which are partially owned by the Company, but are not Subsidiaries), (iv)
the sum across all Persons which are Subsidiaries but are not wholly-owned
by the Company, or by any Subsidiary of the Company, of such Persons'
EBITDA for such fiscal year, multiplied by the effective primary ownership
percentage held in such Person by the Company as of the end of such fiscal
year, (v) extraordinary cash gains to the extent subtracted or otherwise
not included in EBITDA of the Company for such fiscal year and only to the
extent not otherwise requiring a prepayment under subsection 5.4(e) and
(vi) pension expense deducted in calculating EBITDA of the Company for
such fiscal year over (b) the sum of (i) the aggregate amount of capital
expenditures made by the Company and its Subsidiaries during such fiscal
year and not financed, (ii) the aggregate amount of all reductions of the
Revolving Commitments (to the extent such reductions are required by the
terms of this Agreement to be accompanied by prepayment of Revolving
Loans) or payments or prepayments of the Term Loans during such fiscal
year other than pursuant to subsection 5.4(f), (iii) the aggregate amount
of payments of principal in respect of any Indebtedness (other than under
this Agreement) permitted hereunder during such fiscal year, (iv)
Consolidated Interest Expense of the Company paid or payable in cash
during such fiscal year, (v) the aggregate amount of cash used during such
fiscal year to pay fees described in subsection 5.1 and the fees and
expenses incurred in connection with the Recapitalization and the
financing thereof, (vi) Consolidated provision for current income taxes
for such fiscal year, (vii) extraordinary cash payments or losses by the
Company or any of its Subsidiaries to the extent not subtracted in the
determination of EBITDA of the Company for such fiscal year, (viii) cash
expenses of the Company or any of its Subsidiaries during such fiscal year
associated with the New York Real Estate Consolidation, (ix) the aggregate
amount of cash used by the Company or any of its Subsidiaries for
Investments which are permitted under Section 9.9(c), (d), (f) and (g)
made by the Company or any of its Subsidiaries during such fiscal year,
and (x) the aggregate amount of cash used to make Restricted Payments by
the Company and its Subsidiaries during such fiscal year which are
permitted pursuant to subsection 9.8, (xi) cash pension contributions
during such fiscal year and (xii) the amount of cash used to fund any
payment in respect of the matter described on Schedule 6.13 during such
fiscal year (amounts deducted pursuant to this clause (xii) shall not
exceed $25,000,000 in the aggregate for all fiscal years).
"Exchange Act": the Securities Exchange Act of 1934, as amended.
"Existing Credit Facilities": that certain Credit Agreement, dated
as of June 26, 1996, among Y&R Inc. (New York), Y&R LP, the other
borrowers party thereto, NationsBank, N.A., as Administrative Agent, The
Bank of New York, as Documentation Agent and Issuing Bank, and Credit
Lyonnais, New York Branch and Wachovia Bank of Georgia, N.A., as
Co-Agents.
"Existing Issuing Bank": each Person that has issued one or more
Continuing Letters of Credit.
<PAGE> 17
11
"Federal Funds Effective Rate": 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 on
the next succeeding 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 the quotations for the day of such transactions received by
the Administrative Agent from three federal funds brokers of recognized
standing selected by it.
"Fee Payment Date": the first Banking Day of each April, July,
October and January.
"Financing Lease": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of the lessee.
"Fixed Charge Coverage Ratio": as of the last day of any fiscal
quarter of the Company, the ratio of (a) Proportionate EBITDAR of the
Company for the period of four fiscal quarters ending on the last day of
such fiscal quarter to (b) the sum of (i) Consolidated Interest Expense of
the Company, (ii) Consolidated Rental Expense of the Company and (iii)
scheduled amortization of the Term Loans and other Consolidated
Indebtedness of the Company, in each case for such period.
"Foreign Currency Protection Agreements": as to any Person, all
foreign exchange contracts, currency swap agreements or other similar
agreements or arrangements entered into in the ordinary course of business
(and not for speculative purposes) designed to protect such Person against
fluctuations in currency values.
"Foreign Subsidiary": any Operating Subsidiary of the Company
organized under the laws of any jurisdiction outside the United States of
America.
"Fronted Loan Note": as defined in subsection 5.3(g).
"Fronted Loan Participants": with respect to each Fronted Offshore
Loan, the collective reference to all Revolving Lenders.
"Fronting Lender": with respect to a particular Fronted Offshore
Currency, each Lender (or an Affiliate thereof) which executes and
delivers a Fronting Lender Addendum with respect to such Fronted Offshore
Currency, provided that, unless the Administrative Agent otherwise agrees,
there shall be no more than one Fronting Lender for any Fronted Offshore
Currency.
"Fronting Lender Addendum": a Fronting Lender Addendum,
substantially in the form of Exhibit D.
"Fronting Lender's Payment Office": in the case of payments in a
Fronted Offshore Currency, such address as such Fronting Lender may from
time to time specify for such purpose pursuant to the applicable Fronting
Lender Addendum.
"Fronted Offshore Currency": with respect to each Fronting Lender,
the Offshore Currency or Currencies specified in the applicable Fronting
Lender Addendum.
"Fronted Offshore Currency Sublimit": with respect to each Fronting
Lender and any Fronted Offshore Currency, the amount specified by such
Fronting Lender for such Fronted
<PAGE> 18
12
Offshore Currency in the applicable Fronting Lender Addendum.
"Fronted Offshore Currency Subfacility": the lending facility
described in subsection 4.1.
"Fronted Offshore Loans": as defined in subsection 4.1.
"FX Trading Office": the BofA Foreign Exchange Trading Desk in
Chicago, Illinois, or such other of BofA's offices as the Administrative
Agent may designate as such from time to time.
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time, provided that, solely for
purposes of determining compliance with subsection 9.1 and for purposes of
the definitions of "Debt Coverage Ratio", "Interest Coverage Ratio",
"Interest Expense", "Fixed Charge Coverage Ratio", "Net Income" and "Net
Worth" (and, as used in such definitions, any other defined terms used in
such definitions), "GAAP" shall mean generally accepted accounting
principles in the United States of America as in effect on the date
hereof.
"Governmental Authority": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has issued
a reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends
or other obligations (the "primary obligations") of any other third Person
(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or
any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such
primary obligation or (2) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of
the primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation or (iv) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include endorsements
of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing
person shall be deemed to be the lower of (a) an amount equal to the
stated or determinable amount of the primary obligation in respect of
which such Guarantee Obligation is made and (b) the maximum amount for
which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may
be liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum
reasonably anticipated liability in respect thereof as determined by the
Company in good faith.
"Guarantees": the collective reference to the guarantee contained in
Section 11 and in the Subsidiaries Guarantee.
<PAGE> 19
13
"Guarantor": any Person which delivers a Guarantee pursuant to this
Agreement.
"Hedging Agreement": any Foreign Currency Protection Agreement or
Interest Rate Protection Agreement.
"HFCP Investors": the collective reference to Hellman & Friedman
Capital Partners III, L.P., a California limited partnership, H&F Orchard
Partners III, L.P., a California limited partnership, H&F International
Partners III, L.P., a California limited partnership and certain other
investors party to the Contribution Agreement on the date hereof.
"H&F Group": the collective reference to the HFCP Investors and
their Affiliates.
"Holdings Merger": the merger of Y&R Holdings with and into Y&R Inc.
(New York), with Y&R Inc. (New York) as the surviving corporation.
"Inactive Subsidiary": any Subsidiary of the Company which (and only
for so long as such Subsidiary) (a) is not then engaged in any business,
(b) does not have liabilities or obligations, and is not a party to any
litigation or other proceeding involving amounts, in excess of $500,000 in
the aggregate, (c) does not own assets with an aggregate book value in
excess of $500,000, (d) does not own any Capital Stock of any Person
(other than another Inactive Subsidiary) and (e) does not incur any
liabilities or obligations other than in connection with its continued
inactive existence or the liquidation or dissolution thereof.
"Indebtedness": of any Person at any date, without duplication, (a)
all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than (i) current trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices and (ii) deferred rent and deferred
employee compensation incurred in the ordinary course of business), (b)
any other indebtedness of such Person which is evidenced by a note, bond,
debenture or similar instrument, (c) all obligations of such Person under
Financing Leases, (d) all obligations of such Person in respect of letters
of credit and acceptances issued or created for the account of such
Person, (e) all liabilities secured by any Lien on any property owned by
such Person even though such Person has not assumed or otherwise become
liable for the payment thereof and (f) all obligations of such Person in
respect of Hedging Agreements. The Indebtedness of any Person shall
include the Indebtedness of any other entity (including any partnership in
which such Person is a general partner) to the extent such Person is
liable therefor as a result of such Person's ownership interest in or
other relationship with such entity, except to the extent the terms of
such Indebtedness provide that such Person is not liable therefor. For
purposes of determining Indebtedness of any Person, the "principal amount"
of the obligations of such Person in respect of any Hedging Agreement at
any time shall be the maximum aggregate amount (giving effect to any
netting agreements) that such Person would be required to pay if such
Hedging Agreement were terminated at such time.
"Initial Consolidated Net Worth": the Consolidated Net Worth of the
Company as of March 31, 1997.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
<PAGE> 20
14
"Interest Coverage Ratio": as of the last day of any fiscal quarter
of the Company, the ratio of (a) Proportionate EBITDA of the Company for
the period of four fiscal quarters ending on the last day of such fiscal
quarter to (b) Consolidated Interest Expense of the Company for such
period.
"Interest Expense": of any Person for any period the amount of
interest expense, both expensed and capitalized, of such Person,
determined in accordance with GAAP, for such period, including, but not
limited to, the amortization of debt issuance costs, provided that (i)
Interest Expense for the period of four consecutive fiscal quarters ending
March 31, 1997, shall be equal to the product of (A) Interest Expense for
the fiscal quarter ending March 31, 1997 times (B) 4, (ii) Interest
Expense for the period of four consecutive fiscal quarters ending June 30,
1997, shall be equal to the product of (A) Interest Expense for the two
consecutive fiscal quarters ending June 30, 1997 times (B) 2, and (iii)
Interest Expense for the period of four consecutive fiscal quarters ending
September 30, 1997, shall be equal to the product of (A) Interest Expense
for the three consecutive fiscal quarters ending September 30, 1997 times
(B) a fraction, the numerator of which is 4 and the denominator of which
is 3.
"Interest Payment Date": (a) as to any Base Rate Loan or Swing Line
Loan, the last Banking Day of each March, June, September and December,
(b) as to any Eurodollar Loan or Revolving Offshore Loan having an
Interest Period of three months or less, the last day of such Interest
Period, (c) as to any Eurodollar Loan or Revolving Offshore Loan having an
Interest Period longer than three months, each day which is three months,
or a whole multiple thereof, after the first day of such Interest Period
and the last day of such Interest Period and (d) as to any Fronted
Offshore Loan, the date or dates specified in the applicable Fronting
Lender Addendum.
"Interest Period": (a) with respect to any Eurodollar Loan or
Revolving Offshore Loan,
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar
Loan or Revolving Offshore Loan and ending one, two, three or six
months thereafter, as selected by the relevant Borrower in its
notice of borrowing or notice of conversion, as the case may be,
given with respect thereto; and
(ii) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Loan or
Revolving Offshore Loan and ending one, two, three or six months
thereafter, as selected by the relevant Borrower by irrevocable
notice to the Administrative Agent not less than three Banking Days
prior to the last day of the then current Interest Period with
respect thereto;
provided that, all of the foregoing provisions relating to Interest
Periods are subject to the following:
(1) if any Interest Period would otherwise end on a day that
is not a Banking Day, such Interest Period shall be extended to the
next succeeding Banking Day unless the result of such extension
would be to carry such Interest Period into another calendar month
in which event such Interest Period shall end on the immediately
preceding Banking Day;
(2) any Interest Period that would otherwise extend beyond the
Revolving
<PAGE> 21
15
Termination Date (in the case of Revolving Loans) or beyond the date
final payment is scheduled to be due on the Term Loans (in the case
of Term Loans) shall end on the Revolving Termination Date or such
date of final payment, as the case may be; and
(3) any Interest Period that begins on the last Banking Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Banking Day of a calendar month; and
(b) with respect to any Fronted Offshore Loan, the interest
periods (if any) specified in the applicable Fronting Lender Addendum.
"Interest Rate Protection Agreements": as to any Person, all
interest rate swaps, caps or collar agreements or similar arrangements
entered into by such Person in the ordinary course of business (and not
for speculative purposes) providing for protection against fluctuations in
interest rates or the exchange of nominal interest obligations, either
generally or under specific contingencies.
"Investment": as defined in subsection 9.9.
"Issuance Date": any Banking Day specified in a notice pursuant to
subsection 3.4 as a date on which an Issuing Bank is requested to issue a
Letter of Credit hereunder.
"Issuing Bank": initially, (a) each Lender specified on Schedule
1.1(a) as an Issuing Bank and (b) each Existing Issuing Bank listed on
Schedule 6.22, in each case in its capacity as issuer of a Letter of
Credit. Additional Lenders may from time to time be designated as "Issuing
Banks" by the Company (with the consent of such Lender and with the
consent (which shall not be unreasonably withheld) of the Administrative
Agent) by written notice to such effect from the Company to the
Administrative Agent.
"Judgment Currency": as defined in subsection 13.16(b).
"L/C Sublimit": at any time, the lesser of (a) $50,000,000 and (b)
the Revolving Commitments then in effect.
"L/C Obligations": at any time, an amount equal to the sum of (a)
the aggregate then undrawn and unexpired amount (or the Dollar Equivalent
thereof, in the case of Letters of Credit issued in Offshore Currencies)
of all Letters of Credit and (b) the aggregate amount (or the Dollar
Equivalent thereof, in the case of Letters of Credit issued in Offshore
Currencies) of then unpaid Reimbursement Obligations.
"L/C Participants": with respect to each Letter of Credit, the
collective reference to all the Revolving Lenders.
"Lender": as defined in the Preamble to this Agreement, provided
that, for purposes of subsections 5.12, 5.13, 5.14 and 5.15, all Fronting
Lenders and Issuing Banks shall be deemed to be "Lenders".
"Letters of Credit": as defined in subsection 0.
<PAGE> 22
16
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention
agreement and any Financing Lease having substantially the same economic
effect as any of the foregoing).
"Loan": any loan made by any Lender or Fronting Lender pursuant to
this Agreement.
"Loan Documents": this Agreement, any Notes, any Applications, the
Guarantees and the Security Documents.
"Loan Parties": the Parent Borrowers, each Subsidiary Borrower and
each other Subsidiary of the Parent Borrowers which is a party to a Loan
Document.
"Majority Lenders": at any time, Lenders the Voting Percentages of
which aggregate more than 50%.
"Majority Revolving Lenders": at any time, Revolving Lenders the
Revolving Commitment Percentages of which aggregate more than 50%.
"Majority Term Lenders": at any time, Term Lenders the Term
Commitment Percentages of which aggregate more than 50%.
"Management Investor Notes": as defined in subsection 7.1(b).
"Management Investors": as defined in the Stockholders' Agreement.
"Material Adverse Effect": a material adverse effect on (a) at any
time on or prior to the Closing Date, the Recapitalization, (b) the
business, operations, property, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole or (c) the
validity or enforceability of this Agreement or any of the other Loan
Documents or the rights or remedies of the Administrative Agent or the
Lenders hereunder or thereunder.
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated
as such in or under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"Material Foreign Subsidiary": any Foreign Subsidiary of the Company
(a) which has liabilities or obligations, or is a party to any litigation
or other proceeding involving amounts, in excess of $2,500,000 in the
aggregate, provided that no Foreign Subsidiary shall be a Material Foreign
Subsidiary under this clause (a) unless a Borrower or any Domestic
Operating Subsidiary or other Material Foreign Subsidiary is or may be
liable for such liabilities, obligations, litigations or proceedings, or
(b) which owns assets (net of current liabilities (other than those owed
to the Company or any of its Subsidiaries) immediately prior to the
occurrence of the relevant event described in Section 10(f) with respect
to such Foreign Subsidiary) with an aggregate book value in excess of
$2,500,000.
"Material Lease": any lease, sublease, license or other occupancy
agreement (a) which involves an obligation with respect to 50,000 or more
square feet in area of real property and (b)
<PAGE> 23
17
to which any Borrower or any of its Subsidiaries is a party or pursuant to
which such Borrower or any such Subsidiary uses or occupies real property.
"Media and Production Vendors": as defined in the definition of Y&R
Agent Subsidiary.
"Mergers": collectively, the Holdings Merger, the Partnership Merger
and the Company Merger.
"Mortgages": the collective reference to any Parent Borrower
Mortgages and any Subsidiary Mortgages.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Negotiated Rate": an interest rate agreed upon by the relevant
Parent Borrower and the Swing Line Lender.
"Negotiated Rate Loan": a Swing Line Loan that bears interest at the
Negotiated Rate for an interest period (not to exceed 30 days) to be
agreed upon by the relevant Parent Borrower and the Swing Line Lender.
"Net Income": as to any Person for any period, the net income of
such Person and its Consolidated Subsidiaries as determined in accordance
with GAAP for such period.
"Net Proceeds": (a) with respect to any sale, lease or other
disposition of assets (other than inventory sold, leased or otherwise
disposed of in the ordinary course of business) by any Loan Party or any
of its Subsidiaries, the net amount equal to the aggregate amount received
in cash (including any cash received by way of deferred payment pursuant
to a note receivable, other non-cash consideration or otherwise, but only
as and when such cash is so received) in connection with such sale or
other disposition minus the sum of (i) the reasonable and documented fees,
commissions and other out-of-pocket expenses (including, without
limitation, fees and expenses of attorneys, accountants, appraisers, title
examiners, service companies and environmental consultants) incurred by
such Loan Party and its Subsidiaries and payable to Persons other than
Affiliates of such Loan Party in connection with such sale or other
disposition (including, in connection with the repayment or amendment of
any Indebtedness which is secured in whole or in part by such assets) and
(ii) federal, state, local and foreign taxes incurred by such Loan Party
and its Subsidiaries in connection with such sale;
(b) with respect to any issuance of any Indebtedness or Capital
Stock by any Loan Party or any of its Subsidiaries, the net amount equal
to the aggregate amount received in cash (including any cash received by
way of deferred payment pursuant to a note receivable, other non-cash
consideration or otherwise, but only as and when such cash is so received)
in connection with such issuance minus the reasonable and documented fees,
commissions and other out-of-pocket expenses incurred by such Loan Party
and its Subsidiaries in connection with such issuance; and
(c) with respect to proceeds received by any Loan Party or any of
their Subsidiaries in respect of a Casualty Event, the amount of such
proceeds minus (i) the reasonable and documented out-of-pocket fees and
expenses incurred by such Loan Party and its Subsidiaries in
<PAGE> 24
18
connection with the collection of such proceeds and (ii) any such proceeds
received in respect of insurance which are required to be paid to any
co-insured Persons or other loss payees with respect to such insurance.
"Net Worth": of any Person, as of the date of determination thereof,
all items which in conformity with GAAP would be included under
shareholders' equity on a consolidated balance sheet of such Person and
its Consolidated Subsidiaries at such date of determination; provided that
the "Net Worth" of any Person shall not include the effects of any (a)
non-cash compensation charges after the Closing Date or any charges or
losses relating to the sale of the New York Real Property, (b) any foreign
currency translation adjustments and (c) adjustments in respect of pension
plan liabilities.
"New York Real Estate Consolidation": as defined in the definition
of EBITDA.
"New York Real Property": the real property owned by Y&R Inc. (New
York) located at 285 Madison Avenue, New York City, New York.
"Non-Excluded Taxes": as defined in subsection 5.14.
"Non-Executing Persons": as defined in subsection 7.1(a).
"Notes": the collective reference to the Fronted Loan Notes, the
Revolving Notes, the Swing Line Note and the Term Notes.
"Obligations": the unpaid principal of and interest on the Fronted
Offshore Loans and all other obligations and liabilities of the Subsidiary
Borrowers to the Administrative Agent, the Lenders and the Fronting
Lenders (including, without limitation, interest accruing at the then
applicable rate provided in this Agreement after the maturity of the
Fronted Offshore Loans and interest accruing at the then applicable rate
provided in this Agreement after the filing of any petition in bankruptcy,
or the commencement of any insolvency, reorganization or like proceeding,
relating to the relevant Subsidiary Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding),
whether direct or indirect, absolute or contingent, due or to become due,
or now existing or hereafter incurred, which may arise under, out of, or
in connection with, this Agreement, the other Loan Documents, or any other
document made, delivered or given in connection herewith or therewith, in
each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees and disbursements of counsel to the
Administrative Agent or any Lender that are required to be paid by the
Subsidiary Borrowers pursuant to the terms of this Agreement or any other
Loan Document).
"Offers": as defined in subsection 7.1(c).
"Offshore Base Rate": with respect to each day during each Interest
Period pertaining to a Revolving Offshore Loan, the rate of interest per
annum (rounded upwards to the nearest 1/32 of 1%) determined by the
Administrative Agent as the rate at which deposits in the applicable
Eligible Offshore Currency in the approximate amount of BofA's Revolving
Offshore Loan for such Interest Period would be offered by BofA London (or
such other office as may be designated for such purpose by BofA), to major
banks in the London interbank market at their request at approximately
11:00 a.m. (London time) two Banking Days prior to the commencement of
such Interest Period.
<PAGE> 25
19
"Offshore Currency": a currency other than Dollars that is freely
tradeable or exchangeable into Dollars.
"Offshore Currency Equivalent": at any time as to any amount
denominated in Dollars, the equivalent amount in the relevant Offshore
Currency or Currencies as determined by the Administrative Agent at such
time on the basis of the Spot Rate for the purchase of such Offshore
Currency or Currencies with Dollars on the date of determination thereof.
"Offshore Currency Loans": Loans denominated in an Offshore
Currency.
"Offshore Currency Sublimit": at any time, (a) as to all Offshore
Currency Loans, the lesser of (i) $175,000,000 and (ii) the Revolving
Commitments then in effect and (b) as to Offshore Currency Loans
denominated in the same Offshore Currency, the lesser of (i) if such
Offshore Currency is (A) an Eligible Offshore Currency or (B) Canadian
Dollars or Italian Lira, $75,000,000, or, if such Offshore Currency is any
other Offshore Currency, $25,000,000 and (ii) the Revolving Commitments
then in effect.
"Offshore Rate": with respect to each day during each Interest
Period pertaining to a Revolving Offshore Loan, a rate per annum
determined for such day in accordance with the following formula (rounded
upward to the nearest 1/100th of 1%):
Offshore Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
The Offshore Rate shall be adjusted automatically as to all Revolving
Offshore Rate Loans then outstanding as of the effective date of any
change in the Eurocurrency Reserve Requirements.
"Operating Subsidiary": any Subsidiary other than an Inactive
Subsidiary.
"Outstanding Notes": (i) $32.0 million in original principal amount
of 8.75% Guaranteed Notes due January 16, 1999 issued pursuant to that
certain Amended and Restated Guaranteed Senior Note Agreement dated as of
July 15, 1994 and (ii) $100.0 million in original principal amount of
7.01% Guaranteed Notes due February 15, 2006 issued pursuant to that
certain Guaranteed Senior Note Agreement dated as of February 15, 1996.
"Outstanding Swing Line Loans": as defined in subsection 3.12(b).
"Parent Borrower": as defined in the Preamble to this Agreement.
"Parent Borrower Mortgage": a Mortgage, substantially in the form of
Exhibit E or such other form as shall be reasonably acceptable to the
Administrative Agent and the Company, with respect to the New York Real
Property and any other parcel of real property owned by a Parent Borrower
upon which a Mortgage is granted in accordance with subsection 8.10, as
the same may be amended, supplemented or otherwise modified from time to
time.
"Parent Borrower Pledge Agreement": the Pledge Agreement to be
executed and delivered by the Parent Borrowers, substantially in the form
of Exhibit F, as the same may be amended, supplemented or otherwise
modified from time to time.
<PAGE> 26
20
"Parent Borrower Security Agreement": the Security Agreement to be
executed and delivered by the Parent Borrowers, substantially in the form
of Exhibit G, as the same may be amended, supplemented or otherwise
modified from time to time.
"Parent Borrower Security Documents": the collective reference to
any Parent Borrower Mortgages, the Parent Borrower Pledge Agreement and
the Parent Borrower Security Agreement.
"Participant": as defined in subsection 13.6(b).
"Partnership Merger": the merger of a Subsidiary of Y&R Holdings
with and into Y&R LP, with Y&R LP as the surviving entity.
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Permitted Investments": the collective reference to Investments
permitted pursuant to subsection 9.9(c).
"Person": an individual, partnership, corporation, business trust,
joint stock company, limited liability company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Company or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Pledge Agreements": the collective reference to the Parent Borrower
Pledge Agreement and the Subsidiaries Pledge Agreement.
"Properties": as defined in subsection 6.17.
"Proportionate EBITDA": of the Company for any period, the sum of
(a) EBITDA of the Company, for such period, plus (b) the sum across all
Persons which are partially but not wholly-owned by the Company (or by any
other Person which is partially but not wholly owned by the Company) of
such Person's EBITDA, for such period, multiplied by the effective primary
ownership percentage held in such Person by the Company at the "as of"
date for computing Proportionate EBITDA. EBITDA associated with any Person
(or interests therein) or businesses acquired after the Closing Date will
be included for the purposes of calculating Proportionate EBITDA, and
EBITDA associated with any Person (or interests therein) or business sold
after the Closing Date will be deducted from Proportionate EBITDA, in each
case as if such transaction occurred at the beginning of the relevant
period.
"Proportionate EBITDAR": of the Company for any period, the amount
equal to Proportionate EBITDA of the Company for such period plus
Consolidated Rental Expense of the Company (calculated without giving
effect to clause (b) of the definition thereof) for such period.
"Recapitalization": the resulting ownership of the Parent Borrowers
after the
<PAGE> 27
21
consummation of the transactions contemplated by subsections 7.1(b),
7.1(c) and 7.1(e).
"Recapitalization Documentation": as defined in subsection 7.1(d).
"Reference Rate": the rate of interest in effect for such day as
publicly announced from time to time by BofA in San Francisco, California,
as its "reference rate." The "reference rate" is a rate set by BofA based
upon various factors including BofA's costs and desired return, general
economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above, or below such
announced rate. Any change in the reference rate announced by BofA shall
take effect at the opening of business on the day specified in the public
announcement of such change.
"Refinancing": as defined in subsection 7.1(w).
"Register": as defined in subsection 13.6(d).
"Regulation U": Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"Reimbursement Obligation": the obligation of the Borrowers to
reimburse the relevant Issuing Bank pursuant to subsection 0 for amounts
drawn under Letters of Credit issued by such Issuing Bank.
"Related Equity Securities": as to any Person, all options, warrants
or other rights to acquire, or obligations to issue, shares of Capital
Stock of, equity interests in, or partnership interests in, such Person,
or similar securities or contractual obligations the value of which is
derived from the value of an equity interest in such Person, or securities
convertible into or exchangeable for Capital Stock of, equity interests
in, partnership interests in, or similar securities or contractual
obligations of, such Person.
"Remaining Equity Interests": all Equity Interests (together with
interest payable with respect thereto) which are not purchased on the
Closing Date pursuant to the Offers and which are not contributed to the
Company by the Management Investors on or prior to the Closing Date.
"Rental Expense": of any Person for any period, the sum of (a) the
aggregate amount of fixed and contingent rental expense of such Person for
such period determined in accordance with GAAP with respect to leases of
real and personal property, net of rental income from any sublease
arrangements and (b) any cash payments resulting in a reduction in the
lease loss reserve in respect of the New York Real Property.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b)
of ERISA, other than those events as to which the thirty day notice period
is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
ss. 2615.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents
of such Person, and any law, treaty, rule or
<PAGE> 28
22
regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its
property is subject.
"Reset Date": as defined in subsection 5.5.
"Responsible Officer": as to any Person, the chief executive
officer, the president, any member of the management committee of such
Person or any other officer of such Person designated as such in writing
by the Company or, with respect to financial matters, the chief financial
officer, the chief accounting officer or the treasurer of such Person.
"Revolving Commitment": of any Lender at any date, the obligation of
such Lender at such date to (a) make Revolving Loans, (b) issue or
participate in Letters of Credit, (c) participate in Fronted Offshore
Loans and (d) participate in Swing Line Loans, in an aggregate principal
and/or face amount at any one time outstanding not to exceed the amount
set forth opposite such Lender's name on Schedule 1.1(a); collectively, as
to all such Lenders, the "Revolving Commitments".
"Revolving Commitment Percentage": with respect to each Revolving
Lender, (a) at any time prior to the termination of the Revolving
Commitments, the percentage which such Revolving Lender's Revolving
Commitment then constitutes of the Aggregate Revolving Commitment at such
time and (b) at any time after the termination of the Revolving
Commitments, the percentage which (i) the sum of (A) the principal amount
(or the Dollar Equivalent thereof, in the case of Offshore Currency Loans)
of such Lender's Loans (other than Swing Line Loans and Fronted Offshore
Loans) then outstanding plus (B) the product of such Revolving Lender's
Revolving Commitment Percentage immediately prior to the termination of
the Revolving Commitments (after giving effect to any permitted assignment
pursuant to subsection 13.6) times the sum of the L/C Obligations and the
aggregate principal amount (or the Dollar Equivalent thereof, in the case
of Fronted Offshore Loans) of Swing Line Loans and Fronted Offshore Loans
of all the Lenders then outstanding then constitutes of (ii) the sum of
(x) the aggregate principal amount (or the Dollar Equivalent thereof, in
the case of Offshore Currency Loans) of Revolving Loans, Swing Line Loans
and Fronted Offshore Loans then outstanding plus (y) the aggregate L/C
Obligations of all the Lenders then outstanding.
"Revolving Commitment Period": the period from (and including) the
Closing Date to (but not including) the Revolving Termination Date or such
earlier date upon which the Revolving Commitments are terminated as
provided herein.
"Revolving Lender": any Lender with an unused Revolving Commitment
and/or any Revolving Loans outstanding hereunder; collectively, the
"Revolving Lenders".
"Revolving Loan": as defined in subsection 3.1(a).
"Revolving Note": as defined in subsection 5.3(g).
"Revolving Offshore Loan": Revolving Loans denominated in an
Eligible Offshore Currency the rate of interest applicable to which is
based upon the Offshore Rate with respect to such Eligible Offshore
Currency.
"Revolving Termination Date": March 31, 2003.
<PAGE> 29
23
"Second Drawdown Date": a Business Day during the Term Commitment
Period specified in a notice of borrowing delivered pursuant to subsection
2.2.
"Security Agreements": the collective reference to the Parent
Borrower Security Agreement and the Subsidiaries Security Agreement.
"Security Documents": the collective reference to this Agreement,
the Mortgages, the Security Agreements, the Pledge Agreements and all
other security documents hereafter delivered to the Administrative Agent
granting a Lien on any asset or assets of any Person to secure the
obligations and liabilities of the Borrowers hereunder and under any of
the other Loan Documents or to secure any guarantee of any such
obligations and liabilities.
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that, as of
any date of determination, (a) the amount of the "present fair saleable
value" of the assets of such Person will, as of such date, exceed the
amount of all "liabilities of such Person, contingent or otherwise", as of
such date, as such quoted terms are determined in accordance with
applicable federal and state laws governing determinations of the
insolvency of debtors, (b) the present fair saleable value of the assets
of such Person will, as of such date, be greater than the amount that will
be required to pay the liability of such Person on its debts as such debts
become absolute and matured, (c) such Person will not have, as of such
date, an unreasonably small amount of capital with which to conduct its
business, and (d) such Person will be able to pay its debts as they
mature. For purposes of this definition, (i) "debt" means liability on a
"claim", and (ii) "claim" means any (x) right to payment, whether or not
such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured or (y) right to an equitable remedy for breach of
performance if such breach gives rise to a right to payment, whether or
not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured or unmatured, disputed, undisputed, secured or
unsecured.
"Special Compensation Arrangements": as defined in subsection
7.1(c).
"Spot Rate": (a) as to any Eligible Offshore Currency, the rate
quoted by BofA as the spot rate for the purchase by BofA of Dollars with
such Eligible Offshore Currency or the purchase by BofA of such Eligible
Offshore Currency with Dollars, as the case may be, through its FX Trading
Office at approximately 8:00 a.m. (San Francisco time) on such date as of
which the foreign exchange computation is made for delivery two Banking
Days later and (b) as to any Fronted Offshore Currency, the rate quoted by
the relevant Fronting Lender as the spot rate for the purchase by such
Fronting Lender of Dollars with such Fronted Offshore Currency or the
purchase by such Fronting Lender of such Fronted Offshore Currency with
Dollars, as the case may be, at the time specified in such Fronting
Lender's Fronting Lender Addendum and on such date as of which the foreign
exchange computation is made for delivery two Banking Days later.
"Stockholders' Agreement": the Stockholders' Agreement, dated as of
December 12, 1996, by and among the HFCP Investors, the Management
Investors, the Management Voting Trust (as defined therein), the Director
Investors (as defined therein), Y&R Holdings, Y&R Inc. (New York), and Y&R
Inc. (Delaware), as the same may be amended, supplemented or
<PAGE> 30
24
otherwise modified from time to time in accordance with subsection 7.1(d).
"Subsidiaries Guarantee": the Guarantee to be executed and delivered
by each Domestic Subsidiary (other than Summit and any Y&R Agent
Subsidiary) and certain Foreign Subsidiaries, substantially in the form of
Exhibit H, as the same may be amended, supplemented or otherwise modified
from time to time.
"Subsidiaries Pledge Agreement": the Pledge Agreement to be executed
and delivered by the Domestic Subsidiaries and Foreign Subsidiaries
parties thereto, substantially in the form of Exhibit I, as the same may
be amended, supplemented or otherwise modified from time to time.
"Subsidiaries Security Agreement": the Security Agreement to be
executed and delivered by each Domestic Subsidiary (other than Summit and
any Y&R Agent Subsidiary), substantially in the form of Exhibit J, as the
same may be amended, supplemented or otherwise modified from time to time.
"Subsidiaries Security Documents": the collective reference to any
Subsidiary Mortgages, the Subsidiaries Pledge Agreement and the
Subsidiaries Security Agreement.
"Subsidiary": as to any Person, a corporation, partnership or other
entity (a) of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, directly
or indirectly through one or more intermediaries, or both, by such Person
or (b) the accounts of which would be consolidated with those of such
Person in such Person's Consolidated financial statements if such
financial statements were prepared in accordance with GAAP at such time.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Company.
"Subsidiary Borrower": at any time, any Foreign Subsidiary of the
Company designated as a Subsidiary Borrower by the Company pursuant to
subsection 5.17 that has not ceased to be a Subsidiary Borrower pursuant
to such subsection or Section 10.
"Subsidiary Mortgage": a Mortgage, in such form as shall be
reasonably acceptable to the Administrative Agent and the relevant
Domestic Subsidiary, with respect to each parcel of real property owned by
a Domestic Subsidiary upon which a Mortgage is granted in accordance with
subsection 8.10, as the same may be amended, supplemented or otherwise
modified from time to time.
"Summit": Summit Insurance Company, a Subsidiary of the Parent
Borrowers.
"Swing Line Commitment": at any time, the obligation of the Swing
Line Lender to make Swing Line Loans pursuant to subsection 3.11.
"Swing Line Lender": BofA, in its capacity as provider of the Swing
Line Loans.
"Swing Line Loans": as defined in subsection 3.11.
<PAGE> 31
25
"Swing Line Loan Participation Certificate": a certificate,
substantially the form of Exhibit L.
"Swing Line Note": as defined in subsection 5.3(g).
"Term Loan": as defined in subsection 2.1.
"Term Commitment": of any Lender at any time, the obligation of such
Lender at such time to make Term Loans to the Parent Borrowers in an
aggregate principal amount not to exceed the amount set forth opposite
such Lender's name on Schedule 1.1(a); collectively, as to all such
Lenders, the "Term Commitments".
"Term Commitment Percentage": at any time with respect to each Term
Lender, the percentage which (a) the sum of (i) such Term Lender's then
unused Term Commitment and (ii) the principal amount of such Term Lender's
then outstanding Term Loans, then constitutes of (b) the sum of (i) the
aggregate then unused Term Commitments of all the Term Lenders and (ii)
the aggregate principal amount of the then outstanding Term Loans of all
the Term Lenders.
"Term Commitment Period": the period from (and including) the
Closing Date to (and including) the first to occur of the Second Drawdown
Date and March 30, 1997 or such earlier date upon which the Term
Commitments are terminated as provided herein.
"Term Lender": any Lender with an unused Term Commitment hereunder
and/or any Term Loans outstanding hereunder; collectively, the "Term
Lenders".
"Term Note": as defined in subsection 5.3(g).
"Title Insurance Company": as defined in subsection 7.1(r).
"Tranche": the collective reference to Eurodollar Loans or Revolving
Offshore Loans of the same currency the then current Interest Periods with
respect to all of which begin on the same date and end on the same later
date (whether or not such Loans shall originally have been made on the
same day); Tranches may be identified as "Eurodollar Tranches" or
"Offshore Tranches", as the case may be.
"Transferee": as defined in subsection 13.6(f).
"Type": as to any Loan, its nature as a Base Rate Loan, a Eurodollar
Loan, Revolving Offshore Loan or Fronted Offshore Loan.
"UCC Filing Collateral": Collateral (other than fixtures) as to
which filing financing statements under the applicable Uniform Commercial
Code is an effective method of perfection of a security interest in such
Collateral.
"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No.
500, as the same may be amended or replaced from time to time.
"Voting Percentage": as to any Lender (a) at any time prior to the
termination of the Revolving Commitments, the percentage which (i) the sum
of (x) such Lender's Revolving
<PAGE> 32
26
Commitment plus (y) such Lender's unused Term Commitment plus (z) the
outstanding principal amount of such Lender's Term Loans then constitutes
of (ii) the sum of (x) the Revolving Commitment plus (y) the Available
Term Commitment plus (z) the aggregate principal amount of Term Loans of
all the Term Lenders then outstanding, and (b) at any time after the
termination of the Revolving Commitments, the percentage which (i) the sum
of (x) the principal amount (or the Dollar Equivalent thereof, in the case
of Offshore Currency Loans) of such Lender's Loans (other then Swing Line
Loans and Fronted Offshore Loans) then outstanding plus (y) the product of
such Lender's Revolving Commitment Percentage times the sum of the L/C
Obligations and the aggregate principal amount (or the Dollar Equivalent
thereof, in the case of Fronted Offshore Loans) of Swing Line Loans and
Fronted Offshore Loans then outstanding then constitutes of (ii) the sum
of (x) the aggregate principal amount (or the Dollar Equivalent thereof,
in the case of Offshore Currency Loans) of Loans of all the Lenders then
outstanding plus (y) the aggregate L/C Obligations of all the Lenders then
outstanding.
"Y&R Agent Subsidiary": any Domestic Subsidiary of any Borrower
which is designated as such in writing by the Parent Borrowers to the
Administrative Agent and which satisfies the following conditions: (a)
except as permitted pursuant to clause (d) below, (i) the assets of such
Subsidiary shall consist solely of amounts owed by Persons (other than the
Borrowers and Subsidiaries of the Borrowers) ("Clients") to such Y&R Agent
Subsidiary in respect of media and production orders placed by any
Borrower or any Subsidiary of any Borrower on behalf of or at the request
of such Clients which amounts are expected to be paid by such Subsidiary
to the Person or Persons which performed or exhibited the advertising
pursuant to such media and production orders ("Media and Production
Vendors"), and (ii) the liabilities of such Subsidiary shall consist
solely of the obligation to pay amounts owed in respect of media and
production orders placed by any Borrower or any Subsidiary of any Borrower
on behalf of or at the request of such Clients to the Media and Production
Vendors which performed such media and production orders; (b) such
Subsidiary shall not invoice any Client for or collect from any Client any
amounts other than amounts which such Subsidiary expects to pay to Media
and Production Vendors in respect of media and production orders placed by
any Borrower or any Subsidiary of any Borrower on behalf of or at the
request of such Clients and such Subsidiary shall not be entitled to, and
shall not, invoice or collect any amount owed by Clients in respect of
service charges, commissions and other amounts which are not expected to
paid to Media and Production Vendors (including, but not limited to,
amounts which would be reflected on a Consolidated statement of income of
the Company); (c) such Subsidiary shall use amounts collected by it from
Clients to satisfy the obligations owed to Media and Production Vendors
which were expected to be satisfied with such amounts at the time such
amounts were collected; and (d) such Subsidiary shall not (i) engage in
any business, other than as expressly contemplated under this definition,
(ii) own any assets, other than as expressly contemplated under this
definition, (iii) incur, assume or suffer to exist any Indebtedness or
other liabilities or obligations (including, but not limited to, Guarantee
Obligations), other than as expressly contemplated under this definition
and as permitted pursuant to subsection 9.2(b), (iv) incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired, or (v) make any Investments,
other than as permitted pursuant to subsection 9.9(b), 9.9(f) and 9.9(g).
"Y&R Holdings": as defined in the Preamble to this Agreement.
"Y&R Inc. (Delaware)": as defined in the Preamble to this Agreement.
"Y&R Inc. (New York)": as defined in the Preamble to this Agreement.
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"Y&R LP": as defined in the Preamble to this Agreement.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any other Loan Document or any certificate or other document made
or delivered pursuant hereto.
(b) As used herein and in any other Loan Document, and any
certificate or other document made or delivered pursuant hereto, accounting
terms relating to the Parent Borrowers and their Subsidiaries not defined in
subsection 1.1 and accounting terms partly defined in subsection 1.1, to the
extent not defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) Each determination of an amount hereunder that requires the
conversion of a currency into another currency shall be based on the Spot Rate
for such currency in effect as of the most recent applicable Calculation Date
preceding the date of such determination.
(e) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF TERM COMMITMENTS
2.1 Term Loans. Subject to the terms and conditions hereof, each
Term Lender severally agrees to make a term loan (each, a "Term Loan") to the
Parent Borrowers (i) on the Closing Date in an amount up to such Term Lender's
Term Commitment Percentage of $265,000,000 or such lesser amount as shall be
requested by the Parent Borrowers pursuant to subsection 2.2 and (ii) on the
Second Drawdown Date in an amount equal to such Term Lender's Term Commitment
Percentage of the then Available Term Commitment. Subject to subsection 5.7, the
Term Loans may from time to time be (a) Eurodollar Loans, (b) Base Rate Loans or
(c) a combination thereof, as determined by the Company and notified to the
Administrative Agent in accordance with subsections 2.2 and 5.6.
2.2 Procedure for Term Loan Borrowing. The Parent Borrowers may
borrow under the Term Commitments during the Term Commitment Period on the
Closing Date and on the Second Drawdown Date, provided that the Parent Borrowers
shall give the Administrative Agent irrevocable notice (which notice must be
received by the Administrative Agent prior to 8:30 A.M., San Francisco time, (a)
three Banking Days prior to the requested Borrowing Date, if all or any part of
the requested Term Loans are to be initially Eurodollar Loans or (b) one Banking
Day prior to the requested Borrowing Date, otherwise), specifying (i) the amount
to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing
is to be of Eurodollar Loans, Base Rate Loans or a combination thereof and (iv)
if the borrowing is to be entirely or partly of Eurodollar Loans, the respective
amounts of each such Type of Loan and the respective lengths of the initial
Interest Periods therefor. Each borrowing under the Term Commitments shall be in
an amount equal to (x) in the case of Base Rate Loans, $5,000,000 or a whole
multiple of $1,000,000 in excess thereof and (y) in the case of Eurodollar
Loans, $10,000,000 or a whole multiple of $1,000,000 in excess thereof,
provided, further, that Y&R (Delaware) may not borrow under the Term Commitments
prior to the consummation of the Company Merger. Upon receipt of any such notice
from the Parent Borrowers, the Administrative Agent shall promptly notify each
Lender
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thereof. Each Term Lender will make the amount of its pro rata share of the Term
Loans available to the Administrative Agent for the account of the Parent
Borrowers at the Administrative Agent's Payment Office prior to 10:00 A.M., San
Francisco time, on the Closing Date or the Second Drawdown Date, as the case may
be, in Dollars and in funds immediately available to the Administrative Agent.
The Administrative Agent shall credit the account of the Parent Borrower
specified in the relevant notice of borrowing on the books of such office of the
Administrative Agent on the related Borrowing Date, with the aggregate of the
amounts made available to the Administrative Agent by the Term Lenders and in
like funds as received by the Administrative Agent.
SECTION 3. AMOUNT AND TERMS OF REVOLVING COMMITMENTS
3.1 Revolving Commitments. (a) Subject to the terms and conditions
hereof, each Revolving Lender severally agrees to make revolving credit loans
("Revolving Loans") to the Borrowers from time to time during the Revolving
Commitment Period in an aggregate principal amount at any one time outstanding
which, when added to such Revolving Lender's Revolving Commitment Percentage of
the sum of the then outstanding L/C Obligations, the aggregate principal amount
of then outstanding Swing Line Loans and the Dollar Equivalent of the then
outstanding principal amount of Fronted Offshore Loans (after giving effect to
the use of proceeds of such Revolving Loans), does not exceed the amount of such
Revolving Lender's Revolving Commitment and provided that, after giving effect
to such Revolving Loan and the use of proceeds thereof, (i) the Dollar
Equivalent of the aggregate outstanding principal amount of Offshore Currency
Loans does not exceed the Offshore Currency Sublimit for all Offshore Currency
Loans, (ii) the Dollar Equivalent of the aggregate outstanding principal amount
of Offshore Currency Loans in any Offshore Currency does not exceed the Offshore
Currency Sublimit for Offshore Currency Loans in such Offshore Currency and
(iii) the aggregate outstanding principal amount of all Revolving Loans made in
Dollars to any Subsidiary Borrower shall not, together with the Dollar
Equivalent of all outstanding Revolving Offshore Loans made to such Subsidiary
Borrower, exceed $75,000,000. During the Revolving Commitment Period, each
Borrower may use the Revolving Commitments by borrowing, prepaying the Revolving
Loans in whole or in part, and reborrowing, all in accordance with the terms and
conditions hereof.
(b) Subject to subsection 5.7, the Revolving Loans may from time to
time be (i) Eurodollar Loans, (ii) Base Rate Loans, (iii) (subject to the
limitations set forth herein) Revolving Offshore Loans or (iv) a combination
thereof, as determined by the Company and notified to the Administrative Agent
in accordance with subsections 3.2 and 5.6, provided that no Revolving Loan
shall be made as a Eurodollar Loan or a Revolving Offshore Loan after the day
that is one month prior to the Revolving Termination Date.
3.2 Procedure for Revolving Borrowing. Each Borrower may borrow
under the Revolving Commitments during the Revolving Commitment Period on any
Banking Day, provided that the Company shall give the Administrative Agent
irrevocable notice (which notice must be received by the Administrative Agent
prior to 8:30 A.M., San Francisco time, (a) three Banking Days prior to the
requested Borrowing Date, if all or any part of the requested Revolving Loans
are to be initially Eurodollar Loans, (b) four Banking Days prior to the
requested Borrowing Date, if all or any part of the requested Revolving Loans
are to be initially Revolving Offshore Loans or (c) one Banking Day prior to the
requested Borrowing Date, otherwise), specifying (i) the amount to be borrowed,
(ii) the requested Borrowing Date, (iii) whether the borrowing is to be of
Eurodollar Loans, Base Rate Loans, Revolving Offshore Loans or a combination
thereof and (iv) if the borrowing is to be entirely or partly of Eurodollar
Loans or Revolving Offshore Loans, the respective amounts of each such Type of
Loan and the respective lengths of the initial Interest Periods therefor and, in
the case of Revolving Offshore Loans, the type and amount of the Eligible
Offshore Currency or Currencies in which such Loans are to be
<PAGE> 35
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denominated. Each borrowing under the Revolving Commitments shall be in an
amount equal to (x) in the case of Base Rate Loans, $5,000,000 or a whole
multiple of $1,000,000 in excess thereof (or, if the then Available Revolving
Commitment is less than $5,000,000, such lesser amount) and (y) in the case of
Eurodollar Loans or Revolving Offshore Loans, $5,000,000 (or the Offshore
Currency Equivalent thereof, in the case of Revolving Offshore Loans) or a whole
multiple of $1,000,000 (or 1,000,000 units of the relevant Eligible Offshore
Currency, in the case of Revolving Offshore Loans) in excess thereof, provided,
further, that Y&R (Delaware) may not borrow under the Revolving Commitments
prior to the consummation of the Company Merger. Upon receipt of any such notice
from the Company, the Administrative Agent shall promptly notify each Lender
and, if such notice relates to a borrowing of Revolving Offshore Loans, the
European Payment Agent thereof. Each Lender will make the amount of its pro rata
share of each borrowing available to the Administrative Agent or, in the case of
Revolving Offshore Loans, the European Payment Agent, for the account of the
relevant Borrower at the Administrative Agent's Payment Office prior to 11:00
A.M., local time of such office, on the Borrowing Date requested by the Company
in funds immediately available to the Administrative Agent in Dollars or in the
Eligible Offshore Currency, as the case may be, of such borrowing. Such
borrowing will then be made available to the relevant Borrower by the
Administrative Agent or the European Payment Agent, as the case may be,
crediting the account of the relevant Borrower on the books of such office with
the aggregate of the amounts made available to the Administrative Agent by the
Lenders and in like funds as received by the Administrative Agent.
3.3 L/C Commitment. (a) Subject to the terms and conditions hereof,
each Issuing Bank, in reliance on the agreements of the other Revolving Lenders
set forth in subsection 3.6 agrees to issue letters of credit ("Letters of
Credit") for the account of the Parent Borrowers (and, if such Letter of Credit
is issued for the benefit of any Subsidiary, for the account of the Parent
Borrowers and such Subsidiary, jointly and severally) on any Business Day during
the Revolving Commitment Period in such form as may be approved from time to
time by such Issuing Bank; provided that (i) no Issuing Bank shall have any
obligation to issue any Letter of Credit if, after giving effect to such
issuance, (A) the L/C Obligations at such time would exceed the L/C Sublimit or
(B) the Aggregate Outstanding R/C Extensions of Credit at such time would exceed
the Aggregate Revolving Commitment at such time and (ii) no Issuing Bank shall
issue any Letter of Credit unless it shall have received notice from the
Administrative Agent that the issuance of such Letter of Credit will not violate
clause (i) above. Each Continuing Letter of Credit shall be deemed to be issued
under this Agreement on the Closing Date (to the extent such Continuing Letter
of Credit has not been fully drawn or has not expired or been terminated as of
the Closing Date) and shall be a Letter of Credit for all purposes hereof (other
than subsection 3.4) and the other Loan Documents.
(b) Each Letter of Credit shall:
(i) be denominated in Dollars, an Eligible L/C Currency or such
other Offshore Currency as the Company, the relevant Issuing Bank and the
Administrative Agent may from time to time agree, and shall be either (A)
a standby letter of credit issued to support obligations of the Company or
any of its Subsidiaries, contingent or otherwise, or (B) a commercial
letter of credit issued in respect of the purchase of inventory or other
goods or services by the Company or any of its Subsidiaries in the
ordinary course of business, and
(ii) expire no later than the earlier of (A) 30 calendar days prior
to the Revolving Termination Date and (B) one year after the date of
issuance thereof, provided that, subject to the immediately preceding
clause (A), any standby Letter of Credit may, at the request of the
Company as set forth in the applicable Application, be automatically
extended on each anniversary of the issuance thereof for an additional
period of one year unless the Issuing Bank which issued such Letter of
Credit shall have given prior written notice to the Company and the
<PAGE> 36
30
beneficiary of such Letter of Credit that such Letter of Credit will not
be extended.
(c) Each Letter of Credit shall be subject to the Uniform Customs
and, to the extent not inconsistent therewith, the laws of the State of New
York.
(d) No Issuing Bank shall at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause such
Issuing Bank or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.4 Procedure for Issuance of Letters of Credit. The Company may
from time to time request that an Issuing Bank issue a Letter of Credit by (a)
delivering to such Issuing Bank at its address for notices specified herein in
such manner as may be agreed by or be acceptable to such Issuing Bank (including
by electronic transmission) an application therefor, completed to the
satisfaction of such Issuing Bank, and such other certificates, documents and
other papers and information as such Issuing Bank may request and (b)
concurrently delivering a notice to the Administrative Agent that such Letter of
Credit has been requested. Upon receipt of any such application, each Issuing
Bank agrees to process such application and the certificates, documents and
other papers and information delivered to it in connection therewith in
accordance with its customary procedures and shall promptly issue the Letter of
Credit requested thereby (but in no event shall such Issuing Bank be required to
issue any Letter of Credit earlier than three Business Days after its receipt of
the application therefor and all such other certificates, documents and other
papers and information relating thereto) by issuing the original of such Letter
of Credit to the beneficiary thereof or as otherwise may be agreed by such
Issuing Bank and the Company with respect thereto. Each Issuing Bank shall
furnish a copy of each Letter of Credit issued by such Issuing Bank to the
Company and the Administrative Agent promptly following the issuance thereof.
The Administrative Agent shall furnish a copy of each such Letter of Credit to
each Revolving Lender promptly following receipt thereof. The Administrative
Agent shall deliver to each L/C Participant on the last Banking Day of each
calendar month and on each Fee Payment Date a report setting forth for such
period the aggregate daily stated amount available to be drawn under the Letters
of Credit issued by all Issuing Banks that were outstanding during such period.
3.5 Letter of Credit Fees, Commissions and Other Charges. (a) The
Parent Borrowers (or, if a Letter of Credit is issued for the benefit of any
Subsidiary, the Parent Borrowers and such Subsidiary, jointly and severally)
shall pay to the relevant Issuing Bank with respect to each Letter of Credit
issued by such Issuing Bank under this Agreement, for the account of such
Issuing Bank, a fronting fee with respect to the period from the date of
issuance of such Letter of Credit to the expiration or termination date of such
Letter of Credit, computed at a rate of 1/8% per annum on the average aggregate
amount available to be drawn under such Letter of Credit during the period for
which such fee is calculated. Such fronting fee shall be payable in arrears on
each Fee Payment Date to occur after the issuance of such Letter of Credit and
on the Revolving Termination Date (or on such earlier date as the Revolving
Commitments shall terminate as provided herein) and shall be nonrefundable.
(b) The Parent Borrowers (or, if a Letter of Credit is issued for
the benefit of any Subsidiary, the Parent Borrowers and such Subsidiary, jointly
and severally) shall pay to the Administrative Agent, for the account of the L/C
Participants, a letter of credit commission with respect to each Letter of
Credit issued under this Agreement with respect to the period from the date of
issuance of such Letter of Credit to the expiration or termination date of such
Letter of Credit, computed at a rate per annum equal to the Applicable Margin in
respect of Eurodollar Loans from time to time in effect on the average aggregate
amount available to be drawn under such Letter of Credit during the period for
which such fee is calculated. Such commission shall be shared ratably among the
L/C Participants in accordance with their respective Revolving Commitment
Percentages. Such commission shall be payable in arrears on each Fee Payment
Date to occur after the issuance of such Letter of Credit and on
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the Revolving Termination Date (or on such earlier date as the Revolving
Commitments shall terminate as provided herein) and shall be nonrefundable.
(c) In addition to the foregoing fees and commissions, the Parent
Borrowers (or, if a Letter of Credit is issued for the benefit of any
Subsidiary, the Parent Borrowers and such Subsidiary, jointly and severally)
shall pay or reimburse each Issuing Bank for such normal and customary costs and
expenses as are incurred or charged by such Issuing Bank in issuing, effecting
payment under, amending or otherwise administering any Letter of Credit.
(d) The Administrative Agent shall, promptly following its receipt
thereof, distribute to each Issuing Bank and the L/C Participants all fees and
commissions received by the Administrative Agent for their respective accounts
pursuant to this subsection.
3.6 L/C Participations. (a) Each Issuing Bank irrevocably agrees to
grant and hereby grants to each L/C Participant (other than such Issuing Bank),
and, to induce such Issuing Bank to issue Letters of Credit hereunder, each such
L/C Participant irrevocably agrees to accept and purchase and hereby accepts and
purchases from such Issuing Bank, on the terms and conditions hereinafter
stated, for such L/C Participant's own account and risk an undivided interest
equal to such L/C Participant's Revolving Commitment Percentage in such Issuing
Bank's obligations and rights under each Letter of Credit issued by such Issuing
Bank hereunder and the amount of each draft paid by such Issuing Bank
thereunder. Each such L/C Participant unconditionally and irrevocably agrees
with each Issuing Bank that, if a draft is paid under any Letter of Credit
issued by such Issuing Bank for which such Issuing Bank is not reimbursed in
full by the Borrowers in accordance with the terms of this Agreement, such L/C
Participant shall pay to the Administrative Agent for the account of such
Issuing Bank upon demand an amount equal to such L/C Participant's Revolving
Commitment Percentage of the amount of such draft, or any part thereof, which is
not so reimbursed. Each L/C Participant's obligation to make the payment
referred to in the immediately preceding sentence shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, (i) any set-off, counterclaim, recoupment, defense or other right
which such L/C Participant or any Borrower may have against any Issuing Bank,
any Borrower or any other Person for any reason whatsoever, (ii) the occurrence
or continuance of a Default or an Event of Default, (iii) any adverse change in
the condition (financial or otherwise) of any Borrower, (iv) any breach of this
Agreement by any Loan Party or any other Lender or (v) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
(b) If any amount required to be paid by any L/C Participant to any
Issuing Bank pursuant to subsection 3.6 in respect of any unreimbursed portion
of any payment made by such Issuing Bank under any Letter of Credit issued by
such Issuing Bank is not paid to such Issuing Bank when due but is paid within
three Business Days after the date such payment is due, such L/C Participant
shall pay to such Issuing Bank on demand an amount equal to the product of (i)
such amount, times (ii) the daily average cost to such Issuing Bank of funding
such amount as reasonably determined by such Issuing Bank, during the period
from and including the date such payment is required to the date on which such
payment is immediately available to such Issuing Bank, times (iii) a fraction
the numerator of which is the number of days that elapse during such period and
the denominator of which is 360, together with a customary administrative fee
with respect thereto. If any such amount required to be paid by any L/C
Participant pursuant to subsection 3.6 is not in fact made available to any
Issuing Bank by such L/C Participant within three Business Days after the date
such payment is due, such Issuing Bank shall be entitled to recover from such
L/C Participant, on demand, such amount with interest thereon calculated from
such due date at the greater of (A) the rate payable pursuant to the immediately
preceding sentence plus the Applicable Margin for Revolving Offshore Loans and
(B) the rate per annum applicable to Base Rate Loans hereunder. A certificate of
any Issuing Bank submitted to any L/C Participant with respect to
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any amounts owing under this subsection shall be conclusive in the absence of
manifest error.
(c) Whenever, at any time after any Issuing Bank has made payment
under any Letter of Credit issued by such Issuing Bank and has received from any
L/C Participant its pro rata share of such payment in accordance with subsection
3.6, such Issuing Bank receives any payment related to such Letter of Credit
(whether directly from the Borrowers or otherwise, including proceeds of
collateral applied thereto by such Issuing Bank), or any payment of interest on
account thereof, such Issuing Bank will promptly distribute to such L/C
Participant its pro rata share thereof.
(d) If any payment received by any Issuing Bank pursuant to
subsection 3.6 with respect to any Letter of Credit issued by it shall be
required to be returned by such Issuing Bank, each L/C Participant shall pay to
such Issuing Bank its pro rata share thereof.
3.7 Letter of Credit Reimbursement Obligations. (a) The Parent
Borrowers (or, if a Letter of Credit is issued for the benefit of any
Subsidiary, the Parent Borrowers and such Subsidiary, jointly and severally)
agree to reimburse each Issuing Bank for the amount of (i) any draft paid by
such Issuing Bank under any Letter of Credit issued by such Issuing Bank and
(ii) any taxes, fees, charges or other costs or expenses incurred by such
Issuing Bank in connection with such payment. Each such payment shall be made to
the relevant Issuing Bank at its address for notices specified herein in the
currency in which the relevant Letter of Credit was issued and in immediately
available funds in such currency.
(b) If any draft shall be presented for payment under any Letter of
Credit issued by any Issuing Bank, such Issuing Bank shall promptly notify the
Company of the date and amount thereof. If an Issuing Bank notifies the Company
prior to 8:30 A.M., San Francisco time, on any Business Day, of any drawing
under any Letter of Credit issued by it in Dollars, the Parent Borrowers (or, if
such Letter of Credit is issued for the benefit of any Subsidiary, the Parent
Borrowers and such Subsidiary, jointly and severally) shall reimburse such
Issuing Bank pursuant to subsection 3.7(a) with respect to such drawing on such
Business Day. If an Issuing Bank notifies the Company after 8:30 A.M., San
Francisco time, on any Business Day of any drawing under any Letter of Credit
issued by it in Dollars or, if an Issuing Bank notifies the Company on any
Business Day of any drawing under any Letter of Credit issued by it in an
Offshore Currency, the Parent Borrowers (or, if such Letter of Credit is issued
for the benefit of any Subsidiary, the Parent Borrowers and such Subsidiary,
jointly and severally) shall reimburse such Issuing Bank pursuant to subsection
3.7(a) with respect to such drawing on the next succeeding Business Day and
interest shall be payable on the amount of such drawing for such period at the
rate then applicable to Base Rate Loans hereunder or, in the case of any such
amount due in respect of a Letter of Credit issued in an Offshore Currency, the
rate which is equal to the sum of (i) the rate of interest determined by the
relevant Issuing Bank (which determination shall be conclusive absent manifest
error) to be the cost to such Issuing Bank of obtaining such funds for such
period, plus, (ii) the Applicable Margin for Revolving Offshore Loans in effect
at such time. If any amount payable under this subsection is not paid when due,
interest shall be payable on such amount from the date such amount becomes
payable under this subsection until payment in full thereof at the rate which
would be payable on any outstanding Base Rate Loans which were then overdue or,
in the case of any amount due in respect of a Letter of Credit issued in an
Offshore Currency, the rate which is equal to the higher of (i) the rate which
would be payable on any outstanding Base Rate Loans which were then overdue and
(ii) the sum of (A) the rate of interest determined by the relevant Issuing Bank
in respect of such Offshore Currency (which determination shall be conclusive
absent manifest error) to be the cost to such Issuing Bank of funding such
amount for such period, plus (B) the Applicable Margin for Revolving Offshore
Loans in effect at such time, plus (C) 2%.
3.8 Obligations Absolute. (a) The obligations of the Borrowers and
the Subsidiaries
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under this Section 3 in respect of Letters of Credit shall be absolute and
unconditional under any and all circumstances and irrespective of any set-off,
counterclaim or defense to payment which the Borrowers or any Subsidiary may
have or have had against any Issuing Bank or any beneficiary of any Letter of
Credit.
(b) The Borrowers also agree with each Issuing Bank that such
Issuing Bank shall not be responsible for, and the Borrowers' Reimbursement
Obligations shall not be affected by, among other things, (i) the validity or
genuineness of documents or of any endorsements thereon, even though such
documents shall in fact prove to be invalid, fraudulent or forged, or (ii) any
dispute between or among any Parent Borrower, any Subsidiary and any beneficiary
of any Letter of Credit or any other party to which such Letter of Credit may be
transferred or (iii) any claims whatsoever of any Parent Borrower or any
Subsidiary against any beneficiary of such Letter of Credit or any such
transferee.
(c) No Issuing Bank shall be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit issued by
such Issuing Bank, except for errors or omissions caused by such Issuing Bank's
gross negligence or willful misconduct.
(d) The Borrowers agree that any action taken or omitted by any
Issuing Bank under or in connection with any Letter of Credit issued by such
Issuing Bank or the related drafts or documents, if done in the absence of gross
negligence or willful misconduct and in accordance with the standards of care
specified in the Uniform Commercial Code, shall be binding on the Borrowers and
shall not result in any liability of such Issuing Bank to the Borrowers.
3.9 Letter of Credit Payments. The responsibility of each Issuing
Bank to the Borrowers in connection with any draft presented for payment under
any Letter of Credit issued by such Issuing Bank shall, in addition to any
payment obligation expressly provided for in such Letter of Credit, be limited
to determining that the documents (including each draft) delivered under such
Letter of Credit in connection with such presentment are in substantial
conformity with such Letter of Credit.
3.10 Letter of Credit Applications. To the extent that any provision
of any application related to any Letter of Credit is inconsistent with the
provisions of this Section 3 or any other terms of this Agreement or any other
Loan Document, the provisions of this Section 3 or such other terms shall apply.
3.11 Swing Line Commitment. Subject to the terms and conditions
hereof, the Swing Line Lender agrees to make swing line loans in Dollars ("Swing
Line Loans") to the Parent Borrowers from time to time during the Revolving
Commitment Period in an aggregate principal amount at any one time outstanding
not to exceed $20,000,000, provided that, (a) after giving effect to any such
Swing Line Loans, the Aggregate Outstanding R/C Extensions of Credit at such
time would not exceed the Aggregate Revolving Commitment at such time and (b)
the Swing Line Lender shall not make any Swing Line Loan unless it shall have
received notice from the Administrative Agent that the making of such Swing Line
Loan will not violate clause (a) above. During the Revolving Commitment Period,
the Parent Borrowers may use the Swing Line Commitment by borrowing, prepaying
the Swing Line Loans in whole or in part, and reborrowing, all in accordance
with the terms and conditions hereof. All Swing Line Loans shall be a Base Rate
Loan or a Negotiated Rate Loan and shall not be entitled to be converted into
Loans that bear interest at any other rate.
3.12 Procedure for Swing Line Borrowing. (a) Each Parent Borrower
may borrow under the Swing Line Commitment during the Revolving Commitment
Period on any Business Day, provided that such Parent Borrower shall give the
Swing Line Lender and the Administrative Agent
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irrevocable notice (which notice must be received by the Swing Line Lender prior
to 10:00 A.M., San Francisco time) on the requested Borrowing Date specifying
the amount of the requested Swing Line Loan which shall be in an aggregate
minimum amount of $500,000 or a whole multiple of $50,000 in excess thereof. The
proceeds of the Swing Line Loan will be made available by the Swing Line Lender
to the relevant Parent Borrower at the office of the Swing Line Lender by 12:00
Noon (San Francisco time) on the Borrowing Date by crediting the account of such
Parent Borrower at such office with such proceeds. The Parent Borrowers may at
any time and from time to time, prepay the Swing Line Loans, in whole or in
part, without premium or penalty, by notifying the Swing Line Lender prior to
11:00 A.M. (San Francisco time) on any Business Day of the date and amount of
prepayment. If any such notice is given, the amount specified in such notice
shall be due and payable on the date specified therein. Partial prepayments
shall be in an aggregate principal amount of $500,000 or a whole multiple of
$50,000 in excess thereof.
(b) The Swing Line Lender, at any time in its sole and absolute
discretion may, on behalf of the Parent Borrowers (which hereby irrevocably
direct the Swing Line Lender to act on their behalf) request each Revolving
Lender (including the Swing Line Lender) to make a Revolving Loan (which shall
be a Base Rate Loan) in an amount equal to such Revolving Lender's Revolving
Commitment Percentage of the aggregate principal amount of the Swing Line Loans
outstanding on the date such notice is given (the "Outstanding Swing Line
Loans"). Unless any of the events described in paragraph (f) of Section 10 shall
have occurred with respect to a Parent Borrower (in which event the procedures
of paragraph (d) of this subsection 3.11 shall apply) each Revolving Lender
shall make the proceeds of its Revolving Loan available to the Administrative
Agent for the account of the Swing Line Lender at the Administrative Agent's
Payment Office prior to 11:00 A.M. (San Francisco time) in funds immediately
available in Dollars on the Business Day next succeeding the date such notice is
given. The proceeds of such Revolving Loans shall be immediately applied to
repay the outstanding Swing Line Loans. Effective on the day such Revolving
Loans are made, the portion of the Swing Line Loans so paid shall no longer be
outstanding as Swing Line Loans and shall no longer be due under the Swing Line
Note. Each Parent Borrower authorizes the Swing Line Lender to charge such
Parent Borrower's accounts with the Swing Line Lender (up to the amount
available in each such account) in order to immediately pay the amount of its
outstanding Swing Line Loans to the extent amounts received from the Revolving
Lenders are not sufficient to repay in full such outstanding Swing Line Loans.
(c) Notwithstanding anything herein to the contrary, the Swing Line
Lender shall not be obligated to make any Swing Line Loans if the conditions set
forth in subsection 7.3 have not been satisfied.
(d) If prior to the making of a Revolving Loan pursuant to paragraph
(b) of subsection 3.12 one of the events described in paragraph (f) of Section
10 shall have occurred and be continuing with respect to a Parent Borrower, each
Revolving Lender will, on the date such Revolving Loan was to have been made
pursuant to the notice in subsection 3.12, purchase an undivided participating
interest in the outstanding Swing Line Loans in an amount equal to (i) its
Revolving Commitment Percentage times (ii) the aggregate principal amount of
Swing Line Loans then outstanding. Each Lender will immediately transfer to the
Swing Line Lender, in immediately available funds, the amount of its
participation, and upon receipt thereof the Swing Line Lender will deliver to
such Revolving Lender a Swing Line Loan Participation Certificate dated the date
of receipt of such funds and in such amount.
(e) Whenever, at any time after any Revolving Lender has purchased a
participating interest in a Swing Line Loan, the Swing Line Lender receives any
payment on account thereof, the Swing Line Lender will distribute to such
Revolving Lender its participating interest in such amount (appropriately
adjusted, in the case of interest payments, to reflect the period of time during
which such Revolving Lender's participating interest was outstanding and
funded); provided, however, that in the
<PAGE> 41
35
event that such payment received by the Swing Line Lender is required to be
returned, such Lender will return to the Swing Line Lender any portion thereof
previously distributed by the Swing Line Lender to it.
(f) Each Revolving Lender's obligation to make the Revolving Loans
referred to in subsection 3.12(b) and to purchase participating interests
pursuant to subsection 3.12(d) shall be absolute and unconditional and shall not
be affected by any circumstance, including, without limitation, (i) any set-off,
counterclaim, recoupment, defense or other right which such Revolving Lender or
the Parent Borrowers may have against the Swing Line Lender, the Parent
Borrowers or any other Person for any reason whatsoever, (ii) the occurrence or
continuance of a Default or an Event of Default, (iii) any adverse change in the
condition (financial or otherwise) of a Parent Borrower, (iv) any breach of this
Agreement or any other Loan Document by a Parent Borrower, any Subsidiary or any
other Lender, or (v) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
SECTION 4. AMOUNT AND TERMS OF FRONTED OFFSHORE LOANS
4.1 Fronted Offshore Currency Subfacility. (a) Subject to the terms
and conditions hereof, each Fronting Lender agrees to make loans ("Fronted
Offshore Loans") to the Subsidiary Borrowers from time to time during the
Revolving Commitment Period in an aggregate principal amount at any one time
outstanding the Dollar Equivalent of which shall not exceed with respect to each
Fronted Offshore Currency, the related Fronted Offshore Currency Sublimit of
such Fronting Lender with respect to such Fronted Offshore Currency, provided
that, (i) after giving effect to any such Fronted Offshore Loan, the Aggregate
Outstanding R/C Extensions of Credit at such time would not exceed the Aggregate
Revolving Commitment at such time, (ii) after giving effect to such Fronted
Offshore Loan and the use of proceeds thereof, (A) the Dollar Equivalent of the
aggregate outstanding principal amount of Offshore Currency Loans does not
exceed the Offshore Currency Sublimit for all Offshore Currency Loans and (B)
the Dollar Equivalent of the aggregate outstanding principal amount of Offshore
Currency Loans in any Offshore Currency does not exceed the Offshore Currency
Sublimit for Offshore Currency Loans in such Offshore Currency and (iii) no
Fronting Lender shall make any Fronted Offshore Loan unless it shall have
received notice from the Administrative Agent that the making of such Fronted
Offshore Loan will not violate clause (i) or (ii) above. During the Revolving
Commitment Period, the Subsidiary Borrowers may use the Fronted Offshore
Currency Subfacility by borrowing, prepaying Fronted Offshore Loans in whole or
in part, and reborrowing, all in accordance with the terms and conditions
hereof.
4.2 Procedure for Fronted Offshore Loan Borrowings. A Subsidiary
Borrower may borrow under the Fronted Offshore Currency Subfacility during the
Revolving Commitment Period on any Banking Day, provided that the Company or its
authorized designee shall give the relevant Fronting Lender and the
Administrative Agent irrevocable notice (which notice must be received by the
Fronting Lender and the Administrative Agent prior to the applicable time
specified therefor in such Fronting Lender's Fronting Lender Addendum)
specifying (i) the amount to be borrowed and the Fronted Offshore Currency with
respect thereto, (ii) the requested Borrowing Date and (iii) the initial
Interest Periods (if any) with respect thereto. provided, further, that,
notwithstanding anything to the contrary in any Fronting Lender Addendum, no
Fronting Lender shall be required to make a Fronted Offshore Loan until it shall
have received the notice described in clause (iii) of the proviso to the first
sentence of subsection 4.1, upon receipt of which such Fronting Lender shall
make the relevant Fronted Offshore Loan in accordance with the terms of the
applicable Fronting Lender Addendum or as soon thereafter as practicable. Each
borrowing under the Fronted Offshore Currency Subfacility from a Fronting Lender
shall be in such minimum amounts as shall be specified in the applicable
Fronting Lender's Fronting
<PAGE> 42
36
Lender Addendum. The proceeds of each Fronted Offshore Loan will be made
available by the Fronting Lender in respect thereof to the relevant Subsidiary
Borrower at such Fronting Lender's Payment Office at such time on the Borrowing
Date and in such funds as are specified in such Fronting Lender's Fronting
Lender Addendum.
4.3 Fronted Offshore Loans Fees, Commissions and Other Charges. (a)
Each Subsidiary Borrower shall pay to the relevant Fronting Lender with respect
to each Fronted Offshore Loan made to it by such Fronting Lender, for the
account of such Fronting Lender, a fronting fee with respect to the period from
and including the date of such Fronted Offshore Loan to but excluding the date
of repayment thereof computed at a rate of 3/8% per annum on the average daily
principal amount of such Fronted Offshore Loan outstanding during the period for
which such fee is calculated. Such fronting fee shall be payable in arrears on
each Fee Payment Date to occur after the making of such Fronted Offshore Loan
and on the Revolving Termination Date (or on such earlier date as the Revolving
Commitments shall terminate as provided herein) and shall be nonrefundable.
(b) Each Subsidiary Borrower shall pay to the Fronting Lender, for
the account of the Fronted Loan Participants, a participation fee with respect
to each Fronted Offshore Loan with respect to the period from and including the
date of such Loan to but excluding the date of repayment thereof, computed at a
rate per annum equal to the Applicable Margin in respect of Revolving Offshore
Loans from time to time in effect on the average daily principal amount of such
Fronted Offshore Loan outstanding during the period for which such fee is
calculated. Such fee shall be shared ratably among the Fronted Loan Participants
in accordance with their respective Revolving Commitment Percentages. Such
commission shall be payable in arrears on each Fee Payment Date to occur after
the making of such Fronted Offshore Loan and on the Revolving Termination Date
(or on such earlier date as the Revolving Commitments shall terminate as
provided herein) and shall be nonrefundable. Upon receipt of any payment
pursuant to this paragraph, each Fronting Lender shall promptly convert such
payment to Dollars at the Spot Rate determined by the Fronting Lender to be in
effect on the date of such conversion and shall promptly forward such amount in
Dollars to the Administrative Agent at the Administrative Agent's Payment
Office.
(c) The Administrative Agent shall, promptly following its receipt
thereof, distribute to each Fronting Lender and the Fronted Loan Participants
all fees received by the Administrative Agent for their respective accounts
pursuant to this subsection.
4.4 Participations. (a) Each Fronting Lender irrevocably agrees to
grant and hereby grants to each Fronted Loan Participant (other than such
Fronting Lender), and, to induce such Fronting Lender to make Fronted Offshore
Loans hereunder, each such Fronted Loan Participant irrevocably agrees to accept
and purchase and hereby accepts and purchases from such Fronting Lender, on the
terms and conditions hereinafter stated, for such Fronted Loan Participant's own
account and risk an undivided interest equal to such Fronted Loan Participant's
Revolving Commitment Percentage in such Fronting Lender's obligations and rights
in respect of each Fronted Offshore Loan made by such Fronting Lender hereunder.
Each such Fronted Loan Participant unconditionally and irrevocably agrees with
each Fronting Lender that, if any amount in respect of the principal, interest
or fees owing to such Fronting Lender in respect of a Fronted Offshore Loan is
not paid when due in accordance with the terms of this Agreement, such Fronted
Loan Participant shall pay to the Administrative Agent for the account of such
Fronting Lender upon demand an amount in the relevant Offshore Currency equal to
such Fronted Loan Participant's Revolving Commitment Percentage of such unpaid
amount. Each Fronted Loan Participant's obligation to make the payment referred
to in the immediately preceding sentence shall be absolute and unconditional and
shall not be affected by any circumstance, including, without limitation, (i)
any set-off, counterclaim, recoupment, defense or other right which such Fronted
Loan Participant or any Subsidiary Borrower may have against the Fronting
Lender, any Subsidiary Borrower or any other
<PAGE> 43
37
Person for any reason whatsoever, (ii) the occurrence or continuance of a
Default or an Event of Default, (iii) any adverse change in the condition
(financial or otherwise) of any Borrower, (iv) any breach of this Agreement or
any other Loan Document by any Loan Party or any other Lender or (v) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.
(b) If any amount required to be paid by any Fronted Loan
Participant to any Fronting Lender pursuant to subsection 4.4(a) is not paid to
such Fronting Lender when due but is paid within three Banking Days after the
date such payment is due, such Fronted Loan Participant shall pay to such
Fronting Lender on demand an amount equal to the product of (i) such amount,
times (ii) the Cost of Funds in respect of the related Offshore Currency
determined by such Fronting Lender during the period from and including the date
such payment is required to the date on which such payment is immediately
available to such Fronting Lender, times (iii) a fraction the numerator of which
is the number of days that elapse during such period and the denominator of
which is 360. If any such amount required to be paid by any Fronted Loan
Participant pursuant to subsection 4.4(a) is not in fact made available to any
Fronting Lender by such Fronted Loan Participant within three Banking Days after
the date such payment is due, such Fronting Lender shall be entitled to recover
from such Fronted Loan Participant, on demand, such amount with interest thereon
calculated from such due date at the rate per annum equal to the rate applicable
thereto in accordance with the preceding sentence plus the Applicable Margin in
respect of Revolving Offshore Loans. A certificate of any Fronting Lender
submitted to any Fronted Loan Participant with respect to any amounts owing
under this subsection shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after any Fronting Lender has received
from any Fronted Loan Participant the full amount owing by such Fronted Loan
Participant pursuant to and in accordance with subsection 4.4(a) in respect of
any Fronted Offshore Loan, such Fronting Lender receives any payment related to
such Fronted Offshore Loan (whether directly from the relevant Subsidiary
Borrower or otherwise, including proceeds of collateral applied thereto by such
Fronting Lender), or any payment of interest on account thereof, such Fronting
Lender will distribute to such Fronted Loan Participant its pro rata share
thereof.
(d) If any payment received by any Fronting Lender pursuant to
subsection 4.4(c) with respect to any Fronted Offshore Loan made by it shall be
required to be returned by such Fronting Lender, each Fronted Loan Participant
shall pay to such Fronting Lender its pro rata share thereof.
<PAGE> 44
38
SECTION 5. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF
CREDIT
5.1 Commitment Fees. The Parent Borrowers jointly and severally
agree to pay to the Administrative Agent for the account of each Revolving
Lender a commitment fee for the period from and including the first day of the
Revolving Commitment Period to the Revolving Termination Date, computed at a
rate equal to the Applicable Rate per annum on the average daily amount of such
Revolving Lender's Revolving Commitment Percentage of the Available Revolving
Commitment during the period (calculated as if no Swing Line Loans were
outstanding during such period) for which payment is made, payable quarterly in
arrears on each Fee Payment Date and on the Revolving Termination Date (or such
earlier date on which the Revolving Loans become due and payable pursuant to
Section 10), commencing on the first of such dates to occur after the date
hereof. The Parent Borrowers jointly and severally agree to pay to the
Administrative Agent for the account of each Term Lender a commitment fee for
the period from and including the first day of the Term Commitment Period to the
last day of the Term Commitment Period, computed at a rate equal to the
Applicable Rate per annum on the average daily amount of such Lender's Term
Commitment Percentage of the Available Term Commitment during the period for
which payment is made, payable quarterly in arrears on each Fee Payment Date and
on the last day of the Term Commitment Period, commencing on the first of such
dates to occur after the date hereof.
5.2 Termination or Reduction of Commitments. The Company shall have
the right, upon not less than five Business Days' notice to the Administrative
Agent, to terminate the Commitments or, from time to time, to reduce the amount
of the Commitments; provided that no such termination or reduction of the
Revolving Commitments shall be permitted if, after giving effect thereto and to
any prepayments of Revolving Loans made on the effective date thereof, the
Aggregate Outstanding R/C Extensions of Credit would exceed the Revolving
Commitments then in effect. Any such reduction shall be in an amount equal to
$5,000,000 or a whole multiple of $1,000,000 in excess thereof and shall reduce
permanently the Commitments then in effect.
5.3 Repayment of Loans; Evidence of Debt. (a) (i) The Parent
Borrowers hereby jointly and severally unconditionally promise to pay to the
Administrative Agent for the account of each relevant Revolving Lender the then
unpaid principal amount of each Revolving Loan of such Lender made to the Parent
Borrowers on the Revolving Termination Date (or such earlier date on which the
Revolving Loans become due and payable pursuant to Section 10); provided that
each such Loan that is a Revolving Offshore Loan shall, unless continued for a
subsequent Interest Period in accordance with subsection 5.6, be due and payable
on the last day of the Interest Period applicable thereto, (ii) each Subsidiary
Borrower hereby unconditionally promises to pay to the Administrative Agent for
the account of each relevant Revolving Lender the then unpaid principal amount
of each Revolving Loan of such Lender made to such Subsidiary Borrower on the
Revolving Termination Date (or such earlier date on which the Revolving Loans
become due and payable pursuant to Section 10); provided that each such Loan
that is a Revolving Offshore Loan shall, unless continued for a subsequent
Interest Period in accordance with subsection 5.6, be due and payable on the
last day of the Interest Period applicable thereto, (iii) the Parent Borrowers
hereby jointly and severally unconditionally promise to pay to the
Administrative Agent for the account of the Swing Line Lender the then unpaid
principal amount of the Swing Line Loans on the Revolving Termination Date (or
such earlier date on which the Revolving Loans become due and payable pursuant
to Section 10), and (iv) the Parent Borrowers hereby jointly and severally
unconditionally promise to pay to the Administrative Agent for the account of
each relevant Term Lender the principal amount of the Term Loans of such Lender,
in consecutive quarterly installments, payable on the last day of each March,
June, September and December, commencing on September 30, 1997, each such
installment to be in an amount equal to such Lender's Term Commitment Percentage
of (A) in the case of any payments due in March, June or September of any year,
20% of the
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39
amount set forth below opposite the year in which such date occurs and (B) in
the case of any payment due in December of any year, 40% of the amount set forth
below opposite the year in which such date occurs (or the then unpaid principal
amount of such Term Loans, on the date that the Term Loans become due and
payable pursuant to Section 10), provided that (x) the payments due in September
and December 1997 shall be in an amount equal to such Lender's Term Commitment
Percentage of 50% of the amount set forth below for 1997 (as adjusted pursuant
to clause (z) below), (y) the payment due in March 2003 shall be in an amount
equal to such Lender's Term Commitment Percentage of 100% of the amount set
forth below for 2003 (as adjusted pursuant to clause (z) below) and (z) in the
event that the Second Drawdown Date does not occur, each amount set forth below
shall be reduced by multiplying such amount times a fraction the numerator of
which is the aggregate initial principal amount of all Term Loans made on the
Closing Date and the denominator of which is the initial Aggregate Term
Commitment:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1997 $27,500,000
1998 58,750,000
1999 65,000,000
2000 68,750,000
2001 71,250,000
2002 84,583,300
2003 24,166,700
</TABLE>
The Parent Borrowers hereby further agree jointly and severally to pay interest
on the unpaid principal amount of the Term Loans, Revolving Loans made to the
Parent Borrowers and Swing Line Loans from time to time outstanding from the
date hereof until payment in full thereof at the rates per annum, and on the
dates, set forth in subsection 5.8. Each Subsidiary Borrower hereby further
agrees to pay interest on the unpaid principal amount of the Revolving Loans
made to it from time to time outstanding from the date hereof until payment in
full thereof at the rates per annum, and on the dates, set forth in subsection
5.8.
(b) Each Subsidiary Borrower hereby unconditionally promises to pay
to the relevant Fronting Lender the then unpaid principal amount of each Fronted
Offshore Loan of such Fronting Lender made to such Subsidiary Borrower on the
Revolving Termination Date (or such earlier date on which the Revolving Loans
become due and payable pursuant to Section 10 or as may be specified in the
Fronting Bank Addendum of such Fronting Bank). Such Subsidiary Borrower hereby
further agrees to pay interest on the unpaid principal amount of each such
Fronted Offshore Loan from time to time outstanding from the date hereof until
payment in full thereof at the rates per annum, and on the dates, set forth in
subsection 5.8.
(c) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of the Borrowers to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement.
(d) Each Fronting Lender shall maintain in accordance with its usual
practice an account in which shall be recorded (i) the amount of each Fronted
Offshore Loan made by it hereunder, the identity of the Subsidiary Borrower in
respect thereof, the Type thereof and each Interest Period (if any) applicable
thereto, (ii) the amount of any principal or interest due and payable or to
become due and payable from each such Subsidiary Borrower to such Fronting
Lender hereunder and (iii) the amount of any sum received by the Fronting Lender
hereunder from such Subsidiary Borrower in respect of any
<PAGE> 46
40
such Fronted Offshore Loan. At the request of the Administrative Agent, each
Fronting Lender will provide to the Administrative Agent a copy of its records
maintained pursuant to this subsection.
(e) The Administrative Agent shall maintain the Register pursuant to
subsection 13.6(d), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Revolving Loan, Swing Line Loan and Term Loan
made hereunder, the Borrower with respect thereto, the Type thereof and each
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrowers to the Swing
Line Lender, the Term Lenders or the Revolving Lenders, as the case may be,
hereunder, (iii) the amount of each Revolving Lender's participation in
outstanding Letters of Credit and Fronted Offshore Loans and (iv) both the
amount of any sum received by the Administrative Agent hereunder from the
Borrowers and each Lender's share thereof.
(f) The entries made in the Register and the accounts of each Lender
maintained pursuant hereto shall, to the extent permitted by applicable law, be
prima facie evidence of the existence and amounts of the obligations of the
Borrowers therein recorded; provided, however, that the failure of any Lender or
the Administrative Agent to maintain the Register or any such account, or any
error therein, shall not in any manner affect the obligation of the Borrowers to
repay (with applicable interest) the Loans made to such Borrowers by such Lender
in accordance with the terms of this Agreement.
(g) The Parent Borrowers agree that, upon the request to the
Administrative Agent by any applicable Lender, the Parent Borrowers will execute
and deliver to such Lender, as appropriate, (i) a promissory note of the Parent
Borrowers evidencing the Revolving Loans of such Lender, substantially in the
form of Exhibit M with appropriate insertions as to date and principal amount (a
"Revolving Note"), (ii) a promissory note of the Parent Borrowers evidencing
each Term Loan of such Lender, substantially in the form of Exhibit N with
appropriate insertions as to date and principal amount (a "Term Note") and (iii)
a promissory note of the Parent Borrowers evidencing the Swing Line Loans of the
Swing Line Lender, substantially in the form of Exhibit O with appropriate
insertions as to date and principal amount (the "Swing Line Note"). Each
Subsidiary Borrower agrees that, upon the request to the Administrative Agent by
any applicable Lender, such Subsidiary Borrower will execute and deliver to such
Lender, as appropriate, (x) a Revolving Note and (y) a promissory note of such
Subsidiary Borrower evidencing the Fronted Offshore Loans of such Lender,
substantially in the form of Exhibit P with appropriate insertions as to date
and principal amount (a "Fronted Loan Note"). Each Lender is hereby authorized
to record the Borrowing Date, the amount of each relevant Loan and the date and
amount of each payment or prepayment of principal thereof, on the schedule
annexed to and constituting a part of the Note evidencing such Loan and any such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded, provided that the failure by a Lender to make any such
recordation (or any error therein) shall not affect any of the obligations of
the related Borrower under such Note or this Agreement.
5.4 Optional and Mandatory Prepayments. (a) The Borrowers may at any
time and from time to time prepay Eurodollar Loans and Revolving Offshore Loans,
in whole or in part, without premium or penalty except as specified in
subsection 5.15, upon at least four Banking Days' irrevocable notice to the
Administrative Agent, specifying the date and amount of prepayment and whether
the prepayment is of Eurodollar Loans, Revolving Offshore Loans or a combination
thereof, and, if of a combination thereof, the amount allocable to each. The
Borrowers may at any time and from time to time prepay Base Rate Loans and Swing
Line Loans, in whole or in part, without premium or penalty upon, in the case of
Base Rate Loans, at least one Banking Day's irrevocable notice (which notice
must be received by the
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41
Administrative Agent prior to 8:30 A.M., San Francisco time, on such Banking
Day) and in the case of Swing Line Loans on same day notice (which notice must
be received by the Administrative Agent prior to 11:00 A.M., San Francisco time,
on the date of repayment) to the Administrative Agent, specifying the date and
amount of prepayment. Upon receipt of any such notice the Administrative Agent
shall promptly notify each relevant Lender and, if such notice relates to a
prepayment of Revolving Offshore Loans, the European Payment Agent thereof. If
any such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein, together with, in the case of Eurodollar
Loans and Offshore Currency Loans, any amounts payable pursuant to subsection
5.15 and accrued interest to such date on the amount prepaid. Partial
prepayments of the Term Loans shall be applied to the installments of principal
thereof ratably in accordance with the then remaining amounts thereof. Amounts
prepaid on account of the Term Loans may not be reborrowed. Partial prepayments
of Eurodollar Loans, Revolving Offshore Loans and Base Rate Loans shall be in a
principal amount, as to each such Type of Loan, of $5,000,000 (or the Offshore
Currency Equivalent thereof, in the case of Revolving Offshore Loans) or a whole
multiple of $1,000,000 (or 1,000,000 units in the relevant Eligible Offshore
Currency, in the case of Revolving Offshore Loans) in excess thereof. Partial
prepayments of Swing Line Loans shall be in an aggregate principal amount of
$500,000 or a whole multiple of $50,000 in excess thereof. Revolving Loans may
not be prepaid if any Swing Line Loans are outstanding at such time.
(b) A Subsidiary Borrower may at any time and from time to time
prepay Fronted Offshore Loans, in whole or in part, without premium or penalty
except as specified in subsection 5.15, upon at least four Banking Days'
irrevocable notice (or such other number of days as may be specified in the
Fronting Bank Addendum of such Fronting Lender in its discretion) to the
relevant Fronting Lender and the Administrative Agent, specifying the date and
amount of prepayment. If any such notice is given, the amount specified in such
notice shall be due and payable on the date specified therein, together with any
amounts payable pursuant to subsection 5.15 and accrued interest to such date on
the amount prepaid. Partial prepayments of Fronted Offshore Loans shall be in
such minimum amounts as shall be specified in the Fronting Bank Addendum of the
relevant Fronting Lender.
(c) If, on any day, (i) the Dollar Equivalent of the aggregate
outstanding principal amount of Offshore Currency Loans exceeds an amount equal
to 103% of the Offshore Currency Sublimit for all Offshore Currency Loans, (ii)
the Dollar Equivalent of the aggregate outstanding principal amount of Offshore
Currency Loans in any Offshore Currency exceeds an amount equal to 103% of the
Offshore Currency Sublimit for Offshore Currency Loans in such Offshore Currency
or (iii) the Aggregate Outstanding R/C Extensions of Credit exceeds the
Aggregate Revolving Commitment on such date, the Parent Borrowers shall, without
notice or demand, immediately repay (or cause the relevant Subsidiary Borrower
to repay) such of the outstanding Loans in an aggregate principal amount such
that, after giving effect thereto, (x) the Dollar Equivalent of the aggregate
outstanding principal amount of Offshore Currency Loans does not exceed the
Offshore Currency Sublimit for all Offshore Currency Loans, (y) the Dollar
Equivalent of the aggregate outstanding principal amount of Offshore Currency
Loans in each Offshore Currency does not exceed the Offshore Currency Sublimit
for Offshore Currency Loans in such Offshore Currency and (z) the Aggregate
Outstanding R/C Extensions of Credit does not exceed the Aggregate Revolving
Commitment, together with interest accrued to the date of such payment or
prepayment on the principal so prepaid and any amounts payable under subsection
5.15 in connection therewith. Any prepayment of Revolving Loans pursuant to
clause (iii) of the immediately preceding sentence shall first be applied to
prepay any outstanding Swing Line Loans and then be applied to such Revolving
Loans as the Borrowers may determine. The Parent Borrowers may in lieu of
prepaying Offshore Currency Loans in order to comply with this paragraph deposit
amounts in a Cash Collateral Account equal to the aggregate principal amount of
Offshore Currency Loans required to be prepaid. To the extent that after giving
effect to any prepayment of Loans required by this paragraph, the Aggregate
Outstanding R/C Extensions of Credit at such time exceeds the Aggregate
Revolving Commitment at such time, the Parent Borrowers shall, without notice or
demand, immediately deposit in a Cash Collateral Account upon terms reasonably
satisfactory to the Administrative Agent an amount
<PAGE> 48
42
equal to the lesser of (A) the sum of the aggregate then outstanding L/C
Obligations and the aggregate principal amount of Offshore Currency Loans then
outstanding and (B) the amount of such remaining excess. The Administrative
Agent shall apply any cash deposited in the Cash Collateral Account (to the
extent thereof) to pay any Reimbursement Obligations which are or become due
thereafter and/or to repay Offshore Currency Loans at the end of the Interest
Periods therefor, provided that, the Administrative Agent shall release to the
Parent Borrowers from time to time such portion of the amount on deposit in the
Cash Collateral Account to the extent such amount is not required to be so
deposited in order for the Borrowers to be in compliance with this paragraph.
"Cash Collateral Account" means an account established by the Parent Borrowers
with the Administrative Agent and over which the Administrative Agent shall have
exclusive dominion and control, including the right of withdrawal for
application in accordance with this subsection 5.4(c).
(d) On the day upon which the Company or any of its Subsidiaries
receives Net Proceeds from the issuance of any Indebtedness permitted under
subsection 9.2(i) or Capital Stock (other than (i) the issuance of Capital Stock
in the ordinary course of business in connection with employee stock option or
incentive plans or the issuance of Capital Stock to the Company or any of its
Subsidiaries and (ii) in connection with the Management Investor Notes), the
Loans shall be prepaid and/or the Commitments shall be reduced in an amount
equal to 100% (or 50%, in the case of issuances of Capital Stock) of the Net
Proceeds of such issuance in accordance with paragraph (g) of this subsection.
(e) If the Company or any of its Subsidiaries sells, assigns,
transfers, leases or otherwise disposes of any of its assets pursuant to
subsection 9.6(b), or any of its assets become the subject of a Casualty Event,
no later than three Business Days after receipt of the Net Proceeds therefrom,
the Loans shall be prepaid and/or the Commitments shall be reduced in an amount
equal to 100% of such Net Proceeds in accordance with paragraph (g) of this
subsection, provided that, at the option of the Company and so long as no
Default or Event of Default shall have occurred and be continuing or would be
caused thereby, (i) the Company and its Subsidiaries may, in the aggregate,
retain up to $5,000,000 of the Net Proceeds of any such sales, assignments,
transfers, leases or other dispositions for general corporate purposes, (ii) the
Company and its Subsidiaries may use up to $25,000,000 of the Net Proceeds
realized in the aggregate subsequent to the Closing Date from any such sales,
assignments, transfers, leases or other dispositions (A) to make Investments or
(B) to purchase similar assets to those sold, assigned, transferred, leased or
disposed of in such sales, assignments, transfers, leases or other dispositions
or to purchase other fixed or capital assets used in its existing lines of
business, in each case within twelve months after the consummation of the
relevant sale, assignment, lease, transfer or other disposition, subject to the
following conditions: (w) in the event the Company or any of its Subsidiaries
elects to exercise its rights pursuant to this clause (ii), the Company or such
Subsidiary, as the case may be, shall promptly deliver a certificate of a
Responsible Officer to the Administrative Agent setting forth the amount of the
Net Proceeds which the Company or such Subsidiary, as the case may be, expects
to so use during the subsequent twelve month period and (x) on the date which is
twelve months after the relevant sale or other disposition, the Company or such
Subsidiary, as the case may be, shall (I) deliver a certificate of a Responsible
Officer to the Administrative Agent certifying as to the amount and use of such
Net Proceeds actually so used and (II) deliver to the Administrative Agent, for
application in accordance with (and to the extent required by) this subsection,
an amount equal to the remaining unused Net Proceeds, (iii) the Company and the
Subsidiaries may use the Net Proceeds of any sale of the New York Real Property
to finance relocation expenses in connection with the New York Real Estate
Consolidation incurred within twelve months prior or subsequent to the date of
such sale and (iv) the Company or any of its Subsidiaries may use the Net
Proceeds of any Casualty Event to replace or rebuild the property or assets
which were the subject of the Casualty Event within twelve months after the
occurrence of such Casualty Event, subject to the following conditions: (y) in
the event the Company or any of its Subsidiaries elects to exercise its right
pursuant to this clause (iv), the Company or such Subsidiary, as the case may
be, shall promptly deliver a certificate of a Responsible Officer to the
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43
Administrative Agent setting forth the amount of the Net Proceeds which the
Company or such Subsidiary, as the case may be, expects to so use during the
subsequent twelve month period and (z) on the date which is twelve months after
the relevant Casualty Event, the Company or such Subsidiary, as the case may be,
shall (I) deliver a certificate of a Responsible Officer to the Administrative
Agent certifying as to the amount and use of such Net Proceeds actually used to
replace or rebuild such property or assets and (II) deliver to the
Administrative Agent, for application in accordance with (and to the extent
required by) this subsection, an amount equal to the remaining unused Net
Proceeds.
(f) On the earlier of (i) the date of receipt by the Lenders of the
financial statements required to be delivered pursuant to subsection 8.1(a) as
to any fiscal year of the Company (the "Base Year") and (ii) the 90th day of the
fiscal year of the Company next succeeding the Base Year, the Loans shall be
prepaid and/or the Commitments shall be reduced in an amount equal to 50% of
Excess Cash Flow for the Base Year (commencing with the fiscal year ending
December 31, 1997) in accordance with paragraph (g) of this subsection, provided
that, if the Applicable Margin is at any time determined by reference to Debt
Level 2 Status or Debt Level 1 Status (whichever occurs first), no prepayment of
Loans and/or reduction of Commitments shall be required pursuant to this
paragraph from and after such Adjustment Date.
(g) Each prepayment of Loans and/or reduction of Commitments
required by subsections 5.4(d) through (f) shall be made in the aggregate amount
provided in such subsections in the following order: first, the Aggregate Term
Commitment shall be permanently reduced by an amount not to exceed the Available
Term Commitment at such time, second the outstanding Term Loans shall be prepaid
and third the Aggregate Revolving Commitment shall be permanently reduced. Each
such prepayment of Loans shall be accompanied by payment in full of all accrued
fees and interest thereon to and including the date of such prepayment, together
with any additional amounts owing pursuant to subsection 5.15. Each prepayment
of the Term Loans required pursuant to this subsection 5.4(g) may not be
reborrowed and shall be applied to the remaining installments of principal
thereof pro rata.
5.5 Offshore Currency Spot Rate. (a) (i) No later than 2:00 P.M.,
San Francisco time, on each Calculation Date with respect to an Eligible
Offshore Currency, the Administrative Agent shall determine the Spot Rate as of
such Calculation Date with respect to such Eligible Offshore Currency and (ii)
no later than the time specified in the applicable Fronting Lender Addendum, on
each Calculation Date with respect to a Fronted Offshore Currency, the Fronting
Lender with respect to such Offshore Currency shall determine the Spot Rate as
of such Calculation Date with respect to such Fronted Offshore Currency and
shall promptly notify the Administrative Agent thereof, provided that, upon
receipt of a borrowing request pursuant to subsection 4.2, the relevant Fronting
Lender shall determine the Spot Rate with respect to the relevant Fronted
Offshore Currency in accordance with the Fronting Lender Addendum and shall
promptly notify the Administrative Agent thereof (it being acknowledged and
agreed that the Administrative Agent shall use such Spot Rate for the purposes
of determining compliance with subsection 4.1 with respect to such borrowing
request and issuing the notice described in clause (iii) of the proviso to the
first sentence of subsection 4.1). The Spot Rates so determined shall become
effective on the first Business Day immediately following the relevant
Calculation Date (a "Reset Date") and shall remain effective until the next
succeeding Reset Date.
(b) No later than 2:00 P.M., San Francisco time, on each Reset Date,
Borrowing Date (with respect to Offshore Currency Loans) and Issuance Date (with
respect to Letters of Credit issued in an Offshore Currency), the Administrative
Agent shall determine the Dollar Equivalent of the Offshore Currency Loans then
outstanding (after giving effect to any Offshore Currency Loans to be made or
repaid on such date).
(c) The Administrative Agent shall promptly notify the Company and
the European
<PAGE> 50
44
Payment Agent of each determination of a Spot Rate hereunder.
5.6 Conversion and Continuation Options. (a) The relevant Borrower
may elect from time to time to convert Eurodollar Loans to Base Rate Loans, by
giving the Administrative Agent at least one Banking Day's prior irrevocable
notice of such election (which notice must be received by the Administrative
Agent prior to 8:30 A.M., San Francisco time, on such Banking Day), provided
that any such conversion of Eurodollar Loans may only be made on the last day of
an Interest Period with respect thereto. The relevant Borrower may elect from
time to time to convert Base Rate Loans to Eurodollar Loans by giving the
Administrative Agent at least three Banking Days' prior irrevocable notice of
such election (which notice must be received by the Administrative Agent prior
to 8:30 A.M., San Francisco time, on such Banking Day). Any such notice of
conversion to Eurodollar Loans shall specify the length of the initial Interest
Period or Interest Periods therefor. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Lender thereof. All or
any part of outstanding Eurodollar Loans and Base Rate Loans may be converted as
provided herein, provided that (i) no Loan may be converted into a Eurodollar
Loan when any Event of Default has occurred and is continuing and the
Administrative Agent has or the Majority Lenders have determined that such a
conversion is not appropriate and (ii) no Loan may be converted into a
Eurodollar Loan after the date that is one month prior to the Revolving
Termination Date (in the case of conversions of Revolving Loans) or the date of
the final installment of principal of the Term Loans (in the case of conversions
of Term Loans).
(b) Any Eurodollar Loans or Revolving Offshore Loans may be
continued as such upon the expiration of the then current Interest Period with
respect thereto by the relevant Borrower giving notice to the Administrative
Agent, in accordance with the applicable provisions of the term "Interest
Period" set forth in subsection 1.1, of the length of the next Interest Period
to be applicable to such Loans, provided that no Eurodollar Loan may be
continued as such (i) when any Event of Default has occurred and is continuing
and the Administrative Agent has or the Majority Lenders have determined that
such a continuation is not appropriate or (ii) after the date that is one month
prior to, respectively, the Revolving Termination Date (in the case of
continuations of Revolving Loans) or the date of the final installment of
principal of the Term Loans (in the case of continuations of Term Loans) and
provided, further, that, if the relevant Borrower shall fail to give such notice
of continuation of a Eurodollar Loan or if such continuation is not permitted,
such Eurodollar Loan shall be automatically converted to a Base Rate Loan on the
last day of such then expiring Interest Period and, if the relevant Borrower
shall fail to give such notice of continuation of a Revolving Offshore Loan,
such Revolving Offshore Loan shall be automatically continued for an Interest
Period of one month.
5.7 Maximum Number of Tranches. In no event shall there be (x) more
than 7 Eurodollar Tranches outstanding at any time or (y) more than 2 Offshore
Tranches in any single Eligible Offshore Currency outstanding at any time.
5.8 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined for such day plus the
Applicable Margin for such day.
(b) Each Revolving Offshore Loan shall bear interest for each day
during each Interest Period with respect thereto at a rate per annum equal to
the Offshore Rate determined for such day plus the Applicable Margin for such
day.
(c) Each Fronted Offshore Loan shall bear interest for each day
during each Interest Period with respect thereto (or, if there is no Interest
Period with respect thereto, for each day such Loan is outstanding) at a rate
per annum equal to the applicable Cost of Funds determined for such day.
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(d) Each Base Rate Loan shall bear interest at a rate per annum
equal to the Base Rate plus the Applicable Margin.
(e) Each Swing Line Loan shall bear interest (i) if such Swing Line
Loan is a Base Rate Loan, at a rate per annum equal to the Base Rate plus the
Applicable Margin for Eurodollar Loans or (ii) if such Swing Line Loan is a
Negotiated Rate Loan, at a rate per annum equal to the Negotiated Rate with
respect thereto.
(f) If all or a portion of (i) any principal of any Loan, (ii) any
interest payable thereon, (iii) any commitment fee or (iv) any other amount
payable hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), the principal of the Loans and any such overdue
interest, commitment fee or other amount shall bear interest at a rate per annum
which is (x) in the case of principal, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this subsection plus
2% or (y) in the case of any such overdue interest, commitment fee or other
amount, (A) the rate described in paragraph (d) of this subsection plus 2%, in
the case of amounts owing that are denominated in Dollars, or (B) (I) the Cost
of Funds determined by the Administrative Agent in respect of the relevant
Offshore Currency, plus (II) the Applicable Margin for Revolving Offshore Loans
in effect at such time, plus (III) 2%, in the case of amounts owing that are
denominated in Offshore Currencies, in each case from the date of such
non-payment until such overdue principal, interest, commitment fee or other
amount is paid in full (as well after as before judgment).
(g) Interest shall be payable in arrears on each Interest Payment
Date and on the Revolving Termination Date (in the case of Revolving Loans and
Fronted Offshore Loans) and the date of the final installment of principal of
the Term Loans (in the case of Term Loans), provided that (i) interest accruing
pursuant to paragraph (f) of this subsection shall be payable from time to time
on demand and (ii) interest on Revolving Loans and Term Loans shall also be
payable on the date such Loans become due and payable in accordance with Section
10.
5.9 Computation of Interest and Fees. (a) Whenever it is calculated
on the basis of the Reference Rate or with reference to Revolving Offshore Loans
in British Pounds Sterling, interest shall be calculated on the basis of a 365-
(or 366-, as the case may be) day year for the actual days elapsed; and,
otherwise, interest and fees shall be calculated on the basis of a 360-day year
for the actual days elapsed. The Administrative Agent shall as soon as
practicable notify the relevant Borrowers and the relevant Lenders of each
determination of a Eurodollar Rate or of an Offshore Rate. Any change in the
interest rate on a Loan resulting from a change in the Base Rate or the
Eurocurrency Reserve Requirements shall become effective as of the opening of
business on the day on which such change becomes effective. The Administrative
Agent shall as soon as practicable notify the relevant Borrowers and the
relevant Lenders of the effective date and the amount of each such change in
interest rate.
(b) Each determination of an interest rate by the Administrative
Agent or a Fronting Lender pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrowers and the Lenders in the absence of
manifest error. The Administrative Agent shall, at the request of the Borrowers,
deliver to the Borrowers a statement showing the quotations used by the
Administrative Agent in determining any interest rate pursuant to subsection
5.8(a) or (b).
5.10 Inability to Determine Interest Rate. If prior to the first day
of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrowers) that, by
reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period or the Offshore Rate for such Interest Period in
respect of any Eligible
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46
Offshore Currency (an "affected Offshore Currency"), or
(b) the Administrative Agent shall have received notice from the
Majority Lenders that the Eurodollar Rate or the Offshore Rate determined
or to be determined for such Interest Period in respect of any Eurodollar
Loan or Revolving Offshore Loan in an affected Offshore Currency will not
adequately and fairly reflect the cost to such Lenders (as conclusively
certified by such Lenders) of making or maintaining their affected Loans
during such Interest Period, or
(c) a Fronting Lender shall have determined (which determination
shall be conclusive and binding upon the Borrowers) that, by reason of
circumstances affecting the relevant market, adequate and reasonable means
do not exist for ascertaining the Cost of Funds for such Interest Period
in respect of any Fronted Offshore Currency (any such currency shall also
be an "affected Offshore Currency"),
the Administrative Agent (or the relevant Fronting Lender, in the case of clause
(c) above) shall give telecopy or telephonic notice thereof to the Company, the
European Payment Agent and the Lenders (and, in the case of any notice by a
Fronting Lender, the Administrative Agent) as soon as practicable during normal
business hours thereafter (but in any event prior to the first day of such
Interest Period). If such notice is given (v) any Eurodollar Loans requested to
be made on the first day of such Interest Period shall be made as Base Rate
Loans, (w) any request to convert Base Rate Loans on the first day of such
Interest Period to Eurodollar Loans shall be ineffective, (x) any outstanding
Eurodollar Loans shall be converted, on the first day of such Interest Period,
to Base Rate Loans, (y) any Offshore Currency Loans in an affected Offshore
Currency requested to be made on the first day of such Interest Period shall not
be made and (z) any outstanding Offshore Currency Loans in an affected Offshore
Currency shall be due and payable on the first day of such Interest Period.
Until such notice has been withdrawn by the Administrative Agent, no further
Eurodollar Loans or Offshore Currency Loans in an affected Offshore Currency, as
the case may be, shall be made or continued as such, nor shall the Borrowers
have the right to convert Base Rate Loans to Eurodollar Loans.
5.11 Pro Rata Treatment and Payments. (a) Except as provided in
subsections 3.5(a), 4.3(a) and 5.3(b), all payments (including prepayments) to
be made by a Borrower hereunder in respect of Letters of Credit and Loans,
whether on account of principal, interest, fees or otherwise, shall be made
without set off or counterclaim and shall be made prior to 11:00 A.M., San
Francisco time, on the due date thereof to the Administrative Agent, for the
account of the relevant Lenders, at the Administrative Agent's Payment Office in
Dollars or, in the case of payments of principal of and interest on Offshore
Currency Loans, in the currency in which such Loans are denominated and in
immediately available funds in such currency. The Administrative Agent or the
European Payment Agent, as applicable, shall distribute such payments to the
Lenders entitled to receive the same promptly upon receipt in like funds as
received. If any payment hereunder (other than payments on Eurodollar Loans or
Revolving Offshore Loans) becomes due and payable on a day other than a Banking
Day, such payment shall be extended to the next succeeding Banking Day, and,
with respect to payments of principal, interest thereon shall be payable at the
then applicable rate during such extension. If any payment on a Eurodollar Loan
or a Revolving Offshore Loan becomes due and payable on a day other than a
Banking Day, the maturity thereof shall be extended to the next succeeding
Banking Day (and, with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension) unless the result
of such extension would be to extend such payment into another calendar month,
in which event such payment shall be made on the immediately preceding Banking
Day.
(b) All payments (including prepayments) to be made by a Subsidiary
Borrower hereunder in respect of Fronted Offshore Loans, on account of principal
and interest thereon, shall be made without set off or counterclaim and shall be
made prior to 11:00 A.M., local time, on the due date
<PAGE> 53
47
thereof to the relevant Fronting Lender, at the Fronting Lender's Payment Office
in the currency in which such Loans are denominated and in immediately available
funds in such currency. If any payment of principal or interest on a Fronted
Offshore Loan becomes due and payable on a day other than a Banking Day, such
payment shall be extended to the next succeeding Banking Day, and, with respect
to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
(c) Unless the Administrative Agent or, in the case of a borrowing
of Revolving Offshore Loans, the European Payment Agent shall have been notified
in writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its portion of such borrowing available to the
Administrative Agent or the European Payment Agent, as the case may be, the
Administrative Agent and the European Payment Agent may assume that such Lender
is making such amount available to the Administrative Agent or the European
Payment Agent, as the case may be, and the Administrative Agent and the European
Payment Agent may, in reliance upon such assumption, make available to the
relevant Borrowers a corresponding amount. If such amount is not made available
to the Administrative Agent or the European Payment Agent, as the case may be,
by the required time on the Borrowing Date therefor, such Lender shall pay to
the Administrative Agent or the European Payment Agent, as the case may be, on
demand, such amount with interest thereon at a rate equal to the daily average
cost of funding such amount (as determined by the Administrative Agent or the
European Payment Agent, as the case may be) for the period until such Lender
makes such amount immediately available to the Administrative Agent or the
European Payment Agent, as the case may be, together with a customary
administrative fee with respect thereto. A certificate of the Administrative
Agent or the European Payment Agent, as the case may be, submitted to any Lender
with respect to any amounts owing under this subsection shall be conclusive in
the absence of manifest error. If such Lender's portion of such borrowing is not
made available to the Administrative Agent or the European Payment Agent, as the
case may be, by such Lender within three Banking Days of such Borrowing Date,
the Administrative Agent or the European Payment Agent, as the case may be,
shall also be entitled to recover such amount with interest thereon at the rate
per annum equal to the higher of (i) the rate specified in the second sentence
of this paragraph and (ii) the rate applicable to Base Rate Loans, on demand,
from the Borrowers.
(d) Each borrowing by the Borrowers of Term and Revolving Loans
shall be made ratably from the Term Lenders and Revolving Lenders, respectively,
in accordance with their respective Term Commitment Percentages and Revolving
Commitment Percentages. Any reduction of the Term Commitments or the Revolving
Commitments shall be made ratably among the Term Lenders or Revolving Lenders,
in accordance with their respective Term Commitment Percentages or Revolving
Commitment Percentages. Each payment (including each prepayment) by the
Borrowers on account of principal of and interest on the Term Loans shall be
made pro rata according to the respective outstanding principal amounts of the
Term Loans then held by the Term Lenders. Each payment (including each
prepayment) by the Borrowers on account of principal of and interest on the
Revolving Loans shall be made pro rata according to the respective outstanding
principal amounts of the Revolving Loans then held by the Revolving Lenders.
5.12 Illegality. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans or Offshore Currency Loans as contemplated by this Agreement,
(a) the commitment of such Lender hereunder to make such Type of Loans, continue
Loans as such and convert Base Rate Loans to Eurodollar Loans shall forthwith be
cancelled, (b) such Lender's Loans then outstanding as Eurodollar Loans, if any,
shall be converted automatically to Base Rate Loans on the respective last days
of the then current Interest Periods with respect to such Loans or within such
earlier period as required by law and (c) such Lender's Offshore Currency Loans,
if any, shall be due on the respective last days of the then current Interest
Periods with respect to such Loans or
<PAGE> 54
48
within such earlier period as required by law. If any such conversion of a
Eurodollar Loan or repayment of an Offshore Currency Loan occurs on a day which
is not the last day of the then current Interest Period with respect thereto,
the Parent Borrowers shall (or shall cause the applicable Subsidiary Borrower
to) pay to such Lender such amounts, if any, as may be required pursuant to
subsection 5.15. During any such period of illegality any Loans that, but for
the application of the preceding sentence would have been maintained as
Revolving Offshore Loans, shall be made and maintained by the affected Lender as
Base Rate Loans.
5.13 Requirements of Law. (a) If the adoption of or any change in
any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever with
respect to this Agreement, any Note, any Eurodollar Loan, any Offshore
Currency Loan or any Letter of Credit made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for
Non-Excluded Taxes covered by subsection 5.14 and changes in the rate of
tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination
of the Eurodollar Rate, the Offshore Rate or the Cost of Funds hereunder;
or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or Offshore Currency Loans or issuing
or participating in Letters of Credit or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, within 15 days after
demand therefor (accompanied by the certificate contemplated by subsection
5.13(c) with respect thereto), the Parent Borrowers shall (or cause the
applicable Subsidiary Borrower to) pay to such Lender such additional amount or
amounts as will compensate such Lender for such increased cost or reduced amount
receivable.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under any Letter of Credit to a
level below that which such Lender or such corporation could have achieved but
for such adoption, change or compliance (taking into consideration such Lender's
or such corporation's policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, within 15 days
after demand therefor (accompanied by the certificate contemplated by subsection
5.13(c) with respect thereto), the Parent Borrowers shall promptly pay to such
Lender such additional amount or amounts as will compensate such Lender for such
reduction.
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify the Company (with a copy
to the Administrative Agent) of the event
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49
by reason of which it has become so entitled. A certificate as to any additional
amounts payable pursuant to this subsection submitted by such Lender to the
Company (with a copy to the Administrative Agent) shall be conclusive in the
absence of manifest error. The agreements in this subsection shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
5.14 Taxes. (a) All payments made by the Borrowers under this
Agreement and any Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Administrative Agent or any Lender
as a result of a present or former connection between the Administrative Agent
or such Lender and the jurisdiction of the Governmental Authority imposing such
tax or any political subdivision or taxing authority thereof or therein (other
than any such connection arising solely from the Administrative Agent or such
Lender having executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement or any Note), provided that all
payments to be made by the Fronting Lenders pursuant to subsection 4.3(b) shall,
for purposes of this subsection, be deemed to be a payment by the relevant
Borrowers. If any such non-excluded taxes, levies, imposts, duties, charges,
fees, deductions or withholdings ("Non-Excluded Taxes") are required to be
withheld from any amounts payable to the Administrative Agent, the European
Payment Agent or any Lender hereunder or under any Note, the amounts so payable
to the Administrative Agent, the European Payment Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent, the
European Payment Agent or such Lender (after payment of all Non-Excluded Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement, provided, however, that the Borrowers shall
not be required to increase any such amounts payable to any Lender that is not
organized under the laws of the United States of America or a state thereof if
such Lender fails to comply with the requirements of paragraph (b) of this
subsection. Whenever any Non-Excluded Taxes are payable by the Borrowers, as
promptly as possible thereafter the Borrowers shall send to the Administrative
Agent for its own account or for the account of such Lender, as the case may be,
a certified copy of an original official receipt received by the Borrowers
showing payment thereof. If the Borrowers fail to pay any Non-Excluded Taxes
when due to the appropriate taxing authority or fails to remit to the
Administrative Agent the required receipts or other required documentary
evidence, the Parent Borrowers shall indemnify the Administrative Agent and the
Lenders for any incremental taxes, interest or penalties that may become payable
by the Administrative Agent or any Lender as a result of any such failure. The
Parent Borrowers shall make any payments required pursuant to the immediately
preceding sentence within 15 days after receipt of a written demand therefor
from the Administrative Agent or any Lender, as the case may be. The agreements
in this subsection shall survive the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall:
(i) deliver to the Borrowers and the Administrative Agent (A) two
duly completed copies of United States Internal Revenue Service Form 1001
or 4224, or successor applicable form, as the case may be, and (B) an
Internal Revenue Service Form W-8 or W-9, or successor applicable form, as
the case may be;
(ii) deliver to the Borrowers and the Administrative Agent two
further copies of any such form or certification on or before the date
that any such form or certification expires or becomes obsolete and after
the occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrowers; and
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(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Borrowers or
the Administrative Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrowers and the
Administrative Agent. Such Lender shall certify (i) in the case of a Form 1001
or 4224, that it is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes and (ii) in
the case of a Form W-8 or W-9, that it is entitled to an exemption from United
States backup withholding tax. Each Person that shall become a Lender or a
Participant pursuant to subsection 13.6 shall, upon the effectiveness of the
related transfer, be required to provide all of the forms and statements
required pursuant to this subsection, provided that in the case of a Participant
such Participant shall furnish all such required forms and statements to the
Lender from which the related participation shall have been purchased.
(c) Any Lender that is entitled to an exemption from or reduction of
withholding tax with respect to payments under this Agreement and any Note
pursuant to the law of the relevant jurisdiction or any treaty shall deliver to
the Borrowers (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without
withholding or at a reduced rate.
5.15 Indemnity. Each Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (a) default by such Borrower in making a borrowing
of, conversion into or continuation of Eurodollar Loans or Offshore Currency
Loans after such Borrower has given a notice requesting the same in accordance
with the provisions of this Agreement, (b) default by such Borrower in making
any prepayment after such Borrower has given a notice thereof in accordance with
the provisions of this Agreement or (c) the making by such Borrower of a
prepayment of Eurodollar Loans or Offshore Currency Loans on a day which is not
the last day of an Interest Period with respect thereto. Any such loss shall be
an amount equal to the excess, if any, of (i) the amount of interest which would
have accrued on the amount so prepaid, or not so borrowed, converted or
continued, for the period from the date of such prepayment or of such failure to
borrow, convert or continue to the last day of such Interest Period (or, in the
case of a failure to borrow, convert or continue, the Interest Period that would
have commenced on the date of such failure) in each case at the applicable rate
of interest for such Loans provided for herein (excluding, however, the
Applicable Margin included therein, if any) over (ii) the amount of interest (as
reasonably determined by such Lender) which would have accrued to such Lender on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurodollar market. This covenant shall survive
the termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.
5.16 Change of Lending Office. Each Lender agrees that if it makes
any demand for payment under subsection 5.13 or 5.14(a), or if any adoption or
change of the type described in subsection 5.12 shall occur with respect to it,
it will use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its sole discretion) to designate a
different lending office if the making of such a designation would reduce or
obviate the need for the Borrowers to make payments under subsection 5.13 or
5.14(a), or would eliminate or reduce the effect of any adoption or change
described in subsection 5.12.
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5.17 Subsidiary Borrowers. The Parent Borrowers may designate any
Foreign Subsidiary of the Company as a Subsidiary Borrower by delivery to the
Administrative Agent of a Borrowing Subsidiary Agreement executed by such
Subsidiary and the Company and upon such delivery such Subsidiary shall for all
purposes of this Agreement be a Subsidiary Borrower and a party to this
Agreement until the Parent Borrowers shall have executed and delivered to the
Administrative Agent a Borrowing Subsidiary Termination with respect to such
Subsidiary, whereupon such Subsidiary shall cease to be a Subsidiary Borrower
and a party to this Agreement. Notwithstanding the preceding sentence, no
Borrowing Subsidiary Termination will become effective as to any Subsidiary
Borrower at a time when any principal of or interest on any Loan to such
Subsidiary Borrower shall be outstanding hereunder, provided that such Borrowing
Subsidiary Termination shall be effective to terminate such Subsidiary
Borrower's right to make further borrowings under this Agreement.
SECTION 6. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into
this Agreement and to make the Loans and issue or participate in the Letters of
Credit, each of the Parent Borrowers hereby jointly and severally represents and
warrants, and each of the Subsidiary Borrowers severally represents and warrants
(solely with respect to the representations and warranties contained in
subsections 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9, 6.10, 6.11, 6.12, 6.14, 6.15,
6.16(b), 6.17 and 6.21 to the extent applicable to such Subsidiary Borrower and
its Subsidiaries), to the Administrative Agent and each Lender that:
6.1 Financial Condition. (a) The Consolidated balance sheet of Y&R
Inc. (New York) and its Consolidated Subsidiaries as at December 31, 1995 and
the related Consolidated statements of income and of cash flows for the fiscal
year ended on such date, reported on by Price Waterhouse LLP, copies of which
have heretofore been furnished to each Lender, present fairly the Consolidated
financial condition of Y&R Inc. (New York) and its Consolidated Subsidiaries as
at such date, and the Consolidated results of their operations and their
Consolidated cash flows for the fiscal year then ended. The unaudited
Consolidated balance sheet of Y&R Inc. (New York) and its Consolidated
Subsidiaries as at June 30, 1996 and the related unaudited Consolidated
statements of income and of cash flows for the six-month period ended on such
date, certified by a Responsible Officer of Y&R Inc. (New York), copies of which
have heretofore been furnished to each Lender, present fairly the Consolidated
financial condition of Y&R Inc. (New York) and its Consolidated Subsidiaries as
at such date, and the Consolidated results of their operations and their
Consolidated cash flows for the six-month period then ended (subject to normal
year-end audit adjustments). All such financial statements, including the
related schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as approved by such
accountants or a Responsible Officer of Y&R Inc. (New York), as the case may be,
and as disclosed therein). Neither Y&R Inc. (New York) nor any of its
Consolidated Subsidiaries had, at the date of the most recent balance sheet
referred to above, any material Guarantee Obligation, contingent liability or
liability for taxes, or any long-term lease or unusual forward or long-term
commitment, including, without limitation, any interest rate or foreign currency
swap or exchange transaction, which is not reflected in the foregoing statements
or in the notes thereto. Except as set forth on Schedule 6.1, during the period
from December 31, 1995 to and including the date hereof there has been no sale,
transfer or other disposition by Y&R Inc. (New York) or any of its Consolidated
Subsidiaries of any material part of its business or property and no purchase or
other acquisition of any business or property (including any capital stock of
any other Person) material in relation to the Consolidated financial condition
of Y&R Inc. (New York) and its Consolidated Subsidiaries, taken as a whole, at
December 31, 1995.
(b) The unaudited pro forma Consolidated balance sheet of the
Company and its
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Consolidated Subsidiaries as at June 30, 1996 and the unaudited pro forma
Consolidated statements of income of the Company and its Subsidiaries for the
fiscal year ended December 31, 1995 and the six-month period ended June 30,
1996, certified by a Responsible Officer of the Company, copies of which have
been heretofore furnished to each Lender, adjusted to give effect to (as if such
events had occurred on such date) (i) the Recapitalization, (ii) the
Refinancing, (iii) the extensions of credit to the Borrowers hereunder on the
Closing Date and on the Second Drawdown Date, and (iv) the fees, expenses and
financing costs related to the foregoing, together with the notes thereto, were
prepared based on good faith assumptions and on the best information available
to the Company as of the date of delivery thereof and fairly present on a pro
forma basis the Consolidated financial position of the Company and its
Consolidated Subsidiaries as at June 30, 1996 and the Consolidated results of
their operations for the periods specified above, in each case as adjusted, as
described above, assuming such events had occurred at June 30, 1996 or at the
beginning of such period, as the case may be.
6.2 No Change. Since December 31, 1995, (a) there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect, and (b) except as set forth on Schedule 6.2, during the
period from December 31, 1995, to and including the date hereof, no dividends or
other distributions have been declared, paid or made upon the Capital Stock of
the Company nor has any of the Capital Stock of the Company been redeemed,
retired, purchased or otherwise acquired for value by the Company or any of its
Subsidiaries except (i) the purchase of Equity Interests pursuant to the
Recapitalization and (ii) annual dividends and distributions, made in accordance
with past practice, on October 8, 1996, in an aggregate amount not exceeding
$1,700,000.
6.3 Existence; Compliance with Law. Such Borrower and each of its
Operating Subsidiaries (a) is duly organized and validly existing under the laws
of the jurisdiction of its organization and, where applicable and except where
the failure to be so could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, is in good standing under the laws
of the jurisdiction of its organization, (b) has the power and authority, and
the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified as a foreign organization and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification, except where the
failure to be so qualified and/or in good standing could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect, and (d) is in
compliance with all Requirements of Law except to the extent that the failure to
comply therewith could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.
6.4 Corporate Power; Authorization; Enforceable Obligations. Such
Borrower has the power and authority, and the legal right, to make, deliver and
perform the Loan Documents to which it is a party and to borrow hereunder and
has taken all necessary action to authorize the borrowings on the terms and
conditions of this Agreement and any Notes and to authorize the execution,
delivery and performance of the Loan Documents to which it is a party. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of the Loan Documents to which such
Borrower is a party. This Agreement has been, and each other Loan Document to
which it is a party will be, duly executed and delivered on behalf of such
Borrower. This Agreement constitutes, and each other Loan Document to which it
is a party when executed and delivered will constitute, a legal, valid and
binding obligation of such Borrower enforceable against such Borrower in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
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53
6.5 No Legal Bar. The execution, delivery and performance of the
Loan Documents to which such Borrower is a party, the borrowings hereunder and
the use of the proceeds thereof will not violate any Requirement of Law or
Contractual Obligation of such Borrower or of any of its Subsidiaries and will
not result in, or require, the creation or imposition of any Lien on any of its
or their respective properties or revenues pursuant to any such Requirement of
Law or Contractual Obligation.
6.6 No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of such Borrower, threatened by or against such Borrower or any
of its Subsidiaries or against any of its or their respective properties or
revenues (a) with respect to any of the Loan Documents or any of the
transactions contemplated hereby or thereby or (b) which could reasonably be
expected to have a Material Adverse Effect.
6.7 No Default. Neither such Borrower nor any of its Subsidiaries is
in default under or with respect to any of its Contractual Obligations in any
respect which could reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
6.8 Ownership of Property; Liens. Such Borrower and each of its
Subsidiaries has good record and marketable title in fee simple to all its owned
real property and such Borrower and each of its Subsidiaries has a valid
leasehold interest or occupancy rights with respect to all real property leased
or occupied pursuant to the Material Leases, and none of such owned real
property is subject to any Lien except as permitted by subsection 9.3. Such
Borrower and each of its Subsidiaries has such title to their respective
personal property and assets, tangible and intangible, as is necessary to
conduct their respective businesses in the same manner as such businesses have
been conducted, and none of such property is subject to any Lien except as
permitted by subsection 9.3. Schedule 6.8 sets forth a true and complete list of
all parcels of real property owned by such Borrower and its Subsidiaries as of
the Closing Date.
6.9 Intellectual Property. Such Borrower and each of its
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, technology, know-how and processes necessary for the conduct of its
business as currently conducted (the "Intellectual Property") except for those
the failure to own or license which could not reasonably be expected to have a
Material Adverse Effect. No claim has been asserted and is pending by any Person
challenging or questioning the use of any such Intellectual Property or the
validity or effectiveness of any such Intellectual Property, nor does such
Borrower know of any valid basis for any such claim, except for any such claims
which, in the aggregate, could not reasonably be expected to have a Material
Adverse Effect. The use of such Intellectual Property by such Borrower and its
Subsidiaries does not infringe on the rights of any Person, except for such
claims and infringements that, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
6.10 No Burdensome Restrictions. No Requirement of Law or
Contractual Obligation of such Borrower or any of its Operating Subsidiaries
could reasonably be expected to have a Material Adverse Effect.
6.11 Taxes. Such Borrower and each of its Subsidiaries has filed or
caused to be filed all tax returns which, to the knowledge of such Borrower, are
required to be filed and has paid all taxes shown to be due and payable on said
returns or on any assessments made against it or any of its property and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than any the amount or validity of which are
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of such Borrower or its Subsidiaries, as the case may be, and other than,
in the case of jurisdictions outside the United States, where failures to timely
and properly file could not,
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individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect); except as set forth on Schedule 6.11, no tax Lien has been
filed, and, to the knowledge of such Borrower, no claim is being asserted, with
respect to any such tax, fee or other charge (other than, in the case of
jurisdictions outside the United States, such Liens, taxes, fees and other
charges as could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect).
6.12 Federal Regulations. No part of the proceeds of any Loans will
be used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation G or Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. If requested by any Lender or the Administrative Agent,
such Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
G-1 or FR Form U-1 referred to in said Regulation G or Regulation U, as the case
may be.
6.13 ERISA. Except as set forth on Schedule 6.13, neither a
Reportable Event nor an "accumulated funding deficiency" (within the meaning of
Section 412 of the Code or Section 302 of ERISA) has occurred during the
five-year period prior to the date on which this representation is made or
deemed made with respect to any Plan, and each Plan has complied in all material
respects with the applicable provisions of ERISA and the Code. No termination of
a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan
has arisen, during such five-year period. Except as set forth on Schedule 6.13,
the present value of all accrued benefits under each Single Employer Plan (based
on those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits. Neither such Borrower nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan, and neither such
Borrower nor any Commonly Controlled Entity would become subject to any
liability under ERISA if such Borrower or any such Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans as of the valuation
date most closely preceding the date on which this representation is made or
deemed made. No such Multiemployer Plan is in Reorganization or Insolvent.
6.14 Investment Company Act; Other Regulations. Such Borrower is not
an "investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. Such
Borrower is not subject to regulation under any Federal or State statute or
regulation (other than Regulation X of the Board of Governors of the Federal
Reserve System) which limits its ability to incur Indebtedness.
6.15 Subsidiaries. Schedule 6.15 sets forth a true and complete list
of all the Operating Subsidiaries of such Borrower at the date hereof and the
percentage of the Capital Stock of such Operating Subsidiary owned directly and
indirectly by such Borrower.
6.16 Purpose of Loans. (a) The proceeds of the Term Loans on the
Closing Date shall be used by the Parent Borrowers to finance a portion of the
Recapitalization and the Refinancing and to pay related fees and expenses. The
proceeds of the Term Loans on the Second Drawdown Date shall be used by the
Parent Borrowers to redeem or acquire the Remaining Equity Interests and to pay
any interest payable in connection therewith.
(b) The proceeds of the Revolving Loans and Fronted Offshore Loans
shall be used by the relevant Borrowers to finance a portion of the
Recapitalization, the Refinancing, to pay related fees and expenses and for
working capital purposes of such Borrowers and their respective Subsidiaries in
the ordinary course of business.
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6.17 Environmental Matters.
(a) To the best knowledge of such Borrower, the facilities and
properties owned, leased or operated by such Borrower or any of its
Subsidiaries (the "Properties") do not contain, and have not previously
contained, any Materials of Environmental Concern in amounts or
concentrations which (i) constitute or constituted a violation of, or (ii)
could reasonably be expected to give rise to liability under, any
Environmental Law, except in either case insofar as such violation or
liability, or any aggregation thereof, could not reasonably be expected to
have a Material Adverse Effect.
(b) To the best knowledge of such Borrower, the Properties and all
operations at the Properties are in compliance, and have in the last five
years been in compliance, in all material respects with all applicable
Environmental Laws, and there is no contamination at, under or about the
Properties or violation of any Environmental Law with respect to the
Properties or the business operated by the Borrower or any of its
Subsidiaries (the "Business"), except in either case insofar as any such
noncompliance, contamination or violation, or any aggregation thereof,
could not reasonably be expected to have a Material Adverse Effect.
(c) Neither such Borrower nor any of its Subsidiaries has received
any notice of violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Properties or the Business,
nor does such Borrower have knowledge or reason to believe that any such
notice will be received or is being threatened, except insofar as such
notice or threatened notice, or any aggregation thereof, could not
reasonably be expected to have a Material Adverse Effect.
(d) To the best knowledge of such Borrower, Materials of
Environmental Concern have not been transported or disposed of from the
Properties in violation of, or in a manner or to a location which could
reasonably be expected to give rise to liability under, any Environmental
Law, nor have any Materials of Environmental Concern been generated,
treated, stored or disposed of at, on or under any of the Properties in
violation of, or in a manner that could reasonably be expected to give
rise to liability under, any applicable Environmental Law, except insofar
as any such violation or liability referred to in this paragraph, or any
aggregation thereof, could not reasonably be expected to have a Material
Adverse Effect.
(e) No judicial proceeding or governmental or administrative action
is pending or, to the knowledge of such Borrower, threatened, under any
Environmental Law to which such Borrower or any Subsidiary is or will be
named as a party with respect to the Properties or the Business, nor are
there any consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial requirements
outstanding under any Environmental Law with respect to the Properties or
the Business, except insofar as such proceeding, action, decree, order or
other requirement, or any aggregation thereof, could not reasonably be
expected to have a Material Adverse Effect.
(f) To the best knowledge of such Borrower, there has been no
release or threat of release of Materials of Environmental Concern at or
from the Properties, or arising from or related to the operations of such
Borrower or any Subsidiary in connection with the Properties or otherwise
in connection with the Business, in violation of or in amounts or in a
manner that could reasonably give rise to liability under Environmental
Laws, except insofar as any such violation or liability referred to in
this paragraph, or any aggregation thereof, could not reasonably be
expected to have a Material Adverse Effect.
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6.18 Regulation H. No Mortgage encumbers improved real property
which is located in an area that has been identified by the Secretary of Housing
and Urban Development as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of
1968.
6.19 Accuracy of Information. No statement or information contained
in this Agreement, any other Loan Document, or any other document, certificate
or written statement furnished to the Administrative Agent or the Lenders or any
of them (including, without limitation, the Recapitalization Documents), by or
on behalf of any Loan Party for use in connection with the transactions
contemplated by this Agreement or the other Loan Documents (including, without
limitation, any financial information furnished pursuant to subsection 8.1),
taken as a whole, contained as of the date such statement, information, document
or certificate was so furnished any untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
contained herein or therein in light of the circumstances in which it was made
not misleading. The projections and pro forma financial information contained in
the materials referenced above are based upon good faith estimates and
assumptions believed by management of such Borrower to be reasonable at the time
made, it being recognized by the Lenders that such financial information as it
relates to future events is not to be viewed as fact and that actual results
during the period or periods covered by such financial information may differ
from the projected results set forth therein. There is no fact known to any Loan
Party that could reasonably be expected to have a Material Adverse Effect that
has not been expressly disclosed herein, in the other Loan Documents, or in such
other documents, certificates and statements furnished to the Administrative
Agent for the benefit of the Lenders (including, without limitation, the
Recapitalization Documents) for use in connection with the transactions
contemplated hereby and by the other Loan Documents.
6.20 Security Documents. (a) Each of the Pledge Agreements is
effective to create in favor of the Administrative Agent, for the benefit of the
Lenders, a legal, valid and enforceable security interest in the Pledged Stock
(as defined therein), and proceeds thereof and, when the stock certificates
representing the Pledged Stock are delivered to the Administrative Agent, each
such Pledge Agreement shall constitute a fully perfected first priority Lien on,
and security interest in, all right, title and interest of the pledgor in
respect thereof in such Pledged Stock and the proceeds thereof in favor of the
Administrative Agent for the benefit of the Lenders, in each case (except as may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally) prior and superior in right
to any other Person.
(b) Each Security Agreement is effective to create in favor of the
Administrative Agent, for the benefit of the Lenders, a legal, valid and
enforceable security interest in the Collateral described therein and proceeds
thereof; when financing statements in appropriate form are filed in the offices
specified on Schedule 6.20, except as set forth in such Security Agreement, such
Security Agreement constitutes a fully perfected Lien on, and security interest
in, all right, title and interest of the Loan Parties in such Collateral and, to
the extent provided therein, the proceeds thereof in favor of the Administrative
Agent for the benefit of the Lenders, in each case (except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally) prior and superior in right to any other
Person, other than with respect to Liens expressly permitted by subsection 9.3.
6.21 Solvency. Such Borrower and each of its Subsidiaries which is a
Guarantor is, and after giving effect to the incurrence or assumption of all
Indebtedness and obligations being incurred or assumed in connection herewith
and the Recapitalization will be and will continue to be, Solvent.
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6.22 Continuing Letters of Credit. Schedule 6.22 is a true and
complete list, by reference to the aggregate face amounts of letters of credit
issued by the Persons listed thereon, of all letters of credit that are
outstanding as of the dates set forth in such Schedule. The list delivered
pursuant to subsection 7.1(y) shall be deemed to supplement Schedule 6.22.
SECTION 7. CONDITIONS PRECEDENT
7.1 Conditions to Initial Extension of Credit. The agreement of each
Lender to make the initial extension of credit requested to be made by it is
subject to the satisfaction, immediately prior to or concurrently with the
making of such extension of credit on the Closing Date, of the following
conditions precedent:
(a) Loan Documents. The Administrative Agent shall have received (i)
this Agreement, executed and delivered by a duly authorized officer of
each of the Parent Borrowers, with a counterpart for the Administrative
Agent and each Lender, (ii) an executed Addendum (or a copy thereof by
facsimile transmission) from each Person listed on Schedule 1.1(a),
provided, that, notwithstanding the foregoing, in the event that an
Addendum has not been duly executed and delivered by each Person listed on
Schedule 1.1(a) on the date (which shall be no earlier than the date
hereof) on which this Agreement shall have been executed and delivered by
each of the Parent Borrowers and the Administrative Agent, the condition
set forth in this subsection 7.1(a)(ii) shall, subject to satisfaction of
the other conditions precedent set forth in this subsection 7.1,
nevertheless be satisfied on such date with respect to those Persons which
have executed and delivered an Addendum on or before such date if on such
date each of the Parent Borrowers and the Administrative Agent shall have
designated one or more banks, financial institutions or other entities
("Designated Lenders") to assume, in the aggregate, all of the Commitments
which would have been held by the Persons listed on Schedule 1.1(a) (the
"Non-Executing Persons") which have not so executed an Addendum (subject
to each such Designated Lender's prior written consent in its sole
discretion and its execution of an Addendum) (Schedule 1.1(a) shall
automatically be deemed to be amended to reflect the respective
Commitments of the Designated Lenders and the omission of the
Non-Executing Persons as Lenders hereunder), (iii) each of the Security
Documents, each executed and delivered by a duly authorized officer of
each Loan Party which is a party thereto, with a counterpart for the
Administrative Agent and a copy for each Lender and (iv) the Subsidiaries
Guarantee, executed and delivered by a duly authorized officer of each
Loan Party which is a party thereto, with a counterpart for the
Administrative Agent and a copy for each Lender.
(b) Equity Proceeds and Roll-Over. The Administrative Agent shall
have received evidence satisfactory to it that Y&R Holdings shall have
received (i) at least $225,000,000 in cash from the issuance of its common
stock to the H&F Group and certain Director Investors (as defined in the
Contribution Agreement) and (ii) at least $201,000,000 in cash from the
issuance of its common stock to the Management Investors and/or in the
form of the contribution of Equity Interests by the Management Investors
to Y&R Holdings (including up to $5,000,000 in promissory notes payable
out of the cash to be paid with respect to the redemption or acquisition
of the Remaining Equity Interests on the Second Drawdown Date (the
"Management Investor Notes")); provided that the aggregate amount of the
capital contributed to Y&R Holdings by the H&F Group, the Director
Investors (as defined in the Contribution Agreement) and the Management
Investors in cash (and, in the case of the Management Investors, in the
form of the contribution of Equity Interests and Management Investor Notes
by the Management Investors to Y&R Holdings) shall be at least
$460,000,000.
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(c) Offers to Acquire and Initial Acquisition of Equity Interests.
The Administrative Agent shall have received evidence satisfactory to it
that Y&R Holdings and the Company shall have made offers to purchase or to
settle for cash compensation outstanding Equity Interests on the terms and
conditions set forth in the Contribution Agreement (the "Offers" and
"Special Compensation Arrangements") and there shall have been tendered
for purchase and purchased pursuant to the Offers or cancelled in
connection with the Special Compensation Arrangements, (i) not less than a
majority in the aggregate of the common stock of Y&R Inc. (New York),
options to purchase such common stock, and "growth participation units" of
Y&R Inc. (New York) not being contributed to Y&R Holdings by the Initial
Management Investors and (ii) not less than a majority in the aggregate of
the limited partnership units of Y&R LP, options to purchase such units
and "growth participation units" of Y&R LP not being contributed to Y&R
Holdings by the Initial Management Investors.
(d) Recapitalization Documentation. The Administrative Agent shall
have received evidence satisfactory to it that no material provision of
the documentation pursuant to which the Recapitalization shall be effected
(the "Recapitalization Documentation"), including, without limitation, the
Contribution Agreement, the offering documents with respect to the Offers,
the merger agreements relating to the Mergers, and the Stockholders'
Agreement (true and complete copies of which have been furnished to the
Lenders) shall have been waived, amended, supplemented or otherwise
modified without the prior approval of the Administrative Agent.
(e) Right to Effect Subsequent Acquisition of Equity Interests. The
Administrative Agent shall have received evidence satisfactory to it that
after giving effect to the transactions that occur on the Closing Date
pursuant to the Recapitalization Documentation, Y&R Holdings shall have
the right to consummate the Holdings Merger and the Partnership Merger and
all other transactions contemplated in order to complete the
Recapitalization and to acquire or redeem all Remaining Equity Interests
outstanding on the Closing Date without the consent of any other person,
subject only to state law appraisal rights, if any.
(f) Capital Structure. The Administrative Agent shall have received
evidence satisfactory to it that the Consolidated capital structure of the
Company after the Recapitalization shall be as set forth in the
Recapitalization Documentation, after giving effect to the transactions to
occur on the Closing Date and the Second Drawdown Date.
(g) Borrower Closing Certificate. The Administrative Agent shall
have received, with a copy for each Lender, a certificate of each Parent
Borrower, dated the Closing Date, substantially in the form of Exhibit Q,
with appropriate insertions and attachments, satisfactory in form and
substance to the Administrative Agent.
(h) Proceedings of Each Parent Borrower. The Administrative Agent
shall have received, with a copy for each Lender, a copy of the
resolutions or other analogous actions, in form and substance satisfactory
to the Administrative Agent, of the Board of Directors or other analogous
body of each Parent Borrower authorizing (i) the execution, delivery and
performance of this Agreement and the other Loan Documents to which it is
a party, (ii) the borrowings contemplated hereunder and (iii) the granting
by it of the Liens created pursuant to the Parent Borrower Security
Documents to which it is a party, certified by such Parent Borrower as of
the Closing Date, which certificate shall be in form and substance
satisfactory to the Administrative Agent and shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded.
(i) Parent Borrower Incumbency Certificates. The Administrative
Agent shall have
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received, with a copy for each Lender, a certificate of each Parent
Borrower, dated the Closing Date, as to the incumbency and signature of
the Persons executing any Loan Document on behalf of such Parent Borrower,
which certificate shall be satisfactory in form and substance to the
Administrative Agent.
(j) Proceedings of Subsidiaries. The Administrative Agent shall have
received, with a counterpart for each Lender, a copy of the resolutions,
in form and substance satisfactory to the Administrative Agent, of the
Board of Directors of each Subsidiary of each Parent Borrower which is a
Loan Party authorizing (i) the execution, delivery and performance of the
Loan Documents to which it is a party and (ii) the granting by it of the
Liens created pursuant to the Subsidiaries Security Documents to which it
is a party, certified by the Secretary or an Assistant Secretary (or other
appropriate officer) of each such Subsidiary as of the Closing Date, which
certificate shall be in form and substance satisfactory to the
Administrative Agent and shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded.
(k) Subsidiary Incumbency Certificates. The Administrative Agent
shall have received, with a copy for each Lender, a certificate of each
Subsidiary of each Parent Borrower which is a Loan Party, dated the
Closing Date, as to the incumbency and signature of the officers of each
such Subsidiary executing any Loan Document, which certificate shall be
satisfactory in form and substance to the Administrative Agent and shall
be executed by the President or any Vice President and the Secretary or
any Assistant Secretary (or other appropriate officer) of each such
Subsidiary.
(l) Organizational Documents. The Administrative Agent shall have
received, with a copy for each Lender, true and complete copies of the
certificate of incorporation and by-laws or other analogous organizational
documents of each Loan Party, certified as of the Closing Date as complete
and correct copies thereof by the Secretary or an Assistant Secretary or
other authorized representative of such Loan Party.
(m) Consents, Licenses and Approvals. All governmental and third
party approvals necessary in connection with the Recapitalization, the
financing contemplated hereby and the continuing operations of the Parent
Borrowers and their Subsidiaries shall have been obtained and be in full
force and effect, and all applicable waiting periods shall have expired
without any action being taken or threatened by any competent authority
which would restrain, prevent or otherwise impose adverse conditions on
the Recapitalization or the financing thereof.
(n) Fees. The Administrative Agent shall have received the fees
required to be paid to the Administrative Agent and the Lenders on or
prior to the Closing Date and any invoices for expenses payable hereunder
presented for payment at least two Business Days prior to the Closing Date
shall have been paid by the Borrowers.
(o) Legal Opinions and Reliance Letters. The Administrative Agent
shall have received, with a copy for each Lender, the following executed
legal opinions:
(i) the executed legal opinion of Wachtell, Lipton, Rosen &
Katz special counsel to the Parent Borrowers and the other Loan
Parties, substantially in the form of Exhibit R-1;
(ii) the executed legal opinion of Stephanie W. Abramson,
General Counsel of Y&R Inc. (New York), substantially in the form of
Exhibit R-2; and
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60
(iii) the executed legal opinion of Simpson Thacher &
Bartlett, in form and substance satisfactory to the Administrative
Agent.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent
may reasonably require.
(p) Pledged Stock; Stock Powers; Acknowledgement and Consents. The
Administrative Agent shall have received (i) the certificates representing
the shares of Capital Stock pledged pursuant to each of the Pledge
Agreements, together with an undated stock power for each such certificate
executed in blank by a duly authorized officer or representative of the
pledgor thereof and (ii) an Acknowledgement and Consent from each issuer
of such pledged shares in the form attached to the relevant Pledge
Agreement, executed and delivered by a duly authorized officer or
representative of such issuer. To the extent that (i) any of the Pledged
Stock of any Foreign Issuer (as defined in the Pledge Agreements) is
evidenced or represented by certificates, the Parent Borrowers shall take
such actions (including registrations and filings) on or prior to the
Closing Date (or as soon thereafter as practicable) as may be required
under applicable law in connection with and to give effect to the grant of
a first security interest therein pursuant to the Pledge Agreements and
(ii) certificates representing the shares of Capital Stock of any Foreign
Issuer pledged pursuant to the Pledge Agreements shall not be delivered on
the Closing Date, the Administrative Agent shall be satisfied that such
certificates shall be delivered to the Administrative Agent promptly
following the Closing Date.
(q) Actions to Perfect Liens. The Administrative Agent shall have
received evidence in form and substance satisfactory to it that all UCC
financing statements have been filed (or arrangements satisfactory to the
Administrative Agent shall have been made to file such UCC financing
statements) in such jurisdictions as shall be necessary or advisable to
perfect the personal property security interests of the Lenders created
pursuant to the Security Documents.
(r) Surveys. The Administrative Agent shall have received, and the
title insurance company issuing the report referred to in subsection
7.1(s) (the "Title Insurance Company") shall have received, maps or plats
of an as-built survey of the sites of the property covered by each
Mortgage certified to the Administrative Agent and the Title Insurance
Company in a manner satisfactory to them, dated a date satisfactory to the
Administrative Agent and the Title Insurance Company by an independent
professional licensed land surveyor satisfactory to the Administrative
Agent and the Title Insurance Company, which maps or plats and the surveys
on which they are based shall be made in accordance with the Minimum
Standard Detail Requirements for Land Title Surveys jointly established
and adopted by the American Land Title Association and the American
Congress on Surveying and Mapping in 1962, and, without limiting the
generality of the foregoing, there shall be surveyed and shown on such
maps, plats or surveys the following: (i) the locations on such sites of
all the buildings, structures and other improvements and the established
building setback lines; (ii) the lines of streets abutting the sites and
width thereof; (iii) all access and other easements appurtenant to the
sites or necessary or desirable to use the sites; (iv) all roadways,
paths, driveways, easements, encroachments and overhanging projections and
similar encumbrances affecting the site, whether recorded, apparent from a
physical inspection of the sites or otherwise known to the surveyor; (v)
any encroachments on any adjoining property by the building structures and
improvements on the sites; and (vi) if the site is described as being on a
filed map, a legend relating the survey to said map.
(s) Title Reports. The Administrative Agent shall have received in
respect of each parcel covered by each Mortgage a title report,
preliminary title certificate or commitment dated
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61
a date reasonably satisfactory to the Administrative Agent to the effect
that title to such real property is vested in the owner thereof free and
clear of all mortgage liens and all defects and encumbrances (other than
those of a type that would be permitted under subsection 9.3(a), 9.3(b) or
9.3(e)), except such defects and encumbrances as may be approved by the
Administrative Agent.
(t) Flood Insurance. If requested by the Administrative Agent, the
Administrative Agent shall have received (i) a policy of flood insurance
which (A) covers any parcel of improved real property which is encumbered
by any Mortgage, (B) is written in an amount not less than the outstanding
principal amount of the indebtedness secured by such Mortgage which is
reasonably allocable to such real property or the maximum limit of
coverage made available with respect to the particular type of property
under the National Flood Insurance Act of 1968, whichever is less, and (C)
has a term ending not earlier than the maturity of the indebtedness
secured by such Mortgage and (ii) confirmation that the mortgagor under
such Mortgage has received the notice required pursuant to Section
208(e)(3) of Regulation H of the Board of Governors of the Federal Reserve
System.
(u) Copies of Documents. The Administrative Agent shall have
received a copy of all recorded documents referred to, or listed as
exceptions to title in, the title policy or policies or report or reports
referred to in subsection 7.1(s) and a copy, certified by such parties as
the Administrative Agent may deem appropriate, of all other documents
affecting the property covered by each Mortgage.
(v) Lien Searches. The Administrative Agent shall have received the
results of a recent search by a Person satisfactory to the Administrative
Agent, of the Uniform Commercial Code, judgment and tax lien filings which
may have been filed with respect to personal property of any Loan Party,
and the results of such search shall be satisfactory to the Administrative
Agent.
(w) Existing Credit Facilities. The Administrative Agent shall have
received evidence satisfactory to it that, concurrently with the initial
extension of credit hereunder, the Existing Credit Facilities and the
Outstanding Notes shall be repaid in full and the commitments under the
Existing Credit Facilities shall be terminated (collectively, the
"Refinancing"). The Administrative Agent shall also have received executed
copies of all payout or assignment letters, lien releases or assignments,
termination or assignment statements, satisfactions, agreements,
certificates, and other documents entered into in connection with the
Refinancing, all of which payout letters, lien releases or assignments,
termination or assignment statements, satisfactions, agreements,
certificates and other documents shall be in form and substance reasonably
satisfactory to the Administrative Agent.
(x) Fairness Opinion; Certificate of Chief Financial Officer. The
Administrative Agent and the Lenders shall have received a copy of the
fairness opinion to be rendered by Duff & Phelps, together with a
certificate of the chief financial officer of the Company, in form and
substance reasonably satisfactory to the Administrative Agent, to the
effect that the Company is Solvent (after giving effect to the
transactions on the Closing Date) and the projections previously provided
to the Lenders were prepared in good faith based upon reasonable
assumptions.
(y) Letters of Credit. The Administrative Agent shall have received
a list setting forth as of the Closing Date all letters of credit of the
Borrowers and their Subsidiaries outstanding as of such date, together
with the face amounts and expiration dates thereof.
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(z) Certain Payments. The Administrative Agent shall have received
evidence satisfactory to it that the sum of (i) the aggregate amount paid
by the Company and its Subsidiaries on the Closing Date in respect of the
purchase of Equity Interests, (ii) the aggregate value of Equity Interests
contributed by the Management Investors to Y&R Holdings on the Closing
Date, (iii) the aggregate value of the Remaining Equity Interests on the
Closing Date, (iv) the aggregate amount paid or to be paid to the former
holders of the Equity Interests pursuant to the Recapitalization
Documentation, (v) the aggregate payments in respect of the matter
described on Schedule 6.13 and (vi) the aggregate payments in respect of
social welfare or other similar or employee taxes shall not exceed
$800,000,000, provided that to the extent that such sum at any time
exceeds $788,000,000, the Company shall be deemed to have made Restricted
Payments at such time pursuant to clause (ii) of subsection 9.7 in the
amount of such excess.
7.2 Conditions to Term Loans on Second Drawdown Date. The agreement
of each Lender to make the Term Loans on the Second Drawdown Date is subject to
the satisfaction of the following conditions precedent:
(a) No Default. No Default or Event of Default shall have occurred
and be continuing under Section 10(a) or 10(f) on the Second Drawdown
Date.
(b) Minimum Consolidated Proportionate EBITDA. The Consolidated
Proportionate EBITDA of Y&R Inc. (New York) shall be at least $127,000,000
for the year ending December 31, 1996 and the Administrative Agent shall
have received a certificate of a Responsible Officer of Y&R Inc. (New
York) to such effect.
7.3 Conditions to Each Extension of Credit. The agreement of each
Lender to make any extension of credit requested to be made by it on any date
(including, without limitation, its initial extension of credit but excluding
the making of the Term Loans on the Second Drawdown Date and any extension of
credit contemplated under subsection 13.20) is subject to the satisfaction of
the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Loan Parties in or pursuant to the Loan Documents
shall be true and correct in all material respects on and as of such date
as if made on and as of such date, except to the extent such
representations and warranties expressly relate to an earlier date in
which case such representations and warranties shall be true and correct
in all material respects as of such earlier date.
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the extension of
credit requested to be made on such date.
(c) Additional Matters. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement, the other Loan Documents and
the Recapitalization Documentation shall be satisfactory in form and
substance to the Administrative Agent, and the Administrative Agent shall
have received such other documents and legal opinions in respect of any
aspect or consequence of the transactions contemplated hereby or thereby
as it shall reasonably request.
Each borrowing by a Parent Borrower hereunder and the issuance of each Letter of
Credit issued hereunder for the benefit of such Parent Borrower shall constitute
a representation and warranty by such Parent Borrower as of the date thereof
that the conditions contained in this subsection have been
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satisfied. Each borrowing by a Subsidiary Borrower hereunder and the issuance of
each Letter of Credit issued hereunder for the benefit of such Subsidiary
Borrower shall constitute a representation and warranty by such Subsidiary
Borrower (insofar as such conditions relate to representations and warranties or
covenants or agreements of such Subsidiary Borrower) as of the date thereof that
the conditions contained in this subsection have been satisfied.
7.4 Each Subsidiary Borrower Credit Event. The agreement of each
Lender to make the initial extension of credit requested to be made by it to any
Subsidiary Borrower on any date is subject to the satisfaction of the following
conditions precedent:
(a) Borrowing Subsidiary Agreement. The Administrative Agent shall
have received the Borrowing Subsidiary Agreement for such Subsidiary
Borrower executed and delivered by the Company and such Subsidiary
Borrower.
(b) Opinions. The Administrative Agent shall have received a
favorable written opinion of counsel for such Subsidiary Borrower (which
counsel shall be reasonably acceptable to the Administrative Agent),
substantially in the form of Exhibit R-3, and covering such other matters
(including matters of the type described in subsections 5.13 or 5.14)
relating to such Subsidiary Borrower or its Borrowing Subsidiary Agreement
as the Required Lenders shall reasonably request.
(c) Other Documents. The Administrative Agent shall have received
such documents and certificates as the Administrative Agent or its counsel
may reasonably request relating to the organization, existence and good
standing of such Subsidiary Borrower, the authorization of the
transactions contemplated hereby relating to such Subsidiary Borrower and
any other legal matters relating to such Subsidiary Borrower, its
Borrowing Subsidiary Agreement or such transactions, all in form and
substance satisfactory to the Administrative Agent and its counsel.
SECTION 8. AFFIRMATIVE COVENANTS
Each of the Parent Borrowers hereby jointly and severally agrees,
and each of the Subsidiary Borrowers severally agrees (other than with respect
to the covenants contained in subsections 8.1, 8.2, 8.11 and 8.12), that, so
long as the Commitments remain in effect or any amount is owing to any Lender or
the Administrative Agent hereunder or under any other Loan Document, such
Borrower shall and (except in the case of delivery of financial information,
reports and notices) shall cause each of its Operating Subsidiaries to:
8.1 Financial Statements. Furnish to the Administrative Agent and
each Lender:
(a) as soon as available, but in any event within 90 days (or 120
days, in the case of the fiscal year ending December 31, 1996) after the
end of each fiscal year of the Company, a copy of the Consolidated balance
sheet of the Company and its Consolidated Subsidiaries as at
the end of such year and the related Consolidated statements of income and
retained earnings and of cash flows for such year, setting forth in each
case in comparative form the figures for the previous year, reported on
without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by Price Waterhouse
LLP or other independent certified public accountants of nationally
recognized standing; and
(b) as soon as available, but in any event not later than 45 days
(or 75 days, in the case of the quarterly period ending March 31, 1997)
after the end of each of the first three quarterly
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periods of each fiscal year of the Company, the unaudited Consolidated
balance sheet of the Company and its Consolidated Subsidiaries as at the
end of such quarter and the related unaudited Consolidated statements of
income and retained earnings and of cash flows of the Company and its
Consolidated Subsidiaries for such quarter and the portion of the fiscal
year through the end of such quarter, setting forth in each case in
comparative form the figures for the previous year, certified by a
Responsible Officer of the Company as being fairly stated in all material
respects (subject to normal year-end audit adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
8.2 Certificates; Other Information. Furnish to the Administrative
Agent and each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 8.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge was
obtained of any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 8.1(a) and 8.1(b), a certificate of a
Responsible Officer of the Company, substantially in the form of Exhibit
S, (i) stating that, to the best of such Officer's knowledge, during such
period (A) no Subsidiary has been formed or acquired (or, if any such
Subsidiary has been formed or acquired, the Borrowers have complied with
the requirements of subsection 8.10 with respect thereto), (B) no Borrower
nor any of its Domestic Subsidiaries has changed its name, its principal
place of business, its chief executive office or the location of any
material item of tangible Collateral without complying with the
requirements of this Agreement and the Security Documents with respect
thereto and (C) each Borrower has observed or performed all of its
covenants and other agreements, and satisfied every condition, contained
in this Agreement and the other Loan Documents to be observed, performed
or satisfied by it, and that such Officer has obtained no knowledge of any
Default or Event of Default except as specified in such certificate and
(ii) setting forth in reasonable detail the calculations required to
determine compliance with subsection 9.1 (and, in the case of the
certificate delivered in connection with the financial statements
furnished pursuant to subsection 8.1(a), subsection 5.4(f)), together
with, in the event that there is any change in generally accepted
accounting principles in the United States of America subsequent to the
date hereof, a reconciliation of the calculations used to determine
compliance with subsection 9.1 to the financial statements delivered in
connection with such certificate;
(c) not later than thirty days following the beginning of each
fiscal year of the Company (commencing with the fiscal year ending
December 31, 1997), a copy of preliminary operating and cash flow budgets
of the Company and its Subsidiaries for such fiscal year (with the final
operating and cash flow budget to be delivered within 90 days after the
beginning of such fiscal year), such budgets to be accompanied by a
certificate of a Responsible Officer of the Company to the effect that
such budgets have been prepared on the basis of sound financial planning
practice and that such Officer has no reason to believe they are incorrect
or misleading in any material respect;
(d) within five days after the same are sent, copies of all
financial statements and reports
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which any Parent Borrower sends to the holders of its Capital Stock
generally, and within five days after the same are filed, copies of all
financial statements and reports which any Parent Borrower may make to, or
file with, the Securities and Exchange Commission or any successor or
analogous Governmental Authority; and
(e) promptly, such additional financial and other information as any
Lender may from time to time reasonably request.
8.3 Payment of Obligations. Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP (or, in the case of a Foreign Subsidiary, generally
accepted accounting principles in effect in the relevant jurisdiction) with
respect thereto have been provided on the books of such Borrower or its
Operating Subsidiaries, as the case may be, and except to the extent that the
failure to so pay, discharge or otherwise satisfy its obligations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
8.4 Conduct of Business and Maintenance of Existence; Compliance
with Contractual Obligations and Requirements of Law. Continue to engage in
business of the same general type as now conducted by it and preserve, renew and
keep in full force and effect its corporate existence and take all reasonable
action to maintain all material rights, privileges and franchises necessary in
the normal conduct of its business except as otherwise permitted pursuant to
subsection 9.5; comply with all Contractual Obligations and Requirements of Law
except to the extent that failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
8.5 Maintenance of Property; Insurance. Keep all material property
useful and necessary in its business in good working order and condition
(ordinary wear and tear excepted); maintain with financially sound and reputable
insurance companies insurance on (or, to the extent consistent with prudent
business practice, a program of self-insurance with respect to) all its property
in at least such amounts and against at least such risks (but including in any
event public liability, product liability and business interruption) as are
usually insured against in the same general area by companies engaged in the
same or a similar business; and furnish to the Administrative Agent and each
Lender, upon written request, full information as to the insurance carried.
8.6 Inspection of Property; Books and Records; Discussions. Keep
proper books of records and account in conformity with GAAP (or, in the case of
a Foreign Subsidiary, generally accepted accounting principles in effect or
applied in the relevant jurisdiction) and all Requirements of Law; and permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and to discuss the business,
operations, properties and financial and other condition of such Borrower and
its Subsidiaries with officers and employees of such Borrower and its
Subsidiaries and with its independent certified public accountants.
8.7 Notices. Promptly give notice to the Administrative Agent and
each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of such Borrower or any of its Subsidiaries which could
reasonably be expected to have a Material Adverse Effect or (ii)
litigation, investigation or proceeding which may exist at any time
between such Borrower or any of its Subsidiaries and any Governmental
Authority, as to which there is a
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reasonable possibility of an adverse determination and which, if adversely
determined, could reasonably be expected to have a Material Adverse
Effect;
(c) any non-frivolous litigation or proceeding affecting such
Borrower or any of its Subsidiaries in which the amount involved is
$2,500,000 or more and not covered by insurance or third-party
indemnification from third parties which could reasonably be expected to
satisfy any indemnification claim or in which injunctive or similar relief
is sought;
(d) the following events, as soon as possible and in any event
within 30 days after such Borrower knows or has reason to know thereof:
(i) the occurrence or expected occurrence of any Reportable Event with
respect to any Plan, a failure to make any required contribution to a
Plan, the creation of any Lien in favor of the PBGC or a Plan or any
withdrawal from, or the termination, Reorganization or Insolvency of, any
Multiemployer Plan or (ii) the institution of proceedings or the taking of
any other action by the PBGC or such Borrower or any Commonly Controlled
Entity or any Multiemployer Plan with respect to the withdrawal from, or
the terminating, Reorganization or Insolvency of, any Plan; and
(e) any development or event which could reasonably be expected to
have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer of the Company setting forth details of the occurrence
referred to therein and stating what action the Parent Borrowers propose to take
with respect thereto.
8.8 Environmental Laws. (a) Comply with, and ensure compliance by
all tenants and subtenants, if any, with, all applicable Environmental Laws and
obtain and comply with and maintain, and ensure that all tenants and subtenants
obtain and comply with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws, except in any such case to the extent that failure to do so could not, in
the aggregate, be reasonably expected to have a Material Adverse Effect.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws, except to the extent that the failure to do so could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, and promptly comply with all lawful orders and directives of all
Governmental Authorities regarding Environmental Laws, except to the extent that
the same are being contested in good faith by appropriate proceedings and the
pendency of such proceedings could not be reasonably expected to have a Material
Adverse Effect.
8.9 Further Assurances. Upon the request of the Administrative
Agent, promptly perform or cause to be performed any and all acts and execute or
cause to be executed any and all documents (including, without limitation,
financing statements and continuation statements) for filing under the
provisions of the Uniform Commercial Code or any other Requirement of Law which
are necessary or advisable to maintain in favor of the Administrative Agent, for
the benefit of the Lenders, Liens on the Collateral that are duly perfected in
accordance with all applicable Requirements of Law.
8.10 Additional Collateral. (a) With respect to any assets acquired
after the Closing Date by such Borrower or any of its Domestic Subsidiaries that
are intended to be subject to the Lien created by any of the Security Documents
but which are not so subject (other than any assets described in paragraph (b)
or (c) of this subsection), promptly (and in any event within 30 days after the
acquisition thereof): (i) execute and deliver to the Administrative Agent such
amendments to the relevant Security
<PAGE> 73
67
Documents or such other documents as the Administrative Agent shall deem
necessary or advisable to grant to the Administrative Agent, for the benefit of
the Lenders, a Lien on such assets, (ii) take all actions necessary or advisable
to cause such Lien to be duly perfected in accordance with all applicable
Requirements of Law, including, without limitation, the filing of financing
statements in such jurisdictions as may be requested by the Administrative Agent
(it being agreed that (A) no Mortgage shall be required to be executed and
delivered with respect to any parcel of real property acquired after the Closing
Date unless the book value of such parcel of real property exceeds $5,000,000
and (B) no such action shall be required pursuant to clause (ii) to perfect a
Lien (1) in assets that would not constitute UCC Filing Collateral or (2) in
assets constituting UCC Filing Collateral if such perfection relates to
collateral with an aggregate book value of less than $100,000), and (iii) if
requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matters described in clauses (i) and (ii) immediately
preceding, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent.
(b) With respect to any Person that, subsequent to the Closing Date,
becomes a Subsidiary (other than a Foreign Subsidiary), promptly upon the
request of the Administrative Agent: (i) execute and deliver (or cause to be
executed and delivered) to the Administrative Agent, for the benefit of the
Lenders, a new pledge agreement or such amendments to the relevant Pledge
Agreement as the Administrative Agent shall deem necessary or advisable to grant
to the Administrative Agent, for the benefit of the Lenders, a Lien on the
Capital Stock of such Subsidiary which is owned by such Borrower or any of its
Subsidiaries, (ii) deliver (or cause to be delivered) to the Administrative
Agent the certificates representing such Capital Stock, together with undated
stock powers executed and delivered in blank by a duly authorized officer of
such Borrower or such Subsidiary, as the case may be, (iii) if such Subsidiary
is not a Y&R Agent Subsidiary, cause such new Subsidiary (A) to become a party
to the Subsidiary Guarantee and the Subsidiary Security Agreement, in each case
pursuant to documentation which is in form and substance satisfactory to the
Administrative Agent, and (B) to take all actions necessary or advisable to
cause the Lien created by the Subsidiary Security Agreement to be duly perfected
in accordance with all applicable Requirements of Law, including, without
limitation, the filing of financing statements in such jurisdictions as may be
requested by the Administrative Agent (it being agreed that no such action shall
be required pursuant to this clause (ii) to perfect a Lien (1) in assets that
would not constitute UCC Filing Collateral or (2) in assets constituting UCC
Filing Collateral if such perfection relates to collateral with an aggregate
book value of less than $100,000), and (iv) if requested by the Administrative
Agent, deliver to the Administrative Agent legal opinions relating to the
matters described in clauses (i), (ii) and (iii) immediately preceding, which
opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent.
(c) With respect to any Person that, subsequent to the Closing Date,
becomes a Direct Foreign Subsidiary, promptly upon the request of the
Administrative Agent: (i) execute and deliver (or cause to be executed and
delivered) to the Administrative Agent a new pledge agreement or such amendments
to the relevant Pledge Agreement as the Administrative Agent shall deem
necessary or advisable to grant to the Administrative Agent, for the benefit of
the Lenders, a Lien on the Capital Stock of such Direct Foreign Subsidiary which
is owned by such Borrower or any of its Domestic Subsidiaries (provided that in
no event shall more than 66% of the Capital Stock of any such Direct Foreign
Subsidiary be required to be so pledged), (ii) deliver (or cause to be
delivered) to the Administrative Agent any certificates representing such
Capital Stock, together with undated stock powers executed and delivered in
blank by a duly authorized officer of such Borrower or such Subsidiary, as the
case may be, and take or cause to be taken all such other actions under the law
of the jurisdiction of organization of such Direct Foreign Subsidiary as may be
necessary or advisable to perfect such Lien on such Capital Stock and (iii) if
requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matters described in clauses (i) and (ii) immediately
preceding, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent.
<PAGE> 74
68
8.11 Acquisition of Remaining Equity Interests and Completion of
Recapitalization; Consummation of Holdings Merger and Partnership Merger. (a)
Except as set forth on Schedule 8.11, acquire or redeem on or prior to March 30,
1997 all Remaining Equity Interests as of the Closing Date and complete and
effect all transactions and other actions contemplated to be taken on or prior
to such date under the Recapitalization Documentation, provided that, if the
holders of any such Remaining Equity Interests elect to exercise any state law
appraisal rights to which they are entitled, the Borrowers shall acquire the
Remaining Equity Interests of such holders in accordance with all Requirements
of Law applicable to such appraisal rights.
(b) Consummate the Holdings Merger and the Partnership Merger no
later than December 31, 1996.
8.12 Interest Rate Protection. Within 180 days following the Closing
Date, enter into Interest Rate Protection Agreements with respect to at least
$100,000,000 of the Term Loans and, within 180 days following the Second
Drawdown Date, enter into Interest Rate Protection Agreements with respect to
the Term Loans such that such Interest Rate Protection Agreements shall be in
effect with respect to at least $200,000,000 of Term Loans in the aggregate,
such Interest Rate Protection Agreements to have terms and conditions and to be
in form and substance reasonably satisfactory to the Administrative Agent.
SECTION 9. NEGATIVE COVENANTS
Each of the Parent Borrowers hereby jointly and severally agrees,
and each of the Subsidiary Borrowers severally agrees (other than with respect
to subsections 9.1, 9.12 and 9.15), that, so long as the Commitments remain in
effect or any amount is owing to any Lender or the Administrative Agent
hereunder or under any other Loan Document, such Borrower shall not, and (except
with respect to subsections 9.1) shall not permit any of its Operating
Subsidiaries to, directly or indirectly:
9.1 Financial Condition Covenants.
(a) Maintenance of Net Worth. Permit Consolidated Net Worth of the
Company at any time on or after March 31, 1997 to be less than 85% of
Initial Consolidated Net Worth, or, if negative, 115% thereof plus 50% of
Consolidated Net Income of the Company, for each complete fiscal quarter
of the Company (to the extent that Consolidated Net Income for such fiscal
quarter is positive) commencing with the fiscal quarter ending June 30,
1997.
(b) Interest Coverage. Permit for any period of four consecutive
fiscal quarters of the Company ending during any Test Period set forth
below the Interest Coverage Ratio to be less than the ratio set forth
opposite such period below:
<TABLE>
<CAPTION>
Test Period Interest Coverage Ratio
----------- -----------------------
<S> <C>
1/1/97 through 6/30/97 3.25 to 1.00
7/1/97 through 6/30/98 3.50 to 1.00
7/1/98 through 9/30/98 3.75 to 1.00
10/1/98 through 9/30/99 4.00 to 1.00
10/1/99 through 3/31/00 4.25 to 1.00
4/1/00 through 3/31/03 4.50 to 1.00
</TABLE>
<PAGE> 75
69
(c) Fixed Charge Coverage. Permit for any period of four consecutive
fiscal quarters of the Company ending during any Test Period set forth
below the Fixed Charge Coverage Ratio to be less than the ratio set forth
opposite such period below:
<TABLE>
<CAPTION>
Test Period Fixed Charge Coverage Ratio
----------- ---------------------------
<S> <C>
1/1/97 through 12/31/00 1.40 to 1.00
1/1/01 through 3/31/03 1.50 to 1.00
</TABLE>
(d) Debt Coverage. Permit for any period of four consecutive fiscal
quarters of the Company ending during any Test Period set forth below the
Debt Coverage Ratio to be greater than the ratio set forth opposite such
period below:
<TABLE>
<CAPTION>
Test Period Debt Coverage Ratio
----------- -------------------
<S> <C>
1/1/97 through 9/30/97 4.50 to 1.00
10/1/97 through 6/30/98 3.75 to 1.00
7/1/98 through 9/30/98 3.50 to 1.00
10/1/98 through 9/30/99 3.25 to 1.00
10/1/99 through 9/30/00 2.75 to 1.00
10/1/00 through 3/31/03 2.50 to 1.00
</TABLE>
9.2 Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness of the Borrowers under this Agreement;
(b) Indebtedness of the Company to any Subsidiary and of any
Subsidiary to the Company or any other Subsidiary of the Company, provided
that the aggregate amount of any such Indebtedness of any Y&R Agent
Subsidiary shall at no time exceed the amount required to finance the
working capital needs of such Y&R Agent Subsidiary;
(c) Indebtedness of the Borrowers and any of their respective
Subsidiaries incurred to finance the acquisition of fixed or capital
assets (whether pursuant to a loan, a Financing Lease or otherwise) (i) in
an aggregate principal amount not exceeding in the aggregate for the
Borrowers and their respective Subsidiaries $25,000,000 at any time
outstanding and (ii) in a principal amount as to any such fixed or capital
asset not exceeding an amount equal to 100% of the original purchase price
of such fixed or capital asset;
(d) Indebtedness of Foreign Subsidiaries in an aggregate principal
amount not exceeding for all Foreign Subsidiaries at any time outstanding
the sum of (i) $40,000,000 (or the Offshore Currency Equivalent thereof)
and (ii) the product of (A) $5,000,000 (or the Offshore Currency
Equivalent thereof) multiplied by (B) the number of Eligible Offshore
Currencies in respect of which no Revolving Offshore Loans are then
outstanding, provided if, a Person which makes available any such
Indebtedness has been designated as a "Designated Foreign Lender" under
the Security Documents at any time, the Borrowers' right to request
extensions of credit with respect to a portion of the Aggregate Revolving
Commitment equal to the aggregate "Maximum Qualified Foreign Indebtedness
Amount" of all such Persons at such time determined in accordance with the
Security Documents shall be temporarily suspended;
(e) Indebtedness outstanding on the date hereof and listed on
Schedule 9.2(e);
<PAGE> 76
70
(f) prior to the Closing Date, Indebtedness outstanding under the
Existing Credit Facilities;
(g) Indebtedness of a corporation which becomes a Subsidiary after
the date hereof, provided that (i) such indebtedness existed at the time
such corporation became a Subsidiary and was not created in anticipation
thereof and (ii) immediately after giving effect to the acquisition of
such corporation by a Borrower or a Subsidiary no Default or Event of
Default shall have occurred and be continuing;
(h) unsecured Indebtedness (not otherwise permitted by this
subsection 9.2) not exceeding in an aggregate principal amount (as to the
Borrowers and all their respective Subsidiaries) at any one time
outstanding an amount equal to the amount by which (i) the sum of (A)
$60,000,000 (or the Offshore Currency Equivalent thereof) and (B) the
product of (I) $5,000,000 (or the Offshore Currency Equivalent thereof)
multiplied by (II) the number of Eligible Offshore Currencies in respect
of which no Revolving Offshore Loans are then outstanding exceeds (ii) the
aggregate principal amount of Indebtedness then outstanding pursuant to
subsection 9.2(d);
(i) unsecured Indebtedness (not otherwise permitted by this
subsection 9.2) in an aggregate principal amount (as to the Borrowers and
all their respective Subsidiaries) incurred subsequent to the Closing Date
not to exceed $200,000,000, provided that the Net Proceeds of such
Indebtedness are used to prepay Loans pursuant to subsection 5.4(d) and/or
the Commitments are reduced by the amount of such Net Proceeds pursuant to
subsection 5.4(d);
(j) Indebtedness in respect of subordinated payment obligations
issued pursuant to Section 4.05 or 4.06 of the Stockholders' Agreement (as
in effect on the date hereof), provided that (i) such Indebtedness is
subordinated to the Indebtedness, Guarantee Obligations and Letters of
Credit of the Loan Parties under the Loan Documents on the terms and
conditions set forth on Schedule 9.2(j) or on such other terms and
conditions which are reasonably satisfactory to the Administrative Agent,
(ii) no such terms and conditions shall be amended or otherwise modified
in a manner adverse to the Lenders without the prior written consent of
the Administrative Agent and (iii) the aggregate outstanding principal
amount of all such notes shall not exceed $50,000,000 at any time;
(k) Indebtedness in respect of Hedging Agreements; and
(l) any refinancings, refundings, renewals or extensions of
Indebtedness otherwise permitted hereunder, provided that (a) the
principal amount thereof shall not be increased and (b) the subordination
provisions (if any) with respect to any Indebtedness incurred pursuant to
this paragraph are no less favorable to the Lenders than those applicable
to the refinanced, refunded renewed or extended Indebtedness.
9.3 Limitation on Liens. Create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) (i) the Lien described on Schedule 6.11 and (ii) Liens for taxes
not yet due or which are being contested in good faith by appropriate
proceedings, provided that, in the case of clause (ii), adequate reserves
with respect thereto are maintained on the books of such Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP (or, in the case
of a Foreign Subsidiary, generally accepted accounting principles in the
relevant jurisdiction);
<PAGE> 77
71
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
which are not overdue for a period of more than 60 days or which are being
contested in good faith by appropriate proceedings or which are bonded;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of such
Borrower or such Subsidiary;
(f) Liens in existence on the date hereof securing Indebtedness
permitted by subsection 9.2(e) which (i) are listed on Schedule 9.3(f) or
(ii) as to Liens in respect of the assets of Foreign Subsidiaries, do not
secure Indebtedness exceeding $5,000,000 in the aggregate or which arise
in the ordinary course of business by operation of law, provided that no
such Lien is spread to cover any additional property after the Closing
Date and that the amount of Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness of the Borrowers and their
respective Subsidiaries permitted by subsection 9.2(c) incurred to finance
the acquisition of fixed or capital assets, provided that (i) such Liens
shall be created substantially simultaneously with the acquisition of such
fixed or capital assets, (ii) such Liens do not at any time encumber any
property other than the property financed by such Indebtedness and (iii)
the principal amount of Indebtedness secured by any such Lien shall at no
time exceed an amount equal to 100% of the original purchase price of such
property;
(h) Liens on the property or assets of a corporation which becomes a
Subsidiary after the date hereof securing Indebtedness permitted by
subsection 9.2(g), provided that (i) such Liens existed at the time such
corporation became a Subsidiary and were not created in anticipation
thereof, (ii) any such Lien is not spread to cover any property or assets
of such corporation after the time such corporation becomes a Subsidiary,
and (iii) the amount of Indebtedness secured thereby is not increased;
(i) Liens on the assets of any Foreign Subsidiary to secure
Indebtedness of such Foreign Subsidiary permitted under subsection 9.2(d);
(j) Liens (not otherwise permitted hereunder) which secure
obligations not exceeding (as to the Borrowers and all their respective
Subsidiaries) $5,000,000 in aggregate amount at any time outstanding; and
(k) Liens created pursuant to the Security Documents.
9.4 Limitation on Guarantee Obligations. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
<PAGE> 78
72
(a) Guarantee Obligations in existence on the date hereof and listed
on Schedule 9.4(a);
(b) Guarantee Obligations in respect of guarantees made in the
ordinary course of its business by such Borrower of obligations of any of
its Subsidiaries, which obligations are otherwise permitted under this
Agreement;
(c) Guarantee Obligations in respect of the Indebtedness permitted
under subsection 9.2(d);
(d) the Guarantees; and
(e) Guarantee Obligations (not otherwise permitted pursuant to this
subsection 9.4) issued after the Closing Date in an aggregate amount (as
to the Borrowers and their respective Subsidiaries) not to exceed,
together with Guarantee Obligations outstanding under paragraph (a) above,
$40,000,000 at any one time outstanding.
9.5 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, except that:
(a) any Subsidiary of such Borrower may be merged or consolidated
with or into such Borrower (provided that such Borrower shall be the
continuing or surviving corporation) or with or into any one or more
wholly owned Subsidiaries of the Company (provided that the wholly owned
Subsidiary or Subsidiaries shall be the continuing or surviving
corporation);
(b) any wholly owned Subsidiary of such Borrower may sell, lease,
transfer or otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Company or any other wholly owned
Subsidiary of the Company;
(c) any Subsidiary of such Borrower may by way of merger or
consolidation with or into any other Person, convey, sell, transfer,
assign or otherwise dispose of any or all of its assets or its ownership
interest in such assets to, any Person to the extent that the sale or
other disposition of such assets or such ownership interest of such
Subsidiary would be permitted under subsection 9.6;
(d) any Subsidiary of such Borrower may by way of merger or
consolidation with or into any other Person consummate a Permitted
Investment, provided that the surviving corporation in such merger or
consolidation is a Subsidiary; and
(e) the Mergers shall be permitted.
9.6 Limitation on Sale of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or, in the case of any Subsidiary, issue or
sell any shares of such Subsidiary's Capital Stock to any Person other than the
Company or any wholly owned Subsidiary of the Company, except:
(a) the sale or other disposition of obsolete or worn out property
in the ordinary course of business;
<PAGE> 79
73
(b) the sale or other disposition of any property or assets
(including, but not limited to, pursuant to Divestitures) in the ordinary
course of business, provided that the aggregate purchase price for all
such sales or other dispositions by the Borrowers and their Subsidiaries
shall not exceed $100,000,000 in the aggregate after the Closing Date;
(c) the sale of inventory in the ordinary course of business;
(d) the sale or discount without recourse of accounts receivable
arising in the ordinary course of business in connection with the
compromise or collection thereof;
(e) the sale of the New York Real Property; and
(f) as permitted by subsection 9.5(b).
9.7 Limitation on Dividends. Declare or pay any dividend (other than
dividends payable solely in common stock of the Company) on, or make any payment
on account of, or set apart assets for a sinking or other analogous fund for,
the purchase, redemption, defeasance, retirement or other acquisition of, any
shares of any class of Capital Stock of the Company (or, until the Holdings
Merger, Y&R Inc. (New York), or, until the Partnership Merger, Y&R LP) or any
warrants or options to purchase any such Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of the Company or
any Subsidiary of the Company (such declarations, payments, setting apart,
purchases, redemptions, defeasances, retirements, acquisitions and distributions
being herein called "Restricted Payments"), except that the Company (i) may
purchase or exchange then-existing employee stock options for its Capital Stock
for consideration consisting solely of new employee stock options, (ii) so long
as no Default or Event of Default has occurred and is continuing or would occur
as a result thereof, may purchase for cash or Indebtedness permitted pursuant to
subsection 9.2(j) shares of its Capital Stock or options to acquire such Capital
Stock from directors, officers and employees of the Company and its Subsidiaries
in connection with employment and severance arrangements; provided that the
aggregate amount of Restricted Payments made in cash (including payments in
respect of the Principal or interest of the Indebtedness permitted pursuant to
subsection 9.2(j)) pursuant to this clause (ii) shall not exceed $12,500,000 in
the aggregate in any one fiscal year of the Company (the "Annual Amount") and
provided further that any portion of the Annual Amount not utilized for such
purpose in a given fiscal year may be carried over and shall be deemed to
increase the Annual Amount for the subsequent fiscal year, until so utilized,
(iii) may consummate the transactions described on Schedule 8.11, (iv) may make
Restricted Payments solely out of the cash proceeds from the issuance of Capital
Stock upon exercise of stock options, (v) may make Restricted Payments pursuant
to the Mergers, the Offers or the Special Compensation Arrangements (including,
in the latter case, payments made in March 1997 or thereafter pursuant to such
Arrangements (as in effect on the date hereof)), (vi) may make Restricted
Payments made solely in the form of Capital Stock of the Company (including (A)
the acceptance by the Company of Equity Interests contributed to it by the
Management Investors as contemplated under subsection 7.1(b), (B) the acceptance
by the Company of shares of Capital Stock as payment of the exercise price upon
exercise of an option for Capital Stock and (C) the issuance by the Company of
new employee stock options in substitution for outstanding employee stock
options) and (vii) may make Restricted Payments to former holders of Equity
Interests in connection with Equity Interests acquired or otherwise cancelled
prior to the Offers. The acceptance by the Company of shares of Capital Stock
from an employee in satisfaction of tax withholding obligations with respect to
such employee shall be deemed to be a Restricted Payment.
9.8 Limitation on Capital Expenditures. Make or commit to make (by
way of the
<PAGE> 80
74
acquisition of securities of a Person or otherwise) any expenditure in respect
of the purchase or other acquisition of fixed or capital assets (excluding any
such asset acquired in connection with normal replacement and maintenance
programs properly charged to current operations) except for expenditures in the
ordinary course of business ("Capital Expenditures") not exceeding, in the
aggregate for the Borrowers and their respective Subsidiaries during any of the
fiscal years of the Company set forth below, the amount set forth opposite such
fiscal year below:
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1997 $57,500,000
1998 $62,500,000
1999 $67,500,000
2000 $67,500,000
2001 $67,500,000
2002 $67,500,000
2003 $67,500,000
</TABLE>
provided, that (a) up to 50% of any amount set forth above for any fiscal year
if not so expended in the fiscal year for which it is permitted above, may be
carried over for expenditure in the next following fiscal year, (b) Capital
Expenditures resulting from any Investment pursuant to subsection 9.9(c) shall
not be included for purposes of determining compliance with this subsection and
(c) Capital Expenditures resulting from the New York Real Estate Consolidation
(to the extent that such Capital Expenditures are funded with the proceeds of
the sale of the New York Real Property and to the extent such proceeds are not
otherwise used in accordance with clause (iii) of the proviso to subsection
5.4(e)) shall not be included for purposes of determining compliance with this
subsection.
9.9 Limitation on Investments, Loans and Advances. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment in, any Person ("Investments"),
except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) Investments (including, but not limited to, Acquisitions) made
by the Company or any of its Subsidiaries, provided that the aggregate
consideration (including assumed Indebtedness) for all such Investments
after the date hereof shall not exceed $25,000,000 in any one fiscal year
of the Company or $100,000,000 in the aggregate, provided, further, that
additional Investments not exceeding $10,000,000 in any one fiscal year of
the Company or $35,000,000 in the aggregate shall be permitted to the
extent that the consideration therefor consists of Capital Stock of the
Company;
(d) Investments pursuant to subsection 5.4(e);
(e) loans and advances to employees of the Borrowers and their
respective Subsidiaries for (i) travel, entertainment and relocation
expenses and in connection with management incentive plans, in each case
in the ordinary course of business, and loans to officers of the Borrowers
and their respective Subsidiaries in the ordinary course of business, in
an aggregate amount for the Borrowers and their respective Subsidiaries
not to exceed $10,000,000 at any one time outstanding (excluding the
Management Investor Notes) and (ii) the Management Investor
<PAGE> 81
75
Notes;
(f) Investments by such Borrower in any other Borrower or in
Domestic Subsidiaries of any Borrower and Investments by Subsidiaries of
any Borrower in any Borrower and in Domestic Subsidiaries of any Borrower,
provided that no Investment shall be made in any Y&R Agent Subsidiary
pursuant to this paragraph other than any Investment arising out of any
Indebtedness permitted under subsection 9.2(b); and
(g) Investments by the Borrowers and their Domestic Subsidiaries in
Foreign Subsidiaries of the Borrowers, provided that (i) the aggregate
amount of all such Investments (including Investments in the nature of
sales and transfers of assets (including, pursuant to a transaction
permitted under subsection 9.5) for less than fair market value,
Indebtedness pursuant to subsection 9.2(b) and Guarantee Obligations
pursuant to subsection 9.4(b)) subsequent to the Closing Date in such
Foreign Subsidiaries shall not exceed $75,000,000 and (ii) no Investment
shall be made in any Y&R Agent Subsidiary pursuant to this paragraph other
than any Investment arising out of any Indebtedness permitted under
subsection 9.2(b).
9.10 Limitation on Transactions with Affiliates. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement, (b) in the
ordinary course of such Borrower's or such Subsidiary's business and (c) upon
fair and reasonable terms no less favorable to such Borrower or such Subsidiary,
as the case may be, than it would obtain in a comparable arm's length
transaction with a Person which is not an Affiliate, provided that it is agreed
that the transactions contemplated by the Recapitalization Documentation as in
effect on the date hereof shall not be prohibited by this subsection.
9.11 Limitation on Sales and Leasebacks. Enter into any arrangement
with any Person providing for the leasing by such Borrower or any Subsidiary of
real or personal property which has been or is to be sold or transferred by such
Borrower or such Subsidiary to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security of such property
or rental obligations of such Borrower or such Subsidiary, except for any such
arrangement with respect to computer and office equipment with respect to which
the aggregate sales price shall not exceed $20,000,000.
9.12 Limitation on Changes in Fiscal Year. Permit the fiscal year of
the Company to end on a day other than December 31.
9.13 Limitation on Negative Pledge Clauses. Enter into with any
Person any agreement, other than (a) this Agreement, (b) any purchase money
mortgages or Financing Leases permitted by this Agreement (in which cases, any
prohibition or limitation shall only be effective against the assets financed
thereby) and (c) operating leases or similar agreements (in which case any
prohibition or limitation shall only be effective against the relevant
Borrower's or Subsidiary's rights under any such operating lease or similar
agreement, as the case may be), which prohibits or limits the ability of such
Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired.
9.14 Limitation on Lines of Business. Enter into any business,
either directly or through any Subsidiary, except for those businesses in which
such Borrower and its Subsidiaries are engaged on the date of this Agreement or
which are directly related thereto.
9.15 Limitation on Business of Summit. Permit Summit to engage in
any business other
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than the captive insurance business in a manner consistent with past practice.
SECTION 10. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) Any Borrower shall fail to pay any principal of any Loan or any
interest on any Loan (other than a Revolving Offshore Loan or Fronted
Offshore Loan) when due in accordance with the terms thereof or hereof; or
any Borrower shall fail to pay any interest on any Revolving Offshore Loan
or any Fronted Offshore Loan, or any fees or other amount payable
hereunder, within three days after any such interest or other amount
becomes due in accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by any Loan
Party herein or in any other Loan Document or which is contained in any
certificate, document or financial or other statement furnished by it at
any time under or in connection with this Agreement or any such other Loan
Document shall prove to have been incorrect in any material respect on or
as of the date made or deemed made; or
(c) Any Loan Party shall default in the observance or performance of
any agreement contained in subsection 8.11 or Section 9 of this Agreement,
Section 6 of the Parent Borrower Mortgage with respect to the New York
Real Estate (or the comparable provision of any other Mortgage), Section
5(a) or 5(b) of the Parent Borrower Pledge Agreement or the Subsidiaries
Pledge Agreement or Section 4.4 or 7.2 of the Parent Borrower Security
Agreement or Subsidiaries Security Agreement; or
(d) Any Loan Party shall default in the observance or performance of
any other agreement contained in this Agreement or any other Loan Document
(other than as provided in paragraphs (a) through (c) of this Section),
and such default shall continue unremedied for a period of 30 days after
the earlier of (i) the date upon which written notice thereof is given to
the Company by the Administrative Agent or the Majority Lenders or (ii)
the date upon which a Responsible Officer of any Borrower becomes aware of
such default; or
(e) Any Borrower or any of its Subsidiaries shall (i) default in any
payment of principal of or interest of any Indebtedness (other than the
Loans) or in the payment of any Guarantee Obligation, beyond the period of
grace (not to exceed 30 days), if any, provided in the instrument or
agreement under which such Indebtedness or Guarantee Obligation was
created; or (ii) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or Guarantee
Obligation or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness or
beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or
agent on behalf of such holder or holders or beneficiary or beneficiaries)
to cause, with the giving of notice if required, such Indebtedness to
become due prior to its stated maturity or such Guarantee Obligation to
become payable; provided, however, that no Default or Event of Default
shall exist under this paragraph unless the aggregate amount of
Indebtedness and/or Guarantee Obligations at any time in respect of which
any default or other event or condition referred to in this paragraph
shall have occurred shall be equal to at least $5,000,000; or
(f) (i) Any Borrower or any of its Domestic Operating Subsidiaries
or Material Foreign
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Subsidiaries shall commence any case, proceeding or other action (A) under
any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors,
seeking to have an order for relief entered with respect to it, or seeking
to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition
or other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian, conservator or other
similar official for it or for all or any substantial part of its assets,
or any Borrower or any of its Domestic Operating Subsidiaries or Material
Foreign Subsidiaries shall make a general assignment for the benefit of
its creditors; or (ii) there shall be commenced against any Borrower or
any of its Domestic Operating Subsidiaries or Material Foreign
Subsidiaries any case, proceeding or other action of a nature referred to
in clause (i) above which (A) results in the entry of an order for relief
or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there shall be
commenced against any Borrower or any of its Domestic Operating
Subsidiaries or Material Foreign Subsidiaries any case, proceeding or
other action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its
assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending
appeal within 60 days from the entry thereof; or (iv) any Borrower or any
of its Domestic Operating Subsidiaries or Material Foreign Subsidiaries
shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause (i),
(ii), or (iii) above; or (v) any Borrower or any of its Domestic Operating
Subsidiaries or Material Foreign Subsidiaries shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due; or
(g) Except as set forth on Schedule 6.13, (i) any Person shall
engage in any "prohibited transaction" (as defined in Section 406 of ERISA
or Section 4975 of the Code) involving any Plan, (ii) any "accumulated
funding deficiency" (as defined in Section 302 of ERISA), whether or not
waived, shall exist with respect to any Plan or any Lien in favor of the
PBGC or a Plan shall arise on the assets of any Borrower or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with respect to,
or proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or appointment
of a trustee is, in the reasonable opinion of the Majority Lenders, likely
to result in the termination of such Plan for purposes of Title IV of
ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title
IV of ERISA, (v) any Borrower or any Commonly Controlled Entity shall, or
in the reasonable opinion of the Majority Lenders is likely to, incur any
liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan or (vi) any other event or
condition shall occur or exist with respect to a Plan; and in each case in
clauses (i) through (vi) above, such event or condition, together with all
other such events or conditions, if any, could reasonably be expected to
have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against any
Borrower or any of its Subsidiaries involving in the aggregate for the
Borrowers and their respective Subsidiaries, taken as a whole, a liability
(to the extent not paid or fully covered by insurance or third-party
indemnification from third parties which could reasonably be expected to
satisfy any indemnification claim) of $2,500,000 or more, and all such
judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 60 days from the entry thereof; or
(i) (i) Any of the Security Documents shall cease, for any reason,
to be in full force and effect, or any Borrower or any other Loan Party
shall so assert or (ii) the Lien created by any of
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the Security Documents shall cease to be enforceable and of the same
effect and priority purported to be created thereby; or
(j) Any Guarantee shall cease, for any reason, to be in full force
and effect or any Guarantor shall so assert; or
(k) a Change of Control shall occur;
then, and in any such event, (A) (1) if such event is an Event of Default
specified in clause (i) or (ii) of paragraph (f) of this Section with respect to
any Parent Borrower, automatically the Commitments shall immediately terminate
and the Loans hereunder (with accrued interest thereon) and all other amounts
owing under this Agreement (including, without limitation, all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) shall immediately
become due and payable, and (2) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section with respect to a
Subsidiary Borrower, (i) the eligibility of such Subsidiary Borrower to borrow
shall thereupon terminate and (ii) the Loans of such Subsidiary Borrower shall
become immediately due and payable, together with accrued interest thereon and
all fees and other obligations of such Subsidiary Borrower in respect thereof
and (B) if such event is any other Event of Default or an Event of Default
described in clause (A)(2) above, either or both of the following actions may be
taken: (i) with the consent of the Majority Lenders, the Administrative Agent
may, or upon the request of the Majority Lenders, the Administrative Agent
shall, by notice to the Company declare the Commitments to be terminated
forthwith, whereupon the Commitments shall immediately terminate; and (ii) with
the consent of the Majority Lenders, the Administrative Agent may, or upon the
request of the Majority Lenders, the Administrative Agent shall, by notice to
the Company, declare the Loans hereunder (with accrued interest thereon) and all
other amounts owing under this Agreement (including, without limitation, all
amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) to be due and payable forthwith, whereupon the same shall
immediately become due and payable.
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, the Borrower shall at such time deposit in
a cash collateral account opened by the Administrative Agent an amount equal to
the aggregate then undrawn and unexpired amount (or, in the case of Letters of
Credit issued in an Offshore Currency, the Dollar Equivalent of the aggregate
then undrawn and unexpired amount) of such Letters of Credit. Each Borrower
hereby grants to the Administrative Agent, for the benefit of the Issuing Bank
and the L/C Participants, a security interest in such cash collateral to secure
all obligations of the Borrower under this Agreement and the other Loan
Documents. Amounts held in such cash collateral account shall be applied by the
Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay other
obligations of the Borrowers hereunder and under the other Loan Documents. After
all such Letters of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all other obligations of
the Borrowers hereunder and under the Loan Documents shall have been paid in
full, the balance, if any, in such cash collateral account shall be returned to
the relevant Borrowers. Each Borrower shall execute and deliver to the
Administrative Agent, for the account of the Issuing Bank and the L/C
Participants, such further documents and instruments as the Administrative Agent
may request to evidence the creation and perfection of the within security
interest in such cash collateral account.
Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
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SECTION 11. GUARANTEE
11.1 Guarantee. (a) To induce the Administrative Agent and the
Lenders to execute and deliver this Agreement and to make the extensions of
credit provided for herein to the Subsidiary Borrowers, each of the Parent
Borrowers hereby unconditionally and irrevocably guarantees to the
Administrative Agent and the Lenders and their respective successors, permitted
transferees and permitted assigns, the prompt and complete payment and
performance by the Subsidiary Borrowers when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations. Each of the Parent
Borrowers further agrees to pay any and all reasonable expenses (including,
without limitation, all reasonable fees and disbursements of counsel) which may
be paid or incurred by the Administrative Agent or any Lender in enforcing, or
obtaining advice of counsel in respect of, any rights with respect to, or
collecting, any or all of the Obligations and/or enforcing any rights with
respect to, or collecting against, such Parent Borrower under this Section 11.
This Guarantee shall remain in full force and effect until the Obligations are
paid in full and the Commitments are terminated, notwithstanding that from time
to time prior thereto the Subsidiary Borrowers may be free from any Obligations.
For purposes of this Section 11, each Fronting Lender shall be deemed to be a
"Lender".
(b) No payment or payments made by any Subsidiary Borrower or any
other Person or received or collected by the Administrative Agent or any Lender
from any Subsidiary Borrower or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application, at any time or from
time to time, in reduction of or in payment of the Obligations shall be deemed
to modify, reduce, release or otherwise affect the liability of any Parent
Borrower under this Section 11 which shall, notwithstanding any such payment or
payments, remain in full force and effect until the Obligations are paid in full
and the Commitments are terminated. Each of the Parent Borrowers agrees that
whenever, at any time, or from time to time, it shall make any payment to the
Administrative Agent or any Lender on account of its liability under this
Section 11, it will notify the Administrative Agent and such Lender in writing
that such payment is made under this Section 11 for such purpose.
11.2 No Subrogation, Contribution, Reimbursement or Indemnity.
Notwithstanding anything to the contrary in this Section 11, no Parent Borrower
shall be entitled to be subrogated to any of the rights of the Administrative
Agent or any Lender against any Subsidiary Borrower or any other Guarantor or
any collateral security or guarantee or right of offset held by any Lender for
the payment of the Obligations, nor shall any Parent Borrower seek or be
entitled to seek any contribution or reimbursement from any Subsidiary Borrower
or any other Guarantor in respect of payments made by such Parent Borrower
hereunder, until all amounts owing to the Administrative Agent and the Lenders
by the Subsidiary Borrowers on account of the Obligations are paid in full, the
Commitments are terminated and no Letter of Credit remains outstanding. If any
amount shall be paid to any Parent Borrower on account of such subrogation
rights at any time when all of the Obligations shall not have been paid in full,
the Commitments shall not have been terminated or any Letter of Credit is
outstanding, such amount shall be held by such Parent Borrower in trust for the
Administrative Agent and the Lenders, segregated from other funds of such Parent
Borrower, and shall, forthwith upon receipt by such Parent Borrower, be turned
over to the Administrative Agent, for the benefit of the Lenders, in the exact
form received by such Parent Borrower (duly indorsed by such Parent Borrower to
the Administrative Agent, if required), to be applied against the Obligations,
whether matured or unmatured, in such order as the Administrative Agent may
determine. The provisions of this subsection shall survive the termination of
the guarantee contained in this Section 11 and the payment in full of the
Obligations and the termination of the Commitments.
11.3 Amendments, etc. with respect to the Obligations; Waiver of
Rights. Each Parent
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Borrower shall remain obligated hereunder notwithstanding that, without any
reservation of rights against such Parent Borrower, and without notice to or
further assent by such Parent Borrower, any demand for payment of any of the
Obligations made by the Administrative Agent or any Lender may be rescinded by
the Administrative Agent or such Lender, and any of the Obligations continued,
and the Obligations, or the liability of any other party upon or for any part
thereof, or any collateral security or guarantee therefor or right of offset
with respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by the Administrative Agent or any Lender, and this Agreement, the
other Loan Documents, and any other documents executed and delivered in
connection herewith or therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Administrative Agent (or the Majority
Lenders, as the case may be) or such Lender or Affiliate may deem advisable from
time to time, and any collateral security, guarantee or right of offset at any
time held by the Administrative Agent or any Lender for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released. Neither the
Administrative Agent nor any Lender or its Affiliates shall have any obligation
to protect, secure, perfect or insure any Lien at any time held by it as
security for the Obligations or for the guarantee contained in this Section 11
or any property subject thereto. When making any demand hereunder against any
Parent Borrower, the Administrative Agent or any Lender may, but shall be under
no obligation to, make a similar demand on the relevant Subsidiary Borrower or
any other guarantor, and any failure by the Administrative Agent or any Lender
to make any such demand or to collect any payments from such Subsidiary Borrower
or any such other guarantor or any release of such Subsidiary Borrower or such
other guarantor shall not relieve such Parent Borrower of its obligations or
liabilities under this Section 11, and shall not impair or affect the rights and
remedies, express or implied, or as a matter of law, of the Administrative Agent
or any Lender against such Parent Borrower. For the purposes hereof "demand"
shall include the commencement and continuance of any legal proceedings.
11.4 Guarantee Absolute and Unconditional. Each Parent Borrower
waives, to the fullest extent permitted by applicable law, any and all notice of
the creation, renewal, extension or accrual of any of the Obligations and notice
of or proof of reliance by the Administrative Agent or any Lender upon the
guarantee contained in this Section 11 or acceptance of the guarantee contained
in this Section 11; the Obligations, and any of them, shall conclusively be
deemed to have been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon the guarantee contained in this Section 11;
and all dealings between the Subsidiary Borrowers, on the one hand, and the
Administrative Agent and the Lenders, on the other hand, shall likewise be
conclusively presumed to have been had or consummated in reliance upon the
guarantee contained in this Section 11. Each Parent Borrower waives, to the
fullest extent permitted by applicable law, diligence, presentment, protest,
demand for payment and notice of default or nonpayment to or upon the Subsidiary
Borrowers with respect to the Obligations. The Guarantee contained in this
Section 11 shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity, regularity or
enforceability of this Agreement, any Note, any other Loan Document, any of the
Obligations or any guarantee or right of offset with respect thereto at any time
or from time to time held by the Administrative Agent or any Lender, (b) any
defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the
Subsidiary Borrowers against the Administrative Agent or any Lender or (c) any
other circumstance whatsoever (with or without notice to or knowledge of the
Borrowers) which constitutes, or might be construed to constitute, an equitable
or legal discharge of the Subsidiary Borrowers for the Obligations, or of such
Parent Borrower under the guarantee contained in this Section 11, in bankruptcy
or in any other instance. When pursuing its rights and remedies hereunder
against any Parent Borrower, the Administrative Agent and any Lender may, but
shall be under no obligation to, pursue such rights and remedies as it may have
against the Subsidiary Borrowers or any other Person or against any guarantee
for the Obligations or any right of offset with respect thereto, and any failure
by the Administrative Agent or any Lender to pursue such other rights or
remedies or to collect any payments from the Subsidiary Borrowers or any such
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other Person or to realize upon any such guarantee or to exercise any such right
of offset, or any release of the Subsidiary Borrowers or any such other Person
or of any such guarantee or right of offset, shall not relieve such Parent
Borrower of any liability hereunder, and shall not impair or affect the rights
and remedies, whether express, implied or available as a matter of law, of the
Administrative Agent or any Lender against such Parent Borrower. The guarantee
contained in this Section 11 shall remain in full force and effect and be
binding in accordance with and to the extent of its terms upon each Parent
Borrower and its successors, and shall inure to the benefit of the
Administrative Agent and the Lenders, and their respective successors, permitted
transferees and permitted assigns, until all the Obligations and the obligations
of each Parent Borrower under this Section 11 shall have been satisfied by
payment in full and the Commitments shall be terminated, notwithstanding that
from time to time during the term of this Agreement the Subsidiary Borrowers may
be free from any Obligations.
11.5 Reinstatement. The guarantee contained in this Section 11 shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is rescinded or must
otherwise be restored or returned by the Administrative Agent or any Lender upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of any
Subsidiary Borrower or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, such Subsidiary
Borrower or any substantial part of its property, or otherwise, all as though
such payments had not been made.
SECTION 12. THE ADMINISTRATIVE AGENT
12.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent. Without limiting the
foregoing, the use of the term "agent" with respect to the Administrative Agent
is used as a matter of market custom and is intended to create or reflect only
an administrative relationship between independent contracting parties.
The European Payment Agent may act on behalf of the Lenders with
respect to Revolving Offshore Loans and the documents associated therewith. It
is understood and agreed that the European Payment Agent (a) shall have all of
the benefits and immunities (i) provided to the Administrative Agent in this
Section 12 with respect to acts taken or omissions suffered by the European
Payment Agent in connection with Revolving Offshore Loans and the documents
associated therewith as fully as if the term "Administrative Agent", as used in
this Section 12, included the European Payment Agent and (ii) as additionally
provided in this Agreement with respect to the European Payment Agent and (b)
shall have all of the benefits of the provisions of subsection 12.7 as fully as
if the term "Administrative Agent", as used in subsection 12.7, included the
European Payment Agent.
The Issuing Banks and the Fronting Lenders shall act on behalf of
the Lenders with respect to Letters of Credit and Fronted Offshore Loans issued
or made under this Agreement and the documents associated therewith. It is
understood and agreed that the Issuing Banks and the Fronting Lenders (a) shall
have all of the benefits and immunities (i) provided to the Administrative Agent
in this
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Section 12 with respect to acts taken or omissions suffered by such Issuing
Banks and Fronting Lenders in connection with Letters of Credit and Fronted
Offshore Loans issued or made under this Agreement and the documents associated
therewith as fully as if the term "Administrative Agent", as used in this
Section 12, included such Issuing Banks and Fronting Lenders with respect to
such acts or omissions and (ii) as additionally provided in this Agreement and
(b) shall have all of the benefits of the provisions of subsection 12.7 as fully
as if the term "Administrative Agent", as used in subsection 12.7, included such
Issuing Banks and Fronting Lenders.
12.2 Delegation of Duties. The Administrative Agent may execute any
of its duties under this Agreement and the other Loan Documents by or through
agents, employees or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys in-fact selected by it with reasonable care.
12.3 Exculpatory Provisions. Neither the Administrative Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Person's own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Borrowers or
any officer thereof contained in this Agreement or any other Loan Document or in
any certificate, report, statement or other document referred to or provided for
in, or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of any Borrower to perform its obligations hereunder
or thereunder. No Agent-Related Person shall be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of any Borrower.
12.4 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
Note, writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Borrowers),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Majority Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
this Agreement and the other Loan Documents in accordance with a request of the
Majority Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all future holders of
the Loans.
12.5 Notice of Default. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or a
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Administrative Agent receives such a notice, the Administrative Agent shall
give notice
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thereof to the Lenders. The Administrative Agent shall take such action with
respect to such Default or Event of Default as shall be reasonably directed by
the Lenders entitled to so act; provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
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 the Lenders (except to the extent that
this Agreement expressly requires that such actions be taken or not be taken
only with the consent or upon the authorization of the Required Lenders).
12.6 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent or any such other Person hereinafter taken, including any
review of the affairs of any Borrower, shall be deemed to constitute any
representation or warranty by the Administrative Agent or any such other Person
to any Lender. Each Lender represents to the Administrative Agent that it has,
independently and without reliance upon any Agent-Related Person or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Borrowers and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon any Agent-Related Person or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrowers. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Administrative Agent hereunder, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
the Borrowers which may come into the possession of the Administrative Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
12.7 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Lenders agree to indemnify each Agent-Related Person
(to the extent not reimbursed by the Borrowers and without limiting the
obligation of the Borrowers to do so) (other than the Arranger), ratably
according to their respective Voting Percentages in effect on the date on which
indemnification is sought, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against such Agent-Related Person (other
than the Arranger) in any way relating to or arising out of, the Commitments,
this Agreement, any of the other Loan Documents or any documents contemplated by
or referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by such Agent-Related Person (other than
the Arranger) under or in connection with any of the foregoing; provided that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the relevant Agent-Related
Person's gross negligence or willful misconduct. The agreements in this
subsection shall survive the payment of the Loans and all other amounts payable
hereunder.
12.8 Administrative Agent in Its Individual Capacity. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrowers as though the
Administrative Agent were not the Administrative Agent hereunder and under the
other Loan Documents and without notice to or consent of the Lenders. The
Lenders acknowledge
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that, pursuant to such activities, the Administrative Agent and its Affiliates
may receive information regarding the Borrowers or their Affiliates (including
information that may be subject to confidentiality obligations in favor of the
Borrowers or their Affiliates) and acknowledge that neither the Administrative
Agent nor its Affiliates shall be under an obligation to provide such
information to them. With respect to the Loans made by it and with respect to
any Letter of Credit issued or participated in by it, the Administrative Agent
shall have the same rights and powers under this Agreement and the other Loan
Documents as any Lender and may exercise the same as though it were not the
Administrative Agent, and the terms "Lender" and "Lenders" shall include the
Administrative Agent in its individual capacity.
12.9 Successor Administrative Agent. The Administrative Agent may
resign as Administrative Agent upon 10 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents, then the Majority Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which successor agent (provided
that it shall have been approved by the Parent Borrowers (which approval shall
not be unreasonably withheld)), shall succeed to the rights, powers and duties
of the Administrative Agent hereunder. If no successor agent is appointed prior
to the effective date of the resignation of the Administrative Agent, the
Administrative Agent may appoint, after consulting with the Lenders and the
Borrowers, a successor agent from among the Lenders. Effective upon such
appointment by the Majority Lenders or by the Administrative Agent, the term
"Administrative Agent" shall mean such successor agent, and the former
Administrative Agent's rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Section 12 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents. If no
successor agent has accepted appointment as Administrative Agent by the date
which is 10 days following a retiring Administrative Agent's notice of
resignation, the retiring Administrative Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall assume and perform all of the
duties of the Administrative Agent hereunder until such time, if any, as the
Majority Lenders appoint a successor agent as provided for above. The European
Payment Agent may resign upon notice to the Administrative Agent or the
Administrative Agent may replace the European Payment Agent (but neither the
Lenders nor the Borrowers may replace the European Payment Agent).
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SECTION 13. MISCELLANEOUS
13.1 Amendments and Waivers. Neither this Agreement nor any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. The
Majority Lenders may, or, with the written consent of the Majority Lenders, the
Administrative Agent may, from time to time, (a) enter into with the relevant
Loan Parties written amendments, supplements or modifications hereto and to the
other Loan Documents for the purpose of adding any provisions to this Agreement
or the other Loan Documents or changing in any manner the rights of the Lenders
or of the Loan Parties hereunder or thereunder or (b) waive, on such terms and
conditions as the Majority Lenders or the Administrative Agent, as the case may
be, may specify in such instrument, any of the requirements or conditions of
this Agreement or the other Loan Documents or any Default or Event of Default
and its consequences; provided, however, that no such waiver and no such
amendment, supplement or modification shall (i) reduce the amount or extend the
scheduled date of maturity of any Loan or Reimbursement Obligation or of any
installment thereof, or reduce the stated rate of any interest or fee payable
hereunder or extend the scheduled date of any payment thereof or increase the
amount or extend the expiration date of any Lender's Commitments, in each case
without the consent of each Lender affected thereby, or (ii) amend, modify or
waive any provision of this subsection or reduce the percentage specified in the
definition of Majority Lenders, or consent to the assignment or transfer by any
Borrower of any of its rights and obligations under this Agreement and the other
Loan Documents or release all or substantially all of the Collateral or the
Guarantors, in each case without the written consent of all the Lenders, or
(iii) amend, modify or waive any provision of Section 12 without the written
consent of the then Administrative Agent or (iv) amend, modify or waive any
provisions of subsection 3.3 through 3.10 without the consent of each Issuing
Bank adversely affected in any material respect thereby or (v) amend, modify or
waive any provision of Section 4 or subsection 5.3(b), 5.4(b), 5.9(b) or 5.11(b)
without the consent of each Fronting Lender adversely affected thereby or (vi)
amend, modify or waive any provision of subsection 3.11 or 3.12 without the
consent of the Swing Line Lender or (vii) amend, modify or waive any provision
of subsection 5.11(d) without the consent of each Lender adversely affected
thereby or (viii) amend, modify or waive any provision of this clause (viii) or
subsection 5.4(c) without the written consent of the Majority Revolving Credit
Lenders or reduce the percentage specified in the definition of Majority
Revolving Lenders without the written consent of all the Revolving Lenders or
(ix) amend, modify or waive any provision of this clause (ix) or subsection
5.4(g) without the written consent of the Majority Term Lenders or reduce the
percentage specified in the definition of Majority Term Lenders without the
written consent of all the Term Lenders. Any such waiver and any such amendment,
supplement or modification shall apply equally to each of the Lenders and shall
be binding upon each Borrower, the Lenders, the Administrative Agent and all
future holders of the Loans. In the case of any waiver, each Borrower, the
Lenders and the Administrative Agent shall be restored to their former positions
and rights hereunder and under the other Loan Documents, and any Default or
Event of Default waived shall be deemed to be cured and not continuing; no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right consequent thereon.
13.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand,
when delivered, (b) in the case of delivery by mail, three days after being
deposited in the mails, postage prepaid, or (c) in the case of delivery by
facsimile transmission, when sent and receipt has been confirmed, addressed as
follows in the case of the Parent Borrowers and the Administrative Agent, and as
set forth in Schedule 1.1(a) or the relevant Borrowing Subsidiary Agreement, as
the case may be, in the case of the other parties hereto, or to such other
address as may be hereafter notified by the respective parties hereto:
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Y&R Holdings: 285 Madison Avenue
New York, New York 10017
Attention: Barry Belfer
Fax: (212) 210-5363
Y&R Inc.
(New York): 285 Madison Avenue
New York, New York 10017
Attention: Barry Belfer
Fax: (212) 210-5363
Y&R Inc.
(Delaware): 285 Madison Avenue
New York, New York 10017
Attention: Barry Belfer
Fax: (212) 210-5363
Y&R LP: 285 Madison Avenue
New York, New York 10017
Attention: Barry Belfer
Fax: (212) 210-5363
The Administrative
Agent: For notices of borrowing, payments and other administrative
matters:
Bank of America National Trust & Savings Association
ABA No.: 1210-0035-8
Bancontrol No.: 12339-15321
Ref: Young & Rubicam, Inc. - CH1216
Agency Administrative Services #5596
1455 Market Street, 13th floor
San Francisco, CA 94103
For all other notices (including with respect to amendments
and waivers):
Bank of America National Trust and Savings Association
Agency Management #10831
1445 Market Street
San Francisco, California 94103
Attention: Gary Flieger
Fax: (415) 436-3425
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsection 2.2, 3.2, 3.4, 3.12, 4.2, 5.4 or 5.6 shall
not be effective until received.
13.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and
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privileges provided by law.
13.4 Survival of Representations and Warranties. All representations
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans hereunder.
13.5 Payment of Expenses and Taxes. Each Parent Borrower jointly and
severally agrees (each Subsidiary Borrower severally agrees, to the extent
applicable to actions or omissions by it or Loan Documents to which it is a
party) (a) to pay or reimburse the Administrative Agent and the Arranger for all
its out-of-pocket costs and expenses incurred in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to, this Agreement and the other Loan Documents and any other
documents prepared in connection herewith or therewith, and the consummation and
administration of the transactions contemplated hereby and thereby, including,
without limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent and the Arranger (including the allocated non-duplicative
fees and expenses of in-house counsel), (b) to pay or reimburse each Lender and
the Administrative Agent and each of their Affiliates for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the other Loan Documents and any such other
documents, including, without limitation, the fees and disbursements of counsel
(including the allocated non-duplicative fees and expenses of in-house counsel)
to each Lender and of counsel to the Administrative Agent, (c) to pay,
indemnify, and hold each Lender, each Fronting Lender, each Issuing Bank, the
Administrative Agent and each Agent-Related Person harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other taxes, if any, which
may be payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the other Loan Documents and
any such other documents, (d) to pay or reimburse each Lender, each Fronting
Lender and each Issuing Bank for any costs and expenses incurred by such Lender
in funding any payment in an Offshore Currency pursuant to subsection 3.6(a) or
4.4(a) and to pay or reimburse each Lender, each Fronting Lender and each
Issuing Bank for any costs and expenses incurred in connection with any
conversion of any amount to Dollars pursuant to subsection 3.5(b) or 4.3(b) and
(e) to pay, indemnify, and hold each Lender, each Fronting Lender, each Issuing
Bank, the Administrative Agent and each Agent-Related Person harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan Documents, the
Recapitalization, the Recapitalization Documentation or the actual or proposed
use of the proceeds of the Loans in connection with the Recapitalization and any
such other documents, including, without limitation, any of the foregoing
relating to the violation of, noncompliance with or liability under, any
Environmental Law applicable to the operations of the Borrower, any of its
Subsidiaries or any of the Properties (all the foregoing in this clause (e),
collectively, the "indemnified liabilities"), provided that the Borrowers shall
have no obligation hereunder to the Administrative Agent, any Agent-Related
Person, any Lender or any Fronting Lender or Issuing Bank with respect to
indemnified liabilities arising from the gross negligence or willful misconduct
of the Administrative Agent, any such Agent-Related Person or any such Lender,
Fronting Lender or Issuing Bank. The agreements in this subsection shall survive
repayment of the Loans and all other amounts payable hereunder.
13.6 Successors and Assigns; Participations and Assignments. (a)
This Agreement shall be binding upon and inure to the benefit of the Borrowers,
the Lenders, the Administrative Agent and their respective successors and
assigns, except that the Borrowers may not assign or transfer any of
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its rights or obligations under this Agreement without the prior written consent
of each Lender.
(b) Any Lender may, in the ordinary course of its lending business
and in accordance with applicable law, at any time sell to one or more banks or
other financial entities ("Participants") participating interests in any Loan
owing to such Lender, any Commitment of such Lender or any other interest of
such Lender hereunder and under the other Loan Documents. In the event of any
such sale by a Lender of a participating interest to a Participant, such
Lender's obligations under this Agreement to the other parties to this Agreement
shall remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Loan for
all purposes under this Agreement and the other Loan Documents, and the
Borrowers and the Administrative Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. No Lender shall
be entitled to create in favor of any Participant, in the participation
agreement pursuant to which such Participant's participating interest shall be
created or otherwise, any right to vote on, consent to or approve any matter
relating to this Agreement or any other Loan Document except for those specified
in clauses (i) and (ii) of the proviso to subsection 13.1. Each Borrower agrees
that if amounts outstanding under this Agreement are due or unpaid, or shall
have been declared or shall have become due and payable upon the occurrence of
an Event of Default, each Participant shall, to the maximum extent permitted by
applicable law, be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement, provided that, in purchasing such participating
interest, such Participant shall be deemed to have agreed to share with the
Lenders the proceeds thereof as provided in subsection 13.7(a) as fully as if it
were a Lender hereunder. The Borrowers also agree that each Participant shall be
entitled to the benefits of subsections 5.13, 5.14 and 5.15 with respect to its
participation in the Commitments and the Loans outstanding from time to time as
if it were a Lender; provided that, in the case of subsection 5.14, such
Participant shall have complied with the requirements of said subsection and
provided, further, that no Participant shall be entitled to receive any greater
amount pursuant to any such subsection than the transferor Lender would have
been entitled to receive in respect of the amount of the participation
transferred by such transferor Lender to such Participant had no such transfer
occurred.
(c) Any Lender may, in the ordinary course of its lending business
and in accordance with applicable law, at any time and from time to time assign
to any Lender or any affiliate thereof or, with the written consent of the
Company and the Administrative Agent and, in the case of assignment of Revolving
Commitments and/or Revolving Loans, the Issuing Bank, the Fronting Lenders and
the Swing Line Lender (which in each case shall not be unreasonably withheld),
to an additional bank or financial institution or entity (an "Assignee") all or
any part of its rights and obligations under this Agreement and the other Loan
Documents pursuant to an Assignment and Acceptance, substantially in the form of
Exhibit T, executed by such Assignee, such assigning Lender (and, in the case of
an Assignee that is not then a Lender or an affiliate thereof, by the Company,
the Administrative Agent and any other Person whose consent is required under
this subsection) and delivered to the Administrative Agent for its acceptance
and recording in the Register, provided that, (i) in the case of any such
assignment to an additional bank or financial institution of less than all of
the rights and obligations of the assigning Lender, the sum of the aggregate
principal amount of the Loans, the aggregate amount of the L/C Obligations and
the aggregate amount of the unused Commitments being assigned and, if such
assignment is of less than all of the rights and obligations of the assigning
Lender, the sum of the aggregate principal amount of the Loans, the aggregate
amount of the L/C Obligations and the aggregate amount of the unused Commitments
remaining with the assigning Lender are each not less than $5,000,000 (unless
otherwise agreed by the Borrowers and the Administrative Agent) and (ii)
assignments shall not be required to be made on a ratable basis between the
Commitments and/or Loans held by any Lender. Upon such execution, delivery,
acceptance and recording, from and after the
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effective date determined pursuant to such Assignment and Acceptance, (x) the
Assignee thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
with a Commitment as set forth therein, and (y) the assigning Lender thereunder
shall, to the extent provided in such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such assigning Lender shall cease to be a
party hereto). Notwithstanding any provision of this paragraph (c) and paragraph
(e) of this subsection, the consent of the Company shall not be required, and,
unless requested by the Assignee and/or the assigning Lender, new Notes shall
not be required to be executed and delivered by the Borrowers, for any
assignment which occurs at any time when any Event of Default shall have
occurred and be continuing under Section 10(a), 10(c) or 10(k) or any of the
events described in Section 10(f) shall have occurred and be continuing with
respect to any Parent Borrower.
(d) The Administrative Agent, on behalf of the Borrowers, shall
maintain at the address of the Administrative Agent referred to in subsection
13.2 a copy of each Assignment and Acceptance delivered to it and a register
(the "Register") for the recordation of the names and addresses of the Lenders
and the Commitments of, and principal amounts 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 the Borrower, the Administrative Agent and the
Lenders may (and, in the case of any Loan or other obligation hereunder not
evidenced by a Note, shall) treat each Person whose name is recorded in the
Register as the owner of a Loan or other obligation hereunder as the owner
thereof for all purposes of this Agreement and the other Loan Documents,
notwithstanding any notice to the contrary. Any assignment of any Loan or other
obligation hereunder not evidenced by a Note shall be effective only upon
appropriate entries with respect thereto being made in the Register. The
Register shall be available for inspection by the Borrowers or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof, by (to the extent required) the Borrowers
and the Administrative Agent) together with payment to the Administrative Agent
of a registration and processing fee of $3,500, the Administrative Agent shall
(i) promptly accept such Assignment and Acceptance and (ii) on the effective
date determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the Lenders and
the Borrowers.
(f) The Borrowers authorize each Lender to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective Transferee,
subject to such Transferee or prospective Transferee having agreed to be bound
by the provisions of subsection 13.15, any and all information in such Lender's
possession concerning the Borrowers and their Affiliates which has been
delivered to such Lender by or on behalf of the Borrowers pursuant to this
Agreement or which has been delivered to such Lender by or on behalf of the
Borrowers in connection with such Lender's credit evaluation of the Borrowers
and their Affiliates prior to becoming a party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection concerning assignments of
Loans and Notes relate only to absolute assignments and that such provisions do
not prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.
13.7 Adjustments; Set-off. (a) If any Lender (a "benefitted Lender")
shall at any time receive any payment of all or part of its Loans or the
Reimbursement Obligations owing to it, or interest
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thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 10(f), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender's Loans or the Reimbursement Obligations owing to it, or
interest thereon, such benefitted Lender shall purchase for cash from the other
Lenders a participating interest in such portion of each such other Lender's
Loan or the Reimbursement Obligations owing to it, or shall provide such other
Lenders 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.
(b) In addition to any rights and remedies of the Lenders provided
by law, each Lender shall have the right, without prior notice to the Borrowers,
any such notice being expressly waived by the Borrowers to the extent permitted
by applicable law, upon any amount becoming due and payable by the Borrowers
hereunder (whether at the stated maturity, by acceleration or otherwise) to
set-off and appropriate and apply against such amount any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch or agency thereof to or for the
credit or the account of the Borrowers. Each Lender agrees promptly to notify
the Borrowers and the Administrative Agent after any such set-off and
application made by such Lender, provided that the failure to give such notice
shall not affect the validity of such set-off and application.
13.8 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Parent Borrowers
and the Administrative Agent.
13.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Borrowers, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
Lender relative to subject matter hereof not expressly set forth or referred to
herein or in the other Loan Documents.
13.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
13.12 Submission To Jurisdiction; Waivers. Each Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this
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Agreement and the other Loan Documents to which it is a party, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of New York,
the courts of the United States of America for the Southern District of
New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not
to plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Borrower at its address set forth or referred to in subsection 13.2 or at
such other address of which the Administrative Agent shall have been
notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred
to in this subsection any special, exemplary, punitive or consequential
damages.
13.13 Acknowledgements. Each Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to such Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between Administrative Agent and Lenders, on one hand, and
such Borrower, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Borrowers and the Lenders.
13.14 WAIVERS OF JURY TRIAL. EACH BORROWER, THE ADMINISTRATIVE AGENT
AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
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13.15 Confidentiality. Each Lender agrees to keep confidential all
non-public information provided to it by the Borrowers pursuant to this
Agreement that is designated by the Borrowers in writing as confidential;
provided that nothing herein shall prevent any Lender from disclosing any such
information (i) to the Administrative Agent or any other Lender, (ii) to any
Transferee or prospective Transferee which receives such information having been
made aware of the confidential nature thereof, (iii) to its employees,
directors, agents, attorneys, accountants and other professional advisors, (iv)
upon the request or demand of any Governmental Authority having jurisdiction
over such Lender, (v) to the National Association of Insurance Commissioners or
any similar organization or any nationally recognized rating agency that
requires access to information about such Lender's investment portfolio in
connection with ratings issued with respect to such Lender, (vi) in response to
any order of any court or other Governmental Authority or as may otherwise be
required pursuant to any Requirement of Law, (vii) which has been publicly
disclosed other than in breach of this Agreement, or (viii) in connection with
the exercise of any remedy hereunder.
13.16 Conversion of Currencies. (a) If, for the purpose of obtaining
judgment in any court, it is necessary to convert a sum owing hereunder in one
currency into another currency, each party hereto (including any Subsidiary
Borrower) agrees, to the fullest extent that it may effectively do so, that the
rate of exchange used shall be that at which in accordance with normal banking
procedures in the relevant jurisdiction the first currency could be purchased
with such other currency on the Banking Day immediately preceding the day on
which final judgment is given.
(b) The obligations of each Borrower in respect of any sum due to
any party hereto or any holder of the obligations owing hereunder (the
"Applicable Creditor") shall, notwithstanding any judgment in a currency (the
"Judgment Currency") other than the currency in which such sum is stated to be
due hereunder (the "Agreement Currency"), be discharged only to the extent that,
on the Business Day following receipt by the Applicable Creditor of any sum
adjudged to be so due in the Judgment Currency, the Applicable Creditor may in
accordance with normal banking procedures in the relevant jurisdiction purchase
the Agreement Currency with the Judgment Currency; if the amount of the
Agreement Currency so purchased is less than the sum originally due to the
Applicable Creditor in the Agreement Currency, such Borrower agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify the
Applicable Creditor against such loss. The obligations of the Borrowers
contained in this subsection 13.16 shall survive the termination of this
Agreement and the payment of all other amounts owing hereunder.
13.17 Joint and Several Obligations. All obligations, liabilities,
covenants and representations and warranties of any Parent Borrower under this
Agreement shall be joint and several obligations, liabilities, covenants and
representations and warranties of all the Parent Borrowers.
13.18 Release of Lien on Receivables. If the Applicable Margin is at
any time determined by reference to Debt Level 2 Status or Debt Level 1 Status
(whichever occurs first), the Lien on the Receivables (as defined in the
Security Agreements) of the Parent Borrowers and the Domestic Subsidiaries
granted pursuant to the Security Agreements shall be released, provided that, if
the Applicable Margin is at any time thereafter determined by reference to Debt
Level 4 Status, Debt Level 5 Status or Debt Level 6 Status, the Parent Borrowers
and each Guarantor shall, at the request of the Administrative Agent or the
Majority Lenders, grant a Lien on their Receivables (as defined in the Security
Agreement) to the Administrative Agent on the terms and conditions set forth in
the Credit Agreement (prior to giving effect to such release). Upon the release
of the Lien on the Receivables (as defined in the Security Agreements) of the
Parent Borrowers and the Domestic Subsidiaries pursuant to the immediately
preceding sentence, the Administrative Agent shall, and is hereby authorized to,
execute and deliver to the Borrower, or to such person or persons as the Parent
Borrowers shall reasonably designate, all Uniform Commercial Code termination
statements and similar documents prepared by the
<PAGE> 99
93
Parent Borrowers at their expense which the Parent Borrowers shall reasonably
request to evidence such release.
13.19 Release of Lien on New York Real Property. Upon any sale of
the New York Real Property pursuant to subsection 9.6(e), the Administrative
Agent shall, and is hereby authorized to, execute and deliver to the relevant
Borrower, or to such person or persons as such Borrower shall reasonably
designate, all releases, satisfactions of mortgage, non-recourse assignments of
mortgage and similar documents prepared by such Borrower at its expense which
such Borrower shall reasonably request to evidence such release.
13.20 Recordation of Mortgages. The Administrative Agent may record
and file at any time in its discretion or at the direction of the Majority
Lenders any Mortgage delivered to it pursuant to this Agreement in order to
perfect or record the Lien granted pursuant to such Mortgage. The Parent
Borrowers shall reimburse the Administrative Agent for any recording fees or
other costs and expenses incurred by the Administrative Agent in recording such
Mortgages and hereby request that Revolving Loans (which shall be made as Base
Rate Loans) in an aggregate principal amount sufficient to pay from time to time
any such recording fees or other costs and expenses be made and the
Administrative Agent shall retain the proceeds of such Revolving Loans in
satisfaction of the Parent Borrowers' obligation to reimburse such fees, costs
and other expenses.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
YOUNG & RUBICAM HOLDINGS INC.
By:
-------------------------------------------
Title:
YOUNG & RUBICAM INC., a New York corporation
By:
-------------------------------------------
Title:
YOUNG & RUBICAM INC., a Delaware corporation
By:
-------------------------------------------
Title:
<PAGE> 100
94
YOUNG & RUBICAM L.P.
By: YOUNG & RUBICAM INC., a New York
corporation, its General Partner
By:
-------------------------------------------
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as
Administrative Agent
By:
-------------------------------------------
Title:
BANK OF AMERICA INTERNATIONAL LIMITED,
as European Payment Agent
By:
-------------------------------------------
Title:
<PAGE> 101
95
Annex A
PRICING GRID
<TABLE>
<CAPTION>
======================================================================================
Applicable Margin for
Eurodollar and
Applicable Rate for Revolving Offshore Applicable Margin for
Commitment Fees Loans Base Rate Loans
(basis points) (basis points) (basis points)
======================================================================================
<S> <C> <C> <C>
Debt Level 1 Status 20.00 62.50 0.0
- --------------------------------------------------------------------------------------
Debt Level 2 Status 25.00 87.50 0.0
- --------------------------------------------------------------------------------------
Debt Level 3 Status 25.00 112.50 0.0
- --------------------------------------------------------------------------------------
Debt Level 4 Status 37.50 137.50 12.50
- --------------------------------------------------------------------------------------
Debt Level 5 Status 37.50 162.50 37.50
- --------------------------------------------------------------------------------------
Debt Level 6 Status 50.00 200.00 75.00
======================================================================================
</TABLE>
<PAGE> 102
SCHEDULE 1.1(a)
LENDERS, ISSUING BANKS, COMMITMENTS
AND ADDRESSES:
$700 MILLION SENIOR SECURED CREDIT FACILITIES
<TABLE>
<CAPTION>
<S> <C>
BANK OF AMERICA (ILLINOIS)
Address for Notices:
231 South LaSalle Street
Chicago, IL 60697
Attn: Dustin Vincent
Telecopy: (312) 828-3555
Commitment Amounts:
-------------------
Revolving Commitment $29,280,000.00
Term Commitment $66,720,000.00
THE BANK OF NEW YORK
Address for Notices:
One Wall Street, 22nd FL
New York, NY 10286
Attn: David C. Judge
Telecopy: (212) 635-6999
Commitment Amount:
-------------------
Revolving Commitment $23,040,000.00
Term Commitment $24,960,000.00
</TABLE>
<PAGE> 103
SCHEDULE 1.1(a) Page 2
<TABLE>
<CAPTION>
<S> <C>
CITIBANK, N.A.
Address for Notices:
399 Park Avenue
New York, NY 10043
Attn: Charles Hebard
Telecopy: (212) 793-6873
Commitment Amount:
-------------------
Revolving Commitment $23,040,000.00
Term Commitment $24,960,000.00
CREDIT LYONNAIS
Address for Notices:
1301 Avenue of the Americas
New York, NY 10019-6022
Attn: Heidi Rosen
Telecopy: (212) 459-3179
Commitment Amount:
-------------------
Revolving Commitment $23,040,000.00
Term Commitment $24,960,000.00
WACHOVIA BANK OF GEORGIA, N.A.
Address for Notices:
191 Peachtree Street, N.E. (GA 370)
Atlanta, GA 30303
Attn: William Christie
Telecopy: (404) 332-6898
Commitment Amount:
-------------------
Revolving Commitment $23,040,000.00
Term Commitment $24,960,000.00
</TABLE>
<PAGE> 104
SCHEDULE 1.1(a) Page 3
<TABLE>
<CAPTION>
<S> <C>
BANKERS TRUST COMPANY
Address for Notices:
One BT Plaza
130 Liberty Street
New York, NY 10006
Attn: Tony Hass
Telecopy: (212) 250-6029/7351
Commitment Amount:
-------------------
Revolving Commitment $16,800,000.00
Term Commitment $18,200,000.00
THE BANK OF NOVA SCOTiA
Address for Notices:
One Liberty Plaza
New York, NY 10006
Attn: Todd Meller
Telecopy: (212) 225-5090
Commitment Amount:
-------------------
Revolving Commitment $16,800,000.00
Term Commitment $18,200,000.00
BANK OF TOKYO-MITSUBISHI TRUST CO.
Address for Notices:
1251 Avenue of the Americas
12th Floor
New York, NY 10020-1104
Attn: Amanda S. Ryan
Telecopy: (212) 782-6445
Commitment Amount:
-------------------
Revolving Commitment $16,800,000.00
Term Commitment $18,200,000.00
</TABLE>
<PAGE> 105
SCHEDULE 1.1(a) Page 4
<TABLE>
<CAPTION>
<S> <C>
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
Address for Notices:
301 South College Street
5th Floor
Charlotte, NC 28288-0737
Attn: Charles Lockyer
Telecopy:(704) 374-3300
Commitment Amount:
-------------------
Revolving Commitment $16,800,000.00
Term Commitment $18,200,000.00
FLEET BANK, N.A.
Address for Notices:
1133 Avenue of the Americas
New York, NY 10036
Attn: Thomas J. Levy
Telecopy: (212) 703-1724
Commitment Amount:
-------------------
Revolving Commitment $16,800,000.00
Term Commitment $18,200,000.00
KEYBANK NATIONAL ASSOCIATION
Address for Notices:
127 Public Square
Cleveland, OH 44114-1306
Attn: Rod MacDonald
Telecopy: (216) 689-4981
Commitment Amount:
-------------------
Revolving Commitment $16,800,000.00
Term Commitment $18,200,000.00
</TABLE>
<PAGE> 106
SCHEDULE 1.1(a) Page 5
<TABLE>
<CAPTION>
<S> <C>
CORESTATES BANK, N.A.
Address for Notices:
1339 Chestnut Street, FC 1-8-11-28
Philadelphia, PA 19107
Attn: Ed Kirnell
Telecopy: (215) 786-7721
Commitment Amount:
-------------------
Revolving Commitment $12,000,000.00
Term Commitment $13,000,000.00
THE FIRST NATIONAL BANK OF CHICAGO
Address for Notices:
153 West 51st Street
Mail Suite 4000
New York,NY 10019
Attn: Juan Duarte
Telecopy: (212) 373-1180
Commitment Amount:
-------------------
Revolving Commitment $12,000,000.00
Term Commitment $13,000,000.00
BANQUE NATIONALE DE PARIS
Address for Notices:
180 Montgomery Street, 3rd Floor
San Francisco, CA 94101
Attn: Jennifer Cho
Telecopy: (415) 296-8954
Commitment Amount:
-------------------
Revolving Commitment $ 9,600,000.00
Term Commitment $10,400,000.00
</TABLE>
<PAGE> 107
SCHEDULE 1.1(a) Page 6
<TABLE>
<CAPTION>
<S> <C>
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
Addresses for Notices:
1177 Avenue of the Americas
New York, NY 10036-2798
Attn: Christine Pomeranz
Telecopy: (212) 801-9131
Business Banking, 1st Floor
799 Pacific Hwy
Chapswood NSW Australia 2067
Attn: Robin Long
Telecopy: 011-61-2-9419-6321
Commitment Amount:
-------------------
Revolving Commitment $7,200,000.00
Term Commitment $7,800,000.00
CAISSE NATIONALE DE CREDIT AGRICOLE
Address for Notices:
520 Madison Avenue
8th Floor
New York, NY 10022
Attn: John McCloskey
Telecopy: (212) 418-2228
Commitment Amount:
-------------------
Revolving Commitment $7,200,000.00
Term Commitment $7,800,000.00
</TABLE>
<PAGE> 108
SCHEDULE 1.1(a) Page 7
<TABLE>
<CAPTION>
<S> <C>
THE INDUSTRIAL BANK OF JAPAN TRUST COMPANY
Address for Notices:
245 Park Avenue, 23rd Floor
New York, NY 10167
Attn: Akira Yoshida
Telecopy: (212) 682-2870
Commitment Amount:
-------------------
Revolving Commitment $7,200,000.00
Term Commitment $7,800,000.00
THE ROYAL BANK OF SCOTLAND PLC
Address for Notices:
Wall Street Plaza
88 Pine Street, 26th Floor
New York, NY 10005
Attn: Shona Pryor
Telecopy: (212) 480-0791
Commitment Amount:
-------------------
Revolving Commitment $7,200,000.00
Term Commitment $7,800,000.00
THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH
Address for Notices:
277 Park Avenue
New York, NY 10172
Attn: Angelo Balestrieri
Telecopy:(212) 224-5188
Commitment Amount:
-------------------
Revolving Commitment $7,200,000.00
Term Commitment $7,800,000.00
</TABLE>
<PAGE> 109
SCHEDULE 1.1(a) Page 8
<TABLE>
<CAPTION>
<S> <C>
ARAB BANKING CORPORATION (B.S.C.)
Address for Notices:
277 Park Avenue, 32nd Fl.
New York, NY 10172-3299
Attn: Sheldon Tilney
Telecopy:(212) 583-0921/0935
Commitment Amount:
-------------------
Revolving Commitment $4,800,000.00
Term Commitment $5,200,000.00
BANCA MONTE DEI PASCHI DI SIENA S.P.A.
Address for Notices:
245 Park Avenue, 26th Fl.
New York, NY 10167
Attn: Robert F. Woods
Telecopy:(212) 557-8039
Commitment Amount:
-------------------
Revolving Commitment $3,360,000.00
Term Commitment $3,640,000.00
METROPOLITAN LIFE INSURANCE COMPANY
Address for Notices:
334 Madison Avenue
P.O. Box 633
Convent Station, NJ 07961-0633
Attn: James Dingler
Telecopy: (201) 254-3050
Commitment Amount:
-------------------
Revolving Commitment $ 0.00
Term Commitment $25,000,000.00
</TABLE>
<PAGE> 110
SCHEDULE 1.1(a) Page 9
<TABLE>
<CAPTION>
<S> <C>
ALLSTATE INSURANCE COMPANY
Address for Notices:
3075 Sanders Road, Suite G3A
Northbrook, IL 60062-7127
Attn: Mary Ann Hawley
Telecopy: (847) 402-3092
Commitment Amounts:
-------------------
Revolving Commitment $0.00
Term Commitment $15,000,000.00
</TABLE>
[/R]
<PAGE> 111
SCHEDULE 6.1
1. Young & Rubicam L.P. entered into an Asset Purchase Agreement with
Waring & LaRosa, Inc., dated May 9,1996 to purchase substantially all
of seller's assets for $3,000,000 in cash. This transaction closed on
June 3, 1996.
2. Young & Rubicam L.P. entered into an Asset Purchase Agreement with The
Media Edge, Inc. and N.W. Ayer ABH International, Inc., dated October
11, 1996, to purchase substantially all of the assets of The Media
Edge. Inc., for $3,004,500 in cash. The transaction closed on October
11, 1996.
3. The Company is in the process of acquiring the remaining 28% of
Advico/Young & Rubicam AG, to be effective as of January 1, 1996, for
approximately $13,300,000.
Young & Rubicam L.P. and RJC Inc. are in the process of selling their
combined 50% interest in the Los Angeles division of Lord Dentsu & Partners LLC
to Dentsu USA, Inc. (the holder of the remaining 50% interest) for $2,600,000.
It is expected that such sale will be completed and the proceeds will be
received by the end of 1996. Young & Rubicam L.P. has agreed to make a capital
contribution in the amount of $3,500,000 to Lord, Dentsu & Partners LLC ("LDP")
in order to match Dentsu's prior contribution in the same amount, upon the
closing of the sale of the Los Angeles office of LDP as its share of the capital
account deficit of LDP.
The Company is in the process of selling its operations in Australia and
New Zealand, except for Sudler & Hennessey and Burson-Marsteller, to Mattingly
and Partners Group Pty Ltd. ("Mattingly") in exchange for an increased ownership
percentage in Mattingly. The operations are being valued by an independent
valuation firm, so the final ownership percentages have not been determined
yet.
G&R Publicita - Sudler & Hennessey, S.r.l. ("G&R") is in the process of
selling 12% of its subsidiary, Creative Healthcare Advertising S.r.l., to two
directors of the subsidiary, Guiseppe Banfi and Antonio Baschi, for a total of
Lir. 48,061,862. It is expected that such sale will be completed and the
proceeds will be received by the end of 1996.
Dentsu Burson-Marsteller Inc. ("DBM") filed a Certificate of Dissolution
effective as of February 28, 1996. Burson-Marsteller International Inc. owned
49% of DBM and Dentsu Inc. and Dentsu PR Center Ltd. owned 41% and 10%,
respectively. The dissolution has not been finally approved by the State of New
York.
<PAGE> 112
SCHEDULE 6.2
On October 18, 1996, the Company paid a dividend of $.27 per share to
holders of record as of June 30, 1996 of Young & Rubicam Inc. Common Stock,
totaling $683,506.
On October 18, 1996, the Company paid a dividend equivalent of $.27 per
limited partner ship unit to holders of record as of June 30, 1996 of Young &
Rubicam L.P. Limited Partnership Units, totaling $530,088.
On October 18, 1996, the Company paid a dividend of $10.00 per share to
holders of record as of June 30, 1996 of Young & Rubicam Inc. Preferred Stock,
totaling $12,790.
From January 1, 1996 through September 30, 1996, 450,765 shares of Young &
Rubicam Inc. Common Stock have been redeemed in the normal course from 22
terminating employees (including interests held in the Young & Rubicam Inc.
Employees' Savings Plan) for a total of $10,768,461.
From January 1, 1996 through September 30, 1996, 167,161 limited
partnership units of Young & Rubicam L.P. have been repurchased in the normal
course from 18 terminating employees for a total of $1,967,464.
<PAGE> 113
SCHEDULE 6.8
Mexico All that land consisting of approximately 759m2 together
with a building thereon having an area of approximately
530.29m2 together with a patio consisting of approximately
246.98m2 situated at the location commonly known as Calle de
Juarez No. 1, San Angel, Delegation Villa Alvaro Obregon,
Mexico D.F., Mexico.
Cedar Rapids All that certain parcel of land consisting of approximately
6.53 acres, together with a two level building thereon
consisting of approximate]y 28,317 square feet and commonly
known as 4211 Signal Ridge Road N.E., situated in Cedar
Rapids, Linn County, Iowa, which land is more specifically
described in the deed dated September 11, 1989 from Signal
Ridge Development Company to Young & Rubicam L.P.
*New York All that certain parcel of land together with the buildings
and improvements hereon erected in the Borough of Manhattan,
City, County and State of New York, which building is
commonly referred to as 285 Madison Avenue, which property
is more particularly described in the deed dated May 23,
1983 from Metropolitan Life Insurance Company to Young &
Rubicam Inc.
Hungary A suite of offices consisting of approximately 184m2
situated at Nephadscreq Utca 3 in the City of Budapest in
Hungary, which suite is subject to an option to purchase by
the existing third party tenant at price of Ftl4 million
(approximately $100,720 at 1996 planning rates).
Puerto Rico All that certain land and the building thereon consisting of
approximately 15,000 sq. ft. situated at the location
commonly known as 9 Munet Court in the City of Guaynabo in
Puerto Rico.
Santo Domingo All that certain land consisting of approximately 2,705m2
and building thereon of approximately 1,364m2 situated in
the Avenida de los Proceres at the corner of Camino del
Oeste in the City of Santo Domingo in the Dominican
Republic.
- ------------
*Mortgage to be granted
<PAGE> 114
SCHEDULE 6.11
The IRS previously assessed Young & Rubicam L.P. with approximately
$6,000,000 of taxes and interest relating to 1991. There is no reserve for this
item because the Company believes there is no basis for this assessment. The IRS
has put a lien on the Company's headquarters building. A Statement of Adjustment
to the Company's account was received on October 9, 1996 from the IRS indicating
that the tax assessment and interest penalties relating to 1991 have now been
reversed. The Company has not yet received the lien release. The Company is
attempting to finally resolve this matter with the IRS problem resolution office
in Holtsville, New York.
<PAGE> 115
SCHEDULE 6.13
According to William M. Mercer Incorporated, the actuary for the Company's
pension plans, the present value of all accrued benefits of the Young & Rubicam
Inc. Career Cash Balance Plan (formerly known as the Career Compensation Plan)
exceeds the value of assets as of the last valuation date of January 1, 1996.
Such excess is $6.3 million if one uses the actuarial value of assets, or $3.3
million if one uses the market value of assets. These liabilities were
determined using the 9% funding assumption.
<PAGE> 116
SCHEDULE 6.15
I. Set forth below is an organization chart and listing of the legal names of
each domestic and foreign operating subsidiary (by country) of Young & Rubicam
Inc. and Young & Rubicam L.P., and other entities in which Young & Rubicam Inc.
or a subsidiary has a minority interest (other than subsidiaries being formed in
connection with the Recapitalization). The legal ownership percentage held by
Young & Rubicam Inc. or Young & Rubicam L.P. and the type of entity (whether
holding or operating) is set forth below. Unless otherwise indicated, each
entity is a corporation (or equivalent) organized in the country under which its
name appears.
YOUNG & RUBICAM INC. LEGAL OWNERSHIP SCHEDULE
Legal
COMPANY NAME Own TYPE OF
% ENTITY
- --------------------------------------------------------------------------------
ARGENTINA
Young & Rubicam Inc. (New York corporation)
Y&R Inversiones Publicitarias SA 100 Holding
Young & Rubicam SA. 80* Operating
ADD S.A. 100* Operating
Wunderman Cato Johnson, S.A. 44 Operating
Burson-Marsteller S.A. 51 Operating
Action Line, S.A. 32 Operating
*Effective profit ownership interest is 44%
AUSTRALIA
Young & Rubicam Inc. (New York corporation)
Y&R Australia Pty Ltd 100 Operating
Wunderman Cato Johnson, Pty Ltd. 100 Operating
Y&R Sydney Pty Ld. 100 Operating
Burson-Marsteller International Inc.
(Delaware corporation) 100 Operating
Burson-Marsteller Pty Ltd. 100 Operating
AUSTRIA
Young & Rubicam Inc. (New York corporation)
Y&R Vienna Werbegesellschaft m.b.H. 100 Operating
BELGIUM
Young & Rubicam Inc. (New York corporation)
Young & Rubicam International Group
B.V. (Netherlands corporation) 100 Holding
Burson-Marsteller S.A. 100 Operating
Robinson-Linton Associates S.A. 85 Operating
Young & Rubicam Belgium S.A. 100 Operating
Wunderman Cato Johnson, Belgium S.A. 75 Operating
<PAGE> 117
BRAZIL
Young & Rubicam Inc. (New York corporation)
Young & Rubicam do Brasil S/C Ltda. 100 Operating
Young & Rubicam Comunicacoes Ltda. 100 Operating
ADD Communicacoes Ltda. 100 Operating
Wunderman do Brasil Ltda. 100 Operating
VS Escala Comunicacoes Ltda. 25 Operating
Burson-Marsteller International Inc.
(Delaware corporation) 100 Operating
Burson-Marsteller S/C Ltda. 100 Operating
CANADA
Young & Rubicam Inc. (New York corporation)
Young & Rubicam Group of Companies Ltd. 100 Operating
S&H Gall, Inc. 51 Operating
The Finished Line Art & Design Ltd. 100 Operating
The Finished Type Inc. 50 Operating
Saint-Jacques Vallee Y&R Inc. (Montreal) 49 Operating
Firstcom Marketing Inc. 100 Operating
National Public Relations 22 Operating
CHILE
Young & Rubicam Inc. (New York corporation)
Young & Rubicam Inc. y Compania 100 Operating
Prolam/Young & Rubicam S.A. 30 Operating
COLOMBIA
Young & Rubicam Inc. (New York corporation)
Cygnet Holdings Inc. (Delaware corporation) 100 Holding
Young Rubicam S.A. 100 Operating
ADD S.A 100 Operating
THE CZECH REPUBLIC
Young & Rubicam Inc. (New York corporation)
Young & Rubicam International Group B.V.
(Netherlands corporation) 100 Holding
Young & Rubicam Praha, A.S. 100 Operating
WCJ Praha 100 Operating
Mediapolis Czech Republic 50 Operating
DENMARK
Young & Rubicam Inc. (New York corporation)
Young & Rubicam International Group B.V.
(Netherlands corporation) 100 Holding
Young & Rubicam Denmark Group A/S 100 Operating
DOMINICAN REPUBLIC
Young & Rubicam Inc. (New York corporation)
Investigaciones Merdadeo C Por A 65 Operating
Y&R Damaris C por A 65 Operating
2
<PAGE> 118
FINLAND
Young & Rubicam Inc. (New York corporation)
Young & Rubicam International Group B.V.
(Netherlands corporation) 100 Holding
Young & Rubicam Finland Oy 80 Operating
FRANCE
Young & Rubicam Inc. (New York corporation)
Young & Rubicam International Group B.V.
(Netherlands corporation) 100 Holding
Young & Rubicam France S.A. 100 Operating
Covema Holding 35 Operating
BCMW 85* Operating
PERF 85* Operating
Srateme 85* Operating
Creep Sarl 100 Operating
Landor Associates S.A. 100 Operating
Lumiere Sarl 40 Operating
Mediapolis Worldwide 49 Operating
Mediapolis 100 Operating
Wunderman Cato Johnson France S.A. 100 Operating
Larminat Merlet Communications 40 Holding
LM Young & Rubicam 46 Operating
Burson-Marsteller Eurocorporate S.A. 100 Operating
*Effective profit ownership interest is 30%
GERMANY
Young & Rubicam Inc. (New York corporation)
Young & Rubicam International Group B.V.
(Netherlands corporation) 100 Holding
Burson-Marsteller GmbH 100 Operating
Young & Rubicam GmbH 100 Operating
Sudler & Hennessey GmbH 100 Operating
Wunderman Cato Johnson GmbH 100 Operating
FutureCom GmbH 100 Operating
Haehn und Partner GmbH 100 Operating
GREECE
Young & Rubicam Inc. (New York corporation)
Young & Rubicam International Group B.V.
(Netherlands corporation) 100 Holding
Young & Rubicam Italia S.p.A.
(Italian corporation) 100 Operating
Geo/Young & Rubicam S.A. 62 Operating
Greek Media Group 19* Operating
Wunderman Worldwide
Advertising Marketing S.A. 98** Operating
*Effective profit ownership interest is 12%
3
<PAGE> 119
**Effective profit ownership interest is 61%
GUATEMALA
Young & Rubicam Inc. (New York corporation)
Cygnet Holdings Inc. (Delaware corporation) 100 Holding
Eco Young & Rubicam, S.A. 40 Operating
HONG KONG
Young & Rubicam Inc. (New York corporation)
Burson-Marsteller International Inc.
(Delaware corporation) 100 Holding
Burson-Marsteller Asia Ltd. 100 Operating
Burson-Marsteller Hong Kong Ltd. 100 Operating
Landor Associates (California corporation) 100 Operating
Landor Associates Designers & Consultants Ltd. 100 Operating
Landor Associates Asia-Pacific Ltd. 100 Holding
HUNGARY
Young & Rubicam Inc. (New York corporation)
Young & Rubicam International Group B.V.
(Netherlands corporation) 100 Holding
Young & Rubicam Hungary Advertising 100 Operating
WCJ Budapest 100 Operating
Mac-Mester 100 Operating
Mediapolls 50 Operating
Burson-Marsteller Budapest Kft 100 Operating
INDIA
Young & Rubicam Inc. (New York corporation)
Burson-Marsteller International Inc.
(Delaware corporation) 100 Holding
Roger Pereira 49 Operating
INDONESIA
Young & Rubicam Inc. (New York corporation)
Burson-Marsteller International Inc.
(Delaware corporation) 100 Holding
Burson-Marsteller Asia Ltd.
(Hong Kong corporation) 100 Operating
B-M Indonesia 100 Operating
Young & Rubicam Far East Holdings, Inc.
(Delaware corporation) 100 Holding
Dentsu Young & Rubicam Pte Ltd. 50 Operating
PT DY&R Indonesia 50* Operating
*The shares are held by the Indonesian shareholder, but are
beneficially owned by DY&R Pte Ltd. Effective profit ownership
interest is 25%
ITALY
Young & Rubicam Inc. (New York corporation)
Young & Rubicam International Group B.V.
(Netherlands corporation) 100 Holding
Young & Rubicam Italia S.p.A. 100 Operating
G&R Publicita-Sudler & Hennessey S.r.l. 60 Operating
4
<PAGE> 120
Creative Healthcare Advertising S.r.l. 97* Operating
Farma Force S.r.l. 25** Operating
Intramed Communications S.r.l. 85*** Operating
Impact Italia S.r.l. 100 Operating
Landor Associates Continental Europe S.r.l. 100 Operating
Mediapolis/M&CS Italia S.r.l. 100 Operating
Wunderman Cato Johnson Italia S.p.A. 100 Operating
Young & Rubicam Roma S.r.l. 100 Operating
Yellow & Red S.r.l. 15 Operating
Cohn & Wolfe Italia 100 Operating
Burson-Marsteller International Inc.
(Delaware corporation) 100 Holding
Burson-Marsteller Italia S.r.l. 100 Operating
*Effective profit ownership interest is 59%
**Effective profit ownership interest is 15%
***Effective profit ownership interest is 51%
JAPAN
Young & Rubicam Inc. (New York corporation)
Burson-Marsteller International Inc.
(Delaware corporation) 100 Holding
Kabushiki Kaisha Dentsu Burson-Marsteller 51 Operating
Landor Associates International
(California corporation), Japan Branch 100 Operating
Dentsu Wunderman Direct 50 Operating
KENYA
Young & Rubicam Inc. (New York corporation)
Ayton Young & Rubicam 50 Operating
KOREA
Young & Rubicam Inc. (New York corporation)
Burson-Marsteller International Inc.
(Delaware corporation) 100 Holding
Merit Communications Inc. 25 Operating
MALAYSIA
Young & Rubicam Inc. (New York corporation)
Burson-Marsteller International Inc.
(Delaware corporation) 100 Holding
Burson-Marsteller Asia Ltd.
(Hong Kong corporation) 100 Operating
Burson-Marsteller (Malaysia) Sdn Bhd 90 Operating
Dentsu, Young & Rubicam Sdn Bhd 35 Operating
Paragon Communications SDN BHD 49* Operating
*Effective profit ownership is 17%
MEXICO
Young & Rubicam Inc. (New York corporation)
Burson-Marsteller International Inc.
(Delaware corporation) 100 Holding
Burson-Marsteller Mexico S.A. de C.V. 100 Operating
Wunderman Cato Johnson Mexico S.A. de C.V. 100 Operating
5
<PAGE> 121
Landor Associates (California corporation) 100 Operating
Walter Landor Y Asociados S.A. de C.V. 100 Operating
Immobiliaria Landor S.A. de C.V. 100 Operating
Young & Rubicam S.A. de C.V. 100 Operating
Empresas del Sur S.A. de C.V. 100 Holding
Iconic, S.A. de C.V. 100 Operating
Iconic Administracion Corporativa, S.C. 100 Operating
THE NETHERLANDS
Young & Rubicam Inc. (New York corporation)
Young & Rubicam Inc. International Group B.V. 100 Holding
Burson-Marsteller Budapest Kft (Hungarian corporation)*
Burson-Marsteller S.A. (Belgian corporation)*
Burson-Marsteller GmbH (German Gmbh)*
Young & Rubicam Belgium S.A. (Belgian corporation)*
Young & Rubicam Denmark Group A/S (Danish corporation)*
Young & Rubicam SA (Spanish corporation)*
Young & Rubicam Finland Oy (Finnish corporation)**
Young & Rubicam France S.A. (French corporation)*
Young & Rubicam Hungary Advertising (Hungarian corporation)*
Young & Rubicam Italia S.p.A. (Italian corporation)*
Young & Rubicam MediaPro (Romanian corporation)***
Young & Rubicam Poland (Polish corporation)*
Young & Rubicam Praha, A.S. (Czech corporation)*
Young & Rubicam Reklamevi Reklamcilik As. (Turkish corporation)****
Young & Rubicam Group Netherlands BV 100 Holding
Burson-Marsteller B.V. 100 Operating
Bercum, Boender, Cardozo & Werkendam 100 Operating
Consult Communication Strategies 100 Operating
Media Exposure 70***** Operating
Production Control B.V. 100 Operating
PMSvW/Y&R Reclameburo bv 100 Operating
Adbeidsmarkt Comm. Adviesbureau B.V. 49 Operating
P,M,SvW Communication House B.V. 100 Operating
Trefpunt Sports & Leisure Marketing B.V. 44 Operating
Wunderman Cato International b.v. 100 Holding
Wunderman Cato Johnson v.o.f. 80 Partnership
Online Marketing B.V. 100****** Operating
Ad Productions B.V. 100 Holding
Verhoeff & Partners v.o.f. 80 Partnership
*Young & Rubicam International Group B.V. owns 100% of each of these Operating
companies.
**Young & Rubicam International Group B.V. owns 80% of this Operating company.
***Young & Rubicam International Group B.V. owns 60% of this Operating company.
****Young & Rubicam International Group B.V. owns 77% of this Operating company.
*****In process of acquiring an additional 19%.
******Effective profit ownership interest is 80%.
6
<PAGE> 122
NEW ZEALAND
Young & Rubicam Inc. (New York corporation)
Young & Rubicam New Zealand (Holdings) Ltd. 100 Holding
Young & Rubicam (NZ) Limited 50 Operating
Wunderman Cato Johnson (NZ) Ltd. 100 Operating
Sudler & Hennessey Ltd. 100 Operating
NORWAY
Young & Rubicam Inc. (New York corporation)
Burson-Marsteller International Inc.
(Delaware corporation) 100 Holding
Burson-Marsteller A/S 100 Operating
POLAND
Young & Rubicam Inc. (New York corporation)
Young & Rubicam International Group B.V.
(Netherlands corporation) 100 Holding
Young & Rubicam Poland 100 Operating
Burson-Marsteller International Inc.
(Delaware corporation) 100 Holding
Burson-Marsteller Poland Sp. z.o.o. 100 Operating
PORTUGAL
Young & Rubicam Inc. (New York corporation)
Young & Rubicam Holdings U.K. Ltd.
(United Kingdom corporation) 100 Holding
Young & Rubicam SGdPS S.A. 100 Holding
Wunderman Cato Johnson Portugal 55 Operating
Young & Rubicam Publicide Lda. 70 Operating
Mediapolis Portugal 50 Operating
Young & Rubicam International Group B.V.
(Netherlands corporation) 100 Holding
Young & Rubicam SA (Spanish corporation) 100 Operating
Burson-Marsteller S.A.*
(Spanish corporation) 100 Operating
*Burson-Marsteller SA has an operating division located in Portugal.
ROMANIA
Young & Rubicam Inc. (New York corporation)
Young & Rubicam International Group B.V.
(Netherlands corporation) 100 Holding
Y&R MediaPro 60 Operating
THE RUSSIAN FEDERATION
Young & Rubicam Inc. (New York corporation)
Cygnet Holdings Inc. (Delaware corporation) 100 Holding
Burson-Marsteller/NIS, Inc.
(Delaware corporation) 100 Rep. Office
Burson-Marsteller/NIS, Inc. (Russia)
(Delaware corporation) (Ukraine) 100 Rep. Office
B-M Communications Inc.
(Delaware corporation) 100 Rep. Office
(Russia)
7
<PAGE> 123
B-M Communications Inc.
(Delaware corporation) (Ukraine) 100 Rep. Office
B-M Communications Inc.
(Delaware corporation) (Kazahkstan) 100 Rep. Office
Young & Rubicam Holdings U.K. Ltd.
(UK corporation) 100 Holding
Young & Rubicam Group Ltd.
(UK corporation) 100 Rep. Office
(Russia)
SINGAPORE
Young & Rubicam Inc. (New York corporation)
Burson-Marsteller International Inc.
(Delaware corporation) 100 Holding
Burson-Marsteller Asia Ltd.
(Hong Kong corporation) 100 Operating
Burson-Marsteller (Sea) Pte Ltd 100 Operating
SOUTH AFRICA
Young & Rubicam Inc. (New York corporation)
Young & Rubicam Holdings U.K. Ltd.
(UK corporation) 100 Holding
Young & Rubicam Holdings S.A. Pty Ltd 100 Holding
Wunderman Cato Johnson (PTY) LTD 100 Operating
SPAIN
Young & Rubicam Inc. (New York corporation)
Young & Rubicam International Group B.V.
(Netherlands corporation) 100 Holding
Young & Rubicam SA 100 Operating
Equimedia S.A. 25 Operating
Vinizius/Young & Rubicam S.A. 77 Operating
Wunderman Cato Johnson S.A. 100 Operating
Burson-Marsteller S.A. 100 Operating
SWEDEN
Young & Rubicam Inc. (New York corporation)
Young & Rubicam Sweden AB 100 Holding
Hall & Cedarquist/Young & Rubicam AB 100 Operating
Nordstrom & Ohman AB 100 Operating
Wunderman Cato Johnson AB 100 Operating
Burson-Marsteller AB 100 Operating
SWITZERLAND
Young & Rubicam Inc. (New York corporation)
Burson-Marsteller International Inc.
(Delaware corporation) 100 Holding
CMG AG 100 Holding
Sudler & Hennessey AG Zurich 100 Operating
Kulling & Partner Design AG 35 Operating
Wunderman Cato Johnson AG 100 Operating
All Access AG 100 Operating
All Right Social Marketing AG 100 Operating
Y&R Business Communications S.A. 100 Operating
Peter Butikofer AG 4 Operating
Advico/Young & Rubicam AG 72* Operating
8
<PAGE> 124
FutureCom Interactive Media 100 Operating
Adplus AG 33 Operating
*In process of acquiring remaining interest
TAIWAN
Young & Rubicam Inc. (New York corporation)
Burson-Marsteller International Inc.
(Delaware corporation) 100 Holding
Burson-Marsteller Taiwan 100 Operating
THAILAND
Young & Rubicam Inc. (New York corporation)
Burson-Marsteller International Inc.
(Delaware corporation) 100 Holding
Burson-Marsteller Thailand Ltd. 98* Operating
Burson-Marsteller Thailand International 100 Holding
*Effective profit ownership interest is 100%
TURKEY
Young & Rubicam Inc. (New York corporation)
Young & Rubicam International Group B.V.
(Netherlands corporation) 100 Holding
Young & Rubicam Reklamevi Reklamcilik As. 77 Operating
UNITED KINGDOM
Young & Rubicam Inc. (New York corporation)
Young & Rubicam Holdings U.K. Ltd. 100 Holding
Phoenix Travel (Mornington) Ltd. 51 Operating
Prima Europe Ltd. 100 Operating
Young & Rubicam Europe Ltd. 100 Operating
Young & Rubicam Group Ltd. 100 Operating
Allan Burrows Ltd. 100 Operating
MML Field Marketing Ltd. 100 Operating
Corporate Television Network Ltd. 50 Operating
UNITED STATES
Young & Rubicam Inc. 100 Holding
Cygnet Holdings Inc. 100 Operating
Summit Insurance Company 100 Operating
BM Communications Inc. 100 Holding
Burson-Marsteller/NIS, Inc. 100 Operating
Black, Kelly, Scruggs & Healey Inc. 100 Operating
Burson-Marsteller International Inc. 100 Operating
Burson-Marsteller (Puerto Rico) Inc. 100 Operating
Landor Associates 100 Operating
Landor Associates International 100 Operating
RSBC Vestiges, Inc. 100 Operating
Y&R Far East Holdings, Inc. 100 Holding
Young & Rubicam L.P. 100 Partnership
9
<PAGE> 125
Creswell, Munsell, Fultz & Zirbel L.P. 33 Partnership
Sive/Young & Rubicam L.P. 10 Partnership
*Lord Dentsu & Partners LLC 50 Operating
Young & Rubicam Puerto Rico, Inc. 100 Operating
URUGUAY
Young & Rubicam Inc. (New York corporation)
Cygnet Holdings Inc. (Delaware corporation) 100 Holding
ViceVersa S.A. 35 Operating
VENEZUELA
Young & Rubicam Inc. (New York corporation)
Cygnet Holdings Inc. (Delaware corporation) 100 Holding
JMC Creatividad Orientada, C.A. 49 Operating
Optimizacion ADD, C.A. 49 Operating
Wunderman Cato Johnson Promocion y
Mercadeo Directo, C.A. 49 Operating
Burson-Marsteller Relaciones Publicas, C.A. 49 Operating
ZAMBIA
Young & Rubicam Inc. (New York corporation)
Young & Rubicam Zambia Ltd. 100 Operating
ZIMBABWE
Young & Rubicam Inc. (New York corporation)
Michael Hogg Young & Rubicam 25 Operating
10
<PAGE> 126
Schedule 6.20
Filing Jurisdictions
================================================================================
Debtor Name and Location of Filing Jurisdictions
Chief Executive Office
================================================================================
Black, Kelly, Scruggs, & Healey Inc., Secretary of State, New York
Delaware corporation Recorder of Deeds, District of Columbia
1801 K Street, N.W., Washington, DC County Clerk, New York County (NY)
20006
Tax ID: 13-3601615
- --------------------------------------------------------------------------------
BM Communications Inc., Secretary of State, New York
Delaware corporation Recorder of Deeds, District of Columbia
285 Madison Ave, New York, NY 10017 County Clerk, New York County (NY)
1801 K Street, N.W., Washington, DC
20006
Tax ID: Pending
- --------------------------------------------------------------------------------
Burson-Marsteller International Inc., Secretary of State, New York
Delaware corporation County Clerk, New York County (NY)
230 Park Ave South, New York, NY
10003
Tax ID: 13-3496066
- --------------------------------------------------------------------------------
Burson-Marsteller/NIS Inc., Secretary of State, New York
Delaware corporation Recorder of Deeds, District of Columbia
285 Madison Ave, New York, NY 10017 County Clerk, New York County (NY)
1801 K Street, N.W., Washington, DC
20006
Tax ID: Pending
- --------------------------------------------------------------------------------
Burson-Marsteller (Puerto Rico), Inc., Secretary of State, New York
Delaware corporation County Clerk, New York County (NY)
Calle Munet Ct. #9, Pueblo Viejo
Guaynabo, Puerto Rico 00968
Tax ID: 13-3505363
- --------------------------------------------------------------------------------
Cygnet Holdings Inc., Secretary of State, New York
Delaware corporation County Clerk, New York County (NY)
285 Madison Ave. New York, NY 10017
Tax ID: 52-1551841
- --------------------------------------------------------------------------------
Landor Associates, Secretary of State, New York
California corporation Secretary of State, California
1001 Front Street, San Francisco, CA Department of State, Florida
94111 Secretary of State, Illinois
Tax ID: 94-1709801 Department of Licensing, Washington
County Clerk, New York County (NY)
- --------------------------------------------------------------------------------
<PAGE> 127
================================================================================
Debtor Name and Location of Filing Jurisdictions
Chief Executive Office
================================================================================
Landor Associates International, Secretary of State, New York
California corporation Secretary of State, California
1001 Front Street, San Francisco, CA County Clerk, New York County (NY)
94111
Tax ID: 94-2611371
(Japan)
Sogo Hirakawacho Building
l-4-12, Hirakawacho
- --------------------------------------------------------------------------------
RSBC Vestiges Inc., Secretary of State, New York
New York corporation County Clerk, New York County (NY)
285 Madison Ave, New York, NY 10017
Tax ID: 13-2790531
- --------------------------------------------------------------------------------
Y&R Far East Holdings, Inc., Secretary of State, New York
Delaware corporation County Clerk, New York County (NY)
285 Madison Ave, New York, NY 10017
Tax ID: 13-3499286
- --------------------------------------------------------------------------------
Young & Rubicam Inc., Secretary of State, New York
New York corporation Department of State, Florida
285 Madison Ave, New York, NY 10017 Secretary of State, Illinois
Tax ID: 13-1493710 Department of Licensing, Washington
County Clerk, New York County (NY)
- --------------------------------------------------------------------------------
<PAGE> 128
================================================================================
Debtor Name and Location of Filing Jurisdictions
Chief Executive Office
================================================================================
Young & Rubicam L.P., Secretary of State, New York
Delaware limited partnership Secretary of State, California
285 Madison Ave, New York, NY 10017 Secretary of State, Colorado
Tax ID: 13-3493149 Secretary of State, Delaware
Recorder of Deeds,
District of Columbia
Local MA Address: Department of State, Florida
45 Newbury Street, Boston, MA 02116 Secretary of State, Illinois
Secretary of State, Iowa
Local OH Addresses: Secretary of State, Kansas
36 East Seventh Street, State Secretary, Massachusetts
Cincinnati, OH 45202 Secretary of State, Michigan
525 Vine Street, Cincinnati, OH 45202 Secretary of State, Nevada
Secretary of State, Ohio
Secretary of State, Pennsylvania
Prothonotary's Office,
Allegheny County PA
Secretary of State, Texas
State Corporation Commission,
Virginia
County Clerk, Cobb County, (GA)
Clerk's Office, Boston, (MA)
County Clerk, New York County (NY)
County Clerk, Monroe County (NY)
County Clerk, Hamilton County, (OH)
County Court Clerk, Fairfax
County, (VA)
- --------------------------------------------------------------------------------
Young & Rubicam Puerto Rico, Inc., Secretary of State, New York
New York corporation County Clerk, New York County (NY)
9 Munet Court, Buchnan
Guaynabo, Puerto Rico 00968
Tax ID: 66-0215548
================================================================================
<PAGE> 129
SCHEDULE 6.22
Young & Rubicam Inc. SKR 5,000,000 (expires 3/31/97)
Young & Rubicam Inc. GBP 8,800,000 (expires 2/27/97)
<PAGE> 130
Supplement Schedule to Schedule 6.22
Pursuant to Subsections 6.22 and 7.1(y)
of the Credit Agreement
Young & Rubicam Inc. A$ 9,000,000 (expires 12/31/96)
Waring & LaRosa US$127,643 (expires 7/31/97)
Young & Rubicam Inc. FF 25,000,000 (expires 11/30/97)
<PAGE> 131
SCHEDULE 8.11
French equityholders who hold options to purchase common stock will be
subject to the following:
Changes in Implementation of Rollover and Non-Rollover Equity in Europe
French Rollover Options
1. The number of Rollover Options will be calculated as indicated in the
agreement (i.e. the aggregate spread between the exercise price on existing
options and $115 divided by $86.25).
2. However, the exercise price on such options will NOT be reduced to $28.75 per
share. Instead, the option price will continue at the current level (which is,
in every case, greater then $28.75).
Benefit: Optionee qualifies for capital gains, in accordance with initial
design of option plan in France. While the Company will not be able to get full
deduction of spread as compensation, the Company will realize some benefits
because the optionees will be paying more than $28.75 per share.
French Non-Rollover Options
1. Optionees will be allowed to continue to hold such options until the earlier
of a) satisfaction of the 5 year holding period required to qualify for capital
gains treatment under French tax law, or b) termination of employment with Y&R.
At such time the employee must exercise the option, or forfeit rights under the
option.
2. The Company will have a call on the shares issued pursuant to the exercise of
such options at the lower of a) $115 per share, or b) 85% (or 70%, if
applicable) of the then current Public Market Value.
Benefit: Optionee qualifies for capital gains, in accordance with initial
design of option plan in France. While the Company will not be able to get full
deduction of the spread as compensation, the Company will realize some benefits
because the payment of the spread is being deferred (effectively the optionees
are making an interest free loan to the Company).
<PAGE> 132
SCHEDULE 9.2(e)
Approximately $28.0 million in aggregate principal amount of installments notes
outstanding on the date hereof and payable over four years issued to certain
former equityholders of Young & Rubicam in connection with the termination of
their employment and the repurchase by Young & Rubicam of the equity owned by
such former employees. If any amount of principal or interest on such
installments notes is outstanding after the Second Drawdown Date, any such
amounts shall be deemed Unsecured Indebtedness permitted only to the extent set
forth in subsection 9.2(h) of the Credit Agreement.
Any payment of principal or interest of such installment notes shall not be
considered a Restricted Payment for any purposes under the Credit Agreement.
<PAGE> 133
Schedule 9.2(j)
Terms of
Subordinated Payment Obligations Under
ss.ss.4.05 and 4.06 of the
Stockholders' Agreement
--------------------------------------
1. Non-negotiable
2. Principal Amount: Aggregate Applicable Call Price or
Applicable Put Price for shares of
Capital Stock to be repurchased from
Management Investor or Director
Investor.
3. Term: Principal payable in four
installments: First installment on
Applicable Payment Date (as defined
under the Stockholders' Agreement, the
June 30 or December 31 which follows
the later of the Applicable Valuation
Date and 30 days after notice of
exercise), the remaining installments
on the 1st, 2nd and 3rd anniversaries
of such date.
4. Interest: The Specified Rate, which shall be
equal to the applicable Federal rate
in effect under Section 1274(d) of the
Internal Revenue Code of 1986, at the
time such Subordinated Payment
Obligation is first incurred, for
obligations of like maturity
compounded semiannually, payable
annually.
5. Subordination: All claims with respect to principal
or interest, or otherwise, relating to
the Subordinated Payment Obligations
shall be subordinated and junior in
right of payment to all claims under
the Credit Facilities, as set forth
below:
(a) Deferral of Interest and/or
Principal:
Unless and until permitted under
Section 9.8 of the Credit Agreement
and as provided herein, no payment or
other distribution of any kind will be
made in respect of interest or
principal, or otherwise, on the
Subordinated Payment Obligations,
whether in cash, property, securities
or otherwise; provided that payments
shall not, in any event be deferred
after December 31, 2003. In the event
that, as of any date on which a
payment of principal or interest is
required under the Subordinated
Payment Obligations, the aggregate
amount required by the Company to (1)
purchase Capital Stock under Article
IV of the Stockholders'
<PAGE> 134
Agreement and (2) make payments of
principal and interest on Subordinated
Payment Obligations exceeds the
maximum amount of Restricted Payments
the Company is permitted to make under
Section 9.8 of the Credit Agreement,
then the amount of Restricted Payments
permitted to be made as of such date
will be made in the following order:
first, to pay $1.00 per share of
Capital Stock as a portion of the
purchase price for shares to be
purchased on such date;
second, to pay amounts payable as
interest on Subordinated Payment
Obligations (to be paid pro rata to
the extent insufficient amounts are
available);
third, if and to the extent the
Company so elects, to purchase, or
make payments with respect to, shares
of Capital Stock which the Company is,
or was, required to purchase under the
Stockholders' Agreement in connection
with the Termination of Employment of
a Management Investor as a result of
death or Permanent Disability,
payments with respect to shares
previously purchased in connection
with a Termination of Employment where
such Management Investor subsequently
died or became permanently disabled
and payments to Management
Co-Investors (as such terms are
defined in the Stockholders'
Agreement);
fourth, to pay the principal amount
of the Subordinated Payment
Obligations (including amounts of
interest which become principal as a
result of the deferral pursuant to
this provision) (to be paid pro rata
to the extent insufficient amounts are
available);
fifth, to pay, pro rata, a portion
of all such other amounts then due.
Any payments of principal or interest
not made as a result of such priority
of payments shall thereafter be
treated as additional principal and
shall bear interest at the Specified
Rate until the next applicable date
for payment of interest or principal
(with such additional principal being
payable pro rata over the remaining
installments);
-2-
<PAGE> 135
provided that payment shall not, in
any event be deferred after December
31, 2003.
(b) In Event of Default:
No payment of principal or interest,
or otherwise, shall be made in respect
of the Subordinated Payment
Obligations upon the occurrence, and
during the continuance, of a "Default"
or "Event of Default" under the Credit
Agreement.
(c) Liquidation or Bankruptcy:
All obligations (principal, interest,
fees, indemnities, costs, expenses and
otherwise) under the Credit Agreement
shall be paid in full before any
payments are made with respect to the
Subordinated Payment Obligations.
6. Events of Default: (a) Right to Accelerate:
Subordinated Payment Obligations will
accelerate:
- upon notice by the Holder if the
Company defaults in the payment of
principal or interest, except if
payment or principal or interest is
prohibited under Sections 5(a) or
5(b) above;
- upon voluntary bankruptcy petition
and similar events;
- if within 60 days involuntary
proceeding not dismissed.
(b) No Enforcement by Holder:
So long as any obligations under the
Credit Agreement remain unpaid, the
holder, of any Subordinated Payment
Obligation shall not (i) commence any
involuntary proceeding or (ii) if and
so long as payment is required to be
deferred under Sections 5(a) or 5(b)
above, declare any payment default.
-3-
<PAGE> 136
SCHEDULE 9.3(f)
None
<PAGE> 137
SCHEDULE 9.4(a)
Below is a schedule of guarantee obligations of Young & Rubicam Inc.:
NZ$ 750,000
US$ 11,000,000
S$ 3,000,000 (Singapore)
NT$ 15,000,000 (Taiwan)
Baht 34,500,000 (Thailand)
Won 200,000,000 (Korea)
HK$ 6,250,000
US$ 625,000
HK$2,500,000
HK$5,750,000
NZ$ 750,000
The US$ equivalent of the above guarantees is US$18,800,000
<PAGE> 138
EXHIBIT A TO
CREDIT AND GUARANTEE AGREEMENT
[FORM OF ADDENDUM]
ADDENDUM
The undersigned Lender (i) agrees to all of the provisions of the
Credit and Guarantee Agreement, dated as of December __, 1996 (the "Credit
Agreement"), among Young & Rubicam Holdings Inc., a New York corporation ("Y&R
Holdings"), Young & Rubicam Inc., a New York corporation ("Y&R Inc. (New
York)"), Young & Rubicam Inc., a Delaware corporation ("Y&R Inc. (Delaware)"),
and Young & Rubicam L.P., a Delaware limited partnership ("Y&R LP"; collectively
with Y&R Holdings, Y&R Inc. (New York) and Y&R Inc. (Delaware), the "Parent
Borrowers"), the Subsidiary Borrowers (as defined in the Credit Agreement) from
time to time parties thereto, the several banks and other financial institutions
from time to time parties thereto (the "Lenders"), Bank of America National
Trust and Savings Association, as Administrative Agent for the Lenders and Bank
of America International Limited, a bank organized under the laws of England, as
European Payment Agent, and (ii) agrees to become, and hereby becomes, a party
thereto as a "Lender" for all purposes of the Credit Agreement with the
Commitments described in Schedule 1.1(a) to the Credit Agreement.
We hereby confirm that the notice and account information with
respect to the undersigned Lender set forth on Schedule 1.1(a) to the Credit
Agreement is complete and correct:
1. Name of Lender:
2. Address for Notices:
Facsimile Number:
Attention:
3. Administrative Contact*:
Facsimile Number:
Attention:
[NAME OF LENDER]
By:
---------------------------
Name:
Title:
_________ __, 1996
- ----------
* To the extent not otherwise provided.
<PAGE> 139
EXHIBIT B TO
CREDIT AND GUARANTEE AGREEMENT
[FORM OF BORROWING SUBSIDIARY AGREEMENT]
BORROWING SUBSIDIARY AGREEMENT, dated as of _____________ __, 19__
(this "Agreement"), among [NAME OF SUBSIDIARY BORROWER], a ________________ (the
"Subsidiary"), [YOUNG & RUBICAM HOLDINGS INC., a New York corporation ("Y&R
Holdings"),] [YOUNG & RUBICAM INC., a New York corporation ("Y&R Inc. (New
York)"),] YOUNG & RUBICAM INC., a Delaware corporation ("Y&R Inc. (Delaware)"),
YOUNG & RUBICAM L.P., a Delaware limited partnership ("Y&R LP"; collectively
with [Y&R Holdings, Y&R Inc. (New York) and] Y&R Inc. (Delaware), the "Parent
Borrowers"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a
national banking association, as administrative agent (in such capacity, the
"Administrative Agent") for the several banks and other financial institutions
(the "Lenders") from time to time parties to the Credit and Guarantee Agreement,
dated as of December __, 1996 (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), among the Parent Borrowers, the
Subsidiary Borrowers (as defined in the Credit Agreement) from time to time
parties thereto, the Lenders, the Administrative Agent and Bank of America
International Limited, a bank organized under the laws of England, as European
Payment Agent.
The parties hereto hereby agree as follows:
1. Capitalized terms used herein but not otherwise defined herein
shall have the meanings assigned to such terms in the Credit Agreement.
2. Pursuant to subsection 5.17 of the Credit Agreement, the Parent
Borrowers hereby designate the Subsidiary as a Subsidiary Borrower under the
Credit Agreement.
3. Each of the Parent Borrowers and the Subsidiary, jointly and
severally, represents and warrants that the representations and warranties
contained in the Credit Agreement are true and correct on and as of the date
hereof to the extent such representations and warranties relate to the
Subsidiary and this Agreement.
4. Each Parent Borrower agrees that the Guarantee of the Parent
Borrowers contained in Section 11 of the Credit Agreement will apply to the
Obligations of the Subsidiary as a Subsidiary Borrower.
5. Upon execution of this Agreement by each of the Parent Borrowers,
the Subsidiary and the Administrative Agent, the Subsidiary shall be a party to
the Credit Agreement and shall be a "Subsidiary Borrower" and a "Borrower" for
all purposes thereof, and the Subsidiary hereby agrees to be bound by all
provisions of the Credit Agreement.
6. This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York.
<PAGE> 140
2
7. This Agreement may be executed in any number of counterparts
(including by facsimile transmission), each of which shall be an original, and
all of which, when taken together, shall constitute one agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their authorized officers as of the date first appearing
above.
[SUBSIDIARY]
By:
----------------------------
Title:
[YOUNG & RUBICAM HOLDINGS INC.
By:
----------------------------
Title:]
[YOUNG & RUBICAM INC., a New York
corporation
By:
----------------------------
Title:]
[YOUNG & RUBICAM INC., a Delaware
corporation
By:
----------------------------
Title:]
<PAGE> 141
3
YOUNG & RUBICAM L.P.
By: YOUNG & RUBICAM INC., its
General Partner
By:
----------------------------
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Administrative Agent
By:
----------------------------
Title:
<PAGE> 142
EXHIBIT C TO
CREDIT AND GUARANTEE AGREEMENT
[FORM OF BORROWING SUBSIDIARY TERMINATION]
BORROWING SUBSIDIARY TERMINATION
Bank of America National Trust
and Savings Association, as Administrative Agent
for the Lenders referred to below
[Address]
____________, _____
Ladies and Gentlemen:
Reference is made to the Credit and Guarantee Agreement, dated as of
__________ __, 1996 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among [Young & Rubicam Holdings Inc., a New York
corporation ("Y&R Holdings"),] [Young & Rubicam Inc., a New York corporation
("Y&R Inc. (New York)"),] Young & Rubicam Inc., a Delaware corporation ("Y&R
Inc. (Delaware)") and Young & Rubicam L.P., a Delaware limited partnership ("Y&R
LP"; collectively with [Y&R Holdings, Y&R Inc. (New York) and] Y&R Inc.
Delaware, the "Parent Borrowers"), the Subsidiary Borrowers (as defined in the
Credit Agreement) from time to time parties thereto, the several banks and other
financial institutions from time to time parties thereto (the "Lenders"), and
Bank of America National Trust and Savings Association, as Administrative Agent
for the Lenders. Capitalized terms used and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement.
The undersigned Parent Borrowers hereby terminate the status and
rights of _______________ (the "Terminated Subsidiary Borrower") as a Subsidiary
Borrower under the Credit Agreement. [The undersigned Parent Borrowers represent
and warrant that no Loans made to the Terminated Subsidiary Borrower are
outstanding as of the date hereof and that all amounts payable by the Terminated
Subsidiary Borrower in respect of interest and/or fees (and, to the extent
notified by the Administrative Agent or any Lender, any other amounts payable
under the Credit Agreement) pursuant to the Credit Agreement have been paid in
full on or prior to the date hereof.] [The undersigned Parent Borrowers
acknowledge that the Terminated Subsidiary Borrower shall continue to be a
Subsidiary Borrower until such time as all Loans made to the Terminated
Subsidiary Borrower shall have been prepaid and all amounts payable by the
Terminated Subsidiary Borrower in respect of interest and/or fees (and, to the
extent notified by the Administrative Agent or any Lender, any other amounts
payable under the Credit Agreement) pursuant to the Credit Agreement shall have
been paid in full, provided that the Terminated Subsidiary Borrower shall not
have the right to make further borrowings as a Subsidiary Borrower under the
Credit Agreement.]
<PAGE> 143
2
This Borrowing Subsidiary Termination shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New York.
This Borrowing Subsidiary Termination may be executed in any number of
counterparts, each of which shall be an original, and all of which, when taken
together, shall constitute one agreement. Delivery of an executed signature page
of this Borrowing Subsidiary Termination by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof.
Very truly yours,
[YOUNG & RUBICAM HOLDINGS INC.
By:
----------------------------
Title:]
[YOUNG & RUBICAM INC., a New York
corporation
By:
----------------------------
Title:]
YOUNG & RUBICAM INC., a Delaware
corporation
By:
----------------------------
Title:
<PAGE> 144
3
YOUNG & RUBICAM L.P.
By: YOUNG & RUBICAM INC.,
its General Partner
By:
----------------------------
Title:
Acknowledged and Agreed:
[Subsidiary]
By:
----------------------------
Title:
<PAGE> 145
EXHIBIT D TO
CREDIT AND GUARANTEE AGREEMENT
FRONTING LENDER ADDENDUM
The undersigned (i) hereby agrees to become a Fronting Lender under
the Credit and Guarantee Agreement, dated as of __________ __, 1996 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among [Young & Rubicam Holdings Inc., a New York corporation ("Y&R Holdings"),]
[Young & Rubicam Inc., a New York corporation ("Y&R Inc. (New York)"),] Young &
Rubicam Inc., a Delaware corporation ("Y&R Inc. (Delaware)") and Young & Rubicam
L.P., a Delaware limited partnership ("Y&R LP"; collectively with [Y&R Holdings,
Y&R Inc. (New York) and] Y&R Inc. (Delaware), the "Parent Borrowers"), the
Subsidiary Borrowers (as defined in the Credit Agreement) from time to time
parties thereto, the several banks and other financial institutions from time to
time parties thereto, Bank of America National Trust and Savings Association, as
Administrative Agent for the Lenders and Bank of America International Limited,
a bank organized under the laws of England, as European Payment Agent, with
respect to the Subsidiary Borrowers and Fronted Offshore Currencies, and subject
to the other terms and conditions, set forth on Schedule 1 hereto, (ii) hereby
agrees to be bound by the provisions of the Credit Agreement applicable to
Fronting Lenders, (iii) shall be entitled to the benefits of the provisions of
the Credit Agreement and the other Loan Documents insofar as such provisions
relate to Fronting Lenders and Fronted Offshore Loans, including, without
limitation, Section 4 and subsection 11.1, and (iv) if it is not already a
Lender under the Credit Agreement, shall be entitled to the benefits of
subsection 13.5 to the same extent as if it were a Lender under the Credit
Agreement.
To the extent the undersigned is not a Lender under the Credit
Agreement, the undersigned confirms that it has received a copy of the Credit
Agreement and the other Loan Documents and appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Credit Agreement, the other Loan Documents
or any other instrument or document furnished pursuant hereto or thereto as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are incidental thereto.
The provisions of subsections 13.12, 13.14 and 13.15 of the Credit
Agreement are by this reference incorporated herein mutatis mutandis.
This Addendum shall be governed by and construed and interpreted in
accordance with the laws of the State of New York.
Unless otherwise defined herein, terms which are defined in the
Credit Agreement and used herein are so used as so defined.
[NAME OF FRONTING LENDER]
By:
-----------------------
Title:
[Date]
<PAGE> 146
Schedule 1
to Fronting Lender Addendum
TERMS OF FRONTING LENDER COMMITMENT
1. The Fronted Offshore [Currencies] [Currency] shall be
___________________.
2. The Subsidiary Borrower with respect to the Fronted Offshore
Loans made in each Fronted Offshore Currency specified in Section 1 above shall
be as follows:
<TABLE>
<CAPTION>
Fronted Offshore Currency Subsidiary Borrower
------------------------- -------------------
<S> <C>
</TABLE>
3. The Fronted Offshore Currency Sublimit with respect to each
Fronted Offshore Currency specified in Section 1 above shall be as follows:
<TABLE>
<CAPTION>
Fronted Offshore Currency Fronted Offshore Currency Sublimit
------------------------- ----------------------------------
<S> <C>
</TABLE>
4. The Fronting Lender's Payment Office with respect to each Fronted
Offshore Currency specified in Section 1 above shall be as follows (or such
other office as the Fronting Lender may from time to time specify for such
purpose in accordance with subsection 13.2 of the Credit Agreement):
<TABLE>
<CAPTION>
Fronted Offshore Currency Fronting Lender's Payment Office
------------------------- --------------------------------
<S> <C>
</TABLE>
<PAGE> 147
2
5. The Interest Payment Dates with respect to Fronted Offshore Loans
in each Fronted Offshore Currency specified in Section 1 above shall be as
follows:
<TABLE>
<CAPTION>
Fronted Offshore Currency Interest Payment Dates
------------------------- ----------------------
<S> <C>
</TABLE>
[6. The Interest Periods with respect to Fronted Offshore Loans in
each Fronted Offshore Currency specified in Section 1 above shall be as follows:
<TABLE>
<CAPTION>
Fronted Offshore Currency Interest Periods]
------------------------- -----------------
<S> <C>
</TABLE>
7. Notices of borrowing pursuant to subsection 4.2 of the Credit
Agreement shall be given by _____________ [specify timing of notices of
borrowing].
8. Each borrowing of Fronted Offshore Loans in each Fronted Offshore
Currency specified in Section 1 above shall be in the following minimum amounts:
<TABLE>
<CAPTION>
Fronted Offshore Currency Minimum Borrowing Amount
------------------------- ------------------------
<S> <C>
</TABLE>
9. The Fronted Offshore Loans in each Fronted Offshore Currency
specified in Section 1 above shall be made available in [specify funds in which
Fronted Offshore Loans will be made available].
<PAGE> 148
3
10. Each prepayment of Fronted Offshore Loans in each Fronted
Offshore Currency specified in Section 1 above shall be in the minimum amounts
specified below:
<TABLE>
<CAPTION>
Fronted Offshore Currency Minimum Prepayment Amount
------------------------- -------------------------
<S> <C>
</TABLE>
11. Notices of any prepayment pursuant to Section 10 above shall be
given as follows:
<TABLE>
<CAPTION>
Fronted Offshore Currency Requirement for Notices
------------------------- -----------------------
<S> <C>
</TABLE>
12. The Fronting Lender's commitment to make Fronted Offshore Loans
in each Fronted Offshore Currency specified in Section 1 above shall
terminate on the dates specified below:
<TABLE>
<CAPTION>
Fronted Offshore Currency Commitment Termination Date
------------------------- ---------------------------
<S> <C>
</TABLE>
13. The Fronting Lender may terminate its commitment to make Fronted
Offshore Loans to any Subsidiary Borrower in a Fronted Offshore Currency upon
______ days' prior written notice to such Subsidiary Borrower.
14. No later than _______ [a.m./p.m.] on each Calculation Date [and
on each other date on which such calculation is required under the Credit
Agreement] with respect to the Fronted Offshore Currency specified in Section 1
above, the Fronting Lender shall determine the Spot Rate with respect to such
Fronted Offshore Currency.
<PAGE> 149
[New York]
MORTGAGE
from
YOUNG & RUBICAM INC., Mortgagor
to
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
Administrative Agent, Mortgagee
DATED AS OF DECEMBER ____, 1996
After recording, please return to:
Simpson Thacher & Barlett
a partnership which includes
professional corporations
425 Lexington Avenue
New York, New York 10017
Attn: Scott M. Kobak, Esq.
<PAGE> 150
EXHIBIT E TO
CREDIT AND GUARANTEE AGREEMENT
[New York]
MORTGAGE
THIS MORTGAGE, dated as of December __, 1996 is made by YOUNG &
RUBICAM INC., a Delaware corporation ("Mortgagor"), whose address is 285 Madison
Avenue, New York, New York, to BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking association ("Mortgagee"), as administrative
agent for the banks and other financial institutions (the "Lenders") from time
to time parties to the Credit Agreement (as defined below), whose address is
1455 Market Street, San Francisco, California 94103. References to this
"Mortgage" shall mean this instrument and any and all renewals, modifications,
amendments, supplements, extensions, consolidations, substitutions, spreaders
and replacements of this instrument.
Background
A. Mortgagor has entered into a Credit Agreement dated as even date
herewith (as the same may be amended, supplemented or otherwise modified from
time to time, the "Credit Agreement") with Mortgagee and other banks and
financial institutions defined as Lenders therein. Capitalized terms not
otherwise defined herein shall have the meanings ascribed thereto in the Credit
Agreement. References in this Mortgage to the "Default Rate" shall mean the
interest rate provided in Section 5.8(f) of the Credit Agreement.
B. Mortgagor is the owner of the parcel(s) of real property
described on Schedule A attached hereto (such real property, together with all
buildings, improvements, structures and fixtures now or subsequently located
thereon (the "Improvements"), being collectively referred to as the "Real
Estate").
C. Pursuant to the terms and conditions of the Credit Agreement, the
Lenders have agreed to (i) make certain Revolving Credit Loans, Swing Line Loans
and Fronted Offshore Loans to Mortgagor and certain affiliates of Mortgagor;
(ii) make certain Term Loans to Mortgagor in the aggregate principal amount not
to exceed $400,000,000; and (iii) issue Letters of Credit on behalf of
Mortgagor, on the condition among others that, the obligation of the Mortgagor
to pay interest and principal and all other amounts in respect of the Term Loan
to Mortgagee and the other Lenders under the Credit Agreement, shall be secured
by a first mortgage Lien on and security interest in the Real Estate and
<PAGE> 151
2
other Mortgaged Property (as hereinafter defined).
D. In order to satisfy said condition, Mortgagor has agreed to execute
this Mortgage for the purpose of granting a mortgage lien to Mortgagee upon all
of Mortgagor's right, title, estate and interest in the Real Estate and other
Mortgaged Property.
I. Granting Clauses
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Mortgagor agrees that to secure:
(a) (i) repayment of the indebtedness evidenced by each of the Term
Notes (collectively, the "Notes"), and any and all renewals, extensions
for any period, rearrangements and/or modifications of each Note or any
one or more of them, and (ii) all interest and fees payable thereon; and
(b) payment of all other obligations and liabilities of Mortgagor to
the Lenders (including, without limitation, interest accruing after the
maturity of the Loans and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to Mortgagor, whether or not a
claim for post-filing or post-petition interest is allowed in such
proceeding), whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise under,
out of, or in connection with, the Notes, this Mortgage or any other
document made, delivered or given in connection herewith or therewith, in
each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees, charges and disbursements of counsel to
Agent or to any Lender that are required to be paid by Mortgagor pursuant
to the terms of the Credit Agreement, this Mortgage, any other Loan
Document or otherwise, to the extent and only to the extent as such
Obligations shall be limited pursuant to Section III hereof) (the items
set forth in the foregoing clauses (a) and (b) being referred to herein
collectively as the "Indebtedness"); and
(c) the performance of all covenants, agreements, obligations and
liabilities of Mortgagor, other than for any Revolving Loans or Revolving
Offshore Loans (the "Obligations") under or pursuant to the provisions of
the Credit Agreement, the Notes, this Mortgage, or any of the other
Security Documents or any of the other Loan Documents, to the extent and
only to the extent as such Obligations shall be limited pursuant to
Section III hereof;
<PAGE> 152
3
II. MORTGAGOR HEREBY GRANTS TO MORTGAGEE A LIEN UPON AND A SECURITY INTEREST IN,
AND HEREBY MORTGAGES, GRANTS, ASSIGNS, TRANSFERS AND SETS OVER TO MORTGAGEE:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever of
Mortgagor, in possession or expectancy, in and to the Real Estate or any
part thereof;
(C) all right, title and interest of Mortgagor in, to and under all
easements, rights of way, gores of land, streets, ways, alleys, passages,
sewer rights, waters, water courses, water and riparian rights,
development rights, air rights, mineral rights and all estates, rights,
titles, interests, privileges, licenses, tenements, hereditaments and
appurtenances belonging, relating or appertaining to the Real Estate, and
any reversions, remainders, rents, issues, profits and revenue thereof and
all land lying in the bed of any street, road or avenue, in front of or
adjoining the Real Estate to the center line thereof;
(D) all of the right, title and interest of Mortgagor in fixtures,
chattels, business machines, machinery, apparatus, equipment, furnishings,
fittings and articles of personal property of every kind and nature
whatsoever, and all appurtenances and additions thereto and substitutions
or replacements thereof (together with, in each case, attachments,
components, parts and accessories) currently owned or subsequently
acquired by Mortgagor and now or subsequently attached to, or contained in
or used or usable in any way in connection with any operation or letting
of the Real Estate, including but without limiting the generality of the
foregoing, all screens, awnings, shades, blinds, curtains, draperies,
artwork affixed to the Real Estate, carpets, rugs, storm doors and
windows, furniture and furnishings affixed to the Real Estate, heating,
electrical, and mechanical equipment, recessed lighting, switchboards,
plumbing, ventilating, air conditioning and central air-cooling apparatus,
refrigerating, and incinerating equipment, escalators, elevators, loading
and unloading equipment and systems, cleaning systems (including window
cleaning apparatus), telephones, communication systems (including
satellite dishes and antennae), sprinkler systems and other fire
prevention and extinguishing apparatus and materials, security systems,
motors, engines, machinery, pipes, pumps, tanks, conduits, appliances,
fittings and fixtures of every kind and description (all of the foregoing
in this paragraph (D) being referred to as the "Equipment");
(E) all right, title and interest of Mortgagor in and to all
substitutes and replacements of, and all additions and improvements to,
the Real Estate and the Equipment, subsequently acquired by or released to
Mortgagor or
<PAGE> 153
4
constructed, assembled or placed by Mortgagor on the Real Estate,
immediately upon such acquisition, release, construction, assembling or
placement, including, without limitation, any and all building materials
whether stored at the Real Estate or offsite, and, in each such case,
without any further mortgage, conveyance, assignment or other act by
Mortgagor;
(F) all right, title and interest of Mortgagor in, to and under all
leases, subleases, underlettings, concession agreements, management
agreements, licenses and other agreements relating to the use or occupancy
of the Real Estate or the Equipment or any part thereof, now existing or
subsequently entered into by Mortgagor and whether written or oral and all
guarantees of any of the foregoing (collectively, as any of the foregoing
may be amended, restated, extended, renewed or modified from time to time,
the "Leases"), and all rights of Mortgagor in respect of cash and
securities deposited thereunder and the right to receive and collect the
revenues, income, rents, issues and profits thereof, together with all
other rents, royalties, issues, profits, revenue, income and other
benefits arising from the use and enjoyment of the Mortgaged Property (as
defined below) (collectively, the "Rents");
(G) all of the right, title and interest of Mortgagor in books and
records relating to or used in connection with the operation of the Real
Estate or the Equipment or any part thereof; all general intangibles
related to the operation of the Improvements now existing or hereafter
arising;
(H) all unearned premiums under insurance policies now or
subsequently obtained by Mortgagor relating to the Real Estate or
Equipment and Mortgagor's interest in and to all proceeds of any such
insurance policies (including title insurance policies) including the
right to collect and receive such proceeds, subject to the provisions
relating to insurance generally set forth below; and all awards and other
compensation, including the interest payable thereon and the right to
collect and receive the same, made to the present or any subsequent owner
of the Real Estate or Equipment for the taking by eminent domain,
condemnation or otherwise, of all or any part of the Real Estate or any
easement or other right therein;
(I) all right, title and interest of Mortgagor in and to (i) all
contracts from time to time executed by Mortgagor or any manager or agent
on its behalf relating to the ownership, construction, maintenance,
repair, operation, occupancy, sale or financing of the Real Estate or
Equipment or any part thereof and all agreements relating to the purchase
or lease of any portion of the Real Estate or any property which is
adjacent or peripheral to the Real Estate, together with the right to
exercise such options and all
<PAGE> 154
5
leases of Equipment, (ii) all consents, licenses, building permits,
certificates of occupancy and other governmental approvals relating to
construction, completion, occupancy, use or operation of the Real Estate
or any part thereof and (iii) all drawings, plans, specifications and
similar or related items relating to the Real Estate; and
(J) any and all monies now or subsequently on deposit for the
payment of real estate taxes or special assessments against the Real
Estate or for the payment of premiums on insurance policies covering the
foregoing property or otherwise on deposit with or held by Mortgagee as
provided in this Mortgage; all capital, operating, reserve or similar
accounts held by or on behalf of Mortgagor and related to the operation of
the Mortgaged Property, whether now existing or hereafter arising and all
monies held in any of the foregoing accounts and any certificates or
instruments related to or evidencing such accounts;
(K) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now owned or
held or subsequently acquired by Mortgagor and described in the foregoing
clauses (A) through (E) are collectively referred to as the "Premises", and
those described in the foregoing clauses (A) through (K) are collectively
referred to as the "Mortgaged Property").
III. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE
MAXIMUM AMOUNT OF PRINCIPAL INDEBTEDNESS SECURED BY THIS MORTGAGE AT THE TIME OF
EXECUTION OR WHICH UNDER ANY CONTINGENCY MAY HEREAFTER BECOME SECURED HEREBY AT
ANY TIME IS TWENTY-FIVE MILLION DOLLARS ($25,000,000), WHICH WAS ADVANCED ON THE
DATE HEREOF AND EVIDENCED BY THE TERM NOTES; PLUS (I) INTEREST ON THE AFORESAID
MAXIMUM AMOUNT OF PRINCIPAL INDEBTEDNESS AT THE RATES SET FORTH IN THE LOAN
AGREEMENT, (II) SUMS TO PAY IMPOSITIONS (AS DEFINED BELOW), (III) SUMS TO PAY
PREMIUMS ON INSURANCE POLICIES COVERING THE MORTGAGED PROPERTY, (IV) EXPENSES
INCURRED AFTER AN EVENT OF DEFAULT IN UPHOLDING OR ENFORCING THE LIEN OF THIS
MORTGAGE, INCLUDING, BUT NOT LIMITED TO, THE EXPENSES OF ANY LITIGATION TO
PROSECUTE OR DEFEND THE RIGHTS AND LIEN CREATED BY THIS MORTGAGE, (V) COSTS OF
REMOVAL OF OR OTHERWISE RELATED TO HAZARDOUS MATERIAL OR ASBESTOS INCURRED AFTER
AN EVENT OF DEFAULT, (VI) ANY AMOUNT, COSTS OR CHARGE TO WHICH MORTGAGEE BECOMES
SUBROGATED, UPON PAYMENT, WHETHER UNDER RECOGNIZED PRINCIPLES OF LAW OR EQUITY,
OR UNDER EXPRESS STATUTORY AUTHORITY AND (VII) ANY OTHER AMOUNT SECURED BY THIS
MORTGAGE WHICH IF NOT LIMITED BY SUCH LIMITATION WOULD NOT INCREASE THE AMOUNT
OF MORTGAGE RECORDING TAXES, IF ANY, PAYABLE WITH RESPECT TO THIS MORTGAGE.
TO HAVE AND TO HOLD the Mortgaged Property and the rights and
privileges hereby mortgaged unto Mortgagee, its successors and assigns for the
uses and purposes set forth, until
<PAGE> 155
6
the Indebtedness is fully paid and the Obligations fully performed.
IV. Terms and Conditions
Mortgagor further represents, warrants, covenants and agrees with
Mortgagee as follows:
1. Warranty of Title. Mortgagor warrants that it has indefeasible
title to the Premises, subject only to the matters that are set forth in
Schedule B attached hereto (the "Permitted Exceptions").
2. Payment of Indebtedness. Mortgagor shall pay the Indebtedness at
the times and places and in the manner specified in the Notes and Credit
Agreement and shall perform all the Obligations.
3. Requirements.
(a) Mortgagor shall materially comply with, or cause to be
materially complied with, and conform in all material respects to all present
and future laws, statutes, codes, ordinances, orders, judgments, decrees, rules,
regulations and requirements, and irrespective of the nature of the work to be
done, of each of the United States of America, any State and any municipality,
local government or other political subdivision thereof and any agency,
department, bureau, board, commission or other instrumentality of any of them,
now existing or subsequently created (collectively, "Governmental Authority")
which has jurisdiction over the Mortgaged Property and all covenants,
restrictions and conditions now or later of record which may be applicable to
any of the Mortgaged Property, or to the use, manner of use, occupancy,
possession, operation, maintenance, alteration, repair or reconstruction of any
of the Mortgaged Property. All present and future laws, statutes, codes,
ordinances, orders, judgments, decrees, rules, regulations and requirements of
every Governmental Authority applicable to Mortgagor or to any of the Mortgaged
Property and all covenants, restrictions, and conditions which now or later may
be applicable to any of the Mortgaged Property are collectively referred to as
the "Legal Requirements".
(b) From and after the date of this Mortgage, Mortgagor shall not by
act or omission permit any building or other improvement on any premises not
subject to the lien of this Mortgage to rely on the Premises or any part thereof
or any interest therein to fulfill any Legal Requirement, and Mortgagor hereby
assigns to Mortgagee any and all rights to give consent for all or any portion
of the Premises or any interest therein to be so used. Mortgagor shall not by
act or omission impair the integrity of any of the Real Estate as a single
zoning lot separate and apart from all other premises. Mortgagor represents that
each parcel of the Real Estate constitutes a legally subdivided lot, in
compliance with all subdivision laws and
<PAGE> 156
7
similar Legal Requirements. Any act or omission by Mortgagor which would result
in a violation of any of the provisions of this subsection shall be void.
4. Payment of Taxes and Other Impositions. (a) Promptly when due and
payable, Mortgagor shall pay and discharge all taxes of every kind and nature
(including, without limitation, all real and personal property, income,
franchise, withholding, transfer, gains, profits and gross receipts taxes), all
charges for any easement or agreement maintained for the benefit of any of the
Mortgaged Property, all general and special assessments, levies, permits,
inspection and license fees, all water and sewer rents and charges, vault taxes,
and all other public charges even if unforeseen or extraordinary, imposed upon
or assessed against or which may become a lien on any of the Mortgaged Property,
or arising in respect of the occupancy, use or possession thereof, together with
any penalties or interest on any of the foregoing (all of the foregoing are
collectively referred to as the "Impositions"), except for such Impositions as
Mortgagor is contesting in accordance with Section 6.11 of the Credit Agreement.
Upon request by Mortgagee, Mortgagor shall deliver to Mortgagee (i) original or
copies of receipted bills and cancelled checks evidencing payment of such
Imposition if it is a real estate tax or other public charge and (ii) evidence
reasonably acceptable to Mortgagee showing the payment of any other such
Imposition. If by law any Imposition, at Mortgagor's option, may be paid in
installments (whether or not interest shall accrue on the unpaid balance of such
Imposition), Mortgagor may elect to pay such Imposition in such installments and
shall be responsible for the payment of such installments with interest, if any.
5. Insurance. (a) Mortgagor shall maintain or cause to be maintained
on all of the Premises insurance as required by the Credit Agreement.
(b) If the Mortgaged Property, or any part thereof, shall be
destroyed or damaged by fire or any other casualty, whether insured or
uninsured, or in the event any claim is made against Mortgagor for any personal
injury, bodily injury or property damage incurred on or about the Premises,
Mortgagor shall give immediate notice thereof to Mortgagee. If the Mortgaged
Property is damaged by fire or other casualty and provided that no Event of
Default shall have occurred and be continuing, Mortgagor shall have the right to
adjust such loss, and the insurance proceeds relating to such loss may be paid
over to Mortgagor; provided that Mortgagor shall, promptly after any such
damage, repair all such material damage regardless of whether any insurance
proceeds have been received or whether such proceeds, if received, are
sufficient to pay for the costs of repair. If the Mortgaged Property is damaged
by fire or other casualty, and an Event of Default shall have occurred and be
continuing, then Mortgagor authorizes and empowers Mortgagee, at Mortgagee's
option and in Mortgagee's sole discretion, as attorney-in-fact for Mortgagor, to
make proof of loss, to adjust
<PAGE> 157
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and compromise any claim under any insurance policy, to appear in and prosecute
any action arising from any policy, to collect and receive insurance proceeds
and to deduct therefrom Mortgagee's expenses incurred in the collection process.
Each insurance company concerned is hereby authorized and directed to make
payment for such loss directly to Mortgagee. Mortgagee shall have the right to
require Mortgagor to repair or restore the Mortgaged Property, and Mortgagor
hereby designates Mortgagee as its attorney-in-fact for the purpose of making
any election required or permitted under any insurance policy relating to repair
or restoration. The insurance proceeds or any part thereof received by Mortgagee
may be applied by Mortgagee toward reimbursement of all costs and expenses of
Mortgagee in collecting such proceeds, and the balance, at Mortgagee's option in
its sole and absolute discretion, to the principal (to the installments in
inverse order of maturity, if payable in installments) and interest due or to
become due under the Notes, to fulfill any other Obligation of Mortgagor, to the
restoration or repair of the property damaged, or released to Mortgagor. In the
event Mortgagee elects to release such proceeds to Mortgagor, Mortgagor shall be
obligated to use such proceeds to the extent required to restore or repair the
Mortgaged Property. Application by Mortgagee of any insurance proceeds toward
the last maturing installments of principal and interest due or to become due
under the Notes shall not excuse Mortgagor from making any regularly scheduled
payments due thereunder, nor shall such application extend or reduce the amount
of such payments.
(g) In the event of foreclosure of this Mortgage or other transfer
of title to the Mortgaged Property in extinguishment of the Indebtedness, all
right, title and interest of Mortgagor in and to any insurance policies then in
force shall pass to the purchaser or grantee and Mortgagor hereby appoints
Mortgagee its attorney-in-fact, in Mortgagor's name, to assign and transfer all
such policies and proceeds to such purchaser or grantee.
(h) Upon written notice to Mortgagor, Mortgagee after an Event of
Default shall be entitled to require Mortgagor to pay monthly in advance to
Mortgagee the equivalent of 1/12th of the estimated annual premiums due on such
insurance in which event Mortgagee shall pay the premiums on such insurance
policies. Mortgagee may commingle such funds with its own funds and Mortgagor
shall not be entitled to interest thereon.
(i) Mortgagor may maintain insurance required under this Mortgage by
means of one or more blanket insurance policies maintained by Mortgagor;
provided, however, that (A) any such policy shall specify, or Mortgagor shall
furnish to Mortgagee a written statement from the insurer so specifying, the
maximum amount of the total insurance afforded by such blanket policy that is
allocated to the Premises and the other Mortgaged Property and any sublimits in
such blanket policy applicable to the Premises and the other Mortgaged Property,
(B) each such blanket policy shall include an endorsement providing that, in
<PAGE> 158
9
the event of a loss resulting from an insured peril, insurance proceeds shall be
allocated to the Mortgaged Property in an amount equal to the coverages required
to be maintained by Mortgagor as provided above and (C) the protection afforded
under any such blanket policy shall be no less than that which would have been
afforded under a separate policy or policies relating only to the Mortgaged
Property.
6. Restrictions on Liens and Encumbrances. Except for the lien of
this Mortgage, the Permitted Exceptions and any Liens permitted by the terms of
the Credit Agreement, Mortgagor shall not further mortgage, nor otherwise
encumber the Mortgaged Property nor create or suffer to exist any lien, charge
or encumbrance on the Mortgaged Property, or any part thereof, whether superior
or subordinate to the lien of this Mortgage and whether recourse or
non-recourse.
7. Maintenance; No Alteration; Inspection; Utilities. (a) Mortgagor
shall maintain or cause to be maintained all the Improvements in the same
condition and repair as of the date of this Mortgage, subject to reasonable wear
and tear and shall not commit or suffer any waste of the Improvements. Mortgagor
shall repair, restore, replace or rebuild promptly any part of the Premises
which may be materially damaged or destroyed by any casualty whatsoever.
(b) Mortgagor shall pay or cause to be paid when due and payable all
utility charges which are incurred for gas, electricity, water or sewer services
furnished to the Premises and all other assessments or charges of a similar
nature, whether public or private, affecting the Premises or any portion
thereof, whether or not such assessments or charges are liens thereon, except
such charges as Mortgagor may contest in accordance with Section 8.3 of the
Credit Agreement.
8. Condemnation/Eminent Domain. Immediately upon obtaining knowledge
of the institution of any proceedings for the condemnation of the Mortgaged
Property, or any portion thereof, Mortgagor will notify Mortgagee of the
pendency of such proceedings. If an Event of Default is continuing, Mortgagor
authorizes Mortgagee, at Mortgagee's option and in Mortgagee's sole discretion,
as attorney-in-fact for Mortgagor, to commence, appear in and prosecute, in
Mortgagee's or Mortgagor's name, any action or proceeding relating to any
condemnation of the Mortgaged Property, or any portion thereof, and to settle or
compromise any claim in connection with such condemnation. If Mortgagee elects
not to participate in such condemnation proceeding, then Mortgagor shall, at its
expense, diligently prosecute any such proceeding and shall consult with
Mortgagee, its attorneys and experts and cooperate with them in any defense of
any such proceedings. If an Event of Default is continuing, all awards and
proceeds of condemnation shall be assigned to Mortgagee to be applied in the
same manner as insurance proceeds, as provided above, and Mortgagor agrees to
execute any such assignments of all such awards as Mortgagee may request.
<PAGE> 159
10
9. Mortgagee's Right to Perform. If Mortgagor fails to perform any
of the covenants or agreements of Mortgagor, Mortgagee, without waiving or
releasing Mortgagor from any obligation or Event of Default under this Mortgage,
may, at any time (but shall be under no obligation to) pay or perform the same,
and the amount or cost thereof, with interest at the Default Rate, shall
immediately be due from Mortgagor to Mortgagee. To the extent that any such
amounts or costs paid by Mortgagee shall constitute payment of (i) Impositions;
(ii) premiums on insurance policies covering the Premises; (iii) reasonable
expenses incurred in upholding or enforcing the lien of this Mortgage,
including, but not limited to the expenses of any litigation to prosecute or
defend the rights and lien created by this Mortgage; (iv) costs of removal of
hazardous substances or other remediation costs related to violations of
Environmental Laws or the presence of asbestos; or (v) any amount, costs or
charge to which Mortgagee becomes subrogated, upon payment, whether under
recognized principles of law or equity, or under express statutory authority;
then, and in each such event, such amounts or costs, together with interest
thereon at the Default Rate, shall be added to the Indebtedness and shall be
secured by this Mortgage and shall be a lien on the Mortgaged Property prior to
any right, title to, interest in, or claim upon the Mortgaged Property attaching
subsequent to the lien of this Mortgage. No payment or advance of money by
Mortgagee under this Section shall be deemed or construed to cure Mortgagor's
default or waive any right or remedy of Mortgagee.
10. Leases. (a) Mortgagor shall not execute an assignment or pledge
of any Lease relating to all or any portion of the Mortgaged Property other than
in favor of Mortgagee.
(b) As to any Lease, Mortgagor shall:
(i) promptly perform all of the material provisions of the Lease on
the part of the lessor thereunder to be performed;
(ii) promptly enforce all of the material provisions of the Lease on
the part of the lessee thereunder to be performed;
(iii) appear in and defend any action or proceeding to which
Mortgagor is named as a party arising under or in any manner connected
with the Lease or the obligations of Mortgagor as lessor or of the lessee
thereunder;
(iv) exercise, within 5 business days after a request by Mortgagee,
any right to request from the lessee a certificate with respect to the
status thereof;
(v) promptly deliver to Mortgagee copies of any notices of default
which Mortgagor may at any time forward to or receive from the lessee;
<PAGE> 160
11
(vi) promptly deliver to Mortgagee, upon Mortgagee's request, a
fully executed counterpart of the Leases; and
(vii) promptly deliver to Mortgagee, upon Mortgagee's request, an
assignment of the Mortgagor's interest under such Lease.
(c) Mortgagor shall deliver to Mortgagee, within 10 days after a
request by Mortgagee, a written statement, certified by Mortgagor as being true,
correct and complete, containing the names of all lessees and other occupants of
the Mortgaged Property, the terms of all Leases and the spaces occupied and
rentals payable thereunder, and a list of all Leases which are then in default,
including the nature and magnitude of the default; such statement shall be
accompanied by such information as Mortgagee may reasonably request.
(d) All Leases entered into by Mortgagor after the date hereof, if
any, and all rights of any lessees thereunder shall be subject and subordinate
in all respects to the lien and provisions of this Mortgage unless Mortgagee
shall otherwise elect in writing.
(e) In the event of the enforcement by Mortgagee of any remedy under
this Mortgage, the lessee under each Lease shall, if requested by Mortgagee or
any other person succeeding to the interest of Mortgagee as a result of such
enforcement, attorn to Mortgagee or to such person and shall recognize Mortgagee
or such successor in interest as lessor under the Lease without change in the
provisions thereof; provided however, that Mortgagee or such successor in
interest shall not be: (i) bound by any payment of an installment of rent or
additional rent which may have been made more than 30 days before the due date
of such installment; (ii) liable for any previous act or omission of Mortgagor
(or its predecessors in interest); (iii) responsible for any monies owing by
Mortgagor to the credit of such lessee or subject to any credits, offsets,
claims, counterclaims, demands or defenses which the lessee may have against
Mortgagor (or its predecessors in interest); (iv) bound by any covenant to
undertake or complete any construction of the Premises or any portion thereof;
or (v) obligated to make any payment to such lessee other than any security
deposit actually delivered to Mortgagee or such successor in interest. Each
lessee or other occupant, upon request by Mortgagee or such successor in
interest, shall execute and deliver an instrument or instruments confirming such
attornment. In addition, Mortgagor agrees that each Lease entered into after the
date of this Mortgage shall include language to the effect of subsections (d)
and (e) of this Section; provided that the provisions of such subsections shall
be self-operative and any failure of any Lease to include such language shall
not impair the binding effect of such provisions on any lessee under such Lease.
(f) Mortgagee agrees that upon request by a lessee,
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12
Mortgagee shall execute and deliver to such lessee a Nondisturbance,
Subordination and Attornment Agreement in form and substance acceptable to
Mortgagee. Mortgagor shall pay all of Mortgagee's reasonable legal fees and
expenses related to the preparation and negotiation of such agreement.
11. Events of Default. The occurrence of an Event of Default under
the Credit Agreement shall constitute an Event of Default hereunder.
12. Remedies.
(a) Upon the occurrence of any Event of Default, in addition to any
other rights and remedies Mortgagee may have pursuant to the Loan Documents, or
as provided by law, and without limitation, (a) if such event is an Event of
Default specified in clause (i) or (ii) of subsection 10(f) of the Credit
Agreement, automatically the Indebtedness and all other amounts owing under the
Notes, this Mortgage and the other Security Documents immediately shall become
due and payable, and (b) if such event is any other Event of Default, by notice
to Mortgagor, Mortgagee may declare the Indebtedness (together with accrued
interest thereon) and all other amounts payable under the Notes, this Mortgage
and the other Security Documents to be immediately due and payable. Except as
expressly provided above in this Section, presentment, demand, protest and all
other notices of any kind are hereby expressly waived. In addition, upon the
occurrence of any Event of Default, Mortgagee may immediately take such action,
without notice or demand, as it deems advisable to protect and enforce its
rights against Mortgagor and in and to the Mortgaged Property, including, but
not limited to, the following actions, each of which may be pursued concurrently
or otherwise, at such time and in such manner as Mortgagee may determine, in its
sole discretion, without impairing or otherwise affecting the other rights and
remedies of Mortgagee:
(i) Mortgagee may, to the extent permitted by applicable law, (A)
institute and maintain an action of mortgage foreclosure against all or
any part of the Mortgaged Property, (B) institute and maintain an action
on the Notes, (C) sell all or part of the Mortgaged Property (Mortgagor
expressly granting to Mortgagee the power of sale), or (D) take such other
action at law or in equity for the enforcement of this Mortgage or any of
the Loan Documents as the law may allow. Mortgagee may proceed in any such
action to final judgment and execution thereon for all sums due hereunder,
together with interest thereon at the Default Rate and all costs of suit,
including, without limitation, reasonable attorneys' fees and
disbursements. Interest at the Default Rate shall be due on any judgment
obtained by Mortgagee from the date of judgment until actual payment is
made of the full amount of the judgment.
(ii) Mortgagee may personally, or by its agents, attorneys and
employees and without regard to the adequacy
<PAGE> 162
13
or inadequacy of the Mortgaged Property or any other collateral as
security for the Indebtedness and Obligations enter into and upon the
Mortgaged Property and each and every part thereof and exclude Mortgagor
and its agents and employees therefrom without liability for trespass,
damage or otherwise (Mortgagor hereby agreeing to surrender possession of
the Mortgaged Property to Mortgagee upon demand at any such time) and use,
operate, manage, maintain and control the Mortgaged Property and every
part thereof. Following such entry and taking of possession, Mortgagee
shall be entitled, without limitation, (x) to lease all or any part or
parts of the Mortgaged Property for such periods of time and upon such
conditions as Mortgagee may, in its discretion, deem proper, (y) to
enforce, cancel or modify any Lease and (z) generally to execute, do and
perform any other act, deed, matter or thing concerning the Mortgaged
Property as Mortgagee shall reasonably deem appropriate as fully as
Mortgagor might do.
(b) The holder of this Mortgage, in any action to foreclose it,
shall be entitled to the appointment of a receiver. In case of a foreclosure
sale, the Real Estate may be sold, at Mortgagee's election, in one parcel or in
more than one parcel and Mortgagee is specifically empowered, (without being
required to do so, and in its sole and absolute discretion) to cause successive
sales of portions of the Mortgaged Property to be held.
(c) In the event of any breach of any of the covenants, agreements,
terms or conditions contained in this Mortgage, and notwithstanding to the
contrary any exculpatory or non-recourse language which may be contained herein,
Mortgagee shall be entitled to enjoin such breach and obtain specific
performance of any covenant, agreement, term or condition and Mortgagee shall
have the right to invoke any equitable right or remedy as though other remedies
were not provided for in this Mortgage.
13. Right of Mortgagee to Credit Sale. Upon the occurrence of any
sale made under this Mortgage, whether made under the power of sale or by virtue
of judicial proceedings or of a judgment or decree of foreclosure and sale,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof. In
lieu of paying cash therefor, Mortgagee may make settlement for the purchase
price by crediting upon the Indebtedness or other sums secured by this Mortgage
the net sales price after deducting therefrom the expenses of sale and the cost
of the action and any other sums which Mortgagee is authorized to deduct under
this Mortgage. In such event, this Mortgage, the Notes and documents evidencing
expenditures secured hereby may be presented to the person or persons conducting
the sale in order that the amount so used or applied may be credited upon the
Indebtedness as having been paid.
14. Appointment of Receiver. If an Event of Default
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14
shall have occurred and be continuing, Mortgagee as a matter of right and
without notice to Mortgagor, unless otherwise required by applicable law, and
without regard to the adequacy or inadequacy of the Mortgaged Property or any
other collateral as security for the Indebtedness and Obligations or the
interest of Mortgagor therein, shall have the right to apply to any court having
jurisdiction to appoint a receiver or receivers or other manager of the
Mortgaged Property, and Mortgagor hereby irrevocably consents to such
appointment and waives notice of any application therefor (except as may be
required by law). Any such receiver or receivers shall have all the usual powers
and duties of receivers in like or similar cases and all the powers and duties
of Mortgagee in case of entry as provided in this Mortgage, including, without
limitation and to the extent permitted by law, the right to enter into leases of
all or any part of the Mortgaged Property, and shall continue as such and
exercise all such powers until the date of confirmation of sale of the Mortgaged
Property unless such receivership is sooner terminated.
15. Extension, Release, etc. To the extent permitted by applicable
law, (a) without affecting the lien or charge of this Mortgage upon any portion
of the Mortgaged Property not then or theretofore released as security for the
full amount of the Indebtedness, Mortgagee may, from time to time and without
notice, agree to (i) release any person liable for the Indebtedness, (ii) extend
the maturity or alter any of the terms of the Indebtedness or any guaranty
thereof, (iii) grant other indulgences, (iv) release or reconvey, or cause to be
released or reconveyed at any time at Mortgagee's option any parcel, portion or
all of the Mortgaged Property, (v) take or release any other or additional
security for any obligation herein mentioned, or (vi) make compositions or other
arrangements with debtors in relation thereto. If at any time this Mortgage
shall secure less than all of the principal amount of the Indebtedness, it is
expressly agreed that any repayments of the principal amount of the Indebtedness
shall not reduce the amount of the lien of this Mortgage until the lien amount
shall equal the principal amount of the Indebtedness outstanding.
(b) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect the lien of this Mortgage or any liens,
rights, powers or remedies of Mortgagee hereunder, and such liens, rights,
powers and remedies shall continue unimpaired.
(c) If Mortgagee shall have the right to foreclose this Mortgage,
Mortgagor authorizes Mortgagee at its option to foreclose the lien of this
Mortgage subject to the rights of any tenants of the Mortgaged Property. The
failure to make any such tenants parties defendant to any such foreclosure
proceeding and to foreclose their rights will not be asserted by Mortgagor as a
defense to any proceeding instituted by Mortgagee to collect the Indebtedness or
to foreclose the lien of this Mortgage.
<PAGE> 164
15
(d) Unless expressly provided otherwise, in the event that ownership
of this Mortgage and title to the Mortgaged Property or any estate therein shall
become vested in the same person or entity, this Mortgage shall not merge in
such title but shall continue as a valid lien on the Mortgaged Property for the
amount secured hereby.
16. Security Agreement under Uniform Commercial Code. (a) It is the
intention of the parties hereto that this Mortgage shall constitute a Security
Agreement within the meaning of the Uniform Commercial Code (the "Code") of the
State of New York. If an Event of Default shall occur under this Mortgage, then
in addition to having any other right or remedy available at law or in equity,
Mortgagee shall have the option of either (i) proceeding under the Code and
exercising such rights and remedies as may be provided to a secured party by the
Code with respect to all or any portion of the Mortgaged Property which is
personal property (including, without limitation, taking possession of and
selling such property) or (ii) treating such property as real property and
proceeding with respect to both the real and personal property constituting the
Mortgaged Property in accordance with Mortgagee's rights, powers and remedies
with respect to the real property (in which event the default provisions of the
Code shall not apply). If Mortgagee shall elect to proceed under the Code, then
five days' notice of sale of the personal property shall be deemed reasonable
notice and the reasonable expenses of retaking, holding, preparing for sale,
selling and the like incurred by Mortgagee shall include, but not be limited to,
attorneys' fees and legal expenses. At Mortgagee's request, Mortgagor shall
assemble the personal property and make it available to Mortgagee at a place
designated by Mortgagee which is reasonably convenient to both parties.
(b) Mortgagor and Mortgagee agree, to the extent permitted by law,
that: (i) all of the goods described within the definition of the word
"Equipment" are or are to become fixtures on the Real Estate; (ii) this Mortgage
upon recording or registration in the real estate records of the proper office
shall constitute a financing statement filed as a "fixture filing" within the
meaning of Sections 9-313 and 9-402 of the Code; (iii) Mortgagor is the record
owner of the Real Estate; and (iv) the addresses of Mortgagor and Mortgagee are
as set forth on the first page of this Mortgage.
(c) Mortgagor, upon request by Mortgagee from time to time, shall
execute, acknowledge and deliver to Mortgagee one or more separate security
agreements, in form reasonably satisfactory to Mortgagee, covering all or any
part of the Mortgaged Property and will further execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, any financing
statement, affidavit, continuation statement or certificate or other document as
Mortgagee may reasonably request in order to perfect, preserve, maintain,
continue or extend the security interest under and the priority of this Mortgage
and
<PAGE> 165
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such security instrument. Mortgagor further agrees to pay to Mortgagee on demand
all reasonable costs and expenses incurred by Mortgagee in connection with the
preparation, execution, recording, filing and re-filing of any such document and
all reasonable costs and expenses of any record searches for financing
statements Mortgagee shall reasonably require. If Mortgagor shall fail to
furnish any financing or continuation statement within 20 days after request by
Mortgagee, then pursuant to the provisions of the Code, Mortgagor hereby
authorizes Mortgagee, without the signature of Mortgagor, to execute and file
any such financing and continuation statements. The filing of any financing or
continuation statements in the records relating to personal property or chattels
shall not be construed as in any way impairing the right of Mortgagee to proceed
against any personal property encumbered by this Mortgage as real property, as
set forth above.
17. Assignment of Rents. Mortgagor hereby assigns to Mortgagee the
Rents as further security for the payment of the Indebtedness and performance of
the Obligations, and Mortgagor grants to Mortgagee the right to enter the
Mortgaged Property for the purpose of collecting the same and to let the
Mortgaged Property or any part thereof, and to apply the Rents on account of the
Indebtedness. The foregoing assignment and grant is present and absolute and
shall continue in effect until the Indebtedness is paid in full, but Mortgagee
hereby waives the right to enter the Mortgaged Property for the purpose of
collecting the Rents and Mortgagor shall be entitled to collect, receive, use
and retain the Rents until the occurrence of an Event of Default under this
Mortgage; such right of Mortgagor to collect, receive, use and retain the Rents
may be revoked by Mortgagee upon the occurrence of any Event of Default under
this Mortgage by giving not less than fifteen days' written notice of such
revocation to Mortgagor; in the event such notice is given, Mortgagor shall pay
over to Mortgagee, or to any receiver appointed to collect the Rents, any lease
security deposits, and shall pay monthly in advance to Mortgagee, or to any such
receiver, the fair and reasonable rental value as reasonably determined by
Mortgagee for the use and occupancy of the Mortgaged Property or of such part
thereof as may be in the possession of Mortgagor or any affiliate of Mortgagor,
and upon default in any such payment Mortgagor and any such affiliate will
vacate and surrender the possession of the Mortgaged Property to Mortgagee or to
such receiver, and in default thereof may be evicted by summary proceedings or
otherwise. Mortgagor shall not accept prepayments of installments of Rent to
become due for a period of more than one month in advance (except for security
deposits and estimated payments of percentage rent, Impositions and operating
expenses, if any). The agreement contained in this Section has been made with
reference to section 291-f of the Real Property Law of the State of New York.
18. Trust Funds. (a) Mortgagor shall receive the advances secured
hereby subject to the trust fund provisions of Section 13 of the Lien Law of the
State of New York.
<PAGE> 166
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(b) All lease security deposits of the Real Estate shall be treated
as trust funds not to be commingled with any other funds of Mortgagor. Within 20
days after request by Mortgagee, Mortgagor shall furnish Mortgagee reasonably
satisfactory evidence of compliance with this subsection, together with a
statement of all lease security deposits by lessees and copies of all Leases not
previously delivered to Mortgagee, which statement shall be certified by
Mortgagor.
19. Additional Rights. (a) The clauses and covenants contained in
this Mortgage that are construed by Section 254 of the Real Property Law of the
State of New York shall be construed as provided in those sections, except that
the provisions of subsection 4 of such Section 254 shall not in any manner apply
to or construe the provisions of this Mortgage; the additional clauses and
covenants contained herein shall afford rights supplemental to and not exclusive
of the rights conferred by the clauses and covenants construed by such Section
254 and shall not impair, modify, alter or defeat such rights (except that the
provisions of this Mortgage governing insurance shall be exclusive of and shall
be in substitution for the rights which would be conferred by the clauses and
covenants construed by such subsection 4 of such Section 254), notwithstanding
that such additional clauses and covenants may relate to the same subject matter
or provide for different or additional rights in the same or similar
contingencies as the clauses and covenants construed by such Section 254; the
rights of Mortgagee arising under clauses and covenants contained in this
Mortgage shall be separate, distinct and cumulative and none of them shall be in
exclusion of the others; no act of Mortgagee shall be construed as an election
to proceed under any one provision herein to the exclusion of any other
provision, anything herein or otherwise to the contrary notwithstanding, and in
the event of any inconsistencies between the provisions of such Section 254 and
the provisions of this Mortgage, the provisions of this Mortgage shall prevail.
(b) The holder of any subordinate lien on the Mortgaged Property
shall have no right to terminate any Lease whether or not such Lease is
subordinate to this Mortgage nor shall any holder of any subordinate lien join
any tenant under any Lease in any action to foreclose the lien or modify,
interfere with, disturb or terminate the rights of any tenant under any Lease.
By recordation of this Mortgage all subordinate lienholders are subject to and
notified of this provision, and any action taken by any such lienholder contrary
to this provision shall be null and void. Upon the occurrence of any Event of
Default, Mortgagee may, in its sole discretion and without regard to the
adequacy of its security under this Mortgage, apply all or any part of any
amounts on deposit with Mortgagee under this Mortgage against all or any part of
the Indebtedness. Any such application shall not be construed to cure or waive
any Default or Event of Default or invalidate any act taken by Mortgagee on
account of such Default or Event of
<PAGE> 167
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Default.
20. Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been sufficiently given or served when
delivered to Mortgagor in accordance with the terms of the Credit Agreement.
21. No Oral Modification. This Mortgage may not be changed or
terminated orally. Any agreement made by Mortgagor and Mortgagee after the date
of this Mortgage relating to this Mortgage shall be superior to the rights of
the holder of any intervening or subordinate lien or encumbrance.
22. Partial Invalidity. In the event any one or more of the
provisions contained in this Mortgage shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but each shall be
construed as if such invalid, illegal or unenforceable provision had never been
included. Notwithstanding to the contrary anything contained in this Mortgage or
in any provisions of the Indebtedness or Loan Documents, the obligations of
Mortgagor and of any other obligor under the Indebtedness or Loan Documents
shall be subject to the limitation that Mortgagee shall not charge, take or
receive, nor shall Mortgagor or any other obligor be obligated to pay to
Mortgagee, any amounts constituting interest in excess of the maximum rate
permitted by law to be charged by Mortgagee.
23. Mortgagor's Waiver of Rights. To the fullest extent permitted by
law, Mortgagor waives the benefit of all laws now existing or that may
subsequently be enacted providing for (i) any appraisement before sale of any
portion of the Mortgaged Property, (ii) any extension of the time for the
enforcement of the collection of the Indebtedness or the creation or extension
of a period of redemption from any sale made in collecting such debt and (iii)
exemption of the Mortgaged Property from attachment, levy or sale under
execution or exemption from civil process. To the full extent Mortgagor may do
so, Mortgagor agrees that Mortgagor will not at any time insist upon, plead,
claim or take the benefit or advantage of any law now or hereafter in force
providing for any appraisement, valuation, stay, exemption, extension or
redemption, or requiring foreclosure of this Mortgage before exercising any
other remedy granted hereunder and Mortgagor, for Mortgagor and its successors
and assigns, and for any and all persons ever claiming any interest in the
Mortgaged Property, to the extent permitted by law, hereby waives and releases
all rights of redemption, valuation, appraisement, stay of execution, notice of
election to mature or declare due the whole of the secured indebtedness and
marshalling in the event of foreclosure of the liens hereby created.
24. Remedies Not Exclusive. Mortgagee shall be entitled to enforce
payment of the Indebtedness and performance of the Obligations and to exercise
all rights and powers under
<PAGE> 168
19
this Mortgage or under any of the other Loan Documents or other agreement or any
laws now or hereafter in force, notwithstanding some or all of the Indebtedness
and Obligations may now or hereafter be otherwise secured, whether by mortgage,
security agreement, pledge, lien, assignment or otherwise. Neither the
acceptance of this Mortgage nor its enforcement, shall prejudice or in any
manner affect Mortgagee's right to realize upon or enforce any other security
now or hereafter held by Mortgagee, it being agreed that Mortgagee shall be
entitled to enforce this Mortgage and any other security now or hereafter held
by Mortgagee in such order and manner as Mortgagee may determine in its absolute
discretion. No remedy herein conferred upon or reserved to Mortgagee is intended
to be exclusive of any other remedy herein or by law provided or permitted, but
each shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute. Every
power or remedy given by any of the Loan Documents to Mortgagee or to which it
may otherwise be entitled, may be exercised, concurrently or independently, from
time to time and as often as may be deemed expedient by Mortgagee. In no event
shall Mortgagee, in the exercise of the remedies provided in this Mortgage
(including, without limitation, in connection with the assignment of Rents to
Mortgagee, or the appointment of a receiver and the entry of such receiver on to
all or any part of the Mortgaged Property), be deemed a "mortgagee in
possession," and Mortgagee shall not in any way be made liable for any act,
either of commission or omission, in connection with the exercise of such
remedies.
25. Multiple Security. If (a) the Premises shall consist of one or
more parcels, whether or not contiguous and whether or not located in the same
county, or (b) in addition to this Mortgage, Mortgagee shall now or hereafter
hold one or more additional mortgages, liens, deeds of trust or other security
(directly or indirectly) for the Indebtedness upon other property in the State
in which the Premises are located (whether or not such property is owned by
Mortgagor or by others) or (c) both the circumstances described in clauses (a)
and (b) shall be true, then to the fullest extent permitted by law, Mortgagee
may, at its election, commence or consolidate in a single foreclosure action all
foreclosure proceedings against all such collateral securing the Indebtedness
(including the Mortgaged Property), which action may be brought or consolidated
in the courts of any county in which any of such collateral is located.
Mortgagor acknowledges that the right to maintain a consolidated foreclosure
action is a specific inducement to Mortgagee to extend the Indebtedness, and
Mortgagor expressly and irrevocably waives any objections to the commencement or
consolidation of the foreclosure proceedings in a single action and any
objections to the laying of venue or based on the grounds of forum non
conveniens which it may now or hereafter have. Mortgagor further agrees that if
Mortgagee shall be prosecuting one or more foreclosure or other proceedings
against a portion of the Mortgaged Property or against any collateral other than
the Mortgaged Property, which collateral directly or indirectly
<PAGE> 169
20
secures the Indebtedness, or if Mortgagee shall have obtained a judgment of
foreclosure and sale or similar judgment against such collateral, then, whether
or not such proceedings are being maintained or judgments were obtained in or
outside the State in which the Premises are located, Mortgagee may commence or
continue foreclosure proceedings and exercise its other remedies granted in this
Mortgage against all or any part of the Mortgaged Property and Mortgagor waives
any objections to the commencement or continuation of a foreclosure of this
Mortgage or exercise of any other remedies hereunder based on such other
proceedings or judgments, and waives any right to seek to dismiss, stay, remove,
transfer or consolidate either any action under this Mortgage or such other
proceedings on such basis. Neither the commencement nor continuation of
proceedings to foreclose this Mortgage nor the exercise of any other rights
hereunder nor the recovery of any judgment by Mortgagee in any such proceedings
shall prejudice, limit or preclude Mortgagee's right to commence or continue one
or more foreclosure or other proceedings or obtain a judgment against any other
collateral (either in or outside the State in which the Premises are located)
which directly or indirectly secures the Indebtedness, and Mortgagor expressly
waives any objections to the commencement of, continuation of, or entry of a
judgment in such other proceedings or exercise of any remedies in such
proceedings based upon any action or judgment connected to this Mortgage, and
Mortgagor also waives any right to seek to dismiss, stay, remove, transfer or
consolidate either such other proceedings or any action under this Mortgage on
such basis. It is expressly understood and agreed that to the fullest extent
permitted by law, Mortgagee may, at its election, cause the sale of all
collateral which is the subject of a single foreclosure action at either a
single sale or at multiple sales conducted simultaneously and take such other
measures as are appropriate in order to effect the agreement of the parties to
dispose of and administer all collateral securing the Indebtedness (directly or
indirectly) in the most economical and least time-consuming manner.
26. Expenses; Indemnification. Mortgagor shall pay or reimburse
Mortgagee for all expenses incurred by Mortgagee in the same manner as required
of Mortgagor under the terms set forth in the Credit Agreement.
27. Successors and Assigns. All covenants of Mortgagor contained in
this Mortgage are imposed solely and exclusively for the benefit of Mortgagee
and its successors and assigns, and no other person or entity shall have
standing to require compliance with such covenants or be deemed, under any
circumstances, to be a beneficiary of such covenants, any or all of which may be
freely waived in whole or in part by Mortgagee at any time if in its sole
discretion it deems such waiver advisable. All such covenants of Mortgagor shall
run with the land and bind Mortgagor, the successors and assigns of Mortgagor
(and each of them) and all subsequent owners, encumbrancers and tenants of the
Mortgaged Property, and shall inure to the benefit of Mortgagee, its successors
and assigns. The word "Mortgagor"
<PAGE> 170
21
shall be construed as if it read "Mortgagors" whenever the sense of this
Mortgage so requires and if there shall be more than one Mortgagor, the
obligations of the Mortgagors shall be joint and several.
28. No Waivers, etc. Any failure by Mortgagee to insist upon the
strict performance by Mortgagor of any of the terms and provisions of this
Mortgage shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Mortgagee, notwithstanding any such failure, shall have the right
thereafter to insist upon the strict performance by Mortgagor of any and all of
the terms and provisions of this Mortgage to be performed by Mortgagor.
Mortgagee may release, regardless of consideration and without the necessity for
any notice to or consent by the holder of any subordinate lien on the Mortgaged
Property, any part of the security held for the obligations secured by this
Mortgage without, as to the remainder of the security, in anywise impairing or
affecting the lien of this Mortgage or the priority of such lien over any
subordinate lien.
29. Governing Law, etc. This Mortgage shall be governed by and
construed and interpreted in accordance with the laws of the State of New York.
Mortgagor hereby irrevocably agrees that any legal action, suit, or proceeding
against it with respect to its obligations, liabilities or any other matter
under or arising out of or in connection with this Mortgage or the other Loan
Documents or for recognition or enforcement of any judgment rendered in any such
action, suit or proceeding may be brought in the United States Courts for the
Southern District of New York, or in the courts of the State of New York, as
Mortgagee may elect, and, by execution and delivery of this Mortgage, Mortgagor
hereby irrevocably accepts and submits to the non-exclusive jurisdiction of each
of the aforesaid courts in persona, generally and unconditionally with respect
to any such action, suit or proceeding for itself and in respect of its
property. Mortgagor further agrees that final judgment against it in any action,
suit, or proceeding referred to herein shall be conclusive and may be enforced
in any other jurisdiction, by suit on the judgment, a certified or exemplified
copy of which shall be conclusive evidence of the fact and of the amount of its
indebtedness.
30. Waiver of Trial by Jury. Mortgagor and Mortgagee each hereby
irrevocably and unconditionally waive trial by jury in any action, claim, suit
or proceeding relating to this Mortgage and for any counterclaim brought
therein. Mortgagor hereby waives all rights to interpose any counterclaim in any
suit brought by Mortgagee hereunder and all rights to have any such suit
consolidated with any separate suit, action or proceeding, except mandatory
counterclaims or counterclaims which would be waived unless interposed in such
suit.
31. Certain Definitions. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Mortgage shall be used
<PAGE> 171
22
interchangeably in singular or plural form and the word "Mortgagor" shall mean
"each Mortgagor or any subsequent owner or owners of the Mortgaged Property or
any part thereof or interest therein," the word "Mortgagee" shall mean
"Mortgagee or any subsequent holder of the Notes," the word "Notes" shall mean
"the Notes or any other evidence of indebtedness secured by this Mortgage," the
word "person" shall include any individual, corporation, partnership, trust,
unincorporated association, government, governmental authority, or other entity,
and the words "Mortgaged Property" shall include any portion of the Mortgaged
Property or interest therein. Whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns and pronouns shall include the plural and vice
versa. The captions in this Mortgage are for convenience or reference only and
in no way limit or amplify the provisions hereof. To the extent there is any
inconsistency between the provisions of this Mortgage and the provisions of the
Credit Agreement, the provisions of the Credit Agreement shall control.
32. Nonresidential. THIS MORTGAGE DOES NOT COVER REAL PROPERTY
PRINCIPALLY IMPROVED BY ONE OR MORE STRUCTURES CONTAINING IN THE AGGREGATE NOT
MORE THAN SIX RESIDENTIAL DWELLING UNITS, EACH HAVING ITS OWN SEPARATE COOKING
FACILITIES.
<PAGE> 172
23
This Mortgage has been duly executed by Mortgagor on the date first
above written.
YOUNG & RUBICAM INC.
By:
-------------------------
Name:
Title:
<PAGE> 173
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the ____ day of December, 1996 , before me personally came
_________________ , to me known, who, being by me duly sworn, did depose and say
that [s]he resides at ___________________________________________ (insert full
address, include street address, city and state); that [s]he is a[n]
[_________________ ] President of Young & Rubicam, Inc., the corporation
described in and which executed the foregoing instrument; and that [s]he signed
[his][her] name thereto by authority of the board of directors of said
corporation.
------------------------
Notary Public
[Notarial Stamp]
<PAGE> 174
25
Schedule A
Description of the Premises
[Attach Legal Description of all parcels]
<PAGE> 175
Schedule B
Permitted Exceptions
1. Covenants and Restrictions recorded in Liber 738, Page 566 of the Office
of the City Register, New York County.
2. Matters shown on a Survey made by Charles J. Dearing dated July 6, 1954,
provided that the same do not interfere with the use of the Real Estate as
an office building.
3. Rights of tenants, as tenants only.
<PAGE> 176
EXHIBIT F TO
CREDIT AND GUARANTEE AGREEMENT
[FORM OF PARENT BORROWER PLEDGE AGREEMENT]
PLEDGE AGREEMENT, dated as of __________________, 1996, made by
YOUNG & RUBICAM HOLDINGS INC., a New York corporation ("Y&R Holdings"), YOUNG &
RUBICAM INC., a New York corporation ("Y&R Inc. (New York)"), YOUNG & RUBICAM
INC., a Delaware corporation ("Y&R Inc. (Delaware)"), and YOUNG & RUBICAM L.P.,
a Delaware limited partnership ("Y&R LP"; collectively with Y&R Holdings, Y&R
Inc. (New York) and Y&R Inc. (Delaware), the "Parent Borrowers") in favor of
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking
association, as administrative agent (in such capacity, the "Administrative
Agent") for the several banks and other financial institutions (the "Lenders")
from time to time parties to the Credit and Guarantee Agreement, dated as of
_________________, 1996 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Parent Borrowers, the
Subsidiary Borrowers (as defined in the Credit Agreement) from time to time
parties thereto, the Lenders, the Administrative Agent and Bank of America
International Limited, a bank organized under the laws of England, as European
Payment Agent.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Parent Borrowers upon the
terms and subject to the conditions set forth therein;
WHEREAS, the Parent Borrowers are the legal and beneficial owners of
the shares of Pledged Stock (as hereinafter defined) issued by the Issuers (as
hereinafter defined); and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective extensions of credit under the Credit Agreement
that the Parent Borrowers shall have executed and delivered this Pledge
Agreement to the Administrative Agent for the ratable benefit of the Secured
Parties.
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit under the
Credit Agreement, the Parent Borrowers hereby agree with the Administrative
Agent, for the ratable benefit of the Secured Parties, as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement, provided that, for purposes of this Agreement, "Lender"
shall include any Fronting Lender, Issuing Bank and any Person which is a party
to an Eligible Hedge Agreement.
(b) The following terms shall have the following meanings:
"Agreement": this Pledge Agreement, as the same may be amended,
modified or otherwise supplemented from time to time.
<PAGE> 177
2
"Code": the Uniform Commercial Code from time to time in effect in
the State of New York.
"Collateral": the Pledged Stock issued by the Issuers and all
Proceeds thereof.
"Collateral Account": any account established to hold money
Proceeds, maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent
for the account of the Secured Parties as provided in Section 8.
"Credit Agreement Obligations": the unpaid principal of and interest
on the Loans and the Reimbursement Obligations and all other obligations
and liabilities of the Borrowers to the Administrative Agent and the
Lenders (including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the maturity of the
Loans and the Reimbursement Obligations and interest accruing at the then
applicable rate provided in the Credit Agreement after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any Borrower, whether or
not a claim for post-filing or post-petition interest is allowed in such
proceeding), whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise under,
out of, or in connection with, the Credit Agreement, this Agreement, the
other Loan Documents, any Letter of Credit, any Eligible Hedge Agreement
or any other document made, delivered or given in connection therewith, in
each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees and disbursements of counsel to the
Administrative Agent or any Lender that are required to be paid by any
Borrower pursuant to the terms of the Credit Agreement, this Agreement,
any other Loan Document or any Eligible Hedge Agreement).
"Designated Foreign Lender": any bank or financial institution which
(a) makes Qualified Foreign Indebtedness available to a Foreign Subsidiary
(pursuant to a commitment or otherwise) and (b) is designated as a
"Designated Foreign Lender" in accordance with Section 21.
"Domestic Issuer": any Issuer that is not a Foreign Issuer.
"Eligible Hedge Agreement": any Foreign Currency Protection
Agreement and Interest Rate Protection Agreement entered into with any
Person that is a Lender or an Affiliate of a Lender at the time of
entering into such Foreign Currency Protection Agreement or Interest Rate
Protection Agreement, as the case may be.
"Foreign Issuer": any Issuer that is a Direct Foreign Subsidiary of
a Parent Borrower.
"Issuers": the collective reference to the companies identified on
Schedule 1 attached hereto as the issuers of the Pledged Stock;
individually, each an "Issuer."
"Maximum Qualified Foreign Indebtedness Amount": as to any
Designated Foreign Lender, the amount specified as such in the notice
pursuant to which such Designated Foreign Lender is designated as a
"Designated Foreign Lender".
"Obligations": the collective reference to (a) the Credit Agreement
Obligations and (b) the unpaid principal of and interest on any Qualified
Foreign Indebtedness owed by a Foreign Subsidiary to any Designated
Foreign Lender and any obligation of such Foreign Subsidiary to
<PAGE> 178
3
reimburse such Designated Foreign Lender for drawings under letters of
credit issued by Designated Foreign Lender which constitute "Qualified
Foreign Indebtedness", provided that the maximum "Obligations" in respect
of the principal amount (or, in the case of letters of credit, the face
amount) of any Qualified Foreign Indebtedness owed to any Designated
Foreign Lender shall not exceed the Maximum Qualified Foreign Indebtedness
Amount for such Designated Foreign Lender.
"Pledged Stock": the shares of Capital Stock listed on Schedule 1
hereto (regardless of whether such Capital Stock is evidenced or
represented by certificates), together with all stock certificates,
options or rights of any nature whatsoever that may be issued or granted
by any Issuer to any of the Parent Borrowers while this Agreement is in
effect and while such Capital Stock continues to be subject to the
security interest granted pursuant to this Agreement.
"Proceeds": all "proceeds" as such term is defined in Section
9-306(1) of the Uniform Commercial Code in effect in the State of New York
on the date hereof of the Pledged Stock and, in any event, shall include,
without limitation, all dividends or other income from the Pledged Stock,
collections thereon or distributions with respect thereto.
"Qualified Foreign Indebtedness": Indebtedness which is permitted
under subsection 9.2(d) of the Credit Agreement.
"Secured Instrument": any Loan Document, Eligible Hedge Agreement or
any agreement pursuant to which Qualified Foreign Indebtedness is made
available.
"Secured Parties": the collective reference to the Lenders and any
Designated Foreign Lenders.
"Securities Act": the Securities Act of 1933, as amended.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section and
paragraph references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Pledge; Grant of Security Interest. Each Parent Borrower hereby
delivers to the Administrative Agent, for the ratable benefit of the Secured
Parties, all the Pledged Stock issued by the Domestic Issuers and all the
Pledged Stock of the Foreign Issuers which is evidenced or represented by
certificates and hereby grants to the Administrative Agent, for the ratable
benefit of the Secured Parties, a first security interest in the Collateral, as
collateral security for the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration or otherwise) of the
Obligations. To the extent that any of the Pledged Stock of any Foreign Issuer
is not evidenced or represented by certificates, the Parent Borrowers shall take
such actions (including registrations and filings) as may be required under
applicable law in connection with and to give effect to the grant of a first
security interest therein pursuant to this Section.
3. Stock Powers. Concurrently with the delivery to the
Administrative Agent of each certificate representing one or more shares of
Pledged Stock to the Administrative Agent, the Parent Borrowers shall deliver an
undated stock power covering such certificate, duly executed in blank by the
Parent Borrowers with, if the Administrative Agent so requests, signature
guaranteed.
<PAGE> 179
4
4. Representations and Warranties. The Parent Borrowers represent
and warrant that:
(a) The shares of Pledged Stock constitute all the issued and
outstanding shares of all classes of the Capital Stock of each Domestic Issuer
and not less than sixty-six percent of each class of Capital Stock of each
Foreign Issuer held by the Parent Borrowers.
(b) All the shares of the Pledged Stock have been duly and validly
issued and, except as otherwise provided in Section 630 of the New York Business
Corporation Law, are fully paid and nonassessable.
(c) The Parent Borrowers are the record and beneficial owner of, and
have good and marketable title to, the Pledged Stock, free of any and all Liens
or options in favor of, or claims of, any other Person, except the security
interests created by this Agreement.
(d) Upon delivery to the Administrative Agent of the stock
certificates evidencing the Pledged Stock and the taking of the other actions
contemplated by Section 2 in respect of the Pledged Stock issued by Foreign
Issuers which is not evidenced or represented by certificates, the security
interest created by this Agreement will constitute a valid, perfected first
priority security interest in the Collateral, enforceable as such against all
creditors of the Parent Borrowers and any Persons purporting to purchase any
Collateral from the Parent Borrowers, except as affected by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
5. Covenants. The Parent Borrowers covenant and agree with the
Administrative Agent and the Lenders that, from and after the date of this
Agreement until this Agreement is terminated and the security interests created
hereby are released:
(a) If any Parent Borrower shall, as a result of its ownership of
the Pledged Stock, become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate representing a stock
dividend or a distribution in connection with any reclassification, increase or
reduction of capital or any certificate issued in connection with any
reorganization), option or rights, whether in addition to, in substitution of,
as a conversion of, or in exchange for any shares of the Pledged Stock, or
otherwise in respect thereof, such Parent Borrower shall cause the same to be
subject to the security interest granted hereunder and such Parent Borrower
shall accept the same as the agent of the Administrative Agent and the Lenders,
hold the same in trust for the Administrative Agent and the Lenders and deliver
the same forthwith to the Administrative Agent in the exact form received, duly
indorsed by such Parent Borrower to the Administrative Agent, if required,
together with an undated stock power covering such certificate duly executed in
blank by such Parent Borrower and with, if the Administrative Agent so requests,
signature guaranteed, to be held by the Administrative Agent, subject to the
terms hereof, as additional collateral security for the Obligations. Other than
pursuant to a distribution or transfer of any assets of an Issuer to any Parent
Borrower in a transaction permitted under the Credit Agreement, (i) any sums
paid upon or in respect of the Pledged Stock upon the liquidation or dissolution
of any Issuer shall be paid over to the Administrative Agent to be held by it
hereunder as additional collateral security for the Obligations, and (ii) in
case any distribution of capital shall be made on or in respect of the Pledged
Stock or any property shall be distributed upon or with respect to the Pledged
Stock pursuant to the recapitalization or reclassification of the capital of any
Issuer or pursuant to the reorganization thereof, the property so distributed
shall be delivered to the Administrative Agent to be held by it hereunder as
additional collateral security for the Obligations. If any sums of money or
property so paid or distributed in respect of the Pledged Stock shall be
received by such Parent Borrower, such Parent Borrower shall, until such money
or property is paid or delivered to the Administrative Agent, hold such money or
property in trust for the Secured Parties, segregated from other funds of such
<PAGE> 180
5
Parent Borrower, as additional collateral security for the Obligations.
(b) Without the prior written consent of the Administrative Agent,
the Parent Borrowers will not (i) vote to enable, or take any other action to
permit, any Issuer to issue (other than to existing stockholders on a
proportionate basis) any stock or other equity securities of any nature or to
issue any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of any Issuer,
(ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Collateral, other than pursuant to a transaction
permitted under the Credit Agreement, (iii) create, incur or permit to exist any
Lien on any of the Collateral, or any interest therein, except for the security
interests created by this Agreement or (iv) enter into any agreement or
undertaking (other than this Agreement and the other Loan Documents) restricting
the right or ability of any Parent Borrower or the Administrative Agent to sell,
assign or transfer any of the Collateral.
(c) The Parent Borrowers shall maintain the security interest
created by this Agreement as a first perfected security interest and shall
defend such security interest against claims and demands of all Persons
whomsoever. At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of the Parent Borrowers, each
Parent Borrower will promptly and duly execute and deliver such further
instruments and documents and take such further actions as the Administrative
Agent may reasonably request for the purposes of obtaining or preserving the
full benefits of this Agreement and of the rights and powers herein granted. If
any amount payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note, other instrument or chattel paper, such
note, instrument or chattel paper shall be immediately delivered to the
Administrative Agent, duly endorsed in a manner satisfactory to the
Administrative Agent, to be held as Collateral pursuant to this Agreement.
(d) The Parent Borrowers shall pay, and hold the Administrative
Agent and the Secured Parties harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all stamp, excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral or in connection with any of the transactions
contemplated by this Agreement.
6. Cash Dividends; Voting Rights. Unless an Event of Default shall
have occurred and be continuing and the Administrative Agent shall have given
notice to the Parent Borrowers of the Administrative Agent's intent to exercise
its corresponding rights pursuant to Section 7 below, the Parent Borrowers shall
be permitted to receive all cash dividends paid in the normal course of business
of the Issuers consistent with past practice in respect of the Pledged Stock and
to exercise all voting and corporate rights with respect to the Pledged Stock;
provided, however, that no vote shall be cast or corporate right exercised or
other action taken which, in the Administrative Agent's reasonable judgment,
would impair the Collateral or which would be inconsistent with or result in any
violation of any provision of the Credit Agreement, this Agreement or any other
Loan Document.
7. Rights of the Lenders and the Administrative Agent. (a) All money
Proceeds received by the Administrative Agent hereunder shall be held by the
Administrative Agent for the benefit of the Secured Parties in a Collateral
Account. All Proceeds while held by the Administrative Agent in a Collateral
Account (or by the Parent Borrowers in trust for the Administrative Agent and
the Lenders) shall continue to be held as collateral security for all the
Obligations and shall not constitute payment thereof until applied as provided
in Section 8(a).
(b) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights to
the Parent Borrowers, (i) the Administrative Agent shall have the right to
receive any and all cash dividends paid in respect of the Pledged Stock and make
application thereof to the Obligations in accordance with Section 8(a), and (ii)
all shares of the Pledged
<PAGE> 181
6
Stock shall be registered in the name of the Administrative Agent or its
nominee, and the Administrative Agent or its nominee may thereafter exercise (A)
all voting, corporate and other rights pertaining to such shares of the Pledged
Stock at any meeting of shareholders of any Issuer or otherwise and (B) any and
all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such shares of the Pledged Stock as if it
were the absolute owner thereof (including, without limitation, the right to
exchange at its discretion any and all of the Pledged Stock upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate structure of any Issuer, or upon the exercise by the Parent
Borrowers or the Administrative Agent of any right, privilege or option
pertaining to such shares of the Pledged Stock, and in connection therewith, the
right to deposit and deliver any and all of the Pledged Stock with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as the Administrative Agent may determine), all
without liability except to account for property actually received by it, but
the Administrative Agent shall have no duty to the Parent Borrowers to exercise
any such right, privilege or option and shall not be responsible for any failure
to do so or delay in so doing.
8. Remedies. (a) At such intervals as may be agreed upon by the
Parent Borrowers and the Administrative Agent, or, if an Event of Default shall
have occurred and be continuing, at any time at the Administrative Agent's
election, the Administrative Agent may apply all or any part of Proceeds held in
any Collateral Account in payment of the Obligations in the following order of
priority:
First: to the Administrative Agent for any unpaid fees, expenses and
other costs of the Administrative Agent;
Second: to the Secured Parties in an amount equal to the unpaid
principal or face amount of, and unpaid interest on, and premium or fees,
if any, in respect of, the Obligations then outstanding whether or not
then due and payable, including, without limitation, the aggregate undrawn
amounts available to be drawn (assuming compliance with all conditions to
drawing) under all Letters of Credit and the aggregate estimated amount of
payment liabilities of the Parent Borrowers and the Subsidiaries under
Eligible Hedge Agreements assuming immediate termination of all such
agreements, and, if such moneys shall be insufficient to pay such amounts
in full, then ratably (without priority of any one over any other) to the
Secured Parties in proportion to the unpaid amounts thereof on the date
any such payment is made;
Third: to the Secured Parties, amounts equal to all other sums which
constitute Obligations, including without limitation the costs and
expenses of the Secured Parties and their representatives which are due
and payable under the relevant Secured Instruments and which constitute
Obligations as of the date any such payment is made, and, if such moneys
shall be insufficient to pay such sums in full, then ratably to the
Secured Parties in proportion to such sums; and
Fourth: any surplus then remaining shall be paid to the Parent
Borrowers or their successors or assigns or to whomsoever may be lawfully
entitled to receive the same or as a court of competent jurisdiction may
direct.
(b) The term "unpaid" as used in clauses Second and Third of
paragraph (a) above refers:
(i) in the absence of a bankruptcy proceeding with respect to
the relevant Parent Borrower, to all amounts of Obligations, as the case
may be, outstanding as of the date a payment is made, whether or not such
amounts are fixed or contingent, and
(ii) during the pendency of a bankruptcy proceeding with
respect to the
<PAGE> 182
7
relevant Parent Borrower, to all amounts allowed by the bankruptcy court
in respect of Obligations as a basis for distribution (including estimated
amounts, if any, allowed in respect of contingent claims),
to the extent that prior distributions (whether actually distributed or set
aside pursuant to this Section) have not been made in respect thereof.
(c) In the event any Secured Party shall be entitled to receive any
moneys pursuant to clauses Second or Third of paragraph (a) in respect of the
unliquidated, unmatured or contingent portion of the outstanding Obligations
(including, without limitation, obligations under then outstanding Letters of
Credit), then the Administrative Agent shall hold such amount in a Collateral
Account for the benefit of such Secured Party until (i) such Secured Party shall
have notified the Administrative Agent that all or part of such unliquidated,
unmatured or contingent claim shall have become matured or fixed, in which case
the Administrative Agent shall distribute from such Collateral Account an amount
equal to such matured or fixed claim to such Secured Party for application to
the payment of such matured or fixed claim, and shall promptly give notice
thereof to the Company or (ii) all or part of such unliquidated, unmatured or
contingent claim shall have been extinguished, whether as the result of an
expiration without drawing of any Letter of Credit, payment of amounts secured
or covered by any Letter of Credit other than by drawing thereunder, payment of
amounts covered by any guarantee or otherwise, in which case such Secured Party
shall, as soon as practicable thereafter, notify the Company and the
Administrative Agent.
(d) In making the determinations and allocations required by this
Section, the Administrative Agent may conclusively rely upon information
supplied by the Administrative Agent (or the relevant Lender, in the case of
Eligible Hedge Agreements) as to the amounts payable with respect to Credit
Agreement Obligations and upon information supplied by a Designated Foreign
Lender as to the amounts payable with respect to Qualified Foreign Indebtedness,
and the Administrative Agent shall have no liability to any of the Secured
Parties for actions taken in reliance on any such information.
(e) If an Event of Default shall have occurred and be continuing,
the Administrative Agent, on behalf of the Lenders, may exercise, in addition to
all other rights and remedies granted in this Agreement and in any other
instrument or agreement securing, evidencing or relating to the Obligations, all
rights and remedies of a secured party under the Code. Without limiting the
generality of the foregoing, the Administrative Agent, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon the
Parent Borrowers or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived to the fullest extent permitted by
applicable law), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, assign, give option or options to purchase or otherwise dispose
of and deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, in the
over-the-counter market, at any exchange, broker's board or office of the
Administrative Agent or any Lender or elsewhere upon such terms and conditions
as it may deem advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk. The
Administrative Agent or any Secured Party shall have the right upon any such
public sale or sales, and, to the fullest extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the Collateral so
sold, free of any right or equity of redemption in the Parent Borrowers, which
right or equity of redemption is hereby waived or released to the extent
permitted by applicable law. The Administrative Agent shall apply any Proceeds
from time to time held by it and the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred in respect thereof or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Administrative Agent and the
Lenders hereunder, including, without limitation,
<PAGE> 183
8
reasonable attorneys' fees and disbursements of counsel to the Administrative
Agent, to the payment in whole or in part of the Obligations, in accordance with
paragraph (a) above, and only after such application and after the payment by
the Administrative Agent of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the Code, need the
Administrative Agent account for the surplus, if any, to the Parent Borrowers.
To the extent permitted by applicable law, each Parent Borrower waives all
claims, damages and demands they may acquire against the Administrative Agent or
any Secured Party arising out of the exercise by them of any rights hereunder.
If any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition. Each Parent Borrower shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of Collateral are insufficient to pay the Obligations and the fees
and disbursements of any attorneys employed by the Administrative Agent or any
Lender to collect such deficiency.
9. Registration Rights; Private Sales. (a) If the Administrative
Agent shall determine to exercise its right to sell any or all of the Pledged
Stock pursuant to Section hereof, and if in the opinion of the Administrative
Agent it is necessary or advisable to have the Pledged Stock, or that portion
thereof to be sold, registered under the provisions of the Securities Act, the
Parent Borrowers will cause the Issuer thereof to (i) execute and deliver, and
cause the directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Administrative Agent, necessary or advisable to
register the Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) to cause the registration statement
relating thereto to become effective and to remain effective for a period of one
year from the date of the first public offering of the Pledged Stock, or that
portion thereof to be sold, and (iii) to make all amendments thereto and/or to
the related prospectus which, in the opinion of the Administrative Agent, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto. The Parent Borrowers agree to cause such Issuer
to comply with the provisions of the securities or "Blue Sky" laws of any and
all jurisdictions which the Administrative Agent shall designate and to make
available to its security holders, as soon as practicable, an earnings statement
(which need not be audited) which will satisfy the provisions of Section 11(a)
of the Securities Act.
(b) The Parent Borrowers recognize that the Administrative Agent may
be unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. The
Parent Borrowers acknowledge and agree that any such private sale may result in
prices and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agree that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Administrative
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.
(c) The Parent Borrowers further agree to use their best efforts to
do or cause to be done all such other acts as may be necessary to make such sale
or sales of all or any portion of the Pledged Stock pursuant to this Section
valid and binding and in compliance with any and all other applicable
Requirements of Law. The Parent Borrowers further agree that a breach of any of
the covenants contained in this Section will cause irreparable injury to the
Administrative Agent and the Secured Parties, that the Administrative Agent and
the Secured Parties have no adequate remedy at law in respect of such breach
and, as a consequence, that each and every covenant contained in this Section
shall be specifically enforceable against the Parent Borrowers, and the Parent
Borrowers hereby waive and agree
<PAGE> 184
9
not to assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred under the
Credit Agreement.
10. Irrevocable Authorization and Instruction to Issuer. The Parent
Borrowers hereby authorize and instruct each Issuer to comply with any
instruction received by it from the Administrative Agent in writing that (a)
states that an Event of Default has occurred and (b) is otherwise in accordance
with the terms of this Agreement, without any other or further instructions from
the Parent Borrowers, and the Parent Borrowers agree that each Issuer shall be
fully protected in so complying.
11. Administrative Agent's Appointment as Attorney-in-Fact. (a) The
Parent Borrowers hereby irrevocably constitute and appoint the Administrative
Agent and any officer or agent of the Administrative Agent, with full power of
substitution, as their true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Parent Borrowers and in the
name of the Parent Borrowers or in the Administrative Agent's own name, from
time to time in the Administrative Agent's discretion, for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate action
and to execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement, including, without
limitation, any financing statements, endorsements, assignments or other
instruments of transfer.
(b) The Parent Borrowers hereby ratify all that said attorneys shall
lawfully do or cause to be done pursuant to the power of attorney granted in
Section 11(a). All powers, authorizations and agencies contained in this
Agreement are coupled with an interest and are irrevocable until this Agreement
is terminated and the security interests created hereby are released.
12. Duty of Administrative Agent. The Administrative Agent's sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Administrative Agent deals
with similar securities and property for its own account, except that the
Administrative Agent shall have no obligation to invest funds held in any
Collateral Account and may hold the same as demand deposits. Neither the
Administrative Agent, any Secured Party nor any of their respective directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of the Parent Borrowers or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.
13. Execution of Financing Statements. Pursuant to Section 9-402 of
the Code, the Parent Borrowers authorize the Administrative Agent to file
financing statements with respect to the Collateral without the signature of the
Parent Borrowers in such form and in such filing offices as the Administrative
Agent reasonably determines appropriate to perfect the security interests of the
Administrative Agent under this Agreement. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement for
filing in any jurisdiction.
14. Authority of Administrative Agent. The Parent Borrowers
acknowledge that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any option,
voting right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Administrative
Agent and the Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent and the Parent Borrowers, the Administrative
Agent shall be conclusively presumed to be acting as agent for the Secured
Parties with full and valid authority so to act or refrain from acting, and
neither the Parent Borrowers nor any Issuer shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
<PAGE> 185
10
15. Notices. All notices, requests and demands given hereunder shall
be given in accordance with subsection 13.2 of the Credit Agreement.
16. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
17. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None
of the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except, subject to subsection 13.1 of the
Credit Agreement, by a written instrument executed by the Parent Borrowers and
the Administrative Agent.
(b) No failure to exercise and no delay in exercising, on the part
of the Administrative Agent or any Lender, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege.
(c) The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
18. Section Headings. The section headings used in this Agreement
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
19. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Parent Borrowers, the
Administrative Agent and the Lenders, provided that the Parent Borrowers may not
assign or transfer any of its rights or obligations under this Agreement without
the prior written consent of the Administrative Agent and any purported
assignment without such consent shall be null and void.
20. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
21. Designated Foreign Lenders. The Company may from time to time
designate certain banks or other financial institutions acceptable to the
Administrative Agent as "Designated Foreign Lenders" with respect to Qualified
Foreign Indebtedness by delivering a written notice to such effect to the
Administrative Agent in the form of Exhibit A hereto, executed by the Company
and the relevant Designated Foreign Lender and accepted by the Administrative
Agent. Each such bank or other financial institution shall thereafter be deemed
to be a Designated Foreign Lender for all purposes hereunder until such time as
the Administrative Agent shall have received written notice from the Company and
the relevant Designated Foreign Lender to such effect, at which time such
Designated Foreign Lender shall be deemed not to be a Secured Party for all
purposes hereunder and all right, title and interest of such Designated Foreign
Lender in the Collateral and the Security Documents shall terminate. No
Designated Foreign Lender shall have the right to exercise or seek to exercise
any rights or exercise any remedies with respect to any Collateral or institute
any action or proceeding with respect to such rights or remedies, including
without limitation, any action of foreclosure or contest, protest or object to
any foreclosure proceeding or action brought by the Administrative Agent or any
Lender or any other exercise by the Administrative Agent or any Lender of any
rights and remedies hereunder or under
<PAGE> 186
11
any Security Document.
22. To the extent that the shares of Pledged Stock of any Foreign
Issuer subject to the security interest granted under this Agreement exceed 66%
of any class of such Pledged Stock of any such Foreign Issuer, the security
interest in such Pledged Stock (to the extent the security interest in such
shares of Pledged Stock exceeds 66% of any class of shares of such Pledged
Stock) shall be automatically released on the day which is 90 days following the
Closing Date and any certificates evidencing or representing such released
Pledged Stock shall be returned by the Administrative Agent to the relevant
Parent Borrower.
<PAGE> 187
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed and delivered as of the date first above written.
YOUNG & RUBICAM HOLDINGS INC.
By:
-----------------------------
Title:
YOUNG & RUBICAM INC., a New York corporation
By:
-----------------------------
Title:
YOUNG & RUBICAM INC., a Delaware corporation
By:
-----------------------------
Title:
YOUNG & RUBICAM L.P.
By: YOUNG & RUBICAM INC. a New York
corporation, its General Partner
By:
-----------------------------
Title:
Schedules:
Schedule 1 - Description of Pledged Stock
<PAGE> 188
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the Pledge
Agreement dated ___________________, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Pledge Agreement"), made by Young & Rubicam
Holdings Inc., a New York corporation ("Y&R Holdings"), Young & Rubicam Inc., a
New York corporation ("Y&R Inc. (New York)"), and Young & Rubicam., a Delaware
corporation ("Y&R Inc. (Delaware)"), and Young & Rubicam L.P., a Delaware
limited partnership ("Y&R LP"; collectively with Y&R Holdings, Y&R Inc. (New
York) and Y&R Inc. (Delaware), the "Parent Borrowers") in favor of Bank of
America National Trust and Savings Association, as Administrative Agent for the
Lenders referred to in the Pledge Agreement. The undersigned agrees for the
benefit of the Administrative Agent and the Secured Parties as follows:
1. The undersigned will be bound by the terms of the Pledge
Agreement and will comply with such terms insofar as such terms are applicable
to the undersigned.
2. The undersigned will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 5(a) of the
Pledge Agreement.
3. The terms of Section 9(c) of the Pledge Agreement shall apply to
it, mutatis mutandis, with respect to all actions that may be required of it
under or pursuant to or arising out of Section of the Pledge Agreement.
[NAME OF ISSUER]
By:
--------------------------------
Title:
-----------------------------
Address for Notices:
-----------------------------------
-----------------------------------
-------------------------------
Fax:
<PAGE> 189
SCHEDULE 1
TO PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED STOCK
<TABLE>
<CAPTION>
Issuer Class of Stock* Stock Certificate No. No. of Shares % of Shares Outstanding
- ------------------- --------------- --------------------- ------------- -----------------------
<S> <C> <C> <C> <C>
BURSON-MARSTELLER INTERNATIONAL INC., PLEDGOR
*Burson-Marsteller A/S** 1-13,200; 10,000,000 100%
13,201-
20,000
*Burson-Marsteller Asia Ltd.** 15,17,18 27,804 100%
*Burson-Marsteller Italia S.r.l.** na na na 100%
*Burson-Marsteller Mexico S.A. de C.V.
Series B - Variable 1 924 66%
Series B - Minimo Fijo 1 16,500 66%
*Burson-Marsteller Poland Sp. z.o.o. na na na 66%
*Burson-Marsteller Pty Ltd** 11,12 800,000 100%
*Burson-Marsteller S/C Ltda. na na na 66%
*Burson-Marsteller Thailand Ltd. 41,42,45 33,660 66%
*CMG AG 1 1,848 66%
CYGNET HOLDINGS COMPANY INC., PLEDGOR
*BM Communications Inc. 1 1,000 100%
*Burson-Marsteller/NIS, Inc. 1 1,000 100%
*Young Rubicam S.A. **** 82,992,692 66%
*Summit Insurance Company 2 10,000 100%
LANDOR ASSOCIATES, PLEDGOR
*Landor Associates Asia-Pacific Ltd. 5 660 66%
*Landor Associates Designers & Consultants, Ltd. 17 163,300 66%
*Walter Landor Y Asociados S.A. de C.V. 6 4,620 66%
YOUNG & RUBICAM INTERNATIONAL GROUP B.V., PLEDGOR
*Young & Rubicam Denmark Group A/S*** na na na 100%
</TABLE>
- ----------
* Stock is assumed to be common stock unless otherwise indicated.
** 100% of the outstanding shares of these first tier Foreign Subsidiaries
will be pledged upon closing; 90 days thereafter, the pledge will become
66% of the outstanding shares.
*** 100% of the outstanding shares will be pledged for a period of 90 days
from the closing date.
**** See certificate.
<PAGE> 190
EXHIBIT A
[FORM OF DESIGNATED FOREIGN LENDER NOTICE]
DESIGNATED FOREIGN LENDER NOTICE
Reference is made to (a) the Security Agreement, dated as of
____________ __, 1996 (the "Parent Borrower Security Agreement"), made by Young
& Rubicam Holdings Inc., a New York corporation ("Y&R Holdings"), Young &
Rubicam Inc., a New York corporation ("Y&R Inc. (New York)"), Young & Rubicam,
Inc., a Delaware corporation ("Y&R Inc. (Delaware)"), Young & Rubicam L.P., a
Delaware limited partnership ("Y&R LP"; collectively with Y&R Holdings, Y&R Inc.
(New York) and Y&R Inc. (Delaware), the "Parent Borrowers") in favor of Bank of
America National Trust and Savings Association, a national banking association,
as Administrative Agent (in such capacity, the "Administrative Agent") for the
several banks and other financial institutions (the "Lenders") from time to time
parties to the Credit and Guarantee Agreement, dated as of December __, 1996 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Parent Borrowers, the Subsidiary Borrowers (as defined in
the Credit Agreement) from time to time parties thereto, the Lenders, the
Administrative Agent and Bank of America International Limited, a bank organized
under the laws of England, as European Payment Agent, (b) the Pledge Agreement,
dated as of _________ __, 1996 (the "Parent Borrower Pledge Agreement"), made by
the Parent Borrowers in favor of the Administrative Agent, (c) the Security
Agreement, dated as of __________ __, 1996 (the "Subsidiaries Security
Agreement"), made by each of the subsidiaries of the Parent Borrowers which are
parties thereto in favor of the Administrative Agent, and (d) the Pledge
Agreement, dated as of _________ __, 1996 (the "Subsidiaries Pledge Agreement",
and together with the Parent Borrower Security Agreement, the Parent Borrower
Pledge Agreement and the Subsidiaries Security Agreement, the "Security
Documents"), made by each of the subsidiaries of the Parent Borrowers which are
parties thereto in favor of the Administrative Agent.
The Company hereby designates [Name of Designated Foreign Lender] as
a "Designated Foreign Lender" under the Security Documents with a Maximum
Qualified Foreign Indebtedness Amount of $___________. The Company hereby
represents and warrants that the "Qualified Foreign Indebtedness" is comprised
of [include description] and that all amount outstanding in respect thereof will
be permitted under subsection 9.2(d) of the Credit Agreement.
The undersigned, [Name of Designated Foreign Lender], hereby
acknowledges and agrees that the Maximum Qualified Foreign Indebtedness Amount
with respect to the Qualified Foreign Indebtedness described herein shall be
$___________. The undersigned in its capacity as a Designated Foreign Lender
further acknowledges and agrees that (a) it shall be bound by all of the terms
and conditions of the Security Documents, (b) it shall not have the right to
exercise or seek to exercise any rights or exercise any remedies with respect to
any collateral subject to the Security Documents or institute any action or
proceeding with respect to such rights or remedies, including without
limitation, any action of foreclosure or contest, protest or object to any
foreclosure proceeding or action brought by the Administrative Agent or any
Lender or any other exercise by the Administrative Agent or any Lender of any
rights and remedies hereunder or under any Security Document, (c) it shall not
have the right to consent to any amendment, waiver or modification of any
Security Document (other than, subject to clause (d) below, any amendment,
waiver or other modification to subsection 7.3 of the Parent Borrower Security
Agreement and the Subsidiaries Security Agreement and Section 8 (other than
paragraph (e) thereof) of the Parent Borrower Pledge Agreement and the
Subsidiaries Pledge Agreement which materially adversely affects such Designated
Foreign Lender in a manner which is different to the effect of such amendment,
waiver or modification on the other Secured Parties), (d) it shall not have the
right to consent to any release of all or any portion of the Collateral by the
Administrative Agent or the Lenders,
<PAGE> 191
2
(e) it shall not have the right to request or direct that any payment be made
under subsection 7.3 of the Parent Borrower Security Agreement or the
Subsidiaries Security Agreement or Section 8 (other than paragraph (e) thereof)
of the Parent Borrower Pledge Agreement or the Subsidiaries Pledge Agreement,
(f) neither the Administrative Agent nor any Lender shall have any liability or
obligation to the undersigned (including, without limitation, with respect to
the perfection of any lien or security interest granted pursuant to the Security
Documents) except with respect to any payment (if and when made) under
subsection 7.3 of the Parent Borrower Security Agreement or the Subsidiaries
Security Agreement or Section 8 (other than paragraph (e) thereof) of the Parent
Borrower Pledge Agreement or the Subsidiaries Pledge Agreement and (g) it has
received copies of the Credit Agreement and each of the Security Documents. All
notices to the undersigned shall be sent to [insert notice information] or to
such other address as the undersigned shall designate in writing from time to
time to the Administrative Agent and all notices shall be given in accordance
with subsection 13.2 of the Credit Agreement.
THIS NOTICE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
The undersigned hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Notice or for recognition and enforcement of any
judgment in respect thereof,to the non-exclusive general jurisdiction of the
courts of the State of New York, the courts of the United State of America for
the Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail, (or
any substantially similar form of mail), postage prepaid, to its address for
notices hereunder;
(d) agrees that nothing herein shall affect the right to effect
service or process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
<PAGE> 192
3
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred to in
this subsection any special, exemplary, punitive or consequential damages.
[NAME OF DESIGNATED FOREIGN
LENDER]
By:
-----------------------
Name:
[THE COMPANY]
By:
-----------------------
Title
Accepted:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Administrative Agent
By:
-------------------------
Title:
<PAGE> 193
EXHIBIT G TO
CREDIT AND GUARANTEE AGREEMENT
[FORM OF PARENT BORROWER SECURITY AGREEMENT]
SECURITY AGREEMENT, dated as of __________________, 1996, made by
YOUNG & RUBICAM HOLDINGS INC., a New York corporation ("Y&R Holdings"), YOUNG &
RUBICAM INC., a New York corporation ("Y&R Inc. (New York)"), YOUNG & RUBICAM
INC., a Delaware corporation ("Y&R Inc. (Delaware)"), and YOUNG & RUBICAM L.P.,
a Delaware limited partnership ("Y&R LP"; collectively with Y&R Holdings, Y&R
Inc. (New York) and Y&R Inc. (Delaware), the "Parent Borrowers"), in favor of
Bank of America National Trust and Savings Association, a national banking
association, as Administrative Agent (in such capacity, the "Administrative
Agent") for the several banks and other financial institutions (the "Lenders")
from time to time parties to the Credit and Guarantee Agreement, dated as of
December __, 1996 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among the Parent Borrowers, the Subsidiary
Borrowers (as defined in the Credit Agreement) from time to time parties
thereto, the Lenders, the Administrative Agent and Bank of America International
Limited, a bank organized under the laws of England, as European Payment Agent.
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Parent Borrowers upon the
terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective extensions of credit under the Credit Agreement
that the Parent Borrowers shall have executed and delivered this Security
Agreement to the Administrative Agent for the ratable benefit of the Secured
Parties.
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit under the
Credit Agreement, the Parent Borrowers hereby agree with the Administrative
Agent, for the ratable benefit of the Secured Parties, as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are
defined in the Credit Agreement and used herein are so used as so defined,
provided that, for purposes of this Agreement, "Lender" shall include any
Fronting Lender, Issuing Bank and any Person which is a party to an Eligible
Hedge Agreement; the following terms which are defined in the Uniform Commercial
Code in effect in the State of New York on the date hereof are used herein as so
defined: Accounts, Chattel Paper, Documents, Equipment, Farm Products, General
Intangibles, Instruments, Inventory and Proceeds; and the following terms shall
have the following meanings:
"Code": the Uniform Commercial Code as from time to time in effect
in the State of New York.
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"Collateral": as defined in Section 2.
"Collateral Account": any account established to hold money
proceeds, maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent
for the account of the Secured Parties as provided in Section 8.
"Copyright License": any agreement, written or oral, providing for
the grant by or to the Parent Borrowers of any right under any Copyright,
including, without limitation, any thereof listed in Schedule 1 hereto.
"Copyrights": all of the following to the extent that any Parent
Borrower now or hereafter has any right, title or interest in any country
in the world (other than any such right, title or interest (a) created by
any Parent Borrower as a work-made-for-hire on behalf of any Client, (b)
acquired on behalf of any Client or (c) required to be transferred or
otherwise conveyed to any Client): (i) all copyrights in all works,
whether published or unpublished, now existing or hereafter created or
acquired, all registrations and recordings thereof, and all applications
in the United States Copyright Office, including, without limitation, any
thereof referred to in Schedule 1 hereto, and (ii) all renewals thereof.
"Credit Agreement Obligations": the unpaid principal of and interest
on the Loans and the Reimbursement Obligations and all other obligations
and liabilities of the Borrowers to the Administrative Agent and the
Lenders (including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the maturity of the
Loans and the Reimbursement Obligations and interest accruing at the then
applicable rate provided in the Credit Agreement after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any Borrower, whether or
not a claim for post-filing or post-petition interest is allowed in such
proceeding), whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise under,
out of, or in connection with, the Credit Agreement, this Agreement, the
other Loan Documents, any Letter of Credit, any Eligible Hedge Agreement
or any other document made, delivered or given in connection therewith, in
each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees and disbursements of counsel to the
Administrative Agent or any Lender that are required to be paid by any
Borrower pursuant to the terms of the Credit Agreement, this Agreement,
any other Loan Document or any Eligible Hedge Agreement).
"Designated Foreign Lender": any bank or financial institution which
(a) makes Qualified Foreign Indebtedness available to a Foreign Subsidiary
(pursuant to a commitment or otherwise) and (b) is designated as a
"Designated Foreign Lender" in accordance with Section 20.
"Eligible Hedge Agreement": any Foreign Currency Protection
Agreement and Interest Rate Protection Agreement entered into with any
Person that is a Lender or an Affiliate of a Lender at the time of
entering into such Foreign Currency Protection Agreement or Interest Rate
Protection Agreement, as the case may be.
"Maximum Qualified Foreign Indebtedness Amount": as to any
Designated Foreign Lender, the amount specified as such in the notice
pursuant to which such Designated Foreign Lender is designated as a
"Designated Foreign Lender".
"Obligations": the collective reference to (a) the Credit Agreement
Obligations and (b) the unpaid principal of and interest on any Qualified
Foreign Indebtedness owed by a Foreign
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3
Subsidiary to any Designated Foreign Lender and any obligation of such
Foreign Subsidiary to reimburse such Designated Foreign Lender for
drawings under letters of credit issued by Designated Foreign Lender which
constitute "Qualified Foreign Indebtedness", provided that the maximum
"Obligations" in respect of the principal amount (or, in the case of
letters of credit, the face amount) of any Qualified Foreign Indebtedness
owed to any Designated Foreign Lender shall not exceed the Maximum
Qualified Foreign Indebtedness Amount for such Designated Foreign Lender.
"Patent License": all agreements, whether written or oral, providing
for the grant by or to any Parent Borrower of any right to manufacture,
use or sell any invention covered by a Patent.
"Patents": (a) all letters patent of the United States and all
reissues and extensions thereof, and (b) all applications for letters
patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof.
"Qualified Foreign Indebtedness": Indebtedness which is permitted
under subsection 9.2(d) of the Credit Agreement.
"Receivable": any right to payment for goods sold or leased or for
services rendered, whether or not such right is evidenced by an Instrument
or Chattel Paper and whether or not it has been earned by performance
(including, without limitation, any Account).
"Secured Instrument": any Loan Document, Eligible Hedge Agreement or
any agreement pursuant to which Qualified Foreign Indebtedness of a
Designated Foreign Lender is made available.
"Secured Parties": the collective reference to the Lenders and any
Designated Foreign Lenders.
"Security Agreement": this Security Agreement, as amended,
supplemented or otherwise modified from time to time.
"Trademark License": any agreement, written or oral, providing for
the grant by or to any Parent Borrower of any right to use any Trademark,
including, without limitation, any thereof listed on Schedule 2 hereto.
"Trademarks": all of the following to the extent that any Parent
Borrower now or hereafter has any right, title or interest (other than any
such right title or interest (a) created by any Parent Borrower as a
work-made-for-hire on behalf of any Client, (b) acquired on behalf of any
Client or (c) required to be transferred or otherwise conveyed to any
Client) (i) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade dress, trade styles,
service marks, designs, logos and other source or business identifiers,
and the goodwill of the business associated therewith, including customer
lists, license rights, advertising materials and all other business assets
which uniquely reflect the goodwill of the business, now existing or
hereafter adopted or acquired, all registrations and recordings thereof,
and all applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, or any State thereof, or any other Country, including,
without limitation, any thereof listed on Schedule 2 hereto, and (ii) all
renewals thereof.
2. Grant of Security Interest. As collateral security for the prompt
and complete
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4
payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations, each Parent Borrower hereby
grants to the Administrative Agent for the ratable benefit of the Secured
Parties a security interest in all of the following property now owned or at any
time hereafter acquired by such Parent Borrower or in which such Parent Borrower
now has or at any time in the future may acquire any right, title or interest
(collectively, the "Collateral"):
(a) all Accounts and Receivables;
(b) all Chattel Paper;
(c) all Copyrights;
(d) all Copyright Licenses;
(e) all Documents;
(f) all Equipment;
(g) all General Intangibles;
(h) all Instruments;
(i) all Inventory;
(j) all Patents;
(k) all Patent Licenses;
(l) all Trademarks;
(m) all Trademark Licenses;
(n) all books and records pertaining to the Collateral; and
(o) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing.
3. Representations and Warranties. Each Parent Borrower hereby
represents and warrants that:
3.1 Title; No Other Liens. Except for the security interests granted
to the Administrative Agent for the ratable benefit of the Secured Parties
pursuant to this Agreement and for Liens permitted under the Credit Agreement,
such Parent Borrower owns each item of the Collateral free and clear of any and
all Liens or claims of others. No financing statement or other public notice
with respect to all or any part of the Collateral is on file or of record in any
public office, except such as have been filed in favor of the Administrative
Agent, for the ratable benefit of the Secured Parties, pursuant to this
Agreement.
3.2 Perfected First Priority Liens. The security interests granted
pursuant to this Agreement (a) upon completion of the filings and other actions
specified on Schedule 3, will constitute perfected security interests in the
Collateral in favor of the Administrative Agent, for the ratable benefit of the
Secured Parties, as collateral security for the Obligations and (b) are prior to
all other Liens on the
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5
Collateral in existence on the date hereof.
3.3 Inventory and Equipment. The Inventory and the Equipment of such
Parent Borrower are kept at the locations listed on Schedule 4.
3.4 Chief Executive Office. Such Parent Borrower's chief executive
office is located at 285 Madison Avenue, New York, New York 10017.
3.5 Farm Products. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
4. Covenants. Each Parent Borrower covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Agreement until this Agreement shall terminate and the security interests
granted hereby shall be released:
4.1 Delivery of Instruments and Chattel Paper. If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper, such Instrument or Chattel Paper shall be
immediately delivered to the Administrative Agent, duly indorsed in a manner
satisfactory to the Administrative Agent, to be held as Collateral pursuant to
this Agreement.
4.2 Maintenance of Insurance. (a) Such Parent Borrower will
maintain, with financially sound and reputable insurance companies, insurance
policies (or, to the extent consistent with prudent business practice, a program
of self-insurance with respect to) insuring its Inventory and Equipment against
loss by fire, explosion, theft and such other casualties as may be reasonably
satisfactory to the Administrative Agent and insuring such Parent Borrower, the
Administrative Agent and the Secured Parties against liability for personal
injury and property damage relating to such Inventory and Equipment, such
policies to be in such form and amounts and having such coverage as may be
reasonably satisfactory to the Administrative Agent and the Lenders, with losses
payable to such Parent Borrower, the Administrative Agent and the Secured
Parties as their respective interests may appear.
(b) All such insurance shall provide that no cancellation, material
reduction in amount or material change in coverage thereof shall be effective
until at least 30 days after receipt by the Administrative Agent of written
notice thereof, (i) name the Administrative Agent and the Secured Parties as
insured parties, (ii) include a breach of warranty clause and (iii) be
reasonably satisfactory in all other respects to the Administrative Agent.
(c) Such Parent Borrower shall deliver to the Administrative Agent
and the Lenders a report of a reputable insurance broker with respect to such
insurance during the month of in each calendar year and such supplemental
reports with respect thereto as the Administrative Agent may from time to time
reasonably request.
4.3 Maintenance of Perfected Security Interest; Further
Documentation. (a) Such Parent Borrower shall maintain the security interest
created by this Agreement as a perfected security interest having at least the
priority described in subsection 3.2 and shall defend such security interest
against the claims and demands of all Persons whomsoever.
(b) At any time and from time to time, upon the written request of
the Administrative Agent, and at the sole expense of such Parent Borrower, such
Parent Borrower will promptly and duly execute and deliver such further
instruments and documents and take such further actions as the Administrative
Agent may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of
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6
any financing or continuation statements under the Uniform Commercial Code in
effect in any jurisdiction with respect to the security interests created
hereby.
4.4 Changes in Locations, Name, etc. Such Parent Borrower will not:
(a) permit any of its Inventory or Equipment to be kept at a
location other than those listed on Schedule 4; or
(b) change the location of its chief executive office from that
specified in subsection 3.4;
(c) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Administrative Agent in
connection with this Agreement would become seriously misleading;
unless, in each case, it shall have given the Administrative Agent and the
Lenders at least 30 days' prior written notice of such change and all filings
necessary in the opinion of the Administrative Agent to maintain the perfection
of the security interests granted pursuant to this Agreement shall have been
made.
4.5 Further Identification of Collateral. Such Parent Borrower will
furnish to the Administrative Agent and the Lenders from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Administrative Agent may
reasonably request, all in reasonable detail.
4.6 Notices. Such Parent Borrower will advise the Administrative
Agent and the Lenders promptly, in reasonable detail, at their respective
addresses for notices provided for in the Credit Agreement of:
(a) any Lien (other than security interests created hereby or Liens
permitted under the Credit Agreement) on any of the Collateral; and
(b) the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
5. Provisions Relating to Receivables.
5.1 Parent Borrowers Remain Liable under Receivables. Anything
herein to the contrary notwithstanding, each Parent Borrower shall remain liable
under each of its Receivables to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in accordance
with the terms of any agreement giving rise to each such Receivable. Neither the
Administrative Agent nor any Secured Party shall have any obligation or
liability under any Receivable (or any agreement giving rise thereto) by reason
of or arising out of this Agreement or the receipt by the Administrative Agent
or any Secured Party of any payment relating to such Receivable pursuant hereto,
nor shall the Administrative Agent or any Secured Party be obligated in any
manner to perform any of the obligations of any Parent Borrower under or
pursuant to any Receivable (or any agreement giving rise thereto), to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party under
any Receivable (or any agreement giving rise thereto), to present or file any
claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to it or to which it may be entitled
at any time or times.
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5.2 Analysis of Receivables. The Administrative Agent shall have the
right to make test verifications of the Receivables of the Parent Borrowers in
any manner and through any medium that it reasonably considers advisable, and
each Parent Borrower shall furnish all such assistance and information as the
Administrative Agent may require in connection with such test verifications. At
any time and from time to time, upon the Administrative Agent's request and at
the expense of the Parent Borrowers, each Parent Borrower shall cause
independent public accountants or others satisfactory to the Administrative
Agent to furnish to the Administrative Agent reports showing reconciliations,
aging and test verifications of, and trial balances for, its Receivables. The
Administrative Agent in its own name or in the name of others, may at any time
after the occurrence and during the continuance of an Event of Default,
communicate with the obligors on the Receivables of the Parent Borrowers to
verify with them to the Administrative Agent's satisfaction the existence,
amount and terms of any Receivables of the Parent Borrowers.
5.3 Collections on Receivables. (a) The Administrative Agent hereby
authorizes each Parent Borrower to collect its Receivables, subject to the
Administrative Agent's direction and control, and the Administrative Agent may
curtail or terminate said authority at any time after the occurrence and during
the continuance of an Event of Default. If required by the Administrative Agent
at any time after the occurrence and during the continuance of an Event of
Default, any payments of Receivables of the Parent Borrowers, when collected by
any Parent Borrower, shall be forthwith (and, in any event, within two Business
Days) deposited by such Parent Borrower in the exact form received, duly
indorsed by such Parent Borrower to the Administrative Agent if required, in a
Collateral Account maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent for the
account of the Lenders only as provided in subsection 7.3, and until so turned
over, shall be held by such Parent Borrower in trust for the Administrative
Agent and the Lenders, segregated from other funds of such Parent Borrower.
(b) Each such deposit of Proceeds of Receivables shall be
accompanied by a report identifying in reasonable detail the nature and source
of the payments included in the deposit.
(c) At the Administrative Agent's request, each Parent Borrower
shall deliver to the Administrative Agent all original and other documents
evidencing, and relating to, the agreements and transactions which gave rise to
its Receivables, including, without limitation, all original orders, invoices
and shipping receipts.
5.4 Representations and Warranties. Each Parent Borrower hereby
represents and warrants that:
(a) No amount payable to such Parent Borrower under or in connection
with any of its Receivables is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent.
(b) The amounts represented by such Parent Borrower to the Lenders
from time to time as owing to such Parent Borrower in respect of its Receivables
will at such times be accurate.
5.5 Covenants. Each Parent Borrower covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Agreement until this Agreement shall terminate and the security interests
granted pursuant to this Agreement shall be released:
(a) Other than in the ordinary course of business consistent with
its past practice, such Parent Borrower will not (i) grant any extension of the
time of payment of any of its Receivables, (ii) compromise or settle any of its
Receivables for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of any of its Receivables, (iv)
allow any credit or discount
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8
whatsoever on any of its Receivables, (v) amend, supplement or modify any of its
Receivables in any manner that could adversely affect the value thereof or (vi)
fail to exercise promptly and diligently each and every material right which it
may have under each agreement giving rise to a Receivable (other than any right
of termination).
(b) Such Parent Borrower will deliver to the Administrative Agent a
copy of each material demand, notice or document received by it that questions
the validity or enforceability of more than 5% of the aggregate amount of its
then outstanding Receivables.
6. Provisions Relating to Copyrights, Patents and Trademarks.
6.1 Representations and Warranties. Each Parent Borrower hereby
represents and warrants that:
(a) Schedule 1 includes all material Copyrights and Copyright
Licenses owned by such Parent Borrower in its own name on the date hereof.
(b) Schedule 2 includes all material Trademarks and Trademark
Licenses owned by such Parent Borrower in its own name on the date hereof.
(c) To the best of such Parent Borrower's knowledge, each of its
material Copyrights and Trademarks is on the date hereof valid, subsisting,
unexpired, enforceable and has not been abandoned.
(d) Except as set forth in either Schedule 1 or Schedule 2, none of
such Copyrights and Trademarks is on the date hereof the subject of any
licensing or franchise agreement.
(e) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of any
Copyright or Trademark in any respect that could reasonably be expected to have
a Material Adverse Effect.
(f) Such Parent Borrower does not own any Patent or Patent License
which is material to its business.
(g) No action or proceeding is pending on the date hereof (i)
seeking to limit, cancel or question the validity of any material Copyright or
Trademark, or (ii) which, if adversely determined, would have a material adverse
effect on the value of any material Copyright or Trademark.
6.2 Covenants. Each Parent Borrower covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Agreement until this Agreement shall terminate and the security interests
granted pursuant to this Agreement shall be released:
(a) Such Parent Borrower (either itself or through licensees) will
(i) continue to use each material Trademark consistent with past practice in
order to maintain such Trademark in full force free from any claim of
abandonment for non-use, maintain as in the past the quality of products and
services offered under such Trademark, employ such Trademark with the
appropriate notice of registration, not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark unless the
Administrative Agent, for the ratable benefit of the Secured Parties, shall
obtain a perfected security interest in such mark pursuant to this Agreement,
and not (and not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby such Trademark may become invalidated.
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9
(b) Each Parent Borrower will notify the Administrative Agent and
the Lenders immediately if it knows, or has reason to know, that any application
or registration relating to any material Copyright or Trademark may become
abandoned or dedicated, or of any adverse determination or development
(including, without limitation, the institution of, or any such determination or
development in, any proceeding in the United States Trademark Office or any
court or tribunal in any country) regarding such Parent Borrower's ownership of
any material Copyright or Trademark or its right to register the same or to keep
and maintain the same.
(c) Whenever such Parent Borrower, either by itself or through any
agent, employee, licensee or designee, shall file an application for the
registration of any material Copyright or Trademark with the United States
Patent and Trademark Office or any similar office or agency in any other country
or any political subdivision thereof, each Parent Borrower shall report such
filing to the Administrative Agent and the Lenders within five Business Days
after the last day of the fiscal quarter in which such filing occurs. Upon
request of the Administrative Agent, each Parent Borrower shall execute and
deliver any and all agreements, instruments, documents, and papers as the
Administrative Agent may request to evidence the Administrative Agent's and the
Secured Parties' security interest in any material Copyright or Trademark and
the goodwill and general intangibles of such Parent Borrower relating thereto or
represented thereby.
(d) Each Parent Borrower will take all reasonable and necessary
steps, including, without limitation, in any proceeding before the United States
Patent and Trademark Office, or any similar office or agency in any other
country or any political subdivision thereof, to maintain and pursue each
application (and to obtain the relevant registration) and to maintain each
registration of the material Copyrights and Trademarks, including, without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability.
(e) In the event that any material Copyright or Trademark is
infringed, misappropriated or diluted by a third party, each Parent Borrower
shall (i) take such actions as such Parent Borrower shall reasonably deem
appropriate under the circumstances to protect such Copyright or Trademark, (ii)
promptly notify the Administrative Agent and the Lenders after it learns thereof
and (iii) if deemed appropriate by such Parent Borrower, sue for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and to
recover damages for such infringement, misappropriation or dilution.
7. Remedies.
7.1 Notice to Obligors and Contract Parties. Upon the request of the
Administrative Agent at any time after the occurrence and during the continuance
of an Event of Default, each Parent Borrower shall notify obligors on its
Receivables that such Receivables have been assigned to the Administrative Agent
for the ratable benefit of the Secured Parties and that payments in respect
thereof shall be made directly to the Administrative Agent.
7.2 Proceeds to be Turned Over To Administrative Agent. In addition
to the rights of the Administrative Agent and the Lenders specified in
subsection with respect to payments of Receivables, if an Event of Default shall
occur and be continuing all Proceeds received by any Parent Borrower consisting
of cash, checks and other near-cash items shall be held by such Parent Borrower
in trust for the Administrative Agent and the Lenders, segregated from other
funds of such Parent Borrower, and shall, forthwith upon receipt by such Parent
Borrower, be turned over to the Administrative Agent in the exact form received
by such Parent Borrower (duly indorsed by such Parent Borrower to the
Administrative Agent, if required) and held by the Administrative Agent in a
Collateral Account maintained under the sole dominion and control of the
Administrative Agent. All Proceeds while held by the Administrative Agent in a
Collateral Account (or by such Parent Borrower in trust for
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10
the Administrative Agent and the Lenders) shall continue to be held as
collateral security for all the Obligations and shall not constitute payment
thereof until applied as provided in subsection 7.3.
7.3 Application of Proceeds. (a) At such intervals as may be agreed
upon by the Parent Borrowers and the Administrative Agent, or, if an Event of
Default shall have occurred and be continuing, at any time at the Administrative
Agent's election, the Administrative Agent may apply all or any part of Proceeds
held in any Collateral Account in payment of the Obligations in the following
order of priority:
First: to the Administrative Agent for any unpaid fees, expenses and
other costs of the Administrative Agent;
Second: to the Secured Parties in an amount equal to the unpaid
principal or face amount of, and unpaid interest on, and premium or fees,
if any, in respect of, the Obligations then outstanding whether or not
then due and payable, including, without limitation, the aggregate undrawn
amounts available to be drawn (assuming compliance with all conditions to
drawing) under all Letters of Credit and the aggregate estimated amount of
payment liabilities of the Parent Borrowers and the Subsidiaries under
Eligible Hedge Agreements assuming immediate termination of all such
agreements, and, if such moneys shall be insufficient to pay such amounts
in full, then ratably (without priority of any one over any other) to the
Secured Parties in proportion to the unpaid amounts thereof on the date
any such payment is made;
Third: to the Secured Parties, amounts equal to all other sums which
constitute Obligations, including without limitation the costs and
expenses of the Secured Parties and their representatives which are due
and payable under the relevant Secured Instruments and which constitute
Obligations as of the date any such payment is made, and, if such moneys
shall be insufficient to pay such sums in full, then ratably to the
Secured Parties in proportion to such sums; and
Fourth: any surplus then remaining shall be paid to the Parent
Borrowers or their successors or assigns or to whomsoever may be lawfully
entitled to receive the same or as a court of competent jurisdiction may
direct.
(b) The term "unpaid" as used in clauses Second and Third of
paragraph (a) above refers:
(i) in the absence of a bankruptcy proceeding with respect to
the relevant Parent Borrower, to all amounts of Obligations, as the case
may be, outstanding as of the date a payment is made, whether or not such
amounts are fixed or contingent, and
(ii) during the pendency of a bankruptcy proceeding with
respect to the relevant Parent Borrower, to all amounts allowed by the
bankruptcy court in respect of Obligations as a basis for distribution
(including estimated amounts, if any, allowed in respect of contingent
claims),
to the extent that prior distributions (whether actually distributed or set
aside pursuant to this Section) have not been made in respect thereof.
(c) In the event any Secured Party shall be entitled to receive any
moneys pursuant to clauses Second or Third of paragraph (a) in respect of the
unliquidated, unmatured or contingent portion of the outstanding Obligations
(including, without limitation, obligations under then outstanding Letters of
Credit), then the Administrative Agent shall hold such amount in a Collateral
Account for the benefit
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of such Secured Party until (i) such Secured Party shall have notified the
Administrative Agent that all or part of such unliquidated, unmatured or
contingent claim shall have become matured or fixed, in which case the
Administrative Agent shall distribute from such Collateral Account an amount
equal to such matured or fixed claim to such Secured Party for application to
the payment of such matured or fixed claim, and shall promptly give notice
thereof to the Company or (ii) all or part of such unliquidated, unmatured or
contingent claim shall have been extinguished, whether as the result of an
expiration without drawing of any Letter of Credit, payment of amounts secured
or covered by any Letter of Credit other than by drawing thereunder, payment of
amounts covered by any guarantee or otherwise, in which case such Secured Party
shall, as soon as practicable thereafter, notify the Company and the
Administrative Agent.
(d) In making the determinations and allocations required by this
Section, the Administrative Agent may conclusively rely upon information
supplied by the Administrative Agent (or the relevant Lender, in the case of
Eligible Hedge Agreements) as to the amounts payable with respect to Credit
Agreement Obligations and upon information supplied by a Designated Foreign
Lender as to the amounts payable with respect to Qualified Foreign Indebtedness,
and the Administrative Agent shall have no liability to any of the Secured
Parties for actions taken in reliance on any such information.
7.4 Code Remedies. If an Event of Default shall occur and be
continuing, the Administrative Agent, on behalf of the Secured Parties may
exercise, in addition to all other rights and remedies granted to them in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the Code. Without limiting the generality of the foregoing, the Administrative
Agent, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon any Parent Borrower or any other Person (all and each of
which demands, defenses, advertisements and notices are hereby waived), may in
such circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Administrative Agent or any Lender or elsewhere upon such
terms and conditions as it may deem advisable and at such prices as it may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk. The Administrative Agent or any Secured Party shall have the right
upon any such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in any Parent
Borrower, which right or equity is hereby waived or released. Each Parent
Borrower further agrees, at the Administrative Agent's request, to assemble the
Collateral and make it available to the Administrative Agent at places which the
Administrative Agent shall reasonably select, whether at such Parent Borrower's
premises or elsewhere. The Administrative Agent shall apply the net proceeds of
any action taken by it pursuant to this subsection, after deducting all
reasonable costs and expenses of every kind incurred in connection therewith or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Administrative Agent and the
Lenders hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Obligations, in such
order as the Administrative Agent may elect, and only after such application and
after the payment by the Administrative Agent of any other amount required by
any provision of law, including, without limitation, Section 9-504(1)(c) of the
Code, need the Administrative Agent account for the surplus, if any, to the
Parent Borrowers. To the extent permitted by applicable law, each Parent
Borrower waives all claims, damages and demands it may acquire against the
Administrative Agent or any Lender arising out of the exercise by them of any
rights hereunder. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable and
proper if given at least 10 days before such sale or other disposition.
<PAGE> 204
12
8. Administrative Agent's Appointment as Attorney-in-Fact;
Administrative Agent's Performance of Parent Borrower's Obligations.
8.1 Powers. Each Parent Borrower hereby irrevocably constitutes and
appoints the Administrative Agent and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of such Parent Borrower
and in the name of such Parent Borrower or in its own name, for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate action
and to execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement, and, without limiting
the generality of the foregoing, such Parent Borrower hereby gives the
Administrative Agent the power and right, on behalf of such Parent Borrower,
without notice to or assent by such Parent Borrower, to do any or all of the
following:
(a) in the name of such Parent Borrower or its own name, or
otherwise, take possession of and indorse and collect any checks, drafts,
notes, acceptances or other instruments for the payment of moneys due
under any of its Receivables or with respect to any other Collateral and
file any claim or take any other action or proceeding in any court of law
or equity or otherwise deemed appropriate by the Administrative Agent for
the purpose of collecting any and all such moneys due under any of its
Receivables or with respect to any other Collateral whenever payable;
(b) in the case of any Copyright, Patent or Trademark, execute and
deliver any and all agreements, instruments, documents and papers as the
Administrative Agent may request to evidence the Administrative Agent's
and the Secured Parties' security interest in such Copyright, Patent or
Trademark and the goodwill and general intangibles of such Parent Borrower
relating thereto or represented thereby;
(c) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
(d) execute, in connection with any sale provided for in subsection
7.4, any indorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
(e) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct; ask or demand for, collect, receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become
due at any time in respect of or arising out of any Collateral; sign and
indorse any invoices, freight or express bills, bills of lading, storage
or warehouse receipts, drafts against debtors, assignments, verifications,
notices and other documents in connection with any of the Collateral;
commence and prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the Collateral or
any thereof and to enforce any other right in respect of any Collateral;
defend any suit, action or proceeding brought against any Parent Borrower
with respect to any Collateral; settle, compromise or adjust any such
suit, action or proceeding and, in connection therewith, to give such
discharges or releases as the Administrative Agent may deem appropriate;
assign any Copyright, Patent or Trademark (along with the goodwill of the
business to which any such Copyright, Patent or Trademark pertains),
throughout the world for such term or terms, on such conditions, and in
such manner, as the Administrative Agent shall in its sole discretion
determine; and generally, sell, transfer, pledge and make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as though the Administrative Agent were the absolute owner
thereof for all purposes, and do, at the
<PAGE> 205
13
Administrative Agent's option and the Parent Borrowers' expense, at any
time, or from time to time, all acts and things which the Administrative
Agent deems necessary to protect, preserve or realize upon the Collateral
and the Administrative Agent's and the Lenders' security interests therein
and to effect the intent of this Agreement, all as fully and effectively
as any Parent Borrower might do.
Anything in this subsection to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this subsection unless an Event of Default shall
have occurred and be continuing.
8.2 Performance by Administrative Agent of Borrower's Obligations.
If any Parent Borrower fails to perform or comply with any of its agreements
contained herein, the Administrative Agent, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such agreement.
8.3 Borrower's Reimbursement Obligation. The expenses of the
Administrative Agent incurred in connection with actions undertaken as provided
in this Section, together with interest thereon at a rate per annum equal to the
rate per annum at which interest would then be payable on past due Base Rate
Loans under the Credit Agreement, from the date of payment by the Administrative
Agent to the date reimbursed by the Parent Borrowers, shall be payable by the
Parent Borrowers to the Administrative Agent on demand.
8.4 Ratification; Power Coupled With An Interest. Each Parent
Borrower hereby ratifies all that said attorneys shall lawfully do or cause to
be done by virtue hereof. All powers, authorizations and agencies contained in
this Agreement are coupled with an interest and are irrevocable until this
Agreement is terminated and the security interests created hereby are released.
9. Duty of Administrative Agent. The Administrative Agent's sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Administrative Agent deals
with similar property for its own account. Neither the Administrative Agent, any
Secured Party nor any of their respective officers, directors, employees or
agents shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of any Parent Borrower
or any other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof. The powers conferred on the Administrative Agent
and the Lenders hereunder are solely to protect the Administrative Agent's and
the Secured Parties' interests in the Collateral and shall not impose any duty
upon the Administrative Agent or any Lender to exercise any such powers. The
Administrative Agent and the Lenders shall be accountable only for amounts that
they actually receive as a result of the exercise of such powers, and neither
they nor any of their officers, directors, employees or agents shall be
responsible to any Parent Borrower for any act or failure to act hereunder,
except for their own gross negligence or willful misconduct.
10. Execution of Financing Statements. Pursuant to Section 9-402 of
the Code, each Parent Borrower authorizes the Administrative Agent to file
financing statements with respect to the Collateral without the signature of
such Parent Borrower in such form and in such filing offices as the
Administrative Agent reasonably determines appropriate to perfect the security
interests of the Administrative Agent under this Agreement. A carbon,
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement for filing in any jurisdiction.
11 Authority of Administrative Agent. Each Parent Borrower
acknowledges that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action
<PAGE> 206
14
taken by the Administrative Agent or the exercise or non-exercise by the
Administrative Agent of any option, voting right, request, judgment or other
right or remedy provided for herein or resulting or arising out of this
Agreement shall, as between the Administrative Agent and the Secured Parties, be
governed by the Credit Agreement, this Agreement and by such other agreements
with respect thereto as may exist from time to time among them, but, as between
the Administrative Agent and the Parent Borrowers, the Administrative Agent
shall be conclusively presumed to be acting as agent for the Secured Parties
with full and valid authority so to act or refrain from acting, and the Parent
Borrowers shall be under no obligation, or entitlement, to make any inquiry
respecting such authority.
12. Notices. All notices, requests and demands to or upon the
Administrative Agent or any Parent Borrower hereunder shall be effected in the
manner provided for in subsection 13.2 of the Credit Agreement.
13. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
14. Amendments in Writing; No Waiver; Cumulative Remedies.
14.1 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except,
subject to subsection 13.1 of the Credit Agreement, by a written instrument
executed by the Parent Borrowers and the Administrative Agent, provided that any
provision of this Agreement imposing obligations on the Parent Borrowers may be
waived, subject to subsection 13.1 of the Credit Agreement, by the
Administrative Agent in a written instrument executed by the Administrative
Agent.
14.2 No Waiver by Course of Conduct. Neither the Administrative
Agent nor any Lender shall by any act (except by a written instrument pursuant
to subsection 14.1), delay, indulgence, omission or otherwise be deemed to have
waived any right or remedy hereunder or to have acquiesced in any Default or
Event of Default. No failure to exercise, nor any delay in exercising, on the
part of the Administrative Agent or any Lender, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Administrative Agent or any Lender of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Administrative Agent or such Lender would otherwise have on any
future occasion.
14.3 Remedies Cumulative. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
15. Section Headings. The Section and subsection headings used in
this Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
16. Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of the Parent Borrowers and shall inure to the benefit of
the Administrative Agent and the Lenders and their successors and assigns.
17. Governing Law. This Agreement shall be governed by, and
construed and
<PAGE> 207
15
interpreted in accordance with, the law of the State of New York.
18. Integration. This Agreement represents the agreement of the
Parent Borrowers and the Administrative Agent with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Administrative Agent or any Lender relative to subject matter hereof not
expressly set forth or referred to herein or in the other Loan Documents.
19. Termination. (a) Subject to subsection 13.18 of the Credit
Agreement, this Agreement and the Liens created hereby shall terminate when all
the Credit Agreement Obligations shall have been fully and indefeasibly paid,
when no Letters of Credit shall remain outstanding and when the Commitments
shall have expired or terminated under the Credit Agreement, at which time the
Administrative Agent shall execute and deliver to the Parent Borrowers, or to
such person or persons as the Parent Borrowers shall reasonably designate, all
Uniform Commercial Code termination statements and similar documents prepared by
the Parent Borrowers at their expense which the Parent Borrowers shall
reasonably request to evidence such termination.
(b) Without limiting the foregoing, all Collateral permitted to be
sold, transferred or otherwise disposed of in accordance with the terms and
provisions of the Credit Agreement shall be sold, transferred or otherwise
disposed of free and clear of the Liens created hereby. In connection with the
foregoing, the Administrative Agent shall execute and deliver to the Parent
Borrowers, or to such Person or Persons as the Parent Borrowers shall reasonably
designate, all Uniform Commercial Code termination statements and similar
documents prepared by the Parent Borrowers at their expense which the Parent
Borrowers shall reasonably request to evidence the release of the Liens created
hereby with respect to any such Collateral.
(c) Any execution and delivery of statements or documents pursuant
to this Section 19 shall be without recourse to or representation or warranty by
the Administrative Agent.
20. Designated Foreign Lenders. The Company may from time to time
designate certain banks or other financial institutions acceptable to the
Administrative Agent as "Designated Foreign Lenders" with respect to Qualified
Foreign Indebtedness by delivering a written notice to such effect to the
Administrative Agent in the form of Exhibit A hereto, executed by the Company
and the relevant Designated Foreign Lender and accepted by the Administrative
Agent. Each such bank or other financial institution shall thereafter be deemed
to be a Designated Foreign Lender for all purposes hereunder until such time as
the Administrative Agent shall have received written notice from the Company and
the relevant Designated Foreign Lender to such effect, at which time such
Designated Foreign Lender shall be deemed not to be a Secured Party for all
purposes hereunder and all right, title and interest of such Designated Foreign
Lender in the Collateral and the Security Documents shall terminate. No
Designated Foreign Lender shall have the right to exercise or seek to exercise
any rights or exercise any remedies with respect to any Collateral or institute
any action or proceeding with respect to such rights or remedies, including
without limitation, any action of foreclosure or contest, protest or object to
any foreclosure proceeding or action brought by the Administrative Agent or any
Lender or any other exercise by the Administrative Agent or any Lender of any
rights and remedies hereunder or under any Security Document.
IN WITNESS WHEREOF, the undersigned has caused this Security
Agreement to be duly executed and delivered as of the date first above written.
YOUNG & RUBICAM HOLDINGS INC.
<PAGE> 208
16
By:
--------------------------
Title:
YOUNG & RUBICAM INC., a New York
corporation
By:
--------------------------
Title:
YOUNG & RUBICAM INC., a Delaware
corporation
By:
--------------------------
Title:
YOUNG & RUBICAM L.P.
By: YOUNG & RUBICAM INC., a New York
corporation, its General Partner
By:
--------------------------
Title:
Schedules:
Schedule 1 - Copyrights and Copyright Licenses
Schedule 2 - Trademarks and Trademark Licenses
Schedule 3 - Filing Jurisdictions
Schedule 4 - Locations of Inventory and Equipment
<PAGE> 209
Schedule 1
COPYRIGHTS AND COPYRIGHT LICENSES
None.
<PAGE> 210
Schedule 2
TRADEMARKS AND TRADEMARK LICENSES
None.
<PAGE> 211
Schedule 3
FILING JURISDICTIONS
(SUBSIDIARIES)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Debtor Name and Location of Filing Location
Chief Executive Office
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Black, Kelly, Scruggs, & Healey Inc., Secretary of State, New York
Delaware corporation Recorder of Deeds, District of Columbia
1801 K Street, N.W., Washington, DC 20006 County Clerk, New York County (NY)
Tax ID: 13-3601615
- -----------------------------------------------------------------------------------------------------------------------------------
BM Communications Inc., Secretary of State, New York
Delaware corporation Recorder of Deeds, District of Columbia
285 Madison Ave., New York, NY 10017 County Clerk, New York County (NY)
1801 K Street, N.W., Washington, DC 20006
Tax ID: Pending
- -----------------------------------------------------------------------------------------------------------------------------------
Burson-Marsteller International Inc., Secretary of State, New York
Delaware corporation County Clerk, New York County (NY)
230 Park Ave South, New York, NY 10003
Tax ID: 13-3496066
- -----------------------------------------------------------------------------------------------------------------------------------
Burson-Marsteller/NIS Inc., Secretary of State, New York
Delaware corporation Recorder of Deeds, District of Columbia
285 Madison Ave, New York, NY 10017 County Clerk, New York County (NY)
1801 K Street, N.W., Washington, DC 20006
Tax ID: Pending
- -----------------------------------------------------------------------------------------------------------------------------------
Burson-Marsteller (Puerto Rico), Inc., Secretary of State, New York
Delaware corporation County Clerk, New York County (NY)
Calle Munet Ct. #9, Pueblo Viejo
Guaynabo, Puerto Rico 00968
Tax ID: 13-3505363
- -----------------------------------------------------------------------------------------------------------------------------------
Cygnet Holdings Inc., Secretary of State, New York
Delaware corporation County Clerk, New York County (NY)
285 Madison Ave, New York, NY 10017
Tax ID: 52-1551841
- -----------------------------------------------------------------------------------------------------------------------------------
Landor Associates, Secretary of State, New York
California corporation Secretary of State, California
1001 Front Street, San Francisco, CA 94111 Department of State, Florida
Tax ID: 94-1709801 Secretary of State, Illinois
Department of Licensing, Washington
County Clerk, New York County (NY)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 212
DEBTOR NAME AND LOCATION OF
CHIEF EXECUTIVE OFFICE
- ---------------------------
Landor Associates International,
California corporation
1001 Front Street, San Francisco, CA 94111
Tax ID: 94-2611371
(Japan)
Sogo Hirakawacho Building
1-4-12, Hirakawacho
- --------------------------------------------
RSBC Vestiges Inc.,
New York corporation
285 Madison Ave, New York, NY 10017
Tax ID: 13-2790531
- --------------------------------------------
Y&R Far East Holdings, Inc.,
Delaware corporation
285 Madison Ave, New York, NY 10017
Tax ID: 13-3499286
- --------------------------------------------
Young & Rubicam Puerto Rico, Inc.,
New York corporation
9 Munet Court, Buchnan
Guaynabo, Puerto Rico 00968
Tax ID: 66-0215548
- --------------------------------------------
FILING LOCATION
- ---------------------------
Secretary of State, New York
Secretary of State, California
County Clerk, New York County (NY)
- --------------------------------------------
Secretary of State, New York
County Clerk, New York County (NY)
- --------------------------------------------
Secretary of State, New York
County Clerk, New York County (NY)
- --------------------------------------------
Secretary of State, New York
County Clerk, New York County (NY)
<PAGE> 213
Schedule 4
LOCATIONS OF INVENTORY AND EQUIPMENT
(SUBSIDIARIES)
BLACK, KELLY, 1801 K. Street, N.W.
SCRUGGS & HEALY INC. Washington, DC 20006 RSBC VESTIGES INC.
(District of Columbia)
1801 K. Street, NW 285 Madison Avenue
Washington, DC 20006 New York, NY 10017
(District of Columbia) BURSON-MARSTELLER/ (New York County)
NIS INC.
BURSON-MARSTELLER 285 Madison Avenue Y&R FAR EAST
INTERNATIONAL INC. New York, NY 10017 HOLDINGS, INC.
(New York County)
230 Park Avenue South 285 Madison Avenue
New York, NY 10003 1801 K Street, N.W. New York, NY 10017
(New York County) Washington, DC 20006 (New York County)
(District of Columbia)
BURSON-MARSTELLER YOUNG & RUBICAM
(PUERTO RICO), INC. LANDOR ASSOCIATES PUERTO RICO, INC.
Calle Munet Ct. #9 1001 Front Street 9 Munet Court, Buchanan
Pueblo Viejo San Francisco, CA 94111 Guaynabo, Puerto Rico
Guaynabo, Puerto Rico (San Francisco County) 00968
00968
601 Brickell Key Drive
Miami, FL 33131
CYGNET HOLDINGS INC. (Dade County)
285 Madison Avenue One East Wacker Drive
New York, NY 10017 15th Floor
(New York County) Chicago, IL 60601
(Cook County)
SUMMIT INSURANCE 230 Park Avenue South
COMPANY New York, NY 10003
(New York County)
RR3
Airport Road 1411 Fourth Avenue
Berlin, VT 05602 Seattle, WA 98101
(Washington County) (King County)
BM COMMUNICATIONS LANDOR ASSOCIATES
INC. INTERNATIONAL
285 Madison Avenue 1001 Front Street
New York, NY 10017 San Francisco, CA 94111
(New York County) (San Francisco County)
<PAGE> 214
EXHIBIT A
[FORM OF DESIGNATED FOREIGN LENDER NOTICE]
DESIGNATED FOREIGN LENDER NOTICE
Reference is made to (a) the Security Agreement, dated as of
____________ __, 1996 (the "Parent Borrower Security Agreement"), made by Young
& Rubicam Holdings Inc., a New York corporation ("Y&R Holdings"), Young &
Rubicam Inc., a New York corporation ("Y&R Inc. (New York)"), Young & Rubicam,
Inc., a Delaware corporation ("Y&R Inc. (Delaware)"), Young & Rubicam L.P., a
Delaware limited partnership ("Y&R LP"; collectively with Y&R Holdings, Y&R Inc.
(New York) and Y&R Inc. (Delaware), the "Parent Borrowers") in favor of Bank of
America National Trust and Savings Association, a national banking association,
as Administrative Agent (in such capacity, the "Administrative Agent") for the
several banks and other financial institutions (the "Lenders") from time to time
parties to the Credit and Guarantee Agreement, dated as of December __, 1996 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Parent Borrowers, the Subsidiary Borrowers (as defined in
the Credit Agreement) from time to time parties thereto, the Lenders, the
Administrative Agent and Bank of America International Limited, a bank organized
under the laws of England, as European Payment Agent, (b) the Pledge Agreement,
dated as of _________ __, 1996 (the "Parent Borrower Pledge Agreement"), made by
the Parent Borrowers in favor of the Administrative Agent, (c) the Security
Agreement, dated as of __________ __, 1996 (the "Subsidiaries Security
Agreement"), made by each of the subsidiaries of the Parent Borrowers which are
parties thereto in favor of the Administrative Agent, and (d) the Pledge
Agreement, dated as of _________ __, 1996 (the "Subsidiaries Pledge Agreement",
and together with the Parent Borrower Security Agreement, the Parent Borrower
Pledge Agreement and the Subsidiaries Security Agreement, the "Security
Documents"), made by each of the subsidiaries of the Parent Borrowers which are
parties thereto in favor of the Administrative Agent.
The Company hereby designates [Name of Designated Foreign Lender] as
a "Designated Foreign Lender" under the Security Documents with a Maximum
Qualified Foreign Indebtedness Amount of $___________. The Company hereby
represents and warrants that the "Qualified Foreign Indebtedness" is comprised
of [include description] and that all amount outstanding in respect thereof will
be permitted under subsection 9.2(d) of the Credit Agreement.
The undersigned, [Name of Designated Foreign Lender], hereby
acknowledges and agrees that the Maximum Qualified Foreign Indebtedness Amount
with respect to the Qualified Foreign Indebtedness described herein shall be
$___________. The undersigned in its capacity as a Designated Foreign Lender
further acknowledges and agrees that (a) it shall be bound by all of the terms
and conditions of the Security Documents, (b) it shall not have the right to
exercise or seek to exercise any rights or exercise any remedies with respect to
any collateral subject to the Security Documents or institute any action or
proceeding with respect to such rights or remedies, including, without
limitation, any action of foreclosure or contest, protest or object to any
foreclosure proceeding or action brought by the Administrative Agent or any
Lender or any other exercise by the Administrative Agent or any Lender of any
rights and remedies hereunder or under any Security Document, (c) it shall not
have the right to consent to any amendment, waiver or modification of any
Security Document (other than, subject to clause (d) below, any amendment,
waiver or other modification to subsection 7.3 of the Parent Borrower Security
Agreement and the Subsidiaries Security Agreement and Section 8 (other than
paragraph (e) thereof) of the Parent Borrower Pledge Agreement and the
Subsidiaries Pledge Agreement which materially adversely affects such Designated
Foreign Lender in a manner which is different to the effect of such amendment,
waiver or modification on the other Secured Parties), (d) it shall not have the
right to consent to any release of all or any portion of the Collateral by the
Administrative Agent or the Lenders,
<PAGE> 215
2
(e) it shall not have the right to request or direct that any payment be made
under subsection 7.3 of the Parent Borrower Security Agreement or the
Subsidiaries Security Agreement or Section 8 (other than paragraph (e) thereof)
of the Parent Borrower Pledge Agreement or the Subsidiaries Pledge Agreement,
(f) neither the Administrative Agent nor any Lender shall have any liability or
obligation to the undersigned (including, without limitation, with respect to
the perfection of any lien or security interest granted pursuant to the Security
Documents) except with respect to any payment (if and when made) under
subsection 7.3 of the Parent Borrower Security Agreement or the Subsidiaries
Security Agreement or Section 8 (other than paragraph (e) thereof) of the Parent
Borrower Pledge Agreement or the Subsidiaries Pledge Agreement and (g) it has
received copies of the Credit Agreement and each of the Security Documents. All
notices to the undersigned shall be sent to [insert notice information] or to
such other address as the undersigned shall designate in writing from time to
time to the Administrative Agent and all notices shall be given in accordance
with subsection 13.2 of the Credit Agreement.
THIS NOTICE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
The undersigned hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Notice or for recognition and enforcement of any
judgment in respect thereof,to the non-exclusive general jurisdiction of the
courts of the State of New York, the courts of the United State of America for
the Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail, (or
any substantially similar form of mail), postage prepaid, to its address for
notices hereunder;
(d) agrees that nothing herein shall affect the right to effect
service or process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
<PAGE> 216
3
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to in
this subsection any special, exemplary, punitive or consequential damages.
[NAME OF DESIGNATED FOREIGN
LENDER]
By:
---------------------------
Name:
[THE COMPANY]
By:
---------------------------
Name:
Accepted:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Administrative Agent
By:
---------------------------
Name:
Date:
-------------------------
<PAGE> 217
EXHIBIT H TO
CREDIT AND GUARANTEE AGREEMENT
[FORM OF SUBSIDIARIES GUARANTEE]
GUARANTEE, dated as of ____, 1996, made by each of the Persons that
are signatories hereto (the "Guarantors"), in favor of Bank of America National
Trust and Savings Association, as administrative agent (in such capacity, the
"Administrative Agent") for the several banks and other financial institutions
from time to time parties to the Credit and Guarantee Agreement (the "Lenders"),
dated as of ___________, 1996 (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), among Young & Rubicam Holdings Inc.,
a New York corporation ("Y&R Holdings"), Young & Rubicam Inc., a New York
corporation ("Y&R Inc. (New York)"), Young & Rubicam Inc., a Delaware
corporation ("Y&R Inc. (Delaware)"), Young & Rubicam L.P., a Delaware limited
partnership ("Y&R LP"; collectively with Y&R Holdings, Y&R Inc. (New York) and
Y&R Inc. (Delaware), the "Parent Borrowers"), the Subsidiary Borrowers (as
defined in the Credit Agreement) from time to time parties thereto, the Lenders,
the Administrative Agent and Bank of America International Limited, a bank
organized under the laws of England, as European Payment Agent.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrowers upon the terms
and subject to the conditions set forth therein;
WHEREAS, each of the Guarantors is a Subsidiary (as defined in the
Credit Agreement) of the Parent Borrowers;
WHEREAS, the Borrowers and the Guarantors are engaged in related
businesses, and each Guarantor will derive substantial direct and indirect
benefit from the making of the extensions of credit under the Credit Agreement;
and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective extensions of credit under the Credit Agreement
that the Guarantors shall have executed and delivered this Guarantee to the
Administrative Agent for the ratable benefit of the Lenders.
NOW, THEREFORE, in consideration of the promises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit under the
Credit Agreement, each Guarantor hereby agrees with the Administrative Agent,
for the ratable benefit of the Lenders, as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement, provided that, for purposes if this Guarantee, "Lender"
shall include any fronting Lender, Issuing Bank and any Person which is a party
to an Eligible Hedge Agreement .
<PAGE> 218
2
(b) As used herein, "Eligible Hedge Agreement" means any Foreign
Currency Protection Agreement or Interest Rate Protection Agreement entered into
with any Person that is a Lender or an Affiliate of a Lender and "Obligations"
means the collective reference to the unpaid principal of and interest on the
Loans and the Reimbursement Obligations and all other obligations and
liabilities of the Borrowers to the Administrative Agent and the Lenders
(including, without limitation, interest accruing at the then applicable rate
provided in the Credit Agreement after the maturity of the Loans and the
Reimbursement Obligations and interest accruing at the then applicable rate
provided in the Credit Agreement after the filing of any petition in bankruptcy,
or the commencement of any insolvency, reorganization or like proceeding,
relating to any Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, the
Credit Agreement, this Agreement, the other Loan Documents, any Eligible Hedge
Agreement or any other document made, delivered or given in connection
therewith, in each case whether on account of the principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to the
Administrative Agent or to the Lenders that are required to be paid by any
Borrower pursuant to the terms of the Credit Agreement, this Agreement, any
other Loan Document or any Eligible Hedge Agreement).
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Guarantee shall refer to this Guarantee as a
whole and not to any particular provision of this Guarantee, and section and
paragraph references are to this Guarantee unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Guarantee (a) Subject to the provisions of Section 2(b), each of
the Guarantors hereby, jointly and severally, unconditionally and irrevocably,
guarantees to the Administrative Agent, for the ratable benefit of the Lenders
and their respective successors, indorsees, transferees and assigns, the prompt
and complete payment and performance by the Borrowers when due (whether at the
stated maturity, by acceleration or otherwise) of the Obligations, provided that
the liabilities under this Guarantee of each Guarantor which is a Foreign
Subsidiary shall in no event exceed the amount set forth under its signature
below as its "Maximum Guarantee Amount".
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable federal, state and foreign laws relating to
the insolvency of debtors.
(c) Each Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of counsel) which may
be paid or incurred by the Administrative Agent or any Lender in enforcing, or
obtaining advice of counsel in respect of, any rights with respect to, or
collecting, any or all of the Obligations and/or enforcing any rights with
respect to, or collecting against, such Guarantor under this Guarantee. This
Guarantee shall remain in full force and effect until the Obligations are paid
in full, the Commitments are terminated, and no Letter of Credit is outstanding
notwithstanding that from time to time prior thereto the Borrowers may be free
from any Obligations.
(d) Each Guarantor agrees that the Obligations may at any time and
from time to time exceed the amount of the liability of such Guarantor hereunder
without impairing this Guarantee or affecting the rights and remedies of the
Administrative Agent or any Lender hereunder.
<PAGE> 219
3
(e) No payment or payments made by the Borrowers, any of the
Guarantors, any other guarantor or any other Person or received or collected by
the Administrative Agent or any Lender from the Borrowers, any of the
Guarantors, any other guarantor or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application at any time or from
time to time in reduction of or in payment of the Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment or payments other than
payments made by such Guarantor in respect of the Obligations or payments
received or collected from such Guarantor in respect of the Obligations, remain
liable for the Obligations up to the maximum liability of such Guarantor
hereunder until the Obligations are paid in full, the Commitments are terminated
and no Letter of Credit is outstanding.
(f) Each Guarantor agrees that whenever, at any time, or from time
to time, it shall make any payment to the Administrative Agent or any Lender on
account of its liability hereunder, it will notify the Administrative Agent in
writing that such payment is made under this Guarantee for such purpose.
3. Right of Contribution. Each Guarantor hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder who has not paid its
proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section hereof. The provisions
of this Section shall in no respect limit the obligations and liabilities of any
Guarantor to the Administrative Agent and the Lenders, and each Guarantor shall
remain liable to the Administrative Agent and the Lenders for the full amount
guaranteed by such Guarantor hereunder.
4. Right of Set-off. Upon the occurrence of any Event of Default,
each Guarantor hereby irrevocably authorizes the Administrative Agent and each
Lender at any time and from time to time without notice to such Guarantor or any
other Guarantor, any such notice being expressly waived by each Guarantor, to
set-off and appropriate and apply any and all deposits (general or special, time
or demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Administrative Agent or such Lender to or for the credit or the
account of such Guarantor, or any part thereof in such amounts as the
Administrative Agent or such Lender may elect, against and on account of the
obligations and liabilities of such Guarantor to the Administrative Agent or
such Lender hereunder and claims of every nature and description of the
Administrative Agent or such Lender against such Guarantor, in any currency,
whether arising hereunder, under the Credit Agreement, any other Loan Documents
or otherwise, as the Administrative Agent or such Lender may elect, whether or
not the Administrative Agent or any Lender has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. The Administrative Agent and each Lender shall notify such Guarantor
promptly of any such set-off and the application made by the Administrative
Agent or such Lender, provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of the
Administrative Agent and each Lender under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which the Administrative Agent or such Lender may have.
5. No Subrogation. Notwithstanding any payment or payments made by
any of the Guarantors hereunder or any set-off or application of funds of any of
the Guarantors by any Lender, no Guarantor shall be entitled to be subrogated to
any of the rights of the Administrative Agent or any Lender against the
Borrowers or any other Guarantor or any collateral security or guarantee or
right of
<PAGE> 220
4
offset held by any Lender for the payment of the Obligations, nor shall any
Guarantor seek or be entitled to seek any contribution or reimbursement from the
Borrowers or any other Guarantor in respect of payments made by such Guarantor
hereunder, until all amounts owing to the Administrative Agent and the Lenders
by the Parent Borrowers on account of the Obligations are paid in full, the
Commitments are terminated and no Letter of Credit is outstanding. If any amount
shall be paid to any Guarantor on account of such subrogation rights at any time
when all of the Obligations shall not have been paid in full, such amount shall
be held by such Guarantor in trust for the Administrative Agent and the Lenders,
segregated from other funds of such Guarantor, and shall, forthwith upon receipt
by such Guarantor, be turned over to the Administrative Agent in the exact form
received by such Guarantor (duly indorsed by such Guarantor to the
Administrative Agent, if required), to be applied against the Obligations,
whether matured or unmatured, in such order as the Administrative Agent may
determine.
6. Amendments, etc. with respect to the Obligations; Waiver of
Rights. Each Guarantor shall remain obligated hereunder notwithstanding that,
without any reservation of rights against any Guarantor and without notice to or
further assent by any Guarantor, any demand for payment of any of the
Obligations made by the Administrative Agent or any Lender may be rescinded by
such party and any of the Obligations continued, and the Obligations, or the
liability of any other party upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Administrative
Agent or any Lender, and the Credit Agreement, the other Loan Documents, any
Eligible Hedge Agreement and any other documents executed and delivered in
connection therewith may be amended, modified, supplemented or terminated, in
whole or in part, as the Administrative Agent (or the relevant Lenders, as the
case may be) may deem advisable from time to time, and any collateral security,
guarantee or right of offset at any time held by the Administrative Agent or any
Lender for the payment of the Obligations may be sold, exchanged, waived,
surrendered or released. Neither the Administrative Agent nor any Lender shall
have any obligation to protect, secure, perfect or insure any Lien at any time
held by it as security for the Obligations or for this Guarantee or any property
subject thereto. When making any demand hereunder against any of the Guarantors,
the Administrative Agent or any Lender may, but shall be under no obligation to,
make a similar demand on the Borrowers or any other Guarantor or guarantor, and
any failure by the Administrative Agent or any Lender to make any such demand or
to collect any payments from the Borrowers or any such other Guarantor or
guarantor or any release of the Borrowers or such other Guarantor or guarantor
shall not relieve any of the Guarantors in respect of which a demand or
collection is not made or any of the Guarantors not so released of their several
obligations or liabilities hereunder, and shall not impair or affect the rights
and remedies, express or implied, or as a matter of law, of the Administrative
Agent or any Lender against any of the Guarantors. For the purposes hereof
"demand" shall include the commencement and continuance of any legal
proceedings.
7. Guarantee Absolute and Unconditional. Each Guarantor waives any
and all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Administrative Agent or
any Lender upon this Guarantee or acceptance of this Guarantee, the Obligations,
and any of them, shall conclusively be deemed to have been created, contracted
or incurred, or renewed, extended, amended or waived, in reliance upon this
Guarantee; and all dealings between the Borrowers and any of the Guarantors, on
the one hand, and the Administrative Agent and the Lenders, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon this Guarantee. Each Guarantor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Borrowers or any of the Guarantors with respect to the Obligations. Each
Guarantor understands and agrees that this Guarantee shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity, regularity or enforceability of the Credit Agreement, any
other Loan Document, any Eligible Hedge Agreement,
<PAGE> 221
5
any of the Obligations or any other collateral security therefor or guarantee or
right of offset with respect thereto at any time or from time to time held by
the Administrative Agent or any Lender, (b) any defense, set-off or counterclaim
(other than a defense of payment or performance) which may at any time be
available to or be asserted by any Borrower against the Administrative Agent or
any Lender, or (c) any other circumstance whatsoever (with or without notice to
or knowledge of any Borrower or such Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of any Borrower for the
Obligations, or of such Guarantor under this Guarantee, in bankruptcy or in any
other instance. When pursuing its rights and remedies hereunder against any
Guarantor, the Administrative Agent and any Lender may, but shall be under no
obligation to, pursue such rights and remedies as it may have against the
Borrowers or any other Person or against any collateral security or guarantee
for the Obligations or any right of offset with respect thereto, and any failure
by the Administrative Agent or any Lender to pursue such other rights or
remedies or to collect any payments from the Borrowers or any such other Person
or to realize upon any such collateral security or guarantee or to exercise any
such right of offset, or any release of the Borrowers or any such other Person
or any such collateral security, guarantee or right of offset, shall not relieve
such Guarantor of any liability hereunder, and shall not impair or affect the
rights and remedies, whether express, implied or available as a matter of law,
of the Administrative Agent and the Lenders against such Guarantor. This
Guarantee shall remain in full force and effect and be binding in accordance
with and to the extent of its terms upon each Guarantor and the successors and
assigns thereof, and shall inure to the benefit of the Administrative Agent and
the Lenders, and their respective successors, indorsees, transferees and
assigns, until all the Obligations and the obligations of each Guarantor under
this Guarantee shall have been satisfied by payment in full, the Commitments
shall have been terminated and no Letter of Credit shall be outstanding,
notwithstanding that from time to time during the term of the Credit Agreement
the Borrowers may be free from any Obligations.
8. Reinstatement. This Guarantee shall continue to be effective, or
be reinstated, as the case may be, if at any time payment, or any part thereof,
of any of the Obligations is rescinded or must otherwise be restored or returned
by the Administrative Agent or any Lender upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of any Borrower or any Guarantor, or
upon or as a result of the appointment of a receiver, intervenor or conservator
of, or trustee or similar officer for, any Borrower or any Guarantor or any
substantial part of its property, or otherwise, all as though such payments had
not been made.
9. Payments. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim at the office of the Administrative Agent located at 1455 Market
Street, San Francisco, California 94103.
10. Representations and Warranties. Each Guarantor hereby represents
and warrants that:
(a) it is a person duly organized, validly existing and, except to
the extent the failure to be so could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, in good standing under
the laws of the jurisdiction of its organization and has the power and authority
and the legal right to own and operate its property, to lease the property it
operates and to conduct the business in which it is currently engaged;
(b) it has the power and authority and the legal right to execute
and deliver, and to perform its obligations under, this Guarantee, and has taken
all necessary corporate action to authorize its execution, delivery and
performance of this Guarantee;
<PAGE> 222
6
(c) this Guarantee constitutes a legal, valid and binding obligation
of such Guarantor enforceable in accordance with its terms, except as affected
by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting the enforcement of creditors' rights
generally, general equitable principles and an implied covenant of good faith
and fair dealing;
(d) the execution, delivery and performance of this Guarantee will
not violate any provision of any Requirement of Law or Contractual Obligation of
such Guarantor and will not result in or require the creation or imposition of
any Lien on any of the properties or revenues of such Guarantor pursuant to any
Requirement of Law or Contractual Obligation of the Guarantor;
(e) no consent or authorization of, filing with, or other act by or
in respect of, any arbitrator or Governmental Authority and no consent of any
other Person (including, without limitation, any stockholder or creditor of such
Guarantor) is required in connection with the execution, delivery, performance,
validity or enforceability of this Guarantee;
(f) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of such
Guarantor, threatened by or against such Guarantor or against any of its
properties or revenues (i) with respect to this Guarantee or any of the
transactions contemplated hereby, or (ii) which could reasonably be expected to
have a Material Adverse Effect; and
(g) the representations and warranties contained in subsections 6.8
through 6.11 of the Credit Agreement are true and correct to the extent such
representations and warranties apply to such Guarantor.
Each Guarantor agrees that the foregoing representations and
warranties shall be deemed to have been made by such Guarantor on the date of
each extension of credit to the Parent Borrowers under the Credit Agreement on
and as of such date of extension of credit as though made hereunder on and as of
such date.
11. Covenants. Each Guarantor hereby covenants and agrees with the
Administrative Agent and each Lender that, from and after the date of this
Guarantee until the Obligations are paid in full, the Commitments are terminated
and no Letter of Credit is outstanding, such Guarantor will comply with
provisions of Sections 8 and 9 of the Credit Agreement to the extent such
provisions apply to such Guarantor.
12. Authority of Administrative Agent. Each Guarantor acknowledges
that the rights and responsibilities of the Administrative Agent under this
Guarantee with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Guarantee shall, as between the Administrative Agent and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Administrative Agent and such Guarantor, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and no Guarantor shall be under any
obligation, or entitlement, to make any inquiry respecting such authority.
13. Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand,
<PAGE> 223
7
when delivered, (b) in the case of delivery by mail, three days after being
deposited in the mail, postage prepaid, or (c) in the case of delivery by
facsimile transmission, when sent and receipt has been confirmed, addressed as
follows, or to such other address as may be hereinafter notified by the
respective parties hereto:
(a) if to the Administrative Agent, at its address or transmission
number for notices provided in subsection 13.2 of the Credit Agreement; and
(b) if to any Guarantor, at its address or transmission number for
notices set forth under its signature below.
14. Counterparts. This Guarantee may be executed by one or more of
the Guarantors on any number of separate counterparts (including by facsimile
transmission), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the counterparts of this
Guarantee signed by all the Guarantors shall be lodged with the Administrative
Agent.
15. Severability. Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
16. Integration. This Guarantee represents the agreement of each
Guarantor with respect to the subject matter hereof and there are no promises or
representations by the Administrative Agent or any Lender relative to the
subject matter hereof not reflected herein.
17. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None
of the terms or provisions of this Guarantee may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
each Guarantor and the Administrative Agent, subject to subsection 13.1 of the
Credit Agreement.
(b) No failure to exercise and no delay in exercising, on the part
of the Administrative Agent or any Lender, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy power or
privilege.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
18. Section Headings. The section headings used in this Guarantee
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
19. Successors and Assigns. This Guarantee shall be binding upon the
successors and assigns of each Guarantor and shall inure to the benefit of the
Administrative Agent and the Lenders and their successors and assigns provided
that no Guarantor may assign any of its rights or obligations under this
Guarantee without the consent of the Administrative Agent and the Required
Lenders.
20. GOVERNING LAW. THIS GUARANTEE AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND
<PAGE> 224
8
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
21. Termination. (a) Subject to Section 8, this Guarantee shall
remain in full force and effect and be binding in accordance with its terms
until all Obligations shall have been satisfied by payment in full, the
Commitments shall have been terminated and no Letter of Credit shall be
outstanding. A Guarantor shall be released from its obligations hereunder in the
event that all the Capital Stock of such Guarantor shall be sold, transferred or
otherwise disposed of in accordance with the terms of the Credit Agreement.
(b) Subject to the second sentence of paragraph (a) of this Section,
each Guarantor which is a Foreign Subsidiary shall be automatically released
from its obligations under this Guarantee on the day which is 90 days after the
Closing Date.
22. Submission To Jurisdiction; Waivers. Each Guarantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Guarantee and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof,to the non-exclusive general jurisdiction of the courts of the State of
New York, the courts of the United State of America for the Southern District of
New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail, (or
any substantially similar form of mail), postage prepaid, to such Guarantor at
its address set forth under its signature below or at such other address of
which the Administrative Agent shall have been notified pursuant to Section 13;
(d) agrees that nothing herein shall affect the right to effect
service or process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred to in
this subsection any special, exemplary, punitive or consequential damages.
23. WAIVERS OF JURY TRIAL. EACH GUARANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS GUARANTEE OR ANY OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY AND FOR ANY
COUNTERCLAIM THEREIN.
24. Addition of Guarantors. Subsection 8.10(b) of the Credit
Agreement requires that any Subsidiary (other than a Foreign Subsidiary or a Y&R
Agent Subsidiary) of the Borrower created or acquired after the Closing Date
become a Guarantor hereunder by executing and delivering a Supplement to this
Guarantee in the form attached hereto as Exhibit A. From and after the date any
such Subsidiary executes and delivers a Supplement to this Guarantee in the form
attached hereto as Exhibit A to the
<PAGE> 225
9
Administrative Agent, such Subsidiary shall be deemed to be a Guarantor for all
purposes under this Guarantee.
<PAGE> 226
10
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee to be duly executed and delivered by its duly authorized officer as of
the day and year first above written.
BLACK, KELLY, SCRUGGS & HEALEY INC.
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
BM COMMUNICATIONS INC.
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
BURSON-MARSTELLER INTERNATIONAL INC.
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
<PAGE> 227
11
BURSON-MARSTELLER/NIS, INC.
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
BURSON-MARSTELLER (PUERTO RICO) INC.
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
CYGNET HOLDINGS COMPANY INC.
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
<PAGE> 228
12
LANDOR ASSOCIATES
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
LANDOR ASSOCIATES INTERNATIONAL
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
RSBC VESTIGES INC.
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
<PAGE> 229
13
Y&R FAR EAST HOLDINGS, INC.
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
YOUNG & RUBICAM PUERTO RICO, INC.
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
<PAGE> 230
14
YOUNG & RUBICAM GERMANY GMBH
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
Maximum Guarantee Amount: $25,000,000
YOUNG & RUBICAM FRANCE S.A.
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
Maximum Guarantee Amount: $20,000,000
YOUNG & RUBICAM GROUP NETHERLANDS BV
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
Maximum Guarantee Amount: $19,000,000
<PAGE> 231
15
HALL & CEDERQUIST/YOUNG & RUBICAM AB
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
Maximum Guarantee Amount: $6,000,000
BURSON-MARSTELLER HONG KONG LTD.
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
Maximum Guarantee Amount: $3,000,000
BURSON-MARSTELLER S.A.
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
Maximum Guarantee Amount: $3,000,000
<PAGE> 232
16
NORDSTROM & OHMAN AB
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
Maximum Guarantee Amount: $3,000,000
YOUNG & RUBICAM S.A.
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
Maximum Guarantee Amount: $2,000,000
WUNDERMAN CATO JOHNSON AB
By:
----------------------------
Title
Address for Notices:
_______________________________
_______________________________
_______________________________
Fax:
Maximum Guarantee Amount: $1,000,000
<PAGE> 233
EXHIBIT A TO
SUBSIDIARIES GUARANTEE
[FORM OF ADDITIONAL SUBSIDIARIES SUPPLEMENT]
SUPPLEMENT, dated _______________ __, 1996 to the Guarantee, dated
as of __________ __, ____ (as amended, the "Guarantee"), made by each of the
subsidiaries of the Parent Borrowers (as defined therein) from time to time
parties thereto (collectively, the "Guarantors").
W I T N E S S E T H :
WHEREAS, the Guarantee provides that any Subsidiary of the Parent
Borrowers, although not a Guarantor thereunder at the time of the initial
execution thereof, may become a Guarantor under the Guarantee upon the delivery
to the Administrative Agent of a supplement in substantially the form of this
Supplement; and
WHEREAS, the undersigned was not a Guarantor under the Guarantee at
the time of the initial execution thereof but now desires to become a Guarantor
thereunder;
NOW, THEREFORE, the undersigned hereby agrees as follows:
The undersigned agrees to be bound by all of the provisions of the
Guarantee applicable to a Guarantor thereunder and agrees that it shall,
on the date this Supplement is executed and delivered to the
Administrative Agent, become a Guarantor, for all purposes of the
Guarantee to the same extent as if originally a party thereto. Without
limiting the foregoing, subject to the provisions of Section 2(b) of the
Guarantee, the undersigned, jointly and severally with the other
Guarantors, unconditionally and irrevocably, guarantees to the
Administrative Agent, for the ratable benefit of the Lenders and their
respective successors, indorsees, transferees and assigns, the prompt and
complete payment and performance by the Borrowers when due and payable
(whether at the stated maturity, by acceleration or otherwise) of the
Obligations.
Terms defined in the Guarantee shall have their defined meanings
when used herein.
<PAGE> 234
2
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.
[INSERT NAME OF SUBSIDIARY]
By:
----------------------------------
Title:
ACKNOWLEDGED AND AGREED AS OF
THE DATE FIRST ABOVE WRITTEN:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative Agent
By:
----------------------------------
Title:
<PAGE> 235
EXHIBIT I TO
CREDIT AND GUARANTEE AGREEMENT
[FORM OF SUBSIDIARIES PLEDGE AGREEMENT]
PLEDGE AGREEMENT, dated as of December ___, 1996, made by
BURSON-MARSTELLER INTERNATIONAL INC., a Delaware corporation, CYGNET HOLDINGS
COMPANY INC., a Delaware corporation, LANDOR ASSOCIATES, a California
corporation and YOUNG & RUBICAM INTERNATIONAL GROUP B.V., a Netherlands entity
("Y&R B.V.,"; collectively, the "Pledgors"), in favor of BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association, as
administrative agent (in such capacity, the "Administrative Agent") for the
several banks and other financial institutions (the "Lenders") from time to time
parties to the Credit and Guarantee Agreement, dated as of December ___, 1996
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Pledgors, the Subsidiary Borrowers (as defined in the
Credit Agreement) from time to time parties thereto, the Lenders, the
Administrative Agent and Bank of America International Limited, a bank organized
under the laws of England, as European Payment Agent.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrowers upon the terms
and subject to the conditions set forth therein;
WHEREAS, the Pledgors are the legal and beneficial owners of the
shares of Pledged Stock (as hereinafter defined) issued by the Issuers (as
hereinafter defined);
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective extensions of credit under the Credit Agreement
that the Pledgors, other than Y&R B.V., shall have executed and delivered that
certain Subsidiaries Guarantee dated as of the date hereof (the "Guarantee");
WHEREAS, in satisfaction of such condition, the Pledgors, other than
Y&R B.V., have executed and delivered the Guarantee; and
WHEREAS, it is also a condition precedent to the obligation of the
Lenders to make their respective extensions of credit under the Credit Agreement
that the Pledgors shall have executed and delivered this Pledge Agreement to the
Administrative Agent for the ratable benefit of the Secured Parties and to
secure their obligations under the Guarantee and the other Loan Documents.
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit under the
Credit Agreement, the Pledgors hereby agree with the Administrative Agent, for
the ratable benefit of the Secured Parties, as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement, provided that, for purposes of this Agreement, "Lender"
shall include any Fronting Lender, Issuing Bank and any Person which is a party
to an Eligible Hedge Agreement.
<PAGE> 236
2
(b) The following terms shall have the following meanings:
"Agreement": this Pledge Agreement, as the same may be amended,
modified or otherwise supplemented from time to time.
"Code": the Uniform Commercial Code from time to time in effect in
the State of New York.
"Collateral": the Pledged Stock issued by the Issuers and all
Proceeds thereof.
"Collateral Account": any account established to hold money
Proceeds, maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent
for the account of the Secured Parties as provided in Section 8.
"Designated Foreign Lender": any bank or financial institution which
(a) makes Qualified Foreign Indebtedness available to a Foreign Subsidiary
(pursuant to a commitment or otherwise) and (b) is designated as a
"Designated Foreign Lender" in accordance with Section 21.
"Domestic Issuer": any Issuer that is not a Foreign Issuer.
"Eligible Hedge Agreement": any Foreign Currency Protection
Agreement and Interest Rate Protection Agreement entered into with any
Person that is a Lender or an Affiliate of a Lender at the time of
entering into such Foreign Currency Protection Agreement or Interest Rate
Protection Agreement, as the case may be.
"Foreign Issuer": any Issuer that is a Direct Foreign Subsidiary of
a Pledgor.
"Guarantee Obligations": as to any Pledgor, all of the obligations
and liabilities of such Pledgor under the Guarantee.
"Issuers": the collective reference to the companies identified on
Schedule 1 attached hereto as the issuers of the Pledged Stock;
individually, each an "Issuer."
"Maximum Qualified Foreign Indebtedness Amount": as to any
Designated Foreign Lender, the amount specified as such in the notice
pursuant to which such Designated Foreign Lender is designated as a
"Designated Foreign Lender".
"Obligations": as to any Pledgor, the collective reference to (a)
the Guarantee Obligations and (b) the unpaid principal of and interest on
any Qualified Foreign Indebtedness owed by a Foreign Subsidiary to any
Designated Foreign Lender and any obligation of such Foreign Subsidiary to
reimburse such Designated Foreign Lender for drawings under letters of
credit issued by Designated Foreign Lender which constitute "Qualified
Foreign Indebtedness", provided that the maximum "Obligations" in respect
of the principal amount (or, in the case of letters of credit, the face
amount) of any Qualified Foreign Indebtedness owed to any Designated
Foreign Lender shall not exceed the Maximum Qualified Foreign Indebtedness
Amount for such Designated Foreign Lender and (c) all other obligations
and liabilities of such Pledgor under the Loan Documents to which it is a
party, provided, further, that the Guarantee Obligations of Y&R B.V. shall
be the amount which would be the "Guarantee Obligations" of Y&R B.V. if it
were a party to the Guarantee.
<PAGE> 237
3
"Pledged Stock": the shares of Capital Stock listed on Schedule 1
hereto (regardless of whether such Capital Stock is evidenced or
represented by certificates), together with all stock certificates,
options or rights of any nature whatsoever that may be issued or granted
by any Issuer to any of the Pledgors while this Agreement is in effect and
while such Capital Stock continues to be subject to the security interest
granted pursuant to this Agreement.
"Proceeds": all "proceeds" as such term is defined in Section
9-306(1) of the Uniform Commercial Code in effect in the State of New York
on the date hereof of the Pledged Stock and, in any event, shall include,
without limitation, all dividends or other income from the Pledged Stock,
collections thereon or distributions with respect thereto.
"Qualified Foreign Indebtedness": Indebtedness which is permitted
under subsection 9.2(d) of the Credit Agreement.
"Secured Instrument": any Loan Document, Eligible Hedge Agreement or
any agreement pursuant to which Qualified Foreign Indebtedness is made
available.
"Secured Parties": the collective reference to the Lenders and any
Designated Foreign Lenders.
"Securities Act": the Securities Act of 1933, as amended.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section and
paragraph references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Pledge; Grant of Security Interest. Each Pledgor hereby delivers
to the Administrative Agent, for the ratable benefit of the Secured Parties, all
the Pledged Stock issued by the Domestic Issuers and all the Pledged Stock of
the Foreign Issuers which is evidenced or represented by certificates and hereby
grants to the Administrative Agent, for the ratable benefit of the Secured
Parties, a first security interest in the Collateral, as collateral security for
the prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations. To the extent that
any of the Pledged Stock of any Foreign Issuer is not evidenced or represented
by certificates, the Pledgors shall take such actions (including registrations
and filings) as may be required under applicable law in connection with and to
give effect to the grant of a first security interest therein pursuant to this
Section.
3. Stock Powers. Concurrently with the delivery to the
Administrative Agent of each certificate representing one or more shares of
Pledged Stock to the Administrative Agent, the relevant Pledgor shall deliver an
undated stock power covering such certificate, duly executed in blank by such
Pledgor with, if the Administrative Agent so requests, signature guaranteed.
4. Representations and Warranties. Each Pledgor represents and
warrants that:
(a) The shares of Pledged Stock owned by it constitute all the
issued and outstanding shares of all classes of the Capital Stock of each
Domestic Issuer and not less than sixty-six percent of each class of Capital
Stock of each Foreign Issuer held by such Pledgor.
<PAGE> 238
4
(b) All the shares of the Pledged Stock owned by it have been duly
and validly issued and, except as otherwise provided in Section 630 of the New
York Business Corporation Law, are fully paid and nonassessable.
(c) Such Pledgor is the record and beneficial owner of, and have
good and marketable title to, the Pledged Stock owned by it, free of any and all
Liens or options in favor of, or claims of, any other Person, except the
security interests created by this Agreement.
(d) Upon delivery to the Administrative Agent of the stock
certificates evidencing the Pledged Stock owned by it and the taking of the
other actions contemplated by Section 2 in respect of the Pledged Stock issued
by Foreign Issuers which is not evidenced or represented by certificates, the
security interest created by this Agreement will constitute a valid, perfected
first priority security interest in its Collateral, enforceable as such against
all creditors of such Pledgor and any Persons purporting to purchase any
Collateral from such Pledgor, except as affected by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
5. Covenants. Each Pledgor covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Agreement until this Agreement is terminated and the security interests created
by it hereby are released:
(a) If such Pledgor shall, as a result of its ownership of the
Pledged Stock, become entitled to receive or shall receive any stock certificate
(including, without limitation, any certificate representing a stock dividend or
a distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization), option
or rights, whether in addition to, in substitution of, as a conversion of, or in
exchange for any shares of the Pledged Stock, or otherwise in respect thereof,
such Pledgor shall cause the same to be subject to the security interest granted
hereunder and such Pledgor shall accept the same as the agent of the
Administrative Agent and the Lenders, hold the same in trust for the
Administrative Agent and the Lenders and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed by such Pledgor
to the Administrative Agent, if required, together with an undated stock power
covering such certificate duly executed in blank by such Pledgor and with, if
the Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent, subject to the terms hereof, as additional collateral
security for the Obligations. Other than pursuant to a distribution or transfer
of any assets of an Issuer to such Pledgor in a transaction permitted under the
Credit Agreement, (i) any sums paid upon or in respect of the Pledged Stock upon
the liquidation or dissolution of any Issuer shall be paid over to the
Administrative Agent to be held by it hereunder as additional collateral
security for the Obligations, and (ii) in case any distribution of capital shall
be made on or in respect of the Pledged Stock or any property shall be
distributed upon or with respect to the Pledged Stock pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant to
the reorganization thereof, the property so distributed shall be delivered to
the Administrative Agent to be held by it hereunder as additional collateral
security for the Obligations. If any sums of money or property so paid or
distributed in respect of the Pledged Stock shall be received by such Pledgor,
such Pledgor shall, until such money or property is paid or delivered to the
Administrative Agent, hold such money or property in trust for the Secured
Parties, segregated from other funds of such Pledgor, as additional collateral
security for the Obligations.
(b) Without the prior written consent of the Administrative Agent,
such Pledgor will not (i) vote to enable, or take any other action to permit,
any Issuer to issue (other than to existing stockholders on a proportionate
basis) any stock or other equity securities of any nature or to issue any other
securities convertible into or granting the right to purchase or exchange for
any stock or other equity securities of any nature of any Issuer, (ii) sell,
assign, transfer, exchange, or otherwise dispose of,
<PAGE> 239
5
or grant any option with respect to, the Collateral, other than pursuant to a
transaction permitted under the Credit Agreement, (iii) create, incur or permit
to exist any Lien on any of the Collateral, or any interest therein, except for
the security interests created by this Agreement or (iv) enter into any
agreement or undertaking (other than this Agreement and the other Loan
Documents) restricting the right or ability of such Pledgor or the
Administrative Agent to sell, assign or transfer any of the Collateral.
(c) Such Pledgor shall maintain the security interest created by it
pursuant to this Agreement as a first perfected security interest and shall
defend such security interest against claims and demands of all Persons
whomsoever. At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of the Pledgors, such Pledgor will
promptly and duly execute and deliver such further instruments and documents and
take such further actions as the Administrative Agent may reasonably request for
the purposes of obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted. If any amount payable under or in
connection with any of its Collateral shall be or become evidenced by any
promissory note, other instrument or chattel paper, such note, instrument or
chattel paper shall be immediately delivered to the Administrative Agent, duly
endorsed in a manner satisfactory to the Administrative Agent, to be held as
Collateral pursuant to this Agreement.
(d) Such Pledgor shall pay, and hold the Administrative Agent and
the Secured Parties harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
its Collateral or in connection with any of the transactions contemplated by
this Agreement.
6. Cash Dividends; Voting Rights. Unless an Event of Default shall
have occurred and be continuing and the Administrative Agent shall have given
notice to the Pledgors of the Administrative Agent's intent to exercise its
corresponding rights pursuant to Section 7 below, the Pledgors shall be
permitted to receive all cash dividends paid in the normal course of business of
the Issuers consistent with past practice in respect of the Pledged Stock and to
exercise all voting and corporate rights with respect to the Pledged Stock;
provided, however, that no vote shall be cast or corporate right exercised or
other action taken which, in the Administrative Agent's reasonable judgment,
would impair the Collateral or which would be inconsistent with or result in any
violation of any provision of the Credit Agreement, the Guarantee, this
Agreement or any other Loan Document.
7. Rights of the Lenders and the Administrative Agent. (a) All money
Proceeds received by the Administrative Agent hereunder shall be held by the
Administrative Agent for the benefit of the Lenders in a Collateral Account. All
Proceeds while held by the Administrative Agent in a Collateral Account (or by
any Pledgor in trust for the Administrative Agent and the Lenders) shall
continue to be held as collateral security for all the Obligations and shall not
constitute payment thereof until applied as provided in Section 8(a).
(b) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights to
the relevant Pledgor, (i) the Administrative Agent shall have the right to
receive any and all cash dividends paid in respect of the Pledged Stock and make
application thereof to the Obligations in accordance with Section 8(a), and (ii)
all shares of the Pledged Stock shall be registered in the name of the
Administrative Agent or its nominee, and the Administrative Agent or its nominee
may thereafter exercise (A) all voting, corporate and other rights pertaining
<PAGE> 240
6
to such shares of the Pledged Stock at any meeting of shareholders of any Issuer
or otherwise and (B) any and all rights of conversion, exchange, subscription
and any other rights, privileges or options pertaining to such shares of the
Pledged Stock as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Stock upon the merger, consolidation, reorganization, recapitalization or other
fundamental change in the corporate structure of any Issuer, or upon the
exercise by the Pledgors or the Administrative Agent of any right, privilege or
option pertaining to such shares of the Pledged Stock, and in connection
therewith, the right to deposit and deliver any and all of the Pledged Stock
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as the Administrative Agent may
determine), all without liability except to account for property actually
received by it, but the Administrative Agent shall have no duty to the Pledgors
to exercise any such right, privilege or option and shall not be responsible for
any failure to do so or delay in so doing.
8. Remedies. (a) At such intervals as may be agreed upon by the
relevant Pledgor and the Administrative Agent, or, if an Event of Default shall
have occurred and be continuing, at any time at the Administrative Agent's
election, the Administrative Agent may apply all or any part of Proceeds held in
any Collateral Account in payment of the Obligations in the following order of
priority:
First: to the Administrative Agent for any unpaid fees, expenses and
other costs of the Administrative Agent;
Second: to the Secured Parties in an amount equal to the unpaid
principal or face amount of, and unpaid interest on, and premium or fees,
if any, in respect of, the Obligations then outstanding whether or not
then due and payable, including, without limitation, the aggregate undrawn
amounts available to be drawn (assuming compliance with all conditions to
drawing) under all Letters of Credit and the aggregate estimated amount of
payment liabilities of the Borrowers and the Subsidiaries under Eligible
Hedge Agreements assuming immediate termination of all such agreements,
and, if such moneys shall be insufficient to pay such amounts in full,
then ratably (without priority of any one over any other) to the Secured
Parties in proportion to the unpaid amounts thereof on the date any such
payment is made;
Third: to the Secured Parties, amounts equal to all other sums which
constitute Obligations, including without limitation the costs and
expenses of the Secured Parties and their representatives which are due
and payable under the relevant Secured Instruments and which constitute
Obligations as of the date any such payment is made, and, if such moneys
shall be insufficient to pay such sums in full, then ratably to the
Secured Parties in proportion to such sums; and
Fourth: any surplus then remaining shall be paid to the relevant
Pledgors or their successors or assigns or to whomsoever may be lawfully
entitled to receive the same or as a court of competent jurisdiction may
direct.
(b) The term "unpaid" as used in clauses Second and Third of
paragraph (a) above refers:
(i) in the absence of a bankruptcy proceeding with respect to the
relevant Borrower, to all amounts of Obligations, as the case may be,
outstanding as of the date a payment is made, whether or not such amounts
are fixed or contingent, and
(ii) during the pendency of a bankruptcy proceeding with respect to
the relevant Borrower, to all amounts allowed by the bankruptcy court in
respect of Obligations as a basis for distribution (including estimated
amounts, if any, allowed in respect of contingent claims),
to the extent that prior distributions (whether actually distributed or set
aside pursuant to this Section) have not been made in respect thereof.
(c) In the event any Secured Party shall be entitled to receive any
moneys pursuant to
<PAGE> 241
7
clauses Second or Third of paragraph (a) in respect of the unliquidated,
unmatured or contingent portion of the outstanding Obligations (including,
without limitation, obligations under then outstanding Letters of Credit), then
the Administrative Agent shall hold such amount in a Collateral Account for the
benefit of such Secured Party until (i) such Secured Party shall have notified
the Administrative Agent that all or part of such unliquidated, unmatured or
contingent claim shall have become matured or fixed, in which case the
Administrative Agent shall distribute from such Collateral Account an amount
equal to such matured or fixed claim to such Secured Party for application to
the payment of such matured or fixed claim, and shall promptly give notice
thereof to the Company or (ii) all or part of such unliquidated, unmatured or
contingent claim shall have been extinguished, whether as the result of an
expiration without drawing of any Letter of Credit, payment of amounts secured
or covered by any Letter of Credit other than by drawing thereunder, payment of
amounts covered by any guarantee or otherwise, in which case such Secured Party
shall, as soon as practicable thereafter, notify the Company and the
Administrative Agent.
(d) In making the determinations and allocations required by this
Section, the Administrative Agent may conclusively rely upon information
supplied by the Administrative Agent (or the relevant Lender, in the case of
Eligible Hedge Agreements) as to the amounts payable with respect to Guarantee
Obligations and upon information supplied by a Designated Foreign Lender as to
the amounts payable with respect to Qualified Foreign Indebtedness, and the
Administrative Agent shall have no liability to any of the Secured Parties for
actions taken in reliance on any such information.
(e) If an Event of Default shall have occurred and be continuing,
the Administrative Agent, on behalf of the Lenders, may exercise, in addition to
all other rights and remedies granted in this Agreement and in any other
instrument or agreement securing, evidencing or relating to the Obligations, all
rights and remedies of a secured party under the Code. Without limiting the
generality of the foregoing, the Administrative Agent, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon the
Pledgors or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived to the fullest extent permitted by
applicable law), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, assign, give option or options to purchase or otherwise dispose
of and deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, in the
over-the-counter market, at any exchange, broker's board or office of the
Administrative Agent or any Lender or elsewhere upon such terms and conditions
as it may deem advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk. The
Administrative Agent or any Secured Party shall have the right upon any such
public sale or sales, and, to the fullest extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the Collateral so
sold, free of any right or equity of redemption in the Pledgors, which right or
equity of redemption is hereby waived or released to the extent permitted by
applicable law. The Administrative Agent shall apply any Proceeds from time to
time held by it and the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred in respect thereof or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Administrative Agent and the Lenders hereunder, including,
without limitation, reasonable attorneys' fees and disbursements of counsel to
the Administrative Agent, to the payment in whole or in part of the Obligations,
in accordance with paragraph (a) above, and only after such application and
after the payment by the Administrative Agent of any other amount required by
any provision of law, including, without limitation, Section 9-504(1)(c) of the
Code, need the Administrative Agent account for the surplus, if any, to the
relevant Pledgors. To the extent permitted by applicable law, each Pledgor
waives all claims, damages and demands they may acquire against the
Administrative Agent or any Secured Party arising out of the exercise by them of
any rights hereunder. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed
<PAGE> 242
8
reasonable and proper if given at least 10 days before such sale or other
disposition. Each Pledgor shall remain liable for any deficiency if the proceeds
of any sale or other disposition of Collateral are insufficient to pay the
Obligations and the fees and disbursements of any attorneys employed by the
Administrative Agent or any Lender to collect such deficiency.
9. Registration Rights; Private Sales. (a) If the Administrative
Agent shall determine to exercise its right to sell any or all of the Pledged
Stock pursuant to Section 8 hereof, and if in the opinion of the Administrative
Agent it is necessary or advisable to have the Pledged Stock, or that portion
thereof to be sold, registered under the provisions of the Securities Act, the
relevant Pledgors will cause the Issuer thereof to (i) execute and deliver, and
cause the directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Administrative Agent, necessary or advisable to
register the Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) to cause the registration statement
relating thereto to become effective and to remain effective for a period of one
year from the date of the first public offering of the Pledged Stock, or that
portion thereof to be sold, and (iii) to make all amendments thereto and/or to
the related prospectus which, in the opinion of the Administrative Agent, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto. The relevant Pledgors agree to cause such Issuer
to comply with the provisions of the securities or "Blue Sky" laws of any and
all jurisdictions which the Administrative Agent shall designate and to make
available to its security holders, as soon as practicable, an earnings statement
(which need not be audited) which will satisfy the provisions of Section 11(a)
of the Securities Act.
(b) The Pledgors recognize that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. The
Pledgors acknowledge and agree that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agree that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Administrative
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.
(c) Each Pledgor further agree to use their best efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of its Pledged Stock pursuant to this Section valid
and binding and in compliance with any and all other applicable Requirements of
Law. Each Pledgor further agree that a breach of any of the covenants contained
in this Section will cause irreparable injury to the Administrative Agent and
the Secured Parties, that the Administrative Agent and the Secured Parties have
no adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Section shall be specifically
enforceable against such Pledgor, and such Pledgor hereby waives and agrees not
to assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred under the
Credit Agreement.
10. Irrevocable Authorization and Instruction to Issuer. The
Pledgors hereby authorize and instruct each Issuer to comply with any
instruction received by it from the Administrative Agent in writing that (a)
states that an Event of Default has occurred and (b) is otherwise in accordance
with the terms of this Agreement, without any other or further instructions from
the Pledgors, and the Pledgors agree that each Issuer shall be fully protected
in so complying.
<PAGE> 243
9
11. Administrative Agent's Appointment as Attorney-in-Fact. (a) Each
Pledgor hereby irrevocably constitute and appoint the Administrative Agent and
any officer or agent of the Administrative Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Pledgor and in the name of
such Pledgor or in the Administrative Agent's own name, from time to time in the
Administrative Agent's discretion, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, including, without limitation, any financing
statements, endorsements, assignments or other instruments of transfer.
(b) The Pledgors hereby ratify all that said attorneys shall
lawfully do or cause to be done pursuant to the power of attorney granted in
Section 11(a). All powers, authorizations and agencies contained in this
Agreement are coupled with an interest and are irrevocable until this Agreement
is terminated and the security interests created hereby are released.
12. Duty of Administrative Agent. The Administrative Agent's sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Administrative Agent deals
with similar securities and property for its own account, except that the
Administrative Agent shall have no obligation to invest funds held in any
Collateral Account and may hold the same as demand deposits. Neither the
Administrative Agent, any Secured Party nor any of their respective directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of the Pledgors or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.
13. Execution of Financing Statements. Pursuant to Section 9-402 of
the Code, each Pledgor authorizes the Administrative Agent to file financing
statements with respect to the Collateral without the signature of such Pledgor
in such form and in such filing offices as the Administrative Agent reasonably
determines appropriate to perfect the security interests of the Administrative
Agent under this Agreement. A carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement for filing in any
jurisdiction.
14. Authority of Administrative Agent. The Pledgors acknowledge that
the rights and responsibilities of the Administrative Agent under this Agreement
with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Administrative Agent and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Administrative Agent and the Pledgors, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Secured Parties with full
and valid authority so to act or refrain from acting, and neither the Pledgors
nor any Issuer shall be under any obligation, or entitlement, to make any
inquiry respecting such authority.
15. Notices. All notices, requests and demands given hereunder shall
be given in accordance with the Guarantee.
16. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any
<PAGE> 244
10
other jurisdiction.
17. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None
of the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except, subject to subsection 13.1 of the
Credit Agreement, by a written instrument executed by the Pledgors and the
Administrative Agent.
(b) No failure to exercise and no delay in exercising, on the part
of the Administrative Agent or any Lender, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege.
(c) The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
18. Section Headings. The section headings used in this Agreement
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
19. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Pledgors, the
Administrative Agent and the Lenders, provided that the Pledgors may not assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of the Administrative Agent and any purported assignment
without such consent shall be null and void.
20. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
21. Designated Foreign Lenders. The Company may from time to time
designate certain banks or other financial institutions acceptable to the
Administrative Agent as "Designated Foreign Lenders" with respect to Qualified
Foreign Indebtedness by delivering a written notice to such effect to the
Administrative Agent in the form of Exhibit A hereto, executed by the Company
and the relevant Designated Foreign Lender and accepted by the Administrative
Agent. Each such bank or other financial institution shall thereafter be deemed
to be a Designated Foreign Lender for all purposes hereunder until such time as
the Administrative Agent shall have received written notice from the Company and
the relevant Designated Foreign Lender to such effect, at which time such
Designated Foreign Lender shall be deemed not to be a Secured Party for all
purposes hereunder and all right, title and interest of such Designated Foreign
Lender in the Collateral and the Security Documents shall terminate. No
Designated Foreign Lender shall have the right to exercise or seek to exercise
any rights or exercise any remedies with respect to any Collateral or institute
any action or proceeding with respect to such rights or remedies, including
without limitation, any action of foreclosure or contest, protest or object to
any foreclosure proceeding or action brought by the Administrative Agent or any
Lender or any other exercise by the Administrative Agent or any Lender of any
rights and remedies hereunder or under any Security Document.
22. To the extent that the shares of Pledged Stock of any Foreign
Issuer subject to the security interest granted under this Agreement exceed 66%
of any class of such Pledged Stock of any such Foreign Issuer, the security
interest in such shares of Pledged Stock (to the extent the security interest in
such shares of Pledged Stock exceeds 66% of any class of shares of such Pledged
Stock) shall be automatically released on the day which is 90 days following the
Closing Date and any certificates evidencing or representing such released
Pledged Stock shall be returned by the Administrative Agent to
<PAGE> 245
11
the relevant Pledgor. The security interest granted by Y&R B.V. hereunder shall
be automatically released on the day which is 90 days following the Closing Date
and any certificates evidencing or representing such released Pledged Stock
shall be returned by the Administrative Agent to Y&R B.V.
<PAGE> 246
12
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed and delivered as of the date first above written.
BURSON-MARSTELLER INTERNATIONAL INC.
By:
--------------------------------
Title:
CYGNET HOLDINGS COMPANY INC.
By:
--------------------------------
Title:
LANDOR ASSOCIATES
By:
--------------------------------
Title:
YOUNG & RUBICAM INTERNATIONAL GROUP
B.V.
By:
--------------------------------
Title:
Schedules:
Schedule 1 - Description of Pledged Stock
<PAGE> 247
SCHEDULE 1
TO PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED STOCK
<TABLE>
<CAPTION>
% of Shares
Issuer Class of Stock* Stock Certificate No. No. of Shares Outstanding
- ---------------------- ----------------- ---------------------- --------------- --------------
<S> <C> <C> <C> <C>
BURSON-MARSTELLER INTERNATIONAL INC., PLEDGOR
*Burson-Marsteller A/S** 1-13,200; 10,000,000 100%
13,201-
20,000
*Burson-Marsteller Asia Ltd.** 15,17,18 27,804 100%
*Burson-Marsteller Italia S.r.l.** na na na 100%
*Burson-Marsteller Mexico S.A. de C.V.
Series B - Variable 1 924 66%
Series B - Minimo Fijo 1 16,500 66%
*Burson-Marsteller Poland Sp. z.o.o. na na na 66%
*Burson-Marsteller Pty Ltd** 11,12 800,000 100%
*Burson-Marsteller S/C Ltda. na na na 66%
*Burson-Marsteller Thailand Ltd. 41,42,45 33,660 66%
*CMG AG 1 1,848 66%
CYGNET HOLDINGS COMPANY INC., PLEDGOR
*BM Communications Inc. 1 1,000 100%
*Burson-Marsteller/NIS, Inc. 1 1,000 100%
*Young Rubicam S.A. **** 82,992,692 66%
*Summit Insurance Company 2 10,000 100%
LANDOR ASSOCIATES, PLEDGOR
*Landor Associates Asia-Pacific Ltd. 5 660 66%
*Landor Associates Designers & Consultants Ltd. 17 168,300 66%
*Walter Landor Y Asociados S.A. de C.V. 6 4,620 66%
YOUNG & RUBICAM INTERNATIONAL GROUP B.V.,
PLEDGOR
*Young & Rubicam Denmark Group A/S*** na na na 100%
</TABLE>
- ----------
* Stock is assumed to be common stock unless otherwise indicated.
** 100% of the outstanding shares of these first tier Foreign Subsidiaries
will be pledged upon closing; 90 days thereafter, the pledge will become
66% of the outstanding shares.
*** 100% of the outstanding shares will be pledged for a period of 90 days
from the closing date.
**** See certificate.
<PAGE> 248
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the Pledge
Agreement dated December ___, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Pledge Agreement"), made by Burson-Marsteller
International Inc., a Delaware corporation, Cygnet Holdings Company Inc., a
Delaware corporation, Landor Associates, a California corporation and Young &
Rubicam International Group B.V., a Netherlands entity, in favor of Bank of
America National Trust and Savings Association, as Administrative Agent for the
Lenders referred to in the Pledge Agreement. The undersigned agrees for the
benefit of the Administrative Agent and the Secured Parties as follows:
1. The undersigned will be bound by the terms of the Pledge
Agreement and will comply with such terms insofar as such terms are applicable
to the undersigned.
2. The undersigned will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 5(a) of the
Pledge Agreement.
3. The terms of Section 9(c) of the Pledge Agreement shall apply to
it, mutatis mutandis, with respect to all actions that may be required of it
under or pursuant to or arising out of Section 9 of the Pledge Agreement.
[NAME OF ISSUER]
By:
------------------------------------
Title:
---------------------------------
Address for Notices:
_______________________________________
_______________________________________
__________________________________
Fax:
<PAGE> 249
EXHIBIT A
[FORM OF DESIGNATED FOREIGN LENDER NOTICE]
DESIGNATED FOREIGN LENDER NOTICE
Reference is made to (a) the Security Agreement, dated as of
December __, 1996 (the "Parent Borrower Security Agreement"), made by Young &
Rubicam Holdings Inc., a New York corporation ("Y&R Holdings"), Young & Rubicam
Inc., a New York corporation ("Y&R Inc. (New York)"), Young & Rubicam, Inc., a
Delaware corporation ("Y&R Inc. (Delaware)"), Young & Rubicam L.P., a Delaware
limited partnership ("Y&R LP"; collectively with Y&R Holdings, Y&R Inc. (New
York) and Y&R Inc. (Delaware), the "Parent Borrowers") in favor of Bank of
America National Trust and Savings Association, a national banking association,
as Administrative Agent (in such capacity, the "Administrative Agent") for the
several banks and other financial institutions (the "Lenders") from time to time
parties to the Credit and Guarantee Agreement, dated as of December __, 1996 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Parent Borrowers, the Subsidiary Borrowers (as defined in
the Credit Agreement) from time to time parties thereto, the Lenders, the
Administrative Agent and Bank of America International Limited, a bank organized
under the laws of England, as European Payment Agent, (b) the Pledge Agreement,
dated as of December __, 1996 (the "Parent Borrower Pledge Agreement"), made by
the Parent Borrowers in favor of the Administrative Agent, (c) the Security
Agreement, dated as of December __, 1996 (the "Subsidiaries Security
Agreement"), made by each of the subsidiaries of the Parent Borrowers which are
parties thereto in favor of the Administrative Agent, and (d) the Pledge
Agreement, dated as of December __, 1996 (the "Subsidiaries Pledge Agreement",
and together with the Parent Borrower Security Agreement, the Parent Borrower
Pledge Agreement and the Subsidiaries Security Agreement, the "Security
Documents"), made by each of the subsidiaries of the Parent Borrowers which are
parties thereto in favor of the Administrative Agent.
The Company hereby designates [Name of Designated Foreign Lender] as
a "Designated Foreign Lender" under the Security Documents with a Maximum
Qualified Foreign Indebtedness Amount of $___________. The Company hereby
represents and warrants that the "Qualified Foreign Indebtedness" is comprised
of [include description] and that all amount outstanding in respect thereof will
be permitted under subsection 9.2(d) of the Credit Agreement.
The undersigned, [Name of Designated Foreign Lender], hereby
acknowledges and agrees that the Maximum Qualified Foreign Indebtedness Amount
with respect to the Qualified Foreign Indebtedness described herein shall be
$___________. The undersigned in its capacity as a Designated Foreign Lender
further acknowledges and agrees that (a) it shall be bound by all of the terms
and conditions of the Security Documents, (b) it shall not have the right to
exercise or seek to exercise any rights or exercise any remedies with respect to
any collateral subject to the Security Documents or institute any action or
proceeding with respect to such rights or remedies, including without
limitation, any action of foreclosure or contest, protest or object to any
foreclosure proceeding or action brought by the Administrative Agent or any
Lender or any other exercise by the Administrative Agent or any Lender of any
rights and remedies hereunder or under any Security Document, (c) it shall not
have the right to consent to any amendment, waiver or modification of any
Security Document (other than, subject to clause (d) below, any amendment,
waiver or other modification to subsection 7.3 of the Parent Borrower Security
Agreement and the Subsidiaries Security Agreement and Section 8 (other than
paragraph (e) thereof) of the Parent Borrower Pledge Agreement and the
Subsidiaries Pledge Agreement which materially adversely affects such Designated
Foreign Lender in a manner which is different to the effect of such amendment,
waiver or modification on the other Secured Parties), (d) it shall not have the
right to consent to any release of all or any portion of the Collateral by the
Administrative Agent or the Lenders,
<PAGE> 250
2
(e) it shall not have the right to request or direct that any payment be made
under subsection 7.3 of the Parent Borrower Security Agreement or the
Subsidiaries Security Agreement or Section 8 (other than paragraph (e) thereof)
of the Parent Borrower Pledge Agreement or the Subsidiaries Pledge Agreement,
(f) neither the Administrative Agent nor any Lender shall have any liability or
obligation to the undersigned (including, without limitation, with respect to
the perfection of any lien or security interest granted pursuant to the Security
Documents) except with respect to any payment (if and when made) under
subsection 7.3 of the Parent Borrower Security Agreement or the Subsidiaries
Security Agreement or Section 8 (other than paragraph (e) thereof) of the Parent
Borrower Pledge Agreement or the Subsidiaries Pledge Agreement and (g) it has
received copies of the Credit Agreement and each of the Security Documents. All
notices to the undersigned shall be sent to [insert notice information] or to
such other address as the undersigned shall designate in writing from time to
time to the Administrative Agent and all notices shall be given in accordance
with subsection 13.2 of the Credit Agreement.
THIS NOTICE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
The undersigned hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Notice or for recognition and enforcement of any
judgment in respect thereof,to the non-exclusive general jurisdiction of the
courts of the State of New York, the courts of the United State of America for
the Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail, (or
any substantially similar form of mail), postage prepaid, to its address for
notices hereunder;
(d) agrees that nothing herein shall affect the right to effect
service or process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
<PAGE> 251
3
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred to in
this subsection any special, exemplary, punitive or consequential damages.
[NAME OF DESIGNATED FOREIGN
LENDER]
By:
--------------------------------
Name:
[THE COMPANY]
By:
--------------------------------
Title:
Accepted:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Administrative Agent
By:
--------------------------------
Title:
<PAGE> 252
EXHIBIT J TO
CREDIT AND GUARANTEE AGREEMENT
[FORM OF SUBSIDIARIES SECURITY AGREEMENT]
SECURITY AGREEMENT, dated as of December ___, 1996, made by each of
the Persons that are signatories hereto (the "Subsidiaries") in favor of Bank of
America National Trust and Savings Association, a national banking association,
as Administrative Agent (in such capacity, the "Administrative Agent") for the
several banks and other financial institutions (the "Lenders") from time to time
parties to the Credit and Guarantee Agreement, dated as of December __, 1996 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Young & Rubicam Holdings Inc., a New York corporation
("Y&R Holdings"), Young & Rubicam Inc., a New York corporation ("Y&R Inc. (New
York)"), Young & Rubicam Inc., a Delaware corporation ("Y&R Inc. (Delaware)"),
and Young & Rubicam L.P., a Delaware limited partnership ("Y&R LP"; collectively
with Y&R Holdings, Y&R Inc. (New York) and Y&R Inc. (Delaware), the "Parent
Borrowers"), the Subsidiary Borrowers (as defined in the Credit Agreement) from
time to time parties thereto, the Lenders, the Administrative Agent and Bank of
America International Limited, a bank organized under the laws of England, as
European Payment Agent.
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Parent Borrowers upon the
terms and subject to the conditions set forth therein;
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective extensions of credit under the Credit Agreement
that the Subsidiaries shall have executed and delivered that certain Guarantee
dated as of the date hereof (the "Guarantee");
WHEREAS, in satisfaction of such condition, the Subsidiaries have
executed and delivered the Guarantee, and
WHEREAS, it is also a condition precedent to the obligation of the
Lenders to make their respective extensions of credit under the Credit Agreement
that the Subsidiaries shall have executed and delivered this Security Agreement
to the Administrative Agent for the ratable benefit of the Secured Parties and
to secure their obligations under the Guarantee and the other Loan Documents.
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit under the
Credit Agreement, the Subsidiaries hereby agree with the Administrative Agent,
for the ratable benefit of the Secured Parties, as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are
defined in the Credit Agreement and used herein are so used as so defined,
provided that, for purposes of this Agreement, "Lender" shall include any
Fronting Lender, Issuing Bank and any Person which is a party to an Eligible
Hedge Agreement; the following terms which are defined in the Uniform Commercial
Code
<PAGE> 253
2
in effect in the State of New York on the date hereof are used herein as so
defined: Accounts, Chattel Paper, Documents, Equipment, Farm Products, General
Intangibles, Instruments, Inventory and Proceeds; and the following terms shall
have the following meanings:
"Code": the Uniform Commercial Code as from time to time in effect
in the State of New York.
"Collateral": as defined in Section 2.
"Collateral Account": any account established to hold money
proceeds, maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent
for the account of the Secured Parties as provided in Section 8.
"Copyright License": any agreement, written or oral, providing for
the grant by or to the Subsidiaries of any right under any Copyright,
including, without limitation, any thereof listed in Schedule 1 hereto.
"Copyrights": all of the following to the extent that any Subsidiary
now or hereafter has any right, title or interest in any country in the
world (other than any such right, title or interest (a) created by any
Parent Borrower as a work-made-for-hire on behalf of any Client, (b)
acquired on behalf of any Client or (c) required to be transferred or
otherwise conveyed to any Client): (i) all copyrights in all works,
whether published or unpublished, now existing or hereafter created or
acquired, all registrations and recordings thereof, and all applications
in the United States Copyright Office, including, without limitation, any
thereof referred to in Schedule 1 hereto, and (ii) all renewals thereof.
"Designated Foreign Lender": any bank or financial institution which
(a) makes Qualified Foreign Indebtedness available to a Foreign Subsidiary
(pursuant to a commitment or otherwise) and (b) is designated as a
"Designated Foreign Lender" in accordance with Section 20.
"Eligible Hedge Agreement": any Foreign Currency Protection
Agreement and Interest Rate Protection Agreement entered into with any
Person that is a Lender or an Affiliate of a Lender at the time of
entering into such Foreign Currency Protection Agreement or Interest Rate
Protection Agreement, as the case may be.
"Guarantee Obligations": as to any Subsidiary, all of the
obligations and liabilities of such Subsidiary under the Guarantee.
"Maximum Qualified Foreign Indebtedness Amount": as to any
Designated Foreign Lender, the amount specified as such in the notice
pursuant to which such Designated Foreign Lender is designated as a
"Designated Foreign Lender".
"Obligations": as to any Subsidiary, the collective reference to (a)
the Guarantee Obligations and (b) the unpaid principal of and interest on
any Qualified Foreign Indebtedness owed by a Foreign Subsidiary to any
Designated Foreign Lender and any obligation of such Foreign Subsidiary to
reimburse such Designated Foreign Lender for drawings under letters of
credit issued by Designated Foreign Lender which constitute "Qualified
Foreign Indebtedness", provided that the maximum "Obligations" in respect
of the principal amount (or, in the case of letters of credit, the face
amount) of any Qualified Foreign Indebtedness owed to any Designated
Foreign Lender shall not exceed the Maximum Qualified Foreign Indebtedness
Amount for such Designated Foreign Lender and (c) all other obligations
and liabilities of such Subsidiary under
<PAGE> 254
3
the Loan Documents to which it is a party.
"Patent License": all agreements, whether written or oral, providing
for the grant by or to any Subsidiary of any right to manufacture, use or
sell any invention covered by a Patent.
"Patents": (a) all letters patent of the United States and all
reissues and extensions thereof, and (b) all applications for letters
patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof.
"Qualified Foreign Indebtedness": Indebtedness which is permitted
under subsection 9.2(d) of the Credit Agreement.
"Receivable": any right to payment for goods sold or leased or for
services rendered, whether or not such right is evidenced by an Instrument
or Chattel Paper and whether or not it has been earned by performance
(including, without limitation, any Account).
"Secured Instrument": any Loan Document, Eligible Hedge Agreement or
any agreement pursuant to which Qualified Foreign Indebtedness is made
available.
"Secured Parties": the collective reference to the Lenders and any
Designated Foreign Lenders.
"Security Agreement": this Security Agreement, as amended,
supplemented or otherwise modified from time to time.
"Trademark License": any agreement, written or oral, providing for
the grant by or to any Subsidiary of any right to use any Trademark,
including, without limitation, any thereof listed on Schedule 2 hereto.
"Trademarks": all of the following to the extent that any Subsidiary
now or hereafter has any right, title or interest (other than any such
right title or interest (a) created by any Parent Borrower as a
work-made-for-hire on behalf of any Client, (b) acquired on behalf of any
Client or (c) required to be transferred or otherwise conveyed to any
Client) (i) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade dress, trade styles,
service marks, designs, logos and other source or business identifiers,
and the goodwill of the business associated therewith, including customer
lists, license rights, advertising materials and all other business assets
which uniquely reflect the goodwill of the business, now existing or
hereafter adopted or acquired, all registrations and recordings thereof,
and all applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, or any State thereof, or any other Country, including,
without limitation, any thereof listed on Schedule 2 hereto, and (ii) all
renewals thereof.
2. Grant of Security Interest. As collateral security for the prompt
and complete payment and performance when due (whether at the stated maturity,
by acceleration or otherwise) of the Obligations, each Subsidiary hereby grants
to the Administrative Agent for the ratable benefit of the Secured Parties a
security interest in all of the following property now owned or at any time
hereafter acquired by such Subsidiary or in which such Subsidiary now has or at
any time in the future may acquire any right, title or interest (collectively,
the "Collateral"):
(a) all Accounts and Receivables;
<PAGE> 255
4
(b) all Chattel Paper;
(c) all Copyrights;
(d) all Copyright Licenses;
(e) all Documents;
(f) all Equipment;
(g) all General Intangibles;
(h) all Instruments;
(i) all Inventory;
(j) all Patents;
(k) all Patent Licenses;
(l) all Trademarks;
(m) all Trademark Licenses;
(n) all books and records pertaining to the Collateral; and
(o) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing.
3. Representations and Warranties. Each Subsidiary hereby represents
and warrants that:
3.1 Title; No Other Liens. Except for the security interests granted
to the Administrative Agent for the ratable benefit of the Secured Parties
pursuant to this Agreement and for Liens permitted under the Credit Agreement,
such Subsidiary owns each item of the Collateral free and clear of any and all
Liens or claims of others. No financing statement or other public notice with
respect to all or any part of its Collateral is on file or of record in any
public office, except such as have been filed in favor of the Administrative
Agent, for the ratable benefit of the Secured Parties, pursuant to this
Agreement.
3.2 Perfected First Priority Liens. The security interests granted
pursuant to this Agreement (a) upon completion of the filings and other actions
specified on Schedule 3, will constitute perfected security interests in its
Collateral in favor of the Administrative Agent, for the ratable benefit of the
Secured Parties, as collateral security for the Obligations and (b) are prior to
all other Liens on its Collateral in existence on the date hereof.
3.3 Inventory and Equipment. The Inventory and the Equipment of such
Subsidiary are kept at the locations listed on Schedule 4.
3.4 Chief Executive Office. Such Subsidiary's chief executive office
is located at __________________________.
<PAGE> 256
5
3.5 Farm Products. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
4. Covenants. Each Subsidiary covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Agreement until this Agreement shall terminate and the security interests
granted hereby shall be released:
4.1 Delivery of Instruments and Chattel Paper. If any amount payable
under or in connection with any of its Collateral shall be or become evidenced
by any Instrument or Chattel Paper, such Instrument or Chattel Paper shall be
immediately delivered to the Administrative Agent, duly indorsed in a manner
satisfactory to the Administrative Agent, to be held as Collateral pursuant to
this Agreement.
4.2 Maintenance of Insurance. (a) Such Subsidiary will maintain,
with financially sound and reputable insurance companies, insurance policies
(or, to the extent consistent with prudent business practice, a program of
self-insurance with respect to) insuring its Inventory and Equipment against
loss by fire, explosion, theft and such other casualties as may be reasonably
satisfactory to the Administrative Agent and insuring such Subsidiary, the
Administrative Agent and the Secured Parties against liability for personal
injury and property damage relating to such Inventory and Equipment, such
policies to be in such form and amounts and having such coverage as may be
reasonably satisfactory to the Administrative Agent and the Lenders, with losses
payable to such Subsidiary, the Administrative Agent and the Secured Parties as
their respective interests may appear.
(b) All such insurance shall provide that no cancellation, material
reduction in amount or material change in coverage thereof shall be effective
until at least 30 days after receipt by the Administrative Agent of written
notice thereof, (i) name the Administrative Agent and the Secured Parties as
insured parties, (ii) include a breach of warranty clause and (iii) be
reasonably satisfactory in all other respects to the Administrative Agent.
(c) Such Subsidiary shall deliver to the Administrative Agent and
the Lenders a report of a reputable insurance broker with respect to such
insurance during the month of ___________ in each calendar year and such
supplemental reports with respect thereto as the Administrative Agent may from
time to time reasonably request.
4.3 Maintenance of Perfected Security Interest; Further
Documentation. (a) Such Subsidiary shall maintain the security interest created
by it pursuant to this Agreement as a perfected security interest having at
least the priority described in subsection 3.2 and shall defend such security
interest against the claims and demands of all Persons whomsoever.
(b) At any time and from time to time, upon the written request of
the Administrative Agent, and at the sole expense of such Subsidiary, such
Subsidiary will promptly and duly execute and deliver such further instruments
and documents and take such further actions as the Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing or continuation statements under
the Uniform Commercial Code in effect in any jurisdiction with respect to the
security interests created hereby.
4.4 Changes in Locations, Name, etc. Such Subsidiary will not:
(a) permit any of its Inventory or Equipment to be kept at a
location other than those listed on Schedule 4; or
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(b) change the location of its chief executive office from that
specified in subsection 3.4;
(c) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Administrative Agent in
connection with this Agreement would become seriously misleading;
unless, in each case, it shall have given the Administrative Agent
and the Lenders at least 30 days' prior written notice of such change and all
filings necessary in the opinion of the Administrative Agent to maintain the
perfection of the security interests granted pursuant to this Agreement shall
have been made.
4.5 Further Identification of Collateral. Such Subsidiary will
furnish to the Administrative Agent and the Lenders from time to time statements
and schedules further identifying and describing its Collateral and such other
reports in connection with its Collateral as the Administrative Agent may
reasonably request, all in reasonable detail.
4.6 Notices. Such Subsidiary will advise the Administrative Agent
and the Lenders promptly, in reasonable detail, at their respective addresses
for notices provided for in the Credit Agreement of:
(a) any Lien (other than security interests created hereby or Liens
permitted under the Credit Agreement) on any of the Collateral; and
(b) the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of its
Collateral or on the security interests therein created hereby.
5. Provisions Relating to Receivables.
5.1 Subsidiaries Remain Liable under Receivables. Anything herein to
the contrary notwithstanding, each Subsidiary shall remain liable under each of
its Receivables to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Receivable. Neither the Administrative Agent
nor any Secured Party shall have any obligation or liability under any
Receivable (or any agreement giving rise thereto) by reason of or arising out of
this Agreement or the receipt by the Administrative Agent or any Secured Party
of any payment relating to such Receivable pursuant hereto, nor shall the
Administrative Agent or any Secured Party be obligated in any manner to perform
any of the obligations of any Subsidiary under or pursuant to any Receivable (or
any agreement giving rise thereto), to make any payment, to make any inquiry as
to the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party under any Receivable (or any
agreement giving rise thereto), to present or file any claim, to take any action
to enforce any performance or to collect the payment of any amounts which may
have been assigned to it or to which it may be entitled at any time or times.
5.2 Analysis of Receivables. The Administrative Agent shall have the
right to make test verifications of the Receivables of the Subsidiaries in any
manner and through any medium that it reasonably considers advisable, and each
Subsidiary shall furnish all such assistance and information as the
Administrative Agent may require in connection with such test verifications. At
any time and from time to time, upon the Administrative Agent's request and at
the expense of the Subsidiaries, each Subsidiary shall cause independent public
accountants or others satisfactory to the Administrative Agent to furnish to the
Administrative Agent reports showing reconciliations, aging and test
verifications of,
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and trial balances for, its Receivables. The Administrative Agent in its own
name or in the name of others, may at any time after the occurrence and during
the continuance of an Event of Default, communicate with the obligors on the
Receivables of the Subsidiaries to verify with them to the Administrative
Agent's satisfaction the existence, amount and terms of any Receivables of the
Subsidiaries.
5.3 Collections on Receivables. (a) The Administrative Agent hereby
authorizes each Subsidiary to collect its Receivables, subject to the
Administrative Agent's direction and control, and the Administrative Agent may
curtail or terminate said authority at any time after the occurrence and during
the continuance of an Event of Default. If required by the Administrative Agent
at any time after the occurrence and during the continuance of an Event of
Default, any payments of Receivables of the Subsidiaries, when collected by any
Subsidiary, shall be forthwith (and, in any event, within two Business Days)
deposited by such Subsidiary in the exact form received, duly indorsed by such
Subsidiary to the Administrative Agent if required, in a Collateral Account
maintained under the sole dominion and control of the Administrative Agent,
subject to withdrawal by the Administrative Agent for the account of the Lenders
only as provided in subsection 7.3, and until so turned over, shall be held by
such Subsidiary in trust for the Administrative Agent and the Lenders,
segregated from other funds of such Subsidiary.
(b) Each such deposit of Proceeds of Receivables shall be
accompanied by a report identifying in reasonable detail the nature and source
of the payments included in the deposit.
(c) At the Administrative Agent's request, each Subsidiary shall
deliver to the Administrative Agent all original and other documents evidencing,
and relating to, the agreements and transactions which gave rise to its
Receivables, including, without limitation, all original orders, invoices and
shipping receipts.
5.4 Representations and Warranties. Each Subsidiary hereby
represents and warrants that:
(a) No amount payable to such Subsidiary under or in connection with
any of its Receivables is evidenced by any Instrument or Chattel Paper which has
not been delivered to the Administrative Agent.
(b) The amounts represented by such Subsidiary to the Lenders from
time to time as owing to such Subsidiary in respect of its Receivables will at
such times be accurate.
5.5 Covenants. Each Subsidiary covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Agreement until this Agreement shall terminate and the security interests
granted pursuant to this Agreement shall be released:
(a) Other than in the ordinary course of business consistent with
its past practice, such Subsidiary will not (i) grant any extension of the time
of payment of any of its Receivables, (ii) compromise or settle any of its
Receivables for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of any of its Receivables, (iv)
allow any credit or discount whatsoever on any of its Receivables, (v) amend,
supplement or modify any of its Receivables in any manner that could adversely
affect the value thereof or (vi) fail to exercise promptly and diligently each
and every material right which it may have under each agreement giving rise to a
Receivable (other than any right of termination).
(b) Such Subsidiary will deliver to the Administrative Agent a copy
of each material demand, notice or document received by it that questions the
validity or enforceability of more than 5%
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of the aggregate amount of its then outstanding Receivables.
6. Provisions Relating to Copyrights, Patents and Trademarks.
6.1 Representations and Warranties. Each Subsidiary hereby
represents and warrants that:
(a) Schedule 1 includes all material Copyrights and Copyright
Licenses owned by such Subsidiary in its own name on the date hereof.
(b) Schedule 2 includes all material Trademarks and Trademark
Licenses owned by such Subsidiary in its own name on the date hereof.
(c) To the best of such Subsidiary's knowledge, each of its material
Copyrights and Trademarks is on the date hereof valid, subsisting, unexpired,
enforceable and has not been abandoned.
(d) Except as set forth in either Schedule 1 or Schedule 2, none of
such Copyrights and Trademarks owned by it is on the date hereof the subject of
any licensing or franchise agreement.
(e) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of any
Copyright or Trademark in any respect that could reasonably be expected to have
a Material Adverse Effect.
(f) Such Subsidiary does not own any Patent or Patent License which
is material to its business.
(g) No action or proceeding is pending on the date hereof (i)
seeking to limit, cancel or question the validity of any material Copyright or
Trademark, or (ii) which, if adversely determined, would have a material adverse
effect on the value of any material Copyright or Trademark.
6.2 Covenants. Each Subsidiary covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Agreement until this Agreement shall terminate and the security interests
granted pursuant to this Agreement shall be released:
(a) Such Subsidiary (either itself or through licensees) will (i)
continue to use each material Trademark on each and every trademark class of
goods applicable to its current line as reflected in its current catalogs,
brochures and price lists in order to maintain such Trademark in full force free
from any claim of abandonment for non-use, maintain as in the past the quality
of products and services offered under such Trademark, employ such Trademark
with the appropriate notice of registration, not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark unless the
Administrative Agent, for the ratable benefit of the Secured Parties, shall
obtain a perfected security interest in such mark pursuant to this Agreement,
and not (and not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby such Trademark may become invalidated.
(b) Each Subsidiary will notify the Administrative Agent and the
Lenders immediately if it knows, or has reason to know, that any application or
registration relating to any material Copyright or Trademark may become
abandoned or dedicated, or of any adverse determination or development
(including, without limitation, the institution of, or any such determination or
development in, any proceeding in the United States Trademark Office or any
court or tribunal in any country) regarding such Subsidiary's ownership of any
material Copyright or Trademark or its right to register the same or to keep and
maintain the same.
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(c) Whenever such Subsidiary, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any material Copyright or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, such Subsidiary shall report such filing to the
Administrative Agent and the Lenders within five Business Days after the last
day of the fiscal quarter in which such filing occurs. Upon request of the
Administrative Agent, each Subsidiary shall execute and deliver any and all
agreements, instruments, documents, and papers as the Administrative Agent may
request to evidence the Administrative Agent's and the Secured Parties' security
interest in any of its material Copyrights or Trademarks and the goodwill and
general intangibles of such Subsidiary relating thereto or represented thereby.
(d) Each Subsidiary will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, or any similar office or agency in any other country or
any political subdivision thereof, to maintain and pursue each application (and
to obtain the relevant registration) and to maintain each registration of its
material Copyrights and Trademarks, including, without limitation, filing of
applications for renewal, affidavits of use and affidavits of incontestability.
(e) In the event that any material Copyright or Trademark is
infringed, misappropriated or diluted by a third party, each Subsidiary shall
(i) take such actions as such Subsidiary shall reasonably deem appropriate under
the circumstances to protect such Copyright or Trademark and (ii) promptly
notify the Administrative Agent and the Lenders after it learns thereof and sue
for infringement, misappropriation or dilution, to seek injunctive relief where
appropriate and to recover any and all damages for such infringement,
misappropriation or dilution.
7. Remedies.
7.1 Notice to Obligors and Contract Parties. Upon the request of the
Administrative Agent at any time after the occurrence and during the continuance
of an Event of Default, each Subsidiary shall notify obligors on its Receivables
that such Receivables have been assigned to the Administrative Agent for the
ratable benefit of the Secured Parties and that payments in respect thereof
shall be made directly to the Administrative Agent.
7.2 Proceeds to be Turned Over To Administrative Agent. In addition
to the rights of the Administrative Agent and the Lenders specified in
subsection 5.3 with respect to payments of Receivables, if an Event of Default
shall occur and be continuing all Proceeds received by any Subsidiary consisting
of cash, checks and other near-cash items shall be held by such Subsidiary in
trust for the Administrative Agent and the Lenders, segregated from other funds
of such Subsidiary, and shall, forthwith upon receipt by such Subsidiary, be
turned over to the Administrative Agent in the exact form received by such
Subsidiary (duly indorsed by such Subsidiary to the Administrative Agent, if
required) and held by the Administrative Agent in a Collateral Account
maintained under the sole dominion and control of the Administrative Agent. All
Proceeds while held by the Administrative Agent in a Collateral Account (or by
such Subsidiary in trust for the Administrative Agent and the Lenders) shall
continue to be held as collateral security for all the Obligations and shall not
constitute payment thereof until applied as provided in subsection 7.3.
7.3 Application of Proceeds. (a) At such intervals as may be agreed
upon by the relevant Subsidiaries and the Administrative Agent, or, if an Event
of Default shall have occurred and be continuing, at any time at the
Administrative Agent's election, the Administrative Agent may apply all or any
part of Proceeds held in any Collateral Account in payment of the Obligations in
the following order of priority:
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First: to the Administrative Agent for any unpaid fees, expenses and
other costs of the Administrative Agent;
Second: to the Secured Parties in an amount equal to the unpaid
principal or face amount of, and unpaid interest on, and premium or fees,
if any, in respect of, the Obligations then outstanding whether or not
then due and payable, including, without limitation, the aggregate undrawn
amounts available to be drawn (assuming compliance with all conditions to
drawing) under all Letters of Credit and the aggregate estimated amount of
payment liabilities of the Parent Borrowers and the Subsidiaries under
Eligible Hedge Agreements assuming immediate termination of all such
agreements, and, if such moneys shall be insufficient to pay such amounts
in full, then ratably (without priority of any one over any other) to the
Secured Parties in proportion to the unpaid amounts thereof on the date
any such payment is made;
Third: to the Secured Parties, amounts equal to all other sums which
constitute Obligations, including without limitation the costs and
expenses of the Secured Parties and their representatives which are due
and payable under the relevant Secured Instruments and which constitute
Obligations as of the date any such payment is made, and, if such moneys
shall be insufficient to pay such sums in full, then ratably to the
Secured Parties in proportion to such sums; and
Fourth: any surplus then remaining shall be paid to the relevant
Subsidiaries or their successors or assigns or to whomsoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.
(b) The term "unpaid" as used in clauses Second and Third of
paragraph (a) above refers:
(i) in the absence of a bankruptcy proceeding with respect to the
relevant Subsidiary, to all amounts of Obligations, as the case may be,
outstanding as of the date a payment is made, whether or not such amounts
are fixed or contingent, and
(ii) during the pendency of a bankruptcy proceeding with respect to
the relevant Subsidiary, to all amounts allowed by the bankruptcy court in
respect of Obligations as a basis for distribution (including estimated
amounts, if any, allowed in respect of contingent claims),
to the extent that prior distributions (whether actually distributed or set
aside pursuant to this Section) have not been made in respect thereof.
(c) In the event any Secured Party shall be entitled to receive any
moneys pursuant to clauses Second or Third of paragraph (a) in respect of the
unliquidated, unmatured or contingent portion of the outstanding Obligations
(including, without limitation, obligations under then outstanding Letters of
Credit), then the Administrative Agent shall hold such amount in a Collateral
Account for the benefit of such Secured Party until (i) such Secured Party shall
have notified the Administrative Agent that all or part of such unliquidated,
unmatured or contingent claim shall have become matured or fixed, in which case
the Administrative Agent shall distribute from such Collateral Account an amount
equal to such matured or fixed claim to such Secured Party for application to
the payment of such matured or fixed claim, and shall promptly give notice
thereof to the Company or (ii) all or part of such unliquidated, unmatured or
contingent claim shall have been extinguished, whether as the result of an
expiration without drawing of any Letter of Credit, payment of amounts secured
or covered by any Letter of Credit other than by drawing thereunder, payment of
amounts covered by any guarantee or otherwise, in which
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case such Secured Party shall, as soon as practicable thereafter, notify the
relevant Subsidiary and the Administrative Agent.
(d) In making the determinations and allocations required by this
Section, the Administrative Agent may conclusively rely upon information
supplied by the Administrative Agent (or the relevant Lender, in the case of
Eligible Hedge Agreements) as to the amounts payable with respect to Guarantee
Obligations and upon information supplied by a Designated Foreign Lender as to
the amounts payable with respect to Qualified Foreign Indebtedness, and the
Administrative Agent shall have no liability to any of the Secured Parties for
actions taken in reliance on any such information.
7.4 Code Remedies. If an Event of Default shall occur and be
continuing, the Administrative Agent, on behalf of the Secured Parties may
exercise, in addition to all other rights and remedies granted to them in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the Code. Without limiting the generality of the foregoing, the Administrative
Agent, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon any Subsidiary or any other Person (all and each of which
demands, defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Administrative Agent or any Lender or elsewhere upon such
terms and conditions as it may deem advisable and at such prices as it may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk. The Administrative Agent or any Secured Party shall have the right
upon any such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in any Subsidiary,
which right or equity is hereby waived or released. Each Subsidiary further
agrees, at the Administrative Agent's request, to assemble the Collateral and
make it available to the Administrative Agent at places which the Administrative
Agent shall reasonably select, whether at such Subsidiary's premises or
elsewhere. The Administrative Agent shall apply the net proceeds of any action
taken by it pursuant to this subsection, after deducting all reasonable costs
and expenses of every kind incurred in connection therewith or incidental to the
care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Administrative Agent and the Lenders hereunder,
including, without limitation, reasonable attorneys' fees and disbursements, to
the payment in whole or in part of the Obligations, in such order as the
Administrative Agent may elect, and only after such application and after the
payment by the Administrative Agent of any other amount required by any
provision of law, including, without limitation, Section 9-504(1)(c) of the
Code, need the Administrative Agent account for the surplus, if any, to the
relevant Subsidiaries. To the extent permitted by applicable law, each
Subsidiary waives all claims, damages and demands it may acquire against the
Administrative Agent or any Lender arising out of the exercise by them of any
rights hereunder. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable and
proper if given at least 10 days before such sale or other disposition.
8. Administrative Agent's Appointment as Attorney-in-Fact;
Administrative Agent's Performance of Subsidiary Obligations.
8.1 Powers. Each Subsidiary hereby irrevocably constitutes and
appoints the Administrative Agent and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of such Subsidiary and in
the name of such Subsidiary or in its own name, for the purpose of carrying out
the terms of this Agreement, to take any and all appropriate action and to
execute any and all documents and
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instruments which may be necessary or desirable to accomplish the purposes of
this Agreement, and, without limiting the generality of the foregoing, such
Subsidiary hereby gives the Administrative Agent the power and right, on behalf
of the such Subsidiary, without notice to or assent by such Subsidiary, to do
any or all of the following:
(a) in the name of such Subsidiary or its own name, or otherwise,
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
of its Receivables or with respect to any of its other Collateral and file
any claim or take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the Administrative Agent for the
purpose of collecting any and all such moneys due under any of its
Receivables or with respect to any of its other Collateral whenever
payable;
(b) in the case of any of its Copyrights, Patents or Trademarks,
execute and deliver any and all agreements, instruments, documents and
papers as the Administrative Agent may request to evidence the
Administrative Agent's and the Secured Parties' security interest in such
Copyright, Patent or Trademark and the goodwill and general intangibles of
such Subsidiary relating thereto or represented thereby;
(c) pay or discharge taxes and Liens levied or placed on or
threatened against any of its Collateral, effect any repairs or any
insurance called for by the terms of this Agreement and pay all or any
part of the premiums therefor and the costs thereof;
(d) execute, in connection with any sale provided for in subsection
7.4, any indorsements, assignments or other instruments of conveyance or
transfer with respect to any of its Collateral; and
(e) direct any party liable for any payment under any of its
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct; ask or demand for, collect, receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become
due at any time in respect of or arising out of any of its Collateral;
sign and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of its
Collateral; commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect any of
its Collateral or any thereof and to enforce any other right in respect of
any of its Collateral; defend any suit, action or proceeding brought
against any Subsidiary with respect to any of its Collateral; settle,
compromise or adjust any such suit, action or proceeding and, in
connection therewith, to give such discharges or releases as the
Administrative Agent may deem appropriate; assign any Copyright, Patent or
Trademark (along with the goodwill of the business to which any such
Copyright, Patent or Trademark pertains), throughout the world for such
term or terms, on such conditions, and in such manner, as the
Administrative Agent shall in its sole discretion determine; and
generally, sell, transfer, pledge and make any agreement with respect to
or otherwise deal with any of its Collateral as fully and completely as
though the Administrative Agent were the absolute owner thereof for all
purposes, and do, at the Administrative Agent's option and the
Subsidiaries' expense, at any time, or from time to time, all acts and
things which the Administrative Agent deems necessary to protect, preserve
or realize upon the Collateral and the Administrative Agent's and the
Lenders' security interests therein and to effect the intent of this
Agreement, all as fully and effectively as any Subsidiary might do.
Anything in this subsection to the contrary notwithstanding, the
Administrative Agent
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agrees that it will not exercise any rights under the power of attorney provided
for in this subsection unless an Event of Default shall have occurred and be
continuing.
8.2 Performance by Administrative Agent of Borrower's Obligations.
If any Subsidiary fails to perform or comply with any of its agreements
contained herein, the Administrative Agent, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such agreement.
8.3 Borrower's Reimbursement Obligation. The expenses of the
Administrative Agent incurred in connection with actions undertaken as provided
in this Section, together with interest thereon at a rate per annum equal to the
rate per annum at which interest would then be payable on past due Base Rate
Loans under the Credit Agreement, from the date of payment by the Administrative
Agent to the date reimbursed by the relevant Subsidiary, shall be payable by the
such Subsidiary to the Administrative Agent on demand.
8.4 Ratification; Power Coupled With An Interest. Each Subsidiary
hereby ratifies all that said attorneys shall lawfully do or cause to be done by
virtue hereof. All powers, authorizations and agencies contained in this
Agreement are coupled with an interest and are irrevocable until this Agreement
is terminated and the security interests created hereby are released.
9. Duty of Administrative Agent. The Administrative Agent's sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Administrative Agent deals
with similar property for its own account. Neither the Administrative Agent, any
Secured Party nor any of their respective officers, directors, employees or
agents shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of any Subsidiary or any
other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof. The powers conferred on the Administrative Agent
and the Lenders hereunder are solely to protect the Administrative Agent's and
the Secured Parties' interests in the Collateral and shall not impose any duty
upon the Administrative Agent or any Lender to exercise any such powers. The
Administrative Agent and the Lenders shall be accountable only for amounts that
they actually receive as a result of the exercise of such powers, and neither
they nor any of their officers, directors, employees or agents shall be
responsible to any Subsidiary for any act or failure to act hereunder, except
for their own gross negligence or willful misconduct.
10. Execution of Financing Statements. Pursuant to Section 9-402 of
the Code, each Subsidiary authorizes the Administrative Agent to file financing
statements with respect to the Collateral without the signature of such
Subsidiary in such form and in such filing offices as the Administrative Agent
reasonably determines appropriate to perfect the security interests of the
Administrative Agent under this Agreement. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement for
filing in any jurisdiction.
11. Authority of Administrative Agent. Each Subsidiary acknowledges
that the rights and responsibilities of the Administrative Agent under this
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Administrative
Agent and the Secured Parties, be governed by the Credit Agreement, this
Agreement and by such other agreements with respect thereto as may exist from
time to time among them, but, as between the Administrative Agent and the
Subsidiaries, the Administrative Agent shall be conclusively presumed to be
acting as agent for the Secured Parties with full and valid authority so to act
or refrain from acting, and the Subsidiaries shall be under no obligation,
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or entitlement, to make any inquiry respecting such authority.
12. Notices. All notices, requests and demands to or upon the
Administrative Agent or any Subsidiary hereunder shall be effected in the manner
provided for in the Guarantee.
13. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
14. Amendments in Writing; No Waiver; Cumulative Remedies.
14.1 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except,
subject to subsection 13.1 of the Credit Agreement, by a written instrument
executed by the Parent Borrowers and the Administrative Agent.
14.2 No Waiver by Course of Conduct. Neither the Administrative
Agent nor any Lender shall by any act (except by a written instrument pursuant
to subsection 14.1), delay, indulgence, omission or otherwise be deemed to have
waived any right or remedy hereunder or to have acquiesced in any Default or
Event of Default. No failure to exercise, nor any delay in exercising, on the
part of the Administrative Agent or any Lender, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Administrative Agent or any Lender of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Administrative Agent or such Lender would otherwise have on any
future occasion.
14.3 Remedies Cumulative. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
15. Section Headings. The Section and subsection headings used in
this Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
16. Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of the Subsidiaries and shall inure to the benefit of the
Administrative Agent and the Lenders and their successors and assigns.
17. Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the law of the State of New York.
18. Integration. This Agreement represents the agreement of the
Subsidiaries and the Administrative Agent with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Administrative Agent or any Lender relative to subject matter hereof not
expressly set forth or referred to herein or in the other Loan Documents.
19. Termination. (a) Subject to subsection 13.18 of the Credit
Agreement, this Agreement and the Liens created hereby shall terminate when all
the Guarantee Obligations shall have been fully and indefeasibly paid, when no
Letters of Credit shall remain outstanding and when the
<PAGE> 266
15
Commitments shall have expired or terminated under the Credit Agreement, at
which time the Administrative Agent shall execute and deliver to the
Subsidiaries, or to such person or persons as the Subsidiaries shall reasonably
designate, all Uniform Commercial Code termination statements and similar
documents prepared by the Subsidiaries at their expense which the Subsidiaries
shall reasonably request to evidence such termination.
(b) Without limiting the foregoing, all Collateral permitted to be
sold, transferred or otherwise disposed of in accordance with the terms and
provisions of the Credit Agreement shall be sold, transferred or otherwise
disposed of free and clear of the Liens created hereby. In connection with the
foregoing, the Administrative Agent shall execute and deliver to the relevant
Subsidiaries, or to such Person or Persons as such Subsidiaries shall reasonably
designate, all Uniform Commercial Code termination statements and similar
documents prepared by such Subsidiaries at their expense which such Subsidiaries
shall reasonably request to evidence the release of the Liens created hereby
with respect to any such Collateral.
(c) Any execution and delivery of statements or documents pursuant
to this Section 19 shall be without recourse to or representation or warranty by
the Administrative Agent.
20. Designated Foreign Lenders. The Company may from time to time
designate certain banks or other financial institutions acceptable to the
Administrative Agent as "Designated Foreign Lenders" with respect to Qualified
Foreign Indebtedness by delivering a written notice to such effect to the
Administrative Agent in the form of Exhibit A hereto, executed by the Company
and the relevant Designated Foreign Lender and accepted by the Administrative
Agent. Each such bank or other financial institution shall thereafter be deemed
to be a Designated Foreign Lender for all purposes hereunder until such time as
the Administrative Agent shall have received written notice from the
Company and the relevant Designated Foreign Lender to such effect, at which time
such Designated Foreign Lender shall be deemed not to be a Secured Party for all
purposes hereunder and all right, title and interest of such Designated Foreign
Lender in the Collateral and the Security Documents shall terminate. No
Designated Foreign Lender shall have the right to exercise or seek to exercise
any rights or exercise any remedies with respect to any Collateral or institute
any action or proceeding with respect to such rights or remedies, including
without limitation, any action of foreclosure or contest, protest or object to
any foreclosure proceeding or action brought by the Administrative Agent or any
Lender or any other exercise by the Administrative Agent or any Lender of any
rights and remedies hereunder or under any Security Document.
<PAGE> 267
16
IN WITNESS WHEREOF, the undersigned has caused this Security
Agreement to be duly executed and delivered as of the date first above written.
BLACK, KELLY, SCRUGGS & HEALEY INC.
By:
--------------------------------
Title:
BM COMMUNICATIONS INC.
By:
--------------------------------
Title:
BURSON-MARSTELLER INTERNATIONAL
INC.
By:
--------------------------------
Title:
BURSON-MARSTELLER/NIS, INC.
By:
--------------------------------
Title:
BURSON-MARSTELLER (PUERTO RICO) INC.
By:
--------------------------------
Title:
CYGNET HOLDINGS COMPANY INC.
By:
--------------------------------
Title:
<PAGE> 268
17
LANDOR ASSOCIATES
By:
--------------------------------
Title:
LANDOR ASSOCIATES INTERNATIONAL
By:
--------------------------------
Title:
RSBC VESTIGES INC.
By:
--------------------------------
Title:
Y&R FAR EAST HOLDINGS, INC.
By:
--------------------------------
Title:
YOUNG & RUBICAM PUERTO RICO, INC.
By:
--------------------------------
Title:
Schedules:
Schedule 1 - Copyrights and Copyright Licenses
Schedule 2 - Trademarks and Trademark Licenses
Schedule 3 - Filing Jurisdictions
Schedule 4 - Locations of Inventory and Equipment
<PAGE> 269
Schedule 2
TRADEMARKS AND TRADEMARK LICENSES
None.
<PAGE> 270
Schedule 3
FILING JURISDICTIONS
(SUBSIDIARIES)
<TABLE>
<CAPTION>
==========================================================================================================
DEBTOR NAME AND LOCATION OF FILING LOCATION
CHIEF EXECUTIVE OFFICE
==========================================================================================================
<S> <C>
Black, Kelly, Scruggs, & Healey Inc., Secretary of State, New York
Delaware corporation Recorder of Deeds, District of Columbia
1801 K Street, N.W., Washington, DC 20006 County Clerk, New York County (NY)
Tax ID: 13-3601615
- ----------------------------------------------------------------------------------------------------------
BM Communications Inc., Secretary of State, New York
Delaware corporation Recorder of Deeds, District of Columbia
285 Madison Ave, New York, NY 10017 County Clerk, New York County (NY)
1801 K Street, N.W., Washington, DC 20006
Tax ID: Pending
- ----------------------------------------------------------------------------------------------------------
Burson-Marsteller International Inc., Secretary of State, New York
Delaware corporation County Clerk, New York County (NY)
230 Park Ave South, New York, NY 10003
Tax ID: 13-3496066
- ----------------------------------------------------------------------------------------------------------
Burson-Marsteller/NIS Inc., Secretary of State, New York
Delaware corporation Recorder of Deeds, District of Columbia
285 Madison Ave, New York, NY 10017 County Clerk, New York County (NY)
1801 K Street, N.W., Washington, DC 20006
Tax ID: Pending
- ----------------------------------------------------------------------------------------------------------
Burson-Marsteller (Puerto Rico), Inc., Secretary of State, New York
Delaware corporation County Clerk, New York County (NY)
Calle Munet Ct. #9, Pueblo Viejo
Guaynabo, Puerto Rico 00968
Tax ID: 13-3505363
- ----------------------------------------------------------------------------------------------------------
Cygnet Holdings Inc., Secretary of State, New York
Delaware corporation County Clerk, New York County (NY)
285 Madison Ave, New York, NY 10017
Tax ID: 52-1551841
- ----------------------------------------------------------------------------------------------------------
Landor Associates Secretary of State, New York
California corporation Secretary of State, California
1001 Front Street, San Francisco, CA 94111 Department of State, Florida
Tax ID: 94-1709801 Secretary of State, Illinois
Department of Licensing, Washington
County Clerk, New York County (NY)
==========================================================================================================
</TABLE>
<PAGE> 271
Schedule 3
<TABLE>
<CAPTION>
================================================================================
DEBTOR NAME AND LOCATION OF FILING LOCATION
CHIEF EXECUTIVE OFFICE
================================================================================
<S> <C>
Landor Associates International, Secretary of State, New York
California corporation Secretary of State, California
1001 Front Street, San Francisco, CA 94111 County Clerk, New York County (NY)
Tax ID: 94-2611371
(Japan)
Sogo Hirakawacho Building
1-4-12, Hirakawacho
- ------------------------------------------------------------------------------
RSBC Vestiges Inc., Secretary of State, New York
New York corporation County Clerk, New York County (NY)
285 Madison Ave, New York NY 10017
Tax ID: 13-2790531
- -------------------------------------------------------------------------------
Y&R Far East Holdings, Inc., Secretary of State, New York
Delaware corporation County Clerk, New York County (NY)
285 Madison Ave, New York, NY 10017
Tax ID: 13-3499286
- -------------------------------------------------------------------------------
Young & Rubicam Puerto Rico, Inc., Secretary of State, New York
New York corporation County Clerk, New York County (NY)
9 Munet Court, Buchnan
Guaynabo, Puerto Rico 00968
Tax ID: 66-0215548
================================================================================
</TABLE>
<PAGE> 272
Schedule 4
LOCATIONS OF INVENTORY AND EQUIPMENT
(SUBSIDIARIES)
BLACK, KELLY,
- -------------
SCRUGGS & HEALY INC.
- --------------------
1801 K Street, NW
Washington, DC 20006
(District of Columbia)
BURSON-MARSTELLER
- -----------------
INTERNATIONAL INC.
- ------------------
230 Park Avenue South
New York, NY 10003
(New York County)
BURSON-MARSTELLER
- -----------------
(PUERTO RICO), INC.
- -------------------
Calle Munet Ct. #9
Pueblo Viejo
Guaynabo, Puerto Rico
00968
CYGNET HOLDINGS INC.
- --------------------
285 Madison Avenue
New York, NY 10017
(New York County)
SUMMIT INSURANCE
- ----------------
COMPANY
- -------
RR3
Airport Road
Berlin, VT 05602
(Washington County)
BM COMMUNICATIONS
- -----------------
INC.
- ----
285 Madison Avenue
New York, NY 10017
(New York County)
1801 K Street, N.W.
Washington, DC 20006
(District of Columbia)
BURSON-MARSTELLER/
- ------------------
NIS INC.
- --------
285 Madison Avenue
New York, NY 10017
(New York County)
1801 K Street, N.W.
Washington, DC 20006
(District of Columbia)
LANDOR ASSOCIATES
- -----------------
1001 Front Street
San Francisco, CA 94111
(San Francisco County)
601 Brickell Key Drive
Miami, FL 33131
(Dade County)
One East Wacker Drive
15th Floor
Chicago, IL 60601
(Cook County)
230 Park Avenue South
New York, NY 10003
(New York County)
1411 Fourth Avenue
Seattle, WA 98101
(King County)
LANDOR ASSOCIATES
- -----------------
INTERNATIONAL
- -------------
1001 Front Street
San Francisco, CA 94111
(San Francisco County)
RSBC VESTIGES INC.
- ------------------
285 Madison Avenue
New York, NY 10017
(New York County)
Y&R FAR EAST
- ------------
HOLDINGS, INC.
- --------------
285 Madison Avenue
New York, NY 10017
(New York County)
YOUNG & RUBICAM
- ---------------
PUERTO RICO, INC.
- -----------------
9 Munet Court, Buchanan
Guaynabo, Puerto Rico
00968
<PAGE> 273
EXHIBIT A
[FORM OF DESIGNATED FOREIGN LENDER NOTICE]
DESIGNATED FOREIGN LENDER NOTICE
Reference is made to (a) the Security Agreement, dated as of
____________ __, 1996 (the "Parent Borrower Security Agreement"), made by Young
& Rubicam Holdings Inc., a New York corporation ("Y&R Holdings"), Young &
Rubicam Inc., a New York corporation ("Y&R Inc. (New York)"), Young & Rubicam,
Inc., a Delaware corporation ("Y&R Inc. (Delaware)"), Young & Rubicam L.P., a
Delaware limited partnership ("Y&R LP"; collectively with Y&R Holdings, Y&R Inc.
(New York) and Y&R Inc. (Delaware), the "Parent Borrowers") in favor of Bank of
America National Trust and Savings Association, a national banking association,
as Administrative Agent (in such capacity, the "Administrative Agent") for the
several banks and other financial institutions (the "Lenders") from time to time
parties to the Credit and Guarantee Agreement, dated as of December __, 1996 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Parent Borrowers, the Subsidiary Borrowers (as defined in
the Credit Agreement) from time to time parties thereto, the Lenders, the
Administrative Agent and Bank of America International Limited, a bank organized
under the laws of England, as European Payment Agent, (b) the Pledge Agreement,
dated as of _________ __, 1996 (the "Parent Borrower Pledge Agreement"), made by
the Parent Borrowers in favor of the Administrative Agent, (c) the Security
Agreement, dated as of __________ __, 1996 (the "Subsidiaries Security
Agreement"), made by each of the subsidiaries of the Parent Borrowers which are
parties thereto in favor of the Administrative Agent, and (d) the Pledge
Agreement, dated as of _________ __, 1996 (the "Subsidiaries Pledge Agreement",
and together with the Parent Borrower Security Agreement, the Parent Borrower
Pledge Agreement and the Subsidiaries Security Agreement, the "Security
Documents"), made by each of the subsidiaries of the Parent Borrowers which are
parties thereto in favor of the Administrative Agent.
The Company hereby designates [Name of Designated Foreign Lender] as
a "Designated Foreign Lender" under the Security Documents with a Maximum
Qualified Foreign Indebtedness Amount of $___________. The Company hereby
represents and warrants that the "Qualified Foreign Indebtedness" is comprised
of [include description] and that all amount outstanding in respect thereof will
be permitted under subsection 9.2(d) of the Credit Agreement.
The undersigned, [Name of Designated Foreign Lender], hereby
acknowledges and agrees that the Maximum Qualified Foreign Indebtedness Amount
with respect to the Qualified Foreign Indebtedness described herein shall be
$___________. The undersigned in its capacity as a Designated Foreign Lender
further acknowledges and agrees that (a) it shall be bound by all of the terms
and conditions of the Security Documents, (b) it shall not have the right to
exercise or seek to exercise any rights or exercise any remedies with respect to
any collateral subject to the Security Documents or institute any action or
proceeding with respect to such rights or remedies, including without
limitation, any action of foreclosure or contest, protest or object to any
foreclosure proceeding or action brought by the Administrative Agent or any
Lender or any other exercise by the Administrative Agent or any Lender of any
rights and remedies hereunder or under any Security Document, (c) it shall not
have the right to consent to any amendment, waiver or modification of any
Security Document (other than, subject to clause (d) below, any amendment,
waiver or other modification to subsection 7.3 of the Parent Borrower Security
Agreement and the Subsidiaries Security Agreement and Section 8 (other than
paragraph (e) thereof) of the Parent Borrower Pledge Agreement and the
Subsidiaries Pledge Agreement which materially adversely affects such Designated
Foreign Lender in a manner which is different to the effect of such amendment,
waiver or modification on the other Secured Parties), (d) it shall not have the
right to consent to any release of all or any portion of the Collateral by the
Administrative Agent or the Lenders,
<PAGE> 274
2
(e) it shall not have the right to request or direct that any payment be made
under subsection 7.3 of the Parent Borrower Security Agreement or the
Subsidiaries Security Agreement or Section 8 (other than paragraph (e) thereof)
of the Parent Borrower Pledge Agreement or the Subsidiaries Pledge Agreement,
(f) neither the Administrative Agent nor any Lender shall have any liability or
obligation to the undersigned (including, without limitation, with respect to
the perfection of any lien or security interest granted pursuant to the Security
Documents) except with respect to any payment (if and when made) under
subsection 7.3 of the Parent Borrower Security Agreement or the Subsidiaries
Security Agreement or Section 8 (other than paragraph (e) thereof) of the Parent
Borrower Pledge Agreement or the Subsidiaries Pledge Agreement and (g) it has
received copies of the Credit Agreement and each of the Security Documents. All
notices to the undersigned shall be sent to [insert notice information] or to
such other address as the undersigned shall designate in writing from time to
time to the Administrative Agent and all notices shall be given in accordance
with subsection 13.2 of the Credit Agreement.
THIS NOTICE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
The undersigned hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Notice or for recognition and enforcement of any
judgment in respect thereof,to the non-exclusive general jurisdiction of the
courts of the State of New York, the courts of the United State of America for
the Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail, (or
any substantially similar form of mail), postage prepaid, to its address for
notices hereunder;
(d) agrees that nothing herein shall affect the right to effect
service or process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
<PAGE> 275
3
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to in
this subsection any special, exemplary, punitive or consequential damages.
[NAME OF DESIGNATED FOREIGN
LENDER]
By:
--------------------------------
Name:
[THE COMPANY]
By:
--------------------------------
Title:
Accepted:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Administrative Agent
By:
------------------------------------
Title:
Date:
----------------------------------
<PAGE> 276
EXHIBIT L TO
CREDIT AND GUARANTEE AGREEMENT
[FORM OF SWING LINE LOAN PARTICIPATION CERTIFICATE]
SWING LINE LOAN PARTICIPATION CERTIFICATE
[Name of Lender]
__________________________________
__________________________________
__________________________________
Dear Sirs:
Pursuant to subsection 3.12(d) of the Credit and Guarantee
Agreement, dated as of ______________, 1996 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among [Young &
Rubicam Holdings Inc., a New York corporation,] [Young & Rubicam Inc., a New
York corporation,] Young & Rubicam Inc., a Delaware corporation, Young & Rubicam
L.P., a Delaware limited partnership, the Subsidiary Borrowers (as defined
therein) from time to time parties thereto, the several banks and other
financial institutions from time to time parties thereto (the "Lenders"), Bank
of America National Trust and Savings Association, a national banking
association, as Administrative Agent for the Lenders and Bank of America
International Limited, a bank organized under the laws of England, as European
Payment Agent, the undersigned, as Swing Line Lender (as defined in the Credit
Agreement) under the Credit Agreement, hereby acknowledges receipt from you on
the date hereof of _______________ DOLLARS ($____________) as payment for the
purchase of a participating interest in the following Swing Line Loan (as
defined in the Credit Agreement):
Date of Swing Line Loan:
_____________________________________
Principal Amount of Swing Line
Loan Participating Interest:
$____________________________________
Very truly yours,
BANK OF AMERICA (ILLINOIS)
By:
--------------------------------
Title:
<PAGE> 277
EXHIBIT M TO
CREDIT AND GUARANTEE AGREEMENT
[FORM OF REVOLVING NOTE]
REVOLVING NOTE
$_________________ New York, New York
_____________ __, 1996
FOR VALUE RECEIVED, the undersigned, YOUNG & RUBICAM HOLDINGS INC.,
a New York corporation ("Y&R Holdings"), YOUNG & RUBICAM INC., a New York
corporation ("Y&R Inc. (New York)"), YOUNG & RUBICAM INC., a Delaware
corporation ("Y&R Inc. (Delaware)"), and YOUNG & RUBICAM L.P., a Delaware
limited partnership ("Y&R LP"; collectively with Y&R Holdings , Y&R Inc. (New
York) and Y&R Inc. (Delaware), the "Parent Borrowers"), hereby, jointly and
severally, unconditionally promise to pay to the order of
___________________________ (the "Lender"), at the office of Bank of America
National Trust and Savings Association located at 1455 Market Street, San
Francisco, California 94103, in lawful money of the United States of America and
in immediately available funds on the Termination Date the principal amount of
________________ DOLLARS ($___________), or, if less, the aggregate unpaid
principal amount of all Revolving Loans of the Lender made to the Parent
Borrowers pursuant to subsection 3.1 of the Credit Agreement (as defined below).
The Parent Borrowers further, jointly and severally, agree to pay interest in
like money at such office on the unpaid principal amount hereof from time to
time outstanding at the rates and on the dates specified in subsections 5.8 and
5.11 of the Credit Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, Type, currency and amount of
each Revolving Loan of the Lender and the date and amount of each payment or
prepayment of principal thereof, each continuation thereof as the same Type in
accordance with subsection 5.6 of the Credit Agreement, each conversion of all
or a portion thereof to another Type in accordance with subsection 5.6 of the
Credit Agreement and, in the case of Eurodollar Loans and Revolving Offshore
Loans, the length of each Interest Period with respect thereto. Each such
endorsement shall constitute prima facie evidence of the accuracy of the
information endorsed. The failure to make any such endorsement (or any error
therein) shall not affect the obligations of the Parent Borrowers in respect of
any Revolving Loan.
This Note (a) is one of the Revolving Notes referred to in the
Credit and Guarantee Agreement, dated as of December __, 1996 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among the Parent Borrowers, the Subsidiary Borrowers (as defined in the Credit
Agreement) from time to time parties thereto, the Lender, the several other
banks and financial institutions from time to time parties thereto (together
with the Lender, the "Lenders"), Bank of America National Trust and Savings
Association, a national banking association, as Administrative Agent (as defined
in the Credit Agreement) for the Lenders and Bank of America International
Limited, a bank organized under the laws of England, as European Payment Agent,
(b) is subject to the provisions of the Credit Agreement and (c) is subject to
optional and mandatory prepayment in whole or in part as
<PAGE> 278
2
provided in the Credit Agreement. This Note is secured and guaranteed as
provided in the Loan Documents. Reference is hereby made to the Loan Documents
for a description of the properties and assets in which a security interest has
been granted, the nature and extent of the security and the guarantees, the
terms and conditions upon which the security interests and each guarantee were
granted and the rights of the holder of this Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
YOUNG & RUBICAM HOLDINGS INC.
By:
--------------------------------
Title:
YOUNG & RUBICAM INC., a New York corporation
By:
--------------------------------
Title:
YOUNG & RUBICAM INC., a Delaware corporation
By:
--------------------------------
Title:
YOUNG & RUBICAM L.P.
By: YOUNG & RUBICAM INC., its General Partner
By:
--------------------------------
Title:
<PAGE> 279
Schedule A
to Revolving Note
LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount of Base Rate
Date Amount of Base Amount Converted to Amount of Principal of Loans Converted to Unpaid Principal Balance Notation
Rate Loans Base Rate Loans Base Rate Loans Repaid Eurodollar Loans of Base Rate Loans Made By
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 280
YOUNG & RUBICAM L.P.
By: YOUNG & RUBICAM INC., its General Partner
By
-------------------------------------------
Title:
<PAGE> 281
Schedule B
to Revolving Note
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Period and Amount of Principal Amount of Eurodollar Unpaid Principal
Date Amount of Amount Converted Eurodollar Rate with of Eurodollar Loans Converted to Balance of Notation
Eurodollar Loans to Eurodollar Loans Respect Thereto Loans Repaid Base Rate Loans Eurodollar Loans Made By
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 282
Schedule C
to Revolving Note
LOANS, CONTINUATIONS AND REPAYMENTS OF REVOLVING OFFSHORE LOANS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Date Amount and Currency Interest Period and Amount of Principal
of Revolving Revolving Offshore Rate of Revolving Offshore Unpaid Principal Balance of Notation
Offshore Loans with Respect Thereto Loans Repaid Revolving Offshore Loans Made By
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 283
EXHIBIT N TO
CREDIT AND GUARANTEE AGREEMENT
[FORM OF TERM NOTE]
TERM NOTE
$______________________ New York, New York
___________ __, 1996
FOR VALUE RECEIVED, the undersigned, YOUNG & RUBICAM HOLDINGS INC.,
a New York corporation ("Y&R Holdings"), YOUNG & RUBICAM INC., a New York
corporation ("Y&R Inc. (New York)"), YOUNG & RUBICAM INC., a Delaware
corporation ("Y&R Inc. (Delaware)"), and YOUNG & RUBICAM L.P., a Delaware
limited partnership ("Y&R LP"; collectively with Y&R Holdings, Y&R Inc. (New
York) and Y&R Inc. (Delaware), the "Parent Borrowers"), hereby, jointly and
severally, unconditionally promise to pay to the order of
____________________________________ (the "Lender"), at the office of Bank of
America National Trust and Savings Association located at 1455 Market Street,
San Francisco, California 94103, in lawful money of the United States of America
and in immediately available funds, the principal amount of _____________
DOLLARS ($________), or, if less, the unpaid principal amount of the Term Loans
of the Lender made to the Parent Borrowers pursuant to subsection 2.1 of the
Credit Agreement (as hereinafter defined). The principal amount of this Note
shall be payable in the amounts and on the dates specified in subsection 5.3(a)
of the Credit Agreement. The Parent Borrowers, further, jointly and severally,
agree to pay interest in like money at such office on the unpaid principal
amount hereof from time to time outstanding at the rates and on the dates
specified in subsections 5.8 and 5.11 of the Credit Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, Type and amount of each Term
Loan of the Lender and the date and amount of each payment or prepayment of
principal with respect thereto, each conversion of all or a portion thereof to
another Type, each continuation of all or a portion thereof as the same Type
and, in the case of Eurodollar Loans, the length of each Interest Period with
respect thereto. Each such endorsement shall constitute prima facie evidence of
the accuracy of the information endorsed. The failure to make any such
endorsement (or any error therein) shall not affect the obligations of the
Parent Borrowers in respect of any Term Loan.
This Note (a) is one of the Term Notes referred to in the Credit and
Guarantee Agreement, dated as of December __, 1996 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among the Parent
Borrowers, the Subsidiary Borrowers (as defined in the Credit Agreement) from
time to time parties to thereto, the Lender, the several other banks and
financial institutions from time to time parties thereto (together with the
Lender, the "Lenders"), Bank of America National Trust and Savings Association,
a national banking association, as Administrative Agent (as defined in the
Credit Agreement) for the Lenders and Bank of America International Limited, a
bank organized under the laws of England, as European Payment Agent, (b) is
<PAGE> 284
2
subject to the provisions of the Credit Agreement and (c) is subject to optional
and mandatory prepayment in whole or in part as provided in the Credit
Agreement. This Note is secured and guaranteed as provided in the Loan
Documents. Reference is hereby made to the Loan Documents for a description of
the properties and assets in which a security interest has been granted, the
nature and extent of the security and the guarantees, the terms and conditions
upon which the security interests and each guarantee were granted and the rights
of the holder of this Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
YOUNG & RUBICAM HOLDINGS INC.
By:
--------------------------------
Title:
YOUNG & RUBICAM INC., a New York corporation
By:
--------------------------------
Title:
YOUNG & RUBICAM INC., a Delaware corporation
By:
--------------------------------
Title:
YOUNG & RUBICAM L.P.
<PAGE> 285
3
By: YOUNG & RUBICAM INC., its General Partner
By:
--------------------------------
Title:
<PAGE> 286
Schedule A
to Term Note
LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount of Base Rate
Date Amount of Base Amount Converted to Amount of Principal of Loans Converted to Unpaid Principal Balance Notation
Rate Loans Base Rate Loans Base Rate Loans Repaid Eurodollar Loans of Base Rate Loans Made By
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------------
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</TABLE>
<PAGE> 287
Schedule B
to Term Loan Note
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Period and Amount of Principal Amount of Eurodollar Unpaid Principal
Date Amount of Amount Converted Eurodollar Rate with of Eurodollar Loans Converted to Balance of Notation
Eurodollar Loans to Eurodollar Loans Respect Thereto Loans Repaid Base Rate Loans Eurodollar Loans Made By
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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</TABLE>
<PAGE> 288
EXHIBIT O TO
CREDIT AND GUARANTEE AGREEMENT
[FORM OF SWING LINE NOTE]
SWING LINE NOTE
New York, New York
$20,000,000.00 __________ __, 1996
FOR VALUE RECEIVED, the undersigned, YOUNG & RUBICAM HOLDINGS INC.,
a New York corporation ("Y&R Holdings"), YOUNG & RUBICAM INC., a New York
corporation ("Y&R Inc. (New York)"), YOUNG & RUBICAM INC., a Delaware
corporation ("Y&R Inc. (Delaware)"), and YOUNG & RUBICAM L.P., a Delaware
limited partnership ("Y&R LP"; collectively with Y&R Holdings, Y&R Inc. (New
York) and Y&R Inc. (Delaware), the "Parent Borrowers"), hereby, jointly and
severally, unconditionally promise to pay to the order of
____________________________________ (the "Swing Line Lender"), at the office of
Bank of America National Trust and Savings Association located at 1455 Market
Street, San Francisco, California 94103, in lawful money of the United States of
America and in immediately available funds on the Termination Date the principal
amount of TWENTY MILLION DOLLARS ($20,000,000.00) or, if less, the aggregate
unpaid principal amount of the Swing Line Loans of the Swing Line Lender made to
the Parent Borrowers pursuant to subsection 3.11 of the Credit Agreement (as
hereinafter defined). The Parent Borrowers further, jointly and severally, agree
to pay interest in like money at said office on the unpaid principal amount of
Swing Line Loans from time to time outstanding at the rates and on the dates
specified in subsections 5.8 and 5.11 of the Credit Agreement. Unless otherwise
defined herein, terms defined in the Credit Agreement and used herein shall have
the meanings given to them in the Credit Agreement.
The holder of this Note is authorized to endorse on the schedule
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date and amount of each Swing Line
Loan of the Swing Line Lender and the date and amount of each payment or
prepayment of principal thereof. Each such endorsement shall constitute prima
facie evidence of the accuracy of the information endorsed. The failure to make
any such endorsement (or any error therein) shall not affect the obligations of
the Parent Borrowers in respect of any Swing Line Loan.
This Note (a) is the Swing Line Note referred to in the Credit and
Guarantee Agreement, dated as of December ___, 1996 (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among the Parent Borrowers, the Subsidiary Borrowers (as defined in the Credit
Agreement) from time to time parties thereto, the Swing Line Lender, the several
other banks and financial institutions from time to time parties thereto
(together with the Swing Line Lender, the "Lenders"), Bank of America National
Trust and Savings Association, a national banking association, as Administrative
Agent (as defined in the Credit Agreement) for the Lenders, Bank of America
International Limited, a bank organized under the laws of England, as European
Payment Agent, (b) is subject to the provisions of the Credit Agreement and (c)
is subject to optional and mandatory prepayment in whole or in part as provided
in the Credit Agreement. This Note is secured and guaranteed as provided in the
Loan Documents. Reference is hereby made to the Loan Documents for a description
of the properties and assets in which a security interest has been granted, the
nature and
<PAGE> 289
2
extent of the security and the guarantees, the terms and conditions upon which
the security interests and each guarantee were granted and the rights of the
holder of this Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
YOUNG & RUBICAM HOLDINGS INC.
By:
-----------------------------------
Title:
YOUNG & RUBICAM INC., a New York corporation
By:
-----------------------------------
Title:
YOUNG & RUBICAM INC., a Delaware corporation
By:
-----------------------------------
Title:
<PAGE> 290
3
YOUNG & RUBICAM L.P.
By: YOUNG & RUBICAM INC., its General Partner
By:
-----------------------------------
Title:
<PAGE> 291
Schedule to
Swing Line Note
LOANS AND REPAYMENTS
<TABLE>
<CAPTION>
===============================================================================================
Date Amount of Swing Line Amount of Swing Line Unpaid Principal Balance of Notation Made By
Loans Made Loans Repaid Swing Line Loans
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
===============================================================================================
</TABLE>
<PAGE> 292
EXHIBIT P TO
CREDIT AND GUARANTEE AGREEMENT
[FORM OF FRONTED LOAN NOTE]
FRONTED LOAN NOTE
[Commitment Amount in
Applicable Foreign Currency] __________ __, ____
FOR VALUE RECEIVED, the undersigned, [NAME OF SUBSIDIARY BORROWER],
a _______________ organized under the laws of ________________ (the "Subsidiary
Borrower"), unconditionally promises to pay to the order of
_____________________________ (the "Fronting Lender"), at the Fronting Lender's
Payment Office located at ________________________, in lawful money of the
[Jurisdiction of Applicable Foreign Currency] and in immediately available funds
on the ________________________________, the principal amount of [Commitment
Amount in Applicable Foreign Currency] (_________________.__) or, if less, the
aggregate unpaid principal amount of the Fronted Offshore Loans of the Fronting
Lender made to the Subsidiary Borrower pursuant to subsection 4.1 of the Credit
Agreement (as hereinafter defined). The Subsidiary Borrower further agrees to
pay interest in like money at said Fronting Lender's Payment Office on the
unpaid principal amount of each Fronted Offshore Loan from time to time
outstanding at the rates and on the dates specified in subsections 5.8 and 5.11
of the Credit Agreement. Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement.
The holder of this Note is authorized to endorse on the schedule
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, currency and amount of each
Fronted Offshore Loan of the Fronting Lender and the date and amount of each
payment or prepayment of principal thereof, each continuation thereof as the
same Type in accordance with subsection 5.6 of the Credit Agreement, and the
Cost of Funds and the length of each Interest Period (if any) with respect
thereto. Each such endorsement shall constitute prima facie evidence of the
accuracy of the information endorsed. The failure to make any such endorsement
(or any error therein) shall not affect the obligations of the Subsidiary
Borrower in respect of any Fronted Offshore Loan.
This Note (a) is one of the Fronted Loan Notes referred to in the
Credit and Guarantee Agreement, dated as of December __, 1996 (as the same may
be amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Young & Rubicam Holdings Inc., a New York corporation ("Y&R
Holdings"), Young & Rubicam Inc., a New York corporation ("Y&R Inc. (New
York)"), Young & Rubicam Inc., a Delaware corporation ("Y&R Inc. (Delaware)")
and Young & Rubicam L.P., a Delaware limited partnership ("Y&R LP"; collectively
with Y&R Holdings, Y&R Inc. (New York) and Y&R Inc. (Delaware), the "Parent
Borrowers"), the Subsidiary Borrowers (as defined in the Credit Agreement) from
time to time parties thereto, the Fronting Lender, the several other banks and
financial institutions from time to time parties thereto (together with the
Fronting Lender, the "Lenders"), Bank of America National Trust and Savings
Association, a national banking association, as Administrative Agent (as defined
in the Credit Agreement) for the Lenders, and Bank of America International
Limited, a bank organized under the laws of England, as European Payment Agent,
(b) is subject to the provisions of the Credit Agreement and (c) is subject to
optional and mandatory prepayment in whole or in part as provided in the Credit
Agreement. This Note is secured and
<PAGE> 293
2
guaranteed as provided in the Loan Documents. Reference is hereby made to the
Loan Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this Note in respect
thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
[NAME OF SUBSIDIARY BORROWER]
By:
----------------------------------
Title:
<PAGE> 294
Schedule To
Fronted Loan Note
LOANS, CONTINUATIONS AND REPAYMENTS OF FRONTED OFFSHORE LOANS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Date Amount and Currency of Interest Period (if any) and Cost Amount of Principal of Unpaid Principal Balance of Notation
Fronted Offshore Loans of Funds with Respect Thereto Fronted Offshore Loans Repaid Fronted Offshore Loans Made By
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 295
EXHIBIT Q TO
CREDIT AND GUARANTEE AGREEMENT
[FORM OF BORROWER CLOSING CERTIFICATE]
BORROWER CLOSING CERTIFICATE
Pursuant to subsections 7.1(g), 7.1(h), 7.1(i) and 7.1(l) of the
Credit and Guarantee Agreement, dated as of _____________, 1996 (the "Credit
Agreement"), among Young & Rubicam Holdings Inc., a New York corporation [(the
"Parent Borrower")], Young & Rubicam Inc., a New York corporation [(the "Parent
Borrower")], Young & Rubicam Inc., a Delaware corporation [(the "Parent
Borrower")], and Young & Rubicam L.P., a Delaware limited partnership [(the
"Parent Borrower")], the Subsidiary Borrowers (as defined in the Credit
Agreement) from time to time parties thereto, the several banks and other
financial institutions from time to time parties thereto (the "Lenders"), Bank
of America National Trust and Savings Association, a national banking
association, as Administrative Agent (as defined in the Credit Agreement) for
the Lenders, and Bank of America International Limited, a bank organized under
the laws of England, as European Payment Agent, the undersigned,
____________________ of [the General Partner of] the Parent Borrower, hereby
certifies as follows:
1. The representations and warranties of the Parent Borrower set
forth in the Credit Agreement and each of the other Loan Documents to
which it is a party or which are contained in any certificate, document or
financial or other statement furnished pursuant to or in connection with
the Credit Agreement or any Loan Document are true and correct on and as
of the date hereof with the same effect as if made on the date hereof,
except for representations and warranties expressly stated to relate to a
specific earlier date, in which case such representations and warranties
are true and correct as of such earlier date;
2. No Default or Event of Default has occurred and is continuing as
of the date hereof or will occur after giving effect to the making of the
Loans and the issuance of the Letters of Credit requested to be made
and/or issued on the date hereof or the consummation of each of the
transactions contemplated by the Loan Documents; and
3. _________________ is and at all times since ________________,
1996, has been the duly elected and qualified [Assistant] Secretary of
[the General Partner of] the Parent Borrower and the signature set forth
on the signature line for such officer below is such officer's true and
genuine signature;
and the undersigned [Assistant] Secretary of [the General Partner of] the Parent
Borrower hereby certifies as follows:
4. There are no liquidation or dissolution proceedings pending or to
the knowledge of the [Assistant] Secretary of [the General Partner of] the
Parent Borrower threatened against the Parent Borrower or any of its
Subsidiaries, nor has any other event occurred affecting or threatening
the corporate existence of the Parent Borrower or any of its Subsidiaries;
5. The Parent Borrower is a _________________ duly organized,
validly existing and in good standing under the laws of _______________;
<PAGE> 296
2
6. (a) Attached hereto as Exhibit A is a true and complete copy of
resolutions duly adopted by the Board of Directors of [the General Partner
of] the Parent Borrower on __________ __, 1996; such resolutions have not
in any way been amended, modified, revoked or rescinded and have been in
full force and effect since their adoption to and including the date
hereof and are now in full force and effect; such resolutions are the only
corporate proceedings of [the General Partner of] the Parent Borrower now
in force relating to or affecting the matters referred to therein;
(b) attached hereto as Exhibit B is a true and complete copy of the
Bylaws of [the General Partner of] the Parent Borrower as in effect at all
times since __________ __, 19__, to and including the date hereof; and
(c) attached hereto as Exhibit C is a true and complete copy of the
Certificate of Incorporation of [the General Partner of] the Parent
Borrower as in effect at all times since __________ __, 19__, to and
including the date hereof; and
[(d) attached hereto as Exhibit D is a true and complete copy of
[the Certificate of Limited Partnership and the Partnership Agreement] of
the Parent Borrower, together with all amendments, supplements and other
modifications thereto; and]
7. The following persons are now duly elected and qualified officers
of [the General Partner of] the Parent Borrower, holding the offices
indicated next to their respective names below, and such officers have
held such offices with [the General Partner of] the Parent Borrower at all
times since __________ __, 19__, to and including the date hereof, and the
signatures appearing opposite their respective names below are the true
and genuine signatures of such officers, and each of such officers is duly
authorized to execute and deliver on behalf of the Parent Borrower, the
Credit Agreement and the other Loan Documents to which it is a party and
any certificate or other document to be delivered by the Parent Borrower
pursuant to the Credit Agreement or any such Loan Document:
Name Office Signature
[ ] [ ] ---------------
[ ] [ ] ---------------
Unless otherwise defined herein, capitalized terms which are defined
in the Credit Agreement and used herein are so used as so defined.
<PAGE> 297
3
IN WITNESS WHEREOF, the undersigned have hereunto set our names.
[NAME OF PARENT BORROWER] [NAME OF PARENT BORROWER]
By: By:
----------------------------- -----------------------------
Name: Name:
Title: Title:
Date: _____________, 1996
<PAGE> 298
EXHIBIT S TO
CREDIT AND GUARANTEE AGREEMENT
[FORM OF COMPLIANCE CERTIFICATE]
Pursuant to subsection 8.2(b) of the Credit and Guarantee Agreement,
dated as of December ___________, 1996, among [Young & Rubicam Holdings Inc., a
New York corporation ("Y&R Holdings"),] [Young & Rubicam Inc., a New York
corporation ("Y&R Inc. (New York)"),] Young & Rubicam Inc., a Delaware
corporation ("Y&R Inc. (Delaware)"), Young & Rubicam L.P., a Delaware limited
partnership ("Y&R LP"; collectively with [Y&R Holdings,] [Y&R Inc. (New York)]
and Y&R (Delaware), the "Parent Borrowers"), the Subsidiary Borrowers (as
defined therein; collectively with the Parent Borrowers, the "Borrowers") from
time to time parties to the Credit Agreement, the several banks and other
financial institutions from time to time parties to the Credit Agreement
(collectively, the "Lenders"; individually, a "Lender"), Bank of America
National Trust and Savings Association, a national banking association, as
Administrative Agent (as hereinafter defined) for the Lenders, and Bank of
America International Limited, a bank organized under the laws of England, as
European Payment Agent (in such capacity, the "European Payment Agent"), the
undersigned, ____________, the [Title] of the Company, as defined in the Credit
Agreement, does hereby certify on behalf of the Company that
(i) to the best of the undersigned's knowledge, during the period from
[________________] to [______________]:
(A) no Subsidiary has been formed or acquired (or, if any such
Subsidiary has been formed or acquired, the Borrowers have
complied with the requirements of subsection 8.10 of the
Credit Agreement with respect thereto),
(B) no Borrower nor any of their Domestic Subsidiaries has changed
its name, its principal place of business, its chief executive
office or the location of any material item of tangible
Collateral without complying with the requirements of the
Credit Agreement and the Security Documents with respect
thereto,
(C) each Borrower has observed or performed all of its covenants
and other agreements, and satisfied every condition, contained
in the Credit Agreement and the other Loan Documents to be
observed, performed or satisfied by it, and
(D) no Default or Event of Default has occurred [except
___________]; and
(ii) as of the date of the financial statements being delivered in
connection herewith, the Company was in compliance with the
covenants set forth in subsection 9.1 and subsection 9.7(ii) of the
Credit Agreement and the calculations of such covenant compliance
set forth on Annex A hereto are based upon such financial statements
and are true and correct [; and]
<PAGE> 299
2
[(iii) the Excess Cash Flow for the fiscal year ending [______] was
$_________ and the calculations to support the determination of the
amount of such Excess Cash Flow for such period set forth on Annex A
hereto are based upon such financial statements and are true and
correct;
(iv) the aggregate Restricted Payments made pursuant to subsection
9.7(ii) during the fiscal year ending [_________] were $____________
and the calculations to support the determination of the amount of
such Restricted Payments for such period set forth on Annex A hereto
are true and correct; and
(v) the Capital Expenditures of the Borrowers and their respective
Subsidiaries for the fiscal year ending [__________] were
$__________ and the calculations to support the determination of the
amount of such Capital Expenditures set forth on Annex A hereto are
true and correct.]
IN WITNESS WHEREOF, the undersigned has executed and delivered this
certificate as of the day and year set forth below.
[COMPANY]
By:
Title:
Date:
<PAGE> 300
ANNEX A TO
COMPLIANCE CERTIFICATE
I. Subsection 9.1 - Financial Covenants
A. Maintenance of Net Worth
1. Consolidated Net Worth as of [________] ("Compliance Date Net Worth"),
calculated as follows:
Shareholders' Equity calculated in conformity with
GAAP: ___________
Adjustment to remove effect of non-cash compensation
charges after the Closing Date (specify whether
adjustment is negative or positive): ___________
Adjustment to remove effect of any charges or losses
relating to the sale of the New York Real Property
(specify whether adjustment is negative or positive): ___________
Adjustment to remove effect of any foreign currency
translation adjustments (specify whether adjustment
is negative or positive): ___________
Adjustment to remove effect of pension plan
liabilities (specify whether adjustment is negative
or positive): ___________
Compliance Date Consolidated Net Worth: ___________
2. Covenant level for Consolidated Net Worth ("Covenant Level Net
Worth"), calculated as follows:
Initial Consolidated Net Worth (as of 3/31/1997)
[Note: Insert 85% of such Consolidated Net Worth, if
such Consolidated Net Worth is positive and 115% of
such Consolidated Net Worth, if such Net Worth is
negative]: ___________
PLUS 50% of Consolidated Net Income for each complete
fiscal quarter of the Company (commencing with the
fiscal quarter ending June 30, 1997) for which
Consolidated Net Income is positive as set forth
below: ___________
[Insert details regarding Consolidated Net Income for
each such quarter]
______
______
Covenant Level Net Worth: ___________
- --------------------------------------------------------------------------------
Covenant: Compliance Date Net Worth must be greater than Covenant Level Net
Worth. [The Company is in compliance with the covenant.]
- --------------------------------------------------------------------------------
<PAGE> 301
2
B. Interest Coverage
1. EBITDA for four quarters ending [________] (the "Compliance Period"):
Consolidated Net Income for the Compliance Period: ___________
Adjustments in respect of Non-Operating Gains or
Losses (specify whether adjustment is positive or
negative): ___________
PLUS Consolidated Interest Expense for Compliance
Period to the extent deducted in determining
Consolidated Net Income: ___________
PLUS Consolidated provision for income taxes for
Compliance Period to the extent deducted in
determining Consolidated Net Income: ___________
PLUS Consolidated depreciation and amortization
expense for Compliance Period to the extent deducted
in determining Consolidated Net Income: ___________
PLUS foreign exchange non-cash losses associated with
hyperinflationary countries to the extent deducted in
determining Consolidated Net Income: ___________
PLUS Consolidated non-cash compensation expenses
attributable to stock, stock options, restricted
stock, and Related Equity Securities to the extent
deducted in determining Consolidated Net Income: ___________
PLUS Consolidated cash compensation expenses
attributable to repurchases of stock, stock options,
restricted stock and Related Equity Securities to the
extent deducted in determining Consolidated Net
Income: ___________
PLUS Consolidated expenses or reserves directly
associated with the Recapitalization to the extent
deducted in determining Consolidated Net Income: ___________
PLUS any amounts in respect of the minority interest
of any other Person in such Person for Compliance
Period to the extent deducted in determining
Consolidated Net Income: ___________
PLUS expenses or reserves associated with (1) the
sale of the New York Real Property, including the
relocation or consolidation of individuals and
offices located in New York City in connection with,
or in anticipation of, such sale, or (2) the New York
Real Estate Consolidation including in each case all
expenses of renovating office space) to the extent
deducted in determining Consolidated Net Income: ___________
PLUS EBITDA for the Compliance Period of any other
Person which is not wholly-owned by such Person, but
which such Person reports on a consolidated basis
calculated in conformity with accordance with GAAP to
the extent deducted in determining Consolidated Net
Income: ___________
<PAGE> 302
3
PLUS equity losses from any other Person which is
partially but not wholly-owned by such Person and
which is not consolidated for the Compliance Period
to the extent deducted in determining Consolidated
Net Income: ___________
LESS foreign exchange non-cash gains associated
with hyperinflationary countries to the extent
added in determining Consolidated Net Income: ___________
LESS any amounts in respect of the minority
interest of any other Person in such Person for
the Compliance Period to the extent added in
determining Consolidated Net Income: ___________
LESS EBITDA for the Compliance Period of any other
Person which is not wholly-owned by such Person,
but which such Person reports on a consolidated
basis in accordance with GAAP to the extent added
in determining Consolidated Net Income: ___________
LESS equity gains from any other Person which is
partially but not wholly-owned by such Person and
which is not consolidated for the Compliance
Period in each case to the extent added in
determining Consolidated Net Income of such Person
for the Compliance Period: ___________
EBITDA:
[Note: To the extent Acquisitions or Divestitures are consummated
during the Compliance Period, EBITDA is to be adjusted to reflect such
events as if they occurred at the beginning of such period and a
detailed schedule should be attached describing such events and the
adjustments made.]
2. Proportionate EBITDA for the Compliance Period: ___________
EBITDA (see above):
PLUS the sum across all Persons which are partially
but not wholly-owned by the Company (or by any other
Person which is partially but not wholly owned by the
Company) of such Person's EBITDA, for the Compliance
Period, multiplied by the effective primary ownership
percentage held in such Person by the Company as of
[__________________] (calculated as set forth on
Schedule 1 hereto): ___________
Proportionate EBITDA: ___________
3. Consolidated Interest Expense for the Compliance Period: ___________
[Note: The Credit Agreement provides for the annualization of Interest
Expense for the first three Compliance Periods after the Closing Date]
<PAGE> 303
4
- --------------------------------------------------------------------------------
Interest Coverage Ratio for the Compliance Period:
Proportionate EBITDA = ____________ = ____________
--------------------
Consolidated Interest Expense
Covenant: Interest Coverage Ratio for the Compliance Period must not be
less than __________ [insert the relevant ratio set forth in
subsection 9.1 of the Credit Agreement]. [The Company is in
compliance with the covenant.]
- --------------------------------------------------------------------------------
[Note: To the extent Acquisitions or Divestitures are consummated during
the Compliance Period, Interest Expense is to be adjusted to reflect such
events as if they occurred at the beginning of such period and a detailed
schedule should be attached describing such events and the adjustments
made.]
C. Fixed Charge Coverage
1. Proportionate EBITDAR for the Compliance Period,
calculated as follows:
_. Proportionate EBITDA for the Compliance Period: _______________
PLUS the portion of Consolidated Rental Expense
which is the aggregate amount of fixed and
contingent rental expense of such Person for
the Compliance Period determined in accordance
with GAAP with respect to leases of real and
personal property, net of rental income from
any sublease arrangements: _______________
Proportionate EBITDAR: _______________
2. Fixed Charges for the Compliance Period,
calculated as follows:
Consolidated Interest Expense for the
Compliance Period: _______________
Consolidated Rental Expense for the Compliance
Period:
Aggregate amount of fixed and contingent
rental expense of such Person for the
Compliance Period determined in
accordance with GAAP with respect to
leases of real and personal property, net
of rental income from any sublease
arrangements: _______________
PLUS any cash payments resulting in a
reduction in the lease loss reserve in
respect of the New York Real Property: _______________
Consolidated Rental Expense: _______________
Scheduled Amortization of Term Loans for the
Compliance Period: _______________
Scheduled Amortization of Consolidated
Indebtedness for the Compliance Period, as
follows: _______________
[Insert details of amortization, describing in
each case the
<PAGE> 304
5
relevant Indebtedness] _______________
Fixed Charges: _______________
- --------------------------------------------------------------------------------
Fixed Charge Coverage Ratio for the Compliance Period:
Proportionate EBITDAR = ____________ = ____________________
---------------------
Fixed Charges
Covenant: Fixed Charge Coverage Ratio for the Compliance Period must not
be less than __________ [insert the relevant ratio set forth
in subsection 9.1 of the Credit Agreement]. [The Company is in
compliance with the covenant.]
- --------------------------------------------------------------------------------
<PAGE> 305
6
D. Debt Coverage
1. Consolidated Debt as of [________________]:
All indebtedness of such Person for borrowed
money or for the deferred purchase price of
property or services (other than current trade
liabilities incurred in the ordinary course of
business and payable in accordance with
customary practices, deferred rent and deferred
employee compensation incurred in the ordinary
course of business and Indebtedness permitted
under subsection 9.2(j) of the Credit
Agreement): _______________
PLUS any other indebtedness of such Person
which is evidenced by a note, bond, debenture
or similar instrument: _______________
PLUS all obligations of such Person under
Financing Leases: _______________
PLUS all obligations of such Person in respect
of letters of credit and acceptances issued or
created for the account of such Person: _______________
PLUS all liabilities of the types described
secured by any Lien on any property owned by
such Person even though such Person has not
assumed or otherwise become liable for the
payment thereof: _______________
PLUS all Guarantee Obligations of such Person
in respect of liabilities of the types
described above of any Person: _______________
Consolidated Debt: _______________
- --------------------------------------------------------------------------------
Debt Coverage Ratio:
Consolidated Debt = ____________ = ____________________
--------------------
Proportionate EBITDA
Covenant: Debt Coverage Ratio for the Compliance Period must not be
greater than _____ [insert the relevant ratio set forth in
subsection 9.1 of the Credit Agreement]. [The Company is in
compliance with the covenant.]
- --------------------------------------------------------------------------------
<PAGE> 306
7
[II. Subsection 5.4(f) - Excess Cash Flow
A. Excess Cash Flow for the fiscal year ending [_______________]:
EBITDA of the Company for such fiscal year (See above): ___________
PLUS the amount of any refund received by the Company
and its Subsidiaries during such fiscal year on
income taxes paid by the Company and its Subsidiaries
to the extent not included in EBITDA of the Company
for such fiscal year: ___________
PLUS cash dividends, cash interest and other similar
cash payments received by the Company during such
fiscal year in respect of investments to the extent
not included in EBITDA of the Company for such fiscal
year (including from all Persons which are partially
owned by the Company, but are not Subsidiaries): ___________
PLUS the sum across all Persons which are
Subsidiaries but are not wholly-owned by the Company,
or by any Subsidiary of the Company, of such Persons'
EBITDA for such fiscal year, multiplied by the
effective primary ownership percentage held in such
Person by the Company as of the end of such fiscal
year (See Schedule 1 attached hereto): ___________
PLUS extraordinary cash gains to the extent
subtracted or otherwise not included in EBITDA of the
Company for such fiscal year and only to the extent
not otherwise requiring a prepayment under subsection
5.4(e): ___________
PLUS pension expense deducted in calculating EBITDA
of the Company for such fiscal year: ___________
LESS the aggregate amount of capital expenditures
made by the Company and its Subsidiaries during
such fiscal year and not financed: ___________
LESS the aggregate amount of all reductions of the
Revolving Commitments (to the extent such
reductions are required by the terms of this
Agreement to be accompanied by prepayment of
Revolving Loans) or payments or prepayments of the
Term Loans during such fiscal year other than
pursuant to subsection 5.4(f): ___________
LESS the aggregate amount of payments of principal
in respect of any Indebtedness (other than under
this Agreement) permitted hereunder during such
fiscal year: ___________
LESS Consolidated Interest Expense of the Company
paid or payable in cash during such fiscal year: ___________
LESS the aggregate amount of cash used during such
fiscal year to pay fees described in subsection
5.1 and the fees and expenses incurred in
connection with the Recapitalization and the
financing thereof: ___________
LESS Consolidated provision for current income
taxes for such fiscal year: ___________
LESS extraordinary cash payments or losses by the
Company or any
<PAGE> 307
8
of its Subsidiaries to the extent not subtracted
in the determination of EBITDA of the Company
for such fiscal year: ___________
LESS cash expenses of the Company or any of the
Subsidiaries during such fiscal year associated
with the New York Real Estate Consolidation: ___________
LESS the aggregate amount of cash used by the
Company or any of its Subsidiaries for Investments
which are permitted under Section 9.9(c), (d), (f)
and (g) made by the Company or any of its
Subsidiaries during such fiscal year: ___________
LESS the aggregate amount of cash used to make
Restricted Payments by the Company and its
Subsidiaries during such fiscal year which are
permitted pursuant to subsection 9.8: ___________
LESS cash pension contributions during such fiscal
year: ___________
LESS the amount of cash used to fund any payment
in respect of the matter described on Schedule
6.13 during such fiscal year (amounts deducted
pursuant to this clause (xii) shall not exceed
$25,000,000 in the aggregate for all fiscal
years): ___________
Excess Cash Flow: ___________
Mandatory Prepayment (50% of Excess Cash Flow): ___________]
[III. Subsection 9.7(ii) - Restricted Payments
The Restricted Payments made pursuant to subsection 9.7(ii)
during the fiscal year ending [_______] were as follows:
[insert details].]
[IV. Subsection 9.8 - Capital Expenditures
The Capital Expenditures of the Borrower and its Restricted
Subsidiaries pursuant to subsection 9.8 for the fiscal year
ending [__________] were as follows: [insert details].]
<PAGE> 308
EXHIBIT T TO
CREDIT AND GUARANTEE AGREEMENT
[FORM OF ASSIGNMENT AND ACCEPTANCE]
Reference is made to the Credit and Guarantee Agreement, dated as of
___________ __, 1996 (as amended, supplemented or otherwise modified from time
to time, the "Credit Agreement"), among Young & Rubicam Holdings Inc., a New
York corporation ("Y&R Holdings"), Young & Rubicam Inc., a New York corporation
("Y&R Inc. (New York)"), Young & Rubicam Inc., a Delaware corporation ("Y&R Inc.
(Delaware)") and Young & Rubicam L.P., a Delaware limited partnership ("Y&R LP";
collectively with Y&R Holdings, Y&R Inc. (New York) and Y&R Inc. (Delaware), the
"Parent Borrowers"), the Subsidiary Borrowers (as defined in the Credit
Agreement) from time to time parties thereto, the several banks and other
financial institutions from time to time parties thereto (the "Lenders"), Bank
of America National Trust and Savings Association, a national banking
association, as Administrative Agent (as defined in the Credit Agreement) for
the Lenders, and Bank of America International Limited, a bank organized under
the laws of England, as European Payment Agent. Unless otherwise defined herein,
terms defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement.
The Assignor identified on Schedule l hereto (the "Assignor") and
the Assignee identified on Schedule l hereto (the "Assignee") agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below), the interest described in Schedule 1 hereto
(the "Assigned Interest") in and to the Assignor's rights and obligations under
the Credit Agreement with respect to those credit facilities contained in the
Credit Agreement as are set forth on Schedule 1 hereto (individually, an
"Assigned Facility"; collectively, the "Assigned Facilities"), in a principal
amount for each Assigned Facility as set forth on Schedule 1 hereto.
2. The Assignor (a) makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or with respect to the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement, any other Loan Document or any other instrument or
document furnished pursuant thereto, other than that the Assignor has not
created any adverse claim upon the interest being assigned by it hereunder and
that such interest is free and clear of any such adverse claim, (b) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Parent Borrowers, any of their Subsidiaries or any
other obligor or the performance or observance by the Parent Borrower, any of
their Subsidiaries or any other obligor of any of their respective obligations
under the Credit Agreement or any other Loan Document or any other instrument or
document furnished pursuant hereto or thereto, and (c) attaches any Notes held
by it evidencing the Assigned Facilities and (i) requests that the
Administrative Agent, upon request by the Assignee, exchange the attached Notes
for a new Note or Notes payable to the Assignee and (ii) if the Assignor has
retained any interest in the Assigned Facility, requests that the Administrative
Agent exchange the attached Notes for a new Note or Notes payable to the
Assignor, in each case in amounts which reflect the assignment being made hereby
(and after giving effect to any other assignments which have become effective on
the Effective Date).
<PAGE> 309
2
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance, (b) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements delivered pursuant to subsections 6.1 and 8.1 thereof and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into this Assignment and Acceptance,
(c) agrees that it will, independently and without reliance upon the Assignor,
the Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement, the
other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto, (d) appoints and authorizes the Administrative Agent to take
such action as agent on its behalf and to exercise such powers and discretion
under the Credit Agreement, the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto as are delegated to the
Administrative Agent by the terms thereof, together with such powers as are
incidental thereto, and (e) agrees that it will be bound by the provisions of
the Credit Agreement and will perform in accordance with its terms all the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender including, if it is organized under the laws of a
jurisdiction outside the United States, its obligation pursuant to subsection
5.14 of the Credit Agreement.
4. The effective date of this Assignment and Acceptance shall be the
Effective Date of Assignment described in Schedule 1 hereto (the "Effective
Date"). Following the execution of this Assignment and Acceptance, it will be
delivered to the Administrative Agent for acceptance by it and recording by the
Administrative Agent pursuant to the Credit Agreement, effective as of the
Effective Date (which shall not, unless otherwise agreed to by the
Administrative Agent, be earlier than five Business Days after the date of such
acceptance and recording by the Administrative Agent).
5. Upon such acceptance and recording, from and after the Effective
Date, the Administrative Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, fees and other
amounts) [to the Assignor for amounts which have accrued to the Effective Date
and to the Assignee for amounts which have accrued subsequent to the Effective
Date] [to the Assignee whether such amounts have accrued prior to the Effective
Date or accrue subsequent to the Effective Date]. The Assignor and the Assignee
shall make all appropriate adjustments in payments by the Administrative Agent
for periods prior to the Effective Date or with respect to the making of this
assignment directly between themselves.
6. From and after the Effective Date, (a) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Loan Documents and shall be bound by the provisions thereof and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
7. This Assignment and Acceptance shall be governed by and construed
in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
and Acceptance to be executed as of the date first above written by their
respective duly authorized officers on Schedule 1 hereto.
<PAGE> 310
SCHEDULE 1
TO ASSIGNMENT AND ACCEPTANCE
Name of Assignor: ______________________________________________
Name of Assignee: ______________________________________________
Effective Date of Assignment: __________________________________
<TABLE>
<CAPTION>
Credit Principal Commitment Percentage
Facility Assigned Amount Assigned Assigned
- --------------------- ------------------ ---------------------------------
<S> <C> <C>
$______ __.______%
</TABLE>
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By: By:
---------------------------------- ----------------------------------
Title: Title:
Accepted and Consented to: Consented to:
BANK OF AMERICA NATIONAL TRUST [NAME OF COMPANY]
AND SAVINGS ASSOCIATION, as
Administrative Agent
By: By:
---------------------------------- ----------------------------------
Title: Title:
[Consented to: [Consented to:
[NAME OF ISSUING BANK] [NAME OF FRONTING LENDER]
By: By:
---------------------------------- ----------------------------------
Title: Title:
<PAGE> 1
Exhibit 10.21
INDENTURE OF LEASE
BETWEEN
PETER CATALANO AND MICHAEL KORNBLUM
AND
YOUNG & RUBICAM INC.
July 12, 1984
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Title Page
- ------- ----- ----
<C> <S> <C>
1 Premises 1
2 Base Term 2
3 Rent 3
4 Use 6
5 Delivery of Premises 8
6 Payment of Impositions 12
7 Renewal Options 16
8 Alterations 19
9 Landlord's and Tenant's Property 24
10 Tenant's Right of First Offer 26
11 Maintenance and Repairs 28
12 Insurance 32
13 Damage or Destruction 38
14 Eminent Domain 44
15 Compliance with Laws 47
16 Access 50
17 Notice of Occurrences 51
18 Non-Liability and Indemnification 52
19 Curing Tenant's Defaults 54
20 Brokerage 56
21 Notices 57
22 Estoppel Certificates 59
23 Window Cleaning 60
24 Quiet Enjoyment 61
25 Mechanics' Liens 62
26 Assignment and Sub-Letting 64
27 Subordination 67
28 Excavation and Shoring 70
29 Arbitration 71
30 No Rent Abatement 73
31 Recordable Memorandum 74
32 Surrender 75
33 Conditions of Limitation 76
34 Re-Entry by Landlord 78
35 Damages 79
36 Affirmative Waivers 82
37 No Waivers 83
38 Miscellaneous 84
39 Tenant's Financial Statements 89
40 Building Name 90
41 Sanitary Maintenance 91
42 Syndication Rights 92
43 Definitions 95
</TABLE>
<PAGE> 3
INDENTURE OF LEASE dated the 12th day of July, 1984, by and between Peter
Catalano and Michael Kornblum, Tenants in Common, having an office for the
transaction of business at 24 East 21st Street, New York, New York ("Landlord")
and Young & Rubicam Inc., a corporation organized and existing under the laws of
the State of New York, having an office for the transaction of business at 285
Madison Avenue, New York, New York ("Tenant")
W I T N E S S E T H:
In consideration of Ten ($10.00) Dollars, other good and valuable
consideration, and the mutual covenants contained herein, and intending to be
legally bound hereby, Landlord and Tenant hereby agree with each other as
follows:
<PAGE> 4
ARTICLE 1
Premises
Section 1.01 Landlord hereby leases and lets to Tenant, and Tenant hereby
takes and hires from Landlord, upon and subject to the terms, conditions,
covenants and provisions hereof, all that certain tract, piece or parcel of
land, situated in the City of New York, County of New York and State of New
York, more particularly described in Exhibit "A" annexed hereto and made a part
hereof, together with any and all building and improvements now existing or to
be constructed pursuant to the terms hereof ("the Building"), appurtenances,
rights, privileges and easements benefitting, belonging or pertaining thereto,
and any right, title and interest of Landlord in and to any land lying in the
bed of any street, road or highway (open or proposed) to the center line
thereof, in front of or adjoining said tract, piece or parcel of land (all the
foregoing hereinafter sometimes referred to as the "Demised Premises" or the
"Premises")
Section 1.02 The Premises are demised subject to:
(a) the condition of title of the Demised Premises and exceptions
set forth in Exhibit B, hereto annexed.
(b) Landlord's acquisition of fee title to the Demised Premises on
or before December 31, 1984.
(c) Landlord's reservation of all development rights appurtenant
thereto provided, however, that nothing contained herein shall be deemed to
allow Landlord to construct any buildings or improvements on the Demised
Premises other than as set forth in this Lease. In the event that Landlord's
exercise of such rights requires the affirmative action of Tenant, Tenant shall
not be required to take such action unless Landlord incurs the reasonable
expense related thereto and Landlord indemnifies Tenant from any claim related
thereto.
Section 1.03 In the event Tenant wishes to obtain Leasehold Title
Insurance, Tenant shall request such insurance be issued on the date that
Landlord acquires fee title to the Premises. Landlord shall give Tenant at least
fifteen (15) days' notice of the date on which Landlord shall close title. In
the event that American Title Insurance Company will not insure Tenant's
leasehold subject only to those exceptions set forth on Exhibit B (plus such
other exceptions as caused solely by Tenant) then the Commencement Date shall be
delayed until such exceptions are removed. Tenant's failure to request a bona
fide title insurance policy to be issued on such date shall be deemed a waiver
of this Section.
- 1 -
<PAGE> 5
ARTICLE 2
Base Term
Section 2.01. The "Base Term" of this Lease shall consist of a "Short
Term" if applicable and a "Full Term." The Short Term shall commence on the
Commencement Date and end on November 30, 1985. The Full Term shall commence on
the earlier to occur of ninety (90) days subsequent to the Commencement Date or
December 1, 1985, and shall end at midnight on the nineteenth anniversary of the
expiration of Lease Year One, or on such earlier date upon which the term of
this Lease shall expire or be cancelled or terminated pursuant to any of the
conditions or covenants of this Lease or pursuant to law. Notwithstanding the
foregoing, if the Commencement Date occurs after December 1, 1985 there shall be
no Short Term and the Full Term shall commence on the Commencement Date.
Section 2.02. The "Commencement Date" shall be the earliest to occur of
(a) the date on which the Premises are ready for Tenant's occupancy (as set
forth in Article 5) or (b) the date Tenant, or anyone claiming under or through
Tenant, first occupies the Premises or any part thereof, with Landlord's
consent, for any purpose other than the performance of Tenant's Optional Work
(as defined in Section 5.01), except as otherwise specifically provided in
Section IID 14 of Exhibit C hereto. Promptly following the Commencement Date the
parties hereto shall enter into an agreement in form and substance satisfactory
to land1ord setting forth the Commencement Date.
Section 2.03. "Lease Year One" shall be deemed the first year of the Full
Term and shall commence on the first day of the Full Term and shall end on the
last day of that month determined by subtracting from fifteen (15) months that
number of months as shall equal the difference between the number of calendar
months between the Commencement Date and the commencement of the Full Term. The
term "Lease Year" shall refer to each year of the Term including Lease Year One.
Each succeeding Lease Year, after Lease Year One, shall run for the successive
twelve month period from the expiration of the preceding Lease Year, except the
last Lease Year shall end on the Expiration Date.
- 2 -
<PAGE> 6
ARTICLE 3
Rent
Section 3.01. Except as set forth in those Sections of this Lease that
specifically provide for abatement, Tenant shall pay to Landlord, without
notice, abatement, deduction or set-off, in lawful money of the United States by
good check drawn on a bank or trust company which is a member of the New York
Clearinghouse Association, or in such other form or fashion as may be reasonably
acceptable to Landlord, at the office of the Landlord or at such other place as
Landlord may designate, the following:
(a) Base annual rent, as hereinafter set forth ("Base Annual Rent"),
in equal monthly installments in advance, on the first day of each and every
calendar month throughout the Term except that if the commencement of the Full
Term occurs on a day other than the first day of a calendar month, the Base
Annual Rent payable for the partial month at the commencement of the Full Term
shall be prorated; similarly if the Full Term shall end on a day other than the
last day of a calendar month, the Base Annual Rent shall be prorated for such
month. The Base Annual Rent for Lease Year One is Seven Million Dollars.
Thereafter, for each successive Lease Year of the Full Term, the Base Annual
Rent shall be increased by three and one-half (3.5%) percent over the preceding
Lease Year's Base Annual Rent (i.e., the Base Annual Rent for Lease Year Two
shall be determined by multiplying $7,000,000 by 1.035; the product shall be
the Base Annual Rent for Lease Year Two and shall be the multiplicand in
determining the Base Annual Rent for Lease Year 3)
(b) Additional payments consisting of all other sums of money as
shall become due from and payable by Tenant hereunder ("Additional Payments");
The term "Rent" shall include Base Annual Rent and Additional Rent, and
Landlord shall have all rights and remedies provided for herein or by law for
the payment of Rent, whether designated Base Annual Rent or Additional Rent. As
a convenience to Tenant, Landlord shall endeavor to send to Tenant, monthly, a
ten day advance memorandum setting forth the next monthly installment of Base
Annual Rent. The failure of
- 3 -
<PAGE> 7
Landlord to send such memorandum, or if sent, to send an accurate or timely
memorandum, shall in no way relieve Tenant of the obligation to timely pay the
Rent nor in any way mitigate the penalties or late charges otherwise due because
of a late or insufficient payment; except as set forth in Section 3.04.
Section 3.02. If any of the Rent payable under the terms of this Lease
shall be or become uncollectible, reduced or required to be refunded because of
any statute, ordinance, rule or regulation of any Federal, State or City
government or agency, Tenant shall enter into such agreement(s) and take such
other steps as Landlord may reasonably request and as may be legally permissible
to permit Landlord to collect the maximum Rent, but in no event greater than the
Base Annual Rent, which from time to time during the continuance of such legal
rent restriction may be legally permissible. Upon the termination of such legal
rent restriction, so long as the Term has not expired, (a) the Rent shall become
and thereafter be payable in accordance with the amounts reserved herein for the
periods following such termination and (b) Tenant shall pay to Landlord, to the
maximum extent legally permissible, an amount equal to (i) the Rent which would
have been paid pursuant to this Lease but for such legal rent restriction less
(ii) the Rent and payments in lieu of rents paid by Tenant during the period
such legal restriction was in effect.
Section 3.03. No payment by Tenant or receipt or acceptance by Landlord of
a lesser amount than the correct Base Annual Rent or Additional Rent (including
underpayments caused by Landlord's errors or omissions rendering bills or
statements) shall be deemed to be other than a payment on account, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment preclude Landlord from depositing or negotiating such check without
prejudice to Landlord's right to recover the balance or pursue any other remedy
in this Lease or at law provided.
Section 3.04. If Tenant shall fail to pay any Rent, within five (5) days
after the same becomes due and payable, Tenant shall pay, in addition to the
Rent then due, the sum of (x) interest calculated on such unpaid amounts at the
lesser of (a) the interest rate applicable to a late payment of interest and
charged by the then Superior Mortgagee (a letter from the Superior Mortgagee or
Landlord's good faith certification of interest rate shall be conclusive as to
such rate), or (b) the maximum rate permitted by law, and (y) any penalties and
late charges incurred by Landlord applicable to the related late payment
actually charged by the Superior Mortgagee, as a result of Landlord's delay
caused by Tenants late payment provided that if there is no Superior Mortgagee
then the interest rate
- 4 -
<PAGE> 8
shall be equal to the prime interest rate charged by Manufacturers Hanover Trust
Company plus three (3%) per cent or if such rate is in excess of the maximum
rate permitted by law, calculated on the basis of actual days elapsed, based on
a 360-day year, from the date such Rent became due to the date of payment. The
provisions herein for such interest shall not be construed to extend the date
for payment of any sums required to be paid by Tenant hereunder or to relieve
Tenant of its obligation to pay all such sums at the time or times herein
stipulated. Notwithstanding the foregoing, interest on late payments of Base
Annual Rent shall not be due unless Landlord has advised Tenant that the payment
has not been received timely. Landlord shall be relieved of this notice
obligation in each Lease Year after Landlord has sent the fourth such notice.
The sending of any notice, the failure to send a notice, or the failure to send
a timely accurate notice shall not relieve Tenant of its obligation to timely
pay Base Annual Rent.
Section 3.05. It is the intention of the Landlord and the Tenant that the
Rent shall be net to the Landlord throughout the Base Term and the Renewal
Terms; that all costs, expenses and obligations of every kind relating to
Tenant's use and occupancy of the Demised Premises (except as specifically set
forth herein) which may arise or become due during the Base Term and the Renewal
Term shall be paid by Tenant, and Landlord shall be indemnified by Tenant
against such cost, expenses and obligations; provided, however, that Tenant
shall have no obligations to pay any income or franchise tax assessed against
Landlord or the interest or principal on any Superior Mortgage.
Section 3.06. Additional Payments shall be due and payable as Additional
Rent hereunder ("Additional Rent"). Additional Payments shall for these
purposes be deemed due on the first day that such amounts were or become due to
Landlord or any other person to whom such payment is to be made.
- 5 -
<PAGE> 9
ARTICLE 4
Use
Section 4.01. Tenant shall only use and occupy the Premises for: (a)
executive and administrative offices, (b) art studios, production facilities,
typesetting, slide production, television production and such other uses (other
than light or heavy manufacturing) as are then customary in the
advertising/communications and public relations business or (c) such retail use
as the Landlord shall from time to time reasonably permit (taking into account
the notice of the business of the proposed subtenant as appropriate to a first
class office building in Manhattan) for so long as Messrs. Peter Catalano and
Michael Kornblum, or an entity referred to in Section 10.02 (c) or (d) hereof,
is the Landlord hereunder From and after such time that Messrs. Peter Catalano
and Michael Kornblum, ceases to be the Landlord hereunder, the ground level
space may be used for any lawful purpose. Tenant shall have the right, incident
to the uses set forth in sub-sections (a) and (b) to maintain vending machines,
kitchens, dining and exercise facilities.
Section 4.02. As soon as practicable Landlord shall deliver to Tenant a
Certificate of Occupancy permitting the use of the Demised Premises for general
and executive offices and, with regard to the ground floor, retail sales ("the
Initial Certificate of Occupancy") provided that nothing contained herein shall
limit Landlord's obligation contained in Exhibit C to deliver a temporary
Certificate of Occupancy on Substantial Completion of Base Building and Tenant
Work. If any governmental certificate, license or permit, other than the Initial
Certificate of Occupancy to be obtained by Landlord, shall be required for the
proper and lawful conduct of Tenant's business in the Premises or any part
thereof, Tenant, at its expense, shall duly procure and thereafter maintain such
certificate, license or permit and submit the same to Landlord for inspection.
Tenant shall at all times comply with the terms and conditions of each such
certificate, license or permit.
Section 4.03. Tenant shall not at any time use or occupy or suffer or
permit anyone to use or occupy the Premises, or do or permit anything to be done
in the Premises, in any manner (a) which violates the Certificate of Occupancy
for the Demised Premises or for the Building; (b) which causes injury to the
Demised Premises or any Building Equipment; (c) which constitutes a violation of
applicable laws and regulations or the requirements of any public authorities
with jurisdiction or the requirements of insurance bodies; (d) which impairs the
appearance of the building as a first-class office building;
- 6 -
<PAGE> 10
(e) which impairs the economic maintenance, operation and repair of the Building
and/or the Building Equipment; or (f) which makes any fire or other casualty
insurance with extended coverage or liability, elevator, boiler, sprinkler, or
other similar insurance unobtainable from insurance companies of the nature
specified in Article 12 authorized to do business in New York at standard rates
provided, however, such insurance shall not be deemed to be unobtainable if such
insurance is obtainable by payment of an additional premium and Tenant pays such
premium.
- 7 -
<PAGE> 11
ARTICLE 5
Delivery of Premises
Section 5.01. The Demised Premises shall be prepared for Tenant's
occupancy in the manner set forth in Exhibit C annexed hereto and incorporated
herein. "Landlord's Work" is that work required thereby to be done by Landlord
(including labor and materials). "Tenant's Optional Work" is such other work,
materials and installations as Tenant deems necessary or appropriate to prepare
the Demised Premises for occupancy in accordance with the uses permitted
hereunder but which are not included within Landlord's Work. Landlord shall be
responsible for and shall pay for Landlord's Work as provided in Exhibit C
hereto and Tenant shall be responsible and shall pay for Tenant's Optional Work.
Section 5.02. The Premises shall be deemed ready for Tenant's occupancy on
the earlier of (a) the date on which the Premises are Substantially Completed as
set forth in Exhibit C, or (b) the date that Tenant actually takes occupancy of
the Demised Premises other than pursuant to Section II D 14 of Exhibit C.
Landlord shall give Tenant at least one day's written notice of Substantial
Completion as defined in Section 5.03 and the Commencement Date shall be the
date set forth in the notice.
Section 5.03. The Premises shall be deemed Substantially Complete upon a)
Substantial Completion of the Base Building (as such term is defined in Exhibit
C) and b) Substantial Completion of Tenant's Space (as such term is defined in
Exhibit C) provided, however, with respect to those floors denominated
"Untenanted Floors" in Section II E (2) (f) of Exhibit C, such floors shall be
deemed Substantially Complete upon the earlier of (i) Substantial Completion of
(a) and (b) above or (ii) the Substantial Completion of such floors as otherwise
provided in Exhibit C. Nothing contained herein shall be deemed to limit
Landlord's obligation to construct as set forth in Exhibit C. The determination
of Substantial Completion in (a) and (b) above shall be made in accordance with
the provisions of Exhibit C.
Section 5.04. Any items not on Landlord's or Tenant's Punch List as said
terms are used in Exhibit C, other than latent defects that could not reasonably
be discovered during such inspection (or could not reasonably have been
discovered at any prior inspection performed by Tenant's Architect or Tenant's
Construction Consultant while Landlord was performing Landlord's Work) ("Latent
Defects") shall be deemed irrevocably waived by Tenant. Notwithstanding the
foregoing, for purposes hereof Latent Defects in telecommunication and other
work
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performed by Tenant's contractors (as provided in Section III C 2 of Exhibit C)
shall not constitute "Latent Defects" hereunder. Upon receipt of Tenant's Punch
List, Landlord shall diligently and in good faith do or complete the work or
make the repairs required to be made as provided in Exhibit C. The cost of such
repairs, if any, shall be paid in the manner set forth in Exhibit C.
Section 5.05. Punch List shall be defined as a written comprehensive
itemization of the following categories prepared subsequent to Landlord's
declaration of Substantial Completion.
a) all work that is incomplete either in material or in workmanship.
b) all work that is defective either in material or in workmanship.
c) all work that is not in accordance with the Construction
Documents.
The "Punch List" shall be prepared by a licensed Architect who shall
incorporate the accepted guidelines of the Construction Industry for material
and labor standards to be utilized. This definition includes Landlord's Base
Building Punch List and Tenant's Punch List as such terms are used in Exhibit C.
Section 5.06. The Premises shall be presumed to be in satisfactory
condition on the Commencement Date, except for those items referred to on
Tenant's Punch List, as set forth in Section 5.04. Notwithstanding the
foregoing, the taking of occupancy shall not be deemed to be conclusive
evidence, as against Tenant, that Landlord shall have satisfactorily completed
all of Landlord's Work not completed because, a) under good construction
scheduling practice, such work should be done after completion of still
incompleted finishing or other work to be done by or on behalf of Tenant, and
(b) with respect to Latent Defects. As to Latent Defects, Tenant must (i)
conduct at least one inspection of the Premises with Tenant's Architect or
Tenant's Consultants within twelve (12) months from the Commencement Date, and
(ii) give Landlord written certification by Tenant's Architect and Tenant's
Construction Manager that there are Latent Defects in Landlord's Work which
specifies in detail each such Latent Defect. Landlord shall have the right to
enter the Premises to complete or repair any unfinished items and Latent Defects
and entry by Landlord, its agents, servants, employees or contractors for such
purpose shall be without liability to Tenant except for liability arising out of
the negilgence or willful misconduct of Landlord, its agents, servants,
employees
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or contractors. Landlord shall endeavor to cause all repairs to be done in a
manner to cause minimal interference with Tenant's business operations and with
due care for Tenant's property and employees. No defect discovered twelve months
or more subsequent to the Commencement Late shall be deemed a Latent Defect. The
responsibility for the repair of non-Latent Defects is set forth in Article 8.
Section 5.07. If Landlord is unable to give possession of the Premises on
the Commencement Date, because of the fact that a temporary or permanent
Certificate of Occupancy has not been procured, or because the Premises are not
Substantially Completed on any particular date, or for any other reason
(including, but not limited to, the occurrence of an event of Force Majeure),
Landlord shall not be subject to any liability for failure to give possession on
the Commencement Date except as set forth in Section 5.11, and the validity of
this Lease shall not be impaired under such circumstances, nor shall the same be
construed in any way to extend the term of this Lease, but the Base Annual Rent
and Additional Rent payable hereunder shall be abated until Landlord has given
notice to Tenant that the Premises are ready for Tenant's occupancy.
Section 5.08. Tenant hereby waives the provisions of Section 223-a of the
Real Propery Law of the State of New York, and agrees that the provisions of
this Article are intended to constitute "an express provision to the contrary"
within the meaning of Section 223-a.
Section 5.09. Notwithstanding anything herein to the contrary, in the
event that Landlord has not Substantially Completed the Demised Premises by
October 1, 1986, or January 1, 1987 if the delay is caused by Force Majeure,
then and in such event Tenant shall have the right, thereafter upon thirty (30)
days notice to Landlord and the Superior Mortgagee to cancel this Lease. Upon
the expiration of said thirty (30) day period, if the Demised Premises are still
not Substantially Complete, this Lease shall terminate and each party shall have
no further liability to the other. In the event that Tenant exercises this
option Landlord shall reimburse Tenant the amount spent by Tenant for
improvements to the Premises pursuant to Exhibit C.
Section 5.10. In the event that the Demised Premises are not Substantially
Complete on or before November 1, 1985 then Landlord shall, subject to the
limitation in Section 5.11, reimburse to Tenant on the first day of the month
following the month in which the Holdover Expense was incurred the actual
Holdover Expenses incurred by Tenant. As used herein Holdover Expenses means
those actual expenses (including reasonable attorneys fees) of Tenant (or
subsidiaries) incurred because
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Tenant (or subsidiaries) held over beyond the expiration of a lease term
(expiring on or after October 31, 1985) and above and beyond the expenses Tenant
would have incurred had such lease term not expired, but shall not include
incidental damages, loss of income, loss of business, or similar damages. In all
instances Tenant shall substantiate such expense with receipted bills or
invoices or other documentation reasonably satisfactory to Landlord.
Section 5.11. (a) Landlord's liability for Holdover Expenses shall not
exceed $125,000 per month provided that i) in any month wherein Tenant does not
suffer or incur Holdover Expenses in an amount of $125,000 the difference
between $125,000 and the Holdover Expenses for such month shall be available for
the next succeeding month and shall be added to $125,000 for purposes of
determining the reimburseable Holdover Expenses for the next succeeding month or
months; and ii) in the event that Tenant (or subsidiaries) is dispossessed from
its then occupied premises by final judicial process and after utilizing counsel
chosen with Landlord's reasonable consent the Landlord's monthly contribution to
Holdover Expenses shall equal $125,000 plus one-half the amount by which monthly
Holdover Expenses exceed $125,000. In no event shall Landlord be responsible for
more than twenty-four months of Holdover Expenses.
(b) In the event Landlord procures insurance coverage for Holdover
Expenses occasioned by an event of Force Majeure, other than an event of Force
Majeure related to a casualty, Tenant agrees to reimburse Landlord for one-half
of the premium for such insurance up to a maximum reimbursement of $40,000
provided, however, that such insurance coverage shall not exceed $20,000,000.
The reimbursement shall be forthwith paid to Landlord upon Landlord's delivery
to Tenant of a receipted bill together with evidence of such insurance coverage.
(c) Notwithstanding anything to the contrary, in the event Tenant incurs
Holdover Expenses because an event of Force Majeure involving an industry wide
labor disturbance that prevents Landlord from timely delivering the Premises,
and such Holdover Expenses are not reimbursed or paid for by insurance proceeds
obtained pursuant to sub-section (b) or otherwise, then Landlord's obligation to
reimburse Tenant for Holdover Expenses shall be limited to one-half of each
month's Holdover Expense occurring after such event of Force Majeure, up to
$62,500 per month plus one-quarter of the remaining expenses.
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ARTICLE 6
Payment of Impositions
Section 6.01. As used herein "Impositions" shall mean all taxes and
assessments, special assessments, special ad valorum levies and service charges
levied, assessed or imposed at any time by any governmental authority or special
district upon or against all or part of the Demised Premises, water and sewer
charges, rates and rents, charges for public utilities, excises, levies, license
and permit fees, and similar charges, now or hereafter levied or assessed
against the Demised Premises or appurtenant to the use thereof and also any tax,
assessment, special assessment, special ad valorum levy or service charge
levied, assessed or imposed at any time by any governmental authority in
connection with the receipt of income or rents from the Demised Premises,
including without limitation all interest, penalties and late charges relating
to the foregoing, to the extent that same shall be in lieu of or in addition to
all or a portion of any of the aforesaid taxes, assessments, special
assessments, special ad valorum levies or service charges upon or against all or
part of the Demised Premises but shall not include income, estate, succession,
inheritance, capital stock, transfer or similar taxes of owner or Landlord or
any franchise taxes imposed upon any corporate owner of the fee of the Demised
Premises or any income, profits or revenue tax, by any municipality, county or
state, the United States of America or any governmental body; provided, however,
that if at any time during the Term of this Lease, the present method of
taxation or assessment shall be so changed that the whole or any part of the
taxes, assessments, levies, impositions or charges now levied, assessed or
imposed on real estate and the improvements thereon shall be levied, assessed
and/or imposed wholly or partially as a capital levy or otherwise on the Rents
(or should it be any form of occupancy or use tax) received from the Demised
Premises or the Rents reserved herein or any part thereof, then such taxes,
assessments, levies, impositions or charges, to the extent so levied, assessed
or imposed, including without limitation all interest, penalties and late
charges relating to the foregoing, shall be deemed to be included within the
term "Impositions" to the extent that such tax would be payable if the Demised
Premises were the only property of the Landlord subject to such tax.
Section 6.02. As Additional Payment during the Term, Tenant will pay or
cause to be paid, as and when the same becomes due, all Impositions, provided,
however, that:
(a) All Impositions for the fiscal year or tax year in which the
Term of this Lease begins as well as all Impositions for the fiscal year or tax
year in which the Term
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of this Lease expires shall be apportioned as of the Commencement Date or
Expiration Date, as the case may be so that Tenant shall pay its proportionate
share o of such Impositions; and
(b) Where payment of any Imposition is permitted by law to be made
in installments, Tenant may pay such Imposition in installments as and when such
installments become due, provided, however, that the amount of all installments
of any such Imposition which will become due and payable up to the Expiration
Date shall remain the responsibility of Tenant.
(c) Where any Imposition is attributable in part to property other
than the Demised Premises or any improvements of property therein (including the
Building Equipment), provided Tenant has paid such amount, Landlord will, on
demand, reimburse Tenant within fifteen (15) days of receipt of demand for the
amount of such Imposition which is attributable to such other property, failing
which Tenant shall have the right to deduct such amount from any Rent theretofor
or thereafter falling due hereunder. Landlord agrees, however, to use its best
efforts, whenever possible and so long as the aggregate amount of the Imposition
is not thereby increased, to effect a division of the property to which the
Imposition is attributable, so that the Demised Premises constitute a separate
and independent property to which any Imposition may be made applicable.
Section 6.03. Except as set forth in Section 6.02(c), Tenant shall pay all
Impositions directly to the taxing authority, and shall deliver to Landlord
within fifteen days upon request, photostatic copies of receipted bills or other
evidence reasonably satisfactory to Landlord showing such payment.
Section 6.04. Tenant shall have the right to contest the amount or
validity, in whole or in part, of any Imposition by appropriate proceedings, at
Tenant's own cost and expense (which, if instituted, will be conducted with
reasonable diligence) provided, that Tenant shall nevertheless make all payments
required to be made pursuant to such Imposition until there has been a final
determination relieving Tenant of its obligation to make such payment. As used
herein "final determination" means the decision of the highest court of
competent jurisdiction before which the matter has been brought with all time
for rehearings, rearguments or further appeals having expired. In the event that
an Imposition may be contested prior to the payment of such Imposition, and the
failure to timely pay such Imposition shall not result in a lien or other charge
to the Demised Premises, Tenant may contest such Imposition prior to payment so
long as Tenant has reasonably satisfied Landlord that no lien or charge against
the Demised Premises will result thereby. Tenant shall be
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entitled to any refund of any such Imposition and penalties or interest thereon,
which have been paid by Tenant or paid by Landlord, and for which Landlord has
been fully reimbursed.
(a) If any such Imposition paid by Tenant relates to any land or
buildings other than the Demised Premises, Landlord shall pay to Tenant within
fifteen days of receipt of demand the amount of such Imposition relating to land
or buildings other than the Demised Premises. If, pursuant to any contest
initiated by Tenant, Landlord receives a refund of payment on account of an
Imposition paid by Landlord for which Tenant had no responsibility, Tenant may
deduct from such award, or request refund thereof, Landlord's pro rata share of
the expenses attributable to such refund.
Section 6.05. The certificate, advice, bill or statement of the existence
of or of the payment or nonpayment of any Imposition issued or given by the
appropriate officials authorized or designated by law to issue or give the same
or to receive payment of such Imposition shall be prima facie evidence for all
purposes of the existence or amount, or payment or non-payment, of such
Imposition.
Section 6.06. Tenant may, if it shall so desire, endeavor at any time to
obtain a reduction of the assessed valuation of the Demised Premises for the
purpose of reducing taxes thereon and, in such event, at the request of Tenant,
but without expense to Landlord, Landlord will cooperate with Tenant in
attempting to obtain such a reduction. Tenant shall be authorized to collect
any tax refund payable as a result of any proceeding Tenant may institute for
that purpose and any such tax refund shall be the property of Tenant to the
extent to which it is based on payments made by Tenant. Landlord shall be
entitled to a pro rata share of the net proceeds of any such refund to the
extent that it is based upon payments made by Landlord and Tenant shall be
entitled to receive contribution from Landlord of Landlord's pro rata share of
expenses as set forth in Section 6.04.
Section 6.07. Landlord shall not be required to join in any action or
proceeding referred to in Section 6.04 or Section 6.06 hereof unless required by
law or any rule or regulation in order to make such action or proceeding
effective, in which event any such action or proceeding may be taken by Tenant
in the name of, but without expense to, Landlord. If required by law, or
requested by Tenant and so long as Landlord incurs no expense (present or
future), Landlord shall assist Tenant in obtaining the benefit of any available
abatement in Impositions. Tenant hereby agrees to save Landlord harmless from
all costs, expenses, claims, loss or damage (including
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attorneys' fees), by reason of, in connection with, on account of, growing out
of, or resulting from, any such action or proceeding.
Section 6.08. Landlord warrants and represents that it is responsible for
and shall pay, subject to apportionment with Tenant in accordance with the
provisions of Section 6.02 and Section IID 14 of Exhibit C, all Impositions
through the day immediately preceding the Commencement Date.
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ARTICLE 7
Renewal Options
Section 7.01. Tenant shall have five (5) successive options to extend the
Base Term of this Lease for an additional term of five years (each such period
or any combination of such periods are referred to as the "Renewal Term" or
"Renewal Terms"), provided that Tenant, at the time of the exercise of each such
option or thereafter shall not be in default under any of the material terms,
covenants or conditions of this Lease, beyond the time within which Tenant may
cure such default under the provisions of this Lease.
Section 7.02. Each Renewal Term shall be upon the same terms and
conditions as contained in this Lease except (a) the Base Annual Rental to be
paid shall be that amount set forth in Section 7.04, (b) after the exercise of
the fifth renewal option there shall be no further option, privilege or right to
extend the Term of this Lease beyond the expiration of the Renewal Term; (c) the
failure to exercise any one renewal option shall cause all subsequent renewal
options to expire; and (d) in no event shall the Term be forty-nine years or
more (this Lease shall, in such circumstance, expire on the day preceding the
forty-ninth anniversary of the Commencement Late)
Section 7.03. Each option to extend the Term must be exercised by Tenant
giving notice to Landlord in the manner specified in Article 21. The first
option (to extend the Base Term) may only be exercised by giving notice no later
than twenty-four months nor earlier than thirty-six months prior to the
Expiration Date. Thereafter, all subsequent options must be exercised no earlier
than twenty-four months and no later than eighteen months prior to the end of
such Renewal Term. Upon the effective exercise of any option this Lease shall be
deemed to be extended without the execution of any further lease or other
instrument. As soon as practical after Tenant's exercise of this option,
Landlord and Tenant shall seek to negotiate the Base Annual Rent for Renewal
Lease Year One of the respective Renewal Term. In the event that Landlord and
Tenant cannot agree upon such Base Annual Rent by the commencement of the tenth
day prior to the commencement of the eighteenth month prior to the expiration of
the Base Term or Renewal Term, as the case may be, (a) Tenant may withdraw its
exercise of its renewal option by giving notice to Landlord in the same manner
as Tenant exercised such option; and (b) if Tenant does not withdraw its
exercise, the Base Annual Rent shall be determined in accordance with the
procedure set forth in Section 7.04.
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Section 7.04. The Base Annual Rent to be paid during each Renewal Term
shall be determined as follows:
(a) Renewal Lease Year One - The higher of 103.5% of the Base
Annual Rent for the immediately preceding Lease Year (or Renewal Lease Year) or
90% of the "fair market rental value" of the Demised Premises. The determination
of fair market rental value shall be as follows:
(i) Within ten (10) days prior to the commencement of the
eighteenth month prior to the commencement of the Renewal Term
("180th day") Landlord and Tenant shall each give written
notice to the other specifying the name and address of the
person designated to act as an arbitrator on its behalf. The
failure of either party to select an arbitrator shall be
deemed a waiver by that party of its right to choose an
arbitrator and the determination required to be made hereunder
shall be made by the single arbitrator. The two arbitrators so
chosen shall meet in New York City within fifteen (15) days of
the 180th day, and if, within forty-five (45) days of the
180th day, the two arbitrators shall not agree upon a
determination in accordance with the provisions hereof, they
shall together appoint a third arbitrator. In the event they
are unable to agree upon such appointment, the third
arbitrator shall be selected by the parties themselves if they
can agree thereon. If the parties do not so agree, then either
party, on behalf of both and on notice to the other, may
request such appointment by the President of the Real Estate
Board of New York (or any successor organization) in
accordance with its rules then prevailing or if they shall
fail to appoint said third arbitrator within forty-five (45)
days after such request is made, then either party may apply,
on notice to the other, to the presiding Justice of the
Appellate Division, First Department, Supreme Court, New York
County, New York (or any other Court having jurisdiction and
exercising functions similar to those now exercised by said
Court) for the appointment of such third arbitrator.
(ii) Each party shall pay the fees and expenses of the one of the
two original arbitrators
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appointed by or for such party, and the fees and expenses of
the third arbitrator and all other expenses (not including
the attorneys fees, witness fee and similar expenses of the
parties which shall be borne by the party engaging same)
shall be paid equally by Landlord and Tenant.
(iii) The majority of the arbitrators shall determine the fair
market rental value of the Demised Premises and render a
decision as to their determination to both Landlord and Tenant
by the later of sixty (60) days of the appointment of the
first two arbitrators or thirty (30) days from the appointment
of the third arbitrator. In rendering such decision and award,
the arbitrators shall take into account all of the terms and
provisions of this Lease but shall not consider the value of
Tenant's Property or leasehold improvements installed and paid
for by Tenant subsequent to the Commencement Date. The
decision and award of the arbitrators shall be in writing and
be final and conclusive on the parties and counterpart copies
thereof shall be delivered to each of the parties.
(iv) Each of the arbitrators selected as herein provided shall have
at least ten (10) years experience in the (a) leasing of
office space in, and/or (b) appraisal of first class office
buildings in New York County.
(v) If a Renewal Term shall have commenced prior to the
determination by the arbitrators, Tenant shall pay at the rate
of 103.5% of the Base Annual Rent for the immediately
preceding Lease Year, and in the event the arbitrators
determine that the Base Annual Rent for Renewal Lease Year One
is greater than 103.5% of the Base Annual Rent for the
immediately preceding Lease Year, Tenant shall promptly pay
the difference to Landlord upon demand, as Additional Rental.
(b) The Base Annual Rent for each of the four subsequent Renewal
Lease Years of each Renewal Term shall be equal to 103.5% of the Base Annual
Rent for the immediately preceding Renewal Lease Year of such Renewal Term.
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ARTICLE 8
Alterations
Section 8.01. Tenant may, from time to time, at its expense, make such
non-structural alterations ("Alterations") on and to the Building, as Tenant may
reasonably consider necessary for the conduct of its business in the Building,
provided and upon condition that: (a) the outside appearance of the Building
shall not be affected without Landlord's consent which will not be unreasonably
withheld or delayed; (b) the proper functioning of the mechanical, electrical,
sanitary and other service systems of the Building shall not be adversely
affected; (c) no more than seven days after completing Alterations, Tenant shall
submit to Landlord complete "as-built" plans and specifications for the work
done; (d) before proceeding with any Alterations which will cost (exclusive of
the costs of decorating work) more than $250,000 multiplied by the sum of 1 and
the product of 0.035 and the Lease Year number, as estimated by a reputable
contractor designated by Tenant (who, if the Alteration will affect the
Structure or Building Equipment, will be subject to the reasonable approval of
Landlord), Tenant shall obtain and deliver to Landlord either (i) a performance
bond and a labor and materials payment bond (issued by a corporate surety
licensed to do business in New York and reasonably satisfactory to Landlord),
each in an amount equal to 100% of such estimated cost and in form and substance
reasonably satisfactory to Landlord, or (ii) such other security as shall be
reasonably satisfactory to Landlord; (e) Tenant shall complete the Alterations
in accordance with the filed plans; and (f) the Alterations, when completed,
shall not require the issuance of a new Certificate of Occupancy. In instances
wherein Landlord is required to approve Tenant's plans pursuant to this Section
8.01, Landlord shall be deemed to have approved such plans if Landlord does not
comment within ten (10) days of its receipt of such plans. In the event that
Landlord disapproves such plans, Landlord's notice shall set forth in reasonable
detail the reasons for such disapproval.
Section 8.02. Tenant may, from time to time, but in no event after Lease
Year 15 (unless Tenant shall have agreed to restore the altered portion of the
Demised Premises to the condition that existed prior to the Alteration when
Tenant surrenders possession of the Demised Premises, if so required by
Landlord), make structural alterations ("Structural Alterations") in and to the
Demised Premises for the conduct of its business at the Demised Premises, with
the prior written consent of the Landlord, which consent shall not be
unreasonably withheld or delayed so long as (a) the height and
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bulk of the Building shall not be increased and the outside appearance of the
Building shall not be affected; (b) Tenant shall have submitted to Landlord, for
approval, complete plans and specifications for the work to be done (and Tenant
shall not proceed with any work until Tenant has received Landlord's written
consent); (c) the Structural Alterations, when completed, shall not require a
material change in the use set forth in the Certificate of Occupancy (in this
instance Landlord shall not unreasonably withhold its consent to such alteration
unless such Alteration involves a material change in the Certificate of
Occupancy); and (d) Tenant shall pay Landlord, upon demand, the reasonable costs
and expenses incurred by Landlord in reviewing such plans and specifications and
in inspecting such Structural Alterations to assure that they are being
performed in accordance with the plans and specifications and in accordance with
applicable laws, ordinances and administrative requirements (whether federal,
state or local). In addition, Tenant agrees that:
(i) All such work shall be done at Tenant's sole cost and expense.
(ii) No such work shall damage, or impair access to, or the
usefulness of, the Building. Tenant shall keep the Building
and the adjoining sidewalks reasonably free from any
accumulations of rubbish or debris and prevent any
unreasonable accumulation of dirt, dust or annoyance as a
result of the Structural Alterations.
(iii) The Landlord, its architect and their agents and employees
shall have the right, upon giving notice and at reasonable
times, to enter upon the Demised Premises during the course
of construction to inspect and determine whether the work
conforms to the approved plans and specifications and the
terms of this Lease.
(iv) Tenant will cause the Structural Alterations to be promptly
commenced and diligently completed in full compliance with all
applicable laws, building codes, zoning resolutions,
regulations and requirements of all government agencies having
jurisdiction.
(v) Prior to commencing the Structural Alteration if the cost will
exceed $250,000 multiplied by the sum of 1 and the product of
0.035 and the Lease Year number, Tenant shall at Tenant's
election, either:
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(a) deliver to Landlord a payment and performance bond issued by an
insurance company qualified to do business in New York with a Best rating of A
or better insuring that the work to be undertaken by Tenant shall be completed
in accordance with the previously submitted plans and specifications and shall
be fully paid; or
(b) deliver to Landlord a clean, irrevocable letter of credit issued
by a commercial bank in the City of New York, in an amount not less than the
estimated cost (as determined by Landlord) of the Structural Alterations which
Landlord may draw upon to defray the cost of completing such work. Any such
letter of credit shall be replaced (if the work has not yet been completed) at
least ten (10) days prior to its expiration date;
(c) deliver to Landlord an amount equal to the cost (as determined
by Tenant's contractor) of such Structural Alterations to hold as a security
deposit, which fund shall be paid to Landlord to be used by Landlord to defray
the cost of completing the work. The said fund shall be deposited in an interest
bearing account. Interest shall accrue within the account and be paid in
accordance with the provisions hereof governing the payment of the principal; or
(d) deliver to Landlord such other appropriate security as is
reasonably acceptable to Landlord.
Upon certification to Landlord by a licensed architect in the employ of
Tenant (and approved by Landlord) to the effect that all such work has been
completed and paid for in accordance with the approved plans and specifications,
and either i) the delivery to Landlord of lien waivers duly executed by each of
Tenant's contractors and sub-contractors; or ii) the expiration of the statutory
lien period without any liens, being filed; or iii) the expiration of the
statutory period for liens to be filed and the satisfactory bonding of, or
securing by appropriate cash deposit or other appropriate means, any filed
liens, Landlord shall surrender the bonds or letters of credit provided in
paragraphs (a) or (b) above to Tenant for cancellation, or release to Tenant of
all of its rights in and to said cash security funds, as the case may be.
Landlord agrees that it shall review Tenant's plans and specifications
within thirty (30) days of receipt and that Landlord's failure to respond to
Tenant within said thirty (30) days shall be deemed Landlord's approval. In the
event that Landlord disapproves such plans, Landlord's notice shall set forth
in reasonable detail the reasons for such disapproval.
Section 8.03. Tenant, at its expense, shall obtain all necessary
governmental permits and certificates for the commencement and prosecution of
Alterations or Structural Alterations and for final approval thereof upon
completion, and shall cause Alterations or Structural Alterations to be
installed, performed, and completed in compliance therewith and
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with all applicable law and requirements of insurance bodies. Landlord shall
cooperate with Tenant in obtaining such permits and certificates so long as
there is no cost or expense to Landlord not paid by Tenant. Alterations shall be
diligently performed in a good and workmanlike manner, using materials, and
equipment at least equal in quality and class to the better of (i) the original
installations of the Building, or (ii) the then standards for the Building
established by Landlord. Landlord agrees that it will not arbitrarily or
capriciously raise the standards for the Building during the Term. Structural
Alterations and Alterations in or to the mechanical, elevator, electrical,
sanitary, heating, ventilating, air-conditioning or other systems in the
Demised Premises shall be performed only by the contractor (s) approved by
Landlord. Landlord agrees not to unreasonably withhold or delay its consent to
Tenant's choice of contractor(s). Alterations or Structural Alterations shall be
performed in such manner as not to impose any additional expense upon Landlord
in the construction, maintenance, operation or repair of the Building. If any
such additional expense shall be incurred by Landlord as a result of Tenant's
performance, Tenant shall pay such additional expense upon demand. Throughout
the performance of Alterations or Structural Alterations, Tenant, at its
expense, shall carry, or cause to be carried, workmen's compensation insurance
in statutory limits and general liability insurance, with completed operation
endorsement, for any occurrence in or about the Demised Premises, under which
Landlord and its agent shall be named as parties insured, in such limits as
Landlord may reasonably require, with insurers reasonably satisfactory to
Landlord. Tenant shall furnish Landlord with reasonably satisfactory evidence
that such insurance is in effect before the commencment of Alterations or
Structural Alterations and, on request, at reasonable intervals thereafter
during the continuance of Alterations or Structural Alterations.
Section 8.04. Tenant, at its expense, and with diligence and dispatch,
shall procure the cancellation or discharge of all notices of violation arising
from or otherwise connected with Alterations or Structural Alterations done for
or supplied to Tenant, or any person claiming through or under Tenant, which
shall be issued by the Department of Buildings of the City of New York or any
other New York City agency or public authority having or asserting jurisdiction.
Tenant shall defend, indemnify and save harmless Landlord from and against any
and all mechanics' and other liens and encumbrances filed in connection with
Alterations or Structural Alterations or any person claiming through or under
Tenant, including, without limitation, security interests in any materials,
fixtures or
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articles so installed in and constituting part of the Premises and against all
costs, expenses and liabilities incurred in connection with any such lien or
encumbrance or any action or proceeding brought thereon. Tenant, at its expense,
shall procure the satisfaction or discharge of record of all such liens and
encumbrances within 45 days after the filing thereof. However, nothing herein
contained shall prevent Tenant from contesting, in good faith and at its own
expense, any notice of violation.
Section 8.05. Landlord's approval or consent to Alterations or Structural
Alterations shall not be deemed Landlord's agreement or acknowledgement that
said Alterations or Structural Alterations comply with applicable laws, rules or
regulations or insurance requirements; nor shall Landlord's approval or consent
be deemed to be a waiver of compliance with applicable laws, rules, regulations,
insurance requirements, or any other term or phrase of this Lease.
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ARTICLE 9
Landlord's and Tenant's Property
Section 9.01. All fixtures, equipment, improvements and appurtenances
attached to or built into the Premises at the commencement of or during the Term
of this Lease, whether or not by or at the expense of Tenant, except as provided
in Section 9.02 shall be and remain a part of the Premises, shall be deemed the
property of Landlord and shall not be removed by Tenant; provided, however,
Tenant shall have the right to remove any such fixture, equipment, improvement
or appurtenance other than an item of Building Equipment so long as Tenant
repairs any damage caused by such removal and restores the Demised Premises to
their condition immediately preceding such installation subject to reasonable
wear and tear. Further, any carpeting or other personal property in the Premises
on the Expiration Date, unless installed and paid for by Tenant, shall be and
shall remain Landlord's property and shall not be removed by Tenant, unless
Landlord requests its removal, in which event Tenant shall remove such property
at Tenant's expense.
Section 9.02. All movable partitions, business and trade fixtures,
machinery and equipment, communications equipment and office equipment, whether
or not attached to or built into the Premises, which are installed in the
Premises by or for the account of Tenant without expense to Landlord and can be
removed without structural damage to the Building, and all furniture,
furnishings and other articles of movable personal property owned by Tenant and
located in the Premises (herein collectively called "Tenant's Property") shall
be and shall remain the property of Tenant and may be removed by Tenant at any
time during the Term of this Lease; provided that if any of Tenant's Property is
removed, Tenant shall repair or pay the cost of repairing any damage to the
Premises resulting from the installation and/or removal thereof. Any equipment
or other property constituting Landlord's Work (as set forth in Exhibit C
hereto), including that for which Landlord has paid by virtue of Tenant's
Allowance (as set forth in Exhibit C hereto) shall not be deemed to have been
installed by or for the account of Tenant without expense to Landlord, shall not
be considered Tenant's Property and shall be deemed the property of Landlord.
Section 9.03. At or before the Expiration Date of this Lease, or within 30
days after an earlier termination date, Tenant, at its expense, shall remove
from the Premises all of Tenant's Property (except such items thereof as
Landlord shall have expressly permitted to remain, which property shall become
the property of Landlord), and Tenant shall repair any damage to the Premises
resulting from any installation and/or removal of Tenant's Property.
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Section 9.04. Any other items of Tenant's Property which shall remain in
the Premises after the Expiration Date, or after a period of 30 days following
an earlier termination date, may, at the option of Landlord, be deemed to have
been abandoned, and in such case, such items may be retained by Landlord, as its
property or disposed of by Landlord, at Tenant's expense, without
accountability, in such manner as Landlord shall determine.
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ARTICLE 10
Tenant's Right of First Offer
Section 10.01. In the event that at any time during the Term hereof
Landlord shall, in good faith, determine to sell the Demised Premises, Landlord
shall first submit the proposed offer to Tenant, containing prices, financing
terms, closing date and any other salient terms. Landlord's proposal shall be in
the form of a contract of sale. Tenant shall have ninety (90) days from receipt
to accept such offer; in the event that Tenant accepts the offer, Tenant shall
have fifteen (15) days to execute a contract of sale with Landlord. If Tenant
fails to accept such offer, Landlord may offer the Demised Premises to such
other prospective purchaser as Landlord may desire upon the terms and for the
amount contained in Landlord's initial offer, provided, however, that if
Landlord does not execute a contract of sale with such other prospective
purchaser upon such terms within nine months and 15 days from the date Landlord
first submitted an offer to Tenant, Landlord may not sell or convey the Demised
Premises without again complying with this Section. In the event that Landlord
receives a subsequent bona fide offer upon different terms and Landlord is
willing to accept such offer, Landlord shall advise Tenant that it has received
such offer and enclose a copy of such offer. Tenant shall thereupon have fifteen
(15) days to accept such offer and execute a contract of sale with Landlord. If
Tenant fails to execute a contract of sale within such fifteen (15) day period
Landlord shall be free to sell to such bona fide offeror.
The provisions of this section shall apply to a transfer of fifty (50%)
percent or more of either (i) the shares of capital stock of a corporation or
(ii) the interest in any limited or general partnership.
Section 10.02. Subject to Section 10.04, Landlord shall not be required to
comply with Section 10.01 where Landlord
(a) is negotiating with any public or quasi public body for sale or
conveyance in lieu of an eminent domain proceeding; or
(b) is negotiating in good faith the delivery of a deed to a
Superior Mortgagee in lieu of foreclosure proceedings; or
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(c) is planning to convey to any person owning, controlling or under
common control with Landlord or to a spouse or blood relative (including adopted
children) of Landlord or trust for the benefit of such spouse or blood relative
(including adopted children); or
(d) is planning or considering the conveyance or conveyances to any
(i) general or limited partnership or partnerships of which Peter Catalano and
Michael Kornblum will be general partners or (ii) joint venture or joint
ventures of which Peter Catalano and Michael Kornblum will be co-venturers, or
(iii) entity or entities or successor which has retained Peter Catalano and
Michael Kornblum, as managing agent, and which has required that Peter Catalano
and Michael Kornblum remain responsible for the construction and delivery of the
Premises pursuant to the terms hereof, so long as any such conveyance occurs
within the first two years subsequent to the commencement of construction of the
work described in Exhibit C; or
(e) any transfer or conveyance between Peter Catalano and Michael
Kornblum; or
(f) if the Landlord is a natural person or persons, any conveyance
contemplated because of the death or incompetency of the Landlord (or if the
Landlord be more than an individual, then the death or incompetency of any such
person).
10.03. Any purchaser or assignee acquiring their interest pursuant to
Section 10.01 or 10.02 shall be deemed to have thereafter assumed all of
Landlord's obligations under this Lease.
10.04. Except as permitted by Section 10.02, Landlord shall not assign
this Lease nor convey or sell the Premises prior to the Commencement Date except
to an entity in which Michael Kornblum and Peter Catalano have more than a 50%
ownership interest.
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ARTICLE 11
Maintenance and Repairs
Section 11.01. Except as otherwise specifically provided in this Lease,
Landlord shall not be required to furnish any services or facilities or to make
any repairs or alterations in or to the Demised Premises (structural or
non-structural) throughout the Term, Tenant hereby assuming the full and sole
responsibility for the condition, operation, repair, replacement, maintenance
and management of the Demised Premises. All repairs and replacements required to
be made shall be made by Tenant at its sole cost and expense and shall be made
in such manner as to maintain the Demised Premises in substantially the
equivalent condition to its condition after completion of Landlord's Work, as
set forth in Exhibit C (as the same may have been changed pursuant to Article 8)
reasonable wear and tear and unless otherwise provided in Article 13, damage by
fire, casualties, the elements or act of God excepted. Except as otherwise
provided herein, Tenant shall promptly, at its expense, throughout the Term,
take good care of the Premises, the fixtures and appurtenances therein, the
exterior of the Building (including painting), the roof, Building Equipment and
Tenant's Property and Tenant shall be responsible for all repairs, interior and
exterior, Structural or non-Structural, ordinary and extraordinary, foreseen and
unforeseen, in and to the Premises and the Building Equipment, facilities and
systems thereof.
Section 11.02. All work to be performed by Tenant as specified in Section
11.01 shall be performed only by contractor(s) reasonably approved by Landlord
and paid by Tenant. Landlord's consent to Tenant's contractors shall not be
required prior to Tenant's making non-Structural repairs. At the commencement
of the Base Term Landlord shall assign to Tenant all warranties obtained from
the contractors who manufactured or installed Building Equipment.
Section 11.03. Except as otherwise provided herein, Landlord shall
maintain and be responsible for repairs to the structural portions of the
Demised Premises, consisting of the exterior facade (other than those matters
contained in Section 41.01), the beams, columns, slabs, perimeter walls and core
walls (herein referred to as the "Structure" or the "Structural portions of the
Premises, as the context requires) portions of the Demised Premises and Latent
Defects (within the time frame set forth in Article 5) except that Tenant shall
be responsible for repairs or maintenance required if:
(a) Tenant has performed Structural Alterations in which event
Tenant shall assume all liability and
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responsibility for maintenance and repair to those areas where Tenant performed
Structural Alterations, but only to the extent necessitated or caused by such
Structural Alterations; or
(b) Such maintenance or repair is caused by (i) the installation,
use or operation of Tenant's Property in the Demised Premises; (ii) the
performance of Tenant's Optional Work, Structural Alterations or Alterations;
(iii) the moving of Tenant's Property in or out of the Demised Premises; or (iv)
the act, omission, misuse or neglect of Tenant or any of its sub-tenants or its
or their employees, agents, contractors or invitees.
Landlord agrees that all repairs required to be made by Landlord shall, to
the extent practical or feasible, be done expeditiously and with an effort to
cause minimum interference to Tenant's business and with reasonable care to the
persons and property at the Demised Premises provided, however that nothing
contained herein shall require Landlord to incur overtime expense. Landlord
shall maintain the structure in the same manner as comparable buildings in the
area renovated as first class office buildings.
Section 11.04. Except as otherwise expressly provided in this Lease,
Landlord shall have no liability to Tenant, nor shall Tenant's covenants and
obligations under this Lease be reduced or abated in any manner whatsoever, by
reason of any inconvenience, annoyance, interruption or injury to business
arising from Landlord's making any repairs or changes which Landlord is required
or permitted to make by this Lease, or required by law, to make in or to any
portion of the Premises, or in or to the fixtures, equipment or appurtenances of
the Premises and Building Equipment. Landlord represents that in making such
repairs, it shall not materially and substantially reduce the useable square
footage. All repairs shall be made in the manner set forth in Section 11.03.
Section 11.05. If at any time during the Base Term a repair is required to
major components of the air conditioning system or the boiler(s), the cost of
which repair will exceed 20% of the then replacement cost of such major
components of the air conditioning system or the boiler (s), as reasonably
estimated by Tenant, Landlord shall repair or replace such item (and seek to
obtain the best price under the circumstances) and shall receive payment from
Tenant as follows:
(a) Landlord shall certify to Tenant Landlord's cost of repairing or
purchasing and installing such item (the "Replacement Cost") and if requested by
Tenant, Landlord shall exhibit copies of bills or statements relating thereto;
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(b) the Replacement Cost shall be multiplied by a number such that
the product will be an amount equal to the monthly payment needed to amortize a
loan equal to the Replacement Cost payable monthly over a 20 year term in
constant payments of principal and interest at the then best published rate for
secondary financing as published by Manufacturers Hanover Trust Company (or any
successor thereto) (the product to be known as the "Monthly Factor")
(c) the Monthly Factor shall be paid monthly over the months
remaining in the Term commencing at the time the replacement was complete and
shall be due as an Additional Payment hereunder.
Section 11.06. If at any time during the Base Term a repair is required to
the air conditioning system or a component thereof or the boiler(s), the cost of
which will exceed 20% of the the replacement costs of such components of the air
conditioning system or the boiler(s), as reasonably estimated by Tenant and
Tenant is required to do such work because either the repair is an emergency to
which Landlord cannot promptly respond or Landlord has refused for a reasonable
period of time to do the work, then Tenant shall repair or replace such item and
receive payment from Landlord as follows:
(a) Tenant shall certify to Landlord the Replacement Cost;
(b) Landlord shall within 15 days of receipt of such notice
reimburse Tenant for the Replacement Cost;
(c) Thereafter Tenant shall pay Landlord the Monthly Factor as if
Landlord initially incurred the Replacement Cost pursuant to Section 11.05.
Section 11.07. In connection with Landlord's obligation to make repairs or
Alterations as set forth in this Lease Tenant shall permit Landlord to erect,
use and maintain pipes and conduits in and through the Premises; to store
materials at the Premises while such repairs or Alterations are being made with
Tenant's consent which will not be unreasonably withheld or delayed; and to
enter upon the Premises with Landlord's agents, employees and contractors.
Landlord shall at all times endeavor to minimize the dislocation or disruption
of Tenant's business.
Section 11.08. If at any time during a Renewal Term a repair is required
for Building Equipment or components thereof the cost of which will exceed 20%
of the replacement cost of such component item of Building Equipment as
reasonably
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estimated by Tenant, then Landlord shall at its expense make such repair or
replacement. All repairs shall be made as expeditiously as practical (without
overtime) and with materials of like or better quality as those required for use
in Landlord's Work.
Section 11.09. Notwithstanding anything herein to the contrary, wherever
in Exhibit C Landlord has agreed to be responsible for failures resulting from
the use of existing materials, Landlord shall be responsible for repairs
thereto, in accordance with Exhibit C subject however to Tenant's obligation to
maintain such component and to maintain the Building and Building Equipment of
which such component is a part.
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ARTICLE 12
Insurance
Section 12.01(a). Tenant, at its expense, shall keep the Demised Premises
(including the Building and Building Equipment) on the Demised Premises insured,
during the Term, against all risks of physical loss, loss or damage by fire,
with such extended coverage as shall from time to time be customary for premises
similarly situated (as to both use and area) in the Borough of Manhattan, City
of New York, with replacement cost endorsement, in amounts sufficient to prevent
Landlord or Tenant from being or becoming a co-insurer within the terms of the
policy or policies in question and in no event less than ninety per cent (90%)
of the replacement value of the Building and Building Equipment exclusive of the
cost of foundations, excavations, and footings below the lowest basement floor,
without any deduction being made for depreciation and with (i) an inflation
rider and (ii) an agreed amount endorsement. Such replacement value shall be
determined from time to time, but no more frequently than once in any
twenty-four consecutive calendar months, at the request of Landlord, by an
appraiser, architect or contractor who shall be mutually and reasonably
acceptable to Landlord and Tenant (the cost of which shall be equally borne by
Landlord and Tenant). No omission on the part of Landlord to request any such
determination shall relieve Tenant of its obligations hereunder.
(b) Prior to the Commencement Date, Landlord at Landlord's expense,
shall keep the Demised Premises insured in the same manner and to the same
extent as is required of and by Tenant after the Commencement Date; with regard
to comprehensive general public liability insurance Landlord shall name Tenant
as an additional insured.
Section 12.02. Tenant, at its expense, shall maintain during the Term for
the mutual benefit of Landlord and Tenant:
(a) comprehensive, general public liability insurance against claims
for bodily injury, death or property damage, occurring upon, in or about the
Demised Premises, or the elevators or any escalators, and on, in or about the
adjoining sidewalks and passageways (including, without limitation, personal
injury, death or property damage, resulting directly or indirectly from any
change, alteration, improvement or repair thereof) with broad form general
liability endorsement for at least $20,000,000 for any one occurrence and
$500,000 for damage to property and in such greater or lesser limits as may be
determined pursuant to Section 12.10 hereof;
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(b) boiler and pressure vessel insurance, including pressure pipes,
if there be any such vessel or pipes in the Demised Premises, in an amount not
less than $250,000 per boiler;
(c) during the course of any alterations or construction by Tenant
at the Premises and until completion thereof, Builder's Risk insurance on an
"all risk" basis (including collapse) on a completed value (non-reporting) form
for full replacement value covering the interest of Landlord and Tenant (and
their respective contractors and subcontractors), the Superior Mortgagee, and
all work incorporated in the Demised Premises and all materials and equipment
therein, provided, however, Tenant may self-insure that amount of loss
determined by multiplying $250,000 by the sum of 1 and the product of 0.035 and
the Lease Year number;
(d) Worker's Compensation and Employer's Liability Insurance, as
required by law for Tenant's agents, employees, licensees and contractors;
(e) Sprinkler and water damage insurance;
(f) rental value insurance against loss of rental or other income
derived from the use of the Demised Premises due to the risks referred to in
Section 12.01 hereof (including those embraced by "extended coverage") in an
amount sufficient to prevent Tenant from becoming a co-insurer within the terms
of the policy or policies in question, but in no event in an amount or amounts
less than the aggregate amount of the Base Annual Rent and the Impositions
hereunder for a period of three years; and Tenant hereby assigns to Landlord,
or to a Trustee under Section 12.08 hereof if there be one, the proceeds of such
insurance so that in the event the Demised Premises or part thereof shall be
destroyed or seriously damaged such proceeds shall be used for the payment of
such Base Annual Rent and Impositions hereunder until the restoration of such
improvements. Notwithstanding anything herein to the contrary, Landlord shall
reimburse Tenant, within 15 days of Tenant's presentation of a bill, for the
cost of such insurance for so long as Landlord requires Tenant to carry such
insurance under Tenant's global policy; and
(g) so long as Landlord agrees to bear one-half the cost of the
related premiums, (i) such other insurance in such amounts as may from time to
time be reasonably required by either: (A) Landlord against other insurable
hazards which at the time are customarily insured against in the case of
premises similarly situated in the Borough of Manhattan, City of New York, due
regard being, or to be, given to the height and type of Building, its
construction, use and occupancy, or
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(B) any Superior Mortgagee, and (ii) such additional amounts of coverage in
excess of that which Tenant is required to provide pursuant to this Article 12,
which amounts are required by either (A) Landlord, or (B) any Superior
Mortgagee.
Section 12.03.
A. All insurance provided for in this Article shall be effected
under valid and enforceable policies, issued by insurers with "Best" ratings of
not less than A, licensed to do business in New York and authorized to issue
such policies. Upon the execution of this Lease, and thereafter promptly
following Landlord's request therefor, originals of the policies (or,
certificates of the insurers) bearing notations evidencing the payment of
premiums or accompanied by other evidence reasonably satisfactory to Landlord or
such payment, shall be delivered by Tenant to Landlord.
B. Nothing in this Article shall prevent Tenant from taking out
insurance of the kind and in the amounts provided for under this Article under a
blanket insurance policy or policies covering other properties as well as the
Demised Premises, provided, however, that any such policy or policies of blanket
insurance (i) shall specify therein, or Tenant shall furnish Landlord at
Tenant's option, with either an endorsement evidencing the insurance coverage
and the named assureds or a written statement from the insurers under such
policy or policies specifying, the amount of the total insurance allocated to
the Demised Premises, which amounts shall not be less than the amounts required
by Sections 12.01 and 12.02 hereof and, (ii) such amounts so specified shall be
sufficient to prevent any one of the assureds from becoming a co-insurer within
the terms of the applicable policy or policies, and provided further, however,
that any such policy or policies of blanket insurance shall, as to the Demised
Premises, otherwise comply as to endorsements and coverage with the provisions
of this Article.
Section 12.04. [This section intentionally omitted.]
Section 12.05. Tenant shall not violate or permit the violation of any
condition imposed by any insurance policy then issued in respect of the Demised
Premises and/or the property therein and shall not do, or permit anything to be
done, or keep or permit anything to be kept in the Demised Premises which would
subject Landlord to any liability or responsibility for personal injury or death
or property damage, or which would increase any insurance rate in respect of the
Demised Premises or the property therein over the rate which would otherwise
then be in effect or which would result in insurance companies of good standing
refusing to insure the Demised Premises or the
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property therein in amounts reasonably satisfactory to Landlord, or which would
result in the cancellation of or the assertion of any defense by the insurer in
whole or in part to claims under any policy of insurance in respect of the
Demised Premises or the personal property, fixtures and equipment located
therein or thereon. Tenant shall have the right, at its sole cost and expense to
contest by appropriate proceeding any purported violation of an insurance
provision, provided that during such contention or proceeding all insurance
required to be obtained by Tenant pursuant to this Lease is in full force and
effect and such contention or proceeding does not invalidate any insurance
carried by Landlord. Landlord agrees, if requested by Tenant and so long as it
is without cost or expense, to cooperate with Tenant in any such proceeding;
provided, however, if Landlord would be required to incur any cost or expense in
connection with such cooperation, Landlord agrees to do so on the express
condition that Tenant will pay Landlord's costs therefor.
Section 12.06. Tenant and Landlord shall secure an appropriate clause in,
or an endorsement upon, each insurance policy obtained by them covering or
applicable to the Demised Premises or the personal property, fixtures and
equipment located therein or thereon, pursuant to which the insurance company
waives subrogation or permits the insured, prior to any loss, to agree with a
third party to waive any claim it might have against said third party without
invalidating the coverage under the insurance policy. The waiver of subrogation
or permission for waiver of any claim shall extend to Tenant and Landlord or
their agents or employees. Tenant hereby releases Landlord to the extent of
insurance required to be provided and provided by Tenant pursuant to this
Article (and, to the extent that Landlord carries insurance, Landlord releases
Tenant) and its agents and employees in respect of any claim (including a claim
for negligence) which it might otherwise have against landlord or its agents (or
Tenant and its agents) or employees for loss, damage or destruction with respect
to Tenant's Property (or Landlord's property) by fire or other casualty
including rental value or business interest, as the case may be, occurring
during the Term as herein provided.
Section 12.07. Any policies of insurance of the character described in
Section 12.01 hereof shall expressly provide that any losses thereunder shall be
adjusted with and approved by landlord. All insurance provided in accordance
with this Article 12 shall be carried in the name of Landlord and Tenant with
standard mortgagee endorsement covering the interest of any Superior Mortgagee
as such interest may appear and any amounts received pursuant thereto shall be
paid to Landlord and, if requested by Landlord, to the holder of any Superior
Mortgage covering the Demised Premises, for application to the cost of
restoration and repair of the Building, except in the event of termination of
the Lease pursuant to Section 33, in which case such amounts shall be paid to
Landlord.
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Section 12.08. In the case of such damage or destruction resulting in
insurance proceeds of more than $50,000, such insurance proceeds shall be
deposited with a Trustee of Landlord's choosing and shall be paid by the Trustee
in the manner set forth in Article 13. In the event that the damage or
destruction results in insurance proceeds of less than $50,000, Landlord shall
receive and hold such amounts (less the reasonable costs of collecting and
administering such amounts) and reimburse itself for its actual expenditures in
making such repairs in accordance with the provisions of Article 13. In the
event, after the making of all repairs required to be made pursuant to Article
13, there are excess funds remaining with Landlord or the Trustee, such amounts
shall be remitted to Tenant.
Section 12.09. At the expiration of the Term, all policies which are
transferable shall be at Landlord's option, transferred to Landlord free of all
right, title and interest of Tenant and those claiming under Tenant, except that
Tenant shall retain its interest in such policies as they relate to all events
occurring prior to the expiration of the Term, as to which Tenant is entitled to
the protection afforded or proceeds payable under this Lease, in which event
Landlord shall pay to Tenant an amount equal to the unearned premiums
apportioned as of such expiration date. In the event of Landlord's eviction of
Tenant for default, Landlord shall credit against all amounts due from Tenant an
amount equal to the unearned premiums apportioned to the date of eviction on all
policies assigned and acceptable to Landlord.
Section 12.10. Landlord may from time to time, but not more frequently
than once every year, require that the amount of public liability insurance to
be maintained by Tenant under Section 12.02 be increased so that the amount
thereof adequately protects Landlord's interest. If Tenant shall claim that
Landlord's requirement is excessive, the resolution of the dispute shall be
determined by arbitration as provided in Article 24. Tenant shall thereafter
carry the insurance as determined by such arbitration to be required, but in no
event shall the amount thereof be less than the amount specified in Section
12.02.
12.11. Tenant covenants and agrees that it will, at all times during the
Term of this Lease, subject to the provisions of Section 18.01, indemnify,
protect, defend and save Landlord harmless from and against any and all claims,
costs, charges or liabilities (including attorneys' fees) arising from damage or
injury, actual or claimed, of whatsoever kind or character, to property or
persons, occurring in or about the Demised Premises, or the streets, sidewalks,
passageways and alleys adjacent thereto to the extent and amount Tenant was
required to insure against such casualty or event, but excluding from
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this limitation, Tenant's negligence, and in case any action or proceeding shall
be brought against Landlord by reason of such claim, Tenant, upon notice from
Landlord shall resist or defend such action or proceeding at Tenant's expense,
whether or not Tenant has actually obtained insurance coverage for such claims
as required herein.
Section 12.12. Except as set forth in Section 12.01(b) nothing contained
in this Article 12 shall be deemed to require Landlord to carry any insurance.
Section 12.13. All insurance policies delivered pursuant to this Article
shall contain an agreement by the insurer that such policy shall not be
cancelled except on at least thirty (30) days prior notice to Landlord. As to
any loss sustained by Tenant (or Landlord) for which Tenant (or Landlord) is
required to obtain insurance pursuant to this Lease, Tenant (or Landlord) waives
any and all claims and rights for damages against Landlord (or Tenant).
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ARTICLE 13
Damage or Destruction
Section 13.01. Except as is provided in Sections 13.04 and 13.06 hereof,
in case of damage to or destruction of the Building or Building Equipment or any
part thereof by fire or other casualty, Tenant shall promptly give written
notice thereof to Landlord, and Landlord shall, at Landlord's expense, and
whether or not insurance proceeds, if any, shall be sufficient for the purpose,
restore, repair, replace, rebuild or alter the same to restore it as nearly a
possible to its condition or character immediately prior to damage or
destruction. Such restorations, repairs, replacements, rebuilding or alterations
shall be commenced within ninety days from the date of the occurrence of such
damage or destruction, which time shall be extended, if necessary, by time
commensurate with any delays due to adjustment of related insurance claims,
preparation of plans and specifications, and applications for zoning variances
and rezoning, and shall thereafter be prosecuted with reasonable diligence,
unavoidable delays excepted and in accordance with applicable laws, ordinances
and administrative requirements (whether federal, state or local).
Section 13.02. Prior to commencing any work Landlord shall deliver to
Tenant an estimate of the cost of the Restoration certified by an officer of
Landlord and an architect or engineer (reasonably acceptable to Tenant) retained
by Landlord to supervise the construction work.
Section 13.03. A. All insurance money paid on account of such damage or
destruction to the Trustee acting hereunder pursuant to the provision of Section
12.08 (or to the Landlord if the insurance proceeds are less than $50,000)
hereof less the reasonable cost, if any, incurred in connection with adjustment
of the loss and the collection thereof shall be applied by such Trustee (or
Landlord) to the payment of the cost of the aforesaid restoration, repairs,
replacement, rebuilding or alterations, including the cost of temporary repairs
or for the protection of property pending the completion of permanent
restoration, (all of which temporary repairs, protection of property and
permanent restorations, replacements, rebuilding or alterations are hereinafter
collectively referred to as the "Restoration" and the act of doing such
Restoration is hereinafter described as "Restore" and "Restoring" as the context
requires), and shall be paid out to, or at the direction of Landlord from time
to time as the Restoration progresses, in installments equal to the cost of work
completed and materials furnished, and shall be received by Landlord for the
purposes of paying the cost of such Restoration. At the time of each takedown of
funds,
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Landlord shall prepare and make available to Tenant (if requested) a verified
certificate signed by Landlord or if Landlord is a partnership or corporation,
by a general partner or a senior executive officer of Landlord as the case may
be and a certificate signed by the architect or engineer in charge of such
construction, dated not more than thirty days following such request, setting
forth the following:
(1) that the sum then requested represents the amount that
either has been paid by Landlord, or is then due to contractors,
subcontractors, materialmen, engineers, architects or other persons
who have rendered services or furnished materials for the
Restoration therein specified, and giving a brief description of
such services and materials and the several amounts so paid or due
to each of said persons in respect thereof, and stating that no part
of such expenditures has been or is being made the basis, in any
previous or then pending request, for the withdrawal of insurance
money or has been paid out of the proceeds of insurance received by
Landlord;
(2) that the cost, as estimated by the persons signing such
certificate, of the Restoration required to be done subsequent to
the date of such certificate in order to complete the same, does not
exceed the aggregate of the insurance money remaining in the hands
of Trustee or (Landlord) after payment of the sum requested in such
certificate.
Upon compliance with the foregoing provisions of this Section, such Trustee (or
Landlord) shall, out of such insurance money, pay or cause to be paid to
Landlord or the persons named in such certificate (pursuant to subclause (1) of
this Section) the respective amounts stated therein to have been paid by
Landlord or to be due to them, as the case may be.
B. If the net insurance proceeds as aforesaid at the time held by such
Trustee (or Landlord) shall be insufficient to pay the entire cost of such
Restoration, landlord shall pay the deficiency forthwith.
C. Upon receipt by such Trustee (or Landlord) of satisfactory evidence, of
the character required by clauses (1) and (2) of this Section, that the
Restoration has been completed and paid for in full and that there are no liens
of the character referred to therein, any balance of the insurance money at the
time held by such Trustee or Landlord shall be paid to Tenant, unless Tenant is
in default hereunder for failure to pay Rent, in which case such insurance
proceeds shall be applied against the amount owed to Landlord at such time.
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D. Anything herein contained to the contrary notwithstanding, in the event
of the termination of this Lease pursuant to Article 33, any and all insurance
proceeds then on hand with the Trustee shall be paid over to landlord, and
Tenant shall have no right, title, interest or claim thereto or therein
whatsoever, and any amounts held by Landlord shall be retained by Landlord.
Section 13.04. Other than as set forth in Section 13.06 in case of damage
or destruction to the Demised Premises which shall amount to substantially total
destruction of the Building and Building Equipment (i.e. if the casualty
destroys 75% or more of the useable area Demised Premises) and to be of such a
character that in the reasonable judgment of Landlord requires demolition of the
remainder of the Building or shall require more than twelve (12) months for
Restoration, Landlord shall have ninety (90) days from the casualty to notify
Tenant of Landlord's election either to Restore, or not to Restore the Premises.
If Landlord elects so to Restore, Landlord shall deliver to Tenant its estimate
of the approximate completion date of such Restoration. Landlord's failure to
send notice of its election either to Restore or not to Restore shall be deemed
Landlord's election not to Restore. If Landlord elects not to Restore or is
deemed to have elected not to Restore this Lease shall terminate as of the
giving (or deemed giving) of such notice provided, however, Tenant, within
fifteen (15) days of the giving of such notice (or deemed giving of such notice)
from Landlord may notify Landlord that Tenant elects to have landlord Restore.
In such event, Landlord shall commence Restoration. If Landlord elects to
Restore Landlord must Substantially Complete such Restoration within two (2)
months following Landlord's estimated date of completion of Restoration. In the
event Landlord fails to Substantially Complete the Restoration of the Demised
Premises by the expiration of such period (plus an additional three (3) months
if the delay is caused by Force Majeure), Tenant may thereafter upon thirty
(30) days notice elect to cancel this Lease, but if the Demised Premises are
Substantially Complete at the expiration of such thirty (30) day period, this
Lease shall continue until the end of the Term. If this Lease shall be cancelled
pursuant to this Article, it shall be terminated with the same force and effect
as if the date of such termination was set forth as the natural expiration of
this Lease.
Should Landlord elect to Restore landlord shall Restore substantially in
accordance with the procedures and specifications set forth in Exhibit C and
monies shall be released to Landlord in the manner set forth in Section 13.03.
Substantial Completion shall be determined subtantially in the manner set forth
in Article 5. In the event Landlord elects not to Restore Landlord agrees that
it shall not for twelve months from the casualty relet the Demised Premises.
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Section 13.05. Except as set forth in Sections 13.04, 13.06 and 13.10, no
destruction of or damage to the Demised Premises or any part thereof by fire or
any other casualty shall permit Tenant to surrender this Lease or shall relieve
Tenant from its liability to pay the Base Annual Rent or Additional Rent or from
any of its other obligations under this Lease (except that the proceeds of Rent
insurance shall be held and applied as provided in Section 12.02 hereof), and
Tenant waives any rights now or hereafter conferred upon it by statute or
otherwise or quit or surrender this Lease or the Demised Premises or any part
thereof, or to any suspension, diminution, abatement or reduction of Rent on
account of any such destruction or damage.
Section 13.06. Anything herein to the contrary notwithstanding if, during
the last three years of the Base Term or of any Renewal Term, the Demised
Premises shall be so damaged by fire or otherwise that the cost of Restoration
of the Building and Building Equipment thereof shall exceed the greater of (i)
the current year's Base Annual Rent, or (ii) 60% of the then replacement value
of the Building and Building Equipment (any dispute with respect the extent of
such damage to be arbitrated pursuant to Article 29), then
(a) Landlord may elect either to Restore the Demised Premises or to
cancel this Lease on at least thirty (30) days' notice, given within sixty
(60) days after such damage. If Landlord elects so to cancel this Lease,
this Lease and any and all renewal rights hereunder shall come to an end
on the date specified in such notice and Landlord further agrees that it
shall not for six months from the casualty relet the Premises, provided
however, Tenant may within fifteen (15) days of such notice of
cancellation from Landlord notify Landlord that it elects to have Landlord
Restore the Premises, in which event Landlord shall commence Restoration;
and
(b) Tenant may elect to cancel this Lease on at least thirty (30)
days' notice, given within sixty (60) days after such damage, and this
Lease shall come to an end on the date specified in such notice; provided,
however, that simultaneously with the giving of its notice, Tenant shall
deliver to Landlord an assignment, duly executed and acknowledged by
Tenant, transferring to Landlord all of the rights and claims of Tenant
in, to and under all insurance proceeds covering such damage or
destruction and in and to all insurance policies carried by Tenant
pursuant to this Lease.
In the event of any such cancellation, Landlord shall not be obligated to
perform any Restoration, and this Lease and the Term hereof and all renewal
rights shall terminate as of the effective date of such cancellation as
specified in the notice,
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all such insurance proceeds shall be the property of Landlord and Tenant shall
not have any rights or claims with respect thereto. No such cancellation and
termination shall release Tenant from any obligation hereunder for Rent, accrued
or payable for or during any period prior to the effective date of such
cancellation, and any prepaid Rent beyond the effective date of such
cancellation shall be adjusted. In case of any arbitration of a dispute under
this Section whether any cost of replacement shall exceed sixty per cent (60%)
of the then replacement value of the Building and Building Equipment, the time
to give any notice under this Section shall be extended to a date which shall be
thirty (30) days after the determination of such arbitration.
If Landlord elects to Restore, as provided in paragraph (a) above,
Landlord shall give Tenant Landlord's good faith estimate of the time needed to
Restore at the time the Landlord elects to rebuild. If such estimate indicates
that such Restoration will exceed ninety (90) days, Tenant may upon ten (10)
days notice elect to cancel this Lease. In the event Landlord fails to
Substantially Complete the Restoration of the Demised Premises by the later of
ten (10) days following such estimate or one hundred (100) days from Landlord's
delivery of the aforementioned Restoration estimate (130 days if the delay is
caused by force majeure), Tenant may thereafter upon thirty (30) days' notice
elect to cancel this Lease and if the Demised Premises are not Substantially
Complete at the expiration of such thirty (30) day period, this Lease shall be
cancelled with the same force and effect as if the date of such expiration was
set forth as the natural expiration of the Lease.
Section 13.07. In any instance of Restoration utilizing insurance
proceeds, the Superior Mortgagee may impose such terms and conditions upon the
use of the insurance proceeds, including escrows, hold-backs and the like as the
Superior Mortgagee shall determine appropriate in the circumstance, and Landlord
and Tenant shall agree to and abide by such terms and conditions but may not
apply the proceeds to reduce obligations thereunder (except if Tenant has
defaulted in a material obligation hereunder and has not cured such default
within the time for curing and such default)
Section 13.08. The provisions of this Article shall be deemed an express
agreement governing any case of damage to or
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destruction of the Premises by fire or other casualty, and Section 227 of the
Real Property Law of the State of New York, providing for such a contingency in
the absence of an express agreement, and any other law of like import, now or
hereafter in force, shall have no application in such case.
Section 13.09. Except as specifically provided in Sections 13.04 and
13.06, in all instances wherein Landlord elects to Restore the Demised Premises,
Landlord shall, as promptly as practical, deliver to Tenant Landlord's good
faith estimate of the time within which Landlord reasonably expects to
Substantially Complete the Restoration. In the event that with respect to
Restoration required pursuant to Section 13.04, such estimate indicates more
than 12 months is needed for Restoration then Tenant may within 20 days of such
notice elect to cancel this Lease.
Section 13.10. In the event of the occurrence of any casualty, the
prorated share of Base Annual Rent payable hereunder for the portion of the
Premises not usable or occupied by Tenant as a result of such casualty shall
abate from the date of the casualty until Landlord shall have Substantially
Complete the applicable Restoration. Any insurance proceeds available from
insurance carried pursuant to Section 12.02(f) shall be remitted to Landlord.
Section 13.11. In the event that any casualty or loss occurs for which
insurance coverage is required hereunder and such insurance coverage is not
available because Tenant failed to obtain such insurance, or if obtained allowed
to lapse or be cancelled because of Tenant's failure or negligence, Tenant shall
be responsible for and shall pay Landlord the amount that would have been
available had such insurance been in effect.
Section 13.12. In the event Tenant elects to cancel this Lease pursuant to
any Section of this Article. Landlord shall retain all insurance proceeds
relating to the Demised Premises. Provided and to the extent that Tenant is not
in default in the payment of Rent hereunder, insurance proceeds relating to the
Tenant's leasehold interest and Tenant's Property shall be paid to Tenant.
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ARTICLE 14
Eminent Domain
Section 14.01. If all or substantially all the whole of the Demised
Premises or complete access thereto shall be taken by condemnation or in any
other manner for any public or quasi-public use or purpose, this Lease and Term
and estate hereby granted shall terminate as of the date of vesting of title on
such taking (herein called "Date of the Taking"), and the Base Annual Rent and
Additional Rent shall be prorated and adjusted as of such date. For purposes of
this article, (a) "substantially" shall mean 80% or more of the rentable space
in the Building; (b) the Building shall be deemed to have 320,000 square feet of
rentable space (but this shall not be deemed a representation by Landlord).
Section 14.02. In the event of a taking described in Section 14.01 the
compensation or award shall be divided and distributed as follows: (a) first
monies shall be given to the Superior Mortgagee first in priority in an amount
sufficient to repay such Superior Mortgage including all principal sums due
thereunder and all interest accrued thereon (but limited to interest related to
one month's payment); (b) thereafter the Tenant shall receive that amount of the
residual (remaining after subtracting the amount in Subsection (a)), determined
by multiplying the balance of the award (after making the payment described
in Subsection (a) above) by a fraction of which the numerator is the value of
Tenant's leasehold interest including the value of Tenant's renewal options but
excluding the value of Tenant's purchase option and the denominator is the sum
of the value of Tenant's leasehold interest including the value of Tenant's
renewal options and the value of Landlord's interest in the Demised Premises
excluding therefrom the portion of the Superior Mortgage paid pursuant to
Subsection (a). Landlord and Tenant shall first try to agree upon value. If no
agreement is reached within ten (10) days, either party may demand arbitration;
(c) the balance shall be given to Landlord. The application for the compensation
or award shall be made by Landlord and Tenant shall cooperate, without cost or
charge, with Landlord in making application for such award, including execution
of such documents as may be required by Landlord or its counsel. The amounts
payable hereunder represent Tenant's sole right to receive or claim compensation
for a taking as described in Section 14.01.
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Section 14.03. If the temporary use or occupancy of all or any part of the
Premises shall be condemned or taken for any public or quasi-public use or
purpose during the Term, this Lease and the Term shall be and remain unaffected
by such condemnation or taking and Tenant shall continue to be responsible for
all of its obligations hereunder (except to the extent prevented from so doing
by reason of such condemnation or taking) and it shall continue to pay the Rent
in full. In the event of any such condemnation or taking, Tenant shall be
entitled to appear, claim, prove and receive the entire award unless the period
of temporary use or occupancy extends beyond the Expiration Date in which event
Landlord shall be entitled to appear, claim, prove and receive the entire award
as represents the cost of Restoration of the Premises and the balance of any
such award shall be apportioned between Landlord and Tenant as of the Expiration
Date. At the termination of such occupancy prior to the Expiration Date, Tenant,
at its own expense, will restore the Premises as nearly as possible to their
condition prior to the condemnation or taking. Notwithstanding the foregoing,
any lump sum award received by Tenant as compensation for temporary use and
occupancy of the Premises shall be delivered to and held by Landlord in trust
for the payment of Rent.
Section 14.04. In the event of a taking of less than 80% of the Building
this Lease shall continue in full force and effect except that the Base Annual
Rent to be paid shall be reduced to that amount determined by multiplying the
then applicable Base Annual Rent by a fraction, the numerator of which is the
percentage of the Building taken in the condemnation proceeding and the
denominator is 100. The Base Annual Rent set forth above shall be effective and
shall be prorated from the bate that the condemning authority taxes possession.
Section 14.05. In the event of any taking of less than the whole of the
Demised Premises which does not result in termination of this Lease, Landlord,
at its expense, and whether or not any award or awards shall be sufficient for
the purpose, shall proceed with reasonable diligence to repair the remaining
parts of the Building (other than those parts which are Tenant's Property) to
substantially their former condition to the extent that the same may be feasible
and so as to, as nearly as practicable under the circumstances, constitute a
complete and tenantable Building, and in accordance with the procedures
contained in Exhibit C. Landlord shall perform all repairs required to restore
Tenant's leasehold improvements so long as the cost thereof shall not exceed
$500,000. If the cost of such repairs exceed $500,000 Tenant shall cause such
work to be done at Tenant's sole expense to the extent the work
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exceeds $500,000, and in accordance with the provisions of Article 8. The
parties will agree to an appropriate transition in the event an excess of
$500,000 is expended by Landlord in connection with the foregoing.
Landlord shall be promptly reimbursed by Tenant for the cost of all Tenant
Optional Work done by Landlord. Landlord and Tenant shall pro rata share any
compensation or award made for such work based upon the relative expenditures
for such repairs. Landlord shall endeavor to obtain the most favorable prices
available under the circumstances for such work.
Section 14.06. The terms "condemnation" and "acquisition" as used herein
shall include any agreement in lieu of or in anticipation of the exercise of the
power of eminent domain between Landlord and any governmental authority
authorized to exercise the power of eminent domain. In the event that there
shall be any dispute between Landlord and Tenant arising out of provisions of
this Article, such dispute shall be settled by arbitration pursuant to Article
28.
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ARTICLE 15
Compliance with Laws
Section 15.01. Tenant shall give prompt notice to Landlord of any notice
it receives of the violation of any law, rule, regulation or requirement of any
public authority with respect to the Premises or the use or occupation thereof.
Except as otherwise provided herein, Tenant shall, at Tenant's expense, comply
with all laws rules, regulations and requirements of all public authorities
which shall, in respect of the Premises or the use and occupation thereof, or
the abatement of any nuisance in, on or about the Premises, impose any
violation, order or duty on Landlord or Tenant, arising from (a) the use of the
Premises, (b) the manner of conduct of Tenant's business or operation of its
installations, equipment or other property therein, (c) any cause or condition
created by or at the instance of Tenant, (d) the use or operation of any
Building Equipment, or (e) breach of any of Tenant's obligations hereunder; and
Tenant shall pay all the costs, expenses, fines, penalties and damages,
including reasonable attorneys fees, which may be imposed upon Landlord by
reason of or arising out of Tenant's failure to fully and promptly comply with
and observe the provisions of this Section. However, Tenant need not comply with
any such law, rule, regulation or requirement of any public authority so long as
Tenant shall be contesting the validity thereof, or the applicability thereof to
the Premises, in accordance with Section 15.02. Landlord, at its expense, shall
comply with all other such laws, rules, regulations and requirements of public
authorities as shall affect the Premises, but may similarly defer compliance so
long as Landlord shall be contesting the validity or applicability thereof.
15.02. Tenant, at its expense, after notice to Landlord, may contest, by
appropriate proceedings prosecuted diligently and in good faith, the validity,
or applicability to the Premises, of any law, rule, regulation or requirement of
any public authority, provided that (a) Landlord shall not be subject to
criminal penalty or to prosecution for a crime, nor shall the Premises or any
part thereof be subject to being condemned or vacated, by reason of
non-compliance or otherwise by reason of such contest; and (b) if the cost of
such compliance exceeds $250,000 multiplied by 1 and the product of 0.035 and
the Lease Year number before the commencement of such contest, Tenant shall
furnish to Landlord either (i) the bond of a surety company reasonably
satisfactory to Landlord, which bond shall be, as to its provisions and form,
satisfactory to Landlord, and shall be in an amount at least equal to 100% of
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the cost of such compliance (as estimated by a reputable contractor designated
by Tenant) and shall indemnify Landlord against the cost thereof and against all
liability for damages, interest, penalties and expenses (including reasonable
attorneys' fees and expenses), resulting from or incurred in connection with
such contest or non-compliance, or (ii) other security in place of such bond
reasonably satisfactory to Landlord; (c) such non-compliance or contest shall
not constitute or result in any violation of any Superior Mortgage, or if any
such Superior Mortgage shall permit such non-compliance or contest on condition
of the taking of action or furnishing of security by Landlord, such action shall
be taken and such security shall be furnished at the expense of Tenant; and (d)
Tenant shall keep Landlord advised as to the status of such proceedings. Without
limiting the application of the above, Landlord shall be deemed subject to
prosecution for a crime if Landlord, or its managing agent, or any officer,
director, partner, shareholder or employee of Landlord or its managing agent, as
an individual, is charged with a crime of any kind or degree whatever, whether
by service of a summons or otherwise, unless such charge is withdrawn before
Landlord or its managing agent, or such officer, director, partner, shareholder
or employee of Landlord (as the case may be) is required to plead or answer
thereto.
Section 15.03. [This Section purposely omitted.]
Section 15.04. Except as otherwise provided herein, Tenant, at its
expense, shall promptly comply with all orders, rules and regulations of the
National Board of Fire Underwriters, the New York Board of Fire Underwriters or
any other body or bodies exercising similar functions, foreseen or unforeseen,
ordinary as well as extraordinary, which may be applicable to the Demised
Premises subsequent to the Commencement Date or to the use or manner of use of
the Demised Premises provided no such orders, rules, regulations or requirement
shall necessitate Structural changes or improvements or interfere with the use
and enjoyment of the Demised Premises, and whether or not such compliance is
required by reason of any condition, event or circumstance existing prior to or
after the Commencement Date, unless such condition, event or circumstances was
caused by Landlord's negligence.
Section 15.05. Landlord represents that on the Commencement Date the
Demised Premises will be in compliance with all applicable laws, rules or
regulations excepting those matters which then remain subject to Landlord's
completion of Tenant's Punch List or the completion of the work remaining
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unfinished because Tenant took occupancy prior to Landlord's advice to Tenant
that the Premises were Substantially Complete. Landlord further represents that
the work done was in compliance with applicable law during the construction
period, and if not so in compliance Landlord, at its expense, will comply with
such laws.
Section 15.06. Notwithstanding anything herein to the contrary, if at any
time during the Term, a capital expenditure for Building Equipment is required
in excess of $250,000 in order to comply with newly enacted legislation or
regulation of any public authority having jurisdiction, Landlord shall comply
with such requirement and receive payment from Tenant as follows:
(a) Landlord shall certify to Tenant Landlord's cost of complying
with such law, rule or regulation ("the Compliance Cost") and if requested by
Tenant Landlord shall exhibit copies of bills or statements relating thereto;
(b) the Compliance Cost shall be multiplied by a number such that
the product will be an amount equal to the monthly payment needed to amortize a
loan equal to the monthly payment needed to amortize a loan equal to the
Compliance Cost payable monthly over a 20 year term in constant payments of
principal and interest at the then best published rate for a secondary financing
as published by Manufacturers Hanover Trust Company (or any successor thereto)
(the product to be known as "Monthly Factor");
(c) the Monthly Factor shall be paid monthly over the months
remaining in the Term commencing at the time the replacement was made and shall
be due as an Additional Payment hereunder.
Section 15.07 In the event that Structural work is required pursuant to
the provisions of this Article, Landlord shall perform such work and bear the
cost thereof.
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ARTICLE 16
Access
Section 16.01. Landlord and its agents shall have the right to enter
and/or pass through the Premises at any time or times upon notice and at
reasonable times (except in the event of an emergency when Landlord may enter at
any time) (a) to examine the Premises and to show them to actual and prospective
Superior Mortgagees, or prospective purchasers, mortgagees or lessees (but with
regard to prospective lessees only during the last eighteen months of the Term)
of the Building and (b) to examine the Premises in order to determine whether
Tenant is complying with the obligations pursuant to this Lease; and (c) to make
such repairs, alterations, additions and improvements in or to the Premises (or
just the Building or the Building Equipment) as Landlord is required or desires
to make. Landlord shall be allowed to take all materials into and upon the
Premises that may be required in connection therewith, without any liability to
Tenant and without any reduction of Tenant's covenants and obligations hereunder
except that Landlord agrees not to store materials at the Premises.
Section 16.02. If at any time any windows of the Premises are temporarily
darkened or obstructed by reason of any repairs, improvements, maintenance
and/or cleaning in or about the Building, or if any part of the Building, is
temporarily or permanently closed or inoperable, the same shall be without
liability to Landlord and without any reduction or diminution of Tenant's
obligations under this Lease, provided, however, that if it is Landlord's
responsibility to cure such condition, Landlord shall diligently and in good
faith cause to be made all repairs required to be made.
Section 16.03. During the period of 18 months prior to the Expiration Date
of this Lease, Landlord and its agents may exhibit the Premises to prospective
tenants, upon notice and at reasonable times.
Section 16.04. If during the last month of the Term, Tenant has removed
all of Tenant's Property from the Premises, and if Tenant shall have ceased
doing business therein, Landlord may, without notice to Tenant, immediately
enter the Premises and alter, renovate and decorate the same, without liability
to Tenant and without reducing or otherwise affecting Tenant's covenants and
obligations hereunder.
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ARTICLE 17
Notice of Occurrences
Section 17.01. Tenant shall give prompt notice to Landlord of (a) any
occurrence in or about the Demised Premises for which a reasonable man would
conclude that Landlord might be liable, (b) any fire or other casualty in the
Premises, (c) any damage to or defect in the Demised Premises, including the
Building Equipment and appurtenances thereof, for the repair of which Landlord
might be responsible, and (d) any damage to or defect in any part or
appurtenance of the Building Equipment.
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ARTICLE 18
Non-Liability and Indemnification
Section 18.01. Neither Landlord nor any partner, director, officer, agent,
servant or employee of Landlord shall be liable to Tenant for any loss, injury
or damage to Tenant or to any other person, or to this or their property,
irrespective of the cause of such injury, damage or loss, unless caused by or
resulting from the negligence of Landlord, its agents, servants, licensees,
invitees, or employees in the operation or maintenance of the Premises or the
Building (and then only if the casualty is not one for which Tenant was required
to obtain insurance pursuant to Article 12, without contributory negligence on
the part of Tenant or any of its subtenants or licensees or its or their
employees, agents or contractors). Further, neither Landlord nor any partner,
director, officer, agent, servant or employee of Landlord shall be liable (a)
for any such damage caused by other tenants or persons in, upon or about the
Demised Premises, or caused by operations in construction of any public or
quasi-public work, or (b) even if negligent, for incidental damages (such as
loss of income, loss of business or similar damages) arising out of any loss of
use of the Premises or any equipment or facilities therein by Tenant or any
person claiming through or under Tenant.
Section 18.02. Tenant shall indemnify and hold harmless Landlord and its
partners, directors, officers, agents and employees from and against any and all
claims arising from or in connection with (a) the conduct or management of the
Demised Premises or of any business therein, or any work or thing whatsoever
done, or any condition created (other than by Landlord) in or about the Demised
Premises (including sidewalks and other public areas) during the Term; (b) any
omission or negligence of Tenant or any of its subtenants or licensees or its or
their partners, directors, officers, agents, invitees, employees or contractors;
(c) any accident, injury or damage whatever other than that caused by Landlord's
negligence or the negligence of Landlord's agents, servants, employees or
invitees) occurring in, at or upon the Premises; and (d) any breach or default
by Tenant in the full and prompt payment and performance of Tenant's obligations
under this Lease; together with all costs, expenses and liabilities incurred in
or in connection with each such claim or action or proceeding brought thereon,
including, without limitation, all reasonable attorneys' fees and expenses. In
case any action or proceeding be brought against Landlord and/or its partners,
directors, officers, agents or employees by reason of any such claim, Tenant,
upon notice from Landlord, shall resist and defend such action or proceeding (by
counsel reasonably satisfactory to
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Landlord) unless Tenant is a party therein, in which case Tenant shall reimburse
Landlord for all of Landlord's reasonable attorneys' fees; if Tenant is a party
therein Tenant may defend Landlord with Tenant's counsel unless there would be a
conflict of interest in Landlord and Tenant having the same counsel in such
matter.
Section 18.03. Landlord shall indemnify and hold Tenant harmless from and
against any all claims or liabilities arising out of or in connection with any
unpaid Impositions, or any mechanics, materialmen, or other liens affecting the
Demised Premises on the Commencement Date, or arising out of work done prior to
the Commencement Date.
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ARTICLE 19
Curing Defaults
Section 19.01. If Tenant shall default in the performance of any of
Tenant's obligations under this Lease, Landlord may, without thereby waiving
such default (but shall not be obligated to) perform the same for the account
and at the expense of Tenant, without notice in a case of emergency or a
situation which in Landlord's reasonable opinion, with the passage of time, may
result in an emergency, and in any other case only if such default continues
after the expiration of thirty (30) days from the date Landlord gives Tenant
notice of the default provided, however, if such default is not reasonably
capable of being cured within such thirty (30) day period, Landlord may (but is
not obligated to do so) perform the same for the account of and at the expense
of Tenant if Tenant shall not have commenced and diligently proceeded to cure
such default.
Section 19.02. Other than as set forth in Section 38.09 if Landlord shall
default in the performance of any Landlord's obligations under this Lease,
Tenant may, without thereby waiving such default (but shall not be obligated to)
perform the same for the account and at the expense of Landlord, without notice
in a case of emergency, or a situation which in Tenant's reasonable opinion,
with the passage of time, may result in an emergency and in any other case only
if such default continues after the expiration of sixty (60) days from the date
Tenant gives Landlord notice of the default provided, however, if such default
is not reasonably capable of being cured within such sixty (60) day period,
Tenant may (but is not obligated to do so) perform the same for the account of
and at the expense of Landlord if Landlord shall not have commenced and
diligently proceeded to cure such default. Bills for any expenses incurred by
Tenant in connection with any such performance by it of work for Landlord shall
be payable by Landlord within 15 days after Landlord's receipt of such bill.
Late payments by Landlord shall bear interest at the same rate as late payments
by Tenant.
Section 19.03. Bills for any expenses incurred by Landlord in connection
with any such performance by it for the account of Tenant, and bills for all
costs, expenses and disbursements of every kind and nature whatsoever, including
reasonable counsel fees, involved in collecting or endeavoring to collect
overdue Base Annual Rent, Additional Payments or Additional Rent or any part
thereof or enforcing or endeavoring to enforce any rights against Tenant, or
Tenant's obligations hereunder, under or in connection with this Lease or
pursuant to law,
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including any such cost, expense and disbursement involved in instituting and
prosecuting summary proceedings or in recovering possession of the Premises
after default by Tenant or upon the expiration or sooner termination of this
Lease, and interest on all sums advanced by Landlord under this Section at the
rate and in the manner set forth in Section 3.04 shall be due as and for
Additional Rent.
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ARTICLE 20
Brokerage
Section 20.01. Tenant and Landlord each covenants, warrants and represents
to the other that no brokers except Edward S. Gordon Company, Inc. and Yoles &
Furst, Inc. (the "Brokers") were instrumental in bringing about or consummating
this Lease and that (a) Tenant had no conversations or negotiations with any
broker except the Brokers concerning the leasing of the Demised Premises, and
(b) Landlord had no conversations or negotiations with any broker except the
Brokers concerning Tenant's leasing of the Demised Premises.
Section 20.02. Tenant agrees to indemnify and hold harmless Landlord
against and from any claims for any brokerage commissions and all costs,
expenses and liabilities in connection therewith, including, without limitation,
attorneys' fees and expenses arising out of any conversation or negotiations had
by Tenant with any broker other than the Brokers.
Section 20.03. Landlord agrees to indemnify and hold harmless Tenant
against and from any claims for any brokerage commissions and all costs,
expenses and liabilities in connection therewith, including, without limitation,
attorneys' fees an expenses arising out of any conversation or negotiations had
by Landlord with any broker other than the Brokers.
Section 20.04. Landlord shall pay a brokerage commission due the Brokers
pursuant to a separate agreement between Landlord and each of the Brokers.
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ARTICLE 21
Notices
Section 21.01. Except as permitted in Section 21.02, any notice,
statement, demand, consent, approval or other communication required or
permitted to be given, rendered or made by either party to the other, pursuant
to this Lease or pursuant to any applicable law, rule, regulation, or
requirement of public authority, shall be in writing (whether or not so stated
elsewhere in this Lease) and shall be deemed to have been properly given,
rendered or made only if (a) sent by registered or certified mail, return
receipt requested, posted in a United States post office station or letter box
in the continental United States, or (b) personally delivered, return receipt
requested, and if to Tenant addressed to
Young & Rubicam Inc.
285 Madison Avenue
New York, N.Y.
Attn: Chief Financial Officer
and with a courtesy copy to:
Young & Rubicam Inc.
285 Madison Avenue
New York, N.Y.
Attn: General Counsel
and if to Landlord, addressed to:
Messrs. Peter Catalano and
Michael Kornblum
24 East 21st Street
New York, N.Y. 10010
and with a courtesy copy to:
Hyman Miner & Robbin
24 East 21st Street
New York, New York 10010
Attn: Martin P. Miner, Esq.
except that if Tenant shall move its above office outside of the Borough of
Manhattan, Tenant's address shall be the Demised Premises, and shall be deemed
to have been given, rendered or made on the first business day after the day so
mailed or delivered. Either party may, by notice as aforesaid, designate a
different address or addresses for notices, statements,
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demands, consents, approvals or other communications intended for it.
Section 21.02. Any notice, statement or demand for Rent by Landlord may be
made by personal delivery to Tenant, with the envelope or wrapper marked to the
attention of the Chief Financial Officer. Such notice shall be deemed delivered
on the date personally delivered.
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ARTICLE 22
Estoppel Certificates
Section 22.01. Each party agrees, at any time and from time to time, as
requested by the other party, upon not less than 10 days' prior notice, to
execute and deliver to the other a statement certifying that this Lease is
unmodified and in full force and effect (or if there have been modifications,
that the same is in full force and effect as modified and stating the
modifications); certifying the dates to which the Base Annual Rent, Additional
Payments and Additional Rent have been paid; stating whether or not, to the best
knowledge of the signer, the other party is in default in performance of any of
its obligations under this Lease, and, if so, specifying each such default of
which the signer shall have knowledge; and stating whether or not, to the best
knowledge of the signer, any event has occurred which with the giving of notice
or passage of time, or both, would constitute such a default, and, if so,
specifying each such event, it being intended that any such statement delivered
pursuant hereto shall be deemed a representation and warranty to be relied upon
by the party requesting the certificate and by others with whom such party may
be dealing, regardless of independent investigation. Tenant or Landlord, as the
case may be, also shall include in any such statement such other information
concerning this Lease as Landlord or Tenant may reasonably request.
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ARTICLE 23
Window Cleaning
Section 23.01. Tenant will not require, permit, suffer or allow the
cleaning of any window in the Demised Premises from the outside (within the
meaning of Section 202 of the New York Labor Law or and successor statute
thereto) unless the equipment and safety devices required by all applicable
provisions of law including Section 202 of the New York Labor Law or any
successor statute thereto, or the rules of the Board of Standards and Appeals
are provided and used. Tenant hereby indemnifies Landlord against liability as a
result of the Tenant's requiring, permitting, suffering or allowing any window
in the Premises to be cleaned from the outside in violation of any applicable
rule, regulation or provision of law.
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ARTICLE 24
Quiet Enjoyment
Section 24.01. So long as Tenant pays all of the Base Annual Rent and
Additional Rent and performs all of Tenant's other obligations hereunder, Tenant
shall peaceably and quietly have, hold and enjoy the Demised Premises without
hindrance, ejection or molestation by Landlord or any person lawfully claiming
through or under Landlord, subject, nevertheless, to the provisions of this
Lease and to Superior Mortgages (as limited and modified by Article 27). This
personal covenant shall be construed as a covenant running with the Land, and is
not, nor shall it be construed as, a personal covenant of Landlord, except to
the extent of Landlord's interest in this Lease and only so long as such
interest shall continue, and thereafter this covenant shall be binding only upon
subsequent successors in interest to Landlord's interest in this Lease, to the
extent of their respective interests, as and when they shall acquire the same,
and so long as they shall retain such interest.
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ARTICLE 25
Mechanics' Liens
Section 25.01. If Tenant causes any Structural Alteration, Alterations,
changes, additions, improvements or repairs to be made to the Demised Premises,
or material furnished or labor performed therein or thereon, neither Landlord
nor the Demised Premises shall, under any circumstances, be liable for the
payment of any expenses incurred or for the value of any such work done or
material furnished to the Demised Premises or any part thereof; but all such
alterations, changes, additions, improvements and repairs and materials and
labor shall be at Tenant's expense, and Tenant shall be solely and wholly
responsible to contractors, laborers and materialmen furnishing labor and
material to the Demised Premises, or any part thereof, for or on behalf of
Tenant.
Section 25.02. Tenant shall not suffer or permit any mechanics' liens to
be filed against the Demised Premises nor against Tenant's leasehold interest in
the Demised Premises, by reason of work, labor, services or material supplied to
Tenant or to any occupant of the Demised Premises. If any such mechanic's lien
shall at any time be filed against the Demised Premises, Tenant shall, at its
own cost and expense, cause the same to be cancelled and discharged of record by
surety bond or appropriate cash deposit or other appropriate means within thirty
(30) days after the date of filing the same and notice thereof to Tenant, and
Tenant shall indemnify and save Landlord harmless from and against any and all
costs, expenses, claims, losses or damages resulting therefrom or by reason
thereof.
Section 25.03. Tenant, at Tenant's expense, shall also defend on behalf of
Landlord, any action, suit or proceedings which may be brought thereon or for
the enforcement of such liens or orders, and Tenant shall pay any damages and
satisfy and discharge any judgment entered thereon and save Landlord harmless
from and against any and all costs, expenses, claims, losses or damages
resulting therefrom or by reason thereof.
Section 25.04. If Tenant shall fail to discharge such mechanic's lien
within such period, then, in addition to any other right or remedy of Landlord,
Landlord may, but shall not be obligated to, discharge the same either by paying
the amount claimed to be due or by procuring the discharge of such lien by
deposit in court or bonding, and in any such event, Landlord shall be entitled,
if Landlord so elects, to compel the prosecution of any action for the
foreclosure of such mechanic`s lien by the lienor and to pay the amount of the
judgment, if any, in favor of the lienor, with interest, costs and allowances.
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Section 25.05. Any amount paid by Landlord for any of the aforesaid
charges and all other expenses of Landlord, including reasonable counsel fees,
in defending any such action or in procuring the discharge of said lien, with
all necessary disbursements in connection therewith with interest thereon
computed in the manner set forth in Section 3.04, shall be repaid within a
period of twenty (20) days after written demand therefor by Landlord to Tenant,
and may be treated as Additional Rent payable with the next installment of Base
Annual Rent.
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ARTICLE 26
Assignment and Sub-Letting
Section 26.01. Tenant may at any time after the commencement of the Full
Term, without releasing itself from any liability hereunder assign this Lease in
whole and not in part, without the Landlord's consent, subject to Section 26.04
and the following:
(a) at the time of (i) the making of such assignment and (ii) the
effective date of such assignment, Tenant shall not be in default beyond the
time for curing any default under any of the material terms, covenants or
conditions of this Lease;
(b) Tenant shall have delivered a true copy of such assignment to
Landlord not less than one (1) day prior to the effective date of such
assignment;
(c) the assignee shall have executed an assumption of each of
Tenants' obligations hereunder in form reasonably satisfactory to Landlord and
shall have delivered a duplicate original to Landlord not less than one (1) day
prior to the effective date of such assignment;
(d) The assumption shall provide that Tenant and the assignee shall
be jointly and severally liable for the payment of all sums and the performance
of all terms, covenants, conditions and agreements required to be performed by
Tenant;
(e) the assignment shall not attempt to amend or modify any of the
terms, covenants or conditions of this Lease; and
(f) no assignment shall be effective if the Assignee is entitled to
diplomatic or sovereign immunity or is otherwise immune from the service of
process;
(g) except as hereinabove set forth, no assignment shall be
permitted and, if made, shall not be effective against Landlord; and
(h) Tenant may not assign this Lease, directly or indirectly, to an
assignee who is a "tax exempt entity" as defined in Section 168(j)(4) of the
Internal Revenue Code of 1954, or any successor section.
Section 26.02. Subject to the provisions of Section 26.04, Tenant shall
have the right to sub-let, all or a portion of the
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Demised Premises at any time without Landlord's consent, except that:
(a) at the time of (i) making such sublease and (ii) the effective
date of such sublease, Tenant shall not be in default beyond the time for curing
any default under any of the material terms, covenants or conditions of this
Lease;
(b) all sub-leases shall be in writing; and
(c) no sub-lease shall extend beyond the Term of this Lease; and
(d) true copies of all sub-leases and any modifications thereto
shall be delivered to Landlord within ten (10) days of execution;
(e) all sub-leases shall be, and shall provide therein, that they
are subject and subordinate to this Lease and contain sub-lessee's agreement for
the benefit of Landlord not to violate any of the provisions of this Lease
(other than the obligation to pay Rent);
(f) no sub-lease shall be permitted or effective if such sub-lessee
shall be entitled to diplomatic or sovereign immunity or immunity from judicial
process; and
(g) Tenant may not sublease all or any portion of the Demised
Premises, directly or indirectly, to a subtenant who is a "tax-exempt entity" as
defined in Section 168(j)(4) of the Internal Revenue Code of 1954, or any
successor section in excess of such portion of the rentable area of the Demised
Premises as will trigger the provisions of such Section or successor section.
Section 26.03.
(a) The right granted Tenant hereunder to sub-let all or a portion
of the space shall not be deemed to grant or extend any rights from Landlord to
such sub-tenants, and Landlord shall not be bound by any term, covenant or
condition of any sub-lease, whether or not Landlord has received notice of such
sub-let.
(b) In the event of the termination of this Lease, whether by
expiration, forfeiture, cancellation or surrender or any other termination all
sub-leases shall, at the option of Landlord, terminate.
(c) The rights granted Tenant hereunder are Tenant's exclusive
sub-let rights and Tenant may not permit or allow any sub-let in contravention
of the terms hereinabove set forth.
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Section 26.04. In the event that at any time during the Term hereof Tenant
shall, in good faith, determine to assign, directly or indirectly, all or a
portion of its interest in the Demised Premises, or sublet, directly or
indirectly all but an immaterial portion of its interest in the Demised Premises
(except an assignment to collateralize a loan or an assignment or sublease to an
entity owning, owned, controlling, controlled, or under common control with
Tenant) and if Landlord reasonably demonstrates to Tenant its financial ability
to support such assumption or sublease, as the case may be, Tenant shall first
submit the proposed offer to Landlord, containing prices, rental rates, closing
date and other salient terms. Tenant's proposal shall be in the form of an
assignment or sublease, as the case may be. Landlord shall have forty-five (45)
days from receipt to accept such offer; in the event that Landlord accepts the
offer, Landlord shall have fifteen (15) days to execute an assignment or
sublease, as the case may be, with Tenant. If Landlord fails to accept such
offer, Tenant may offer the Demised Premises, or portion thereof, to such other
prospective assignee or subtenant as Tenant may desire, upon the terms and for
the amount contained in Tenant's initial offer, provided, however, that if
Tenant does not execute an assignment or sublease with such other prospective
assignee or subtenant upon such terms within nine (9) months and fifteen (15)
days from the date Tenant first submitted an offer to Landlord, Tenant may not
assign or sublet the Demised Premises, or portion thereof without again
complying with this Section.
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ARTICLE 27
Subordination
Section 27.01. This Lease, and all rights of Tenant hereunder, are and
shall be subject and subordinate to all mortgages which may now or hereafter
affect the Demised Premises, or the land or the Building ("Superior Mortgage")
to each and every advance made or hereafter to be made under such mortgages, and
to all renewals, modifications, replacements and extensions of such mortgages
and spreaders and consolidations of such mortgages. However, this subordination
of this Lease is expressly subject to the following conditions:
(a) Tenant shall have received notice of such Superior Mortgage.
(b) So long as Tenant has complied with all the terms and provisions
of this Lease and is not in default under and terms, covenants or
conditions of this Lease, (i) Tenant shall not be named or joined in any
action or proceeding to foreclose any Superior Mortgage (unless Tenant is
deemed a necessary party), (ii) any such action or proceeding shall not
result in a cancellation or termination of this Lease, and (iii) if the
holder of any Superior Mortgage becomes the owner of the fee of the
Demised Premises or if the Demised Premises shall be sold as a result of
any action or proceeding to foreclose any Superior Mortgage, this Lease
shall continue in full force and effect as a direct lease between Tenant
and the then owner of the Demised Premises upon all of the terms and
conditions of this Lease, except such as are not applicable or pertinent
to the remainder of the Term.
(c) So long as Tenant has complied with all the terms and provisions
of this Lease and is not in default under the terms, covenants or
conditions of the Lease, and subject to the imposition of such conditions
as they may require, the holder of any such Superior Mortgage ("Superior
Mortgagee") shall consent to the application of insurance proceeds and
condemnation awards in the manner set forth in Articles 12, 13, and 14.
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Section 27.02. The subordination herein set forth shall be self-operative
and no further instrument of subordination shall be required. However, should
Tenant request, Landlord shall use its best efforts to obtain from any Superior
Mortgagee, written confirmation of Tenant's rights hereunder, provided that if
Landlord shall be required to incur any expense in obtaining such agreement,
Tenant shall reimburse Landlord for all expenses (including reasonable
attorney's fees) incurred in obtaining such agreement. Tenant shall, if
requested by Landlord or the Superior Mortgagee execute, at Tenant's cost and
expense, such an agreement, in recordable form, as may be reasonably requested
to confirm such subordination.
Section 27.03. If any act or omission of Landlord would give Tenant the
right, immediately or after lapse of a period of time, to cancel or terminate
this Lease, or to claim a partial or total eviction, Tenant shall not exercise
such right (a) until it has given written notice of such act or omission to
Landlord and each Superior Mortgagee whose name and address shall previously
have been furnished to Tenant, and (b) until a reasonable period for remedying
such act or omission shall have elapsed following the giving of such notice and
following the time when such Superior Mortgagee shall have become entitled under
such Superior Mortgage, to remedy the same (which reasonable period shall be the
same period to which Landlord would be entitled under this Lease or otherwise,
after similar notice, to effect such remedy), provided such Superior Mortgagee
shall with due diligence give Tenant notice of intention to, and commence and
continue to remedy such act or omission, provided, however, if such act or
omission shall relate to an event described in Section 5.09 or Article 13
allowing Tenant to cancel this Lease, the Superior Mortgagee shall not have
additional time (except as set forth in Section 5.09 or Article 13) to remedy
such act or omission. Landlord shall furnish Tenant with the name and address of
the Superior Mortgagee.
Section 27.04. If any Superior Mortgagee shall succeed to the rights of
Landlord under this Lease, whether through possession or foreclosure action or
delivery of a new lease or deed, then at the request of such party so succeeding
to Landlord's rights (herein called "Successor Landlord" and upon such Successor
Landlord's written agreement to accept Tenant's attornment, Tenant shall attorn
to and recognize such Successor Landlord as Tenant's landlord under this Lease
and shall promptly execute and deliver any instrument that Successor Landlord
may reasonably request to evidence such attornment. Upon such attornment this
Lease shall continue in full force and effect as a direct lease between the
Successor Landlord and Tenant upon all of the terms, conditions and covenants as
are
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set forth in this Lease except that the Successor Landlord shall not (a) be
liable for any previous act or omission of Landlord (who shall remain liable to
Tenant) under this Lease; (b) be subject to any offset, not expressly provided
for in this Lease, which theretofore shall have accrued to Tenant against
Landlord; or (c) unless previously agreed upon, be bound by any previous
modification of this Lease or by any previous prepayment of Base Annual Rent in
excess on one month.
Section 27.05. If, in connection with the obtaining, renewal or extension
of any Superior Mortgage, such proposed or existing Superior Mortgagee shall
request modifications of this Lease, Tenant shall consent to such modifications
provided they do not materially or adversely (a) increase Tenant's obligations
hereunder, or (b) decrease Tenant's rights hereunder. Any increase in Base
Annual Rent shall be deemed material and adverse.
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ARTICLE 28
Excavation and Shoring
Section 28.01.
A. If any excavation shall be made or contemplated to be made for
building or other purposes upon property or streets adjacent to or nearby the
Demised Premises, Tenant either
(a) shall afford to the person or persons causing or authorized to
cause such excavation the right to enter upon Demised Premises for the
purpose of doing such work as such person or persons shall consider to be
necessary to preserve any of the walls or structures of the Building or
the Demised Premises from injury or damage and to support the same by
proper foundations, or
(b) shall, at Landlord's expense, do or cause to be done all such
work as may be necessary to preserve any of the walls or structures of the
improvements on the Demised Premises from injury or damage and to support
the same by proper foundations.
Tenant shall not by reason of any such excavation or work, have any claim
against Landlord for suspension, diminution, abatement or reduction of Rent
under this Lease or for damages or indemnity unless resulting from or arising
out of Landlord's negligence or willful misconduct.
B. Landlord hereby assigns to Tenant, without recourse, such rights,
if any, as Landlord may have against any parties causing damage to the Demised
Premises to sue for and recover amounts expended by Tenant as a result of such
damage.
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ARTICLE 29
Arbitration
Section 29.01. Except as set forth in Article 7, in any case in which it
is provided by the terms of this Lease that any matter shall be determined by
arbitration, such arbitration shall be conducted in the manner specified in this
Article.
Section 29.02. The party desiring such arbitration shall give written
notice to that effect to the other party specifying the matter to be arbitrated
and shall in such notice appoint a person of recognized competence as arbitrator
on its behalf. Within fifteen days thereafter, the other party shall by written
notice to the original party appoint a second person of recognized competence as
arbitrator on its behalf. The arbitrators thus appointed shall appoint a third
person, independent and of recognized competence and such three arbitrators
shall as promptly as possible determine such matter, provided, however, that
(a) if the second arbitrator shall not have been appointed as
aforesaid, the first arbitrator shall proceed to determine such matter;
and
(b) if the two arbitrators appointed by the parties shall be unable
to agree, within fifteen days after the appointment of the second
arbitrator, upon the appointment of a third arbitrator, they shall give
written notice of such failure to agree to the parties, and, if the
parties fail to agree upon the selection of such third arbitrator within
fifteen days after the arbitrators appointed by the parties give notice as
aforesaid, then within ten days thereafter either of the parties upon
written notice to the other party may request such appointment by the then
President of the Real Estate Board of New York, Inc. (or any organization
successor thereto), or in his absence, refusal, failure or inability to
act, may apply for such appointment to the presiding Justice of the
Appellate Division, First Department, Supreme Court, New York County, New
York, (or to any other court having jurisdiction and exercising functions
similar to those now exercised by the said Court).
Landlord and Tenant shall each be entitled to present evidence and
argument to the arbitrators.
Section 29.03. The determination of the majority of the arbitrators or of
the sole arbitrator, as the case may be, shall be conclusive upon the parties
and judgment upon the same
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may be entered in any court having jurisdiction thereof. The arbitrators or the
sole arbitrator, as the case may be, shall give written notice to the parties
stating their or his determination, and shall furnish to each party a signed
copy of such determination.
Section 29.04. Each party shall pay the fees and expenses of the
arbitrator appointed by such party and one-half of the fee and expenses of the
third arbitrator, if any.
Section 29.05. Anything in this Lease contained to the contrary
notwithstanding, whenever under the provisions of this Lease, Tenant is required
to make any payment or to perform any act or thing at a specified time or within
a specified time limit, and any such payment or performance is subject to
arbitration under this Article, such time or time limit as it relates to the
specific amount subject to arbitration, as the case may be, shall be and be
deemed to be extended by the period consumed by the institution and prosecution
of any arbitration concerning or relating to such payment or performance.
Section 29.06. As used herein a person of recognized competence shall be
any person engaged in the real estate business in Manhattan as a broker,
appraiser lender, attorney or accountant for at least the ten preceding years.
Section 29.07. Except as specifically set forth in this Lease, the parties
hereto have not agreed to arbitration for the determination of any dispute
hereunder.
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ARTICLE 30
No Rent Abatement
Section 30.01. Unless otherwise expressly provided in this Lease, no
abatement, diminution or reduction of Rent shall be claimed by or allowed to
Tenant, or any person claiming under it, under any circumstances, whether for
inconvenience, discomfort, interruption of business, or otherwise, arising from
any cause including the making of alterations, changes, additions, improvements
or repairs to the Building, or buildings, now on or which may hereafter be
erected on the Demised Premises, by virtue or because of any present or future
governmental laws, ordinances, requirements, orders, directions, rules or
regulations or for any other cause or reason.
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ARTICLE 31
Recordable Memorandum
Section 31.01. Promptly after the Landlord acquires fee title to the
Demised Premises or a leasehold in the Demised Premises, Landlord and Tenant
shall execute a memorandum of lease in recordable form, setting forth a
description of the Demised Premises, the Term, rights of renewal, and such other
information, excepting the Rent, as either party may reasonably request. The
memorandum of lease may be recorded by either party hereto and the party so
recording such instrument shall pay the recording fee. In no event shall the
memorandum of lease be deemed to alter, amend, or modify any of the terms,
covenants or conditions of this Lease. Except as set forth herein Tenant shall
not record this Lease.
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ARTICLE 32
Surrender
Section 32.01. On the last day of the Term, or upon any earlier
termination of this Lease, or upon any re-entry by Landlord upon the Demised
Premises, Tenant shall quit and surrender the Demised Premises to Landlord
"broom clean" and in good order, condition and repair, except for ordinary wear
and tear and such damage or destruction as Landlord is required to repair or
restore under this Lease, free and clear of all lettings and occupancies other
than subleases to which Landlord shall have specifically and particularly
consented, and Tenant shall remove all of the Tenant's Property therefrom except
as otherwise expressly provided in this Lease.
Section 32.02. No act or thing done by Landlord or its agents shall be
deemed an acceptance of a surrender of the Demised Premises, and no agreement to
accept such surrender shall be valid unless in writing and signed by Landlord.
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ARTICLE 33
Conditions of Limitation
Section 33.01. This Lease and the Term and estate hereby granted are
subject to the limitation that whenever Tenant, or any guarantor, if any, of
Tenant's obligations under this Lease, shall make an assignment for the benefit
of creditors, or shall file a voluntary petition under any bankruptcy or
insolvency law, or an involuntary petition alleging an act of bankruptcy or
insolvency shall be filed against Tenant or such guarantor under the
reorganization provisions of the United States Bankruptcy Code or under the
provisions of any law of like import, or whenever a permanent receiver of
Tenant, or such guarantor, or of or for the property of Tenant, or such
guarantor shall be appointed, then Landlord (a) if such event occurs without the
acquiescence of Tenant, or such guarantor, as the case may be, at any time after
the event continues for ninety (90) days, or (b) in any other case at any time
after the occurrence of any such event, may give Tenant a notice of intention to
end the Term of this Lease at the expiration of five days from the date of
service of such notice of intention, and upon the expiration of said five-day
period this Lease and the Term and estate hereby granted, whether or not the
Term shall theretofore have commenced, shall terminate with the same force and
effect as if that day were the Expiration Date of this Lease, but Tenant shall
remain liable for damages as provided in Article 35. If as a matter of law,
Landlord has no right on the bankruptcy of Tenant to terminate this Lease, then,
if Tenant, as debtor, or its trustee wishes to assume or assign this Lease, in
addition to curing or adequately assuring the curing of all defaults existing
under this Lease on Tenant's part on the date of filing of the proceeding (such
assurance being defined below), Tenant, as debtor, or the trustee or assignee
must also furnish adequate assurance of future performance under this Lease (as
defined below). Adequate assurance of curing defects means the posting with
Landlord a sum in cash sufficient to defray the cost of such cure. Adequate
assurance of future performance under this Lease means posting a deposit equal
to two (2) months Rent and in the case of an assignee, assuring Landlord that
assignee is financially capable of assuming this Lease. In a reorganization
under Chapter 11 of the Bankruptcy Code, the debtor or trustee must assume or
assign this Lease within 120 days from the filing of the proceeding, or the
debtor or the trustee shall be deemed to have rejected or terminated this Lease.
Section 33.02. The Lease and the term and estate hereby granted are
subject to the further limitations that:
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(a) if Tenant shall default in the payment of any Base Annual Rent
or Impositions and such default shall continue for fifteen (15) days after
notice, or
(b) if Tenant shall default in the payment of Additional Rent (other
than Impositions) and such default shall continue for twenty (20) days
after notice from Landlord specifying such default; or
(c) if Tenant shall be, whether by action or inaction, in default in
its obligations under this Lease (other than a default in the payment of
Base Annual Rent or Additional Rent) and such default shall continue and
not be remedied within thirty (30) days after Landlord shall have given to
Tenant a notice specifying the same, or in the case of a default which
cannot with due diligence be cured within a period of thirty (30) days and
the continuance of which for the period required for cure will not subject
Landlord to prosecution for a crime (as more particularly described in
Section 15.02) or foreclosure of any Superior Mortgage, if Tenant shall
not (i) within said 30-day period advise Landlord of Tenant's intention to
take all steps necessary to remedy such default, (ii) duly commence within
said 30-day period, and thereafter diligently prosecute to completion all
steps necessary to remedy the default and (iii) complete such remedy
within a reasonable time after the date of said notice of Landlord,
then, in any of said cases, Landlord may give to Tenant a notice of intention to
end the Term of this Lease, and upon the expiration of said five days from the
date of service of such notice of intention this Lease and the Term and estate
hereby granted, whether or not the Term shall theretofore have commenced, shall
terminate with the same effect as if that day were the Expiration Date of this
Lease, but Tenant shall remain liable for damages as provided in Article 35.
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ARTICLE 34
Re-Entry by Landlord
Section 34.01. If Tenant shall default in the payment of any Rent, and
such default shall continue after any applicable grace period, or if this Lease
shall terminate as provided in Article 33, Landlord or Landlord's agents and
employees may immediately or at any time thereafter re-enter the Premises, or
any part thereof, either by summary dispossess proceedings or by any suitable
action or proceeding at law, or by force or otherwise, without being liable to
indictment, prosecution or damages therefor, and may repossess the same and may
remove any person therefrom, to the end that Landlord may have, hold and enjoy
the Demised Premises. The word "re-enter", as used herein, is not restricted to
its technical legal meaning. If this lease is terminated under the provisions of
Article 33, or if Landlord shall re-enter the Demised Premises under the
provisions of this Article, or in the event of the termination of this Lease, or
of re-entry, by or under any summary dispossess or other proceeding or action or
any provision by law by reason of default hereunder on the part of Tenant,
Tenant shall thereupon pay to Landlord the Base Annual Rent and Additional Rent
payable up to the time of such termination of this Lease, or of such recovery of
possession of the Premises by Landlord, as the case may be, and shall also pay
to Landlord damages as provided in Article 35.
Section 34.02. In the event of a breach or threatened breach by Tenant of
any of its obligations under this Lease, Landlord shall also have the right to
seek temporary or permanent injunctive relief. The special remedies to which
Landlord may resort hereunder are cumulative and are not intended to be
exclusive of any other remedies to which Landlord may lawfully be entitled at
any time and Landlord may invoke any remedy allowed at law or in equity as if
specific remedies were not provided for herein.
Section 34.03. If this Lease shall terminate under the provisions of
Article 33, or if Landlord shall re-enter the Demised Premises under the
provisions of this Article, or in the event of the termination of this Lease, or
of re-entry, by or under any summary dispossess or other proceeding or action or
any provision of law by reason of default hereunder on the part of Tenant,
Landlord shall be entitled to retain all monies, if any, paid by Tenant to
Landlord, whether as advance Rent, security or otherwise, but such monies shall
be credited by Landlord against any Base Annual Rent or Additional Rent due from
Tenant at the time of such termination or re-entry or, at Landlord's option,
against any damages payable by Tenant under Article 35 or pursuant to law.
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ARTICLE 35
Damages
Section 35.01. If this Lease is terminated under the provisions of Article
33, or if Landlord shall re-enter the Demised Premises under the provisions of
Article 34, or in the event of the termination of this Lease, or of re-entry, by
or under any summary dispossess or other proceeding or action or any provision
of law by reason of default beyond any applicable grace period hereunder on the
part of Tenant, Tenant shall pay to Landlord as damages sums equal to the Base
Annual Rent and the Additional Payment which would have been payable by Tenant
had the Lease not so terminated, or had Landlord not so re-entered the Demised
Premises, payable upon the due dates therefor specified herein following such
termination or such re-entry and until the date contemplated as the Expiration
Date of this Lease had it not so terminated or if Landlord had not so re-entered
the Demised Premises, provided, however, that if Landlord shall relet the
Demised Premises during said period, Landlord shall credit Tenant with the net
rents received by Landlord from such reletting, such net rents to be determined
by first deducting from the gross rents as and when received by Landlord from
such reletting the expenses incurred or paid by Landlord in terminating this
Lease or in re-entering the Demised Premises and in securing possession thereof,
as well as the expenses of reletting, including without limitation, altering and
preparing the Demised Premises for new tenants, brokers' commissions, reasonable
legal fees, and all other expenses properly chargeable against the Demised
Premises and the rental therefrom, it being understood that any such reletting
may be for a period shorter or longer than the remaining term of this Lease; but
in no event shall Tenant be entitled to receive any excess of such net rents
over the sums payable by Tenant to Landlord hereunder, nor shall Tenant be
entitled to receive in any suit for the collection of damages pursuant to this
section a credit in respect of any net rents from a reletting, except to the
extent that such net rents are actually received by Landlord. If the Demised
Premises or any part thereof be relet by Landlord for the unexpired portion of
the Term, or any part thereof, before presentation of proof of such damages to
any court, commission or tribunal, the amount of rent reserved upon such
reletting shall, prima facie, be the fair and reasonable rental value for the
Demised Premises, or part thereof, so relet during the term of the reletting.
Landlord shall not be liable in any way whatsoever for its failure or refusal to
relet the Demised Premises or any part thereof, or if the Demised Premises or
any part thereof are relet, for its failure to collect the rent under such
reletting, and no such refusal or failure to relet or failure
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to collect rent shall release or affect Tenant's liability for damages or
otherwise under this Lease.
Section 35.02. Suit or suits for the recovery of such damages, or any
installments thereof, may be brought by Landlord from time to time at its
election, and nothing contained herein shall be deemed to require Landlord to
postpone suit until the date when the Term would have expired if it had not been
so terminated under the provisions of Article 33, or under any provision of law,
or had Landlord not re-entered the Demised Premises. Nothing herein contained
shall be construed to limit or preclude recovery by Landlord against Tenant of
any sums or damages to which, in addition to the damages particularly provided
above, Landlord may lawfully be entitled by reason of any default hereunder on
the part of Tenant. Nothing herein contained shall be construed to limit or
prejudice the right of Landlord to prove for and obtain as damages by reason of
the termination of this Lease or re-entry on the Demised Premises for the
default of Tenant under this Lease an amount equal to the maximum allowed by any
statute or rule of law in effect at the time when, and governing the proceedings
in which, such damages are to be proved whether or not such amount be greater,
or less than any of the sums referred to in Section 35.01.
Section 35.03. In addition, if this Lease is terminated under the
provisions of Article 33, or if Landlord shall re-enter the Demised Premises
under the provisions of Article 34, Tenant agrees that:
(a) the Demised Premises shall be in the same condition as that in
which Tenant has agreed to surrender the same to Landlord at the
expiration of the Term hereof;
(b) Tenant shall have performed prior to any such termination any
covenant of Tenant contained in this Lease for the making of any
Alteration or for restoring or rebuilding the Demised Premises, or any
part thereof; and
(c) for the breach of any covenant of Tenant set forth above in this
Section 35.03, Landlord shall be entitled immediately, without notice or
other action by Landlord, to recover, and Tenant shall pay, as and for
liquidated damages therefor, the cost of performing such covenant.
Section 35.04. In addition to any other remedies Landlord may have under
this Lease, and without reducing or adversely affecting any of Landlord's rights
and remedies under Article 33, if any Base Annual Rent, Additional Rent and
damages
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payable hereunder by Tenant to Landlord are not paid within the time periods set
forth elsewhere in this Lease, the same shall bear interest at the rate set
forth in Section 3.04, from the due date thereof until paid, and the amount of
such interest shall be Additional Rent hereunder.
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ARTICLE 36
Affirmative Waivers
Section 36.01. Tenant, on behalf of itself and any and all persons
claiming through or under Tenant, does hereby waive and surrender all right and
privilege which it, they or any of them might have under or by reason of any
present of future law, to redeem the Premises or to have a continuance of this
Lease after being dispossessed or ejected therefrom after final judicial
determination.
Section 36.02. If Tenant is in arrears in payment of Base Annual Rent or
Additional Rent, Tenant waives Tenant's right, if any, to designate the items
which any payments made by Tenant are to be credited, and Tenant agrees the
Landlord may apply any payments made by Tenant to such items as Landlord sees
fit, irrespective of and notwithstanding any designation or request by Tenant as
to the items which any such payments shall be credited.
Section 36.03. Landlord and Tenant hereby waive trial by jury in any
action, proceeding or counterclaim brought by either against the other on any
matter whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, and Tenant's use or occupancy of the
Demised Premises, including, without limitation, any claim of injury or damage,
and any emergency and other statutory remedy with respect thereto.
Section 36.04. Tenant shall not interpose any counterclaim of any kind in
any action or proceeding commenced by Landlord to recover the Rent, unless
Tenant's failure to assert such counterclaim in such proceeding shall forever
preclude Tenant, as a matter of law, from pursuing such claim.
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ARTICLE 37
No Waivers
Section 37.01. The failure of either party to insist in any one or more
instances upon the strict performance of any one or more of the obligations of
this Lease, or to exercise any election herein contained, shall not be construed
as a waiver or relinquishment for the future performance of such one or more
obligations of this Lease or the right to exercise such election, but the same
shall continue and remain in full force and effect with respect to any
subsequent breach, and/or omission. The receipt and acceptance of Base Annual
Rent or Additional Rent with knowledge of breach by Tenant of any obligation of
this Lease shall not be deemed a waiver of such breach.
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ARTICLE 38
Miscellaneous
Section 38.01. Tenant expressly acknowledges that Landlord has not made
and is not making, and Tenant, in executing and delivering this Lease, is not
relying upon any warranties, representations, promises or statements, except to
the extent that the same are expressly set forth in this Lease or in any other
written agreement which may be made between the parties concurrently with the
execution and delivery of this Lease and shall expressly refer to this Lease.
All understandings and agreements heretofore had between the parties are merged
in this Lease and any other written agreement(s) made concurrently herewith,
which alone fully and completely express the agreement of the parties and which
are entered into after full investigation, neither party relying upon any
statement or representation not embodied in this Lease or any other written
agreement(s) made concurrently herewith.
Section 38.02. No agreement shall be effective to change, modify, waive,
release, discharge, terminate or effect an abandonment of this Lease, in whole
or in part, unless such agreement is in writing, refers expressly to this Lease
and is signed by the party against whom enforcement of the change, modification,
waiver, release, discharge, termination or effectuation of the abandonment is
sought.
Section 38.03. Except as otherwise expressly provided in this Lease, the
obligation of this Lease shall bind and benefit the successors and assigns of
the parties hereto with the same effect as if mentioned in each instance where a
party is named or referred to herein.
Section 38.04. Tenant shall look only to Landlord's estate and property in
the Demised Premises (or the proceeds thereof) for the satisfaction of Tenant's
remedies for the collection of a judgment (or other judicial process) requiring
the payment of money by Landlord in the event of any default by Landlord
hereunder, and no other property or assets of Landlord or its partners or
principals, disclosed or undisclosed, shall be subject to levy, execution or
other enforcement procedure for the satisfaction of Tenant's remedies under or
with respect to this Lease, the relationship of Landlord and Tenant hereunder or
Tenant's use or occupancy of the Demised Premises.
Section 38.05. Any apportionments or prorations of Base Annual Rent or
Additional Rent to be made under this Lease
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shall be computed on the basis of a 360 day year with 12 months of 30 days each.
Section 38.06. In each instance hereunder wherein Tenant has agreed to
deliver a certificate or other instrument, Landlord shall be entitled to execute
such certificate or instrument on behalf of Tenant, as Tenant's attorney-in-fact
if Tenant does not deliver such certificate or instrument to Landlord or
Landlord's designee, properly executed, within the time herein set forth for the
delivery of such certificate or instrument.
Section 38.07. Irrespective of the place of execution or performance this
Lease shall be governed by and construed in accordance with the laws of the
State of New York. If any provision of this Lease or the application thereof to
any person or circumstance shall for any reason and to any extent be invalid or
unenforceable, the remainder of this Lease and the application of that provision
to other persons or circumstances shall not be affected but rather shall be
enforced to the extent permitted by law. The table of contents, captions,
headings and titles in this Lease are solely for convenience of reference and
shall not affect its interpretation. This Lease shall be construed without
regard to any presumption or other rule requiring construction against the party
causing this Lease to be drafted. Each covenant, agreement, obligation or other
provision of this Lease on Tenant's part to be performed, shall be deemed and
construed as a separate and independent covenant of Tenant, not dependent on any
other provision of this Lease. All terms and words used in this Lease,
regardless of the number or gender in which they are used, shall be deemed to
include any other number and any other gender as the context may require.
Section 38.08. Whenever Tenant shall submit to Landlord any plan,
agreement, or other document for Landlord's consent or approval, and Landlord
requires the opinion of Landlord's architect or engineers, attorney or
accountant as to the form or substance thereof, Tenant agrees to pay the
reasonable fee of such person for reviewing the said plan, agreement, or
document.
Section 38.09. (a) If Landlord fails to meet an obligation required to be
performed by Landlord pursuant to the Lease within thirty days after notice from
Tenant of Landlord's failure to meet such obligation and Landlord thereafter
certifies to Tenant that 1) Landlord is financially unable to meet such
obligation, and 2) after exerting reasonable efforts to secure the financing
required to meet such obligation, Landlord has been unable to procure such
financing, then and in
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such event, the Tenant may but shall not be obligated to (1) procure a loan for
Landlord, directly or indirectly, of the funds necessary to enable Landlord to
meet the aforementioned obligation; provided, however, that the amount of such
loan shall not exceed the Base Annual Rent due over the succeeding twelve
months. The loan will be self-amortizing in constant monthly payments of
principal and interest over a twelve month term commencing thirty days after the
full proceeds of the loan have been paid to Landlord, provided, however, if the
full proceeds of the loan have not been paid to Landlord within three (3) months
of the execution of the Note hereinafter mentioned, the Landlord will commence
repayment of the amount borrowed upon the expiration of said three (3) month
period hereinabove referred to and bearing interest at the rate set forth in
Section 3.04 (but without late charges and penalties as set forth in 3.04(y)).
The loan shall be evidenced by a note ("Note") incorporating these terms in a
form satisfactory to Tenant, which Note shall be delivered by Landlord to Tenant
or Tenant's designee on the date Landlord delivers to Tenant the certification
hereinabove set forth. In the event that Landlord fails to make any payment
required to be made pursuant to the Note within 10 days of due date, Tenant may
offset that payment against the next due installment of Base Annual Rent due
hereunder and thereafter, without further notice Tenant may continue such
monthly offset until the Note has been fully paid, or (2) guarantee a loan in an
amount necessary to enable Landlord to meet the aforementioned obligation,
provided, however that the amount of such loan shall not exceed the Base Annual
rent due over the succeeding twelve months. If Landlord fails to make any
payment or meet any obligation under such guaranteed loan and as a result Tenant
is required to expend any amount on Landlord's behalf in accordance with its
obligations under such guarantee, Tenant may offset such expenditure together
with interest thereon at the rate set forth in Section 3.04 (but without late
charges and penalties as set forth in 3.04(y)) against the next due monthly
installment of Base Annual Rent due hereunder and thereafter, without further
notice Tenant may continue such monthly offset until such expenditure and
interest has been fully paid.
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The proceeds of any loan made by Tenant pursuant to (1) or any loan
guaranteed by Tenant pursuant to (2) shall be held by Tenant and shall be
applied to the payment of the cost of Landlord's performance of its obligations
from time to time as the performance progresses, in installments equal to the
cost of work completed and materials furnished in accordance with the provisions
of Section 13.02 and 13.03(b), (c), and (d). At the time of each takedown of
funds, Landlord or if Landlord is a partnership or a corporation, by a general
partner or a senior executive officer, of Landlord, as the case may be, shall
prepare and make available to Tenant such documentation as Tenant may require
setting forth the following:
(i) that the sum then requested represents the amount that either
has been paid by Landlord or is then due to contractors, subcontractors,
materialmen, engineers, architects or other persons who have rendered services
or furnished materials and the amounts so paid or due to each of the said
persons in respect thereof, and that no part of such expenditures has been or is
being made the basis of any previous or then pending request for the takedown of
loan proceeds or has been made out of loan proceeds; and
(ii) that the cost, as reasonably estimated by Landlord, required to
complete the aforesaid performance does not exceed the aggregate amount of the
loan remaining in Tenant's hands after payment of the sum required.
Upon compliance with the foregoing provisions of this Section, Tenant
shall pay or cause to be paid out of such loan proceeds to Landlord or the
persons referred to in clause (i) above, the respective amounts which Landlord
has documented is due to them. If after fully performing all obligations
required of Landlord there are excess funds remaining with Tenant, Tenant shall
(x) retain such funds if the loan was procured by Tenant and the amount of the
loan made to Landlord will be reduced by the amount Tenant so retains or (y) if
Tenant has guaranteed such loan, Tenant shall remit such excess funds to
Landlord, provided, however, if Tenant is required to expend any amount on
Landlord's behalf in accordance with Tenant's obligation under the guarantee,
Tenant may retain such excess funds to the extent required to repay or reduce
the Landlord's obligations to repay the amount of such expenditure together with
interest thereon.
(b) If, within 60 days of Tenant's notice as set forth in subsection (a)
or within a reasonable period following the making or guarantying of the loan
referred to in paragraph (a) hereof (or a shorter period as may be required in
the event of an emergency), Landlord fails to take any action to satisfy
Landlord's obligation required to be performed by Landlord
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pursuant to the Lease or fails diligently to proceed to satisfy such
obligations, then Tenant may, at such time, or thereafter, so long as Landlord
continues to fail to take action to satisfy its obligations hereunder, but shall
not be obligated to, perform Landlord's obligation and demand from Landlord
repayment of the cost thereof as if the loan hereinabove described had been
made. Landlord's failure to make such payments to Tenant shall entitle Tenant to
offset such amounts against next due rent payments in the manner set forth in
subsection (a).
(c) Tenant's failure to procure the loan hereinabove described shall not
be a default pursuant to this Lease.
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ARTICLE 39
Tenant's Financial Statements
Section 39.01. Throughout the Term whenever requested by a Superior
Mortgagee or by a proposed Superior Mortgagee, provided Landlord executes and
delivers to Tenant a confidentiality agreement, substantially in the form
annexed hereto as Exhibit D, Tenant shall cause to be prepared and timely
delivered, but no more than twice a year, to such Superior Mortgagee or proposed
Superior Mortgagee:
(A) Annual consolidated financial statements (balance sheets and
profit and loss statements) of Tenant, in comparative form certified by
independent certified public accountants and prepared in accordance with
generally accepted accounting principles applied on a basis consistent
with prior periods, and certified by the chief financial officer of
Tenant; and
(2) Such other information regarding the financial condition of
Tenant as may be reasonably requested.
Section 39.02. Each financial statement of Tenant shall be accompanied by
a certificate of its chief financial officer that (a) he has reviewed this Lease
and has no knowledge of any default hereunder or of any condition or event
which, with notice or lapse of time or both, would constitute a default
hereunder (or, if any such default, condition or event shall exist, the nature
and period of existence thereof and the action to be taken by Tenant with
respect thereto), and (b) no material adverse change in the business, condition
(financial or otherwise), operations or prospects of Tenant or its affiliates
has occurred during the period covered by such statement and through the date of
such certification.
Section 39.03. Throughout the Term, Tenant shall on the first day of each
Lease Year deliver to Landlord a certificate of Tenant's chief financial officer
containing the certification required by Section 39.02. In lieu of delivering
such certificate to Landlord, Tenant may at its sole election make available to
Landlord at Landlord's office and at reasonable times, Tenant's audited
financial statements as described in Section 39.01; provided that Landlord
executes a confidentiality agreement substantially in the form attached hereto
as Exhibit "D".
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ARTICLE 40
Building Name
Section 40.01. Tenant shall have the right to designate the name of the
Building and to thereafter change such designation from time to time as may be
reasonable. Tenant hereby consents to the use of such name by Landlord in such
advertising or promotional materials as Landlord determines provided, however,
all such advertising and promotional materials shall be subject to Tenant's
prior approval. In the event that Tenant does not designate a name for the
Building within six (6) months of the execution of this Lease, Tenant shall be
deemed to have initially chosen the name "Gramercy Court".
Section 40.02. Tenant at Tenant's sole cost and expense, shall be entitled
to erect on the facade of the Building identifying signs subject to:
(a) submission of plans and specifications to Landlord which are
reasonably satisfactory to Landlord;
(b) the consent or acknowledgement of Landlord's architect which
will not be unreasonably withheld or delayed that the proposed signs are
in conformity with and complement the architectural integrity of the
facade of the Building;
(c) Tenant's procuring all necessary permits and licenses for the
installation and maintenance of such signs;
(d) The installation by Tenant of the signs shall be done in
accordance with the provisions of Article 8 as if such work constituted a
Structural Alteration.
(e) On the Expiration Date, Tenant shall remove the signs and repair
and restore the facade of the Building if necessary.
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ARTICLE 41
Sanitary Maintenance
Section 41.01. In order to maintain the Demised Premises as a first class
office building, Tenant shall at Tenant's expense and throughout the Term:
(a) retain at the Demised Premises cleaning, carting, exterminating,
window cleaning, janitorial and maintenance personnel sufficient to
maintain the Demised Premises as a first class office building;
(b) keep in full force and effect prepaid maintenance service
contracts for the Building Equipment with contractors or maintenance
personnel reasonably satisfactory to Landlord; and
(c) maintain all public portions of the Demised Premises (including
adjoining streets and sidewalks) clean and free from accumulated dirt,
snow, ice and litter.
Section 41.02 Landlord shall be responsible for painting, pointing,
caulking windows, and cleaning the facade of the building. During the Base Term
Tenant will upon request of Landlord (which request shall include contractor's
receipts) reimburse Landlord for the painting and cleaning expenses incurred
after Lease Year 10, but such reimbursement shall not exceed $200,000.
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ARTICLE 42
Syndication Rights
Section 42.01. Promptly upon request by Landlord, Tenant will execute any
amendments to the Lease and any additional documents provided by Landlord and
deemed necessary by Landlord to facilitate a sale or syndication of all or part
of the Demised Premises, provided such amendment to the Lease or additional
documents will not cause Tenant in its reasonable judgment to incur any
additional financial burden beyond that which is provided herein, except as to
certain Impositions as are specifically provided for below and provided such
amendment or additional document will not in Tenant's reasonable judgment
materially or adversely increase Tenant's obligations or decrease Tenant's
rights hereunder.
Section 42.02. In the event (i) of a proposed transfer or sale of all or a
portion of (A) the Demised Premises or (B) the entity which owns the Demised
Premises, other than as described in Section 10.02 (a), (b), (c), (e) or (f)
("Sale"), and (ii) such Sale closes within two years from the Commencement Date,
Landlord shall give Tenant notice of such Sale within fifteen (15) days after
the related closing by delivering all material documents relating thereto (which
Tenant shall keep confidential in the manner provided in Exhibit "D") Tenant
shall thereafter have twenty (20) days from the giving of such notice to advise
Landlord whether Tenant elects to be bound by the provisions of Section 42.03 as
set forth below.
Tenant's failure to timely give such notice shall be deemed Tenant's
irrevocable determination that Section 42.03 shall be of no force and effect
with respect to such Sale (but will not effect Tenant's right to invoke Section
42.03 with respect to any subsequent Sale during such two year period).
Section 42.03 Landlord shall reimburse Tenant during the balance of the
Base Term (except as herein otherwise provided), within ten (10) days of
Tenant's notification that Tenant has paid that portion of the real estate
taxes, assessments, special assessments, special ad valorum levies or service
charges (excluding interest, late charges and penalties) ("Real Estate Taxes")
relating to the Demised Premises attributable to an increased assessed valuation
resulting directly from such Sale. Such reimbursement ("Initial Landlord
Contribution") shall be determined by multiplying the Real Estate Taxes that
would be due if the Demised Premises were fully assessed to include the increase
valuation attributable to such Sale by the tax rate in effect
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during the fiscal year in which such Sale is first reflected in the assessed
value of the Demised Premises ("Fiscal Year") by a fraction ("Landlord's Rate")
of which the numerator is the difference between the Sale price and $70 million
and the denominator is the Sale price. If the Initial Landlord Contribution
includes any amounts due as special assessments or special charges then the
Initial Landlord Contribution shall be reduced by the applicable portion payable
by Landlord of the special assessment or special charge when the special
assessment or special charge has been fully paid to the taxing authority.
For so long as the assessed valuation of the Demised Premises exceeds that
amount determined by multiplying $70 million by the Equalization Rate in effect
in the Fiscal Year then in the event of an increase in the assessed valuation of
the Demised Premises for any reason other than a Sale during the first two years
subsequent to the Commencement Date, and/or there is an increase in the
applicable tax rate during such period ("Subsequent Event"), the Initial
Landlord Contribution from and after such date shall be adjusted to equal to the
lesser of (x) the previous Initial Landlord's Contribution and (y) the amount
determined by multiplying the product of the Landlord's Rate and the assessed
valuation following the Subsequent Event by the then effective tax rate.
Any payment to be made by Landlord or Tenant hereunder, as the case may
be, shall be made in the proportions provided herein, of the actual Real Estate
Taxes paid, thereby permitting the participation of the paying party in the
related benefit of any applicable deferment which may affect the amount of Real
Estate Taxes due from time to time.
In the event Tenant elects this Section 42.03, Landlord shall at all times
have the right at Landlord's sole cost and expense to institute certiorari or
other appropriate proceedings in an attempt to reduce the assessed valuation of
the Demised Premises. Notwithstanding Article 6 hereof Landlord shall have the
right for each Fiscal Year in which Landlord is required to make the Initial
Landlord Contribution to institute, maintain and settle all certiorari or other
proceedings; provided, however, that Landlord shall allow Tenant to participate
in all such proceedings and Landlord shall not settle any such proceedings
without first receiving Tenant's approval, which will not be unreasonably
withheld or delayed and further provided if there is any dispute with regard to
settlement, the determination shall be submitted to Arbitration. If there is a
reduction in the assessed valuation, as a result of the foregoing, or otherwise,
or the applicable tax rate, which results in Real Estate Taxes in an
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amount less than the Real Estate Taxes due prior to such change in assessed
valuation or tax rate, then the difference, between the prior Real Estate Taxes
and the actual Real Estate Taxes due following the Subsequent Event shall be
subtracted from the Initial Landlord Contribution. If a certiorari or similar
proceeding related to the assessed valuation resulting from a Sale results in a
reduction in Real Estate Taxes below Real Estate Taxes calculated as if the
assessed valuation were $70,000,000 and the Equalization Rate and Tax Rate were
equal to that in effect in the Fiscal Year in which the Initial Landlord
Contribution was made ("Base Amount"), Landlord a) shall have no further
obligation to make Initial Landlord Contributions to Tenant and b) Landlord
shall receive from Tenant that amount determined by subtracting the then
applicable Real Estate Taxes from Base Amount, and, except as hereinafter
provided shall thereafter be paid throughout the Term at the time such amounts
are paid to the appropriate taxing authority.
It is hereby expressly agreed that if there has been a reduction in Real
Estate Taxes, as described in the preceding paragraph, and subsequently as a
result of events or governmental actions, Real Estate Taxes are increased,
Tenant shall nevertheless be required to make the payments to Landlord as set
forth in the preceeding paragraph. Notwithstanding the foregoing, to the extent
due to reassessments of the Demised Premises, the assessed valuation is
thereafter increased to an amount greater than the prior assessment but less
than the assessed valuation resulting from applying the then Equalization Rate
to $70,000,000, the Tenant's obligation to pay Landlord as provided in the
preceding paragraph will be correspondingly reduced. Tenant shall have no
further obligation to make payments to Landlord as herein provided from and
after the time that such assessed valuation equals the assessed valuation
resulting from applying the then Equalization rate to $70,000,000. Any dispute
regarding the apportionment of the related benefits described in this paragraph
shall be resolved by arbitration as provided in the Lease.
All payments made by Tenant to Landlord pursuant to this Article shall
constitute Additional Payments.
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ARTICLE 43
Definitions
Section 42.01 For the purposes of this Lease, the following terms have the
meanings indicated:
(a) "Additional Rent" shall have the meaning as set forth in Article
3 hereof.
(b) "Additional Payment" shall have the meaning as set forth in
Article 3 hereof.
(c) "Alterations" shall have the meaning as set forth in Article 8
hereof.
(d) The term "and/or" when applied to two or more matters or things
shall be construed to apply to any one or more or all thereof as the
circumstances warrant at the time in question.
(e) "Base Term" shall have the meaning as set forth in Article 2
hereof.
(f) "Base Annual Rent" shall have the meaning as set forth in
Article 3 hereof.
(g) "Best" shall have the meaning as set forth in Article 12 hereof.
(h) Purposely omitted.
(i) "Building" shall have the meaning as set forth in Article 1
hereof.
(j) "Brokers" shall have the meaning as set forth in Article 20
hereof.
(k) "Building Equipment" means all machinery, apparatus, equipment,
personal property, fixtures and systems of every kind and nature
whatsoever now or hereafter attached to or used in connection with the
operation or maintenance of the Building, including all electrical,
heating, mechanical, sanitary, sprinkler, utility, power, plumbing,
cleaning, fire prevention, refrigeration, ventilating, air cooling, air
conditioning, elevator and escalator systems, apparatus and equipment and
any and all renewals and replacements of any thereof (this inclusion shall
in no way effect the respective repair and
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maintenance obligations of Landlord and Tenant as set forth in this
Lease); but excluding, however, (i) Tenant's Property, (ii) property of
contractors servicing the Building and (iii) improvements for water, gas,
steam and electricity and other similar equipment owned by any public
utility company or any governmental agency or body.
(l) "Commencement Date" shall have the meaning as set forth in
Article 2 hereof.
(m) "Completion Date" shall have the meaning as set forth in Article
5 hereof.
(n) "Consent" means prior consent and approval and the consent by
either party to any particular action shall not in any way be considered
as relieving the other party from obtaining the express consent to any
subsequent or further action.
(o) "Construction Documents" shall have the meaning set forth in
Exhibit C.
(p) "Date of the Taking" shall have the meaning as set forth in
Article 14 herein.
(q) "Demised Premises" shall have the meaning as set forth in
Article 1 hereof.
(r) "Expiration Date" is 12 midnight on the last day of the Base
Term, or if the Lease be renewed, the "Renewal Term, the option with
respect to which has been exercised by Tenant.
(s) "Force Majeure means any and all causes beyond Landlord's
reasonable control, including delays caused by Tenant, governmental
restriction, regulation or control, labor dispute, accident, mechanical
breakdown, shortages or inability to obtain labor, fuel, steam, water,
electricity or materials, acts of God, enemy action, civil commotion, fire
or other casualty.
(t) "Full Term" shall have the meaning as set forth in Article 2
hereof.
(u) The terms "herein," "hereof" and "hereunder," and words of
similar import, shall be construed to refer to this Lease as a whole, and
not to any particular Article or Section, unless expressly so stated.
(v) "Holdover Expenses" shall have the meaning set forth in Article
5.
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(w) "Impositions" shall have the meaning as set forth in Article 6
hereof.
(x) "Include" and "including" shall be construed as if followed by
the phrase "without being limited to."
(y) Reference to Tenant being "in default hereunder," or words of
like import, shall mean that Tenant is in default in the performance of
one or more of Tenant's obligations hereunder.
(z) "In full force and effect" when used in reference to this Lease
as a condition to the existence or exercise of a right on the part of
Tenant shall be construed in each instance as including the further
condition that at the time in question no default on the part of Tenant
exists, and no event has occurred which has continued to exist for such
period of time (after notice, if any, required by this Lease), as would
entitle Landlord in either such instance to terminate this Lease or to
dispossess Tenant.
(aa) "Initial Certificate of Occupancy" shall have the meaning set
forth in Article 4 hereof.
(bb) "Landlord" means only the owner at the time in question of the
Demised Premises, so that in the event of any transfer or transfers of
title to the Demised Premises or of Landlord's interest in a Lease of the
Demised Premises, the transferor shall be and hereby is relieved and freed
of all obligations of Landlord under this Lease accruing after such
transfer, and it shall be deemed, without further agreement that such
transferee has assumed and agreed to perform and observe all obligations
of Landlord herein during the period it is the holder of Landlord's
interest under this Lease.
(cc) "Latent Defects" shall have the meaning as set forth in Article
5 hereof.
(dd) "Lease" shall mean this indenture of lease together with all
exhibits and documents attached hereto.
(ee) "Lease Year" shall have the meaning as set forth in Article 2
hereof.
(ff) "Lease Year One" shall have the meaning as set forth in Article
2 hereof.
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(gg) "Lease Year Number" shall refer to the number of years which
have elapsed following the first day of the Full Term and prior to the
date of the event to which such reference to "Lease Year Number" is made
herein.
(hh) "Obligations of this Lease" and words of like import, shall
mean the covenants to pay Rent and all of the other terms of this Lease.
Any provision in this Lease that one party or the other or both shall do
or not do or shall cause or permit or not cause or permit a particular
act, condition or circumstance shall be deemed to mean that such party so
covenants or both parties so covenant, as the case may be.
(ii) "the 180th day" shall have the meaning as set forth in Article
7 hereof.
(jj) "Premises" shall have the meaning as set forth in Article 1
hereof.
(kk) "Renewal Lease Year" means a twelve month period of time
occurring within a Renewal Term (e.g. Renewal Lease Year One is the first
year of any Renewal Term).
(ll) "Renewal Lease Year One" means the first Lease Year of each
Renewal Term.
(mm) "Renewal Term" or "Renewal Terms" shall have the same meaning
as set forth in Article 7 hereof.
(nn) "Rent" shall have the meaning as set forth in Article 3 hereof.
(oo) "Restoration" shall have the meaning as set forth in Article 13
hereof.
(pp) "Short Term" shall have the meaning as set forth in Article 2
hereof.
(qq) "Structural" shall have the meaning as set forth in Article 11
hereof.
(rr) "Structural Alterations" shall have the meaning as SCL forth in
Article 8 hereof.
(ss) "Successor Landlord" shall have the meaning as set forth in
Article 27 hereof.
(tt) "Superior Mortgage" shall have the meaning as set forth in
Article 27 hereof.
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(uu) "Superior Mortgagee" shall have the meaning as set forth in
Article 27 hereof.
(vv) "Tenant" means the Tenant herein named or any assignee or other
successor in interest (immediate or remote) of the Tenant herein named,
which at the time in question is the owner of the Tenant's estate and
interest granted by this Lease; but the foregoing provisions of this
subsection shall not be construed to permit any assignment of this Lease
or to relieve the Tenant herein named or any assignee or other successor
in interest (whether immediate or remote) of the Tenant herein named from
the full and prompt payment, performance and observance of the covenants,
obligations and conditions to be performed, paid and observed by Tenant
under this Lease.
(ww) "Tenant's Architect" is Hellmuth, Obata, Kassabaum, P.C. or
such other person designated by Tenant and licensed to practice
architecture in the State of New York.
(xx) "Tenant's Construction Consultant" is Hunter and Partner or
such person designated by Tenant who shall have been engaged in the
construction business in the Borough of Manhattan for at least the
preceding five years. If such person is a partnership or corporation such
person may only act through a general partner or corporate officer.
(yy) "Tenant hereby indemnifies Landlord against liability" and
"Landlord hereby indemnifies Tenant against liability" and words of
similar import shall mean that the indemnifying party hereby agrees to and
hereby does indemnify, hold and save the indemnified party and its agents
(and in each case where Landlord is the indemnified party, the Superior
Mortgagee) and their respective agents, employees, contractors, officers,
directors, shareholders, partners and principals (disclosed or
undisclosed), harmless from and against any and all cost, liability,
claim, damage, fine, penalty and expense, including reasonable attorneys'
fees and disbursements, but the same shall not be construed as
indemnifying any of the foregoing named persons against its or their own
negligence.
(zz) "Tenant's obligations hereunder," and words of like import, and
"Landlord's obligations hereunder," and words of like import, shall mean
the obligations of this Lease which are to be performed or observed by
Tenant, or by Landlord, as the case may be. Reference to "performance" of
either party's obligations and words of like import shall be construed as
"performance and
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observance". Tenant's obligations hereunder shall be construed in every
instance as conditions as well as covenants.
(aaa) "Tenant's Property" shall have the meaning as set forth in
Article 9 hereof.
(bbb) "Tenant's Punch List" shall have the meaning as set forth in
Article 5 hereof.
(ccc) "Tenant's Optional Work" shall have the meaning as set forth
in Article 5 hereof.
(ddd) "Term" means Base Term and Renewal Term(s), but only those
Renewal Terms, the option with respect to which has been exercised by
Tenant.
(eee) "Trustee" means an insurance company, bank or trust company
with a principal office in the Borough of Manhattan and having capital in
excess of $250,000,000.
(fff) All words or phrases defined within a Section shall have the
same meaning throughout this Lease.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this
Lease as of the day and year first above written.
LANDLORD:
Witness:
/s/ [ILLEGIBLE] /s/ Peter Catalano
- ------------------------ -----------------------------
Peter Catalano
/s/ Michael Kornblum
-----------------------------
Michael Kornblum
TENANT: Young & Rubicam Inc.
Witness:
/s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
- ------------------------- ------------------------
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<PAGE> 104
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 12th day of July, 1984, before me personally came , to me
known, who being by me duly sworn, did say that he has an office at 285
Madison Avenue, New York, NY, that he is of Young & Rubicam Inc., the
corporation described in and which executed the foregoing instrument as
Tenant; that he knows the seal of said corporation; that the seal affixed to
said instrument is such seal; that it was so affixed by order of the board of
directors of said corporation; and that he signed his name thereby by like
order.
/s/ Peter Farranto
---------------------------
Notary Public
PETER C. FARRANTO
Notary Public, State of New York
No. 4803539
Qualified in New York County
Commission Expires March 30, 1986
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 12th day of July, 1984, before me personally came Peter
Catalano, to me known and known to me to be the individual described in and who,
as Landlord, executed the foregoing instrument and acknowledged to me that he
executed the same.
/s/ Peter Farranto
---------------------------
Notary Public
PETER C. FARRANTO
Notary Public, State of New York
No. 4803539
Qualified in New York County
Commission Expires March 30, 1986
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 12th day of July, 1984, before me personally came Michael
Kornblum, to me know and known to me to be the individual described in and who,
as Landlord, executed the foregoing instrument and acknowledged to me that he
executed the same.
/s/ Peter Farranto
---------------------------
Notary Public
PETER C. FARRANTO
Notary Public, State of New York
No. 4803539
Qualified in New York County
Commission Expires March 30, 1986
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FIRST AMENDMENT TO INDENTURE OF LEASE
THIS AMENDMENT made as of the 15 day of November, 1984 by and
between GRAMERCY COURT ASSOCIATES (hereinafter referred to as "Landlord") and
YOUNG & RUBICAM INC. (hereinafter referred to as "Tenant").
W I T N S S E T H:
WHEREAS, Peter Catalano and Michael Kornblum, as Landlord, and
Tenant, as tenant, entered into an Indenture of Lease dated July 12, 1984
(hereinafter referred to as "Lease") whereby Landlord let to Tenant the premises
situated at 230 Park Avenue South in the City of New York, State of New York
which premises are more particularly described in the Lease; and
WHEREAS, by Assiqnment dated September 24, 1984, Peter Catalano and
Michael Kornblum assigned all their right, title and interest in the Lease to
Landlord; and
WHEREAS, Landlord and Tenant now desire to amend the Lease as follows:
NOW THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration, Landlord and Tenant hereby agree
as follows:
1. Section 2.03 of the Lease is hereby amended to read as follows:
<PAGE> 106
"Lease Year One" shall be deemed the first year of the Full Term and shall
commence on the first day of the Full Term and shall end on the last day of that
month determined by subtracting the number of months between the Commencement
Date and the commencement of the Full Term from the following:
(a) fifteen (15) months, if the Commencement Date is on or prior to
October 1, 1985,
(b) fourteen (14) months plus the number of days by which the
Commencement Date precedes November 1, 1985, if the Commencement Date is
subsequent to October 1, 1985 but prior to November 1, 1985,
(c) fourteen (14) months, if the Commencement Date is November 1,
1985 or November 2, 1985,
(d) fourteen (14) months less one half the number of days (rounded
down to the nearest whole day) between the Commencement Date and November 1,
1985, if the Commencement Date occurs after November 2, 1985, but prior to
January 1, 1986.
(e) thirteen (13) months if the Commencement Date occurs on or after
January 1, 1986.
The term "Lease Year" shall refer to each year of the term including Lease
Year One. Each succeeding Lease Year, after Lease Year One, shall run for the
successive twelve month period from the expiration of the preceding Lease Year,
except the last Lease Year shall end on the Expiration Date.
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2. The second sentence of Section 5.10 of the Lease is hereby amended to
read as follows:
As used herein 'Holdover Expenses' shall mean one half of those
actual expenses (including reasonable attorney's fees) of Tenant (or
Tenant's subsidiaries) incurred because Tenant (or Tenant's subsidiaries)
held over beyond the expiration of a lease term (expiring on or after
October 31, 1985) above and beyond the expenses had such lease term not
expired, but shall not include incidental damages, loss of income, loss of
business or similar damages.
3. Section 5.11 of the Lease is hereby amended by inserting "$62,500" in
lieu of "$125,000" in the second, fourth, fifth, seventh, thirteenth and
fourteenth lines thereof.
4. Intentionally omitted.
5. Section II D.7 of Exhibit "C" to the Lease is hereby amended by
inserting "October 31, 1984" in lieu of "October 1, 1984" in the first line
thereof.
6. Section II D. 8 of Exhibit "C" to the Lease is hereby amended by
deleting the last sentence thereof in its entirety and replacing it as follows:
"In the event Tenant's Construction Documents are not timely filed with the
Building Department, any resulting delay shall be treated as a "delayed
submission" as such term is defined in paragraph II E(2) hereof."
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<PAGE> 108
7. Exhibit "C" to the Lease is hereby amended by adding the following
Section II D.15:
15. Submission of Tenant's Revised Construction Documents
On or before November 16, 1984, Tenant shall furnish to Landlord
Tenant's Construction Documents and Tenant's Interior Decoration
Documents with all architectural and engineering details of such
revisions as may be required to incorporate change orders mutually
agreed upon by Landlord and Tenant prior to November 16, 1984 which
Tenant requires to reduce the Budget Estimate submitted by Landlord
to Tenant by letter dated October 11, 1984 and which documents shall
be stamped "For Construction."
8. Section II E. 2a. of Exhibit "C" to the Lease is hereby amended to read
as follows:
In the event all or a portion of Tenant's Construction Documents or
resubmissions of Construction Documents are not submitted in
completed form by the respective dates ("Due Dates") set forth in
Section II D hereof (hereinafter referred to as "delayed
submissions"), the date of Substantial Completion of the floor(s)
relating to such late
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construction documents shall be determined by subtracting the
number of days of delay in Substantial Completion resulting
from such delayed submissions, from the date of actual
completion of the related floor(s), provided, however, in no
event shall the date of Substantial Completion be deemed to
occur prior to October 1, 1985 for the purposes of this
paragraph.
9. Sections II E 2b, II E 2c, II E 2d and II E 2f of Exhibit "C" to the
Lease are hereby deleted.
10. Section II E 2e of Exhibit "C" to the Lease is hereby renumbered
Section II E 2b.
11. Section II E. of Exhibit "C" to the Lease is amended by adding thereto
the following:
6. Emergency Meetings to Resolve Delays.
If Tenant, pursuant to any provision of this Letter, has not
responded to requests, submissions or demands by Landlord within the
specified response time, Landlord may request a meeting with John
Cooper, Esq., or an Executive Officer of Tenant of equivalent
authority of Tenant, and Mr. Cooper or such other designated officer
shall attend such meeting. Such meeting shall occur within two (2)
calendar days of
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notice by Landlord to Tenant and any delay in the occurence of such
meeting beyond such period shall be considered a delaying item.
12. The parties hereto acknowledge that this amendment is subject to the
acceptance and approval by Manufacturers Hanover Trust Company which approval
Landlord agrees to use its best efforts to obtain as promptly as practical.
13. Except as hereby expressly amended and modified, the terms and
provisions of the Lease shall remain in full force and effect and are hereby
ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as
of the date first above written.
GRAMERCY COURT ASSOCIATES
By:
-------------------------
Peter Catalano
By: /s/ Michael Kornblum
------------------------
Michael Kornblum
YOUNG & RUBICAM INC.
By: /s/ [ILLEGIBLE]
-------------------------
ACCEPTED AND APPROVED:
MANUFACTURERS HANOVER TRUST COMPANY
By: /s/ [[ILLEGIBLE]]
----------------------------
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AGREEMENT AND SECOND AMENDMENT TO INDENTURE OF LEASE
THIS AGREEMENT AND SECOND AMENDMENT TO INDENTURE OF LEASE made as of the
31st day of July, 1985 by and between GRAMERCY COURT ASSOCIATES (hereinafter
referred to as "Landlord") and YOUNG & RUBICAM INC. (hereinafter referred to as
"Tenant").
W I T N E S S E T H:
WHEREAS, Peter Catalano and Michael Kornblum, as landlord, and Tenant, as
tenant, entered into an Indenture of Lease (the "Indenture of Lease") dated July
12, 1984 whereby the premises situated at 230 Park Avenue South in the City of
New York, State of New York, which premises are more particularly described in
the Indenture of Lease (the "Premises"), were let to Tenant;
WHEREAS, by Assignment dated September 24, 1984, Peter Catalano and
Michael Kornblum assigned all of their right, title and interest in the
Indenture of Lease to Landlord;
WHEREAS, by Amendment dated November 15, 1984 between Landlord and Tenant,
the Indenture of Lease was amended (the Indenture of Lease as so amended being
hereinafter to as the "Lease");
WHEREAS, Peter Catalano and Michael Kornblum have separately agreed with
Tenant pursuant to a letter agreement dated July 12, 1984 (the "July Letter
Agreement") as to certain
<PAGE> 112
matters including the obligations of Messrs. Catalano and Kornblum to pay
$3,500,000 to Tenant upon certain conditions (the "$3,500,000 Payment") and, in
connection with such obligation to make the $3,500,000 Payment, to take out a
Letter of Credit in the amount of $3,500,000 (the "Letter of Credit");
WHEREAS, Landlord has agreed with Tenant pursuant to a Letter Agreement
dated November 15, 1984 (the "November Letter Agreement") as to certain
additional matters pertaining to the Lease and the Premises;
WHEREAS, by letter dated April 30, 1985 (the "Commitment Letter")
Connecticut General Life Insurance Company (the "Lender") has agreed to lend to
the Landlord the sum of $59,000,000 (the "Loan") upon the condition that certain
modifications be made in the Lease and upon such other terms and conditions as
are set forth in the Commitment Letter;
NOW THEREFORE, in order to induce the Lender to make the Loan, which the
parties agree is in their mutual interests, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. $3,500,000 Payment. Tenant acknowledges that $3,500,000 Payment is
solely the personal obligation of Peter Catalano and Michael Kornblum which
obligation as set forth in the July Letter Agreement is hereby ratified and
affirmed. In the event Tenant fails to receive all or any portion of the
<PAGE> 113
$3,500,000 Payment when due, Tenant shall nonetheless continue to be obligated
to make all payments under the Lease to the full extent set forth therein and
Tenant (i) shall not assert any breach or default in the $3,500,000 Payment as a
defense to its failure to perform any of its obligations (including, but not
limited to, its obligation to pay rent) under the Lease, and (ii) shall not make
any claims arising out of such $3,500,000 Payment against the Lender (in the
Lender's capacity either as lender or as owner of the Premises by acceptance of
a deed in lieu of foreclosure or otherwise). Nothing set forth herein shall
preclude Tenant from drawing upon the Letter of Credit in the event all or any
portion of the $3,500,000 Payment is not paid when due.
2. The Lease is hereby amended as follows:
2.1 Subordination. Paragraph (b) of Section 27.01 of the Lease is
hereby amended by deleting the phrase "So long as Tenant has complied with all
the terms and provisions of this Lease and is not in default under any terms,
covenants or conditions of this Lease" and substituting therefor the phrase "So
long as this Lease has not been terminated".
2.2 Assignment and Subletting. Section 26.04 of the Lease is hereby
amended by adding the following sentence at the end thereof:
"Notwithstanding anything to the contrary set forth in this Section
26.04, there shall not be any assignment or sublease of all or any
portion of the Demised Premises from Tenant to Landlord without the
prior
<PAGE> 114
written consent of any holder of any Superior Mortgage, provided,
however, that the failure or refusal of the Superior Mortgagee to
consent within the same time period that Landlord has to respond to
Tenant shall be deemed a rejection of such request. If the Superior
Mortgagee refuses the request (whether affirmatively or by inaction)
Landlord shall be deemed to have forever waived its rights under
this Section.
2.3 Tenant's Right of First Offer. Section 10.02 is hereby
amended to add an additional sub-paragraph (g) at the end thereof to read as
follows:
"(g) A sale or transfer to an entity which is controlled by,
controls, or is under common control with the seller or transferor
if the sale or transfer takes place after foreclosure of a Superior
Mortgage or acceptance of a deed in lieu of such foreclosure and if
the seller or transferor was the holder of the Superior Mortgage or
is an entity which is controlled by, controls or is under common
control with such holder."
2.4 Insurance. Section 12.03 of the Lease is hereby amended by
deleting the reference to "`Best' ratings of not less than A" and substituting a
reference to "`Best' ratings of not less than A+: XV".
3. Other Lease Provisions. The Lease except as expressly amended
hereby, shall remain in full force and effect as on the date hereof.
4. Termination of Tenancy of C.U. Graphics Centers, Inc. Landlord
and Tenant acknowledge that the tenancy of C.U. Graphics Centers, Inc. and the
lease dated December 20, 1978 between LaSalle Industries, Inc. and C.U. Graphics
Centers, Inc., which was assigned to Landlord by LaSalle Industries, Inc. by
Assignment dated September 25, 1984 have both been terminated and, accordingly,
paragraph IV of the November Letter Agreement is of no further force and effect.
<PAGE> 115
5. Acceptance of the Construction Lender and the Lender. The parties
do agree to and acknowledge this Agreement and Second Amendment of Indenture of
Lease subject to the acceptance and approval of Manufacturers Hanover Trust
Company, the construction lender, and the Lender, which approvals Landlord
agrees to use its best efforts to obtain as promptly as practicable.
IN WITNESS WHEREOF, the parties hereto have set their hands and
seals as of the date first above written.
GRAMERCY COURT ASSOCIATES
By: /s/ Peter Catalano
-------------------------
Peter Catalano
By: /s/ Michael Kornblum
------------------------
Michael Kornblum
YOUNG & RUBICAM INC.
By: /s/ [ILLEGIBLE]
-------------------------
ACCEPTED AND APPROVED:
MANUFACTURERS HANOVER TRUST COMPANY
By: /s/ Susan V. Adelman, AVP Date: July 31, 1985
- ----------------------------- -------------------
<PAGE> 116
CONNECTICUT GENERAL LIFE INSURANCE COMPANY.
By: /s/ [ILLEGIBLE] Date: 7/31/85
- ----------------------------- -------------------
We affirm our obligation to
Young & Rubicam Inc. pursuant
to Section 1 hereof
/s/ Peter Catalano
-------------------------
Peter Catalano
/s/ Michael Kornblum
------------------------
Michael Kornblum
0063C
<PAGE> 117
YOUNG & RUBICAM INC.
285 Madison Avenue
New York, New York 10017
December 12, 1985
Messrs. Peter Catalano and
Michael Kornblum
Gramercy Court Associates
24 East 21st Street
New York, New York 10010
Gentlemen:
Reference is made to (i) that certain Indenture of Lease (the "Indenture
of Lease") dated July 12, 1984 between Michael Kornblum ("Kornblum") and Peter
Catalano ("Catalano") as Landlord and Young & Rubicam, Inc. ("Young & Rubicam")
as Tenant which Lease was assigned by Kornblum and Catalano to Gramercy Court
Associates ("GCA") by assignment dated September 24, 1984, and amended by the
First Amendment of Lease dated November 15, 1984 (the "First Amendment") and the
Agreement and Second Amendment of Lease dated July 31, 1985 (the "Second
Amendment") and (ii) a letter agreement dated July 12, 1984 between Kornblum,
Catalano and Young & Rubicam (the "July Letter Agreement") and a letter
agreement between GCA and Young & Rubicam dated November 15, 1984 (the "November
Letter Agreement"). The Indenture of Lease as amended by the First Amendment and
Second Amendment is hereinafter referred to as the Lease.
This document may be referred to as the THIRD AMENDMENT TO THE INDENTURE
OF LEASE.
This will confirm the agreement between Young & Rubicam and GCA, Kornblum
and Catalano as follows:
1. Capitalized terms defined in the Lease and not otherwise defined herein
shall have the same meanings when used herein.
2. Young & Rubicam and GCA agree to amend and the Lease is hereby amended
as follows:
(a) Section 2.01 of the Lease (as heretofore amended) is hereby
amended to read in its entirety as follows:
"Section 2.01. The "Full Term" of the Lease shall commence on December 12,
1985 and shall end on midnight on January 22, 2006, or on such earlier
date
<PAGE> 118
upon which the term of this Lease shall expire or be cancelled or
terminated pursuant to any of the conditions or covenants of this Lease or
pursuant to law. There shall be no "Short Term" of this Lease and the
"Base Term" of this Lease shall mean the Full Term."
(b) Section 2.02 of the Lease is hereby amended by adding the
following sentence at the end of such Section.
"The parties hereto acknowledge that the "Commencment Date" is December
12, 1985."
(c) The first sentence of Section 2.03 of the Lease is hereby
deleted and the following sentence substituted therefor.
"Lease Year One" shall commence on December 12, 1985 and end on January
22, 1987, unless this Lease shall otherwise expire or be cancelled or
terminated in accordance with the terms hereof."
(d) Paragraph (a) of Section 3.01 of the Lease (as heretofore
amended) is hereof amended to read in its entirety as follows:
(a) Base annual rent, as hereinafter set forth ("Base Annual Rent") in
advance on the first day of each and every calendar month throughout the
Term, except that the Base Annual Rent payable for the partial calendar
month at the commencement of the Full Term shall be payable on the
Commencement Date. The Base Annual Rent for Lease Year One and Lease Year
Two (and the first 9 days of Lease Year Three which fall within January
1988) are as follows:
December 1985 $376,344.08
January 1986 Free
February 1986 $427,083.32
March 1986 $291,666.67
April 1986 $291,666.67
May 1986 $291,666.67
June 1986 $291 666.67
July 1986 $291,666.67
August 1986 $291,666.67
September 1986 $291,666.67
October 1986 $291,666.67
November 1986 $291,666.67
December 1986 $291,666.67
January 1987 $297,594.07
February 1987 $312,083.34
-2-
<PAGE> 119
March 1987 $603,750.00
April 1987 $603,750.00
May 1987 $603,750.00
June 1987 $603,750.00
July 1987 $603,750.00
August 1987 $603,750.00
September 1987 $603,750.00
October 1987 $603,750.00
November 1987 $603,750.00
December 1987 $603,750.00
January 1988 $609,884.86
The Base Annual Rent for Lease Year Three (which commences on January 23,
1988 and ends on January 22, 1989) shall be Seven Million Four Hundred
Ninety Eight Thousand Five Hundred Seventy Five Dollars ($7,498,575.00).
Thereafter, for each successive Lease Year of the Full Term, the Base
Annual Rent shall be increased by three and one-half (3.5%) percent over
the preceding Lease Year's Base Annual Rent (i.e., the Base Annual Rent
for Lease Year Four shall be determined by multiplying $7,498,575 by
1.035; the product shall be the multiplicand In determining the Base
Annual Rent for Lease Year Five). The Base Annual Rent payable for each
full calendar month within each Lease Year commencing with Lease Year
Three shall be one-twelfth of the Base Annual Rent for such Lease Year;
and the Base Annual Rent for each month of January within the Full Term
shall be the sum of (a) 22/31 of one-twelfth of the Base Annual Rent of
the Lease Year ending and (b) 9/31 of one-twelfth of the Base Annual Rent
of the Lease Year commencing."
(e) Section 3.01 of the Lease, as amended by the preceding paragraph
(d) is further amended by adding at the end thereof a new paragraph (c), as
follows:
(c) In the event Tenant defaults under any provision of this Lease and
such default is not cured after notice, if required, and the lapse of
applicable grace periods, the Base Annual Rent payable for the month of
January 1986 through December 1986 shall be increased to $583,333,33, the
Base Annual Rent payable for the month of January 1987 shall be increased
to $589,260.74 and the Base Annual Rent payable for the month of February
1987 shall be increased to $603,750."
(f) Section 14.02 of the Lease is hereby amended by deleting the
paranthetical clause "(but limited to interest related to one month's payment)".
Tenant hereby acknowledges
-3-
<PAGE> 120
that it is familiar with the interest accrual provision of the five year
mortgage Loan (with an optional five-year extension) which Connecticut General
Life Insurance Co. is making to Landlord.
3. The Second Amendment is hereby amended by deleting Section 1
thereof.
4. The July Letter Agreement is hereby superseded and shall be void
and of no further force and effect.
5. The November Letter Agreement is hereby amended by deleting
Article II thereof.
6. Except as expressly amended hereby the Lease and the November
Letter Agreement shall remain in full force and effect.
7. Young & Rubicam hereby consents to the purchase of a 49.9%
partnership interest in GCA by Gramrock Associates a New York Limited
Partnership, and confirms that such purchase and subsequent transfers between
the partners of GCA will not give rise to Tenant's right of first offer under
Article X of the Lease; so long as the transfer is between Peter J. Catalano and
Michael Kornblum (or their permitted assigns pursuant to Article X) and Gramrock
Associates, so long as the general partners and substantially all of its limited
partners are partners of Lazard Freres & Co. or members of their immediate
families, or an entity similarly controlled by or under common control with
Lazard Freres & Co.
8. This letter agreement shall be binding upon the successor and
assigns of the parties hereto.
Please indicate your agreement to and acceptance of the provisions
hereof by signing this letter agreement in the space provided below. This letter
agreement shall not be effective until approved by Manufacturers Hanover Trust
Company and Connecticut General Life Insurance Company and shall be void and of
no further force and effect if not so accepted and approved within 60 days from
the date hereof.
Very truly yours
YOUNG & RUBICAM INC.
By: [[ILLEGIBLE]]
-----------------------
-4-
<PAGE> 121
Agreed and Accepted:
GRAMERCY COURT ASSOCIATES
By: /s/ [[ILLEGIBLE]]
-------------------------
By: /s/ Michael Kornblum
-------------------------
MICHAEL KORNBLUM
By: /s/ Peter J. Catalano
-------------------------
PETER J. CATALANO
Approved:
MANUFACTURERS HANOVER TRUST COMPANY Date: 12/17/89
---------------
By: /s/ Susan V. Adelman
---------------------------------
Thomas P. Mahoney, Vice President
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY Date:
---------------
By CIGNA Capital Advisors, Inc.
By:/s/ Thomas P. Mahoney
---------------------------------
0151C
-5-
<PAGE> 122
STATE OF NEW YORK )
)ss.:
COUNTY OF NEW YORK )
On this 12 day of December, 1985, before me personally came Peter
Catalano and Michael Kornblum, to me known, and known to me to be the general
partners in Gramercy Court Associates, the firm described in and which executed
the foregoing instrument, and Peter Catalano and Michael Kornblum acknowledge
that they executed the foregoing instrument for and on behalf of such firm.
/s/ [ILLEGIBLE]
----------------------
NOTARY PUBLIC
No. 4514918
Qualified NY County
Term Expires 3/30/87
-7-
<PAGE> 123
STATE OF NEW YORK )
)ss.:
COUNTY OF NEW YORK )
On the 12 day of December, 1985, before me personally came Michael
Kornblum and Peter Catalano, to me known to be the individuals described in and
who executed the foregoing instrument, and acknowledged that they executed the
same.
/s/ [ILLEGIBLE]
----------------------
NOTARY PUBLIC
No. 4514918
Qualified NY County
Term Expires 3/30/87
-8-
<PAGE> 124
STATE OF NEW YORK )
)ss.:
COUNTY OF NEW YORK )
On this 17 day of December, 1985, before me personally came Susan
Adelman, to me known, and known to me to be an Assistant Vice President of
Manufacturers Hanover Trust Company, the corporation described in and which
executed the foregoing instrument, and said Assistant Vice President
acknowledges that she executed the foregoing instrument by order of the board of
directors of said corporation.
/s/ Arthur Taffet
----------------------
NOTARY PUBLIC
Arthur Taffet
Notary Public, State of New York
No. 30-9274580
Qualified in Nassau County
Commission Expires March 30, 1986
-9-
<PAGE> 125
STATE OF Connecticut )
) SS.: Bloomfield
COUNTY OF Hartford )
On this 24th day of December, 1985 before me personally came Thomas
P. Mahoney, to me known, who, being by me duly sworn, did depose and say that
he resides at Hartford County, that he is a Vice President of CIGNA CAPITAL
ADVISERS, INC., the corporation described in and which executed the foregoing
instrument on behalf of CONNECTICUT GENERAL LIFE INSURANCE COMPANY, and that he
signed his name thereto by order of the Board of Directors of said corporation.
/s/ Barbara W. Hutchins
---------------------------
Notary Pubic
Barbara W. Hutchins
My commission expires 3/31/90
[SEAL]
<PAGE> 126
Young & Rubicam Inc.
285 Madison Avenue
New York, New York 10017
November 12, 1987
Gramercy Court Associates
24 East 21th Street
New York, New York 10010
Gentlemen:
Reference is made to (i) that certain indenture of lease (the
"Indenture of Lease") dated July 12, 1984 between Michael Kornblum ("Kornblum")
and Peter Catalano ("Catalano") as Landlord and Young & Rubicam Inc. ("Young &
Rubicam") as Tenant which lease was assigned by Kornblum and Catalano to
Gramercy Court Associates ("GCA") by assignment dated September 24, 1984, and
amended by the first amendment of lease dated November 15, 1984 ("the first
amendment") and the agreement and second amendment of lease dated July 31, 1985
("the second amendment") and a third amendment of lease dated December 12, 1985
("the third amendment"), (ii) a letter agreement dated July 12, 1984 between
Kornblum, Catalano and Young & Rubicam (the "July letter agreement") and a
letter agreement between GCA and Young & Rubicam dated November 15, 1984 ("the
November letter agree-
<PAGE> 127
Gramercy Court Associates
November 12, 1987
Page 2
ment") and iii) a letter agreement dated December 12, 1985 relating to
construction disputes ("the Survival Letter"). All of the above are referred to
collectively as "the Lease".
This document may be referred to as the Fourth Amendment to the
Indenture of Lease.
This will confirm the agreement between Young & Rubicam and GCA as
follows:
1. Capitalized terms defined in the Lease and not otherwise defined
herein shall have the same meanings when used herein.
2. Young & Rubicam and GCA agree to amend the Lease and the Lease is
hereby amended as follows:
2.1 Section 1.02(c) is hereby amended by adding the following at the
end thereof:
"Tenant hereby waives and surrenders any right it may have
under the zoning resolution of the City of New York and any
applicable statutes to consent to the mortgaging or sale of
the development rights reserved by Landlord hereunder;
provided, however, that nothing contained herein shall be
deemed Tenant's acquiescence to the construction
<PAGE> 128
Gramercy Court Associates
November 12, 1987
Page 3
of any buildings or improvements on the Demised Premises other
than as set forth in this Lease."
2.2 Section 10.02(b) is hereby deleted and replaced as follows:
"(b) is negotiating in good faith the delivery of a deed
to a Superior Mortgagee, or the designee of a Superior
Mortgagee, which is an entity controlled by, which controls,
or which is under common control with, the Superior Mortgagee,
in lieu of foreclosure proceedings."
2.3 A new section 10.05 is added as follows:
"10.05. In the event that Tenant acquires the Demised Premises
pursuant to its exercise of its rights pursuant to Section
10.01 or otherwise, this Lease shall not be merged with the
fee title to the Demised Premises and shall continue in full
force and effect unless the Superior Mortgagee consents to
such termination."
2.4 A new Section 10.06 is added as follows:
"10.06. In the event that Tenant exercises its rights pursuant
to Section 10.01 to acquire the
<PAGE> 129
Gramercy Court Associates
November 12, 1987
Page 4
Demised Premises but does not close the purchase because
Landlord does not deliver title as required by the contract of
sale, such failure by the Landlord to deliver title shall not
be an event of default under this Lease."
2.5 A new Section 10.07 is hereby added as follows:
"10.07. As used in this Article 10 the term "control"
(including the terms "controlling," "controlled by" and "under
common control with") means the possession, direct or
indirect, of the power to direct or cause the direction of the
management and policies of a corporation, partnership,
individual or other entity, whether through the ownership of
voting securities, by contract, or otherwise."
2.6 Section 13.04 is amended by inserting after the sixth sentence
thereof the following sentences and deleting the seventh sentence:
"In the event that Landlord has elected not to Restore and
Tenant has elected to have Landlord Restore then in such event
Landlord shall deliver to Tenant its estimate of the
approximate comple-
<PAGE> 130
Gramercy Court Associates
November 12, 1987
Page 5
tion date of such Restoration within 45 days of Tenant's
delivery of its election to have Landlord restore. Upon its
receipt of Landlord's estimate Tenant shall have ten (10) days
to elect to cancel this Lease. If Tenant does not
affirmatively and timely elect to cancel within such ten (10)
day period Tenant shall be deemed to have waived its right to
cancel and Landlord must Substantially Complete such
Restoration within six (6) months following Landlord's
estimated date of completion of Restoration. In the event
Landlord fails to Substantially Complete the Restoration of
the Demised Premises by the expiration of the applicable
period after the approximate date of completion as set forth
in the sixth or ninth sentences of this Section, as the case
may be, (plus an additional three (3) months if the delay is
caused by Force Majeure), Tenant may thereafter upon thirty
(30) days notice elect to cancel this Lease, but if the
Demised Premises are Substantially Complete at the expiration
of such thirty (30) day period, this Lease shall continue
until the end of the Term."
<PAGE> 131
Gramercy Court Associates
November 12, 1987
Page 6
2.7 Section 13.04 is further amended by inserting the following
phrase:
", or be required to Restore,"
between the words "Restore" and "Landlord" in the first sentence of the second
paragraph.
2.8 Section 13.06 of the lease is hereby amended by changing
paragraph (a) thereof to read as follows:
"(a). Landlord may elect either to Restore the Demised
Premises or to cancel this Lease on at least thirty (30) days'
notice, given within sixty (60) days after such damage.
Landlord's failure to send notice of its election either to
Restore or not to Restore shall be deemed Landlord's election
not to Restore. If Landlord elects so to cancel this Lease,
this Lease and any and all renewal rights hereunder shall come
to an end on the date specified in such notice and Landlord
further agrees that it shall not for six months from the
casualty relet the Premises, provided, however, Tenant may
within fifteen (15) days of such notice of cancellation from
Landlord so long as it simultaneously exercises the next
<PAGE> 132
Gramercy Court Associates
November 12, 1987
Page 7
available renewal option as set forth in Article 7 hereof,
notify Landlord that it elects to have Landlord Restore the
premises, in which event Landlord shall deliver the good faith
estimate of time needed to Restore as provided in the
penultimate paragraph of this Section 13.06; and"
2.9 Section 13.06 is further amended by deleting the last paragraph
and replacing it with the two paragraphs following:
"If Landlord elects to Restore, as provided in
paragraph (a) above, Landlord shall simultaneously with such
election give Tenant Landlord's good faith estimate of the
time needed to Restore. If Tenant has elected to have
Landlord Restore after Landlord has given its election to
cancel then Landlord shall give Tenant Landlord's good faith
estimate of the time needed to Restore within forty-five
(45) days of the receipt of Tenant's notice. If, in either
case, Landlord's estimate of the time needed to Restore
indicates that such Restoration will exceed ninety (90) days,
Tenant may upon ten (10)
<PAGE> 133
Gramercy Court Associates
November 12, 1987
Page 8
days notice elect to cancel this Lease in the manner and with
the effect described in subsection (b) hereof. If Landlord
elects to Restore, Landlord must Substantially Complete such
Restoration within two (2) months following Landlord's
estimated date of completion of Restoration. In the event
that Landlord has elected not to Restore and Tenant has
elected to have Landlord Restore then in such event Landlord
must Substantially Complete such Restoration within six (6)
months following Landlord's estimated date of completion of
Restoration. In the event Landlord fails to Substantially
Complete the Restoration of the Demised Premises by the
expiration of the applicable period after the approximate date
of completion as provided in the preceding two sentences (plus
an additional three (3) months if the delay is caused by Force
Majeure), Tenant may thereafter upon thirty (30) days notice
elect to cancel this Lease, in the manner and with the effect
described in subsection (b) hereof, and, if the Demised
Premises are not Substantially Complete at the expiration of
such thirty (30) day period, this Lease shall
<PAGE> 134
Gramercy Court Associates
November 12, 1987
Page 9
be cancelled with the same force and effect as if the date of
such expiration was set forth as the natural expiration of the
Lease (including, if applicable, any Renewal Term).
"Should Landlord elect to Restore, or be required to
Restore, Landlord shall Restore substantially in accordance
with the procedures and specifications set forth in Exhibit C
and monies shall be released to Landlord in the manner set
forth in Section 13.03. Substantial Completion shall be
determined substantially in the manner set forth in Article
5."
2.10 Section 2(e) of the Third Amendment of Indenture of Lease dated
December 12, 1985 is hereby deleted in its entirety and is of no further force
and effect.
3. This amendment is subject to the consent of Metropolitan Life
Insurance Company. If such consent is not given within thirty (30) days of the
date hereof this Fourth Amendment shall be null void and of no force and effect.
<PAGE> 135
Gramercy Court Associates
November 12, 1987
Page 10
4. Except as expressly set forth herein the Lease is and shall
continue to remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto set their hands and seals
this 12 day of November, 1987.
Young & Rubicam Inc.
By /s/ [[ILLEGIBLE]]
------------------------
Gramercy Court Associates
By /s/ [[ILLEGIBLE]]
------------------------
/s/ [[ILLEGIBLE]]
<PAGE> 136
Gramercy Court Associates
November 12, 1987
Page 11
We hereby consent to this
Fourth Amendment this 1st day
of December,1987.
Metropolitan Life Insurance Company
By /s/ James F. Hartnett
- ---------------------------------------------
Assistant Vice President
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 19, 1998
relating to the financial statements of Young & Rubicam Inc., which appears in
such Prospectus. We also consent to the application of such report to the
Financial Statement Schedules for the three years ended December 31, 1997
listed under Item 16(b) of this Registration Statement when such schedules are
read in conjunction with the financial statements referred to in our report.
The audits referred to in such report also included these schedules. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
- ------------------------
Price Waterhouse LLP
New York, New York
April 7, 1998
