AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 17, 1999
REGISTRATION NO. 333-90271
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
YOUNG & RUBICAM INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-1493710
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
----------------
285 MADISON AVENUE
NEW YORK, NEW YORK 10017
(212) 210-3000
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
STEPHANIE W. ABRAMSON, ESQ.
EXECUTIVE VICE PRESIDENT AND 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:
<TABLE>
<S> <C>
STEPHEN H. SHALEN, ESQ. MARK C. SMITH, ESQ.
CHRISTOPHER J. WALTON, ESQ. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
CLEARY, GOTTLIEB, STEEN & HAMILTON 919 THIRD AVENUE
ONE LIBERTY PLAZA NEW YORK, NEW YORK 10022
NEW YORK, NEW YORK 10006 (212) 735-3000
(212) 225-2000
</TABLE>
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
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, other than securities offered only in connection with dividend or interest
reinvestment plans, 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
----------------
<PAGE>
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) PRICE(2) REGISTRATION FEE(1)
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value ............... 1,525 $ 45.03 $68,671 $20
Preferred Share Purchase Rights (3) .........
Total ...................................... 1,525 $ 45.03 $68,671 $20
</TABLE>
- --------------------------------------------------------------------------------
(1) The Company previously registered 5,513,918 shares of common stock, par
value $0.01 per share, and related preferred share purchase rights, having a
proposed maximum aggregate offering price of $242,444,168, on which the
applicable fee of $67,401 was paid.
(2) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(c) of the Securities Act of 1933, as amended, and
based on the average high and low trading prices of the Common Stock on the
New York Stock Exchange, Inc. on November 10, 1999.
(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>
SUBJECT TO COMPLETION, DATED NOVEMBER 17, 1999
PROSPECTUS
5,231,443 SHARES
YOUNG & RUBICAM INC.
COMMON STOCK
-------------------
This is an offering of 5,231,443 shares of common stock of Young & Rubicam
Inc.
All of the 5,231,443 shares of common stock offered by this prospectus are
being sold by the selling stockholders named in this prospectus. Young & Rubicam
will not receive any of the proceeds from the sale of shares of common stock by
the selling stockholders.
The last reported sale price of the common stock, which is listed on the
New York Stock Exchange under the symbol "YNR", on November 16, 1999, was $47.75
per share.
INVESTING IN COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 7 TO READ ABOUT RISKS THAT YOU SHOULD CONSIDER BEFORE BUYING SHARES OF THE
COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
-------------------
<TABLE>
<CAPTION>
Per
Share Total
----------- ----------
<S> <C> <C>
Public offering price ........................ $ $
Underwriting discount ........................ $ $
Proceeds to the selling stockholders ......... $ $
</TABLE>
-------------------
The underwriters may purchase up to an additional 284,000 shares from
selling stockholders to cover over-allotments. Young & Rubicam has agreed to pay
expenses incurred by the selling stockholders in connection with the offering,
other than the underwriting discount.
The underwriters expect to deliver the shares in New York, New York on ,
1999.
-------------------
Joint Book-Running Managers
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SALOMON SMITH BARNEY
-------------------
BANC OF AMERICA SECURITIES LLC
GOLDMAN, SACHS & CO.
ING BARINGS
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
THOMAS WEISEL PARTNERS LLC
The date of this prospectus is , 1999
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION BECOMES EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES OR A SOLICITATION OF AN
OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all of the information that you should consider
before investing in the common stock. You should read the entire prospectus
carefully, especially the risks of investing in the common stock discussed under
"Risk Factors."
YOUNG & RUBICAM INC.
Young & Rubicam Inc. is the fifth largest consolidated marketing and
communications organization in the world based on 1998 revenues. Since our
founding 75 years ago, we have evolved from a single New York-based advertising
agency to a diversified global marketing and communications company operating in
121 cities in 76 countries worldwide as of December 31, 1998. We operate through
recognized market leaders, including:
o Young & Rubicam Advertising, full-service advertising;
o Dentsu Young & Rubicam, full-service advertising in the Asia/Pacific
region;
o The Bravo Group and Kang & Lee, multi-cultural marketing and
communications;
o Wunderman Cato Johnson, direct marketing and sales promotion;
o KnowledgeBase Marketing, customer relationship marketing;
o Brand Dialogue, digital interactive branding and digital commerce;
o The Media Edge, media planning, buying and placement services;
o Burson-Marsteller, perception management and public relations;
o Cohn & Wolfe, full-service public relations;
o Landor Associates, branding consultation and design services; and
o Sudler & Hennessey, healthcare communications.
Our revenues in 1998 totaled $1.5 billion, representing a compound annual
growth rate of 12.2% from 1994 to 1998.
We are a single agency network, allowing us to centrally manage and
utilize our resources. Through multi-disciplinary, client-focused teams, we
provide clients with global access to fully integrated marketing and
communications solutions. Among our approximately 5,500 client accounts are a
number of large multinational organizations, including AT&T, Citibank,
Colgate-Palmolive, Ford and Philip Morris. We have maintained long-standing
relationships with many of our clients. The average length of relationship with
our top 20 clients exceeds 20 years.
Our mission is to be our clients' most valued business partner in
building, leveraging, protecting and managing their brands for both short-term
results and long-term growth. Consistent with our mission, we have developed an
organizational and management structure designed to meet the diverse needs of
our large global clients as well as the more specialized needs of our other
clients. Our strategy combines this organizational and management structure with
the pursuit of new business opportunities and continued investment in our
business, personnel and superior consumer knowledge. As part of our strategy, we
seek to provide clients with superior creative services and extensive research
capabilities, including access to Y&R's proprietary research tool, BrandAsset
Valuator.
Our principal executive office is located at 285 Madison Avenue, New
York, New York 10017, and our telephone number is (212) 210-3000.
1
<PAGE>
STRATEGY
Our strategy consists of the following key components:
o INCREASE PENETRATION OF KEY CORPORATE ACCOUNTS
o DEVELOP NEW CLIENT RELATIONSHIPS
o LEVERAGE EXISTING GLOBAL NETWORK
o CAPITALIZE ON EXISTING CAPABILITIES
o UTILIZE SUPERIOR CONSUMER KNOWLEDGE AND BRAND INSIGHTS
o CULTIVATE CREATIVE EXCELLENCE
o IMPROVE OPERATING EFFICIENCIES
o EXPAND CAPABILITIES THROUGH ACQUISITIONS AND INVESTMENTS
RECENT DEVELOPMENTS
On September 21, 1999, we contributed $15 million and certain net assets
of our Brand Dialogue operations in exchange for an ownership interest in
Luminant Worldwide Corporation, or Luminant, a newly formed internet and
e-commerce services firm that provides strategic consulting, content development
and systems integration capabilities to its clients. Under the terms of the
contribution agreement between Luminant and Y&R, we are eligible to receive
future contingent consideration from Luminant in the form of non-voting shares
of Luminant common stock and/or cash, at Luminant's discretion, based on the
revenue and operating profit performance of the Brand Dialogue contributed
assets for the period from July 1, 1999 through December 31, 1999 and on the
consolidated performance of Luminant for the first six months of 2000. We
recognized a net after-tax gain of approximately $42 million on the sale of the
Brand Dialogue contributed assets in the third quarter of 1999.
Effective August 2, 1999, the ownership and management structure of
Dentsu Young & Rubicam, which we refer to as DY&R, was amended. The agreement
resulted in our acquiring majority ownership in and operational control of all
DY&R companies throughout principal markets in Asia, excluding Japan. In Japan,
Dentsu has acquired a majority share. We paid approximately $6 million for the
incremental ownership interest and in the first quarter of 2001, will pay $4
million and may pay contingent consideration of up to an additional $1.5 million
in connection with this transaction, subject to DY&R's financial performance.
Effective August 2, 1999, we commenced consolidating the results of DY&R for
those markets where we hold a majority ownership interest. A preliminary
allocation of the cost to acquire the additional interest in DY&R has been made
based upon the fair value of the net assets.
During the third quarter of 1999, we acquired Rainey Kelly Campbell
Roalfe, a London-based advertising agency, and a majority ownership interest in
The Banner Corporation, a European marketing communications firm specializing in
the technology sector, and made several other acquisitions and equity
investments for which the aggregate purchase price was approximately $43
million. Some of these transactions may require us to pay additional amounts as
contingent consideration over a period not to exceed five years, based on
company performance and the achievement of stipulated targets. All of these
acquisitions were accounted for under the purchase method of accounting, and a
preliminary allocation of the costs to acquire these entities has been made
based on the fair value of the net assets. Since September 30, 1999, we have
also acquired ownership interests in certain other entities. Cash payments made
in connection with these transactions amounted to approximately $40 million.
In the third quarter of 1999, we repurchased approximately 800,000 shares
of common stock at an average price of $42.13 on the open market and in other
transactions. From October 1, 1999 through November 12, 1999, we repurchased an
additional approximately 1.0 million shares of common stock at an average price
of $44.85 on the open market and in other transactions. This brings the total to
2
<PAGE>
5.4 million shares repurchased under our existing 12 million share repurchase
program. The shares are being purchased under this program principally in
anticipation of exercises of outstanding employee stock options, and will likely
be reissued to employees as options are exercised.
In August 1999, we announced certain changes in our senior management
team. Effective August 2, 1999, Ed Vick was named Chief Creative Officer and Tom
Bell was named President and Chief Operating Officer of Young & Rubicam Inc. On
January 1, 2000, Mr. Vick will become our Chairman and Mr. Bell will become our
Chief Executive Officer, as Peter Georgescu, our current Chairman and Chief
Executive Officer, assumes the role of Chairman Emeritus. As Chairman Emeritus,
Mr. Georgescu will continue to be active in client work and on other key
corporate initiatives.
3
<PAGE>
THE OFFERING
Common stock offered..... 5,231,443 shares
Common stock to be outstanding
after the offering...... 72,152,238 shares
This number excludes:
o 25,397,954 shares of common stock reserved for
issuance upon the exercise of outstanding employee
options at a weighted average exercise price of
$14.14 per share;
o 33,915 shares of common stock reserved for
issuance upon the exercise of outstanding options
issued to investors in Y&R at a weighted average
exercise price of $7.67 per share; and
o 20,500 shares of common stock reserved for
issuance upon the exercise of options to be
granted to employees of KnowledgeBase Marketing in
connection with the acquisition of KnowledgeBase
Marketing at an exercise price per share equal to
the fair market value of the common stock on the
date of grant.
Unless otherwise specified, all information in this
prospectus assumes that the underwriters'
over-allotment option is not exercised.
Dividend Policy......... On September 15, 1999 we paid our second quarterly
cash dividend of $0.025 per share of common stock to
all stockholders of record as of September 1, 1999.
Use of Proceeds........ We will not receive any of the proceeds from the
sale of common stock offered by this prospectus. We
expect to receive $19.4 million in cash in
connection with the exercise by the H&F investors of
options to purchase common stock.
New York Stock Exchange
Symbol.................. YNR
In connection with the offering, Hellman & Friedman Capital Partners III,
L.P., H&F Orchard Partners III, L.P. and H&F International Partners III, L.P.,
whom we refer to as the H&F investors, have notified Y&R that they intend to
exercise options to purchase 2,530,260 shares of common stock for a total
exercise price of $19.4 million and to sell an aggregate of 5,231,443 shares of
common stock in this offering. Following the offering, the H&F investors will
own no shares of Y&R, and accordingly the H&F investors will no longer have the
right to nominate and have elected any members of Y&R's board of directors. See
"Selling Stockholders." Prior to the offering, the H&F investors will distribute
shares of common stock of Y&R to some of their limited partners and to
individuals that control the H&F investors, so that following the offering those
limited partners and individuals will beneficially own an aggregate of 2.1% of
the outstanding shares of common stock.
RISK FACTORS
For a discussion of risks that you should consider before buying shares of
the common stock, see "Risk Factors."
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------------ -------------------------------------------
1999 1998 1998 1997 1996
--------------- -------------- -------------- -------------- -------------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ................................ $ 1,226,686 $1,095,720 $1,522,464 $1,382,740 $1,222,139
Compensation expense, including
employee benefits ...................... 724,491 659,449 903,948 836,150 730,261
General and administrative expenses 359,498 324,783 455,578 463,936 391,617
Other charges (1) ....................... -- 234,449 234,449 11,925 17,166
Recapitalization-related charges (1) .... -- -- -- -- 315,397
------------ ---------- ---------- ---------- ----------
Operating expenses ..................... 1,083,989 1,218,681 1,593,975 1,312,011 1,454,441
------------ ---------- ---------- ---------- ----------
Operating profit (loss) ................. 142,697 (122,961) (71,511) 70,729 (232,302)
Extraordinary charge for early
retirement of debt (net of tax
benefit of $2,834) ..................... -- (4,433) (4,433) -- --
Net income (loss) ....................... $ 124,228 $ (113,328) $ (86,068) $ (23,938) $ (238,311)
EARNINGS (LOSS) PER SHARE (2):
Basic:
Income (loss) before extraordinary
charge (2) ........................... $ 1.83 $ (1.84) $ (1.34) $ (0.51)
Extraordinary charge ................... -- (0.08) (0.08) --
------------ ---------- ---------- ----------
Net income (loss) ...................... $ 1.83 $ (1.92) $ (1.42) $ (0.51)
============ ========== ========== ==========
Diluted:
Income (loss) before extraordinary
charge (2) ........................... $ 1.50 $ (1.84) $ (1.34) $ (0.51)
Extraordinary charge ................... -- (0.08) (0.08) --
------------ ---------- ---------- ----------
Net income (loss) ...................... $ 1.50 $ (1.92) $ (1.42) $ (0.51)
============ ========== ========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING
USED TO COMPUTE:
Basic ................................... 67,914,158 58,939,274 60,673,994 46,949,355
Diluted ................................. 82,595,373 58,939,274 60,673,994 46,949,355
OTHER OPERATING DATA:
EBITDA (3) .............................. $ 194,232 $ 154,549 $ 223,548 $ 139,375 $ 147,221
Net cash provided by
operating activities ................... 70,391 22,073 195,615 224,511 178,064
Net cash used in investing activities ... 211,705 39,260 99,683 67,142 76,094
Net cash provided by (used in)
financing activities ................... 112,155 (75,444) (136,242) (98,667) (12,614)
Capital expenditures .................... 53,947 34,784 76,378 51,899 51,792
International revenues as a % of
total revenues ......................... 45.8 % 48.2 % 49.1 % 52.2 % 53.3%
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1999
--------------------
<S> <C>
BALANCE SHEET DATA:
Total assets (4) ................... $2,104,804
Total debt (5) ..................... 344,422
Total stockholders' equity ......... 289,571
</TABLE>
(footnotes on following page)
5
<PAGE>
- -----------
(1) For a discussion of other charges and recapitalization-related charges for
the years ended December 31, 1998, 1997 and 1996, see notes 4, 6 and 9 to
the audited consolidated financial statements incorporated by reference in
this prospectus.
(2) At September 30, 1999, Y&R had outstanding options to purchase 28,639,817
shares of common stock with a weighted average exercise price of $12.61 that
could potentially dilute basic earnings per share in the future. For a
discussion of options outstanding, see note 3 to the unaudited interim
consolidated financial statements and note 18 to the audited consolidated
financial statements incorporated by reference in this prospectus.
Earnings per share for 1996 cannot be computed because Y&R's capital
structure prior to its recapitalization in December 1996 consisted of both
common shares and limited partnership units in predecessor entities. For a
discussion of the recapitalization, see note 6 to the audited consolidated
financial statements incorporated by reference in this prospectus.
(3) EBITDA is defined as operating profit (loss) 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 Y&R's credit facilities; however, EBITDA may not be comparable
to other registrants' calculation of EBITDA or similarly titled items. You
should not consider EBITDA 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. EBITDA for the nine months ended September 30, 1998 and for the
year ended December 31, 1998 is before $234,449 of non-cash compensation
charges related to the vesting of restricted stock taken at the time of our
initial public offering. EBITDA for 1997 and 1996 is before $11,925 and
$11,096, respectively, of non-cash charges primarily related to impairment
write-downs which are included in other charges. For a discussion of other
charges and recapitalization-related charges for the years ended December
31, 1998, 1997 and 1996, see notes 4, 6 and 9 to the audited consolidated
financial statements incorporated by reference in this prospectus.
(4) Total assets as of September 30, 1999 include net deferred tax assets of
$145,926 consisting primarily of federal, state and foreign net operating
loss carryforwards.
(5) Total debt includes current and non-current loans and installment notes,
which are discussed in notes 14 and 15 to the audited consolidated financial
statements incorporated by reference in this prospectus.
6
<PAGE>
RISK FACTORS
An investment in the common stock involves a number of risks. You should
consider carefully the following information about these risks, together with
the other information included and incorporated by reference in this prospectus,
before buying shares of common stock.
WE HAVE RECENTLY INCURRED SUBSTANTIAL NET LOSSES.
We reported net losses of $86.1 million for 1998 and $23.9 million for
1997. The net loss in 1998 includes a non-cash pre-tax compensation charge of
$234.4 million recorded in connection with the vesting of restricted stock upon
completion of our initial public offering, or IPO, in May 1998 and a $7.3
million pre-tax charge for unamortized deferred financing costs related to a
credit facility that we replaced in connection with the IPO.
WE MAY HAVE DIFFICULTY COMPETING IN THE HIGHLY COMPETITIVE MARKETING AND
COMMUNICATIONS INDUSTRY.
The marketing and communications industry is highly competitive, and we
expect it to remain so. Our 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. We must compete with
these 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 periodic
intervals. We compete principally on the basis of the following factors:
o creative reputation;
o knowledge of media;
o geographical coverage and diversity;
o relationships with clients;
o quality and breadth of services; and
o financial controls.
Recently, traditional advertising agencies also have been competing with
major consulting firms, which have developed practices in marketing and
communications. New competitors also include 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.
When we represent a client, we do not necessarily handle all advertising
or public relations for that client. 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. This conflicts policy typically prohibits agencies
from performing similar services for competing products or companies. Our
principal international competitors are holding companies for more than one
global advertising agency network. As a result, in some situations separate
agency networks within these holding companies may be able to perform services
for competing products or for products of competing companies. We have one
global advertising agency network. Accordingly, our 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.
WE MAY BE ADVERSELY AFFECTED BY A DOWNTURN IN THE MARKETING AND COMMUNICATIONS
INDUSTRY, WHICH IS CYCLICAL.
The marketing and communications industry is cyclical and as a result it
is subject to downturns in general economic conditions and changes in client
business and marketing budgets. Our prospects, business, financial condition and
results of operations may be materially adversely affected by a downturn in
general economic conditions in one or more markets or changes in client business
and marketing budgets.
7
<PAGE>
WE MAY LOSE CLIENTS DUE TO CONSOLIDATION OF ACCOUNTS WITH OTHER GLOBAL MARKETING
AND COMMUNICATIONS AGENCIES.
We believe that large multinational companies will seek to consolidate
their accounts with one organization that can fulfill their marketing and
communications needs worldwide. We may not 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. These investments include additional offices and
personnel around the world and new and improved technology for linking these
offices and people. We are required to make significant capital expenditures for
maintenance, expansion and upgrades of the computer networks that link our
international network of employees and offices. To the extent that our
competitors may have broader geographic scope or greater financial resources to
invest in additional offices, personnel or technology, they may be better able
than we are to take advantage of an opportunity for the consolidation of a
global account. In those circumstances, our business and results of operations
could suffer.
WE ARE DEPENDENT UPON, AND RECEIVE A SIGNIFICANT PERCENTAGE OF OUR REVENUES
FROM, A LIMITED NUMBER OF LARGE CLIENTS.
A significant reduction in the marketing and communications spending by,
or the loss of one or more of, our largest clients could weaken our financial
condition and cause our business and results of operations to suffer. A
relatively small number of clients contribute a significant percentage of our
consolidated revenues. In 1998, our Key Corporate Accounts, or KCAs, contributed
48.6% of consolidated revenues, and our largest client account, Ford Motor
Company, contributed 10.5% of consolidated revenues. Our dependence on revenues
from these client accounts may increase in the future as we pursue our strategy
of increasing penetration of existing large clients. In addition, clients'
conflicts policies typically prohibit us from performing similar services for
competing products or companies.
These major clients, and our other clients, may not continue to use our
services to the same extent, or at all, in the future. Most of our agreements
with U.S.-based clients are cancelable on 90 days' notice, and our 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.
WE MAY LOSE SOME OF OUR EXISTING CLIENTS AND MAY NOT BE ABLE TO ATTRACT NEW
CLIENTS FOR OUR MARKETING AND COMMUNICATIONS SERVICES.
The loss of one or more of our largest clients could weaken our financial
condition and cause our business and results of operations to suffer. Our
success, like the success of other marketing and communications organizations,
depends on our continuing ability to attract and retain clients. We have
approximately 5,500 client accounts worldwide. Although historically we have
maintained long-term relationships with many of our 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, in order to maintain and increase revenues, we must
obtain new assignments in areas of our business that are project-based, such as
the perception management and public relations business, and the branding
consultation and design business. As is typical in the marketing and
communications industry, we have lost or resigned client accounts and
assignments, including Blockbuster Video, International Home Foods and Molson,
for a variety of reasons, including conflicts with newly acquired clients. We
may not be successful in replacing clients or revenues when a client
significantly reduces the amount of work given to Y&R.
STRENGTHENING OF THE U.S. DOLLAR AGAINST OTHER MAJOR CURRENCIES COULD
MATERIALLY ADVERSELY AFFECT US.
Our financial statements are denominated in U.S. dollars. In 1998,
operations outside the United States represented 49.1% of our revenues.
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 harm our results
8
<PAGE>
of operations and weaken our financial position. With limited exceptions, we do
not actively hedge our foreign currency exposure.
THE MARKET PRICE OF OUR COMMON STOCK MAY DECLINE DUE TO THE LARGE NUMBER OF
SHARES ELIGIBLE FOR FUTURE SALE.
Following the offering, we will have 72,152,238 shares of common stock
outstanding, substantially all of which will be eligible for sale in the public
market without registration under the Securities Act, subject, in some cases, to
compliance with the volume limitations, manner of sale provisions and other
restrictions of Rule 144 under the Securities Act. Following the offering, and
based upon information as of November 12, 1999, an aggregate of 23,203,868
shares of common stock and shares subject to options that are currently vested
or will vest within 60 days of the date of this prospectus held by current or
former employees of Y&R, whom we refer to as management investors, will be
eligible for sale in the public market without registration under the Securities
Act, subject, in some instances, to compliance with the volume limitations,
manner of sale provisions and other restrictions of Rule 144 under the
Securities Act.
Following the offering, individuals and entities that control the H&F
investors and some of the limited partners of the H&F investors will hold an
aggregate of 1,508,777 shares of common stock that will be eligible for sale in
the public market without registration under the Securities Act, subject, in the
case of affiliates of the H&F investors who are currently members of our board
of directors, to compliance with the volume limitations, manner of sale
provisions and other restrictions of Rule 144 under the Securities Act. Of this
number, 1,313,484 shares will be subject to the 90-day lock-up agreements
described in this prospectus. An additional 187,432 shares of common stock are
subject to a prohibition on sale under a limited partnership agreement with the
H&F investors for 90 days from the date of this prospectus.
Future sales of common stock, or the perception that future sales could
occur, could adversely affect prevailing market prices for the common stock.
WE ARE CONTROLLED BY OUR PRINCIPAL STOCKHOLDERS, INCLUDING MANAGEMENT
STOCKHOLDERS, WHOSE INTERESTS MAY DIFFER FROM THOSE OF OTHER STOCKHOLDERS.
A substantial percentage of our common stock is owned by management
investors. All common stock held at any time by management investors is required
to be deposited in a voting trust, which we refer to as the management voting
trust, that is controlled by six members of Y&R's senior management, in their
capacities as voting trustees. Following the offering, and based upon
information as of November 12, 1999, this trust will hold voting power over
28.5% of the outstanding shares of common stock, assuming the exercise of all
options held by the management investors that are currently vested or will vest
within 60 days of the date of this prospectus. As a result, this voting trust
will continue to be able to exercise substantial control over any matters
requiring the vote of stockholders, including the election of directors, which
could delay or prevent a change in control of Y&R. 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 voting trust, will bind the voting trust
unless he or his successor is outvoted by the five other voting trustees. As a
result of the foregoing, Peter A. Georgescu or his successor will be able to
exercise a significant degree of control over business decisions affecting Y&R.
In addition, the management voting trust could delay or prevent a change in
control of us. This voting trust will terminate no later than May 15, 2000. In
the event that, following the termination of the voting trust, Y&R management
continues to own collectively a significant percentage of the outstanding shares
of common stock, management acting together will be able to exercise a
significant degree of control over business decisions affecting Y&R.
Following the offering, the H&F investors will own no shares of common
stock of Y&R, and accordingly the H&F investors will no longer have the right to
nominate and have elected any members of Y&R's board of directors.
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OUR COMPETITIVE POSITION DEPENDS ON OUR ABILITY TO ATTRACT AND RETAIN KEY
MARKETING AND COMMUNICATIONS PERSONNEL.
Our ability to maintain our competitive position depends on retaining the
services of our senior management. The loss of the services of key members of
senior management could harm our business and results of operations. In
addition, our success has been, and is expected to continue to be, highly
dependent upon the skills of our creative, research, media and account personnel
and practice group specialists, and their relationships with our clients.
Employees generally are not subject to employment contracts and are, therefore,
typically able to move within the industry with relative ease. Although the
agreement establishing the management voting trust and other stock option and
restricted stock agreements contain non-competition and non-solicitation
covenants, these covenants may not be effective in helping us retain qualified
personnel. We may be adversely affected by the failure to retain qualified
personnel.
If we were unable to continue to attract and retain additional key
personnel, or if we were unable to retain and motivate our existing key
personnel, our prospects, business, financial condition and results of
operations would be materially adversely affected.
WE ARE EXPOSED TO VARIOUS RISKS FROM OPERATING A MULTINATIONAL BUSINESS.
If we were unable to remain in compliance with local laws in developing
countries in which we conduct business, our prospects, business and results of
operations could be harmed, and our financial condition could be weakened. We
conduct business in various developing countries in Asia, Latin America, Eastern
Europe and Africa, where the systems and bodies of commercial law and trade
practices are evolving. Commercial laws in many of these countries are often
vague, arbitrary, contradictory, inconsistently administered and retroactively
applied. Under these circumstances, it is difficult for us to determine with
certainty at all times the exact requirements of these local laws. In addition,
the global nature of our operations poses various challenges to our management
and our financial, accounting and other systems which, if not satisfactorily
met, also could harm our prospects, business and results of operations and
weaken our financial condition.
WE MAY NOT BE SUCCESSFUL IN IDENTIFYING APPROPRIATE ACQUISITION CANDIDATES OR
INVESTMENT OPPORTUNITIES, COMPLETING ACQUISITIONS OR INVESTMENTS ON
SATISFACTORY TERMS OR INTEGRATING NEWLY ACQUIRED COMPANIES.
Our business strategy includes increasing our share of clients' marketing
expenditures by adding to or enhancing our existing marketing and communications
capabilities, and expanding our geographic reach. We intend to implement this
strategy in part by making acquisitions and investments. We may not be
successful in identifying appropriate acquisition candidates or investment
opportunities or consummating acquisitions or investments on terms satisfactory
to us. In addition, we may not be successful in integrating any newly acquired
companies into our existing global network. We may use common stock, which could
result in dilution to purchasers of common stock, incur indebtedness, which may
be long-term, expend cash or use any combination of common stock, indebtedness
and cash for all or part of the consideration to be paid in future acquisitions.
While we regularly evaluate potential acquisition opportunities, we have no
present commitments, agreements or understandings with respect to any material
acquisition.
WE ARE EXPOSED TO POTENTIAL LIABILITIES, INCLUDING LIABILITIES ARISING FROM
ALLEGATIONS THAT OUR CLIENTS' ADVERTISING CLAIMS ARE FALSE OR MISLEADING OR
OUR CLIENTS' PRODUCTS ARE DEFECTIVE.
From time to time, we may be, or may be joined as, a defendant in
litigation brought against our clients by third parties, including our clients'
competitors, governmental or regulatory bodies or consumers. These litigations
could include claims alleging that:
o advertising claims made with respect to our clients' products or
services are false, deceptive or misleading;
o our clients' products are defective or injurious; or
o marketing and communications materials created for our clients
infringe on the proprietary rights of third parties.
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If, in those circumstances, we are not insured under the terms of our
insurance policies or are not indemnified under the terms of our agreements with
clients or this indemnification is unavailable for these claims, then the
damages, costs, expenses or attorneys' fees arising from any of these claims
could have an adverse effect on our prospects, business, results of operations
and financial condition. In addition, our contracts with clients generally
require us to indemnify clients for claims brought by competitors or others
claiming that advertisements or other communications infringe on intellectual
property rights. Although we maintain an insurance program, including insurance
for advertising agency liability, this insurance may not be available, or if
available may not be sufficient to cover any claim, if a significant adverse
claim is made.
OUR COMPUTER SYSTEMS, AND THOSE OF THIRD PARTIES ON WHOM WE RELY, MAY NOT
ACHIEVE YEAR 2000 READINESS.
We continue to work to resolve the potential impact of the year 2000 on
the ability of our computer systems to accurately process information with dates
later than December 31, 1999, or to process date-sensitive information
accurately after the turn of the century (referred to as the "Year 2000" issue).
We have modified or replaced all significant systems necessary for us to operate
our business that we have identified as requiring Year 2000 remediation. We have
completed the testing of all critical systems and continue working on finalizing
tests for the non-critical systems. We are also dependent in part 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 our own computer systems. We have performed tests of major systems in this
category and have received assurances as to their readiness for compliance with
the Year 2000 issue.
While we believe our 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 our efforts, or those of third parties
with whom we interact, will not be satisfactorily completed in a timely fashion.
Our failure to satisfactorily address the Year 2000 issue could have a material
adverse effect on our prospects, business, financial condition and results of
operations.
The out-of-pocket costs incurred in the first nine months of 1999 for the
Year 2000 issue were not material to consolidated results of operations and are
expected to be immaterial for the year ended December 31, 1999. We have funded
all identified remedial projects in connection with our program. We may
experience cost overruns or delays as we replace or modify systems, however,
which could have a material adverse effect on our prospects, business, financial
condition and results of operations.
We have completed the assessment and compliance testing phases and
believe that the implementation phase of the Year 2000 readiness plan will be
substantially completed during the fourth quarter. Contingency planning for
critical business processes will continue through the fourth quarter, to seek to
ensure a smooth migration into the year 2000.
THE MARKET PRICE OF THE COMMON STOCK WILL FLUCTUATE, AND COULD FLUCTUATE
SIGNIFICANTLY.
The market price of the common stock will fluctuate, and could fluctuate
significantly, in response to various factors and events, including the
following:
o the liquidity of the market for the common stock;
o differences between Y&R's actual financial or operating results and
those expected by investors and analysts;
o changes in analysts' recommendations or projections;
o changes in marketing and communications budgets of clients;
o new statutes or regulations or changes in interpretations of existing
statutes and regulations affecting our business;
o changes in general economic or market conditions; and
o broad market fluctuations.
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OUR ORGANIZATIONAL DOCUMENTS, PROVISIONS OF DELAWARE LAW AND OUR STOCKHOLDER
RIGHTS PLAN MAY DELAY, DETER OR PREVENT A CHANGE IN CONTROL OF US.
Various provisions of our organizational documents, and of the law of
Delaware, where we are incorporated, may delay, deter or prevent a change in
control of Y&R not approved by our board of directors. These provisions include:
o a classified board of directors;
o 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;
o a requirement that special meetings of stockholders be called only by
the chairman of the board of directors or the board of directors;
o advance notice requirements for stockholder proposals and nominations;
o limitations on the ability of stockholders to amend, alter or repeal
provisions of our organizational documents;
o authorization for the board of directors to issue without stockholder
approval preferred stock with terms as the board of directors may
determine; and
o authorization for the board of directors to consider the interests of
clients and other customers, creditors, employees and other
constituencies of Y&R and its subsidiaries and the effect upon
communities in which Y&R and its subsidiaries do business, in
evaluating proposed corporate transactions.
Section 203 of the Delaware general corporation law imposes restrictions
on mergers and other business combinations between Y&R and any holder of 15% or
more of the common stock. These restrictions generally do not apply to the H&F
investors, their affiliates and any of their permitted transferees that acquire
15% or more of the outstanding common stock, who have been exempted from these
restrictions by the board of directors.
In addition, we have adopted a stockholder rights plan under which each
holder of common stock also receives rights. Under the stockholder rights plan,
if any person acquires beneficial ownership of 15% or more of the outstanding
shares of common stock (with exceptions, including the management voting trust),
that person will become an "acquiring person". As a result, holders of rights
other than the acquiring person and some other transferees and related persons
will be entitled to purchase shares of common stock at one-half their market
price. In general, the H&F investors and any permitted transferee of the H&F
investors that beneficially owns more than 15% of the outstanding common stock
after a transfer from the H&F investors will not become an acquiring person
unless they acquire additional shares of common stock under circumstances
described in the stockholder rights plan. While the stockholder rights plan is
designed to protect stockholders in the event of an unsolicited offer and other
takeover tactics which, in the opinion of the board of directors, could impair
Y&R's ability to represent stockholder interests, the provisions of the
stockholder rights plan may render an unsolicited takeover of Y&R more difficult
or less likely to occur or might prevent such a takeover.
These provisions of our organizational documents, Delaware law and the
stockholder rights plan, together with the control of 28.5% of the outstanding
shares of common stock by the management voting trust upon completion of the
offering (assuming the exercise of all options held by management investors that
are currently vested or will vest within 60 days of the date of this prospectus
and based upon information as of November 12, 1999), could discourage potential
acquisition proposals and could delay, deter or prevent a change in control of
Y&R, although a majority of Y&R's stockholders might consider these acquisition
proposals, if made, to be desirable. These provisions also could make it more
difficult for third parties to remove and replace the members of the board of
directors. Moreover, these provisions could diminish the opportunities for a
stockholder to participate in tender offers, including tender offers at prices
above the then-current market price of the common stock, and may also inhibit
increases in the market price of the common stock that could result from
takeover attempts or speculation. In addition, some options issued to our
employees contain change in control
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provisions that could have the effect of delaying, deterring or preventing a
change in control of us.
OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM RESULTS ANTICIPATED IN
FORWARD-LOOKING STATEMENTS WE MAKE.
Some of the statements included or incorporated by reference in this
prospectus are forward-looking statements. These forward-looking statements
include statements in the "Young & Rubicam Inc.--Industry Trends" and
"--Strategy" sections of this prospectus relating to trends in the advertising
and marketing and communications industries, including anticipated advertising
expenditures, and the growth thereof, in the world's advertising markets. These
forward-looking statements also include statements relating to Y&R's performance
in the "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business" sections of our Annual Report on Form 10-K for the
year ended December 31, 1998 and Quarterly Reports on Form 10-Q for the first,
second and third quarters of 1999. In addition, we may make forward-looking
statements in future filings with the Securities and Exchange Commission, and in
written material, press releases and oral statements issued by or on behalf of
us. Forward-looking statements include statements regarding the intent, belief
or current expectations of Y&R or its officers. Forward-looking statements
include statements preceded by, followed by or that include forward-looking
terminology such as "may," "will," "should," "believes," "expects,"
"anticipates," "estimates," "continues" or similar expressions.
It is important to note that our actual results could differ materially
from those anticipated in these forward-looking statements depending on various
important factors. These important factors include the following:
o revenues received from clients, including under incentive compensation
arrangements entered into by us with clients;
o gains or losses of clients and client business and projects, as well as
changes in the marketing and communications budgets of clients;
o our ability to successfully integrate companies and businesses that we
acquire;
o the overall level of economic activity in the principal markets in
which we conduct business and other trends affecting our financial
condition or results of operations;
o the impact of competition in the marketing and communications industry;
o our liquidity and financing plans; and
o risks associated with our efforts to comply with Year 2000
requirements.
All forward-looking statements included in this prospectus are based on
information available to us on the date hereof. We do not undertake to update
any forward-looking statements that may be made by or on behalf of us, in this
prospectus or otherwise. In addition, the matters set forth above in this "Risk
Factors" section constitute cautionary statements identifying important factors
with respect to these forward-looking statements, including risks and
uncertainties that could cause actual results to differ materially from those
included in these forward-looking statements.
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YOUNG & RUBICAM INC.
Young & Rubicam Inc. ("Y&R") is the fifth largest consolidated marketing
and communications organization in the world based on 1998 revenues. Since our
founding 75 years ago, we have evolved from a single New York-based advertising
agency to a diversified global marketing and communications company operating in
121 cities in 76 countries worldwide as of December 31, 1998. We operate through
recognized market leaders including:
o Young & Rubicam Advertising, full-service advertising;
o Dentsu Young & Rubicam, full-service advertising in the Asia/Pacific
region;
o The Bravo Group and Kang & Lee, multi-cultural marketing and
communications;
o Wunderman Cato Johnson, direct marketing and sales promotion;
o KnowledgeBase Marketing, customer relationship marketing;
o Brand Dialogue, digital interactive branding and digital commerce;
o The Media Edge, media planning, buying and placement services;
o Burson-Marsteller, perception management and public relations;
o Cohn & Wolfe, full-service public relations;
o Landor Associates, branding consultation and design services; and
o Sudler & Hennessey, healthcare communications.
Our revenues in 1998 totaled $1.5 billion, representing a compound annual
growth rate of 12.2% from 1994 to 1998.
We are a single agency network, allowing us to centrally manage and
utilize our resources. Through multi-disciplinary, client-focused teams, we
provide clients with global access to fully integrated marketing and
communications solutions. Among our approximately 5,500 client accounts are a
number of large multinational organizations, including AT&T, Citibank,
Colgate-Palmolive, Ford and Philip Morris. We have maintained long-standing
relationships with many of our clients. The average length of relationship with
our top 20 clients exceeds 20 years.
Our mission is to be our clients' most valued business partner in
building, leveraging, protecting and managing their brands for both short-term
results and long-term growth. Consistent with our mission, we have developed an
organizational and management structure designed to meet the diverse needs of
our large global clients as well as the more specialized needs of our other
clients. Our strategy combines this organizational and management structure with
the pursuit of new business opportunities and continued investment in our
business, personnel and superior consumer knowledge. As part of our strategy, we
seek to provide clients with superior creative services and extensive research
capabilities, including access to Y&R's proprietary research tool, BrandAsset
Valuator.
In late 1992, we created the Key Corporate Account, or 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 our revenues
and profits, and are served on a multinational basis by two or more of our
businesses. Revenues from the client accounts designated as KCAs accounted for
48.6% of our consolidated revenues in 1998. In order to further strengthen
client relationships and reward us for meeting or exceeding performance targets,
we are working with KCAs to adopt incentive compensation arrangements that align
our compensation with our performance and our clients' business performance.
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 industries,
including the following:
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o 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 $200 billion in 1998.
o GROWTH OF 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 52% in 1998.
o 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.
o 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.
o 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
Our strategy consists of the following key components:
o INCREASE PENETRATION OF KEY CORPORATE ACCOUNTS. We believe that
there are significant opportunities to increase our share of the
marketing and communications expenditures of our KCAs by leveraging
our global network to provide integrated services. In recent years,
we have successfully increased our share of the marketing and
communications expenditures of some KCAs. KCAs also have increased
their use of multiple services offered by us over the same period.
During 1998, our 20 largest KCAs used the capabilities of an average
of five of our marketing and communications services.
o DEVELOP NEW CLIENT RELATIONSHIPS. We believe 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. We have successfully used our integrated and global
approach as an effective tool in winning new business.
o LEVERAGE EXISTING GLOBAL NETWORK. With a worldwide presence in 76
countries as of December 31, 1998, we believe that we are well
positioned to continue to benefit from the trend toward the
globalization of client marketing and communications needs and the
consolidation of those needs with a single global network.
o CAPITALIZE ON EXISTING CAPABILITIES. We intend to continue the
development of our existing capabilities into more visible and
accessible client services. For example, we created our Brand
Dialogue unit in 1997 by combining the existing interactive
capabilities of Young & Rubicam Advertising and Wunderman Cato
Johnson in the United States, Latin America, Europe and the
Asia/Pacific region.
o UTILIZE SUPERIOR CONSUMER KNOWLEDGE AND BRAND INSIGHTS. To assist
our clients in building, leveraging, protecting and managing their
brands, we have developed and are maintaining extensive knowledge of
consumer brand perceptions. For example, we have developed
BrandAsset Valuator, a proprietary database that reflects the
perceptions of over 95,000 consumers in 32 countries on five
continents. We believe that BrandAsset Valuator is the first global
consumer study that provides
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an empirically derived model for how brands gain and lose their
strength over time.
o CULTIVATE CREATIVE EXCELLENCE. We intend to continue emphasizing the
importance of creative marketing and communications. We have 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. We have also performed identity and design assignments,
including the creation of corporate identities, for Lucent
Technologies, Netscape and the 2002 Salt Lake City Olympics.
o IMPROVE OPERATING EFFICIENCIES. We believe that opportunities exist
to improve operating efficiencies in order to expand margins and
increase future profitability. For example, we have implemented
initiatives that have both improved productivity and reduced
compensation expense as a percentage of consolidated revenues.
o EXPAND CAPABILITIES THROUGH ACQUISITIONS AND INVESTMENTS. In order
to add new capabilities, enhance our existing capabilities and
expand the geographic scope of our operations, we regularly evaluate
and intend to pursue appropriate acquisition and investment
opportunities. For example, in May 1999, we acquired KnowledgeBase
Marketing, Inc., a provider of database and analytical services, in
a stock and cash transaction valued at approximately $175 million.
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RECENT DEVELOPMENTS
On September 21, 1999, we contributed $15 million and certain net assets
of our Brand Dialogue operations in exchange for an ownership interest in
Luminant Worldwide Corporation, or Luminant, a newly formed internet and
e-commerce services firm that provides strategic consulting, content development
and systems integration capabilities to its clients. Under the terms of the
contribution agreement between Luminant and Y&R, we are eligible to receive
future contingent consideration from Luminant in the form of non-voting shares
of Luminant common stock and/or cash, at Luminant's discretion, based on the
revenue and operating profit performance of the Brand Dialogue contributed
assets for the period from July 1, 1999 through December 31, 1999 and on the
consolidated performance of Luminant for the first six months of 2000. We
recognized a net after-tax gain of approximately $42 million on the sale of the
Brand Dialogue contributed assets in the third quarter of 1999.
Effective August 2, 1999, the ownership and management structure of
Dentsu Young & Rubicam, which we refer to as DY&R, was amended. The agreement
resulted in our acquiring majority ownership in and operational control of all
DY&R companies throughout principal markets in Asia, excluding Japan. In Japan,
Dentsu has acquired a majority share. We paid approximately $6 million for the
incremental ownership interest and in the first quarter of 2001, will pay $4
million and may pay contingent consideration of up to an additional $1.5 million
in connection with this transaction, subject to DY&R's financial performance.
Effective August 2, 1999, we commenced consolidating the results of DY&R for
those markets where we hold a majority ownership interest. A preliminary
allocation of the cost to acquire the additional interest in DY&R has been made
based upon the fair value of the net assets.
During the third quarter of 1999, we acquired Rainey Kelly Campbell
Roalfe, a London-based advertising agency, and a majority ownership interest in
The Banner Corporation, a European marketing communications firm specializing in
the technology sector, and made several other acquisitions and equity
investments for which the aggregate purchase price was approximately $43
million. Some of these transactions may require us to pay additional amounts as
contingent consideration over a period not to exceed five years, based on
company performance and the achievement of stipulated targets. All of these
acquisitions were accounted for under the purchase method of accounting, and a
preliminary allocation of the costs to acquire these entities has been made
based on the fair value of the net assets. Since September 30, 1999, we have
also acquired ownership interests in certain other entities. Cash payments made
in connection with these transactions amounted to approximately $40 million.
In the third quarter of 1999, we repurchased approximately 800,000 shares
of common stock at an average price of $42.13 on the open market and in other
transactions. From October 1, 1999 through November 12, 1999, we repurchased an
additional approximately 1.0 million shares of common stock at an average price
of $44.85 on the open market and in other transactions. This brings the total to
5.4 million shares repurchased under our existing 12 million share repurchase
program. The shares are being purchased under this program principally in
anticipation of exercises of outstanding employee stock options, and will likely
be reissued to employees as options are exercised.
In August 1999, we announced certain changes in our senior management
team. Effective August 2, 1999, Ed Vick was named Chief Creative Officer and Tom
Bell was named President and Chief Operating Officer of Young & Rubicam Inc. On
January 1, 2000, Mr. Vick will become our Chairman and Mr. Bell will become our
Chief Executive Officer, as Peter Georgescu, our current Chairman and Chief
Executive Officer, assumes the role of Chairman Emeritus. As Chairman Emeritus,
Mr. Georgescu will continue to be active in client work and on other key
corporate initiatives.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of common
stock by the selling stockholders. We expect to receive $19.4 million in cash in
connection with the exercise by the H&F investors of options to purchase
2,530,260 shares of common stock.
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SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated statement of operations data and
consolidated balance sheet data as of and for the years ended December 31, 1994
through 1998 have been derived from Y&R's audited annual consolidated financial
statements, including the consolidated balance sheets as of December 31, 1997
and 1998 and the related consolidated statements of operations and of cash flows
for the three years ended December 31, 1998 and the notes thereto incorporated
by reference in this prospectus.
Data for the nine months ended September 30, 1999 and 1998 have been
derived from Y&R's unaudited interim consolidated financial statements,
including the consolidated balance sheet as of September 30, 1999 and the
related consolidated statements of operations and of cash flows for the nine
months ended September 30, 1999 and 1998 and the notes thereto incorporated by
reference in this prospectus.
The selected consolidated financial data set forth below should be read
in conjunction with the consolidated financial statements incorporated by
reference in this prospectus. See "Available Information."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1999 1998
------------- -------------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ..................................... $ 1,226,686 $ 1,095,720
Compensation expense, including employee
benefits .................................... 724,491 659,449
General and administrative expenses .......... 359,498 324,783
Other charges(1) ............................. -- 234,449
Recapitalization-related charges(1) .......... -- --
----------- -----------
Operating expenses .......................... 1,083,989 1,218,681
----------- -----------
Operating profit (loss) ...................... 142,697 (122,961)
Interest income .............................. 8,554 6,129
Interest expense ............................. (17,778) (19,144)
Other income ................................. 70,835 2,200
----------- -----------
Income (loss) before income taxes ............ 204,308 (133,776)
Income tax provision (benefit) ............... 81,723 (22,291)
----------- -----------
122,585 (111,485)
Equity in net income (loss) of
unconsolidated companies .................... 3,049 3,194
Minority interest in net (income) loss of
consolidated subsidiaries ................... (1,406) (604)
----------- -----------
Income (loss) before extraordinary charge .... 124,228 (108,595)
Extraordinary charge for early retirement of
debt (net of tax benefit of $2,834) ......... -- (4,433)
----------- -----------
Net income (loss) ............................ $ 124,228 $ (113,328)
=========== ===========
EARNINGS (LOSS) PER SHARE(2):
Basic:
Income (loss) before extraordinary
charge(2) .................................. $ 1.83 $ (1.84)
Extraordinary charge ........................ -- (0.08)
----------- -----------
Net income (loss) ........................... $ 1.83 $ (1.92)
=========== ===========
Diluted:
Income (loss) before extraordinary
charge(2) .................................. $ 1.50 $ (1.84)
Extraordinary charge ........................ -- (0.08)
----------- -----------
Net income (loss) ........................... $ 1.50 $ (1.92)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING USED
TO COMPUTE:
Basic ........................................ 67,914,158 58,939,274
Diluted ...................................... 82,595,373 58,939,274
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ..................................... $ 1,522,464 $ 1,382,740 $1,222,139 $1,085,494 $ 959,275
Compensation expense, including employee
benefits .................................... 903,948 836,150 730,261 672,026 594,322
General and administrative expenses .......... 455,578 463,936 391,617 356,523 323,087
Other charges(1) ............................. 234,449 11,925 17,166 31,465 4,507
Recapitalization-related charges(1) .......... -- -- 315,397 -- --
----------- ----------- ---------- ---------- ---------
Operating expenses .......................... 1,593,975 1,312,011 1,454,441 1,060,014 921,916
----------- ----------- ---------- ---------- ---------
Operating profit (loss) ...................... (71,511) 70,729 (232,302) 25,480 37,359
Interest income .............................. 8,315 8,454 10,269 9,866 12,100
Interest expense ............................. (26,001) (42,879) (28,584) (27,441) (23,027)
Other income ................................. 2,200 -- -- -- --
----------- ----------- ---------- ---------- ---------
Income (loss) before income taxes ............ (86,997) 36,304 (250,617) 7,905 26,432
Income tax provision (benefit) ............... (2,644) 58,290 (20,611) 9,130 12,998
----------- ----------- ---------- ---------- ---------
(84,353) (21,986) (230,006) (1,225) 13,434
Equity in net income (loss) of
unconsolidated companies .................... 4,707 342 (9,837) 5,197 4,740
Minority interest in net (income) loss of
consolidated subsidiaries ................... (1,989) (2,294) 1,532 (3,152) (2,742)
----------- ----------- ---------- ---------- ---------
Income (loss) before extraordinary charge .... (81,635) (23,938) (238,311) 820 15,432
Extraordinary charge for early retirement of
debt (net of tax benefit of $2,834) ......... (4,433) -- -- -- --
----------- ----------- ---------- ---------- ---------
Net income (loss) ............................ $ (86,068) $ (23,938) $ (238,311) $ 820 $ 15,432
=========== =========== ========== ========== =========
EARNINGS (LOSS) PER SHARE(2):
Basic:
Income (loss) before extraordinary
charge(2) .................................. $ (1.34) $ (0.51)
Extraordinary charge ........................ (0.08) --
----------- -----------
Net income (loss) ........................... $ (1.42) $ (0.51)
=========== ===========
Diluted:
Income (loss) before extraordinary
charge(2) .................................. $ (1.34) $ (0.51)
Extraordinary charge ........................ (0.08) --
----------- -----------
Net income (loss) ........................... $ (1.42) $ (0.51)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING USED
TO COMPUTE:
Basic ........................................ 60,673,994 46,949,355
Diluted ...................................... 60,673,994 46,949,355
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1999 1998
------------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
OTHER OPERATING DATA:
EBITDA(3) ..................................... $ 194,232 $ 154,549
Net cash provided by operating
activities ................................... 70,391 22,073
Net cash used in investing activities ......... 211,705 39,260
Net cash provided by (used in) financing
activities ................................... 112,155 (75,444)
Capital expenditures .......................... 53,947 34,784
International revenues as a % of
total revenues ............................... 45.8% 48.2%
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ----------- ----------- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OTHER OPERATING DATA:
EBITDA(3) ..................................... $ 223,548 $ 139,375 $ 147,221 $ 72,972 $ 77,662
Net cash provided by operating
activities ................................... 195,615 224,511 178,064 79,809 43,314
Net cash used in investing activities ......... 99,683 67,142 76,094 45,821 49,941
Net cash provided by (used in) financing
activities ................................... (136,242) (98,667) (12,614) (50,025) (30,705)
Capital expenditures .......................... 76,378 51,899 51,792 42,096 33,196
International revenues as a % of
total revenues ............................... 49.1% 52.2% 53.3% 54.7% 53.6%
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
---------------------
1999
---------------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Working capital (deficit)(4) ............ $ (110,191)
Total assets(5) ......................... 2,104,804
Total debt(6) ........................... 344,422
Mandatorily redeemable equity
securities(7) .......................... --
Total stockholders' equity (deficit) .... 289,571
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- -------------- -------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)(4) ............ $ (216,888) $ (106,169) $ (196,509) $ 27,827 $ 72,651
Total assets(5) ......................... 1,635,119 1,537,807 1,598,812 1,226,581 1,118,846
Total debt(6) ........................... 63,925 351,051 267,238 230,831 256,032
Mandatorily redeemable equity
securities(7) .......................... -- 508,471 363,264 -- --
Total stockholders' equity (deficit) .... 114,969 (661,714) (480,033) (55,485) 69,982
</TABLE>
<PAGE>
- ----------
(1) For a discussion of other charges and recapitalization-related charges for
the years ended December 31, 1998, 1997 and 1996, see notes 4, 6 and 9 to
the audited consolidated financial statements incorporated by reference in
this prospectus.
(2) At September 30, 1999, Y&R had outstanding options to purchase 28,639,817
shares of common stock with a weighted average exercise price of $12.61 that
could potentially dilute basic earnings per share in the future. For a
discussion of options outstanding, see note 3 to the unaudited interim
consolidated financial statements and note 18 to the audited consolidated
financial statements incorporated by reference in this prospectus.
Earnings per share for 1996 and 1995 cannot be computed because Y&R's
capital structure prior to its recapitalization in 1996 consisted of both
common shares and limited partnership units in predecessor entities. For a
discussion of the recapitalization, see note 6 to the audited consolidated
financial statements incorporated by reference in this prospectus.
(3) EBITDA is defined as operating profit (loss) 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 Y&R's credit facilities; however, EBITDA may not be comparable
to other registrants' calculation of EBITDA or similarly titled items. You
should not consider EBITDA to be 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. EBITDA for the nine months ended September 30, 1998 and for the
1998 year is before $234,449 of non-cash compensation charges taken at the
time of our initial public offering in May 1998. EBITDA for 1997 and 1996 is
before $11,925 and $11,096, respectively, of non-cash charges primarily
related to impairment write-downs which are included in other charges. For a
discussion of other charges and recapitalization-related charges for the
years ended December 31, 1998, 1997 and 1996, see notes 4, 6 and 9 to the
audited consolidated financial statements incorporated by reference in this
prospectus.
(4) Working capital balances are significantly impacted by the seasonal media
spending patterns of advertisers, including the timing of payments made to
media and other suppliers on behalf of clients as well as the timing of cash
collection from clients to fund each expenditure.
(5) Total assets as of September 30, 1999 include net deferred tax assets of
$145,926 consisting primarily of federal, state and foreign net operating
loss carryforwards.
(6) Total debt includes current and non-current loans and installment notes,
which are discussed in notes 14 and 15 to the audited consolidated financial
statements incorporated by reference in this prospectus.
(7) From the date of completion of the recapitalization of Y&R in 1996 and
through the date of completion of the IPO, all outstanding shares of common
stock, exclusive of shares of common stock held in a restricted stock trust
under our restricted stock plan, were redeemable, subject to restrictions,
at the option of the stockholder. Accordingly, all of these shares of common
stock were recorded at their redemption values and classified as mandatorily
redeemable equity securities at December 31, 1997 and 1996. For a discussion
of the mandatorily redeemable equity securities, see note 17 to the audited
consolidated financial statements incorporated by reference in this
prospectus.
19
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the name of each selling stockholder and
information regarding the beneficial ownership of the common stock and options
to purchase common stock by the selling stockholders as of November 16, 1999,
and as adjusted to reflect the sale of shares of common stock in the offering.
The information in the table below has been calculated in accordance with Rule
13d-3 under the Securities Exchange Act of 1934 . Except as described below, 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.
In connection with the offering, the H&F investors have notified Y&R that
they intend to exercise options to purchase 2,530,260 shares of common stock for
a total exercise price of $19.4 million and to distribute all of the shares of
Y&R common stock owned by them, other than the shares to be sold by them in the
offering, to some of their limited partners and to individuals and entities that
control the H&F investors.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING AFTER OFFERING
---------------------------------- ------------------------------
SHARES AND SHARES SHARES AND
VESTED VESTED BEING VESTED VESTED
OPTIONS OPTIONS PERCENT OFFERED OPTIONS OPTIONS PERCENT
------------ ----------- --------- ----------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Hellman & Friedman Capital
Partners III, L.P.(1) ..................... 6,157,027 2,311,590 8.6% 4,749,971 -- -- --
H&F Orchard Partners III, L.P.(1) .......... 448,632 168,270 * 370,390 -- -- --
H&F International Partners III, L.P.(1)..... 134,561 50,400 * 111,082 -- -- --
</TABLE>
- ----------
* Less than one percent.
(1) Hellman & Friedman Capital Partners III, L.P., H&F Orchard Partners III,
L.P. and H&F International Partners III, L.P. have notified Y&R that they
intend to distribute an aggregate of 1,407,056, 78,242 and 23,479 shares of
common stock, respectively, to some of their limited partners and to
individuals and entities that control the H&F investors. The H&F investors
also intend to exercise all options to purchase shares of Y&R common stock
held by them on or before the date of the offering.
20
<PAGE>
UNDERWRITING
Subject to the terms and conditions of an Underwriting Agreement, dated
November , 1999 (the "Underwriting Agreement"), the Underwriters named below
(the "Underwriters"), who are represented by Bear, Stearns & Co. Inc. ("Bear
Stearns"), Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), Salomon
Smith Barney Inc. ("SSB"), Banc of America Securities LLC, Goldman, Sachs & Co.,
ING Barings LLC, Merrill Lynch & Co., Morgan Stanley & Co. Incorporated and
Thomas Weisel Partners LLC (the "Representatives"), have severally agreed to
purchase from the selling stockholders the respective number of shares of common
stock set forth opposite their names below.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ------------------------------------------------------------------ -----------------
<S> <C>
Bear, Stearns & Co. Inc. .....................................
Donaldson, Lufkin & Jenrette Securities Corporation ..........
Salomon Smith Barney Inc. ....................................
Banc of America Securities LLC ...............................
Goldman, Sachs & Co. .........................................
ING Barings LLC ..............................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated. ..........
Morgan Stanley & Co. Incorporated ............................
Thomas Weisel Partners LLC. ..................................
-----------------
Total ......................................................
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of common stock
offered by this prospectus are subject to approval by their counsel of legal
matters and to other conditions set forth in the Underwriting Agreement. 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 that 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.
Each of Matthew R. Barger, John M. Pasquesi, Brian M. Powers, Thomas F.
Steyer, Marco W. Hellman, Mitchell R. Cohen, Joseph M. Niehaus, The Tully M.
Friedman 1997 Charitable Lead Annuity Trust, The Jackson Street Trust and The
Tully M. Friedman Revocable Trust is an affiliate of the H&F investors, to whom
the H&F investors will distribute shares of Y&R common stock in connection with
the offering. These individuals and entities will grant to the 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 284,000
shares of common stock (consisting of 30,000, 50,000, 11,000, 64,000, 42,000,
15,000, 15,000, 12,000, 20,000 and 25,000 shares, respectively), at the public
offering price less underwriting discounts and commissions. The Underwriters may
exercise this option solely to cover over-allotments, if any, made in connection
with the offering. To the extent that the Underwriters exercise this option,
each Underwriter will become obligated, subject to certain conditions, to
purchase its pro rata portion of these additional shares based on the
Underwriter's percentage underwriting commitment in the offering as indicated in
the preceding table.
The following table shows the per share and total underwriting discounts
to be paid to the Underwriters by the selling stockholders. These amounts are
shown assuming both no
21
<PAGE>
exercise and full exercise of the Underwriters' over-allotment option.
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
------------- --------------
<S> <C> <C>
Per share .......... $ $
Total ..............
</TABLE>
Y&R 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 of those liabilities.
Y&R has agreed to pay expenses incurred by the selling stockholders in
connection with the offering, other than the underwriting discount. Y&R
estimates that the expenses that it will bear in connection with the offering
will total approximately $550,000.
Certain affiliates of the H&F investors, who upon completion of the
offering collectively will hold an aggregate of 1,313,484 shares, have agreed
not to:
o 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
o 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 these transactions
are to be settled by the delivery of common stock, or such other
securities, in cash or otherwise) for a period of 90 days after the
date of this prospectus without the prior written consent of Bear
Stearns, DLJ and SSB.
In addition, during this period, certain affiliates of the H&F Investors
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 Bear Stearns, DLJ and SSB.
Other than in the United States, no action has been taken by Y&R, the
selling stockholders or the Underwriters that would permit a public offering of
the shares of common stock offered by this prospectus in any jurisdiction where
action for that purpose is required. The shares of common stock offered by this
prospectus 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 that jurisdiction.
Persons into whose possession this prospectus comes are advised to inform
themselves about and to observe any restrictions relating to the offering 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 by this prospectus in any jurisdiction in which such an offer or a
solicitation is unlawful.
In order to facilitate the offering, the Underwriters participating in
the offering may engage in transactions that stabilize, maintain or otherwise
affect the price of the common stock during and after the offering.
Specifically, the Underwriters may over-allot or otherwise create a short
position in the common stock for their own account by selling more shares of
common stock than have been sold to them by the selling stockholders. The
Underwriters may elect to cover this short position by purchasing shares of
common stock in the open market or by exercising the over-allotment option
granted to the Underwriters. In addition, the Underwriters may stabilize or
maintain the price of the common stock by bidding for or purchasing shares of
common stock in the open market and may impose penalty bids, under which selling
concessions allowed to syndicate members or other broker-dealers participating
in the offering are reclaimed if shares previously distributed in the offering
are repurchased in connection with stabilization transactions or otherwise. The
effect of these transactions may be to stabilize the market price of the common
stock at a level above that which might otherwise prevail in the open market.
The imposition of a penalty bid may also affect the price of the common stock to
the
22
<PAGE>
extent that it discourages resales of the common stock. No representation is
made as to the magnitude or effect of any stabilization or other transactions.
These transactions, if commenced, may be discontinued at any time.
Thomas Weisel Partners LLC, one of the Representatives of the
underwriters, was organized and registered as a broker-dealer in December 1998.
Since December 1998, Thomas Weisel Partners LLC has been named as a lead or
co-manager on 79 filed public offerings of equity securities, of which 58 have
been completed, and has acted as a syndicate member in an additional 41 public
offerings of equity securities. Thomas Weisel Partners LLC does not have any
material relationship with us or any of our officers, directors or other
controlling persons, except with respect to its contractual relationship with us
pursuant to the underwriting agreement entered into in connection with this
offering.
Bear Stearns, DLJ and other Representatives from time to time perform
investment banking and other financial services for Y&R and its affiliates for
which they have received advisory or transaction fees, as applicable, plus
out-of-pocket expenses, of the nature and in amounts customary in the industry
for these financial services. Alan D. Schwartz, an Executive Vice President and
Head of the Investment Banking Department of Bear Stearns, is a member of Y&R's
board of directors.
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus
will be passed upon for Y&R by Cleary, Gottlieb, Steen & Hamilton, New York, New
York. Certain legal matters in connection with the offering will be passed upon
for the Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New
York.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K of Young & Rubicam Inc. for the year
ended December 31, 1998 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
23
<PAGE>
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-3. This prospectus is a part of the registration statement
and does not contain all of the information set forth in the registration
statement. For further information with respect to Y&R and the common stock, you
should refer to the registration statement. Statements contained in this
prospectus as to the contents of any contract or other document referred to in
this prospectus are not necessarily complete. Where a contract or other document
is an exhibit to the registration statement, each of those statements is
qualified in all respects by the provisions of the exhibit, to which reference
is hereby made.
We are required to file annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission.
You may review the registration statement, as well as reports and other
information we have filed, without charge at the Commission's public reference
room at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies may also 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. These materials may also be inspected at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New York 10005. For
further information on the operation of the public reference rooms, please call
1-800-SEC-0330. You may also review these statements 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.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below.
o Y&R's Annual Report on Form 10-K for the year ended December 31, 1998;
o Y&R's Quarterly Reports on Form 10-Q for the quarterly periods ended
March 31, 1999, June 30, 1999 and September 30, 1999;
o The description of our common stock contained in Y&R's registration
statement (Registration No. 001-14093) on Form 8-A, and any
amendment or report filed for the purpose of updating that
description; and
o The description of our preferred share purchase rights contained in
Y&R's registration statement (Registration No. 001-14093) on Form
8-A, and any amendment or report filed for the purpose of updating
that description.
We also incorporate by reference any future filings made with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until the termination of the offering of common stock offered hereby.
We will provide without charge to each person, including any beneficial
owner, to whom this prospectus is delivered, upon written or oral request, a
copy of any or all of the documents incorporated by reference in this
prospectus, other than exhibits to those documents, unless the exhibits to those
documents are specifically incorporated by reference into those documents.
Requests for copies should be directed to Young & Rubicam Inc., 285 Madison
Avenue, New York, New York 10017, Attention: Investor Relations, telephone (212)
210-3000.
24
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ONLY THE SHARES OFFERED BY
THIS PROSPECTUS, BUT ONLY UNDER CIRCUMSTANCES AND IN JURISDICTIONS WHERE IT IS
LAWFUL TO DO SO. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CURRENT ONLY AS
OF ITS DATE.
------------------------------------------------
TABLE OF CONTENTS
------------------------------------------------
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary ...................... 1
Risk Factors ............................ 7
Young & Rubicam Inc. .................... 14
Recent Developments ..................... 17
Use of Proceeds ......................... 17
Selected Consolidated Financial Data..... 18
Selling Stockholders .................... 20
Underwriting ............................ 21
Legal Matters ........................... 23
Experts ................................. 23
Available Information ................... 24
</TABLE>
================================================================================
YOUNG & RUBICAM INC.
5,231,443 SHARES
COMMON STOCK
--------------------------------
PROSPECTUS
--------------------------------
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SALOMON SMITH BARNEY
--------------------------------
BANC OF AMERICA SECURITIES LLC
GOLDMAN, SACHS & CO.
ING BARINGS
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
THOMAS WEISEL PARTNERS LLC
, 1999
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. 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>
Securities and Exchange Commission registration fee ................. $ 67,421
National Association of Securities Dealers, Inc. filing fee ......... 30,500
Legal fees and expenses ............................................. 200,000
Accounting fees and expenses ........................................ 100,000
Printing and engraving expenses ..................................... 100,000
Registrar and transfer agent's fee .................................. 25,000
Miscellaneous ....................................................... 27,079
--------
Total .............................................................. $550,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article XI of Young & Rubicam Inc.'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 Y&R 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 Section shall be a
contract right and shall include the right to be paid by the Company the
expenses incurred in
II-1
<PAGE>
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 145 of the General Corporation Law of the State of Delaware
provides as follows:
(a) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that the person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with such
action, suit or proceeding if the person acted in good faith and in a manner
the person reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe the person's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not,
of itself, create a presumption that the
II-2
<PAGE>
person did not act in good faith and in a manner which the person reasonably
believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had reasonable cause
to believe that the person's conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by the person in connection with the defense or settlement of such action or
suit if the person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the Court of Chancery or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which the Court of Chancery or such other
court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of
the present or former director, officer, employee or agent is proper in the
circumstances because the person has met the applicable standard of conduct
set forth in subsections (a) and (b) of this section. Such determination
shall be made, with respect to a person who is a director or officer at the
time of such determination, (1) by a majority vote of the directors who are
not parties to such action, suit or proceeding, even though less than a
quorum, or (2) by a committee of such directors designated by majority vote
of such directors, even though less than a quorum, or (3) if there are no
such directors, or if such directors so direct, by independent legal counsel
in a written opinion, or (4) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by former directors and officers or
other employees and agents may be so paid upon such terms and conditions, if
any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted under, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
such person's official capacity and as to action in another capacity while
holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
II-3
<PAGE>
against such person and incurred by such person in any such capacity, or
arising out of such person's status as such, whether or not the corporation
would have the power to indemnify such person against such liability under
this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with respect
to the resulting or surviving corporation as such person would have respect
to such constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan;
and references to "servicing at the request of the corporation" shall include
any service as a director, officer, employee or agent of the corporation
which imposes duties on, or involves services by, such director, officer,
employee, or agent with respect to an employee benefit plan, its participants
or beneficiaries; and a person who acted in good faith and in a manner such
person reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to
in this section.
(j) The indemnification and advancement of expense proved by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise. The Court of Chancery
may summarily determine a corporation's obligation to advance expenses
(including attorneys' fees).
Section 5 of the Young & Rubicam Inc. 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 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
II-4
<PAGE>
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 Young & Rubicam Holdings Inc. Restricted Stock Plan and Management
Stock Option Plan each provide that no member of the Compensation Committee of
the board of directors or of the board of directors 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 board of directors. The Young & Rubicam Inc. 1997
Incentive Compensation Plan (the "1997 ICP") provides that no member of the
Compensation Committee of the board of directors or any officer or employee of
Y&R 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, and shall, to the extent
permitted by law, be fully indemnified and protected by Y&R with respect to any
such action or determination.
Young & Rubicam Inc. 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 Young & Rubicam Inc. in
certain circumstances.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO DESCRIPTION
-------- ------------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement.
4.1 -- Specimen Certificate of Common Stock of Y&R (incorporated by reference from Exhibit 4.1
to the Registration Statement on Form S-1 (File No. 333-46929) filed by Y&R).
4.2 -- Rights Agreement, dated as of May 1, 1998 (incorporated by reference from Exhibit 4.9 to
the Registration Statement on Form S-8 (File No. 333-57605) filed by Y&R).
4.3 -- Certificate of Designation for Y&R's Cumulative Participating Junior Preferred Stock
(incorporated by reference from Exhibit 4.3 to the Registration Statement on Form S-1
(File No. 333-66883) filed by Y&R).
5.1 -- Opinion of Cleary, Gottlieb, Steen & Hamilton, counsel to Y&R, as to the legality of the
shares of Common Stock being registered.
23.1 -- Consent of PricewaterhouseCoopers LLP.
23.2 -- Consent of Cleary, Gottlieb, Steen & Hamilton (included in opinion filed as Exhibit 5.1).
24.1 -- Powers of Attorney (included on signature pages).*
</TABLE>
- ----------
* Previously filed.
II-5
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(a) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement 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.
(b) 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 court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(c) (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, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
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-3 and has duly caused this Amendment No. 2 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 November 16,
1999.
YOUNG & RUBICAM INC.
By: /s/ Stephanie W. Abramson
------------------------------------
Name: Stephanie W. Abramson
Title: Executive Vice President and
General Counsel
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
---------- ------ -----
<S> <C> <C>
*
- ----------------------------- Chairman of the Board and Chief November 16, 1999
Peter A. Georgescu Executive Officer
(principal executive officer)
*
- ----------------------------- Vice Chairman, Chief Financial November 16, 1999
Michael J. Dolan Officer and Director
(principal financial officer)
*
- ----------------------------- Senior Vice President, Finance November 16, 1999
Jacques Tortoroli (principal accounting officer)
*
- ----------------------------- Chief Creative Officer November 16, 1999
Edward H. Vick and Director
*
- ----------------------------- President, Chief Operating Officer November 16, 1999
Thomas D. Bell, Jr. and Director
* Director November 16, 1999
- -----------------------------
F. Warren Hellman
*
- ----------------------------- Director November 16, 1999
Richard S. Bodman
*
- -----------------------------
Philip U. Hammarskjold Director November 16, 1999
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------- ---------- ------------------
<S> <C> <C>
*
- ----------------------------- Director November 16, 1999
Sir Christopher Lewinton
*
- ----------------------------- Director November 16, 1999
Alan D. Schwartz
*
- ----------------------------- Director November 16, 1999
John F. McGillicuddy
</TABLE>
By: /s/ Stephanie W. Abramson
---------------------------
Name: Stephanie W. Abramson
Title: Attorney-in-Fact
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO DESCRIPTION
- -------- ------------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement.
4.1 -- Specimen Certificate of Common Stock of Y&R (incorporated by reference from Exhibit 4.1
to the Registration Statement on Form S-1 (File No. 333-46929) filed by Y&R).
4.2 -- Rights Agreement, dated as of May 1, 1998 (incorporated by reference from Exhibit 4.9 to
the Registration Statement on Form S-8 (File No. 333-57605) filed by Y&R).
4.3 -- Certificate of Designation for Y&R's Cumulative Participating Junior Preferred Stock
(incorporated by reference from Exhibit 4.3 to the Registration Statement on Form S-1
(File No. 333-66883) filed by Y&R).
5.1 -- Opinion of Cleary, Gottlieb, Steen & Hamilton, counsel to Y&R, as to the legality of the
shares of Common Stock being registered.
23.1 -- Consent of PricewaterhouseCoopers LLP.
23.2 -- Consent of Cleary, Gottlieb, Steen & Hamilton (included in opinion filed as Exhibit 5.1).
24.1 -- Powers of Attorney (included on signature pages).*
</TABLE>
- ----------
* Previously filed.
EXHIBIT 1.1
o Shares
Young & Rubicam Inc.
Common Stock
UNDERWRITING AGREEMENT
----------------------
November o, 1999
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON SMITH BARNEY INC.
BANC OF AMERICA SECURITIES LLC
GOLDMAN, SACHS & CO.
ING BARINGS LLC
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
THOMAS WEISEL PARTNERS LLC
As representatives of the
several Underwriters
named in Schedule I hereto
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Ladies and Gentlemen:
Certain stockholders of Young & Rubicam Inc., a Delaware corporation
(the "COMPANY"), named in Schedule II hereto (the "H&F SELLING STOCKHOLDERS")
severally propose to sell to the several Underwriters (as defined below) an
aggregate of o shares (the "Firm Shares") of the Company's Common Stock, par
value $.01 per share ("COMMON STOCK").
It is understood that, subject to the conditions hereinafter stated,
the Firm Shares will be sold to the several Underwriters named in Schedule I
hereto (the
<PAGE>
"UNDERWRITERS") in connection with the offering and sale of such Firm Shares.
Bear, Stearns & Co. Inc. ("BEAR STEARNS"), Donaldson, Lufkin & Jenrette
Securities Corporation, Salomon Smith Barney Inc., Banc of America Securities
LLC, Goldman, Sachs & Co., ING Barings LLC, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Morgan Stanley & Co. Incorporated and Thomas Weisel LLC
Partners shall act as representatives (the "REPRESENTATIVES") of the several
Underwriters.
The individuals or entities listed on Schedule III hereto (the "OPTION
SELLING STOCKHOLDERS") also severally propose to issue and sell to the several
Underwriters not more than an additional o shares of Common Stock (the
"ADDITIONAL SHARES"), if requested by the Underwriters as provided in Section 2
hereof. The Firm Shares and the Additional Shares are herein collectively called
the "SHARES." The H&F Selling Stockholders and the Option Selling Stockholders
are herein collectively called the "SELLING STOCKHOLDERS."
SECTION 1. Registration Statement and Prospectus. The Company meets
the requirements for use of Form S-3 under the Securities Act of 1933, as
amended, and the rules and regulations of the Securities and Exchange Commission
(the "COMMISSION") thereunder (collectively, the "ACT"). The Company has filed
with the Commission in accordance with the provisions of the Act, a registration
statement on Form S-3, including a form of prospectus, relating to the Shares.
The registration statement, as amended at the time it became effective,
including all documents filed with the Commission and incorporated by reference
therein and including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Act, is hereinafter referred to as the "REGISTRATION STATEMENT;" and the
prospectus in the form first filed pursuant to Rule 424(b) under the Act,
including all documents filed with the Commission and incorporated by reference
therein, is hereinafter collectively referred to as the "PROSPECTUS." If the
Company has filed or is required pursuant to the terms hereof to file a
registration statement pursuant to Rule 462(b) under the Act registering
additional shares of Common Stock (a "RULE 462(B) REGISTRATION STATEMENT"),
then, unless otherwise specified, any reference herein to the term "Registration
Statement" shall be deemed to include such Rule 462(b) Registration Statement.
The terms "SUPPLEMENT" and "AMENDMENT" or "AMEND" as used in this Agreement with
respect to the Registration Statement or the Prospectus shall include all
documents subsequently filed by the Company with the Commission pursuant to the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Commission thereunder (collectively, the "EXCHANGE ACT") that are deemed to
be incorporated by reference in the Prospectus.
2
<PAGE>
SECTION 2. Agreements to Sell and Purchase and Lock-Up Agreements. On
the basis of the representations and warranties contained in this Agreement (the
"AGREEMENT"), and subject to its terms and conditions, (i) each H&F Selling
Stockholder agrees, severally and not jointly, to sell the number of Firm Shares
set forth opposite such H&F Selling Stockholder's name in Schedule II and (ii)
each Underwriter agrees, severally and not jointly, to purchase from each H&F
Selling Stockholder at a price per Share of $o (the "PURCHASE PRICE") the number
of Firm Shares (subject to such adjustments to eliminate fractional shares as
you may determine) that bears the same proportion to the total number of Firm
Shares to be sold by such H&F Selling Stockholder as the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule I hereto bears to
the total number of Firm Shares.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Option Selling
Stockholders severally agree to sell the Additional Shares and the Underwriters
shall have the right to purchase, severally and not jointly, up to o Additional
Shares from the Option Selling Stockholders at the Purchase Price. Additional
Shares may be purchased solely for the purpose of covering over-allotments made
in connection with the offering of the Firm Shares. The Underwriters may
exercise their right to purchase Additional Shares in whole or in part from time
to time by giving written notice thereof to the Option Selling Stockholders and
the Company within 30 days after the date of this Agreement. The Representatives
shall give any such notice on behalf of the Underwriters and such notice shall
specify the aggregate number of Additional Shares to be purchased pursuant to
such exercise and the date for payment and delivery thereof, which date shall be
a business day (i) no earlier than two business days after such notice has been
given (and, in any event, no earlier than the Closing Date (as hereinafter
defined)) and (ii) no later than ten business days after such notice has been
given. If any Additional Shares are to be purchased, (i) each Option Selling
Stockholder agrees to sell to the Underwriters the number of Additional Shares
(subject to such adjustments to eliminate fractional shares as the
Representatives may determine) specified in such notice multiplied by a fraction
the numerator of which is the number of Additional Shares set forth opposite
each such Option Selling Stockholder's name on Schedule III hereto and the
denominator of which is the total number of Additional Shares and (ii) each
Underwriter, severally and not jointly, agrees to purchase from the Option
Selling Stockholders, the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as the Representatives may determine)
which bears the same proportion to the total number of Additional Shares to be
purchased from the Option Selling Stockholders, as the
3
<PAGE>
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I bears to the total number of Firm Shares.
Each individual or entity listed on Schedule IV hereto shall, prior to
or concurrently with the execution of this Agreement, execute and deliver an
agreement to the effect that such entity shall not, during the period commencing
on the date such entity signs such agreement and ending 90 days after the date
of the Prospectus, without the prior written consent of Bear, Stearns & Co.
Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Salomon Smith
Barney Inc.: (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, (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) or
(iii) 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.
SECTION 3. Terms of Public Offering. The Company and the Selling
Stockholders are advised by you that the Underwriters propose (i) to make a
public offering of their respective portions of the Shares as soon after the
execution and delivery of this Agreement as in your judgment is advisable and
(ii) initially to offer the Shares upon the terms set forth in the Prospectus.
SECTION 4. Delivery and Payment. The Shares shall be represented by
definitive certificates and shall be issued in such authorized denominations and
registered in such names as Bear, Stearns & Co. Inc. shall request no later than
two business days prior to the Closing Date or the applicable Option Closing
Date (as defined below), as the case may be. The Shares shall be delivered by or
on behalf of the Selling Stockholders, with any transfer taxes thereon duly paid
by the respective Selling Stockholders, to Bear, Stearns & Co. Inc. through the
facilities of The Depository Trust Company ("DTC"), for the respective accounts
of the several Underwriters, against payment to the Selling Stockholders of the
Purchase Price therefor by wire transfer of Federal or other funds immediately
available in New York City. The certificates representing the Shares shall be
made available for inspection not later than 9:30 A.M., New York City time, on
the business day prior to the Closing Date or the applicable Option Closing
Date, as the case may be, at the
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office of DTC or its designated custodian (the "DESIGNATED OFFICE"). The time
and date of delivery and payment for the Firm Shares shall be 10:00 A.M., New
York City time, on November o, 1999 or such other time on the same or such other
date as Bear, Stearns & Co. Inc. and the Company shall agree in writing. The
time and date of delivery and payment for the Firm Shares are hereinafter
referred to as the "CLOSING DATE." The time and date of delivery and payment for
any Additional Shares to be purchased by the Underwriters shall be 10:00 A.M.,
New York City time, on the date specified in the applicable exercise notice
given by the Representatives pursuant to Section 2 or such other time on the
same or such other date as Bear, Stearns & Co. Inc. and the Company shall agree
in writing. The time and date of delivery and payment for any Additional Shares
are hereinafter referred to as an "OPTION CLOSING DATE."
The documents to be delivered on the Closing Date or an Option Closing
Date on behalf of the parties hereto pursuant to Section 10 of this Agreement
shall be delivered at the offices of Cleary, Gottlieb, Steen & Hamilton, One
Liberty Plaza, New York, New York 10006, and the Shares shall be delivered at
the Designated Office, all on the Closing Date or such Option Closing Date, as
the case may be.
SECTION 5. Agreements of the Company. The Company agrees with you:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the suspension
of qualification of the Shares for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purposes, when any amendment to the
Registration Statement becomes effective, if the Company is required to file a
Rule 462(b) Registration Statement after the effectiveness of this Agreement,
when the Rule 462(b) Registration Statement has become effective and of the
happening of any event during the period referred to in Section 5(d) below, as a
result of which it is necessary to amend the Registration Statement or amend or
supplement the Prospectus in order that the Prospectus will not include any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein in light of the circumstances under which they
were made, not misleading. If at any time the Commission shall issue any stop
order suspending the effectiveness of the
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Registration Statement, the Company will use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
(b) To furnish to you three signed copies of the Registration
Statement as first filed with the Commission and of each amendment to it,
including all exhibits and documents incorporated therein by reference, and to
furnish to you and each other Underwriter designated by you such number of
conformed copies of the Registration Statement as so filed and of each amendment
to it, without exhibits but including documents incorporated therein by
reference, as you may reasonably request.
(c) To prepare the Prospectus, the form and substance of which shall
be reasonably satisfactory to you, and to file the Prospectus in such form with
the Commission within the applicable period specified in Rule 424(b) under the
Act; during the period specified in Section 5(d) below, not to file any further
amendment to the Registration Statement and not to make any amendment or
supplement to the Prospectus of which you shall not previously have been advised
and as to which you shall not have had an opportunity to comment; and, during
such period, to prepare and file with the Commission, promptly upon your
reasonable request, any amendment to the Registration Statement or amendment or
supplement to the Prospectus which may be necessary or advisable in connection
with the distribution of the Shares by you, and to use its best efforts to cause
any such amendment to the Registration Statement to become promptly effective.
(d) Prior to 10:00 A.M., New York City time, on the first business day
after the date of this Agreement and from time to time thereafter for such
period as in the reasonable opinion of counsel for the Underwriters a prospectus
is required by law to be delivered in connection with sales by an Underwriter or
a dealer, to furnish in New York City to each Underwriter and any dealer as many
copies of the Prospectus (and of any amendment or supplement to the Prospectus)
and any documents incorporated by reference therein as such Underwriter or
dealer may reasonably request.
(e) If during the period specified in Section 5(d), any event shall
occur or condition shall exist as a result of which, in the reasonable opinion
of counsel for the Underwriters, it becomes necessary to amend or supplement the
Prospectus in order that the Prospectus will not include any untrue statement of
a material fact or omit to state a material fact, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not misleading,
or if, in the reasonable opinion of counsel for the Underwriters, it is
necessary to amend or supplement the
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Prospectus to comply with applicable law, forthwith to prepare and file with the
Commission an appropriate amendment or supplement to the Prospectus so that the
statements in the Prospectus, as so amended or supplemented, will not in the
light of the circumstances when it is so delivered, include any untrue statement
of a material fact or omit to state a material fact, or so that the Prospectus
will comply with applicable law, and to furnish to each Underwriter and to any
dealer as many copies thereof as such Underwriter or dealer may reasonably
request.
(f) To make generally available to you and to its stockholders as soon
as practicable an earnings statement covering the twelve-month period ending
December 31, 2000 that shall satisfy the provisions of Section 11(a) of the Act.
(g) During the period ending three years after the date of this
Agreement, to furnish to you as soon as available copies of all reports or other
communications furnished to the record holders of Common Stock (for so long as
the Common Stock is registered under Section 12 of the Exchange Act (as defined
herein)) or furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed and such
other publicly available information concerning the Company and its subsidiaries
as you may reasonably request.
(h) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
reasonable expenses incident to the performance of the Company's obligations
under this Agreement, including: (i) the reasonable fees, disbursements and
expenses of the Company's counsel and the Company's accountants in connection
with the registration and delivery of the Shares under the Act and all other
reasonable fees and expenses in connection with the preparation, printing,
filing and distribution of the Registration Statement (including financial
statements and exhibits), any preliminary prospectus, the Prospectus and all
amendments and supplements to any of the foregoing, including the mailing and
delivering of copies thereof to the Underwriters and dealers in the quantities
specified herein, (ii) all costs of printing or producing this Agreement and any
other agreements or documents in connection with the offering, purchase, sale or
delivery of the Shares, (iii) all expenses in connection with the preparation of
the Preliminary and Supplemental Blue Sky Memoranda (including the filing fees
and the fees and disbursements of counsel for the Underwriters in connection
with such memoranda), (iv) the filing fees in connection with the review and
clearance of the offering of the Shares by the National Association of
Securities Dealers, Inc., (v) the cost of printing certificates representing the
Shares, (vi) the costs and charges of any transfer agent, registrar
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and/or depositary, and (vii) all other costs and expenses incident to the
performance of the obligations of the Company hereunder for which provision is
not otherwise made in this Section, but in each of cases (i) through (vii)
excluding all underwriting discounts and commissions and all stock transfer
taxes applicable to the sale of any Shares. The provisions of this Section shall
not supersede or otherwise affect any separate agreement thatthe Company and any
Selling Stockholders may have for allocation of such expenses among themselves.
(i) To use its best efforts to list, subject to notice of issuance,
the Shares on the NYSE.
(j) If the Registration Statement at the time of the effectiveness of
this Agreement does not cover all of the Shares, to file a Rule 462(b)
Registration Statement with the Commission registering the Shares not so covered
in compliance with Rule 462(b), such that the Rule 462(b) Registration Statement
will be effective by 10:00 P.M., New York City time, on the date of this
Agreement (or by 9:30 A.M., New York City time on the day following the date of
this Agreement) and to pay to the Commission the filing fee for such Rule 462(b)
Registration Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
SECTION 6. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter and the Selling Stockholders that:
(a) The Registration Statement has become effective (other than any
Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement); and no stop order suspending the effectiveness
of the Registration Statement is in effect, and no proceedings for such purpose
are pending before or, to the knowledge of the Company, threatened by the
Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in the Prospectus complied or will
comply when so filed in all material respects with the Exchange Act; (ii) the
Registration Statement (other than any Rule 462(b) Registration Statement to be
filed by the Company after the effectiveness of this Agreement), when it became
effective, did not contain and, as amended by any post-effective amendment, if
applicable, will not, as of the applicable effective date, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; (iii)
the Registration Statement (other than any
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Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement) and the Prospectus comply, and any amendments
to the Registration Statement when they become effective and any amendments or
supplements to the Prospectus as of the applicable filing date will comply in
all material respects with the Act; (iv) if the Company is required to file a
Rule 462(b) Registration Statement after the effectiveness of this Agreement,
such Rule 462(b) Registration Statement and any post-effective amendments
thereto, when they become effective (A) will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading and (B) will comply
in all material respects with the Act; and (v) the Prospectus does not contain
and, as amended or supplemented, if applicable, as of the Closing Date will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations and
warranties set forth in this paragraph do not apply to statements or omissions
in the Registration Statement or the Prospectus based upon information relating
to any Underwriter furnished to the Company in writing through you expressly for
use therein.
(c) Each preliminary prospectus filed as part of Amendment No. 1 [or
Amendment No. 2] to the registration statement as originally filed, or filed
pursuant to Rule 424 under the Act, when so filed, complied in all material
respects with the Act, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and warranties
set forth in this paragraph do not apply to statements or omissions in any
preliminary prospectus filed as part of the registration statement as originally
filed, or filed pursuant to Rule 424 under the Act, based upon information
relating to any Underwriter furnished to the Company in writing through you
expressly for use therein. The Company acknowledges for all purposes under this
Agreement that the statements set forth in the last paragraph of the prospectus
front cover page and under the caption "Underwriting" (other than in the sixth,
seventh and tenth paragraphs of such section) constitute the only written
information furnished to the Company by any Underwriter expressly for use in the
Registration Statement, any preliminary prospectus and the Prospectus.
(d) Each of the Company and each subsidiary of the Company has been
duly incorporated, is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation and has the corporate power and
authority to carry on its business as described in the Prospectus and to own,
lease and operate
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its properties, and each of the Company and its subsidiaries is duly qualified
and is in good standing as a foreign corporation authorized to do business in
each jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except in each case where the
failure to be in good standing or to be so qualified would not have a Material
Adverse Effect (as defined herein). As used herein, the term "SUBSIDIARY" has
the meaning set forth in Rule 1-02(x) of Regulation S-X. Young & Rubicam L.P.
("YRLP") has been duly organized, is validly existing and in good standing as a
limited partnership under the laws of the State of Delaware and has the
partnership power and authority to carry on its business as it is currently
conducted and to own, lease and operate its properties, and YRLP is duly
qualified and is in good standing as a foreign partnership authorized to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be in good standing or to be so qualified would not have a Material
Adverse Effect. For United States federal income tax purposes, YRLP has been and
is currently classified as a partnership, and not as an association taxable as a
corporation.
(e) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens granted or issued by
the Company or YRLP relating to or entitling any person to purchase or otherwise
to acquire any shares of the capital stock of the Company or any partnership
interest in YRLP, except as otherwise disclosed in the Registration Statement.
(f) All the outstanding shares of capital stock of the Company
(including the Shares to be sold by the Selling Stockholders have been duly
authorized and validly issued and are fully paid, non-assessable and not subject
to any preemptive or similar rights.
(g) All of the outstanding partnership interests in YRLP have been
duly authorized and validly issued and are fully paid and non-assessable, and
are owned by the Company, directly or indirectly through one or more
subsidiaries, free and clear of any security interest, claim, lien, encumbrance
or adverse interest of any nature (each, a "Lien") other than Liens securing
indebtedness incurred pursuant to the Company's credit facilities.
(h) The authorized capital stock of the Company conforms as to legal
matters in all material respects to the description thereof contained in the
Prospectus.
(i) Neither the Company nor any of its subsidiaries is (i) in
violation of its respective charter, by-laws or partnership agreement, as the
case may be, or (ii)
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in default in the performance of any obligation, agreement, covenant or
condition contained in any indenture, loan agreement, mortgage, lease or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or their respective
property is bound, which default in clause (ii) would have a material adverse
effect on the business, financial condition or results of operation of the
Company and its subsidiaries, taken as a whole (a "MATERIAL ADVERSE EFFECT").
(j) The execution and delivery of this Agreement by the Company, the
compliance by the Company with all the provisions hereof and the performance by
the Company of its obligations hereunder will not (i) require any consent,
approval, authorization or other order of, or qualification with, any court or
governmental body or agency (except such as have been obtained or may be
required under the Act or the securities or Blue Sky laws of the various
states), (ii) (x) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or by-laws of the Company, (y)
conflict with or constitute a breach of any of the terms or provisions of, or a
default under, the organizational documents of YRLP or (z) conflict with or
constitute a breach of any of the terms or provisions of, or a default under,
any indenture, loan agreement, mortgage, lease or other agreement or instrument
to which the Company or YRLP is a party or by which the Company or YRLP or their
respective property is bound, which conflict, breach or default would have a
Material Adverse Effect, (iii) violate or conflict with any applicable law or
any rule, regulation, judgment, order or decree of any court or any governmental
body or agency having jurisdiction over the Company, YRLP or their respective
property, which violation or conflict would have a Material Adverse Effect or
(iv) result in the suspension, termination or revocation of any Authorization
(as defined below) of the Company or YRLP or any other impairment of the rights
of the holder of any such Authorization, which suspension, termination,
revocation or impairment would have a Material Adverse Effect.
(k) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened to which the Company or YRLP is a party or
to which any of their respective property is subject that are required to be
described in the Registration Statement or the Prospectus and are not so
described; nor are there any statutes, regulations, contracts or other documents
that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that are not
so described or filed as required.
(l) Neither the Company nor any of its subsidiaries has violated any
applicable foreign, federal, state or local law or regulation relating to the
protection
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of human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), any provisions of the
Employee Retirement Income Security Act of 1974, as amended, or any provisions
of the Foreign Corrupt Practices Act or the rules and regulations promulgated
thereunder, except for such violations which, singly or in the aggregate, would
not have a Material Adverse Effect.
(m) Each of the Company and YRLP has such permits, licenses, consents,
exemptions, franchises, authorizations and other approvals (each, an
"AUTHORIZATION") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, except where the failure to
have any such Authorization or to make any such filing or notice would not,
singly or in the aggregate, have a Material Adverse Effect. Each such
Authorization is valid and in full force and effect and each of the Company and
YRLP is in compliance with all the terms and conditions thereof and with the
rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred (including, without
limitation, the receipt of any notice from any authority or governing body)
which allows or, after notice or lapse of time or both, would allow, revocation,
suspension or termination of any such Authorization or results or, after notice
or lapse of time or both, would result in any other impairment of the rights of
the holder of any such Authorization; and such Authorizations contain no
restrictions that are burdensome to the Company or any of its subsidiaries; in
each case except as would not have a Material Adverse Effect.
(n) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any Authorization, any related constraints on operating activities and
any potential liabilities to third parties) which would, singly or in the
aggregate, have a Material Adverse Effect.
(o) This Agreement has been duly authorized, executed and delivered by
the Company.
(p) PricewaterhouseCoopers LLP are independent public accountants with
respect to the Company and its subsidiaries as required by the Act.
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(q) The consolidated financial statements included or incorporated by
reference in the Registration Statement and the Prospectus (and any amendment or
supplement thereto), together with the related schedule and notes, present
fairly in all material respects the consolidated financial position, results of
operations and cash flows of the Company and its subsidiaries on the basis
stated therein at the respective dates or for the respective periods to which
they apply; such statements and the related schedule and notes have been
prepared in accordance with United States generally accepted accounting
principles consistently applied throughout the periods involved, except as
disclosed therein; the supporting schedules, if any, included in the
Registration Statement present fairly in accordance with United States generally
accepted accounting principles the information required to be stated therein;
and the other financial and statistical information and data set forth under the
captions "Prospectus Summary Summary Consolidated Financial Data" and "Selected
Consolidated Financial Data" in the Registration Statement and the Prospectus
(and any amendment or supplement thereto) have been accurately derived from such
financial statements and the books and records of the Company.
(r) The Company is not and, after giving effect to the offering and
sale of the Shares as described in the Prospectus, will not be, an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended.
(s) Except as provided in the Registration Rights Agreement dated as
of December 12, 1996 by and among the Company, the H&F Selling Stockholders and
the other parties named therein (the "Registration Rights Agreement"), there are
no contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a registration
statement under the Act with respect to any securities of the Company or to
require the Company to include such securities with the Shares registered
pursuant to the Registration Statement.
(t) Since the respective dates as of which information is given in the
Prospectus, other than as set forth in the Prospectus, (i) there has not
occurred any material adverse change in the condition, financial or otherwise,
or the earnings, business, management or operations of the Company and its
subsidiaries, taken as a whole, (ii) there has not been any material adverse
change in the capital stock or in the long-term debt of the Company or any of
its subsidiaries and (iii) neither the Company nor any of its subsidiaries has
incurred any liability or obligation, direct or contingent, that is material to
the Company.
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(u) Each certificate signed by any officer of the Company and
delivered to the Underwriters or counsel for the Underwriters hereunder shall be
deemed to be a representation and warranty by the Company to the Underwriters as
to the matters covered thereby.
(v) The Company and YRLP own or possess, or can acquire on reasonable
terms, all patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks and
trade names ("INTELLECTUAL PROPERTY") referenced or described in the Prospectus
as being owned by or licensed to them (it being understood that the Company and
its subsidiaries do not own or possess, and do not have the right to acquire,
any intellectual property of clients, customers or other third parties that is
employed by the Company and its subsidiaries in connection with the business now
operated by them) except where the failure to own or possess or otherwise be
able to acquire such intellectual property would not, singly or in the
aggregate, have a Material Adverse Effect; and neither the Company nor YRLP has
received any written notice of infringement of or conflict with asserted rights
of others with respect to any of such intellectual property which, singly or in
the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a Material Adverse Effect.
(w) The Company and YRLP are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which they are engaged; and
neither the Company nor YRLP (i) has received written notice from any insurer or
agent of such insurer that substantial capital improvements or other material
expenditures will have to be made in order to continue such insurance or (ii)
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers at a cost that would not have a Material Adverse
Effect.
(x) The Company and YRLP have good and marketable title in fee simple
to all real property and good and marketable title to all personal property
owned by them which is material to the business of the Company and YRLP, in each
case free and clear of all liens, encumbrances and defects except such as are
described in the Prospectus or such as would not result in a Material Adverse
Effect; and any real property and buildings held under lease by the Company and
YRLP are held by them under valid, subsisting and enforceable leases with such
exceptions as would not result in a Material Adverse Effect.
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(y) There is no (i) significant unfair labor practice complaint,
grievance or arbitration proceeding pending or threatened against the Company or
YRLP before the National Labor Relations Board or any state or local labor
relations board, (ii) strike, labor dispute, slowdown or stoppage pending or, to
the knowledge of the Company, threatened against the Company or YRLP or (iii)
union representation question existing with respect to the employees of the
Company and YRLP, except for such actions specified in clause (i), (ii) or (iii)
above, which, singly or in the aggregate, would not have a Material Adverse
Effect. To the Company's knowledge, no collective bargaining organizing
activities are taking place with respect to the Company or YRLP, which would,
singly or in the aggregate, have a Material Adverse Effect.
(z) The Company and YRLP maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with United States generally accepted accounting
principles and to maintain asset accountability; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(aa) All material tax returns required to be filed by the Company and
each of its subsidiaries in any jurisdiction have been filed, other than those
filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due pursuant to such returns or pursuant to any assessment received by the
Company or any of its subsidiaries have been paid, other than those being
contested in good faith and for which adequate reserves have been provided, if
required by United States generally accepted accounting principles.
(bb) No subsidiary of the Company (excluding YRLP), is a "significant
subsidiary" within the meaning of Rule 1-02(w) of Regulation S-X.
SECTION 7. Representations and Warranties of the H&F Selling
Stockholders. Each H&F Selling Stockholder, severally and not jointly,
represents and warrants to each Underwriter, solely in such H&F Selling
Stockholder's capacity as an H&F Selling Stockholder, that:
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(a) Such H&F Selling Stockholder (i) is, and on the Closing Date will
be, the lawful owner of the Shares to be sold by such H&F Selling Stockholder
pursuant to this Agreement and (ii) owns, and on the Closing Date will own such
Shares, free of all restrictions on transfer, liens, encumbrances, security
interests, equities and claims whatsoever, other than pursuant to the H&F
Custody Agreement (as defined below), if any, the H&F Power of Attorney (as
defined below), this Agreement and the Stockholders' Agreement, with which such
H&F Selling Stockholder is, and on the Closing Date will be, in compliance, and
other than any such restriction on transfer, lien, encumbrance, security
interest, equity or claim created by an Underwriter or resulting from any
actions taken by an Underwriter.
(b) Such H&F Selling Stockholder has, and on the Closing Date will
have, full legal right, power and authority, and all authorization and approval
required by law, (i) to enter into this Agreement, the Letter of Transmittal and
Custody Agreement, if any, signed by or on behalf of such H&F Selling
Stockholder and The Bank of New York, as Custodian (the "H&F CUSTODY
AGREEMENT"), relating to the deposit of the Shares to be sold by such H&F
Selling Stockholder and the Power of Attorney of such H&F Selling Stockholder
(the "H&F POWER OF ATTORNEY") appointing certain individuals as such H&F Selling
Stockholder's attorneys-in-fact (the "H&F SELLING STOCKHOLDERS ATTORNEY") to the
extent set forth therein, relating to the transactions contemplated hereby and
by the Registration Statement and the H&F Custody Agreement, if any, and (ii) to
sell, assign, transfer and deliver on the Closing Date the Shares to be sold by
such H&F Selling Stockholder in the manner provided herein and therein.
(c) This Agreement has been duly authorized, executed, and delivered
by or on behalf of such H&F Selling Stockholder.
(d) The H&F Custody Agreement, if any, of such H&F Selling Stockholder
has been duly authorized, executed and delivered by or on behalf of such H&F
Selling Stockholder and is a valid and binding agreement of such H&F Selling
Stockholder, enforceable in accordance with its terms.
(e) The H&F Power of Attorney of such H&F Selling Stockholder has been
duly authorized, executed and delivered by such H&F Selling Stockholder and is a
valid and binding instrument of such H&F Selling Stockholder, enforceable in
accordance with its terms, and pursuant to the applicable H&F Power of Attorney,
such H&F Selling Stockholder has, among other things, authorized the H&F Selling
Stockholders Attorney to execute and deliver on such H&F Selling Stockholder's
behalf this Agreement, the H&F Custody Agreement, and any other document that
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they may deem necessary or desirable in connection with the transactions
contemplated hereby and thereby and to deliver the Shares to be sold by such H&F
Selling Stockholder pursuant to this Agreement.
(f) Upon sale and delivery of and payment for the Shares to be sold by
such H&F Selling Stockholder pursuant to this Agreement, the Underwriters will
own such Shares, free and clear of all restrictions on transfer, liens,
encumbrances, security interests, equities and claims whatsoever, other than any
such restriction on transfer, lien, encumbrance, security interest, equity or
claim created by an Underwriter or resulting from any actions taken by an
Underwriter.
(g) Assuming that the representations and warranties of the Company in
Section 6 hereof are true and accurate in all material respects, the execution
and delivery of this Agreement and the H&F Custody Agreement, if any, and the
H&F Power of Attorney of such H&F Selling Stockholder by or on behalf of such
H&F Selling Stockholder, the compliance by such H&F Selling Stockholder with all
the provisions hereof and thereof and the performance by such H&F Selling
Stockholder of its obligations hereunder and thereunder will not (i) require any
consent, approval, authorization or other order of, or qualification with, any
court or governmental agency or body (except such as have been obtained or may
be required under the Act or the securities or Blue Sky laws of the various
states), (ii) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the organizational documents of such H&F
Selling Stockholder, if such H&F Selling Stockholder is not an individual, or
any indenture, loan agreement, mortgage, lease or other agreement or instrument
to which such H&F Selling Stockholder or any spouse of such H&F Selling
Stockholder is a party or by which such H&F Selling Stockholder or any spouse or
property of such H&F Selling Stockholder is bound or (iii) violate or conflict
with any applicable law or any rule, regulation, judgment, order or decree of
any court or any governmental body or agency having jurisdiction over such H&F
Selling Stockholder or any spouse or property of such H&F Selling Stockholder.
(h) The information in the Prospectus under the caption "Selling
Stockholders" which specifically relates to such H&F Selling Stockholder
(consisting of such H&F Selling Stockholder's name and number of shares of
Common Stock beneficially owned by such H&F Selling Stockholder both before and
after the offering contemplated hereby) will not on the date of the execution of
this Agreement, the Closing Date or on the Option Closing Date, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated
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therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(i) At any time during the period commencing on the first business day
after the date of this Agreement and from time to time thereafter for such
period as in the reasonable opinion of counsel for the Underwriters a prospectus
is required by law to be delivered in connection with sales by an Underwriter or
dealer, if there is any change in the information referred to in Section 7(h)
above, such H&F Selling Stockholder will promptly notify you and the Company of
such change.
(j) Each certificate signed by or on behalf of such H&F Selling
Stockholder and delivered to the Underwriters or counsel for the Underwriters
pursuant to Section 10(e) shall be deemed to be a representation and warranty by
such H&F Selling Stockholder, in its capacity as such, to the Underwriters as to
the matters covered thereby.
SECTION 8. Representations and Warranties of the Option Selling
Stockholders. Each Option Selling Stockholder, severally and not jointly,
represents and warrants to each Underwriter, solely in such Option Selling
Stockholder's capacity as an Option Selling Stockholder, that:
(a) Such Option Selling Stockholder (i) is, and on the Closing Date
and the Option Closing Date will be, the lawful owner of the Shares to be sold
by such Option Selling Stockholder pursuant to this Agreement and (ii) owns, and
on the Closing Date and the Option Closing Date will own such Shares free of all
restrictions on transfer, liens, encumbrances, security interests, equities and
claims whatsoever, other than pursuant to the Option Custody Agreement (as
defined below), if any, the Option Power of Attorney (as defined below), this
Agreement and the Stockholders' Agreement, with which such Option Selling
Stockholder is, and on the Closing Date and the Option Closing Date will be, in
compliance, and other than any such restriction on transfer, lien, encumbrance,
security interest, equity or claim created by an Underwriter or resulting from
any actions taken by an Underwriter.
(b) Such Option Selling Stockholder has, and on the Closing Date and
the Option Closing Date will have, full legal right, power and authority, and
all authorization and approval required by law, (i) to enter into this
Agreement, the Letter of Transmittal and Custody Agreement, if any, signed by or
on behalf of such Option Selling Stockholder and The Bank of New York, as
Custodian (the "OPTION CUSTODY AGREEMENT"), relating to the deposit of the
Shares to be sold by such Option Selling Stockholder and the Power of Attorney
of such Option Selling
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Stockholder (the "OPTION POWER OF ATTORNEY") appointing certain individuals as
such Option Selling Stockholder's attorneys-in-fact (the "OPTION SELLING
STOCKHOLDERS ATTORNEY" and with the H&F Selling Stockholders Attorney, the
"ATTORNEYS") to the extent set forth therein, relating to the transactions
contemplated hereby and by the Registration Statement and the Option Custody
Agreement, if any, and (ii) to sell, assign, transfer and deliver on the Closing
Date and the Option Closing Date the Shares to be sold by such Option Selling
Stockholder in the manner provided herein and therein.
(c) This Agreement has been duly authorized, executed, and delivered
by or on behalf of such Option Selling Stockholder.
(d) The Option Custody Agreement, if any, of such Option Selling
Stockholder has been duly authorized, executed and delivered by or on behalf of
such Option Selling Stockholder and is a valid and binding agreement of such
Option Selling Stockholder, enforceable in accordance with its terms.
(e) The Option Power of Attorney of such Option Selling Stockholder
has been duly authorized, executed and delivered by such Option Selling
Stockholder and is a valid and binding instrument of such Option Selling
Stockholder, enforceable in accordance with its terms, and pursuant to the
Option Power of Attorney, such Option Selling Stockholder has, among other
things, authorized the Option Selling Stockholders' Attorney to execute and
deliver on such Option Selling Stockholder's behalf this Agreement, the Option
Custody Agreement, and, any other document that they may deem necessary or
desirable in connection with the transactions contemplated hereby and thereby
and to deliver the Shares to be sold by such Option Selling Stockholder pursuant
to this Agreement.
(f) Upon sale and delivery of and payment for the Shares to be sold by
such Option Selling Stockholder pursuant to this Agreement, the Underwriters
will own such Shares, free and clear of all restrictions on transfer, liens,
encumbrances, security interests, equities and claims whatsoever, other than any
such restriction on transfer, lien, encumbrance, security interest, equity or
claim created by an Underwriter or resulting from any actions taken by an
Underwriter.
(g) Assuming that the representations and warranties of the Company in
Section 6 hereof are true and accurate in all material respects, the execution
and delivery of this Agreement and the Option Custody Agreement, if any, and the
Option Power of Attorney of such Option Selling Stockholder by or on behalf of
such Option Selling Stockholder, the compliance by such Option Selling
Stockholder
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with all the provisions hereof and thereof and the performance by such Option
Selling Stockholder of its obligations hereunder and thereunder will not (i)
require any consent, approval, authorization or other order of, or qualification
with, any court or governmental agency or body (except such as have been
obtained or may be required under the Act or the securities or Blue Sky laws of
the various states), (ii) conflict with or constitute a breach of any of the
terms or provisions of, or a default under, the organizational documents of such
Option Selling Stockholder, if such Option Selling Stockholder is not an
individual, or any indenture, loan agreement, mortgage, lease or other agreement
or instrument to which such Option Selling Stockholder or any spouse of such
Option Selling Stockholder is a party or by which such Option Selling
Stockholder or any spouse or property of such Option Selling Stockholder is
bound or (iii) violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental body or
agency having jurisdiction over such Option Selling Stockholder or any spouse or
property of such Option Selling Stockholder.
(h) The information in the Prospectus under the caption "Underwriting"
which specifically relates to such Option Selling Stockholder (consisting of
such Option Selling Stockholder's name and the maximum number of shares of
Common Stock to be sold in the offering contemplated hereby if the Underwriters
exercise their option pursuant to Section 2 hereof) will not on the date of the
execution of this Agreement, the Closing Date or on the Option Closing Date,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(i) At any time during the period commencing on the first business day
after the date of this Agreement and from time to time thereafter for such
period as in the reasonable opinion of counsel for the Underwriters a prospectus
is required by law to be delivered in connection with sales by an Underwriter or
dealer, if there is any change in the information referred to in Section 7(h)
above, such Option Selling Stockholder will promptly notify you and the Company
of such change.
(j) Each certificate signed by or on behalf of such Option Selling
Stockholder and delivered to the Underwriters or counsel for the Underwriters
pursuant to Section 9(e) shall be deemed to be a representation and warranty by
such Option Selling Stockholder, in its capacity as such, to the Underwriters as
to the matters covered thereby.
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SECTION 9. Indemnification. (a) The Company agrees to indemnify and
hold harmless each Underwriter, its directors, its officers and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act from and against any and all losses, claims,
damages, liabilities and judgments (including, without limitation, any
reasonable legal or other expenses incurred in connection with investigating or
defending any matter, including any action, that could give rise to any such
losses, claims, damages, liabilities or judgments) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), the Prospectus (or any
amendment or supplement thereto) or any preliminary prospectus filed as part of
the registration statement as originally filed or as part of any amendment
thereto or filed pursuant to Rule 424 under the Act ("PRELIMINARY PROSPECTUS"),
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to any Underwriter
furnished in writing to the Company through you expressly for use therein,
provided, however, that the foregoing indemnity agreement with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter, any
director or officer of any Underwriter or any person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act to the extent such Underwriter failed to deliver a Prospectus (as
then amended or supplemented, provided by the Company to the several
Underwriters in the requisite quantity and on a timely basis to permit proper
delivery on or prior to the Closing Date) to the person asserting any losses,
claims, damages, liabilities and judgments caused by any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if such material misstatement or omission or alleged
material misstatement or omission was cured in such Prospectus.
(b) The Company agrees to indemnify and hold harmless each Selling
Stockholder, its directors, its officers and each person, if any, who controls
any Selling Stockholder within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, from and against any and all losses, claims, damages,
liabilities and judgments (including, without limitation, any reasonable legal
or other expenses incurred in connection with investigating or defending any
matter, including any action, that could give rise to any such losses, claims,
damages, liabilities or judgments) caused by any untrue statement or alleged
untrue statement of a material
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fact contained in the Registration Statement (or any amendment thereto), the
Prospectus (or any amendment or supplement thereto) or any Preliminary
Prospectus, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading except insofar as such losses, claims, damages,
liabilities or judgments are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to any
Selling Stockholder furnished in writing to the Company by such Selling
Stockholder expressly for use therein.
(c) Each of the Selling Stockholders, severally and not jointly,
agrees to indemnify and hold harmless each Underwriter, its directors, its
officers and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages, liabilities and judgments
(including, without limitation, any reasonable legal or other expenses incurred
in connection with investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or any amendment
thereto), the Prospectus (or any amendment or supplement thereto) or any
Preliminary Prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only with respect to losses, claims,
damages, liabilities and judgments caused by an untrue statement or omission or
alleged untrue statement or omission based on information relating to such
Selling Stockholder furnished in writing by or on behalf of such Selling
Stockholder expressly for use in the Prospectus.
(d) Each of the Selling Stockholders, severally and not jointly,
agrees to indemnify and hold harmless the Company, its directors, its officers
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages, liabilities and judgments (including, without
limitation, any legal or other expenses incurred in connection with
investigating or defending any matter, including any action, that could give
rise to any such losses, claims, damages, liabilities or judgments) caused by
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement (or any amendment thereto), the Prospectus (or any
amendment or supplement thereto) or any Preliminary Prospectus, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
only with respect to losses, claims, damages,
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liabilities and judgments caused by an untrue statement or omission or alleged
untrue statement or omission based on information relating to such Selling
Stockholder furnished in writing by or on behalf of such Selling Stockholder
expressly for use in the Prospectus.
(e) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers, each person, if any,
who controls the Company within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, each Selling Stockholder and each person, if any, who
controls such Selling Stockholder within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company to such Underwriter but only with reference to information
relating to such Underwriter furnished in writing to the Company through you
expressly for use in the Registration Statement (or any amendment thereto), the
Prospectus (or any amendment or supplement thereto) or any Preliminary
Prospectus.
(f) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Sections 9(a), 9(b), 9(c),
9(d) or 9(e) (the "INDEMNIFIED PARTY"), the indemnified party shall promptly
notify the person against whom such indemnity may be sought (the "INDEMNIFYING
PARTY") in writing and the indemnifying party shall assume the defense of such
action, including the employment of counsel reasonably satisfactory to the
indemnified party and the payment of all reasonable fees and expenses of such
counsel, as incurred (except that in the case of any action in respect of which
indemnity may be sought pursuant to Sections 9(a), 9(b), 9(c), 9(d) and 9(e),
the Underwriter shall not be required to assume the defense of such action
pursuant to this Section 9(f), but may employ separate counsel and participate
in the defense thereof, but the fees and expenses of such counsel, except as
provided below, shall be at the expense of such Underwriter). Any indemnified
party shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the indemnified party unless (i) the employment of
such counsel shall have been specifically authorized in writing by the
indemnifying party, (ii) the indemnifying party shall have failed to assume the
defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such
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case, the indemnifying party shall not, in connection with any one action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for (i)
the reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all Underwriters, their officers and
directors and all persons, if any, who control any Underwriter within the
meaning of either Section 15 of the Act or Section 20 of the Exchange Act, (ii)
the reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for the Company, its directors, its officers and
all persons, if any, who control the Company within the meaning of either such
Section and (iii) the reasonable fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for any Selling
Stockholders and all persons, if any, who control any Selling Stockholder within
the meaning of either such Section, and all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the
Underwriters, their officers and directors and such control persons of any
Underwriters, such firm shall be designated in writing by Bear, Stearns & Co.
Inc. In the case of any such separate firm for the Company and such directors,
officers and control persons of the Company, such firm shall be designated in
writing by the Company. In the case of any such separate firm for the Selling
Stockholders and such control persons of any Selling Stockholders, such firm
shall be designated in writing by the Attorneys. The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any settlement
of any action (i) effected with its written consent or (ii) effected without its
written consent if the settlement is entered into more than twenty business days
after the indemnifying party shall have received a written request from the
indemnified party for reimbursement for the fees and expenses of counsel (in any
case where such fees and expenses are at the expense of the indemnifying party)
and, prior to the date of such settlement, the indemnifying party shall have
failed to comply with such reimbursement request. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could have
been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
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(g) To the extent the indemnification provided for in this Section 9
is unavailable (other than in accordance with the terms hereof) to an
indemnified party or insufficient in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the indemnifying party or parties on
the one hand and the indemnified party or parties on the other hand from the
offering of the Shares or (ii) if the allocation provided by clause 9(g)(i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause 9(g)(i) above
but also the relative fault of the indemnifying party or parties on the one hand
and the indemnified party or parties on the other hand in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other hand shall be deemed to be in the same
respective proportion as the total net proceeds from the offering (after
deducting underwriting discounts and commissions, but before deducting expenses)
received by all Selling Stockholders and the total underwriting discounts and
commissions received by the Underwriters, bear to the total price to the public
of the Shares, in each case as set forth on the cover page of the Prospectus.
The relative benefits received by each Selling Stockholder on the one hand and
the Underwriters on the other hand shall be deemed to be in the same respective
proportion as the total net proceeds from the offering (after deducting
underwriting discounts and commissions, but before deducting expenses) received
by such Selling Stockholder, and the total underwriting discounts and
commissions received by the Underwriters, bear to the total price to the public
of the Shares, in each case as set forth on the cover page of the Prospectus.
The relative fault of the Company, the Selling Stockholders and the Underwriters
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
respective Selling Stockholders on the one hand or the Underwriters on the other
hand and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company, the Selling Stockholders and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 9(g)
were determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take
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account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses incurred by such indemnified
party in connection with investigating or defending any matter, including any
action, that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 9, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 9(g) are several in proportion to the respective number
of Shares purchased by each of the Underwriters hereunder and not joint. The
respective obligations of the Selling Stockholders to contribute pursuant to
this Section 9(g) are several in proportion to the respective number of Shares
sold by each Selling Stockholder hereunder and not joint.
(h) Notwithstanding anything in this Agreement to the contrary, the
maximum aggregate liability of any Selling Stockholder pursuant to this Section
9 shall be limited to an amount equal to the gross proceeds (after deducting
underwriting discounts and commissions but before deducting expenses) received
by such Selling Stockholder from the Underwriters for the sale of the Shares
sold by such Selling Stockholder hereunder (with respect to each Selling
Stockholder, such amount is referred to as the "SELLING STOCKHOLDER PROCEEDS").
(i) The remedies provided for in this Section 9 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity. The provisions of this Section 9 shall
supersede the provisions of Article 5 of the Registration Rights Agreement with
respect to the offer and sale of the Shares by the Selling Stockholders provided
that the remaining provisions of the Registration Rights Agreement shall remain
in full force and effect.
(j) Each Selling Stockholder hereby designates H&F Investors III,
Inc., One Maritime Plaza, San Francisco, California 94111 , as its authorized
agent, upon which process may be served in any action which may be instituted in
any state
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or federal court in the State of New York by any Underwriter, any director or
officer of any Underwriter or any person controlling any Underwriter asserting a
claim for indemnification or contribution under or pursuant to this Section 9,
and each Selling Stockholder will accept the jurisdiction of such court in such
action, and waives, to the fullest extent permitted by applicable law, any
defense based upon lack of personal jurisdiction or venue. A copy of any such
process shall be sent or given to such Selling Stockholder, at the address for
notices specified in Section 13 hereof.
SECTION 10. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date with the same force
and effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., New York City
time, on the date of this Agreement (or by 9:30 A.M., New York City time on the
day following the date of this Agreement); and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before the Commission.
(c) You shall have received on the Closing Date a certificate dated
the Closing Date, signed by Peter A. Georgescu and Michael J. Dolan, in their
capacities as the Chairman of the Board and Chief Executive Officer and Vice
Chairman and Chief Financial Officer of the Company, respectively, confirming
the matters set forth in Sections 6(t) and 10(a) and that the Company has
complied with all of the agreements and satisfied all of the conditions herein
contained and required to be complied with or satisfied by the Company on or
prior to the Closing Date.
(d) Since the respective dates as of which information is given in the
Prospectus, other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there shall not have occurred any change in the condition, financial or
otherwise, or the earnings, business, management or operations of the Company
and its subsidiaries, taken as a whole, and (ii) there shall not have been any
change in the capital stock or in the long-term debt of the Company and its
subsidiaries, taken as a whole, and (iii) neither the Company nor any of its
subsidiaries shall have incurred any liability or
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obligation, direct or contingent, the effect of which, in any such case
described in clause 10(d)(i), 10(d)(ii) or 10(d)(iii), in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectus.
(e) All the representations and warranties of each Selling Stockholder
contained in this Agreement shall be true and correct on the Closing Date with
the same force and effect as if made on and as of the Closing Date and you shall
have received on the Closing Date a certificate dated the Closing Date executed
by an Attorney pursuant to the Power of Attorney on behalf of each Selling
Stockholder to such effect and to the effect that such Selling Stockholder has
complied with all of the agreements and satisfied all of the conditions herein
contained and required to be complied with or satisfied by such Selling
Stockholder on or prior to the Closing Date.
(f) You shall have received on the Closing Date (i) an opinion, dated
the Closing Date, of Cleary, Gottlieb, Steen & Hamilton, counsel for the
Company, to the effect set forth in Appendix A hereto and (ii) an opinion, dated
the Closing Date, of the General Counsel or Senior Vice President, Legal
Counsel, for the Company, to the effect set forth in Appendix B hereto.
(g) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Wachtell, Lipton, Rosen & Katz, counsel for the H&F Selling
Stockholders, to the effect set forth in Appendix C hereto.
(h) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the
Underwriters, substantially to the effect set forth in Sections 6(b)(ii),
6(b)(iii), 6(b)(iv), 6(b)(v), and 6(o) herein.
(i) You shall have received, on each of the date hereof and the
Closing Date, a letter dated the date hereof or the Closing Date, as the case
may be, in form and substance satisfactory to you, from PricewaterhouseCoopers
LLP, independent public accountants, containing the information and statements
of the type ordinarily included in accountants' "comfort letters" to
Underwriters with respect to the financial statements and certain financial
information contained or incorporated by reference in the Registration Statement
and the Prospectus.
28
<PAGE>
(j) Each entity listed on Schedule IV hereto shall have delivered to
you the agreements specified in Section 2 hereof which agreements shall be in
full force and effect on the Closing Date.
(k) The Shares shall have been duly listed, subject to official notice
of issuance, on the NYSE.
(l) You shall have received on the Closing Date, a certificate of each
Selling Stockholder who is not a U.S. Person (as defined under applicable U.S.
federal tax legislation) to the effect that such Selling Stockholder is not a
U.S. Person, which certificate may be in the form of a properly completed and
executed United States Treasury Department Form W-8 (or other applicable form or
statement specified by Treasury Department regulations in lieu thereof).
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to the Representatives on the
applicable Option Closing Date of such documents as they may reasonably request
with respect to the good standing of the Company, a certificate to the effect
set forth in Section 10(c) dated the applicable Option Closing Date,
certificates to the effect set forth in Section 10(l) dated the applicable
Option Closing Date, an opinion of Cleary, Gottlieb, Steen & Hamilton to the
effect set forth in paragraph 3 of Appendix A, an opinion of Wachtell, Lipton,
Rosen & Katz to the effect set forth in Appendix D and an opinion of Greene
Radovsky Maloney & Share LLP as set forth in Appendix E.
SECTION 11. Effectiveness of Agreement and Termination. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the
Closing Date by you by written notice to the Company if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectus, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on
29
<PAGE>
any such exchange or the Nasdaq National Market, (iii) the suspension of trading
of any securities of the Company on any exchange or in the over-the-counter
market, (iv) the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of any court or other
governmental authority which in your opinion materially and adversely affects,
or will materially and adversely affect, the business, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole, or
(v) the declaration of a banking moratorium by either federal or New York State
authorities or the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in your
opinion has a material adverse effect on the financial markets in the United
States.
If on the Closing Date or on an Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase the
Firm Shares or Additional Shares, as the case may be, which it has or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not more
than one-tenth of the total number of Firm Shares or Additional Shares, as the
case may be, to be purchased on such date by all Underwriters, each
non-defaulting Underwriter shall be obligated severally, in the proportion which
the number of Firm Shares set forth opposite its name in Schedule I bears to the
total number of Firm Shares which all the non-defaulting Underwriters have
agreed to purchase, or in such other proportion as you may specify, to purchase
the Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date; provided that in no event shall the number of Shares which any Underwriter
has agreed to purchase pursuant to Section 2 hereof be increased pursuant to
this Section 11 by an amount in excess of one-ninth of such number of Shares
without the written consent of such Underwriter. If on the Closing Date any
Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the
aggregate number of Firm Shares with respect to which such default occurs is
more than one-tenth of the aggregate number of Firm Shares to be purchased by
all Underwriters and arrangements satisfactory to you and the H&F Selling
Stockholders for purchase of such Firm Shares are not made within 48 hours after
such default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Stockholders. In any such
case which does not result in termination of this Agreement, you shall have the
right to postpone the Closing Date, but in no event for longer than seven days,
in order that the required changes, if any, in the Registration Statement and
the Prospectus or any other documents or arrangements may be effected. If, on an
Option Closing
30
<PAGE>
Date, any Underwriter or Underwriters shall fail or refuse to purchase
Additional Shares and the aggregate number of Additional Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of
Additional Shares to be purchased on such date, the non-defaulting Underwriters
shall have the option to (i) terminate their obligation hereunder to purchase
such Additional Shares or (ii) purchase not less than the number of Additional
Shares that such non-defaulting Underwriters would have been obligated to
purchase on such date in the absence of such default. Any action taken under
this paragraph shall not relieve any defaulting Underwriter from liability in
respect of any default of any such Underwriter under this Agreement.
SECTION 12. Agreements of the Selling Stockholders. Each Selling
Stockholder, severally and not jointly, agrees with you and the Company, whether
or not the transactions contemplated in this Agreement are consummated or this
Agreement is terminated, to pay or cause to be paid all reasonable expenses
incident to the performance of the Selling Stockholders' obligations under this
Agreement, including: (i) the fees, disbursements and expenses of any Selling
Stockholder's counsel in connection with the registration and delivery of the
Shares under the Act, (ii) all costs and expenses related to the transfer and
delivery of the Firm Shares to the Underwriters, including any transfer or other
taxes payable thereon, and (iii) all other costs and expenses incident to the
performance of the obligations of the Selling Stockholders hereunder for which
provision is not otherwise made in this Section. The provisions of this Section
shall not supersede or otherwise affect any separate agreement that the Company
and any Selling Stockholders may have for allocation of such expenses among
themselves.
SECTION 13. Miscellaneous. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company, to Young &
Rubicam Inc., 285 Madison Avenue, New York, New York 10017, Attention: General
Counsel, (ii) if to the Selling Stockholders, to Philip U. Hammarskjold and
Matthew R. Barger, as Attorneys, c/o H&F Investors III, Inc., One Maritime
Plaza, San Francisco, California 94111, and (iii) if to any Underwriter or to
you, to you c/o Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York
10167, Attention: Syndicate Department, or in any case to such other address as
the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, the Selling Stockholders and the
several Underwriters set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of and
payment for
31
<PAGE>
the Shares, regardless of any investigation, or statement as to the results
thereof, made by or on behalf of any Underwriter, the officers or directors of
any Underwriter, any person controlling any Underwriter, the Company, the
officers or directors of the Company, any person controlling the Company, any
Selling Stockholder or any person controlling such Selling Stockholder,
acceptance of the Shares and payment for them hereunder and termination of this
Agreement.
If for any reason the Shares are not delivered by or on behalf of any
Selling Stockholders as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 11 or breach of this Agreement
by any Underwriter), the H&F Selling Stockholders and the Option Selling
Stockholders agree severally and not jointly, to reimburse the several
Underwriters for all out-of-pocket expenses (including the reasonable fees and
disbursements of counsel) incurred by them in proportion to the number of shares
to be sold by the H&F Selling Stockholders and the Option Selling Stockholder,
respectively. Notwithstanding any termination of this Agreement, the Company
shall be liable for all expenses which it has agreed to pay pursuant to Section
5(h) hereof.
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Selling
Stockholders, the Underwriters, the Underwriters' directors and officers, any
controlling persons referred to herein, the Company's directors and the
Company's officers who sign the Registration Statement and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Shares from any of the several Underwriters merely because of such
purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
32
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement among the
Company, the Selling Stockholders and the several Underwriters.
Very truly yours,
YOUNG & RUBICAM INC.
By:
---------------------------------------------
Name: Stephanie W. Abramson
Title: Executive Vice President
and General Counsel
THE H&F SELLING
STOCKHOLDERS NAMED IN
SCHEDULE II HERETO, ACTING
SEVERALLY
By:
---------------------------------------------
Attorney-in-fact
THE OPTION SELLING
STOCKHOLDERS NAMED IN
SCHEDULE III HERETO,
ACTING SEVERALLY
By:
---------------------------------------------
Attorney-in-fact
<PAGE>
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON SMITH BARNEY INC.
BANC OF AMERICA SECURITIES LLC
GOLDMAN, SACHS & CO.
ING BARINGS LLC
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
THOMAS WEISEL PARTNERS LLC
Acting severally on behalf of themselves
and the several Underwriters
named in Schedule I hereto
By BEAR, STEARNS & CO. INC.
By:
---------------------------------------------
Name:
Title:
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
----------
- ----------------------------------------------------- ---------------------------------------------------
<S> <C>
Number of Firm
Underwriters Shares to be Purchased
- ----------------------------------------------------- ---------------------------------------------------
Bear, Stearns & Co. Inc.
- ----------------------------------------------------- ---------------------------------------------------
Donaldson, Lufkin & Jenrette Securities Corporation
- ----------------------------------------------------- ---------------------------------------------------
Salomon Smith Barney Inc.
- ----------------------------------------------------- ---------------------------------------------------
Banc of America Securities LLC
- ----------------------------------------------------- ---------------------------------------------------
Goldman, Sachs & Co.
- ----------------------------------------------------- ---------------------------------------------------
ING Barings LLC
- ----------------------------------------------------- ---------------------------------------------------
Merrill Lynch, Pierce, Fenner & Smith Incorporated
- ----------------------------------------------------- ---------------------------------------------------
Morgan Stanley & Co. Incorporated
- ----------------------------------------------------- ---------------------------------------------------
Thomas Weisel Partners LLC
- ----------------------------------------------------- ---------------------------------------------------
Total
- ----------------------------------------------------- ---------------------------------------------------
</TABLE>
1
<PAGE>
SCHEDULE II
-----------
SELLING STOCKHOLDERS
<TABLE>
<CAPTION>
Number of
Firm Shares
Name Being Sold
- --------------------------------------------------------------- --------------------------------------
<S> <C>
Hellman & Friedman Capital Partners III, L.P.
H&F Orchard Partners III, L.P.
H&F International Partners III, L.P.
--------------------------------------
Total
</TABLE>
2
<PAGE>
SCHEDULE III
------------
OPTION SELLING STOCKHOLDERS
<TABLE>
<CAPTION>
Number of Additional
Shares Subject to
Name Additional Share Option
- ------------------------------------------------------------------- ------------------------------------
<S> <C>
Matthew R. Barger
John M. Pasquesi
Brian M. Powers
Thomas F. Steyer
Marco W. Hellman
Mitchell R. Cohen
Joseph M. Niehaus
The Tully M. Friedman 1997 Charitable Lead Annuity
Trust
The Jackson Street Trust
The Tully M. Friedman Revocable Trust
------------------------------------
Total Shares Subject to Additional Share
Option
</TABLE>
3
<PAGE>
SCHEDULE IV
-----------
Fifth Durango Pty Ltd.
Fountain Wealth Enterprises Limited
Arthur Rock
The Hellman Family Revocable Trust
Locust Street Group III, LP
The Tully M. Friedman Revocable Trust
The Tully M. Friedman 1997 Charitable Lead Annuity Trust
The Jackson Street Trust
Matthew R. Barger
John M. Pasquesi
David M. Pasquesi Irrevocable Trust dtd 7-15-97
Thomas A. Pasquesi Irrevocable Trust dtd 7-15-97
John L. Bunce, Jr.
Brian M. Powers
Thomas E. Steyer
Marco W. Hellman
Mitchell R. Cohen
Joseph M. Niehaus
Georgia Lee
Philip U. Hammarskjold
Patrick J. Healy
4
<PAGE>
Appendix A
----------
FORM OF OPINION OF CLEARY, GOTTLIEB, STEEN & HAMILTON:
1. The Company is validly existing as a corporation in good standing
under the laws of the State of Delaware.
2. The Company has corporate power to own its properties and conduct
its business as described in the Prospectus, and the Company has corporate power
to enter into the Underwriting Agreement and to perform its obligations
thereunder.
3. The Shares have been duly authorized by all necessary corporate
action of the Company, have been validly issued by the Company and are fully
paid and nonassessable; and the holders of outstanding shares of capital stock
of the Company are not entitled to any preemptive rights to subscribe for the
Shares under the Amended and Restated Certificate of Incorporation or the
Amended and Restated By-Laws of the Company, or the General Corporation Law of
the State of Delaware.
4. The execution and delivery of the Underwriting Agreement have been
duly authorized by all necessary corporate action of the Company, and the
Underwriting Agreement has been duly executed and delivered by the Company.
5. The execution and delivery of the Underwriting Agreement and the
performance by the Company of its obligations in the Underwriting Agreement (a)
do not require any consent, approval, authorization, registration or
qualification of or with any governmental authority of the United States of
America or the State of New York or pursuant to the Delaware General Corporation
Law, except such as have been obtained or effected under the Securities Act and
the Securities Exchange Act of 1934, as amended (but such counsel expresses no
opinion as to any consent, approval, authorization, registration or
qualification that may be required under state securities or Blue Sky laws), and
(b) do not result in a breach or violation of any of the terms and provisions
of, or constitute a default under, any of the agreements of the Company filed
(including by incorporation by reference) as exhibits to the Registration
Statement, the Amended and Restated Certificate of Incorporation of the Company
or the Amended and Restated By-laws of the Company.
6. The Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company" as such term is defined
in the Investment Company Act of 1940, as amended.
7. The Registration Statement (except the financial statements and
schedules and other financial and statistical data included therein, as to which
such counsel expresses no view), at the time it became effective, and the
Prospectus (except as aforesaid), as of the date thereof, appeared on their face
to be appropriately responsive in all material
5
<PAGE>
respects to the requirements of the Securities Act and the rules and regulations
thereunder. In addition, such counsel does not know of any contracts or other
documents of a character required to be filed as exhibits to the Registration
Statement or required to be described in the Registration Statement or the
Prospectus that are not filed or described as required.
8. No information has come to such counsel's attention that causes
such counsel to believe that the Registration Statement (except the financial
statements and schedules and other financial and statistical data included
therein, as to which such counsel expresses no view), at the time it became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading.
9. No information has come to such counsel's attention that causes
such counsel to believe that the Prospectus (except the financial statements and
schedules and other financial and statistical data included therein, as to which
such counsel expresses no view), as of the date thereof or as of the Closing
Date, contained or contains an untrue statement of a material fact or omitted or
omits to state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
10. Such counsel shall confirm that (based solely upon a telephonic
confirmation from a representative of the Commission) the Registration Statement
is effective under the Securities Act and, to the best of such counsel's
knowledge, no stop order with respect thereto has been issued, and no proceeding
for that purpose has been instituted or threatened by the Commission.
6
<PAGE>
Appendix B
----------
FORM OF OPINION OF GENERAL COUNSEL OR SENIOR VICE PRESIDENT, LEGAL COUNSEL FOR
THE COMPANY:
1. The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Delaware and has the
corporate power and authority to carry on its business as described in the
Prospectus and to own, lease and operate its properties.
2. YRLP has been duly organized, is validly existing and in good
standing as a limited partnership under the laws of the State of Delaware and
has the partnership power and authority to carry on its business as it is
currently conducted and to own, lease and operate its properties.
3. The Company is duly qualified to transact business and is in good
standing as a foreign corporation authorized to do business in each jurisdiction
in which the nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so qualified or in
good standing would not have a Material Adverse Effect.
4. YRLP is duly qualified and is in good standing as a foreign
partnership authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be in good standing or to be so
qualified would not have a Material Adverse Effect.
5. All of the issued and outstanding shares of Common Stock of the
Company, including the Shares, have been duly authorized by all necessary
corporate action of the Company, have been validly issued by the Company and are
fully paid and nonassessable; and the holders of outstanding shares of capital
stock of the Company are not entitled to any preemptive rights to subscribe for
the Shares under the Amended and Restated Certificate of Incorporation, the
Amended and Restated By-Laws of the Company, the General Corporation Law of the
State of Delaware or any contracts to which the Company is a party.
6. All of the outstanding partnership interests in YRLP have been duly
authorized and validly issued and are fully paid and non-assessable, and are
owned by the Company, directly or indirectly through one or more subsidiaries,
free and clear of any security interest, claim, lien, encumbrance or adverse
interest of any nature.
7. The execution and delivery of the Underwriting Agreement have been
duly authorized by all necessary corporate action of the Company, and the
Underwriting Agreement has been duly executed and delivered by the Company.
7
<PAGE>
8. The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
9. The statements set forth under the heading "Description of Capital
Stock" and in the fifth, sixth, seventh and tenth paragraphs under the heading
"Underwriting" in the Prospectus and Item 15 of Part II of the Registration
Statement, insofar as such statements constitute a summary of the legal matters,
documents or proceedings referred to therein, fairly summarize the matters,
documents or proceedings referred to therein.
10. The Company is not in violation of its Amended and Restated
Certificate of Incorporation or Amended and Restated By-laws, YRLP is not in
violation of its partnership agreement or other organizational documents, and,
to such counsel's knowledge, neither the Company nor YRLP is in default in the
performance of any obligation, agreement, covenant or condition contained in any
of the agreements of the Company or YRLP filed as exhibits to the Registration
Statement except for defaults which would not have a Material Adverse Effect.
11. The execution and delivery by the Company of the Underwriting
Agreement and the performance by the Company of its obligations therein (a) do
not require any consent, approval, authorization, registration or qualification
of or with any governmental authority of the United States or the State of New
York, except such as have been obtained or effected under the Securities Act and
the Securities Exchange Act of 1934, as amended (but such counsel expresses no
opinion as to any consent, approval, authorization, registration or
qualification that may be required under state securities or Blue Sky laws of
the United States or the securities laws of any non-U.S. jurisdiction), (b) do
not result in a breach or violation of any of the terms or provisions of, or a
default under (i) any of the agreements of the Company or YRLP filed (including
by incorporation by reference) as exhibits to the Registration Statement, (ii)
the Amended and Restated Certificate of Incorporation or the Amended and
Restated By-laws of the Company, (iii) the partnership agreement or other
organizational documents of YRLP or (iv) any judgment, decree or order
applicable to the Company of any United States federal or New York State court
or other governmental authority, except (in the case of (i) and (iv)) for such
breaches or violations as would not result in a Material Adverse Effect, and (c)
do not result in the suspension, termination or revocation of any Authorization
of the Company or YRLP or any other impairment of the rights of the holder of
any such Authorization, except as would not result in a Material Adverse Effect.
12. To such counsel's knowledge after due inquiry, there are no legal
or governmental proceedings pending or threatened to which the Company or YRLP
is a party or to which any of the properties of the Company or YRLP is subject
that are required to be described in the Registration Statement or the
Prospectus that are not so described, and there are no contracts or other
documents that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that are not
so described or filed as required.
8
<PAGE>
13. To such counsel's knowledge, neither the Company nor any of its
subsidiaries has violated any Environmental Law, any provisions of the Employee
Retirement Income Security Act of 1974, as amended, or any provisions of the
Foreign Corrupt Practices Act, or the rules and regulations promulgated
thereunder, except for such violations which, singly or in the aggregate, would
not have a Material Adverse Effect.
14. The Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company" as such term is defined
in the Investment Company Act of 1940, as amended.
15. To such counsel's knowledge, except as described in the
Prospectus, there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such securities
with the Shares registered pursuant to the Registration Statement.
16. Each of the Company and YRLP has such Authorizations of, and has
made all filings with and notices to, all United States federal and New York
State governmental or regulatory authorities and self-regulatory organizations
and all courts and other tribunals, including, without limitation, under any
applicable Environmental Laws, as are necessary to own, lease, license and
operate its respective properties and to conduct its business, except where the
failure to have any such Authorization or to make any such filing or notice
would not, in the aggregate, have a Material Adverse Effect; each such
Authorization is valid and in full force and effect and each of the Company and
YRLP is in compliance with all the terms and conditions thereof and with the
rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred (including, without
limitation, the receipt of any notice from any authority or governing body)
which allows or, after notice or lapse of time or both, would allow, revocation,
suspension or termination of any such Authorization or results or, after notice
or lapse of time or both, would result in any other impairment of the rights of
the holder of any such Authorization; and such Authorizations contain no
restrictions that are burdensome to the Company; in each case except as would
not have a Material Adverse Effect.
17. Each document, if any, filed pursuant to the Exchange Act and
incorporated by reference in the Prospectus (except for financial statements and
other financial data included therein as to which no opinion need be expressed)
complied when so filed as to form with the Exchange Act. The Registration
Statement (except the financial statements and schedules and other financial and
statistical data included therein, as to which such counsel expresses no view),
at the time it became effective, and the Prospectus (except as aforesaid), as of
the date thereof, appeared on their face to be appropriately responsive in all
material respects to the requirements of the Securities Act and the rules and
regulations thereunder other than Regulation S-T under the Securities Act. In
addition, I do not know of any statutes,
9
<PAGE>
regulations, contracts or other documents of a character required to be filed as
exhibits to the Registration Statement or required to be described in the
Registration Statement or the Prospectus that are not filed or described as
required.
18. No information has come to my attention that causes me to believe
that (i) the Registration Statement (except the financial statements and
schedules and other financial and statistical data included therein, as to which
I express no view) at the time it became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
(ii) the Prospectus (except the financial statements and schedules and other
financial and statistical data included therein, as to which I express no view),
as of the date thereof or as of the Closing Date, contained or contains an
untrue statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
10
<PAGE>
Appendix C
----------
FORM OF OPINION OF WACHTELL, LIPTON, ROSEN & KATZ:
1. Each of the H&F Selling Stockholders is the lawful owner of the
Shares to be sold by such Selling Stockholder pursuant to the Underwriting
Agreement and owns such Shares, free of all restrictions on transfer, liens,
encumbrances, security interests, equities and claims whatsoever other than
pursuant to the H&F Custody Agreement, the H&F Power of Attorney, the
Underwriting Agreement and other than any such restriction on transfer, lien,
encumbrance, equity or claim created by an Underwriter or resulting from any
actions taken by an Underwriter.
2. Each of the H&F Selling Stockholders has full legal right, power
and authority, and all authorization and approval required by law, to enter into
the Underwriting Agreement and the H&F Custody Agreement and the H&F Power of
Attorney of such Selling Stockholder and to sell, assign, transfer and deliver
the Shares to be sold by such Selling Stockholder in the manner provided herein
and therein.
3. The H&F Custody Agreement of each of the H&F Selling Stockholders
has been duly authorized, executed and delivered by such Selling Stockholder and
is a valid and binding agreement of such Selling Stockholder, enforceable in
accordance with its terms.
4. The H&F Power of Attorney of each of the H&F Selling Stockholders
has been duly authorized, executed and delivered by such Selling Stockholder and
is a valid and binding instrument of such Selling Stockholder, enforceable in
accordance with its terms, and, pursuant to such H&F Power of Attorney, such
Selling Stockholder has, among other things, authorized the Attorneys, or any
one of them, to execute and deliver on such Selling Stockholder's behalf this
Agreement and any other document they, or any one of them, may deem necessary or
desirable in connection with the transactions contemplated hereby and thereby
and to deliver the Shares to be sold by such Selling Stockholder pursuant to
this Agreement.
5. Upon sale and delivery of and payment for the Shares to be sold by
each of the H&F Selling Stockholders pursuant to the Underwriting Agreement, and
assuming the Underwriters purchase such Shares for value and in good faith
without notice of any adverse claim, the Underwriters will own such Shares, free
and clear of all restrictions on transfer, liens, encumbrances, security
interests, equities and claims whatsoever other than any such restriction on
transfer, lien, encumbrance, equity or claim created by an Underwriter or
resulting from any actions taken by an Underwriter.
6. Assuming that the representations and warranties of the Company in
Section 6 of the Underwriting Agreement are true and accurate in all material
respects, the
11
<PAGE>
execution and delivery of the Underwriting Agreement and the H&F Custody
Agreement and H&F Power of Attorney of each of the H&F Selling Stockholders by
such Selling Stockholder, the compliance by such Selling Stockholder with all
the provisions hereof and thereof and the performance by such Selling
Stockholder of its obligations thereunder will not require any consent,
approval, authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the securities
or Blue Sky laws of the various states), conflict with or constitute a breach of
any of the terms or provisions of, or a default under, the organizational
documents of such Selling Stockholder, if such Selling Stockholder is not an
individual, or any indenture, loan agreement, mortgage, lease or other agreement
or instrument to which such Selling Stockholder is a party or by which any
property of such Selling Stockholder is bound or violate or conflict with any
applicable law or any rule, regulation, judgment, order or decree of any court
or any governmental body or agency having jurisdiction over such Selling
Stockholder or any property of such Selling Stockholder.
12
<PAGE>
Appendix D
----------
FORM OF OPINION OF WACHTELL, LIPTON, ROSEN & KATZ:
1. Each of the Option Selling Stockholders is the lawful owner
of the Shares to be sold by such Option Selling Stockholder pursuant to the
Underwriting Agreement and owns such Shares, free of all restrictions on
transfer, liens, encumbrances, security interests, equities and claims
whatsoever other than pursuant to the Option Custody Agreement, the Option Power
of Attorney, the Underwriting Agreement and other than any such restriction on
transfer, lien, encumbrance, equity or claim created by an Underwriter or
resulting from any actions taken by an Underwriter.
2. Each of the Option Selling Stockholders has full legal
right, power and authority, and all authorization and approval required by law,
to enter into the Underwriting Agreement and the Option Custody Agreement and
the Option Power of Attorney of such Option Selling Stockholder and to sell,
assign, transfer and deliver the Shares to be sold by such Option Selling
Stockholder in the manner provided herein and therein.
3. The Option Custody Agreement of each of the Option Selling
Stockholders has been duly authorized, executed and delivered by such Option
Selling Stockholder and is a valid and binding agreement of such Option Selling
Stockholder, enforceable in accordance with its terms.
4. The Option Power of Attorney of each of the Option Selling
Stockholders has been duly authorized, executed and delivered by such Option
Selling Stockholder and is a valid and binding instrument of such Option Selling
Stockholder, enforceable in accordance with its terms, and, pursuant to such
Option Power of Attorney, such Option Selling Stockholder has, among other
things, authorized the Attorneys, or any one of them, to execute and deliver on
such Option Selling Stockholder's behalf this Agreement and any other document
they, or any one of them, may deem necessary or desirable in connection with the
transactions contemplated hereby and thereby and to deliver the Shares to be
sold by such Option Selling Stockholder pursuant to this Agreement.
5. Upon sale and delivery of and payment for the Shares to be
sold by each of the Option Selling Stockholders pursuant to the Underwriting
Agreement, and assuming the Underwriters purchase such Shares for value and in
good faith without notice of any adverse claim, the Underwriters will own such
Shares, free and clear of all restrictions on transfer, liens, encumbrances,
security interests, equities and claims whatsoever other than any such
restriction on transfer, lien, encumbrance, equity or claim created by an
Underwriter or resulting from any actions taken by an Underwriter.
13
<PAGE>
6. Assuming that the representations and warranties of the
Company in Section 6 of the Underwriting Agreement are true and accurate in all
material respects, the execution and delivery of the Underwriting Agreement and
the Option Custody Agreement and Option Power of Attorney of each of the Option
Selling Stockholders by such Option Selling Stockholder, the compliance by such
Option Selling Stockholder with all the provisions hereof and thereof and the
performance by such Option Selling Stockholder of its obligations thereunder
will not require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such as may
be required under the securities or Blue Sky laws of the various states),
conflict with or constitute a breach of any of the terms or provisions of, or a
default under, the organizational documents of such Option Selling Stockholder,
if such Option Selling Stockholder is not an individual, or any indenture, loan
agreement, mortgage, lease or other agreement or instrument to which such Option
Selling Stockholder is a party or by which any property of such Option Selling
Stockholder is bound or violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental body or
agency having jurisdiction over such Option Selling Stockholder or any property
of such Option Selling Stockholder.
14
<PAGE>
Appendix E
----------
FORM OF OPINION OF GREENE RADOVSKY MALONEY & SHARE LLP:
1. Each of The Tully M. Friedman 1997 Charitable Lead Annuity Trust,
the Jackson Street Trust and the Tully M. Friedman Revocable Trust
(collectively, the "Trusts") is the lawful owner of the Shares to be sold by the
Trusts pursuant to the Underwriting Agreement and owns such Shares, free of all
restrictions on transfer, liens, encumbrances, security interests, equities and
claims whatsoever other than pursuant to the Custody Agreement, the Power of
Attorney, the Underwriting Agreement and other than any such restriction on
transfer, lien, encumbrance, equity or claim created by an Underwriter or
resulting from any actions taken by an Underwriter.
2. Each of the Trusts has full legal right, power and authority, and
all authorization and approval required by law, to enter into the Underwriting
Agreement and the Custody Agreement and the Power of Attorney of the Trusts and
to sell, assign, transfer and deliver the Shares to be sold by the Trusts in the
manner provided herein and therein.
3. The Custody Agreement of each of the Trusts has been duly
authorized, executed and delivered by the Trusts and is a valid and binding
agreement of the Trusts, enforceable in accordance with its terms.
4. The Power of Attorney of each of the Trusts has been duly
authorized, executed and delivered by the Trusts and is a valid and binding
instrument of the Trusts enforceable in accordance with its terms, and, pursuant
to such Power of Attorney, the Trusts has, among other things, authorized the
Attorneys, or any one of them, to execute and deliver on such Trust's behalf
this Agreement and any other document they, or any one of them, may deem
necessary or desirable in connection with the transactions contemplated hereby
and thereby and to deliver the Shares to be sold by the Trusts pursuant to this
Agreement.
5. Upon sale and delivery of and payment for the Shares to be sold by
each of the Trusts pursuant to the Underwriting Agreement, and assuming the
Underwriters purchase such Shares for value and in good faith without notice of
any adverse claim, the Underwriters will own such Shares, free and clear of all
restrictions on transfer, liens, encumbrances, security interests, equities and
claims whatsoever other than any such restriction on transfer, lien,
encumbrance, equity or claim created by an Underwriter or resulting from any
actions taken by an Underwriter.
6. Assuming that the representations and warranties of the Company in
Section 6 of the Underwriting Agreement are true and accurate in all material
respects, the execution and delivery of the Underwriting Agreement and the
Custody Agreement and Power of Attorney of the Trusts by the Trusts, the
compliance by the Trusts with all the provisions
15
<PAGE>
hereof and thereof and the performance by the Trusts of its obligations
thereunder will not require any consent, approval, authorization or other order
of, or qualification with, any court or governmental body or agency (except such
as may be required under the securities or Blue Sky laws of the various states),
conflict with or constitute a breach of any of the terms or provisions of, or a
default under, the organizational documents of the Trusts, if the Trusts is not
an individual, or any indenture, loan agreement, mortgage, lease or other
agreement or instrument to which the Trusts is a party or by which any property
of the Trusts is bound or violate or conflict with any applicable law or any
rule, regulation, judgment, order or decree of any court or any governmental
body or agency having jurisdiction over the Trusts or any property of the
Trusts.
16
[LETTERHEAD OF CLEARY, GOTTLIEB, STEEN & HAMILTON]
EXHIBIT 5.1
Writer's Direct Dial: (212) 225-2420
November 9, 1999
Young & Rubicam Inc.
285 Madison Avenue
New York, New York 10017-6486
Re: Young & Rubicam Inc.
Registration Statement on Form S-3 (No. 333-90271)
Ladies and Gentlemen:
We have acted as special counsel to Young & Rubicam Inc., a
Delaware corporation (the "Company"), in connection with the registration
statement on Form S-3 (No. 333-90271) (the "Registration Statement") filed with
the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Act of 1933, as amended (the "Act"), for the registration of
outstanding shares (the "Issued Shares") of Common Stock, par value $.01 per
share (the "Common Stock"), of the Company and shares (the "Option Shares") of
Common Stock issuable upon the exercise of options granted pursuant to option
agreements (the "Option Agreements"), and the related preferred share purchase
rights (the "Rights") issued pursuant to the Rights Agreement dated as of May 1,
1998 (the "Rights Agreement"), between the Company and The Bank of New York, as
Rights Agent (the "Rights Agent").
We have participated in the preparation of the Registration
Statement and have reviewed the originals or copies certified or otherwise
identified to our satisfaction of all such corporate records of the Company and
such other instruments and other certificates of public officials, officers and
representatives of the Company and such other persons, and we have made such
investigations of law, as we have deemed appropriate as a basis for the opinions
expressed below.
In arriving at the opinions expressed below, we have assumed
the authenticity of all documents submitted to us as originals and the
conformity to the originals of all documents
<PAGE>
Young & Rubicam Inc., p. 2
submitted to us as copies. In addition, we have assumed and have not verified
the accuracy as to factual matters of each document we have reviewed.
Based on the foregoing, and subject to the further
qualification set forth below, it is our opinion that:
1. The Issued Shares have been duly authorized by all
necessary corporate action of the Company, have been validly issued by the
Company and are fully paid and nonassessable.
2. The Option Shares have been duly authorized by all
necessary corporate action of the Company and, when issued in accordance with
the terms of the Option Agreements, at prices in excess of the par value
thereof, will be validly issued, fully paid and nonassessable.
3. Assuming the due authorization, execution and delivery of
the Rights Agreement by the Rights Agent, the Rights associated with the Issued
Shares have been validly issued and, upon issuance of the Option Shares in
accordance with the terms of the Option Agreements, at prices in excess of the
par value thereof, the Rights associated with the Option Shares will be validly
issued.
The foregoing opinions are limited to the General Corporation
Law of the State of Delaware.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to this firm under the
heading "Legal Matters" in the prospectus included in the Registration
Statement. In giving such consent, we do not thereby admit that we are "experts"
within the meaning of the Act or the rules and regulations of the Commission
issued thereunder with respect to any part of the Registration Statement,
including this exhibit.
Very truly yours,
CLEARY, GOTTLIEB, STEEN & HAMILTON
By /s/: Stephen H. Shalen
_________________________________
Stephen H. Shalen, a partner
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated February 16, 1999 relating to the
consolidated financial statements, which appears in Young & Rubicam Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1998. We also consent
to the application of such report to the Financial Statement Schedule for the
years ended December 31, 1996, 1997 and 1998 listed in the accompanying index
when such schedule is read in conjunction with the financial statements referred
to in our report. The audits referred to in such report also included this
schedule. We also consent to the reference to us under the heading "Experts" in
such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
November 17, 1999
