As filed with the Securities and Exchange Commission on April 17, 2000
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Young & Rubicam Inc.
(Exact name of Registrant as specified in its charter)
Delaware 13-1493710
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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:
Stephen H. Shalen, Esq.
Christopher J. Walton, Esq.
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
(212) 225-2000
---------------
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, check the following box. [X]
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, please 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. [_]
<TABLE>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------
Proposed Maximum Proposed Maximum
Title of each Class of Securities To Be Amount To Be Offering Price Per Aggregate Offering Amount of
Registered Registered Unit(1) Price(1) Registration Fee
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3% Convertible Subordinated Notes due 2005 $287,500,000 88.75% $255,156,250 $67,361.25
- --------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.01 per share, 3,919,029
issuable upon conversion of Notes shares(2) N/A N/A N/A(3)
- --------------------------------------------------------------------------------------------------------------------------
Preferred Share Purchase Rights (4)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933.
(2) Plus such additional indeterminate number of shares of Common Stock as
may become issuable upon conversion of the Notes being registered
hereunder by reason of adjustment of the conversion price.
(3) Pursuant to Rule 457(i) under the Securities Act of 1933 there is no
filing fee with respect to the shares of Common Stock issuable upon
conversion of the Notes because no additional consideration will be
received in connection with the exercise of the conversion privilege.
(4) Rights will initially 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>
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 is effective. This preliminary
prospectus is not an offer to sell nor does it seek an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED APRIL 17, 2000
PROSPECTUS
YOUNG & RUBICAM INC.
$287,500,000 aggregate principal amount of
3% Convertible Subordinated Notes Due 2005
(Interest payable January 15 and July 15)
and
shares of common stock issuable upon conversion thereof
----------------
This prospectus relates to (i) $287,500,000 aggregate principal amount
of 3% convertible subordinated notes due 2005 of Young & Rubicam Inc., a
Delaware corporation, and (ii) the shares of common stock, par value $0.01 per
share, of Y&R issuable upon conversion of the notes. The notes and the common
stock that are offered for resale in this prospectus are offered for the
accounts of their current holders, to whom we refer as the selling
securityholders.
The notes are convertible into common stock of Y&R at any time between
April 20, 2000 and January 14, 2005, unless Y&R has previously redeemed or
repurchased the notes, at a conversion price of $73.36 (which is equal to a
conversion rate of 13.6314 shares per $1,000 principal amount), subject to
adjustment. The common stock is listed on the New York Stock Exchange under the
symbol "YNR." On April 14, 2000, the last sale price of the common stock as
reported on the New York Stock Exchange Composite Tape was $38.50 per share.
Y&R will not receive any of the proceeds from sales of the notes or the
shares of common stock by the selling securityholders. The notes and the shares
of common stock may be offered in negotiated transactions or otherwise at market
prices prevailing at the time of sale or at negotiated prices. The selling
securityholders may be deemed to be "underwriters" as defined in the Securities
Act of 1933, as amended. If any broker-dealers are used by the selling
securityholders, any commissions paid to broker-dealers and, if broker-dealers
purchase any notes or shares as principals, any profits received by such
broker-dealers on the resale of the notes or shares of common stock may be
deemed to be underwriting discounts or commissions under the Securities Act. In
addition, any profits realized by the selling securityholders may be deemed to
be underwriting commissions.
This prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, any of the securities offered hereby by any person in any
jurisdiction in which it is unlawful for such person to make such an offering or
solicitation.
Investing in the notes or shares of common stock involves certain
risks. See "Risk Factors" beginning on page 6.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
April , 2000
<PAGE>
TABLE OF CONTENTS
Page
----
Incorporation of Documents by Reference.................................... 1
Cautionary Statement Regarding Forward-Looking Statements.................. 2
Prospectus Summary......................................................... 3
Risk Factors............................................................... 6
Use of Proceeds............................................................ 13
Price Range of Common Stock and Dividend Policy............................ 13
Ratio of Earnings to Fixed Charges (Coverage Deficiency)................... 14
Description of Notes....................................................... 15
Certain United States Federal Income Tax Considerations.................... 33
Selling Securityholders.................................................... 38
Plan of Distribution....................................................... 39
Legal Matters.............................................................. 40
Experts.................................................................... 41
----------------
INCORPORATION OF DOCUMENTS BY REFERENCE
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may review the
reports and other information we have filed without charge at the SEC'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 SEC, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates or at the SEC's web site at
http://www.sec.gov. For further information on the operation of the public
reference rooms, please call 1-800-SEC-0330. You may also review these materials
at the regional offices of the SEC 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. These materials may also be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
We have chosen to "incorporate by reference" in this prospectus
information we file with the SEC. This 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 include in this prospectus or that we file later with the
SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below:
o Our Annual Report on Form 10-K for the year ended December 31, 1999;
o Our Current Report on Form 8-K filed on January 7, 2000; and
o The descriptions of our common stock and our preferred share purchase
rights contained in our two registration statements on Form 8-A (File
No. 001-14093), and any amendments or reports filed for the purpose of
updating those descriptions.
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,
as amended (the "Exchange Act") until the termination of the offering of the
notes and common stock issued or issuable upon conversion of the notes.
1
<PAGE>
Information contained on Y&R's internet web site will not be deemed to be
a part of this prospectus.
You may request a copy of these filings (other than exhibits to these
filings, unless the exhibits are specifically incorporated by reference) at no
cost by writing or telephoning us as follows:
Young & Rubicam Inc.
285 Madison Avenue
New York, New York 10017
Attention: Investor Relations
(212) 798-1120
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements included or incorporated by reference in this
prospectus are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements also
include statements relating to our performance in the "Management's Discussion
and Analysis of Financial Condition and Results of Operations" section of our
Annual Report on Form 10-K for the year ended December 31, 1999. In addition, we
may make forward-looking statements in future filings with the SEC, 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 Young & Rubicam 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, among
other important factors:
o revenues received from clients, including pursuant to 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;
and
o our liquidity and financing plans.
All forward-looking statements included or incorporated by reference 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 in "Risk Factors" 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.
2
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere or incorporated
by reference in this prospectus. This is not intended to be a complete
description of the matter covered in this prospectus and is subject to and
qualified in its entirety by reference to the more detailed information and
financial statements (including the notes thereto) appearing elsewhere or
incorporated by reference in this prospectus. Unless the context otherwise
requires, references to "we," "us," "Young & Rubicam" and "Y&R" are to Young &
Rubicam Inc. and its consolidated subsidiaries.
Young & Rubicam Inc.
Since our founding 75 years ago, Young & Rubicam Inc. ("Y&R" or the
"Company") has evolved from a single New York-based advertising agency to the
sixth largest consolidated marketing and communications organization in the
world based upon 1999 revenues. We currently 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 Y&R 2.1 (full-service on-line and off-line advertising and marketing
services);
o The Bravo Group and Kang & Lee (multi-cultural marketing and
communications);
o impiric (customer relationship management, 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 The Digital Edge (internet media planning, buying and placement
services);
o Burson-Marsteller (perception management and public relations);
o Cohn & Wolfe (full-service public relations);
o Robinson Lerer & Montgomery (strategic corporate public relations);
o Landor Associates (branding consultation and design services); and
o Sudler & Hennessey (healthcare communications).
Our principal executive office is located at 285 Madison Avenue, New
York, New York 10017, and our telephone number is (212) 210-3000.
Risk Factors
For a discussion of risks that you should consider before buying notes
or shares of common stock, see "Risk Factors" beginning on page 6.
3
<PAGE>
The Offering
Issuer............................ Young & Rubicam Inc., a Delaware
corporation.
Securities Offered................ $287,500,000 aggregate principal amount
of 3% Convertible Subordinated Notes due
2005, previously issued in a private
offering.
Such shares of Y&R common stock as may be
issued upon conversion of the notes.
Maturity.......................... January 15, 2005, unless earlier
redeemed, repurchased or converted.
Interest Payment Dates............ January 15 and July 15 of each year,
commencing on July 15, 2000.
Conversion........................ The notes are convertible, unless
previously redeemed or repurchased, at
the option of the holder at any time
between April 20, 2000 and January 14,
2005, into shares of our common stock at
a conversion price of $73.36, subject to
adjustment in certain events. See
"Description of Notes--Conversion." The
right to convert notes that have been
called for redemption will terminate at
the close of business on the business day
immediately preceding the date of
redemption.
Optional Redemption............... On or after January 20, 2003 at any time
or from time to time, the notes may be
redeemed at our option, in whole or in
part, in cash at the redemption prices
set forth herein, plus accrued and unpaid
interest to the date of redemption. See
"Description of Notes--Optional
Redemption."
Mandatory Redemption.............. None
Repurchase at the Option Upon a Designated Event (as defined),
of Holders Upon Designated holders of the notes will have the right,
Event........................ subject to certain restrictions and
conditions, to require us to purchase all
or any part of their notes at a purchase
price equal to 100% of the principal
amount thereof, plus accrued and unpaid
interest to the date of the purchase. See
"Risk Factors--Our ability to repurchase
notes if a designated event occurs is
subject to limitations" and "Description
of Notes--Repurchase at the Option of
Holders."
Ranking........................... The notes are general unsecured
obligations of Young & Rubicam and are
subordinated in right of payment to all
existing and future senior debt (as
defined) of Young & Rubicam. The notes
are structurally subordinated to all
existing and future indebtedness and
other liabilities of subsidiaries of
Young & Rubicam. As of December 31, 1999,
we had approximately $159.3 million of
debt that would have constituted senior
debt and our subsidiaries had
approximately $1.6 billion of additional
non-interest bearing liabilities
consisting substantially of accounts
payable. The indenture under which the
notes were issued contains no limitation
on the incurrence of indebtedness and
other liabilities by Young & Rubicam or
its subsidiaries. See "Risk Factors--The
notes are subordinated to our senior debt
and all the obligations of our
subsidiaries" and "Description of
Notes--Subordination of Notes."
4
<PAGE>
Use of Proceeds................... We will not receive any proceeds from the
sale by the selling securityholders of
the notes or shares of common stock. See
"Use of Proceeds."
Trading........................... The notes have been designated for
trading in The Portal Market. Our common
stock is traded on the New York Stock
Exchange under the symbol "YNR." We will
file a supplemental application with
the NYSE to list the shares of common
stock issuable upon conversion of the
notes.
5
<PAGE>
RISK FACTORS
An investment in the notes or the shares of 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 notes or shares of common stock.
We have in the recent past 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 in the advertising, direct
marketing and perception management and public relations businesses are large
multinational marketing and communications companies, as well as numerous
smaller agencies that operate only in the United States or in one or more
countries or local markets. 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 quality and breadth of services;
o geographical coverage and diversity;
o relationships with clients; and
o financial controls.
Recently, traditional advertising agencies also have been competing
with major consulting firms that 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 always handle all advertising,
public relations or other marketing and communications services for that client.
Many large multinational companies are served by a number of agencies within the
marketing and communications industry. In many cases, clients' policies on
conflicts of interest or desires to be served by multiple agencies result in one
or more global agency networks representing a client only for a portion of its
marketing and communications needs or only in particular geographic areas. In
addition, the ability of agencies within marketing and communications
organizations to acquire new clients or additional assignments from existing
clients may be limited by the conflicts policy followed by many clients. 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.
6
<PAGE>
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.
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 1999, our ten largest client accounts contributed
approximately 37% of consolidated revenues, our three largest client accounts
contributed approximately 22% of consolidated revenues and our largest client
account, Ford Motor Company, contributed 13% of consolidated revenues (an
increase from prior years). Our dependence on revenues from these client
accounts may increase further 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. United States clients may
typically cancel contracts with agencies on 90 days' notice, and non-U.S.
clients typically also may cancel contracts with agencies 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 The Clorox Company and Blockbuster Video, for a variety
of reasons, including conflicts with newly acquired clients. We may not be
successful in replacing clients that may leave Y&R or in replacing revenues when
a client significantly reduces the amount of work given to Y&R.
7
<PAGE>
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 1999,
operations outside the United States represented 48% 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 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.
At March 31, 2000, we had 72,189,892 shares of common stock
outstanding, substantially all of which are 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. At that date, an aggregate of
18,829,915 shares of common stock and shares subject to vested options held by
current or former employees of Y&R, whom we refer to as management investors,
were 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.
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 five members of Y&R's senior management, in their
capacities as voting trustees. At March 31, 2000, this trust held voting power
over 23.6% of the outstanding shares of common stock, assuming the exercise of
all vested options held by the management investors. 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
Thomas D. Bell, 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 all of the other voting trustees. As a result
of the foregoing, Mr. Bell or his successor will be able to exercise a
significant degree of control over business decisions affecting Y&R. 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 would be able to exercise a significant degree of
control over business decisions affecting Y&R.
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.
8
<PAGE>
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 deepening our geographic presence. 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.
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 fully
address year 2000 issues.
We continue to monitor 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, and 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
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remediation. 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.
Since January 1, 2000, we have experienced no material impact on our
computer systems or operations as a result of the year 2000 issue. While we
believe our efforts have been successful to date, 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, may not be sufficient to prevent all year 2000 issues that may arise
in the future. Our failure to satisfactorily and completely 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 1999 in respect of the year 2000
issue were not material. We have funded all remedial projects in connection with
our program.
The market price of Y&R's common stock will fluctuate, and could fluctuate
significantly.
The market price of Y&R's 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.
Our organizational documents, provisions of Delaware law and our stockholder
rights plan may delay, deter or prevent a change in control of Y&R.
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;
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o authorization for the board of directors to issue without
stockholder approval preferred stock with such 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.
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. 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 23.6% of the outstanding
shares of common stock by the management voting trust at March 31, 2000
(assuming the exercise of all vested options held by management investors),
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 provisions that could
have the effect of delaying, deterring or preventing a change in control of Y&R.
The notes are subordinated to our senior debt and all the obligations of our
subsidiaries.
The notes are unsecured and subordinated in right of payment to all
existing and future senior debt (as defined) of Y&R. As a result of such
subordination, in the event of bankruptcy, liquidation or reorganization of Y&R
or upon acceleration of the notes due to an event of default under the indenture
and in certain other events, the assets of Y&R will be available to pay
obligations on the notes only after all senior debt has been paid in full in
cash or other payment satisfactory to the holders of the senior debt, and there
may not be sufficient assets remaining to pay amounts due on any or all of the
notes then outstanding. The notes also will be effectively subordinated to the
liabilities, including trade payables, of all subsidiaries of Y&R. The indenture
does not prohibit or limit the incurrence of senior debt or the incurrence of
other indebtedness and other liabilities by Y&R or any of its subsidiaries. The
incurrence of additional indebtedness and other liabilities by us or our
subsidiaries could adversely affect our ability to pay our obligations on the
notes. As of December 31, 1999, we had approximately $159.3 million of
indebtedness outstanding that would constitute senior debt and our subsidiaries
had approximately $1.6 billion of additional non-interest bearing liabilities
consisting substantially of accounts payable. See "Description of
Notes--Subordination of Notes."
Our ability to repurchase notes if a designated event occurs is subject to
limitations.
Our ability to repurchase notes upon the occurrence of a designated
event is subject to limitations. If a designated event were to occur, we may not
have sufficient financial resources, or we may be unable to arrange financing,
to pay the repurchase price for all notes tendered. Our subsidiaries may be
parties in the future to credit agreements, and other agreements relating to
indebtedness that contain restrictions on transferring funds sufficient to
permit us to effect a designated event repurchase. In addition, future credit
agreements or other agreements relating
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to our indebtedness (including additional senior debt) may contain prohibitions
or restrictions on our ability to effect a designated event repurchase. In the
event a designated event occurs at a time when such prohibitions or restrictions
are in effect, we could seek the consent of our lenders and lenders to our
subsidiaries to enable us to repurchase notes or could attempt to refinance the
borrowings that contain such prohibitions or restrictions. If we do not obtain
such consents or repay such borrowings, we will be effectively prohibited from
repurchasing notes. In such case, our failure to repurchase tendered notes would
constitute an event of default under the indenture whether or not such
repurchase is permitted by the subordination provisions of the indenture. Any
such default may, in turn, cause a default under our senior debt. As a result,
in such a case, any repurchase of the notes would, absent a waiver, be
prohibited under the subordination provisions of the indenture until the senior
debt is paid in full.
There is no public trading market for the notes.
There is no existing public trading market for the notes and there can
be no assurance as to the liquidity of any market that may develop, the ability
of holders of the notes to sell those notes, the price at which the holders of
notes would be able to sell those notes or whether a public trading market, if
it develops, will continue. If a public trading market were to develop, the
notes could trade at prices higher or lower than their principal amount,
depending on many factors, including prevailing interest rates, the market for
similar securities and Y&R's operating results.
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USE OF PROCEEDS
Y&R will not receive any proceeds from the sale by the selling
securityholders of the notes or the shares of common stock issuable upon
conversion of the notes.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The common stock has been listed on the New York Stock Exchange under
the symbol "YNR" since May 12, 1998. The following table sets forth the low and
high sales prices of the common stock for the fiscal quarters indicated as
reported on the New York Stock Exchange Composite Tape.
Low High
--- ----
1998
Second Quarter (beginning May 24, 1998).............. $26.50 $33.06
Third Quarter........................................ $28.38 $35.88
Fourth Quarter....................................... $19.75 $33.63
1999
First Quarter........................................ $31.25 $43.31
Second Quarter....................................... $37.25 $44.38
Third Quarter........................................ $39.69 $48.25
Fourth Quarter....................................... $43.00 $73.25
2000
First Quarter......................................... $38.56 $71.56
Second Quarter (through April 14, 2000)............... $38.50 $45.06
On April 14, 2000, the last sale price of our common stock as
reported on the New York Stock Exchange Composite Tape was $38.50. As of March
24, 2000, there were approximately 1,038 holders of record of shares of common
stock.
On June 15, 1999, September 15, 1999, December 15, 1999 and March 15,
2000, Y&R paid quarterly cash dividends of $0.025 per common share to all
stockholders of record as of June 1, 1999, September 1, 1999, December 1, 1999
and March 1, 2000, respectively. The decision whether to apply legally available
funds to the payment of dividends on the common stock in the future will be made
at the discretion of our board of directors and will depend upon, among other
factors, our results of operations, financial condition, capital requirements
and contractual restrictions under our credit facilities. Our credit facilities
contain financial and operating restrictions and covenant requirements and
permit the payment of cash dividends except in the event of a continuing default
under the credit agreements governing those facilities.
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RATIO OF EARNINGS TO FIXED CHARGES (COVERAGE DEFICIENCY)
<TABLE>
Year Ended December 31,
------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges 6.38x $(83,530) 1.58x $(247,926) 1.21x
(deficiency in the coverage of fixed
charges by earnings before fixed
charges)
</TABLE>
The ratio of earnings to fixed charges has been computed by dividing
total earnings by total fixed charges. Coverage deficiencies have been computed
by subtracting fixed charges from total earnings. Earnings were calculated by
adding (1) income (loss) before income taxes, (2) dividends from unconsolidated
companies, and (3) fixed charges. Fixed charges consist of interest and
one-third of rent expense as representative of the interest portion of rentals.
As a result of the loss before income taxes incurred for the years
ended 1998 and 1996, the ratio of earnings to fixed charges was less than 1:1.
Excluding the effects of the income recorded in connection with the
1999 net pre-tax gain on the sale of certain assets of our Brand Dialogue
operations in exchange for an ownership interest in Luminant Worldwide
Corporation and additional consideration received in the fourth quarter of 1999
as the result of achieving revenue and operating profit performance targets of
the Brand Dialogue contributed assets totaling $85.0 million, the ratio of
earnings to fixed charges would have been 4.76x for the year ended December 31,
1999. Excluding the effects of the $234.4 million of charges recorded in
connection with the consummation of our initial public offering of common stock
in May 1998, the ratio of earnings to fixed charges would have been 3.95x for
the year ended December 31, 1998. Excluding the effects of the $315.4 million of
charges recorded in connection with our recapitalization in December 1996, the
ratio of earnings to fixed charges for the year ended December 31, 1996 would
have been 2.36x.
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DESCRIPTION OF NOTES
General
The notes were issued pursuant to an indenture dated as of January 20,
2000 between us and The Bank of New York, as trustee. A copy of the indenture
and the registration agreement relating to the notes are available from us as
set forth under "Incorporation of Documents by Reference". The following is a
summary of certain provisions of the indenture and the registration agreement.
Although we believe that we have summarized the material terms of these
agreements, this summary is not complete and is qualified in its entirety by
reference to the indenture and the registration agreement. The definitions of
certain terms used in the following summary are set forth below under the
heading "--Definitions."
The notes are general unsecured obligations of Young & Rubicam Inc. and
are subordinated in right of payment to all our existing and future senior debt
to the extent set forth in the indenture. The notes are also effectively
subordinated to all existing and future indebtedness and other liabilities of
any of our current or future subsidiaries. The indenture does not limit the
amount of other indebtedness or liabilities that we or our subsidiaries may
incur or securities that we or our subsidiaries may issue. You should read the
information under the heading "Risk Factors--The notes are subordinated to our
senior debt and all the obligations of our subsidiaries" for more information on
the subordination of the notes.
Principal, Maturity and Interest
The notes are limited in aggregate principal amount to $287,500,000.
The notes bear interest from January 20, 2000 at 3% per annum and mature on
January 15, 2005.
We will pay interest on the notes semiannually on January 15 and July
15 of each year commencing on July 15, 2000, to holders of record at the close
of business on the January 1 or July 1 immediately preceding the interest
payment dates. We will compute interest on the basis of a 360-day year
consisting of twelve 30-day months. Interest on the notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from January 20, 2000.
The notes are in registered form, without coupons, in denominations of
$1,000 and integral multiples thereof.
If a payment date is not a business day at a place of payment, we may
make payment at that place on the next succeeding business day, and no interest
will accrue for the intervening period.
We have appointed the trustee, The Bank of New York, at its corporate
trust office in the Borough of Manhattan, The City of New York as the registrar,
paying agent and conversion agent for the notes. We may terminate the
appointment of the registrar, paying agent or conversion agent at any time and
appoint additional or other registrars, paying agents and conversion agents. We
will maintain an office or agency in the Borough of Manhattan, The City of New
York for payments with respect to the notes and for the surrender of notes for
conversion until the notes have been delivered to the trustee for cancellation,
or moneys sufficient to pay the principal of, and premium, if any, interest and
additional amounts, if any, on the notes have been made available for payment
and either paid or returned to us as provided in the indenture. We will give
notice of any termination or appointment and of any change in the office through
which the paying agent or conversion agent will act in accordance with the
procedures set forth under the heading "--Notices" below.
Optional Redemption
We may not redeem the notes prior to January 20, 2003. On and after
January 20, 2003, we may redeem the notes at our option, in whole or from time
to time in part (in any integral multiple of $1,000), after giving not less than
30 nor more than 60 days' prior notice by mail to the holders of the notes. We
may redeem the notes at the following redemption prices (expressed as
percentages of the principal amount), in each case together with accrued
interest and additional amounts, if any, to, but excluding, the redemption date,
subject to the right of holders of record on the relevant record date to receive
interest and additional amounts, if any, due on an interest payment date.
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If we redeem the notes during the 12-month period beginning January 15 of the
years indicated (January 20, in the case of 2003) the redemption price shall be:
Year Redemption Price
---- ----------------
2003 101.20%
2004 100.60%
On or after the redemption date, interest and additional amounts, if any, will
cease to accrue on the notes, or portions thereof, called for redemption unless
we fail to redeem the notes.
Mandatory Redemption
We are not required to make mandatory redemption or sinking fund
payments with respect to the notes.
Repurchase at the Option of Holders
Upon the occurrence of an event known as a "designated event" (which
includes a change of control or a termination of trading), each holder of notes
has the right to require us to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of the holder's notes pursuant to the offer described
below at a purchase price equal to 100% of the principal amount of the notes,
together with accrued and unpaid interest and additional amounts, if any, on the
notes to the payment date for the designated event.
Within 30 days following any designated event, unless we have
previously given the holders notice of our intention to redeem the notes in
whole pursuant to the provisions set forth under the heading "--Optional
Redemption" above, we will mail a notice to each holder stating:
o that the designated event offer is being made pursuant to the covenant
described in this paragraph and that all notes validly tendered will be
accepted for payment;
o the purchase price and the purchase date, which will be no earlier than
30 days nor later than 60 days following the date such notice is mailed
unless a later date is required by applicable law;
o that any notes not validly tendered or accepted for payment will
continue to accrue interest and additional amounts, if applicable, and
will continue to have conversion rights;
o that, unless we default in the payment of the designated event payment,
all notes accepted for payment pursuant to the designated event offer
will cease to accrue interest and additional amounts, if applicable,
from and after the designated event payment date and will cease to have
conversion rights after the designated event payment date;
o that holders electing to have any notes purchased pursuant to a
designated event offer will be required to surrender the notes, with
the form entitled "Option of Noteholder to Elect Purchase" on the
reverse of the notes completed, to a paying agent at the address
specified in the notice prior to the close of business on the third
business day preceding the designated event payment date;
o that any holder will be entitled to withdraw its election if it
delivers to the paying agent a facsimile transmission or letter setting
forth the name of the holder, the principal amount of notes delivered
for purchase and a statement that such holder is withdrawing its
election to have such notes purchased, and if the paying agent receives
it not later than the close of business on the second business day
preceding the designated event payment date;
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<PAGE>
o that holders whose notes are being purchased only in part will be
issued new notes equal in principal amount to the unpurchased portion
of the notes surrendered, which unpurchased portion must be equal to
$1,000 in principal amount or an integral multiple thereof; and
o the instructions and any other information necessary to enable holders
to accept a designated event offer or effect withdrawal of such
acceptance.
We will comply with the requirements of Rules 13e-4 and 14e-1 under the
Exchange Act and any other securities laws and regulations to the extent these
laws and regulations apply to the repurchase of the notes in connection with a
designated event.
On the designated event payment date, we will, to the extent lawful:
o accept for payment notes or portions thereof validly tendered pursuant
to the designated event offer;
o deposit with the trustee or a paying agent in immediately available
funds an amount equal to the designated event payment in respect of all
notes or portions of notes tendered; and
o deliver or cause to be delivered to the trustee the notes accepted
together with an officers' certificate identifying the notes or
portions of notes that we have accepted for payment.
The paying agent will promptly (but in any event not later than five
calendar days after the designated event payment date) mail or deliver to each
holder of notes accepted payment in an amount equal to the designated event
payment for the notes, and the trustee will promptly authenticate and mail or
deliver to each holder a new certificate representing a note equal in principal
amount to any unpurchased portion of the notes surrendered. Each new certificate
representing a note will be in a principal amount of $1,000 or an integral
multiple thereof. Any notes not accepted will be promptly mailed or delivered by
or on behalf of us to the holder of the notes. We will publicly announce the
results of the designated event offer on or as soon as practicable after the
designated event payment date.
Except as described above with respect to a designated event, the
indenture does not contain any other provisions that permit the holders of the
notes to require us to repurchase or redeem the notes in the event of a
takeover, recapitalization or similar restructuring.
The designated event purchase feature of the notes may in certain
circumstances make more difficult or discourage a takeover of our company, and,
thus, the removal of the management of our company at that time. The designated
event purchase feature, however, is not the result of our knowledge of any
specific effort to accumulate our capital stock or to obtain control of us by
means of a merger, tender offer, solicitation or otherwise, or part of a plan by
management to adopt a series of anti-takeover provisions. Instead, the
designated event purchase feature is a result of negotiations between us and the
initial purchasers of the notes. We have no current intention to engage in a
transaction involving a designated event, although it is possible that we could
decide to do so in the future.
Subject to the limitations on mergers, consolidations and sales of
assets described in "--Merger, Consolidation or Sale of Assets" below, we could,
in the future, enter into certain transactions, including acquisitions,
refinancings or other recapitalizations, that would not be a designated event
under the indenture, but that could increase the amount of indebtedness
(including senior debt) outstanding at that time or otherwise affect our capital
structure or credit ratings. The payment of the designated event payment is
subordinated to the prior payment of senior debt as described under the heading
"--Subordination of Notes" below.
Our ability to repurchase notes upon the occurrence of a designated
event may be limited. If a designated event were to occur, we cannot assure you
that we would have sufficient financial resources, or would be able to arrange
financing, to pay the designated event payment for all notes tendered by holders
of the notes. Our subsidiaries may be parties in the future to credit agreements
and other agreements that restrict the transfer of funds to our company that
would be necessary to permit us to pay a designated event payment. In addition,
future credit agreements or other agreements may prohibit or restrict our
ability to pay a designated event payment. If a designated event occurs at a
time when prohibitions or restrictions are in effect, we could seek the consent
of appropriate third parties to enable us to purchase notes or we could attempt
to refinance any borrowings that contain
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<PAGE>
prohibitions or restrictions. If we do not obtain consents or repay these
borrowings, we will not be able to purchase notes. In this case, our failure to
purchase tendered notes would constitute an event of default under the indenture
whether or not the repurchase is permitted by the subordination provisions of
the indenture. Any default may, in turn, cause a default under our senior debt.
Moreover, the occurrence of a designated event may cause an event of default
under, and permit acceleration of, senior debt that we designate under the
indenture. The indenture prohibits us from repurchasing the notes until this
senior debt is paid in full, or unless we obtain a waiver under the indenture.
You should read the information under the heading "Subordination of Notes" below
and under the headings "Risk Factors -- The notes are subordinated to our senior
debt and all obligations of our subsidiaries" and " -- Our ability to repurchase
notes if a designated event occurs is subject to limitations" for more
information on the subordination of the notes.
A "designated event" will be deemed to have occurred upon a change of
control or a termination of trading.
A "change of control" will be deemed to have occurred when:
o any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act) of shares
representing more than 50% of the combined voting power of the then
outstanding securities entitled to vote generally in elections of our
directors;
o we consolidate with or merge into any other person, or any other person
merges into us, and, in the case of any such transaction, our
outstanding common stock is reclassified into or exchanged for any
other property or securities, unless our stockholders immediately
before such transaction own, directly or indirectly immediately
following such transaction, at least a majority of the combined voting
power of the then outstanding voting securities entitled to vote
generally in elections of directors of the corporation resulting from
such transaction in substantially the same respective proportions as
their ownership of our voting stock immediately before the transaction;
o our company and our subsidiaries, taken as a whole, sell, assign,
convey, transfer or lease all or substantially all of the assets of our
company or of our company and our subsidiaries, taken as a whole,
(other than to one or more of our wholly-owned subsidiaries); or
o any time the continuing directors do not constitute a majority of our
board of directors (or, if applicable, a successor corporation to our
company);
provided, however, that:
o a change of control under the first three bullets above shall not be
deemed to have occurred if the daily market price per share of common
stock for any five trading days within the period of 10 consecutive
trading days ending immediately after the later of the change of
control or the public announcement of the change of control (in the
case of a change of control under the first bullet above) or the period
of 10 consecutive trading days ending immediately before the change of
control (in the case of a change of control under the second and third
bullets above) shall equal or exceed 105% of the conversion price of
the notes in effect on the date of the change of control or the public
announcement of the change of control, as applicable, and
o a change of control under the first three bullets above shall not be
deemed to have occurred if at least 90% of the consideration in the
change of control transaction consists of shares of capital stock
traded on a U.S. national securities exchange or quoted on The Nasdaq
National Market, and as a result of the transaction, the notes become
convertible solely into this capital stock.
Note that the definition of change of control in the indenture includes a
phrase relating to the sale, assignment, conveyance, transfer or lease of "all
or substantially all" of the assets of our company or of our company and our
subsidiaries taken as a whole. There are only a limited number of court
decisions interpreting the phrase "substantially all" and, as a result, there is
no precise established definition of the phrase under applicable law.
Accordingly, your ability as a holder of notes to require us to repurchase your
notes as a result of a sale, assignment,
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conveyance, transfer or lease of less than all of the assets of our company or
our company and our subsidiaries, taken as a whole, to another person or group
may be uncertain.
The term "continuing directors" means, as of any date of determination,
any member of our board of directors who (i) was a member of our board of
directors on January 20, 2000 or (ii) was nominated for election or elected to
our board of directors with the approval of a majority of the continuing
directors who were members of our board at the time of their nomination or
election.
A "termination of trading" will be deemed to have occurred if our
common stock (or other securities into which the notes are then convertible) is
neither listed for trading on a United States national securities exchange nor
approved for trading on The Nasdaq National Market or other established
automated over-the-counter trading market in the United States.
Selection and Notice
If we are redeeming less than all of the notes, the trustee will select
the notes for redemption by complying with the requirements of the principal
national securities exchange, if any, on which the notes are listed, or, if the
notes are not listed, on a pro rata basis, by lot or by another method that the
trustee deems fair and appropriate. No notes of $1,000 in principal amount or
less will be redeemed in part. We will mail, or cause to be mailed, a notice of
redemption to each holder of notes to be redeemed at its registered address at
least 30 but not more than 60 days before the redemption date. If we are
redeeming any note in part only, the notice of redemption that relates to the
note will state the portion of the principal amount of the note to be redeemed.
We will issue, or cause to be issued, a new note in principal amount equal to
the unredeemed portion of the note in the name of the holder of the note upon
cancellation of the original note. On and after the redemption date, interest
and additional amounts, if any, will cease to accrue on notes or portions of
notes called for redemption unless we default in the payment of the redemption
price for the notes.
Registration of Notes
Pursuant to the registration agreement we entered into with the initial
purchasers of the notes, we have filed with the SEC a shelf registration
statement, of which this prospectus is a part, covering resales by holders of
the notes and the common stock issuable upon conversion of the notes.
Our obligation to keep the shelf registration statement continually
effective expires upon the earliest of:
o January 27, 2002, the second anniversary of the last date on which
notes were issued upon exercise of the initial purchaser's
over-allotment option;
o the date on which the notes or the common stock issuable upon
conversion of the notes may be sold by non-affiliates of our company
pursuant to paragraph (k) of Rule 144 (or any similar provision then in
force) under the Securities Act;
o the date as of which the notes or the common stock issuable upon
conversion of the notes have been transferred pursuant to Rule 144
under the Securities Act (or any similar provision then in force); or
o the date as of which all the notes or the common stock issuable upon
conversion of the notes have been sold pursuant to the shelf
registration statement.
If the shelf registration statement ceases to be effective (without
being succeeded immediately by a replacement shelf registration statement filed
and declared effective) or cannot be used (including as a result of a suspension
period, as described below) for the offer and sale of transfer restricted
securities (as described below) for a period of time (including any suspension
period) that exceeds 90 days in the aggregate in any 12-month period during the
period beginning on January 20, 2000 and ending on January 27, 2002 (each of
these events is called a "registration default") then we will pay additional
amounts to each holder of transfer restricted securities which has complied with
its obligations under the registration agreement.
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The additional amounts payable during any period in which a
registration default shall have occurred and be continuing is that amount which
is equal to one-quarter of one percent (25 basis points) per annum per $1,000
principal amount of notes or $2.50 per annum per 13.6314 shares of common stock
(subject to adjustment in the event of a stock split, stock recombination, stock
dividend and the like) constituting transfer restricted securities for the first
90 days during which a registration default has occurred and is continuing and
one-half of one percent (50 basis points) per annum per $1,000 principal amount
of notes or $5.00 per annum per 13.6314 shares of common stock (subject to
adjustment as set forth above) constituting transfer restricted securities for
any additional days during which such registration default has occurred and is
continuing. We have agreed to pay all accrued additional amounts by wire
transfer of immediately available funds or by federal funds check on each
payment of additional amounts date. Following the cure of a registration
default, additional amounts will cease to accrue.
The term "transfer restricted securities" means each note and each
share of common stock issued on conversion of notes until the earlier of (1) the
date on which the note or share, as the case may be:
o has been transferred pursuant to the shelf registration statement or
another registration statement covering the note or share which has
been filed pursuant to the Securities Act, in either case after the
registration statement has become and while such registration statement
is effective under the Securities Act;
o has been transferred pursuant to Rule 144 under the Securities Act (or
any similar provision then in force); or
o may be sold or transferred pursuant to Rule 144(k) under the Securities
Act (or any similar provision then in force),
or (2) January 27, 2002.
In the registration agreement, we also agreed to:
o provide or cause to be provided to each holder of the notes, or common
stock issuable upon conversion of the notes, copies of the prospectus,
which is a part of the shelf registration statement; and
o notify or cause to be notified each holder when the shelf registration
statement for the notes or the common stock issuable upon conversion of
the notes has become effective.
A holder of notes or the common stock issuable upon conversion of the
notes that sells these securities pursuant to a shelf registration statement:
o will be required to be named as a selling securityholder in the related
prospectus and to deliver a prospectus to purchasers;
o will be subject to certain of the civil liability provisions under the
Securities Act in connection with such sales; and
o will be bound by the provisions of the registration agreement that are
applicable to such holder (including certain indemnification and
contribution rights or obligations).
We are permitted to suspend the use of the prospectus which is a part
of the shelf registration statement for a period not to exceed 30 days in any
three-month period or for three periods not to exceed an aggregate of 90 days in
any twelve-month period under certain circumstances relating to pending
corporate developments, public filings with the SEC and similar events.
The period of time that we have suspended the use of the prospectus is
called a "suspension period." We will pay all expenses of the shelf registration
statement other than broker's commissions, agency fees and underwriter's or
dealer's discounts and commissions.
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Conversion
The holder of any note has the right, exercisable at any time between
April 20, 2000 and January 14, 2005, to convert the principal amount of its
notes (or any portion of its notes that is an integral multiple of $1,000) into
shares of common stock at the conversion price of $73.36 per share, subject to
adjustment as described below. If we have called a note for redemption, the
conversion right will terminate at the close of business on the business day
immediately preceding the redemption date (unless we default in making the
redemption payment when it becomes due, in which case the conversion right shall
terminate on the date on which the default is cured). If the holder of any note
delivers notice of its election to have such note purchased pursuant to a
designated event offer, the note may be converted only if the notice of election
is withdrawn as described under the heading "Repurchase at the Option of
Holders" above. Except as described below, we will not pay or adjust any notes
upon conversion for accrued and unpaid interest or additional amounts, if any,
accrued on the notes or for dividends or distributions on, or additional
amounts, if any, attributable to, any common stock issued upon conversion of
notes. We will not issue fractional shares upon conversion. Instead, we will
make a cash adjustment for any fractional interest.
The owners of a note may exercise their right of conversion by
delivering to The Depository Trust Company, which is known as the "DTC," the
appropriate instruction form for conversion pursuant to DTC's conversion
program. In the case of conversions through Euroclear or Clearstream Banking
S.A. (formerly Cedelbank), the owner shall deliver instructions in accordance
with Euroclear's or Clearstream Banking's normal operating procedures when
application has been made to make the underlying common stock eligible for
trading on Euroclear or Clearstream Banking. To convert a note held in
certificated form into shares of common stock, a holder must:
o complete and manually sign the conversion notice on the back of the
note (or complete and manually sign a facsimile of the notice) and
deliver the notice to the conversion agent;
o surrender the note to the conversion agent;
o if required by the conversion agent, furnish appropriate endorsements
and transfer documents; and
o if required, pay any transfer or similar taxes.
Pursuant to the indenture, the date on which all of the foregoing
requirements have been satisfied is the date of surrender for conversion. The
notice of conversion can be obtained from the trustee at its corporate trust
office or the office of the conversion agent.
As promptly as practicable on or after the conversion date, we will
issue and deliver to the trustee a certificate or certificates for the number of
full shares of common stock issuable upon conversion, together with payment for
any fraction of a share in an amount determined on the basis of the daily market
price (as described below) of the common stock on the trading day prior to the
applicable conversion date. The trustee will send the certificate or
certificates to the conversion agent for delivery to the holder.
The common stock issuable upon conversion of the notes will be fully
paid and nonassessable. Any note surrendered for conversion during the period
after the close of business on any record date and before the opening of
business on the next succeeding interest payment date (except notes called for
redemption on a redemption date or to be repurchased on a designated event
payment date during this period) must be accompanied by payment of an amount
equal to the interest and additional amounts, if any, payable on the interest
payment date on the principal amount of notes being surrendered for conversion.
In the case of any note that has been surrendered for conversion after the close
of business on any record date and before the opening of business on the next
succeeding interest payment date, interest and additional amounts, if any, on
the note shall be payable on the interest payment date notwithstanding the
conversion of the note, and the interest and additional amounts, if any, will be
paid to the person who was the holder of the note at the close of business on
the record date. As a result, a holder that surrenders notes for conversion on a
date that is not an interest payment date will not receive any interest or
additional amounts, if applicable, on notes called for redemption that are
surrendered for conversion after a notice of redemption (except for the payment
of interest and additional amounts, if any, on notes called for redemption on a
redemption date or to be repurchased on a designated event payment date between
a regular record date and the interest payment date to which it relates.) No
other payment or adjustment for interest or additional amounts, or for any
dividends in respect
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of common stock, will be made upon conversion. Holders of common stock issued
upon conversion will not be entitled to receive any dividends payable to holders
of common stock as of any record time before the close of business on the
conversion date.
We will adjust the conversion price upon the occurrence of certain
events, including:
o the issuance of shares of common stock as a dividend or distribution on
the common stock;
o the subdivision or combination of common stock;
o the issuance to all holders of common stock of rights or warrants to
subscribe for or purchase common stock (or securities convertible into
common stock) at a price per share less than the then current market
price per share (determined as set forth below); and
o the distribution of shares of our capital stock (other than common
stock), evidences of indebtedness, cash, rights or warrants to
subscribe for or purchase securities (other than rights or warrants
referred to in the third bullet above) or other assets (including
securities of persons other than our company), but excluding:
(1) dividends or distributions paid exclusively in cash;
(2) dividends or distributions referred to in the first or second
bullets above; and
(3) distributions in connection with a consolidation, merger or
transfer of assets (covered in the next succeeding paragraph) to
all holders of common stock;
o distributions, by dividend or otherwise, to all holders of common stock
exclusively in cash (excluding any cash that is distributed as part of
a distribution requiring a conversion price adjustment pursuant to the
fourth bullet above) in an aggregate amount that, together with the
aggregate of:
(1) any other all-cash distributions to all holders of common stock
within the 12 months preceding the date fixed for determining the
stockholders entitled to the distribution that did not trigger a
conversion price adjustment; and
(2) all excess payments in respect of each tender offer or other
negotiated transaction by our company or any of our subsidiaries
for common stock concluded within the 12 months preceding the date
fixed for determining the stockholders entitled to the
distribution not triggering a conversion price adjustment, exceeds
12 1/2% of the product of the current market price per share on
the date fixed for determining the stockholders entitled to the
distribution times the number of shares of common stock
outstanding on that date; or
o payment of an excess payment in respect of a tender offer or other
negotiated transaction consummated by our company or any of our
subsidiaries for common stock, if the aggregate amount of that excess
payment, together with the aggregate amount of
(1) cash distributions made to all holders of common stock within the
12 months preceding the expiration of the tender offer or the date
of payment of the negotiated transaction consideration, as the
case may be, not triggering a conversion price adjustment; and
(2) all excess payments in respect of each other tender offer or other
negotiated transaction by our company or any of our subsidiaries
for common stock concluded within the 12 months preceding that
date not triggering a conversion price adjustment, exceeds 12 1/2%
of the product of the current market price per share on that date
times the number of shares of common stock outstanding on that
date.
In the event of a distribution to all holders of common stock of rights
to subscribe for additional shares of our capital stock (other than those rights
and warrants referred to in the third bullet above), we may, instead of making
any adjustment in the conversion price, make proper provision so that each
holder of a note who converts the note after the record date for the
distribution and prior to the expiration or redemption of the rights shall be
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entitled to receive upon the conversion, in addition to shares of common stock,
an appropriate number of the rights. We will not make an adjustment of the
conversion price until cumulative adjustments amount to one percent or more of
the conversion price as last adjusted.
If we reclassify or change our outstanding common stock (other than
changes in par value or from par value to no par value or from no par value to
par value or resulting from a subdivision or a combination), or consolidate with
or merge into any person (other than a merger where our company is the
continuing corporation and which does not result in a reclassification or change
in the common stock other than a change in par value described above), or
transfers all or substantially all our assets (determined on a consolidated
basis), the notes will become convertible into the kind and amount of
securities, cash or other assets which the holders of the notes would have owned
immediately after any transaction if the holders had converted the notes
immediately before the transaction.
The indenture also provides that if rights, warrants or options expire
unexercised, we will readjust the conversion price to take into account the
actual number of such warrants, rights or options which were exercised.
In the indenture, the "current market price" per share of common stock
on any date is deemed to be the average of the daily market prices for the
shorter of:
o 30 consecutive business days ending on the last full trading day on the
exchange or market referred to in determining the daily market prices
prior to the time of determination; or
o the period commencing on the date next succeeding the first public
announcement of the issuance of rights or warrants or other
distribution or tender offer or other negotiated transaction through
the last full trading day on the exchange or market referred to in
determining the daily market prices prior to the time of determination.
An "excess payment" is the excess of (1) the aggregate of the cash and
fair market value (as determined by our board of directors, whose determination
shall be conclusive evidence of the fair market value) of other consideration
paid by our company or any of our subsidiaries with respect to the shares
acquired in a tender offer or other negotiated transaction over (2) the daily
market price on the trading day immediately following the completion of the
tender offer or other negotiated transaction multiplied by the number of
acquired shares.
To the extent permitted by law, we may from time to time reduce the
conversion price by any amount for any period of at least 20 days, in which case
we will give at least 15 days' notice of the reduction if our board of directors
has made a determination that the reduction would be in the best interests of
our company, which determination will be conclusive. We may, at our option, make
reductions in the conversion price, in addition to those set forth above, as our
board of directors deems advisable to avoid or diminish any income tax to
holders of common stock resulting from any dividend or distribution of stock (or
rights to acquire stock) or any event treated as a dividend or distribution for
federal income tax purposes. See "Certain United States Federal Income Tax
Considerations."
Subordination of Notes
The notes are general unsecured obligations of our company, and are
subordinated in right of payment to all our existing and future senior debt. In
addition, the notes are structurally subordinated to all indebtedness and other
liabilities of our subsidiaries. The indenture does not restrict the amount of
senior debt or other indebtedness of our company or any subsidiary of our
company. You should read the information under the heading "Risk Factors--The
notes are subordinated to our senior debt and all the obligations of our
subsidiaries," for more information on the subordination of the notes.
The payment of the principal of, and premium, if any, interest, and
additional amounts, if any, on, and any other amounts due on the notes is
subordinated in right of payment to the prior payment in full of all our senior
debt. No payment on account of principal of, or premium, if any, interest or
additional amounts, if any, on or any other amounts due on the notes, including,
without limitation, any payments on the designated event offer, and no
redemption, purchase or other acquisition of the notes may be made unless:
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o full payment of amounts then due on all senior debt has been made or
duly provided for pursuant to the terms of the instrument governing the
senior debt; or
o at the time for, and immediately after giving effect to, any payment,
redemption, purchase or other acquisition, there shall not exist under
any senior debt or any agreement pursuant to which any senior debt has
been issued any default which shall not have been cured or waived and
which shall have resulted in the full amount of the senior debt being
declared due and payable.
In addition, the indenture provides that if any of the holders of any issue of
designated senior debt notify the trustee that a default has occurred and is
continuing giving the holders of the designated senior debt the right to
accelerate the maturity of the designated senior debt, we will make no payment
on account of principal of, or premium, if any, interest, additional amounts, if
any, or any other amounts due on the notes and we will make no purchase,
redemption or other acquisition of the notes for the period commencing on the
date the notice is received and ending (unless earlier terminated by notice
given to the trustee by the holders or the representative of the holders of the
designated senior debt) on the earlier of:
o the date on which the default is cured or waived; or
o 180 days from the date the notice is received.
Notwithstanding the foregoing (but subject to the provisions contained in the
first and second sentences of this paragraph), unless the holders of the
designated senior debt or the representative of the holders have accelerated the
maturity of the designated senior debt, we may resume payments on the notes
after the end of the blockage period described above. The holders of designated
senior debt may not give, in the aggregate, more than one blockage notice in any
consecutive 365-day period, irrespective of the number of defaults with respect
to senior debt during any consecutive 365-day period.
We must pay in full all senior debt before the holders of the notes are
entitled to any payments whatsoever (other than payments of junior securities)
upon:
o any distribution of our assets in connection with any dissolution,
winding-up, liquidation or reorganization of our company; or
o acceleration of the principal amount due on the notes because of an
event of default.
If payment of the notes is accelerated because of an event of default,
we will give prompt written notice to the holders of senior debt or to the
trustee(s) for senior debt of the acceleration. We may not pay the principal of,
premium, if any, interest or additional amounts, if any, on or any other amounts
due on the notes until five business days after the holders or trustee(s) of
senior debt receive notice of the acceleration and, thereafter, we may pay the
principal of, premium, if any, interest and additional amounts, if any, on or
any other amounts due on the notes only if the subordination provisions of the
indenture otherwise permit payment at that time. As a result of these
subordination provisions, in the event of our insolvency, holders of the notes
may recover less than our general creditors.
Merger, Consolidation or Sale of Assets
The indenture provides that we may not consolidate or merge with or
into any person (whether or not our company is the surviving corporation),
continue in a new jurisdiction, or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of our properties or assets
unless:
o (a) our company is the surviving corporation or (b) the person formed
by or surviving any consolidation or merger (if other than our company)
or the person which acquires by sale, assignment, transfer, lease,
conveyance or other disposition our properties and assets is a
corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia;
o the corporation formed by or surviving any consolidation or merger (if
other than our company) or the corporation to which the sale,
assignment, transfer, lease, conveyance or other disposition has been
made
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assumes all our obligations, pursuant to a supplemental indenture in
a form reasonably satisfactory to the trustee, under the notes, the
registration agreement and the indenture;
o the sale, assignment, transfer, lease, conveyance or other disposition
of all or substantially all of our properties or assets shall be as an
entirety or virtually as an entirety to one corporation and the
corporation assumes all obligations, pursuant to a supplemental
indenture in a form reasonably satisfactory to the trustee, under the
notes, the registration agreement and the indenture;
o immediately after the transaction, no default or event of default
exists; or
o our company or the corporation has delivered to the trustee an
officers' certificate and an opinion of counsel, each stating that the
transaction and the supplemental indenture comply with the indenture
and that all conditions precedent in the indenture relating to the
transaction have been satisfied.
Reports
Whether or not required by the rules and regulations of the SEC, so
long as any notes are outstanding, we will file with the SEC and furnish to the
trustee and the holders of notes all quarterly and annual financial information
(without exhibits) required to be contained in a filing with the SEC on Forms
10-Q and 10-K, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
consolidated financial statements only, a report on the annual consolidated
financial statements by our independent auditors. We are not required to file
any report or other information with the SEC if the SEC does not permit the
filing.
Events of Default and Remedies
The indenture provides that each of the following constitutes an event
of default:
o default for 30 days in the payment when due of interest on or
additional amounts payable with respect to the notes;
o default in payment when due of principal of the notes at maturity, upon
redemption or otherwise, including our failure to purchase the notes
when required as described under the heading "--Repurchase at the
Option of Holders" above;
o our failure for 60 days after the receipt of written notice from the
trustee or from the holders of at least 25% in aggregate principal
amount of the outstanding notes to comply with other covenants and
agreements contained in the indenture or the notes;
o default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by our company or any of our material
subsidiaries (or the payment of which is guaranteed by the company or
any of our material subsidiaries), whether the indebtedness or
guarantee existed on the January 20, 2000 or is created thereafter,
which default (a) is caused by a failure to pay when due principal of
or interest on the indebtedness within the grace period provided in the
indebtedness (which failure continues beyond any applicable grace
period) or (b) results in the acceleration of the indebtedness prior to
its express maturity (without such acceleration being rescinded or
annulled) and, in each case, the principal amount of the indebtedness,
together with the principal amount of any other indebtedness under
which there has been default in payment or the maturity of which has
been accelerated, aggregates $15,000,000 or more, which default in
payment is not cured or acceleration is not annulled, within 30 days
after the receipt of written notice to comply as provided in the
indenture;
o failure by our company or any material subsidiary of our company to pay
final non-appealable judgments (other than any judgment as to which a
reputable insurance company has accepted full liability) for the
payment of money entered by a court or courts of competent jurisdiction
aggregating in excess of $15,000,000, which judgments are not stayed,
bonded or discharged within 60 days after their entry; and
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o certain events of bankruptcy or insolvency with respect to our company
or any of our material subsidiaries.
If any event of default (other than an event of default arising from
certain events of bankruptcy or insolvency) occurs and is continuing, the
trustee or the holders of at least 25% in principal amount of the then
outstanding notes may declare all the notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an event of default arising from
certain events of bankruptcy or insolvency with respect to our company or any
material subsidiary, all outstanding notes will become due and payable without
further action or notice. Holders of the notes may not enforce the indenture or
the notes except as provided in the indenture. Subject to certain limitations,
holders of a majority in principal amount of the then outstanding notes may
direct the trustee in its exercise of any trust or power. The trustee may
withhold from holders of the notes notice of any continuing default or event of
default (except a default or event of default relating to the failure to pay
principal, premium, if any, interest or additional amounts, if applicable) if it
determines that withholding notice is in their interest.
By notice to the trustee, the holders of a majority in aggregate
principal amount of the notes then outstanding may, on behalf of the holders of
all of the notes, waive any existing default or event of default and its
consequences under the indenture except:
o in the case of a continuing default or event of default in the payment
of the designated event payment or interest or additional amounts, if
applicable, on, or the principal of or premium on, the notes; or
o in respect of any covenant or provision of the indenture or the notes
which cannot be modified or amended without the consent of the holder
of each note affected.
We are required to deliver to the trustee annually a statement
regarding compliance with the indenture, and we are required, upon becoming
aware of any default or event of default, to deliver to the trustee a statement
describing the default or event of default.
Form, Denomination and Registration
Global Note, Book-Entry Form
Notes sold by the selling securityholders pursuant to the registration
statement of which this prospectus forms a part will be represented by a global
note, except as set forth below under "Certificated Notes." The global note will
be deposited with the trustee as custodian for DTC and registered in the name of
a nominee of DTC in New York, New York for the accounts of participants in DTC.
Beneficial interests in the global note will be exchangeable for definitive
certificated notes only in accordance with the terms of the indenture.
Except as set forth below, the global note may be transferred, in whole
or in part, only to another nominee of DTC or to a successor of DTC or its
nominee.
DTC has advised us that DTC is:
o a limited purpose trust company organized under the laws of the State
of New York;
o a member of the Federal Reserve System;
o a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
o a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act.
DTC was created to hold securities of institutions that have accounts
with DTC and to facilitate the clearance and settlement of securities
transactions among its participants in securities through electronic book-entry
changes in accounts of the participants, thereby eliminating the need for
physical movement of securities certificates. DTC's participants include:
o securities brokers and dealers;
o banks;
o trust companies;
o clearing corporations; and
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o certain other organizations.
Access to DTC's book-entry system is also available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, whether directly or indirectly.
Upon the issuance of the global note, DTC credited, on its book-entry
registration and transfer system, the respective principal amount of the
individual beneficial interests represented by the global note to the accounts
of participants. The accounts credited were designated by the initial purchasers
of the beneficial interests. Ownership of beneficial interests in the global
note is limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests in the global note will be shown
on, and the transfer of those ownership interests will be effected only through,
records maintained by DTC (with respect to participants' interests) and the
participants (with respect to the owners of beneficial interests in the global
note other than participants).
So long as DTC or its nominee is the registered holder and owner of the
global note, DTC or its nominee, as the case may be, will be considered the sole
legal owner of the notes represented by the global note for all purposes under
the indenture and the notes. Except as set forth below, owners of beneficial
interests in the global note will not be entitled to receive definitive notes
and will not be considered to be the owners or holders of any notes under the
global note. We understand that under existing industry practice, in the event
an owner of a beneficial interest in the global note desires to take any action
that DTC, as the holder of the global note, is entitled to take, DTC would
authorize the participants to take the action, and that participants would
authorize beneficial owners owning through the participants to take the action
or would otherwise act upon the instructions of beneficial owners owning through
them. No beneficial owner of an interest in the global note will be able to
transfer the interest except in accordance with DTC's applicable procedures, in
addition to those provided for under the indenture and, if applicable, those of
Euroclear and Clearstream Banking.
We will make payments of the principal of, and interest on, the notes
represented by the global note registered in the name of and held by DTC or its
nominee to DTC or its nominee, as the case may be, as the registered owner and
holder of the global note.
We expect that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of the global note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the global note as shown on the records of
DTC or its nominee. We also expect that payments by participants and indirect
participants to owners of beneficial interests in the global note held through
such participants will be governed by standing instructions and customary
practices, as is now the case with securities held for accounts of customers
registered in the names of nominees for these customers. The payments, however,
will be the responsibility of the participants and indirect participants, and
neither we, the trustee nor any paying agent will have any responsibility or
liability for:
o any aspect of the records relating to, or payments made on account of,
beneficial ownership interests in the global note;
o maintaining, supervising or reviewing any records relating to the
beneficial ownership interests;
o any other aspect of the relationship between DTC and its participants;
or
o the relationship between the participants and indirect participants and
the owners of beneficial interests in the global note.
Unless and until it is exchanged in whole or in part for definitive
notes, the global note may not be transferred except as a whole by DTC to a
nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC.
Participants in DTC will effect transfers with other participants in
the ordinary way in accordance with DTC rules and will settle transfers in
same-day funds. Participants in Euroclear and Clearstream Banking will effect
transfers with other participants in the ordinary way in accordance with the
rules and operating procedures of Euroclear and Clearstream Banking, as
applicable. If a holder requires physical delivery of a definitive note for any
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reason, including to sell notes to persons in jurisdictions which require
physical delivery or to pledge notes, the holder must transfer its interest in
the global note in accordance with the normal procedures of DTC and the
procedures set forth in the indenture.
Cross-market transfers between DTC, on the one hand, and directly or
indirectly through Euroclear or Clearstream Banking participants, on the other,
will be effected in DTC in accordance with DTC rules on behalf Euroclear or
Clearstream Banking, as the case may be, by its respective depositary; however,
these cross-market transactions will require delivery of instructions to
Euroclear or Clearstream Banking, as the case may be, by the counterparty in the
system in accordance with its rules and procedures and within its established
deadlines (Brussels time). Euroclear or Clearstream Banking, as the case may be,
will, if the transaction meets its settlement requirements, deliver instructions
to its respective depositary to take action to effect final settlement on its
behalf by delivering or receiving interests in the global note in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Euroclear participants and Clearstream
Banking participants may not deliver instructions directly to the depositaries
for Euroclear or Clearstream Banking.
Because of time zone differences, the securities account of a Euroclear
or Clearstream Banking participant purchasing an interest in the global note
from a DTC participant will be credited during the securities settlement
processing day (which must be a business day for Euroclear or Clearstream
Banking, as the case may be) immediately following the DTC settlement date, and
the credit of any transactions interests in the global note settled during the
processing day will be reported to the relevant Euroclear or Clearstream Banking
participant on that day. Cash received in Euroclear or Clearstream Banking as a
result of sales of interests in the global note by or through a Euroclear or
Clearstream Banking participant to a DTC participant will be received with value
on the DTC settlement date, but will be available in the relevant Euroclear or
Clearstream Banking cash account only as of the business day following
settlement in DTC.
We expect that DTC will take any action permitted to be taken by a
holder of notes (including the presentation of notes for exchange as described
below) only at the direction of one or more participants to whose accounts at
the DTC interests in the global note are credited and only in respect of the
portion of the aggregate principal amount of the notes as to which the
participant or participants has or have given direction. However, if there is an
event of default under the notes, DTC will exchange the global note for
definitive notes, which it will distribute to its participants. These definitive
notes are subject to certain restrictions on registration of transfers and will
bear appropriate legends restricting their transfer.
Although we expect that DTC, Euroclear and Clearstream Banking will
agree to the foregoing procedures in order to facilitate transfers of interests
in the global note among participants of DTC, Euroclear, and Clearstream
Banking, DTC, Euroclear and Clearstream Banking are under no obligation to
perform or continue to perform these procedures, and these procedures may be
discontinued at any time. Neither we nor the trustee have any responsibility for
the performance by DTC, Euroclear or Clearstream Banking or their participants
or indirect participants of their obligations under the rules and procedures
governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary
for the global note or ceases to be a clearing agency registered under the
Securities Exchange Act of 1934 and we do not appoint a successor depositary
within 90 days, we will issue definitive notes in exchange for the global note.
The definitive notes will be subject to certain restrictions on registration of
transfers and will bear appropriate legends concerning these restrictions.
Certificated Notes
Notes originally purchased by or transferred to institutional
accredited investors (as defined in Rules 501(a)(1), (2), (3) or (7) under the
Securities Act) that were not qualified institutional buyers were issued and
physically delivered in fully registered, definitive form. Unless the purchaser
of notes sold by a selling securityholder is required to take delivery of notes
in the form of definitive certificated notes, the purchaser must take delivery
under the global note. Beneficial interests in the global note will be
exchangeable for definitive certificated notes only in limited circumstances in
accordance with the terms of the indenture.
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Transfer and Exchange
We have initially appointed the trustee as registrar in New York, New
York. We reserve the right to vary or terminate the appointment of the registrar
or to appoint additional or other registrars or to approve any change in the
office through which the registrar acts.
A holder may transfer or exchange notes in accordance with the
indenture. The registrar may require a holder, among other things, to furnish
appropriate endorsements and transfer documents and pay any taxes and fees
required by law or permitted by the indenture. We are not required to exchange
or register the transfer of any note selected for redemption. Also, we are not
required to exchange or register the transfer of any note for a period of 15
days before the mailing of a notice of redemption of notes to be redeemed.
All notes that our company or any of our subsidiaries or affiliates
redeem, purchase or otherwise acquire prior to the final maturity date of the
notes shall be delivered to the trustee for cancellation. We will not hold or
resell any of these notes or issue any new notes to replace any of these notes
or any other notes that any holder has converted pursuant to the indenture.
We will treat the registered holder of a note as the owner of the note
for all purposes.
Amendment, Supplement and Waiver
Except as provided in the next succeeding paragraph, the indenture or
the notes may be amended or supplemented with the consent of the holders of at
least a majority in principal amount of the then outstanding notes (including
consents obtained in connection with a tender offer or exchange offer for
notes), and any existing default or compliance with any provision of the
indenture or the notes may be waived with the consent of the holders of a
majority in principal amount of the then outstanding notes (including consents
obtained in connection with a tender offer or exchange offer for notes).
Without the consent of each holder affected, an amendment, supplement
or waiver may not (with respect to any notes held by a nonconsenting holder of
notes):
o reduce the amount of notes whose holders must consent to an amendment,
supplement or waiver;
o reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the notes;
o reduce the rate of or change the time for payment of interest on any
note;
o waive a default in the payment of principal of or premium, if any, or
interest or additional amounts, if any, on any notes (except a
rescission of acceleration of the notes by the holders of at least a
majority in aggregate principal amount of the notes and a waiver of the
payment default that resulted from the acceleration);
o make any note payable in money other than that stated in the notes;
o make any change in the provisions of the indenture relating to waivers
of past defaults or the rights of holders of notes to receive payments
of principal of or premium, if any, or interest or additional amounts,
if any, payable on the notes;
o waive a redemption payment with respect to any note;
o impair the right to convert the notes into common stock;
o modify the conversion or subordination provisions of the indenture in a
manner adverse to the holders of the notes; or
o make any change in the amendment and waiver provisions described above.
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Notwithstanding the foregoing, without the consent of any holder of
notes, we and the trustee may amend or supplement the indenture or the notes:
o to cure any ambiguity, defect or inconsistency;
o to provide for uncertificated notes in addition to or in place of
definitive notes;
o to provide for the succession of another person to us and the
assumption by the successor to our covenants and obligations under the
indenture;
o to evidence and provide for the acceptance of the appointment under the
indenture of a successor trustee;
o to make any change that would provide any additional rights or benefits
to the holders of the notes or that does not adversely affect the legal
rights under the indenture of any such holder;
o to make provisions with respect to the conversion rights of holders of
notes in the event of a consolidation, merger, continuation or sale of
assets as required by the indenture; or
o to comply with requirements of the SEC in order to qualify, or maintain
the qualifications of, the indenture under the Trust Indenture Act.
Notices
We will give or cause to be given notices to holders of the notes by
mail to the addresses of the holders as they appear in the note register. The
notices will be deemed to have been given on the date of the mailing or on the
date of the first publication, as the case may be.
Governing Law
The indenture, the notes and the registration agreement are governed by
and construed in accordance with the laws of the State of New York.
Concerning the Trustee
The indenture contains limitations on the rights of the trustee, should
it become a creditor of our company, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any claim as
security or otherwise. The trustee will be permitted to engage in other
transactions with us; however, if the trustee acquires any conflicting interest
it must eliminate the conflict within 90 days, apply to the SEC for permission
to continue or resign.
The holders of a majority in principal amount of outstanding notes have
the right to direct the time, method and place of conducting any proceeding for
exercising any remedy available to the trustee, subject to exceptions. The
indenture provides that, if an event of default occurs (which is not cured), the
trustee will be required, in the exercise of its power, to use the degree of
care of a prudent person in the conduct of the person's own affairs. Subject to
these provisions, the trustee will be under no obligation to exercise any of its
rights or powers under the indenture at the request of any holder of notes,
unless the holder shall have offered to the trustee security and indemnity
satisfactory to the trustee against any loss, liability or expense.
Definitions
Set forth below are some of the defined terms used in the indenture.
"Business day" means any day that is not a legal holiday.
"Default" means any event that is or, with the passage of time or the
giving of notice or both, would be an event of default.
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"Designated senior debt" means any senior debt which, at the date of
determination, has an aggregate principal amount outstanding of, or commitments
to lend up to, at least $15,000,000 and is specifically designated by us in the
instrument evidencing or governing the senior debt as "designated senior debt"
for purposes of the indenture.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in other statements by other
entities as may be approved by a significant segment of the accounting
profession of the United States, which are in effect from time to time.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness; and such term, when used as a verb, shall have a correlative
meaning.
"Indebtedness" means, with respect to any person, all obligations,
whether or not contingent, of the person:
o (a) for borrowed money (including, but not limited to, any indebtedness
secured by a security interest, mortgage or other lien on the assets of
such person which is (1) given to secure all or part of the purchase
price of property subject thereto, whether given to the vendor of such
property or to another, or (2) existing on property at the time of
acquisition thereof), (b) evidenced by a note, debenture, bond or other
written instrument, (c) under a lease required to be capitalized on the
balance sheet of the lessee under GAAP or under any lease or related
document (including a purchase agreement) which provides that the
person is contractually obligated to purchase or to cause a third party
to purchase such leased property, (d) in respect of letters of credit,
bank guarantees or bankers' acceptances (including reimbursement
obligations with respect to any letters of credit, bank guarantees or
bankers' acceptances), (e) with respect to indebtedness secured by a
mortgage, pledge, lien, encumbrance, charge or adverse claim affecting
title or resulting in an encumbrance to which the property or assets of
the person are subject, whether or not the obligation secured by a
mortgage, pledge, lien, encumbrance, charge or adverse claim shall have
been assumed or guaranteed by or shall otherwise be the person's legal
liability, (f) in respect of the balance of the deferred and unpaid
purchase price of any property or assets, and (g) under interest rate
or currency swap agreements, cap, floor and collar agreements, spot and
forward contracts and similar agreements and arrangements;
o with respect to any obligation of others of the type described in the
preceding bullet or under the third bullet below assumed by or
guaranteed in any manner by the person or in effect guaranteed by the
person through an agreement to purchase (including, without limitation,
"take or pay" and similar arrangements), contingent or otherwise (and
the obligations of the person under the assumptions, guarantees or
other such arrangements); or
o with respect to any and all deferrals, renewals, extensions,
refinancings and refundings of, or amendments, modifications or
supplements to, any of the foregoing.
"Junior securities" means securities of our company as reorganized or
readjusted or any other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinate, at least to the extent
provided for in the indenture with respect to the notes, to the payment in full
without diminution or modification by the plan of all senior debt.
"Legal holiday" means a Saturday, a Sunday or a day on which banking
institutions in the State of New York are not required to be open. If a payment
date is a legal holiday at a place of payment, we may make payment at that place
on the next succeeding day that is not a legal holiday, and no interest shall
accrue for the intervening period. If any other operative date for purposes of
the indenture occurs on a legal holiday then for all purposes the next
succeeding day that is not a legal holiday shall be the operative date.
"Material subsidiary" means any of our subsidiaries which at the date
of determination is a "significant subsidiary" as defined in Rule 1-02(w) of
Regulation S-X under the Securities Act and the Exchange Act.
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"Senior debt" means the principal of, premium, if any, interest on and
other amounts due on our indebtedness, whether outstanding on January 20, 2000
or created, incurred, assumed or guaranteed by us (including all deferrals,
renewals, extensions, refinancings and refundings of, or amendments,
modifications or supplements to, any of the foregoing) after that date, unless,
in the instrument creating or evidencing or pursuant to which indebtedness is
outstanding, it is expressly provided that the indebtedness is not senior in
right of payment to, or ranks pari passu in right of payment with, the notes.
Senior debt includes, with respect to the obligations described above, interest
accruing, pursuant to the terms of the senior debt, on or after the filing of
any petition in bankruptcy or for reorganization relating to our company,
whether or not post-filing interest is allowed in any proceeding, at the rate
specified in the instrument governing the relevant obligation. Notwithstanding
anything to the contrary in the previous sentences, senior debt shall not
include:
o indebtedness of or amounts owed by us for compensation to employees, or
for goods, services or materials purchased in the ordinary course of
business;
o indebtedness of our company to one of our subsidiaries; or
o any liability for federal, state, local or other taxes owed or owing by
us.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material U.S. federal income tax
consequences of acquiring, holding and disposing of the notes or common stock,
or converting the notes. This summary does not purport to be a comprehensive
description of all of the tax considerations that may be relevant to any
particular investor, including tax considerations that arise from rules of
general application to all taxpayers or to certain classes of investors or that
are generally assumed to be known by investors. This summary is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations,
Internal Revenue Service ("IRS") rulings, and judicial decisions currently in
effect, all of which are subject to change (possibly with retroactive effect) or
different interpretations.
This summary does not deal with all aspects of U.S. federal income
taxation that may be relevant to holders of the notes or common stock and does
not deal with tax consequences arising under the laws of any state, local or
foreign jurisdiction. This summary deals only with holders that will hold notes
and common stock as capital assets and does not address tax considerations
applicable to investors that may be subject to special tax rules such as banks,
insurance companies, tax-exempt organizations, dealers in securities or
currencies, traders in securities that elect mark-to-market treatment, persons
that will hold notes or common stock as part of an integrated investment
(including a "straddle") comprised of notes or shares of common stock and one or
more other positions, persons that have a "functional currency" other than the
U.S. dollar or holders of notes that did not acquire the notes in the initial
distribution thereof at their original issue price.
For the purpose of this discussion, a "U.S. Holder" refers to (i) an
individual who is a citizen or resident of the United States, (ii) a U.S.
domestic corporation or (iii) any other person that is subject to U.S. federal
income tax on a net income basis in respect of its investment in the notes.
PROSPECTIVE HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF ACQUIRING,
HOLDING AND DISPOSING OF THE NOTES OR COMMON STOCK, OR CONVERTING THE NOTES, AND
THE EFFECT THAT THEIR PARTICULAR CIRCUMSTANCES MAY HAVE ON SUCH TAX
CONSEQUENCES.
Certain U.S. Federal Income Tax Considerations Applicable to U.S. Holders
Interest on Notes
Stated interest on the notes generally will be taxable to a U.S. Holder
as ordinary interest income at the time that such interest is accrued or
received in accordance with the holder's regular method of accounting for U.S.
federal income tax purposes.
Sale, Exchange, Redemption or Retirement of Notes
In general, a U.S. Holder of notes will recognize gain or loss upon the
sale, exchange, redemption, retirement or other disposition of the notes (other
than a conversion into common stock) measured by the difference between (i) the
amount realized (except to the extent attributable to the payment of accrued
market discount (as described below) or accrued interest not previously included
in income, which amounts are taxed as ordinary income) and (ii) the Holder's
adjusted tax basis in the notes. A Holder's tax basis in the notes generally
will equal the cost of the notes to the Holder, increased by the amount of any
market discount (as discussed below) previously taken into income by the Holder
or decreased by any bond premium amortized by the Holder with respect to the
notes and any principal payments received by the Holder. Any such gain or loss
recognized on the sale, exchange, redemption, retirement or other disposition of
a note should be capital gain or loss and will generally be long-term capital
gain or loss if the note has been held or deemed held for more than one year at
the time of the sale or exchange.
Conversions of Notes into Common Stock
In general, a holder of notes will not recognize gain or loss on the
conversion of the notes into shares of common stock, except upon the receipt of
cash in lieu of a fractional share. The holder's tax basis in the shares of
common stock received upon conversion of the notes will equal the holder's
aggregate basis in the notes exchanged
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therefor (less any portion thereof allocable to a fractional share). The holding
period of the shares of common stock received by the holder upon conversion of
notes generally will include the period during which the holder held the notes
prior to conversion. Cash received in lieu of a fractional share of common stock
should be treated as a payment in exchange for such fractional share (rather
than a dividend). Gain or loss recognized on the receipt of cash paid in lieu of
a fractional share generally will equal the difference between the amount of
cash received and the tax basis allocable to the fractional share. Any such gain
or loss generally will result in capital gain or loss, and generally will be
long-term capital gain or loss if the notes were held for more than one year at
the time of conversion.
Amortizable Premium
A U.S. holder of a note that purchases the note at a cost greater than
the total of all future payments to be made on the note (the "remaining
redemption amount") will be considered to have purchased the note at a premium.
A U.S. holder may elect to amortize the portion of the premium not attributable
to a note's conversion feature, as an offset to interest income, using a
constant-yield method, over the remaining term of the note. The amount
attributable to the conversion feature, which is not amortizable by a U.S.
holder is the excess, if any, of the note's purchase price over what the note's
fair market value would be if there were no conversion feature. An election to
amortize such bond premium, once made, generally applies to all bonds held or
subsequently acquired by the U.S. holder on or after the first taxable year to
which the election applies and may not be revoked without the consent of the
IRS. A U.S. holder that elects to amortize such premium must reduce its tax
basis in a note by the amount of the premium amortized during its holding
period. With respect to a U.S. holder that does not elect to amortize bond
premium, the amount of bond premium will be included in the U.S. holder's tax
basis when the note matures or is disposed of by the U.S. holder. Therefore, a
U.S. holder that does not elect to amortize such premium and that holds the note
to maturity generally will be required to treat the premium as capital loss when
the note matures.
Market Discount
If a U.S. holder of a note purchases the note at a price that is lower
than its remaining redemption amount, the note will be considered to have
"market discount" in the hands of such U.S. holder. In such case, gain realized
by the U.S. holder on the disposition of the note generally will be treated as
ordinary income to the extent of the market discount that accrued on the note
while held by such U.S. holder. If a note with accrued market discount is
converted into common stock pursuant to the conversion feature, the amount of
such accrued market discount generally will be taxable as ordinary income upon
disposition of the common stock. In addition, the U.S. holder could be required
to defer the deduction of a portion of the interest paid on any indebtedness
incurred or maintained to purchase or carry the note until the note is disposed
of in a taxable transaction. In general terms, market discount on a note will be
treated as accruing ratably over the term of such note, or, at the election of
the holder, under a constant yield method.
A U.S. holder may elect to include market discount in income on a
current basis as it accrues (on either a ratable or constant-yield basis), in
lieu of treating a portion of any gain realized on a sale of a note as ordinary
income. If a U.S. holder elects to include market discount on a current basis,
the interest deduction deferral rule described above will not apply. Any such
election, if made, applies to all market discount bonds acquired by the taxpayer
on or after the first day of the first taxable year to which such election
applies and is revocable only with the consent of the IRS.
Registration Rights; Additional Amounts
The registration of the notes pursuant to Y&R's obligations under
"Description of Notes--Registration of Notes" will not constitute a taxable
event for U.S. federal income tax purposes, will not affect a U.S. Holder's tax
basis in the notes, and a U.S. Holder's holding period for the registered notes
will include the holding period such U.S. Holder had in the notes before such
notes were registered.
Adjustments to Conversion Rate--Constructive Dividends
If at any time (i) Y&R makes a distribution to its shareholders or
purchases common stock in a tender offer and such distribution or purchase would
be taxable to such stockholders as a dividend for U.S. federal income tax
purposes (e.g., distributions of evidences of indebtedness or assets of Y&R, but
generally not stock dividends or
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rights to subscribe for common stock) and, pursuant to the antidilution
provisions of the indenture, the conversion rate of the notes is increased, or
(ii) the conversion rate of the notes is increased at the discretion of Y&R,
such increase may be deemed to be the payment of a taxable dividend to holders
or beneficial owners of notes (pursuant to Section 305 of the Code). Holders of
notes therefore could have taxable income as a result of an event in which they
receive no cash or property. Similarly, a failure to adjust the conversion rate
to reflect a stock dividend or other event increasing the proportionate interest
of the holders of outstanding common stock could, in some circumstances, give
rise to deemed dividend income to U.S. Holders of such common stock.
Dividends Paid on the Shares
In general, a U.S. Holder will be required to include in gross income
as ordinary dividend income the amount of any distributions paid on the common
stock after a conversion (or deemed distributions on the notes as described
above under "--Adjustments to Conversion Rate--Constructive Dividends") to the
extent that such distributions are paid out of Y&R's current or accumulated
earnings and profits as determined for U.S. federal income tax purposes.
Distributions in excess of such earnings and profits will be applied against and
will reduce the U.S. Holder's tax basis in its common stock and, to the extent
in excess of such tax basis, will be treated as gain from a sale or exchange of
such common stock.
Disposition of Shares
Gain or loss realized on the sale or exchange of common stock will
equal the difference between (i) the amount realized on such sale or exchange
and (ii) the holders' adjusted tax basis in such common stock. Except as
discussed above with respect to market discount, such gain or loss will
generally be long-term capital gain or loss if the holder has held or is deemed
to have held (e.g., by reason of ownership of the notes) the common stock for
more than one year.
Certain U.S. Federal Income Tax Considerations Applicable to Non-U.S. Holders
Interest on Notes
Payment on a note by Y&R or any paying agent to a holder of a note that
is not a U.S. Person (as defined below) (a "Non-U.S. Holder") and that does not
hold a note in connection with a U.S. trade or business will not be subject to
U.S. federal income tax or withholding of U.S. federal income tax, provided
that, with respect to payments of interest, (i) the holder does not actually or
constructively own 10 percent or more of the combined voting power of all
classes of stock of Y&R and is not a controlled foreign corporation related to
Y&R through stock ownership and (ii) the beneficial owner of the note provides a
statement signed under penalties of perjury that includes its name and address
and certifies that it is a Non-U.S. Holder in compliance with applicable
requirements (or, with respect to payments made after December 31, 2000,
satisfies certain documentary evidence requirements for establishing that it is
a Non-U.S. Holder).
For this purpose, a "U.S. Person" is a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States or any political subdivision thereof,
an estate the income of which is subject to U.S. federal income taxation
regardless of its source or a trust if (i) a U.S. court is able to exercise
primary supervision over the trust's administration and (ii) one or more United
States persons have the authority to control all of the trust's substantial
decisions.
Sale, Exchange or Redemption of Notes or Shares of Common Stock
In general, a Non-U.S. Holder will not be subject to U.S. federal
income tax on gain realized on the sale, exchange or redemption of notes or
shares of common stock received in exchange therefor, unless (i) such gain is
effectively connected with the conduct by the holder of a trade or business in
the United States or (ii) in the case of gain realized by an individual holder,
the holder is present in the United States for 183 days or more in the taxable
year of the sale and either (A) such gain or income is attributable to an office
or other fixed place of business maintained in the United States by such holder
or (B) such holder has a tax home in the United States.
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Conversion of Notes
A Non-U.S. Holder generally will not be subject to U.S. federal income
tax on the conversion of a note into shares of common stock. However, to the
extent a Non-U.S. Holder receives cash in lieu of a fractional share upon
conversion, any gain upon the receipt of cash would be subject to the rules
described above regarding the sale or exchange of common stock.
Dividends on Shares of Common Stock
In general, any distribution paid, or deemed paid, on common stock
(including a deemed distribution on the notes described above under "--Certain
U.S. Federal Income Tax Considerations Applicable to U.S. Holders--Adjustments
to Conversion Rate--Constructive Dividends") to a Non-U.S. Holder will be
subject to U.S. federal income tax withholding at a rate of 30%, unless (i) a
lower rate is provided by an applicable tax treaty or (ii) the distribution is
effectively connected with the conduct of a trade or business in the United
States by the Non-U.S. Holder. For either of these exceptions to apply, the
Non-U.S. Holder may be required to provide a properly executed certificate
claiming the benefit of a treaty or exemption.
Federal Estate Taxes
A note will not be subject to U.S. federal estate tax as a result of
the death of a holder who is not a citizen or resident of the United States at
the time of death, provided that such holder did not at the time of death
actually or constructively own 10 percent or more of the combined voting power
of all classes of stock of Y&R and, at the time of such holder's death, payments
of interest on such note would not have been effectively connected with the
conduct by such holder of a trade or business in the United States.
Common stock owned or treated as being owned by a Non-U.S. Holder at
the time of death will be included in such holder's gross estate for U.S.
federal estate tax purposes, unless an applicable estate tax treaty provides
otherwise.
Information Reporting and Backup Withholding
U.S. Holders
Information reporting and backup withholding may apply to payments of
principal, interest, premium or dividends on or the proceeds from the sale or
other disposition (including a payment of cash in lieu of a fractional share
upon conversion) of the notes or common stock with respect to certain
noncorporate U.S. Holders. Such U.S. Holders generally will be subject to backup
withholding at a rate of 31% unless the U.S. Holder provides their correct
taxpayer identification number and certain other information, certified under
penalties of perjury, to the payor, or otherwise establishes an exemption from
backup withholding. Any amount withheld under backup withholding is allowable as
a credit against the U.S. Holder's federal income tax liability, provided the
proper information is provided to the IRS.
Non-U.S. Holders
In general, information reporting will apply to payments of interest
and/or premium (if any) on the notes or dividends on the common stock, and
backup withholding at a rate of 31% may apply unless the payee certifies that it
is not a U.S. person or otherwise establishes an exemption. In addition,
information reporting and backup withholding will apply to payments of principal
on the notes unless the payee certifies that it is not a U.S. Person or
otherwise establishes an exemption.
Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of a note or common stock
effected outside the United States by a foreign office of a foreign "broker" (as
defined in applicable Treasury Regulations), provided that such broker (i)
derives less than 50 percent of its gross income for certain periods from the
conduct of a trade or business in the United States, (ii) is not a controlled
foreign corporation for U.S. federal income tax purposes and (iii) with respect
to sales effected after December 31, 2000, is not a foreign partnership that, at
any time during its taxable year, is 50 percent or more (by income or capital
interest) owned by U.S. Persons or is engaged in the conduct of a U.S. trade or
business. Payment of the proceeds of the sale of a note or common stock effected
outside the United States by a foreign office of any other broker will not be
subject to backup withholding tax, but will be subject to information reporting
requirements unless such broker has documentary evidence in its records that the
beneficial owner is a Non-U.S. Holder and certain other conditions are met, or
the beneficial owner otherwise establishes an exemption. Payment
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of the proceeds of a sale or other disposition (including a payment of cash in
lieu of a fractional share upon conversion) of a note or common stock by the
United States office of a broker will be subject to information reporting
requirements and backup withholding tax unless the beneficial owner certifies
its non-U.S. status under penalties of perjury or otherwise establishes an
exemption.
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SELLING SECURITYHOLDERS
The notes offered hereby were originally issued by Y&R and sold by the
initial purchasers in transactions exempt from the registration requirements of
the Securities Act to "qualified institutional buyers" (as defined in Rule 144A
under the Securities Act) or other institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act). The
selling securityholders (which term includes their transferees, pledgees, donees
or their successors) may from time to time offer and sell pursuant to this
prospectus any or all of the notes and common stock issued upon conversion of
the notes.
Prior to any use of this prospectus in connection with an offering of
the notes and/or the common stock issued upon conversion of the notes, this
prospectus will be supplemented to set forth the name and number of shares
beneficially owned by the selling securityholder intending to sell such notes
and/or common stock and the number of notes and/or shares of common stock to be
offered. The prospectus supplement will also disclose whether any selling
securityholder selling in connection with the prospectus supplement has held any
position or office with, been employed by or otherwise has had a material
relationship with, Y&R or any of its affiliates during the three years prior to
the date of the prospectus supplement.
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PLAN OF DISTRIBUTION
The notes and shares of common stock issuable upon conversion thereof
may be sold from time to time:
o directly by any selling securityholder to one or more purchasers;
o to or through underwriters, dealers or brokers;
o through agents on a best-efforts basis or otherwise; or
o through a combination of such methods of sale.
If a selling securityholder sells the notes or shares of common stock
issuable upon conversion thereof through underwriters, dealers, brokers or
agents, such underwriters, dealers, brokers or agents may receive compensation
in the form of discounts, concessions or commissions from the selling
securityholder and/or the purchasers of the notes or shares of common stock.
The notes and shares of common stock issuable upon conversion thereof
may be sold from time to time:
o in one or more transactions at a fixed price or prices, which may be
changed;
o at prevailing market prices at the time of sale or at prices related to
such prevailing prices;
o at varying prices determined at the time of sale; or
o at negotiated prices.
The notes and shares of common stock issuable upon conversion thereof
may be sold:
o in transactions on any national securities exchange or quotation
service on which the notes or shares of common stock may be listed or
quoted at the time of sale;
o in transactions in the over-the-counter market;
o in transactions otherwise than on such exchanges or services or in the
over-the-counter market;
o in block transactions in which the broker or dealer so engaged will
attempt to sell the notes or shares of common stock issuable upon
conversion thereof as agent but may position and resell a portion of
the block as principal to facilitate the transaction, or in crosses;
o through purchases by a broker or dealer as principal and resale by such
broker or dealer for its own account pursuant to this prospectus;
o in ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
o through the writing of options; or
o through other types of transactions.
At the time a particular offering of notes or shares of common stock
issuable upon conversion thereof is made, a prospectus supplement, if required,
will be distributed which will set forth the aggregate amount of notes or shares
of common stock being offered and the terms of the offering, including the name
or names of any underwriters, dealers, brokers or agents and any discounts,
commissions or concessions allowed or reallowed or paid
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to brokers or dealers. In connection with sales of the notes or shares of common
stock issuable upon conversion thereof or otherwise, any selling securityholder
may:
o enter into hedging transactions with brokers, dealers or others, which
may in turn engage in short sales of the notes or shares of common
stock issuable upon conversion thereof in the course of hedging the
positions they assume;
o sell short and deliver notes or shares of common stock issuable upon
conversion thereof to close out such short positions; or
o loan or pledge notes or shares of common stock issuable upon conversion
thereof to brokers, dealers or others that in turn may sell such
securities.
A selling securityholder may pledge or grant a security interest in
some or all of the notes or shares of common stock issuable upon conversion of
the notes owned by it, and if it defaults in the performance of its secured
obligations, the pledgees or secured parties may offer and sell the notes or
shares of common stock issuable upon conversion thereof from time to time
pursuant to this prospectus. The selling securityholders may also transfer and
donate notes or shares of common stock in other circumstances in which case the
transferees, donees, pledgees or other successors in interest will be the
selling securityholders for purposes of this prospectus. The selling
securityholders may sell short notes or shares of common stock and may deliver
this prospectus in connection with such short sales and use the notes or shares
of common stock covered by this prospectus to cover such short sales. In
addition, any notes or shares of common stock covered by this prospectus that
qualify for sale pursuant to Rule 144, Rule 144A or any other available
exemption from registration under the Act may be sold under Rule 144, Rule 144A
or such other available exemption.
Selling securityholders and any underwriters, dealers, brokers, or
agents who participate in the distribution of the notes or shares of common
stock may be deemed to be "underwriters" within the meaning of the Act and any
profits on the sale of the notes or shares of common stock by them and any
discounts, commissions or concessions received by any such underwriters,
dealers, brokers or agents may be deemed to be underwriting discounts and
commissions under the Act.
The selling securityholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M which may limit the timing of purchases and sales of the notes and shares of
common stock by the selling securityholders and any other such person.
Furthermore, Regulation M under the Exchange Act may restrict the ability of any
person engaged in a distribution of the notes or shares of common stock to
engage in market-making activities with respect to the notes and shares of
common stock being distributed for a period of up to five business days prior to
the commencement of such distribution. All of the foregoing may affect the
marketability of the notes and shares of common stock and the ability of any
person or entity to engage in market-making activities with respect to the notes
and shares of common stock.
Pursuant to the registration agreement entered into in connection with
the offer and sale of the notes by Y&R, each of Y&R and the selling
securityholders will be indemnified by the other against certain liabilities,
including certain liabilities under the Act, or will be entitled to contribution
in connection therewith.
Y&R will pay all expenses of the shelf registration statement, provided
that each selling securityholder will pay any broker's commission, agency fee or
underwriter's discount or commission.
LEGAL MATTERS
The validity of the notes and shares of common stock issuable upon
conversion of the notes offered hereby will be passed upon for Y&R by Stephanie
W. Abramson.
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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, 1999 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.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution.
The following table sets forth estimated expenses in connection with
the issuance and distribution of the securities being registered, other than any
broker's commissions, agency fees or underwriting discounts and commissions that
may be payable by the selling securityholders:
Securities and Exchange Commission registration fee........... $67,361.25
National Association of Securities Dealers, Inc. filing fee... 26,016
Legal fees and expenses....................................... 65,000
Accounting fees and expenses.................................. 5,000
Total....................................................... $163,377.25
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
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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
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,
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or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a manner
which 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 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.
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(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 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
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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.
ITEM 16. Exhibits.
Exhibit Number Description
-------------- -----------
4.1 Indenture dated as of January 20, 2000
between Y&R and The Bank of New York, as
trustee (incorporated by reference from
Exhibit 10.28 to Y&R's Annual Report on
Form 10-K for the year ended December
31, 1999 (File No. 001-14093)).
4.2 Form of Note (included in Exhibit 4.1).
4.3 Registration Agreement dated as of
January 20, 2000 between Y&R and Salomon
Smith Barney Inc., Bear Stearns & Co.
Inc., Donaldson Lufkin & Jenrette
Securities Corporation, Merrill Lynch,
Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. Incorporated and
Thomas Weisel Partners LLC.
5 Opinion of Stephanie W. Abramson, Esq.
12 Statement of Ratio of Earnings to Fixed
Charges.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Stephanie W. Abramson, Esq.
(included in Exhibit 5).
24 Power of Attorney (included on signature
pages).
25 Statement regarding Eligibility of
Trustee on Form T-1.
ITEM 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made
of the securities registered hereby, a post-effective amendment to this
registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the
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aggregate, represent a fundamental change in the information
set forth in this registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in this
registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement;
provided, however, that the undertakings set forth in paragraphs (i) and (ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Commission by the registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes 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 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.
(c) 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 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 whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be initial bona fide offering thereof.
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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
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York, on April 17, 2000.
YOUNG & RUBICAM INC.
By:/s/ Stephanie W. Abramson
----------------------------------
Name: Stephanie W. Abramson
Title: Executive Vice President
and General Counsel
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POWER OF ATTORNEY
We, the undersigned officers and directors of Young & Rubicam
Inc., hereby severally and individually constitute and appoint Michael J. Dolan,
Stephanie W. Abramson and Jacques Tortoroli each of them, the true and lawful
attorneys-in-fact and agents of each of us to execute in the name, place and
stead of each of us (individually and in any capacity stated below) (1) any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
or instruments necessary or advisable in connection therewith, and (2) a
Registration Statement, and any and all amendments thereto, relating to the
offering covered hereby filed pursuant to Rule 462(b) under the Securities Act
of 1933, with the Securities and Exchange Commission, each of said
attorneys-in-fact and agents to have the power to act with or without the others
and to have full power and authority to do and perform in the name and on behalf
of each of the undersigned every act whatsoever necessary or advisable to be
done in and about the premises, as fully to all intents and purposes as any of
the undersigned might or could do in person, and we hereby ratify and confirm
our signatures as they may be signed by our said attorneys-in-fact and agents or
each of them to any and all such amendments and instruments.
This Power of Attorney may be executed in multiple
counterparts, each of which shall be deemed an original, but which taken
together shall constitute one instrument.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
Signature Title Date
--------- ----- ----
<S> <C> <C>
- --------------------------------------- Chief Executive Officer and President of Y&R
Thomas H. Bell, Jr. and Director
(principal executive officer)
/s/ Edward H. Vick
- --------------------------------------- Chairman of the Board of Directors and Chief April 17, 2000
Edward H. Vick Creative Officer of Y&R
/s/ Michael J. Dolan
- --------------------------------------- Vice Chairman, Chief Financial Officer of April 17, 2000
Michael J. Dolan Y&R and Director
(principal financial officer)
/s/ Jacques Tortoroli
- --------------------------------------- Senior Vice President, Finance April 14, 2000
Jacques Tortoroli (principal accounting officer)
/s/ Richard S. Bodman
- --------------------------------------- Director April 17, 2000
Richard S. Bodman
/s/ F. Warren Hellman
- --------------------------------------- Director April 17, 2000
F. Warren Hellman
/s/ Michael H. Jordan
- --------------------------------------- Director April 17, 2000
Michael H. Jordan
/s/ Sir Christopher Lewinton
- --------------------------------------- Director April 17, 2000
Sir Christopher Lewinton
II-8
<PAGE>
/s/ John F. McGillicuddy
- --------------------------------------- Director April 17, 2000
John F. McGillicuddy
/s/ Dr. Judith Rodin
- --------------------------------------- Director April 14, 2000
Dr. Judith Rodin
/s/ Alan D. Schwartz
- --------------------------------------- Director April 14, 2000
Alan D. Schwartz
</TABLE>
II-9
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
4.1 Indenture dated as of January 20, 2000
between Y&R and The Bank of New York, as
trustee (incorporated by reference from
Exhibit 10.28 to Y&R's Annual Report on
Form 10-K for the year ended December
31, 1999 (File No. 001-14093)).
4.2 Form of Note (included in Exhibit 4.1).
4.3 Registration Agreement dated as of
January 20, 2000 between Y&R and Salomon
Smith Barney Inc., Bear Stearns & Co.
Inc., Donaldson Lufkin & Jenrette
Securities Corporation, Merrill Lynch,
Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. Incorporated and
Thomas Weisel Partners LLC.
5 Opinion of Stephanie W. Abramson, Esq.
12 Statement of Ratio of Earnings to Fixed
Charges.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Stephanie W. Abramson, Esq.
(included in Exhibit 5).
24 Power of Attorney (included on signature
pages).
25 Statement regarding Eligibility of
Trustee on Form T-1.
Exhibit 4.3
Young & Rubicam Inc.
3% Convertible Subordinated Notes due 2005
REGISTRATION AGREEMENT
New York, New York
January 20, 2000
Salomon Smith Barney Inc.
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
Thomas Weisel Partners LLC
As Representatives of the Initial Purchasers named in Schedule I to the Purchase
Agreement (as defined below) 388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Young & Rubicam Inc., a Delaware corporation (the "Company"), proposes
to issue and sell (such issuance and sale, the "Initial Placement") to the
several parties named in Schedule I to the Purchase Agreement (the "Initial
Purchasers") for whom you (the "Representatives") are acting as representatives,
upon the terms set forth in a purchase agreement dated January 14, 2000 (the
"Purchase Agreement"), $250,000,000 aggregate principal amount (plus up to an
additional $37,500,000 aggregate principal amount to cover over-allotments, if
any) of its 3% Convertible Subordinated Notes due 2005 (the "Securities"). The
Securities will be convertible into shares of common stock, par value $.01 per
share, of the Company at the conversion price set forth in the Offering
Memorandum (as defined herein), as the same may be adjusted from time to time
pursuant to the Indenture referred to below. As an inducement to you to enter
into the Purchase Agreement and in satisfaction of a condition to your
obligations thereunder, the Company agrees with you, (i) for your benefit and
(ii) for the benefit of the holders from time to time of the Securities and the
Common Stock issuable upon conversion of the Securities (including you), as
follows:
1. Definitions. Capitalized terms used herein without definition shall
have the respective meanings set forth in the Purchase Agreement. As used in
this Agreement, the following capitalized terms shall have the following
meanings:
"Act" means the Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.
"Additional Amounts" has the meaning set forth in Section 2(e) hereof.
"Affiliate" of any specified person means any other person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such person,
whether through the ownership of voting securities or by agreement or otherwise.
"Business Day" has the meaning set forth in the Indenture.
"Closing Date" means January 20, 2000.
"Common Stock" means the common stock, par value $.01 per share, of the
Company, as it exists on the date of this Agreement and any other shares of
capital stock or other securities of the Company into which such Common Stock
may be reclassified or changed, together with any and all other securities which
may from time to time be issuable upon conversion of Securities.
"Damages Payment Date" means, with respect to the Securities or the
Common Stock issuable upon conversion thereof, as applicable, each Interest
Payment Date; and in the event that any Security, or portion thereof, is called
for redemption or surrendered for purchase by the Company and not withdrawn
pursuant to a Designated Event Offer (as defined in the Indenture), the relevant
redemption date or Designated Event Payment Date (as defined in the Indenture),
as the case may be, shall also be a Damages Payment Date with respect to such
Security, or portion thereof, unless the Indenture provides that accrued and
unpaid interest on the Security (or portion thereof) to be redeemed or
repurchased, as the case may be, is to be paid to the person who was the Holder
thereof on a record date prior to such redemption date or Designated Event
Payment Date, as the case may be, in which case the Damages Payment Date shall
be the date on which interest is payable to such Record Holder.
"Default Rate" has the meaning set forth in the Indenture.
"DTC" has the meaning set forth in Section 3(k) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Final Maturity Date" means January 15, 2005.
"Holder" means a person who is a holder or beneficial owner (including
the Initial Purchasers) of any Securities or shares of Common Stock issued upon
conversion of Securities; provided that, unless otherwise expressly stated
herein, only registered holders of Securities or Common Stock issued on
conversion thereof shall be counted for purposes of calculating any proportion
of holders entitled to take any action or give notice pursuant to this
Agreement.
"Indenture" means the Indenture relating to the Securities dated as of
January 20, 2000, between the Company and The Bank of New York, as trustee, as
the same may be amended from time to time in accordance with the terms thereof.
"Initial Placement" has the meaning set forth in the preamble hereto.
"Initial Purchasers" has the meaning set forth in the preamble hereto.
"Interest Payment Date" shall mean each January 15 and July 15,
commencing July 15, 2000 and ending on the Final Maturity Date.
"Majority Holders" means the Holders of a majority of the then
outstanding aggregate principal amount of Securities registered under a Shelf
Registration Statement; provided that Holders of Common Stock issued upon
conversion of Securities shall be deemed to be Holders of the aggregate
principal amount of Securities from which such Common Stock was converted; and
provided, further, that Securities or Common Stock which have been sold or
otherwise transferred pursuant to the Shelf Registration Statement shall not be
included in the calculation of Majority Holders.
"Majority Underwriting Holders" means, with respect to any Underwritten
Offering, the Holders of a majority of the then outstanding aggregate principal
amount of Securities registered under any Shelf Registration Statement whose
Securities are or are to be included in such Underwritten Offering; provided
that Holders of Common Stock issued upon conversion of Securities whose shares
of Common Stock are or are to be included in such Underwritten Offering shall be
deemed to be Holders of the aggregate principal amount of Securities from which
such Common Stock was converted.
"Managing Underwriters" means the Underwriter or Underwriters that
shall manage an Underwritten Offering.
"NASD" has the meaning set forth in Section 3(i) hereof.
"Notice and Questionnaire" means a Notice of Registration Statement and
Selling Securityholder Questionnaire substantially in the form of Exhibit A
hereto.
"Offering Memorandum" means the Final Memorandum as defined in the
Purchase Agreement.
"Person" and "person" have the meaning set forth in the Indenture.
"Prospectus" means the prospectus included in any Shelf Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Securities or Common Stock issuable upon
conversion thereof covered by such Shelf Registration Statement, and all
amendments and supplements to such prospectus, including all documents
incorporated by reference in such prospectus.
"Purchase Agreement" has the meaning set forth in the preamble hereto.
"Record Holder" means (i) with respect to any Damages Payment Date
which occurs on an Interest Payment Date, each person who is registered on the
books of the registrar as the holder of Securities at the close of business on
the record date with respect to such Interest Payment Date and (ii) with respect
to any Damages Payment Date relating to the Common Stock issued upon conversion
thereof, each person who is a holder of record of such Common Stock fifteen days
prior to the Damages Payment Date.
"Registration Default" has the meaning set forth in Section 2(e)
hereof.
"Representatives" has the meaning set forth in the preamble hereto.
"Rule 144" means Rule 144 (or any successor provision) under the Act.
"SEC" means the Securities and Exchange Commission.
"Securities" has the meaning set forth in the preamble hereto.
"Shelf Registration" means a registration effected pursuant to Section
2 hereof.
"Shelf Registration Period" has the meaning set forth in Section 2(c)
hereof.
"Shelf Registration Statement" means a "shelf" registration statement
of the Company pursuant to the provisions of Section 2 hereof which covers all
of the Securities and the Common Stock issuable upon conversion thereof, as
applicable, on Form S-3 or on another appropriate form for an offering to be
made on a delayed or continuous basis pursuant to Rule 415 under the Act, or any
similar rule that may be adopted by the SEC, and all amendments and supplements
to such registration statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and all
documents incorporated by reference therein.
"Suspension Period" has the meaning set forth in Section 2(d) hereof.
"Transfer Restricted Securities" means each Security and each share of
Common Stock issued upon conversion thereof until the earlier of (A) the date on
which such Security or share of Common Stock, as the case may be, (i) has been
transferred pursuant to the Shelf Registration Statement or another registration
statement covering such Security or share of Common Stock which has been filed
with the SEC pursuant to the Act, in either case after such registration
statement has become effective and while such registration statement is
effective under the Act, (ii) has been transferred pursuant to Rule 144 under
the Act (or any similar provision then in force), or (iii) may be sold or
transferred pursuant to Rule 144(k) under the Act (or any similar provision then
in force) or (B) the second anniversary of the Closing Date or, if later, the
second anniversary of the last date on which any Securities are issued upon
exercise of the Initial Purchasers' over-allotment option.
"Trustee" means the trustee with respect to the Securities under the
Indenture.
"Underwriter" means any underwriter of Securities or Common Stock
issuable upon conversion thereof in connection with an offering thereof under a
Shelf Registration Statement.
"Underwritten Offering" means an offering in which the Securities or
Common Stock issued upon conversion thereof are sold to an Underwriter or with
the assistance of an Underwriter for reoffering to the public.
All references in this Agreement to financial statements and schedules
and other information which is "contained", "included", or "stated" in the Shelf
Registration Statement, any preliminary Prospectus or Prospectus (and all other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in such Shelf Registration Statement, preliminary Prospectus or
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Shelf Registration Statement, any preliminary
Prospectus or Prospectus shall be deemed to mean and include the filing of any
document under the Exchange Act, after the date of such Shelf Registration
Statement, preliminary Prospectus or Prospectus, as the case may be, which is
incorporated by reference therein.
2. Shelf Registration Statement.
(a) The Company shall prepare and, not later than 90 days following the
Closing Date, shall file with the SEC a Shelf Registration Statement with
respect to resales of the Securities and the Common Stock issuable upon
conversion thereof by the Holders from time to time in accordance with the
methods of distribution elected by such Holders and set forth in such Shelf
Registration Statement and thereafter shall use its reasonable best efforts to
cause such Shelf Registration Statement to be declared effective under the Act
within 180 days after the Closing Date; provided that if any Securities are
issued upon exercise of the over-allotment option granted to the Initial
Purchasers in the Purchase Agreement and the date on which such Securities are
issued occurs after the Closing Date, the Company will take such steps, prior to
the effective date of the Shelf Registration Statement, to ensure that such
Securities and Common Stock issuable upon conversion thereof are included in the
Shelf Registration Statement on the same terms as the Securities issued on the
Closing Date and Common Stock issuable upon conversion thereof. The Company
shall supplement or amend the Shelf Registration Statement if required by the
rules, regulations or instructions applicable to the registration form used by
the Company for the Shelf Registration Statement, if required by the Act, the
Exchange Act or the SEC.
(b) (1) Not less than 10 calendar days prior to the effectiveness of
the Shelf Registration Statement, the Company shall mail the Notice and
Questionnaire to the Holders of Securities and Common Stock issued upon
conversion thereof. No Holder shall be entitled to be named as a selling
securityholder in the Shelf Registration Statement, and no Holder shall be
entitled to use the Prospectus forming a part thereof for resales of Securities
or Common Stock issued upon conversion thereof at any time, unless such Holder
has returned a completed and signed Notice and Questionnaire to the Company by
the deadline for responses set forth therein; provided, however, that Holders of
Securities or Common Stock issued upon conversion thereof shall have at least 7
calendar days from the date on which the Notice and Questionnaire is first
mailed to such Holders to return a completed and signed Notice and Questionnaire
to the Company.
(2) After the Shelf Registration Statement has become effective,
the Company shall, upon the request of any Holder of Securities or Common Stock
issued or issuable upon conversion thereof that has not returned a completed
Notice and Questionnaire, promptly send a Notice and Questionnaire to such
Holder. The Company shall not be required to take any action to name such Holder
as a selling securityholder in the Shelf Registration Statement or to enable
such Holder to use the Prospectus forming a part thereof for resales of
Securities or Common Stock issued or issuable upon conversion thereof until such
Holder has returned a completed and signed Notice and Questionnaire to the
Company, whereupon the Company will be required to take such action.
(c) Subject to Section 2(d), the Company shall keep the Shelf
Registration Statement continuously effective under the Act in order to permit
the Prospectus forming part thereof to be usable by all Holders until the
earliest of (i) the second anniversary of the Closing Date or, if later, the
second anniversary of the last date on which any Securities are issued upon
exercise of the Initial Purchasers' over-allotment option, (ii) the date on
which all the Securities and Common Stock issued or issuable upon conversion
thereof may be sold by non-Affiliates of the Company pursuant to paragraph (k)
of Rule 144 (or any successor provision) promulgated by the SEC under the Act,
(iii) the date as of which all the Securities and Common Stock issued or
issuable upon conversion thereof have been (A) transferred pursuant to Rule 144
under the Securities Act (or any similar provision then in force) or (B) sold
pursuant to the Shelf Registration Statement (in any such case, such period
being called the "Shelf Registration Period"). The Company will, subject to
Section 2(d), prepare and file with the SEC such amendments and post-effective
amendments to the Shelf Registration Statement as may be necessary to keep the
Shelf Registration Statement continuously effective for the Shelf Registration
Period; subject to Section 2(d), cause the related Prospectus to be supplemented
by any required supplement, and as so supplemented to be filed pursuant to Rule
424 (or any similar provision then in force) under the Act; and, comply in all
material respects with the provisions of the Act with respect to the disposition
of all securities covered by the Shelf Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
sellers thereof set forth in such Shelf Registration Statement as so amended or
such Prospectus as so supplemented.
(d) The Company may suspend the use of the Prospectus for a period not
to exceed 30 days in any three-month period or for three periods not to exceed
an aggregate of 90 days in any twelve-month period (the "Suspension Period") for
valid business reasons, to be determined by the Company in its sole reasonable
judgment (not including avoidance of the Company's obligations hereunder),
including, without limitation, the acquisition or divestiture of assets, public
filings with the SEC, pending corporate developments and similar events;
provided that the Company promptly thereafter complies with the requirements of
Section 3(j) hereof, if applicable; provided, that the existence of a Suspension
Period will not prevent the occurrence of a Registration Default or otherwise
limit the obligation of the Company to pay Additional Amounts. The Company shall
provide notice to the Holders of a Suspension Period as required under Section
3(c)(1)(iv) hereof.
(e) If (i) the Shelf Registration Statement is not filed with the SEC
on or prior to 90 days after the Closing Date, (ii) the Shelf Registration
Statement has not been declared effective by the SEC within 180 days after the
Closing Date, or (iii) the Shelf Registration Statement is filed and declared
effective but shall thereafter cease to be effective (without being succeeded
immediately by a replacement shelf registration statement filed and declared
effective) or usable (including as a result of a Suspension Period) for the
offer and sale of Transfer Restricted Securities for a period of time (including
any Suspension Period) which shall exceed 90 days in the aggregate in any
twelve-month period during the period beginning on the Closing Date and ending
on the second anniversary of the Closing Date or, if later, the second
anniversary of the last date on which any Securities are issued upon exercise of
the Initial Purchasers' over-allotment option (each such event referred to in
clauses (i) through (iii), a "Registration Default"), the Company will pay
additional amounts ("Additional Amounts") to each Holder of Transfer Restricted
Securities who has complied with such Holder's obligations under this Agreement.
The amount of Additional Amounts payable during any period in which a
Registration Default has occurred and is continuing is the amount which is equal
to one-quarter of one percent (25 basis points) per annum per $1,000 principal
amount of Securities and $2.50 per annum per 13.6314 shares of Common Stock
(subject to adjustment in the event of a stock split, stock recombination, stock
dividend and the like) constituting Transfer Restricted Securities for the first
90 days during which a Registration Default has occurred and is continuing and
one-half of one percent (50 basis points) per annum per $1,000 principal amount
of Securities and $5.00 per annum per 13.6314 shares of Common Stock (subject to
adjustment as set forth above) constituting Transfer Restricted Securities for
any additional days during which a Registration Default has occurred and is
continuing; it being understood that all calculations pursuant to this sentence
shall be carried out to five decimals. Following the cure of a Registration
Default, Additional Amounts will cease to accrue with respect to such
Registration Default. All accrued Additional Amounts shall be paid by wire
transfer of immediately available funds to the accounts specified by the Record
Holders or, if a Record Holder has not specified such an account, by check
mailed by the Company to the registered address of such Record Holder on each
Damages Payment Date and Additional Amounts will be calculated on the basis of a
360-day year consisting of twelve 30-day months. In the event that any
Additional Amounts are not paid when due, then to the extent permitted by law,
such overdue Additional Amounts, if any, shall bear interest until paid at the
Default Rate, compounded semi-annually. The parties hereto agree that the
Additional Amounts provided for in this Section 2(e) constitute a reasonable
estimate of the damages that may be incurred by Holders by reason of a
Registration Default.
(f) All of the Company's obligations (including, without limitation,
the obligation to pay Additional Amounts) set forth in the preceding paragraph
which are outstanding or exist with respect to any Transfer Restricted Security
at the time such security ceases to be a Transfer Restricted Security shall
survive until such time as all such obligations with respect to such security
shall have been satisfied in full.
(g) Immediately upon the commencement or the termination of a
Registration Default, the Company shall give the Trustee, in the case of notice
with respect to the Securities, and the transfer and paying agent for the Common
Stock, in the case of notice with respect to Common Stock issued or issuable
upon conversion thereof, notice of such commencement or termination, of the
obligation to pay Additional Amounts with regard to the Securities and Common
Stock and the amount thereof and of the event giving rise to such commencement
or termination (such notice to be contained in an Officers' Certificate (as such
term is defined in the Indenture)), and prior to receipt of such Officers'
Certificate the Trustee and such transfer and paying agent shall be entitled to
assume that no such commencement or termination has occurred, as the case may
be.
3. Registration Procedures. In connection with any Shelf Registration
Statement, the following provisions shall apply:
(a) The Company shall furnish to you, prior to the filing thereof with
the SEC, a copy of any Shelf Registration Statement, and each amendment thereof,
a copy of any Prospectus, and each amendment or supplement, if any, to the
Prospectus included therein (excluding in all cases amendments caused by the
filing by the Company with the SEC of a report required by the Exchange Act) and
shall use its reasonable best efforts to reflect in each such document, when so
filed with the SEC, such comments as Salomon Smith Barney Inc. reasonably may
propose. Salomon Smith Barney Inc. shall promptly furnish to the Company any
comments it may have to such documents mentioned in the foregoing sentence.
(b) Subject to Section 2(d), the Company shall ensure that upon the
occurrence of any event that (i) would cause any Shelf Registration Statement,
as amended, and any Prospectus forming part thereof, as amended or supplemented,
not to be in compliance as to form in all material respects with the Act and the
rules and regulations thereunder, (ii) would cause the Shelf Registration
Statement, as amended, when it became effective, to 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 not misleading or (iii)
would cause any Prospectus forming part of any Shelf Registration Statement, as
amended or supplemented, to include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading, the
Company shall file promptly an appropriate amendment to such Shelf Registration
Statement or Prospectus, as the case may be, (A) in the case of clause (i) to
place such document in compliance as to form in all material respects, and (B)
in the case of clauses (ii) and (iii) to correct any such misstatements or
omissions; provided that the Company makes no representation or agreement with
respect to information with respect to you, any Underwriter or any Holder
required to be included in any Shelf Registration or Prospectus pursuant to the
Act or the rules and regulations thereunder and which information is included
therein in reliance upon and in conformity with information furnished to the
Company in writing by you, any Underwriter or any such Holder.
(c) (1) The Company, as promptly as reasonably practicable, shall
advise you and each Holder that has returned a completed and signed Notice and
Questionnaire to the Company and, if requested by you or any such Holder,
confirm such advice in writing:
(i) when a Shelf Registration Statement and any amendment
thereto has been filed with the SEC and when the Shelf Registration
Statement or any post-effective amendment thereto has become effective;
(ii) of any request by the SEC for amendments or supplements to
the Shelf Registration Statement or the Prospectus or for additional
information;
(iii) of the determination by the Company that a post-effective
amendment to the Shelf Registration Statement would be appropriate; and
(iv) of the commencement or termination of any Suspension
Period.
(2) The Company shall advise you and each Holder that has returned
a completed and signed Notice and Questionnaire to the Company and, if requested
by you or any such Holder, confirm such advice in writing:
(i) of the issuance by the SEC of any stop order suspending the
effectiveness of the Shelf Registration Statement or the initiation of
any proceedings for that purpose;
(ii) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities
included in any Shelf Registration Statement for sale in any
jurisdiction or the initiation or threat of any proceeding for such
purpose; and
(iii) of the suspension of the use of the Prospectus pursuant
to Section 2(d) hereof or of the happening of any event that requires
the making of any changes in the Shelf Registration Statement or the
Prospectus so that, as of such date, the statements therein are not
misleading and the Shelf Registration Statement or the Prospectus, as
the case may be, does not include 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 case of the
Prospectus, in light of the circumstances under which they were made)
not misleading (which advice shall be accompanied by an instruction to
suspend the use of the Prospectus until the requisite changes have been
made).
(d) The Company shall use its reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of any Shelf Registration
Statement or the lifting of any suspension of the qualification (or exemption
from qualification) of any of the Securities for offer or sale in any
jurisdiction at the earliest possible time.
(e) The Company shall furnish to each Holder of Securities and the
Common Stock issued upon conversion thereof included within the coverage of any
Shelf Registration Statement, without charge, at least one copy of such Shelf
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, but excluding exhibits and documents
incorporated by reference unless the Holder so requests in writing.
(f) The Company shall, during the Shelf Registration Period, deliver to
each Holder of Securities or the Common Stock issued upon conversion thereof
included within the coverage of any Shelf Registration Statement, without
charge, as many copies of the Prospectus (including each preliminary Prospectus)
included in such Shelf Registration Statement and any amendment or supplement
thereto as such Holder may reasonably request but excluding documents
incorporated by reference unless the Holder so requests in writing; and, except
during the continuance of any Suspension Period, the Company consents to the use
of the Prospectus or any amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Securities or the Common
Stock issued upon conversion thereof covered by the Prospectus or any amendment
or supplement thereto.
(g) Prior to any offering of Securities or the Common Stock issued upon
conversion thereof pursuant to any Shelf Registration Statement, the Company
shall register or qualify or cooperate with the Holders of Securities and the
Common Stock issued upon conversion thereof included therein and their
respective counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Securities or Common
Stock for offer and sale, as the case may be, under the securities or blue sky
laws of such jurisdictions as any such Holders reasonably request in writing and
do any and all other acts or things necessary or advisable to enable the offer
and sale in such jurisdictions of the Securities and the Common Stock issued
upon conversion thereof covered by such Shelf Registration Statement; provided,
however, that the Company will not be required to (A) qualify generally to do
business in any jurisdiction where it is not then so qualified or to (B) take
any action which would subject it to general service of process or to taxation
in any such jurisdiction where it is not then so subject.
(h) The Company shall cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing Securities or the
Common Stock issued upon conversion thereof to be sold pursuant to any Shelf
Registration Statement free of any restrictive legends and in such denominations
and registered in such names as Holders may request prior to sales of Securities
or the Common Stock issued upon conversion thereof pursuant to such Shelf
Registration Statement.
(i) Subject to the exceptions contained in (A) and (B) of subsection
(g) hereof and except as may be required solely as a consequence of the nature
of a selling Holder, the Company shall use its reasonable best efforts to cause
the Securities and Common Stock issued upon conversion thereof covered by the
applicable Shelf Registration Statement to be registered with or approved by
such other federal, state and local governmental agencies or authorities, and
self-regulatory organizations in the United States as may be necessary to enable
the Holders to consummate the disposition of such Securities and Common Stock
issued upon conversion thereof as contemplated by the Shelf Registration
Statement; without limitation to the foregoing, the Company shall make all
filings and provide all such information as may be required by the National
Association of Securities Dealers, Inc. (the "NASD") in connection with the
offering under the Shelf Registration Statement of the Securities and Common
Stock issued upon conversion thereof (including, without limitation, such as may
be required by NASD Rule 2710 or 2720), and shall cooperate with each Holder in
connection with any filings required to be made with the NASD by such Holder in
that regard.
(j) Upon the occurrence of any event contemplated by paragraph
3(c)(2)(iii) above and subject to Section 3(a) hereof, the Company shall
promptly prepare and file with the SEC a post-effective amendment to any Shelf
Registration Statement or an amendment or supplement to the related Prospectus
or any document incorporated therein by reference or file a document which is
incorporated or deemed to be incorporated by reference in such Shelf
Registration Statement or Prospectus, as the case may be, so that, as thereafter
delivered to purchasers of the Securities or the Common Stock issued upon
conversion thereof included therein, the Shelf Registration Statement and the
Prospectus, in each case as then amended or supplemented, will not include an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein (in
the case of the Prospectus in light of the circumstances under which they were
made) not misleading and in the case of a post-effective amendment, use its
reasonable best efforts to cause it to become effective as promptly as
practicable; provided that the Company's obligations under this Subsection (j)
shall be suspended if the Company has suspended the use of the Prospectus in
accordance with Section 2(d) hereof and given notice of such suspension to
Holders, it being understood that the Company's obligations under this
Subsection (j) shall be automatically reinstated at the end of such Suspension
Period.
(k) The Company shall use its reasonable best efforts to cause The
Depository Trust Company ("DTC") on the first Business Day following the
effective date of any Shelf Registration Statement hereunder or as soon as
possible thereafter to remove (i) from any existing CUSIP number assigned to the
Securities any designation indicating that the Securities are "restricted
securities", which efforts shall include delivery to DTC of a letter executed by
the Company substantially in the form of Exhibit B hereto and (ii) any other
stop or restriction on DTC's system with respect to the Securities. In the event
the Company is unable to cause DTC to take actions described in the immediately
preceding sentence, the Company shall take such actions as Salomon Smith Barney
Inc. may reasonably request to provide, as soon as practicable, a CUSIP number
for the Securities registered under such Shelf Registration Statement and to
cause such CUSIP number to be assigned to such Securities (or to the maximum
aggregate principal amount of the Securities to which such number may be
assigned). Upon compliance with the foregoing requirements of this Section 3(k),
the Company shall provide the Trustee with global certificates for such
Securities in a form eligible for deposit with DTC.
(l) The Company shall use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC and shall make generally
available to its security holders as soon as practicable but in any event not
later than 15 months after (i) the effective date of the applicable Shelf
Registration Statement, (ii) the effective date of each post-effective amendment
to any Shelf Registration Statement, and (iii) the date of each filing by the
Company with the SEC of an Annual Report on Form 10-K that is incorporated by
reference or deemed to be incorporated by reference in the Shelf Registration
Statement, an earnings statement satisfying the provisions of Section 11(a) of
the Act and Rule 158 promulgated by the SEC thereunder.
(m) The Company shall use its reasonable best efforts to cause the
Indenture to be qualified under the TIA (as defined in the Indenture) in a
timely manner.
(n) The Company shall cause all Common Stock issued or issuable upon
conversion of the Securities to be listed on each securities exchange or
quotation system on which the Common Stock is then listed no later than the date
the applicable Shelf Registration Statement is declared effective and, in
connection therewith, to make such filings as may be required under the Exchange
Act and to have such filings declared effective as and when required thereunder.
(o) The Company may require each Holder of Securities or the Common
Stock issued upon conversion thereof to be sold pursuant to any Shelf
Registration Statement to furnish to the Company such information regarding the
Holder and the distribution of such Securities or Common Stock sought by the
Notice and Questionnaire and such additional information as may, from time to
time, be required by the Act and the rules and regulations promulgated
thereunder, and the obligations of the Company to any Holder hereunder shall be
expressly conditioned on the compliance of such Holder with such request.
(p) The Company shall, if reasonably requested, use its reasonable best
efforts to promptly incorporate in a Prospectus supplement or post-effective
amendment to a Shelf Registration Statement (i) such information as the Majority
Holders provide or, if the Securities or Common Stock are being sold in an
Underwritten Offering, as the Managing Underwriters or the Majority Underwriting
Holders reasonably agree should be included therein and provide to the Company
in writing for inclusion in the Shelf Registration Statement or Prospectus, and
(ii) such information as a Holder may provide from time to time to the Company
in writing for inclusion in a Prospectus or any Shelf Registration Statement
concerning such Holder and the distribution of such Holder's Securities and
Common Stock and, in either case, shall make all required filings of such
Prospectus supplement or post-effective amendment as soon as practicable after
being notified in writing of the matters to be incorporated in such Prospectus
supplement or post-effective amendment, provided that the Company shall not be
required to take any action under this Section 3(p) that is not, in the
reasonable opinion of counsel for the Company, in compliance with applicable
law.
(q) The Company shall enter into such customary agreements (including
underwriting agreements) and take all other appropriate actions as may be
reasonably requested in order to expedite or facilitate the registration or the
disposition of the Securities or the Common Stock issued or issuable upon
conversion thereof, and in connection therewith, if an underwriting agreement is
entered into, cause the same to contain indemnification and contribution
provisions and procedures no less favorable than those set forth in Section 5
(or such other reasonable and customary provisions and procedures acceptable to
the Majority Underwriting Holders and the Managing Underwriters, if any, with
respect to all parties to be indemnified pursuant to Section 5). The plan of
distribution in the Shelf Registration Statement and the Prospectus included
therein shall permit resales of the Securities or Common Stock issuable upon
conversion thereof to be made by selling security holders through underwriters,
brokers and dealers, and shall also include such other information as Salomon
Smith Barney Inc. may reasonably request.
(r) The Company shall (i) make reasonably available for inspection by
the Holders of Securities and the Common Stock issued upon conversion thereof
registered or to be registered under a Shelf Registration Statement, any
Underwriter participating in any disposition pursuant to such Shelf Registration
Statement, and any attorney, accountant or other agent retained by the Holders
or any such Underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries as is
customary for due diligence examinations in connection with public offerings;
(ii) cause the Company's officers, directors and employees to supply all
relevant information reasonably requested by the Holders or any such
Underwriter, attorney, accountant or agent in connection with any such Shelf
Registration Statement as is customary for similar due diligence examinations;
provided, however, that any information so delivered shall be kept confidential
by the Holders or any such Underwriter, attorney, accountant or agent, unless
disclosure thereof is made in connection with a court, administrative or
regulatory proceeding or required by law, or such information has become
available to the public generally through the Company or through a third party
without an accompanying obligation of confidentiality; provided, further, that
if the foregoing inspection and information gathering specified in subsections
(i) and (ii) would, in the Company's reasonable judgment, disrupt the Company's
conduct of business, such inspections and information gathering shall be
coordinated on behalf of the Holders and the other parties entitled thereto by
one counsel designated by or on behalf of the Majority Holders (or, in the case
of an Underwritten Offering, the Majority Underwriting Holders and the Managing
Underwriters); (iii) make such representations and warranties to the Holders of
Securities and the Common Stock issued upon conversion thereof registered
thereunder and the Underwriters, if any, in form, substance and scope as are
customarily made by issuers to Underwriters; (iv) use its reasonable best
efforts to obtain opinions of counsel to the Company and updates thereof (which
counsel and opinions, in form, scope and substance, shall be reasonably
satisfactory to the Managing Underwriters, if any) addressed to each selling
Holder and the Underwriters, if any, covering such matters as are customarily
covered in opinions requested in public offerings; (v) use its reasonable best
efforts to obtain "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Shelf Registration
Statement), addressed to each selling Holder of Securities and Common Stock
issued upon conversion thereof registered thereunder (provided such Holder
furnishes the accountants with such representations as the accountants
customarily require in similar situations) and the Underwriters, if any, in
customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with primary underwritten offerings; and (vi)
deliver such documents and certificates as may be reasonably requested by the
Majority Holders or, in the case of an Underwritten Offering, the Majority
Underwriting Holders, and the Managing Underwriters, if any, including those to
evidence compliance with Section 3(j) and with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Company. The foregoing actions set forth in clauses (iii), (iv), (v) and (vi) of
this Section 3(r) shall be performed (A) at the reasonable request of the
Representative, at the effectiveness of such Shelf Registration Statement and
each post-effective amendment thereto and (B) at each closing under any
underwriting or similar agreement as and to the extent required thereunder.
(s) Each Holder agrees that, upon receipt of notice of the happening of
an event described in Sections 3(c)(1)(ii) through and including 3(c)(1)(iv) and
Sections 3(c)(2)(i) through and including 3(c)(2)(iii), each Holder shall
forthwith discontinue (and shall cause its agents and representatives to
discontinue) disposition of the Securities and the Common Stock issuable upon
conversion thereof and will not resume disposition of such Securities or the
Common Stock until such Holder has received copies of an amended or supplemented
Prospectus contemplated by Section 3(j) hereof, or until such Holder is advised
in writing by the Company that the use of the Prospectus may be resumed or that
the relevant Suspension Period has been terminated, as the case may be, provided
that, the foregoing shall not prevent the sale, transfer or other disposition of
Securities or Common Stock issuable upon conversion thereof by a Holder in a
transaction which is exempt from, or not subject to, the registration
requirements of the Act, so long as such Holder does not and is not required to
deliver the applicable Prospectus or Shelf Registration Statement in connection
with such sale, transfer or other disposition, as the case may be; and provided,
further, that the provisions of this paragraph (s) shall not prevent the
occurrence of a Registration Default or otherwise limit the obligation of the
Company to pay Additional Amounts.
(t) Anything herein to contrary notwithstanding, the Company will not
be required to pay the costs and expenses of, or to participate in the marketing
or "road show" presentations of, more than one Underwritten Offering initiated
at the request of the Holders of Securities or shares of Common Stock issued or
issuable upon conversion thereof, or to effect more than one Underwritten
Offering at the request of such Holders. The Company will not be required to pay
the costs and expenses of, or to participate in the marketing or "road show"
presentations of, an Underwritten Offering unless Holders of at least the
Minimum Amount (as defined below) of Securities and/or Common Stock issued or
issuable on conversion thereof have requested that such Securities and/or shares
of Common Stock be included in such an Underwritten Offering. For purposes of
this Agreement, the "Minimum Amount" means 50% of the aggregate principal amount
of Securities originally issued under the Indenture; provided that, for purposes
of computing the Minimum Amount, Holders of Common Stock issued upon conversion
of Securities shall be deemed to be holders of the aggregate principal amount of
Securities which were converted into those shares of Common Stock. Only Holders
of Securities or shares of Common Stock issued or issuable upon conversion
thereof which are Transfer Restricted Securities shall be entitled to include
such Securities or shares of Common Stock in an Underwritten Offering and only
Transfer Restricted Securities shall be included in the computation of the
Minimum Amount. The Underwritten Offering initiated by Holders as aforesaid
shall include both Securities and Common Stock if so requested by the Holders.
Upon receipt by the Company, from Holders of at least the Minimum Amount of
Securities and/or Common Stock issued or issuable upon conversion thereof, of a
request for an Underwritten Offering, the Company will, within 10 days
thereafter, mail notice to all Holders of Securities and shares of Common Stock
issued upon conversion thereof stating that: (i) the Company has received a
request from the Holders of the requisite amount of Securities and/or Common
Stock issued or issuable on conversion thereof to effect an Underwritten
Offering on behalf of such Holders; (ii) under the terms of this Agreement, all
Holders of Securities and shares of Common Stock issued or issuable upon
conversion thereof which are Transfer Restricted Securities may include their
Securities and shares of Common Stock in such Underwritten Offering, subject to
the terms and conditions set forth in this Agreement and subject to the right of
the Managing Underwriters to reduce, in light of market conditions and other
similar factors, the aggregate principal amount of Securities and number of
shares of Common Stock included in such Underwritten Offering; (iii) all Holders
electing to include Securities or shares of Common Stock in such Underwritten
Offering must notify the Company in writing of such election (the "Election"),
and setting forth an address and facsimile number to which such written
elections may be sent and the deadline (which shall be 12:00 midnight on the
10th calendar day after such notice is mailed to Holders or, if not a Business
Day, the next succeeding Business Day (the "Deadline")) by which such elections
must be received by the Company; and (iv) setting forth such other instructions
as shall be necessary to enable Holders to include their Securities and shares
of Common Stock in such Underwritten Offering. No Holder shall be entitled to
participate in an Underwritten Offering unless such Holder notifies the Company
of such Election by the Deadline. Notwithstanding anything to the contrary
contained herein, if the Managing Underwriters for an Underwritten Offering to
be effected pursuant to this Section 3(t) advise the Holders of the Securities
and shares of the Common Stock to be included in such Underwritten Offering
that, because of aggregate principal amount of Securities and/or number of
shares of Common Stock that such Holders have requested be included in the
Underwritten Offering, the success of the offering would likely be materially
adversely affected by the inclusion of all of the Securities and shares of
Common Stock requested to be included, then the principal amount of Securities
and the number of shares of Common Stock to be offered for the accounts of
Holders shall be reduced pro rata, according to the aggregate principal amount
of Securities and number of shares of Common Stock, respectively, requested for
inclusion by each such Holder, to the extent necessary to reduce the size of the
offering to the size recommended by the Managing Underwriter. Notwithstanding
anything to the contrary contained herein, neither the Company nor any Person,
other than a Holder of Securities or shares of Common Stock issued or issuable
upon conversion thereof and only with respect to its Transfer Restricted
Securities, shall be entitled to include any securities in the Underwritten
Offering.
4. Registration Expenses. The Company shall bear all expenses incurred
in connection with the performance of its obligations under Sections 2 and 3
hereof and shall reimburse the Holders for the reasonable fees and disbursements
of one firm or counsel designated by the Majority Holders to act as counsel for
the Holders in connection with the Shelf Registration. Notwithstanding the
provisions of this Section 4, each Holder shall bear the expense of any broker's
commission, agency fee or Underwriter's discount or commission.
5. Indemnification and Contribution.
(a) (i) The Company agrees to indemnify and hold harmless each Holder
of Securities and each Holder of Common Stock issued upon conversion thereof
covered by any Shelf Registration Statement (including the Initial Purchasers),
the directors, officers, employees and agents of each such Holder and each
person who controls any such Holder within the meaning of either Section 15 of
the Act or Section 20 of the Exchange Act against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or other Federal or state law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
the Shelf Registration Statement as originally filed or in any amendment
thereof, or in any preliminary Prospectus or Prospectus, or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein 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, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the Company
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon (A) any such untrue statement
or alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any such Holder or any Initial Purchaser specifically
for inclusion therein, (B) use of a Shelf Registration Statement or the related
Prospectus during a period when a stop order has been issued in respect of such
Shelf Registration or any proceedings for that purpose have been initiated or
use of a Prospectus when use of such Prospectus has been suspended pursuant to
Section 2(d) or Section 3(s); provided, further, in each case, that Holders
received prior notice of such stop order, initiation of proceedings or
suspension, or (C) if the Holder fails to deliver a Prospectus, as then amended
or supplemented, provided that the Company shall have delivered to such Holder
such Prospectus, as then amended or supplemented. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
(ii) The Company also agrees to indemnify and to contribute to
Losses, as provided in Section 5(d), of any Underwriters of Securities or Common
Stock issued upon conversion thereof registered under a Shelf Registration
Statement, their officers and directors and each person who controls any such
Underwriter within the meaning of either Section 15 of the Act or Section 20 of
the Exchange Act on substantially the same basis as that of the indemnification
of the Initial Purchasers and the selling Holders provided in this Section 5(a)
and shall, if requested by any Holder, enter into an underwriting agreement
reflecting such agreement, as provided in Section 3(q) hereof. This indemnity
agreement will be in addition to any liability which the Company may otherwise
have.
(b) Each Holder of Securities or Common Stock issued upon conversion
thereof covered by a Shelf Registration Statement (including the Initial
Purchasers) severally and not jointly agrees to indemnify and hold harmless (i)
the Company, (ii) each of its directors, (iii) each of its officers who signs
such Shelf Registration Statement and (iv) each person who controls the Company
within the meaning of either Section 15 of the Act or Section 20 of the Exchange
Act to the same extent as the foregoing indemnity from the Company to each such
Holder, but only with reference to written information relating to such Holder
furnished to the Company by or on behalf of such Holder specifically for
inclusion in the documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability which any such Holder
may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 5
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof may be made against the indemnifying party under this
Section 5, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses; and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to assume the defense of the
action and to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel (and local counsel) if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest; (ii) the actual or potential defendants in,
or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party; (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action; or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. Notwithstanding the foregoing,
the Company shall not, in the connection with any one action or proceeding or
separate but substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm (in
addition to one separate firm of local counsel) at any time for the indemnified
parties, which firm or firms (including any local counsel) shall be designated
by Salomon Smith Barney Inc. An indemnifying party will not, without the prior
written consent of the indemnified party, which consent will not be unreasonably
withheld, settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of such indemnified party from all liability arising out
of such claim, action, suit or proceeding. The Company shall not be liable for
any losses, claims, damages or liabilities by reason of any settlement of any
action or proceeding effected without the Company's prior written consent, which
consent will not be unreasonably withheld.
(d) In the event that the indemnity provided in paragraph (a) or (b) of
this Section 5 is unavailable to or insufficient to hold harmless an indemnified
party for any reason, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall have an obligation to contribute to
the aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending same)
(collectively "Losses"), as incurred, to which such indemnified party may be
subject in such proportion as is appropriate to reflect the relative benefits
received by such indemnifying party, on the one hand, and such indemnified
party, on the other hand, from the Initial Placement and the Shelf Registration
Statement which resulted in such Losses; provided, however, that in no case
shall any Initial Purchaser (except as may be provided in any agreement among
the Initial Purchasers relating to the offering of the Securities) be required
to contribute any amount in excess of the amount by which the principal amount
of the Securities purchased by such Initial Purchaser under the Purchase
Agreement exceeds the amount of Losses which such Initial Purchaser has
otherwise been required to pay, nor shall any Underwriter be required to
contribute any amount in excess of the amount by which the total price of the
Securities and Common Stock issued upon conversion thereof purchased by such
Underwriter under the Shelf Registration Statement exceeds the amount of any
damages which such Underwriter has otherwise been required to pay. If the
allocation provided by the immediately preceding sentence is unavailable for any
reason, the indemnifying party and the indemnified party shall contribute in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of such indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal to
the total net proceeds from the Initial Placement (before deducting expenses),
benefits received by the Initial Purchasers shall be deemed to be equal to the
total purchase discounts and commissions, and benefits received by any other
Holders shall be deemed to be equal to the value of receiving Securities or the
Common Stock issuable upon conversion thereof registered under the Act. Benefits
received by any Underwriter shall be deemed to be equal to the total
underwriting discounts and commissions, as set forth on the cover page of the
Prospectus forming a part of the Shelf Registration Statement (or the applicable
Prospectus supplement) which resulted in such Losses. Relative fault shall be
determined by reference to, among other things, whether any untrue statement or
omission or alleged untrue statement or omission relates to information provided
by the indemnifying party, on the one hand, or by the indemnified party, on the
other hand. The parties agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), 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. For purposes of this Section 5, each person who
controls a Holder within the meaning of either the Act or the Exchange Act and
each director, officer, employee and agent of such Holder shall have the same
rights to contribution as such Holder, and each person who controls the Company
within the meaning of either the Act or the Exchange Act, each officer of the
Company and each director of the Company shall have the same rights to
contribution as the Company, and each person who controls an Underwriter within
the meaning of either the Act or the Exchange Act and each officer and director
of each Underwriter shall have the same rights to contribution as such
Underwriter, subject in each case to the applicable terms and conditions of this
paragraph (d).
(e) The provisions of this Section 5 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder, any
Underwriter or the Company or any of the officers, directors or controlling
persons referred to in Section 5 hereof, and will survive the sale by a Holder
of Securities or shares of Common Stock covered by a Shelf Registration
Statement.
6. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not, as of the date
hereof, entered into nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, qualified, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
Majority Holders; provided that with respect to any matter that directly or
indirectly affects the rights of the Initial Purchasers hereunder, the Company
shall obtain the written consent of each of the Initial Purchasers against which
such amendment, qualification, supplement, waiver or consent is to be effective.
Notwithstanding the foregoing (except the foregoing proviso), a waiver or
consent to departure from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders whose Securities or Common Stock
are being sold pursuant to a Shelf Registration Statement and that does not
directly or indirectly affect the rights of other Holders may be given by the
Majority Holders, determined on the basis of Securities or Common Stock issued
upon conversion thereof being sold rather than registered under such Shelf
Registration Statement.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier, or air courier guaranteeing overnight delivery:
(1) if to you, initially at the address set forth in the Purchase
Agreement;
(2) if to any other Holder, at the most current address given by
such Holder to the Company in accordance with the provisions of this Section
6(c), which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture or, in the case of
Common Stock, the address maintained by the registrar of the Common Stock, with
a copy in like manner to Salomon Smith Barney Inc.; and
(3) if to the Company, initially at its address set forth in the
Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given when received, if delivered by hand or air courier, and when sent, if sent
by first-class mail or telecopier.
The Initial Purchasers or the Company by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
(d) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including, without the need for an express assignment or any consent by the
Company thereto, subsequent Holders. The Company hereby agrees to extend the
benefits of this Agreement to any Holder and any such Holder may enforce the
provisions of this Agreement as if an original party hereto. In the event that
any other person shall succeed to the Company under the Indenture as provided in
Article VII thereof, then such successor shall enter into an agreement, in form
and substance reasonably satisfactory to the Initial Purchasers, whereby such
successor shall assume all of the Company's obligations under this Agreement.
(e) Counterparts. This agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN SAID STATE, WITHOUT REGARD, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, TO THE CONFLICTS OF LAW RULES THEREOF.
(h) Severability. In the event that any one of more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.
(i) Securities Held by the Company, etc. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Securities
or the Common Stock issuable upon conversion thereof is required hereunder,
Securities or the Common Stock issued upon conversion thereof held by the
Company or its Affiliates (other than subsequent Holders of Securities or the
Common Stock issued upon conversion thereof if such subsequent Holders are
deemed to be Affiliates solely by reason of their holdings of such Securities)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
YOUNG & RUBICAM INC.
/s/ Jay M. Kushner
-------------------------------------------
Name: Jay M. Kushner
Title: Senior Vice President Tax & Treasury
The foregoing Agreement is hereby
confirmed and accepted as of the date first
above written.
SALOMON SMITH BARNEY INC.
BEAR, STEARNS, & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
THOMAS WEISEL PARTNERS LLC
BY: SALOMON SMITH BARNEY INC.
By /s/ Anthony S. Graham
------------------------------
Name: Anthony S. Graham
Title: Director
<PAGE>
EXHIBIT A
Notice of Registration Statement
and
Selling Securityholder Questionnaire
Reference is hereby made to the Registration Agreement (the
"Registration Agreement") between Young & Rubicam Inc., a Delaware corporation
(the "Company"), and the Initial Purchasers named therein. Pursuant to the
Registration Agreement, the Company has filed or will file with the United
States Securities and Exchange Commission (the "Commission") a registration
statement on Form S-3 (the "Shelf Registration Statement") for the registration
and resale under Rule 415 of the Securities Act of 1933, as amended (the
"Securities Act"), of the Company's __% Convertible Subordinated Notes due 2005
(the "Securities"), and the shares of the Company's common stock, par value $.01
per share (the "Common Stock"), issuable upon conversion thereof. A copy of the
Registration Agreement is attached hereto. All capitalized terms not otherwise
defined herein shall have the meanings ascribed thereto in the Registration
Agreement.
Each holder and beneficial owner of Transfer Restricted Securities is
entitled to have its Transfer Restricted Securities included in the Shelf
Registration Statement. In order to have Transfer Restricted Securities included
in the Shelf Registration Statement, this Notice of Registration Statement and
Selling Securityholder Questionnaire ("Notice and Questionnaire") must be
completed, executed and delivered to the Company's counsel at the following
address, for receipt ON OR BEFORE [DEADLINE FOR RESPONSE]: [NAME AND ADDRESS OF
COUNSEL]. Holders or beneficial owners of Transfer Restricted Securities who do
not complete, execute and return this Notice and Questionnaire by such date (i)
will not be named as selling securityholders in the Shelf Registration Statement
and (ii) may not use the Prospectus forming a part thereof for resales of
Transfer Restricted Securities, subject, however, to the Company's obligations
under Section 2(b)(2) of the Registration Agreement.
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.
Accordingly, holders and beneficial owners of Transfer Restricted Securities are
advised to consult their own securities law counsel regarding the consequences
of being named or not being named as a selling securityholder in the Shelf
Registration Statement and related Prospectus.
ELECTION
The undersigned (the "Selling Securityholder") hereby elects to include
in the Shelf Registration Statement the Transfer Restricted Securities held or
beneficially owned by it and listed below in Item (3)(b). The undersigned, by
signing and returning this Notice and Questionnaire, agrees to be bound with
respect to such Transfer Restricted Securities by the terms and conditions of
this Notice and Questionnaire and the Registration Agreement, including, without
limitation, the indemnification set forth in Section 5 of the Registration
Agreement, as if the undersigned Selling Securityholder were an original party
thereto.
QUESTIONNAIRE
(1) (a) Full legal name of Selling Securityholder:
(b) Full legal name of registered holder (if not the same as in (a)
above) of Transfer Restricted Securities listed in (3) below (if the Transfer
Restricted Securities are held through a broker-dealer or other third party and,
as a result, you do not know the legal name of the registered holder, please
complete Item (1)(c) below):
(c) Full legal name of broker-dealer or other third party through which
Transfer Restricted Securities listed in (3) below are held:
(2) Address for notices to Selling Securityholder:
Telephone:
Fax:
Contact Person:
(3) Beneficial ownership of Transfer Restricted Securities.
Except as set forth below in this Item (3), the undersigned does not
beneficially own any Securities or shares of Common Stock which constitute
Transfer Restricted Securities.
(a) Principal amount of Securities constituting Transfer Restricted
Securities beneficially owned:
Number of shares of Common Stock, if any, constituting Transfer
Restricted Securities (include only shares of Common Stock which have actually
been issued, not shares issuable upon future conversion of Securities):
The undersigned also may be deemed to beneficially own such number of
shares of Common Stock as may be issued from time to time upon conversion of the
Securities listed in Item (3)(a) above.
(b) Principal amount of Securities and number of shares of outstanding
Common Stock constituting Transfer Restricted Securities which the undersigned
wishes to be included in the Shelf Registration Statement:
Unless otherwise indicated in the space provided below, all Securities,
all shares of Common Stock listed in response to Item (3)(a) above, and all
shares of Common Stock issuable upon conversion of the Securities listed in
response to Item (3)(b)above, will be included in the Shelf Registration
Statement. If the undersigned does not wish all such Securities or shares of
Common Stock to be so included, please indicate below the number of such shares
to be included:
(4) Beneficial ownership of other securities of the Company:
Except as set forth below in this item (4), the undersigned Selling
Securityholder is not the beneficial or registered owner of any shares of Common
Stock or any other securities of the Company, other than Securities and shares
of Common Stock listed above in Item (3).
State any exceptions here:
(5) Relationships with the Company:
Except as set forth below, neither the Selling Securityholder nor any
of its officers, directors or 5% or greater stockholders has held any position
or office or has had any other material relationship with the Company (or its
predecessors or affiliates)during the past three years.
State any exceptions here:
(6) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder
intends to distribute the Transfer Restricted Securities listed above in Item
(3) only as follows (if at all): Such Transfer Restricted Securities may be sold
from time to time by the undersigned Selling Securityholder (i) to or through
underwriters, brokers or dealers; (ii) directly to one or more other purchasers;
(iii) through agents on a best-efforts basis or otherwise; or (iv) through a
combination of any such methods of sale. Such Transfer Restricted Securities may
be sold from time to time in one or more transactions at a fixed price or
prices, which may be changed, at market prices prevailing at the time of sale,
at prices related to such prevailing market prices, at varying prices determined
at the time of sale, or at negotiated prices. Such sales may be effected in
transactions (which may involve crosses or block transactions) (i) on any
national securities exchange or quotation service on which the Transfer
Restricted Securities may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such exchanges
or services or in the over-the-counter market, or (iv) through the writing of
options. In connection with sales of the Transfer Restricted Securities or
otherwise, the Selling Securityholder may enter into hedging transactions with
brokers-dealers or others, which may in turn engage in short sales of the
Transfer Restricted Securities in the course of hedging the positions they
assume. The Selling Securityholder may also sell Transfer Restricted Securities
short and deliver Transfer Restricted Securities to close out such short
positions, or loan or pledge Transfer Restricted Securities to brokers-dealers
or others that in turn may sell such securities. The Selling Securityholder may
pledge or grant a security interest in some or all of the Transfer Restricted
Securities owned by it and, if it defaults in the performance of its secured
obligations, the pledgees or secured parties may offer and sell the Transfer
Restricted Securities from time to time pursuant to the Prospectus. The Selling
Securityholder also may transfer and donate shares in other circumstances in
which case the transferees, donees, pledgees or other successors in interest
will be the selling stockholders for purposes of the Prospectus. The Selling
Securityholder may sell short the Common Stock and may deliver the Prospectus in
connection with such short sales and use the shares covered by the Prospectus to
cover such short sales.
State any exceptions here:
By signing below, the Selling Securityholder acknowledges that it
understands its obligation to comply, and agrees that it will comply, with the
provisions of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, particularly Regulation M and the prospectus delivery
requirements under the Securities Act.
In the event that the Selling Securityholder transfers all or any
portion of the Transfer Restricted Securities listed in Item (3) above after the
date on which such information is provided to the Company (other than a
transaction as a result of which such securities shall no longer be Transfer
Restricted Securities), the Selling Securityholder agrees to notify the
transferees at the time of the transfer of its rights and obligations under this
Notice and Questionnaire and the Registration Agreement.
By signing below, the Selling Securityholder consents to the disclosure
of the information contained herein in its answers to Items (1) through (6)
above and the inclusion of such information in the Shelf Registration Statement
and related Prospectus. The Selling Securityholder understands that such
information will be relied upon by the Company in connection with the
preparation of the Shelf Registration Statement and related Prospectus.
The Selling Securityholder agrees to promptly notify the Company of any
inaccuracies or changes in the information provided herein which may occur
subsequent to the date hereof at any time while the Shelf Registration Statement
remains in effect. All notices hereunder and pursuant to the Registration
Agreement shall be made in writing, by hand-delivery, first-class mail, or air
courier guaranteeing overnight delivery as follows:
Young & Rubicam Inc.285 Madison Ave.New York, New York 10017
Attention: Chief Financial Officer
Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company, the terms of this Notice and
Questionnaire, and the representations and warranties contained herein, shall be
binding on, shall inure to the benefit of and shall be enforceable by the
respective successors, heirs, personal representatives, and assigns of the
Company and the Selling Securityholder (with respect to the Transfer Restricted
Securities beneficially owned by such Selling Securityholder and listed in Item
(3)(b) above). This Agreement shall be governed by and construed in accordance
with the internal laws of the State of New York.
IN WITNESS WHEREOF, the undersigned, by authority duly given, has
caused this Notice and Questionnaire to be executed and delivered either in
person or by its duly authorized agent.
Dated:
Selling Securityholder(Print/type
full legal name of beneficial owner
of Transfer Restricted Securities).
By:
-------------------------------
Name:
Title:
<PAGE>
EXHIBIT B
FORM OF LETTER TO BE PROVIDED BY ISSUER TO
------------------
THE DEPOSITORY TRUST COMPANY
7 Hanover Square, 23rd Floor
New York, NY 10004
Re: __% Convertible Subordinated Notes due 2005 (the "Securities") of
Young & Rubicam Inc.
Ladies and Gentlemen:
Please be advised that the Securities and Exchange Commission has
declared effective a Registration Statement on Form S-3 under the Securities Act
of 1933, as amended, with regard to all of the Securities referenced above.
Accordingly, there is no longer any restriction as to whom such Securities may
be sold and any restrictions on the CUSIP designation are no longer appropriate
and may be removed. I understand that upon receipt of this letter, DTC will
remove any stop or restriction on its system with respect to this issue.
As always, please do not hesitate to call if we can of further
assistance.
Very truly yours,
By:
----------------------
Authorized Officer
Exhibit 5
April 17, 2000
Young & Rubicam Inc.
285 Madison Avenue
New York, New York 10017
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
I am General Counsel to Young & Rubicam Inc., a Delaware corporation
(the "Company"). In such capacity, I have acted as counsel to the Company in
connection with a Registration Statement on Form S-3 (the "Registration
Statement") being filed by the Company contemporaneously herewith with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
covering (i) $287,500,000 aggregate principal amount of the Company's 3%
Convertible Subordinated Notes due 2005 (the "Notes") and (ii) the shares of
common stock, par value $.01 per share, of the Company issuable upon conversion
of such Notes (the "Shares"). The Notes and the Shares registered by the
Registration Statement are to be offered for the respective accounts of the
holders thereof.
In that connection, I have examined:
(a) the amended and restated Certificate of Incorporation of the
Company;
(b) the amended and restated By-Laws of the Company;
(c) an executed copy of the Indenture dated as of January 20, 2000
(the "Indenture") between the Company and The Bank of New
York, as trustee;
(d) the Registration Agreement dated as of January 20, 2000
between the Company and the Initial Purchasers named therein;
(e) the Registration Statement; and
(f) corporate proceedings relating to the authorization of the
Notes and the Shares, and such other instruments and documents
as I deemed relevant under the circumstances.
In addition, I or members of my staff have reviewed the originals or copies
certified or otherwise identified to my 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 I have made such investigations of law, as I have deemed
appropriate as a basis for the opinions expressed below.
In arriving at the opinions expressed below, I have assumed the
authenticity of all documents submitted to me as originals and the conformity to
the originals of all documents submitted as copies. In addition, I have assumed
and have not verified (i) the accuracy as to factual matters of each document I
have reviewed (including, without limitation, the accuracy of the
representations and warranties of the Company in the Purchase Agreement), (ii)
that the Notes conform to the specimen thereof that I have reviewed and (iii)
that the certificates representing the Shares conform to the specimen thereof
that I have reviewed.
Based on the foregoing, and subject to the further assumptions and
qualifications set forth below, it is my opinion that:
<PAGE>
1. The execution and delivery of the Notes have been duly authorized by
all necessary corporate action of the Company, and the Notes have been duly
executed and delivered by the Company and are the legal, valid and binding
obligations of the Company, entitled to the benefits of the Indenture; and
2. The Shares into which the Notes are convertible at the initial
conversion price have been duly authorized by all necessary corporate action of
the Company and reserved for issuance upon conversion and, upon issuance thereof
on conversion of the Notes in accordance with the Indenture and the terms of the
Notes at conversion prices at or in excess of the par value of such Shares, will
be validly issued, fully paid and nonassessable.
Insofar as the foregoing opinions relate to the validity,
binding effect or enforceability of any agreement or obligation of the Company,
(a) I have assumed that each other party to such agreement or obligation has
satisfied those legal requirements that are applicable to it to the extent
necessary to make such agreement or obligation enforceable against it, and (b)
such opinions are subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and to general principles of equity.
The foregoing opinions are limited to the federal law of the
United States of America, the law of the State of New York and the General
Corporation Law of the State of Delaware.
2
<PAGE>
I hereby consent to the use of my opinion as herein set forth as an
exhibit to the Registration Statement and to the use of my name under the
caption "Legal Matters" in the prospectus forming part of the Registration
Statement. In giving such consent, I do not thereby admit that I am an "expert"
within the meaning of the Act or the rules and regulations of the Securities and
Exchange Commission issued thereunder with respect to any part of the
Registration Statement, including this exhibit.
Very truly yours,
/s/ Stephanie W. Abramson
------------------------------
Stephanie W. Abramson
Executive Vice President,
General Counsel and Secretary
EXHIBIT 12
YOUNG & RUBICAM INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
The following table shows the ratios of earnings to fixed charges of Young &
Rubicam Inc. for the periods indicated.
<TABLE>
Year Ended December 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings:
Income (loss) before income taxes $278,220 $(86,997) $36,304 $(250,617) $7,905
Dividends from unconsolidated companies 3,714 3,467 2,728 2,691 2,101
Interest expense 24,069 26,001 42,879 28,584 27,441
Interest component of rent expenses 28,367 25,167 24,800 20,967 20,790
------- ------ ------- ------- ------
Total earnings (deficiency) 334,370 (32,362) 106,711 (198,375) 58,237
Fixed charges:
Interest expense 24,069 26,001 42,879 28,584 27,441
Interest component of rent expenses 28,367 25,167 24,800 20,967 20,790
Total fixed charges 52,436 51,168 67,679 49,551 48,231
------- ------ ------- ------- ------
Ratio of earnings to fixed charges
(deficiency in the coverage of fixed charges by
earnings before fixed charges) (a) (b) (c) 6.38x $(83,530) 1.58x $(247,926) 1.21x
==== ====== ==== ======== ====
</TABLE>
(a) The ratio of earnings to fixed charges has been computed by
dividing total earnings by total fixed charges. Coverage deficiencies have been
computed by subtracting fixed charges from total earnings. Earnings were
calculated by adding (i) income (loss) before income taxes, (ii) dividends from
unconsolidated companies, and (iii) fixed charges. Fixed charges consist of
interest and one-third of rent expense as representative of the interest portion
of rentals.
(b) As a result of the loss before income taxes incurred for the years
ended 1998 and 1996, the ratio coverage was less than 1:1.
(c) Excluding the effects of the income recorded in connection with the
1999 net pre-tax gain on the sale of certain assets of our Brand Dialogue
operations in exchange for an ownership interest in Luminant Worldwide
Corporation and additional consideration received in the fourth quarter of 1999
as a result of achieving revenue and operating profit performance targets of the
Brand Dialogue contributed assets totaling $85.0 million, the ratio of earnings
to fixed charges would have been 4.76x for the year ended December 31, 1999.
Excluding the effects of the $234.4 million of charges recorded in connection
with the consummation of our initial public offering of common stock in May
1998, the ratio of earnings to fixed charges would have been 3.95x for the year
ended December 31, 1998. Excluding the effects of the $315.4 million of charges
recorded in connection with our recapitalization in December 1996, the ratio of
earnings to fixed charges for the year ended December 31,1996 would have been
2.36x.
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 11, 2000
relating to the consolidated financial statements and financial statement
schedule, which appears in Young & Rubicam Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1999. We also consent to the reference to us under
the heading "Experts" in this Registration Statement.
PricewaterhouseCoopers LLP
New York, New York
April 17, 2000
Exhibit 25
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
===========================
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
===========================
Young & Rubicam Inc.
(Exact name of obligor as specified in its charter)
Delaware 13-1493710
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
285 Madison Avenue
New York, New York 10017
(Address of principal executive offices) (Zip code)
===========================
3% Convertible Subordinated Notes due 2005
(Title of the indenture securities)
================================================================================
<PAGE>
1. General information. Furnish the following information as to the
Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State 2 Rector Street, New York, N.Y.
of New York 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to
Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State
of New York, has duly caused this statement of eligibility to be signed
on its behalf by the undersigned, thereunto duly authorized, all in The
City of New York, and State of New York, on the 10th day of April,
2000.
THE BANK OF NEW YORK
By: /s/MARY BETH A. LEWICKI
------------------------------------
Name: MARY BETH A. LEWICKI
Title: VICE PRESIDENT
3
