Registration No. 333-34948
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
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
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If 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.|_|
______________
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.
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X The information in this preliminary prospectus is not complete X
X and may be changed. These securities may not be sold until the X
X registration statement filed with the Securities and Exchange X
X Commission is effective. This preliminary prospectus is not an X
X offer to sell nor does it seek an offer to buy these securities X
X in any jurisdiction where the offer or sale is not permitted. X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
SUBJECT TO COMPLETION, DATED JULY 10, 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
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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 July 7, 2000, the last sale price of the common stock as
reported on the New York Stock Exchange Composite Tape was $57.94 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 principal, 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 8.
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.
July , 2000
<PAGE>
TABLE OF CONTENTS
Page
----
Incorporation of Documents by Reference...........................2
Cautionary Statement Regarding Forward-Looking Statements.........3
Prospectus Summary................................................4
Risk Factors......................................................8
Recent Developments..............................................14
Use of Proceeds..................................................14
Price Range of Common Stock and Dividend Policy..................14
Ratio of Earnings to Fixed Charges (Coverage Deficiency).........15
Description of Notes.............................................16
Certain United States Federal Income Tax Considerations..........34
Certain United Kingdom Income Tax Considerations ................38
Selling Securityholders..........................................39
Plan of Distribution.............................................40
Legal Matters....................................................41
Experts..........................................................42
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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 Quarterly Report on Form 10-Q for the quarterly period ended March
31, 2000;
o Our Current Report on Form 8-K filed on January 7, 2000;
o Our Current Report on Form 8-K filed on May 16, 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.
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.
<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.
Recent Developments
On May 12, 2000, Y&R and WPP Group plc ("WPP") announced that they had
entered into a definitive merger agreement dated as of May 11, 2000 providing
for a business combination of Y&R and WPP. The transaction is structured as a
merger of Y&R with a subsidiary of WPP and is subject to the approval of each
company's stockholders and other customary conditions. Subject to the terms of
the definitive merger agreement, by virtue of the merger, each share of common
stock, par value $.01 per share, of Y&R, together with any associated preferred
share purchase rights, will be converted into the right to receive .835 American
Depositary Shares of WPP. Each American Depositary Share of WPP represents five
ordinary shares, of nominal value 10p each, of WPP, and Y&R stockholders will be
entitled to elect to receive WPP ordinary shares in lieu of the American
Depositary Shares. Pursuant to the indenture governing the notes, upon
consummation of the merger, the notes will not be convertible into shares of Y&R
but will be convertible at the conversion price into .835 of an American
Depositary Share of WPP for each share of Y&R common stock into which such notes
would be convertible if the merger were not to occur. No designated event offer,
as described in "Description of Notes--Repurchase at the Option of Holders,"
will be made to the holders of the notes in connection with the merger. There
can be no assurance, however, whether or when the merger will occur.
Subject to completion of the merger, WPP intends, with the cooperation
of Y&R, to solicit the consent of the holders of the notes to amend the
indenture relating to those notes to provide that Y&R's obligation under the
indenture to file with the SEC and distribute to noteholders annual and
quarterly financial information may be satisfied by distributing to noteholders
the same financial information WPP distributes to its shareholders. If the
requisite consent of the noteholders is obtained and the merger is completed,
Y&R has been informed by WPP that WPP will fully and unconditionally guarantee
Y&R's obligations under those notes and Y&R will discontinue filing periodic
reports with the SEC under the Exchange Act.
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 8.
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
Event............................. the right, 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
March 31, 2000, we had approximately
$380.2 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."
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."
The shares of common stock issuable
upon conversion of the notes have been
authorized for listing on the
NYSE upon official notice of issuance.
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.
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.
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 June 21, 2000, we had 73,146,658 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. As of May 15, 2000, the last date for which
this information is available, an aggregate of approximately 9,700,000 shares of
common stock received pursuant to equity grants made by Y&R, and as of June 21,
2000, 7,492,741 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.
Management investors, whose interests may differ from those of other
stockholders, hold significant ownership interests in Y&R and may be able to
exercise a significant degree of control over Y&R.
A substantial percentage of our common stock is owned by management
investors. At May 15, 2000, the date of termination of the Y&R management voting
trust, the management investors held voting power over 21.5% of the
outstanding shares of common stock, assuming the exercise of all vested options
held by them. As a result, assuming their continued ownership of those shares of
Y&R common stock, Y&R's management acting together will be able to exercise a
significant degree of control over matters requiring the vote of stockholders,
including the election of directors, and 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.
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.
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;
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 21.5% of the outstanding
shares of common stock by management investors at May 15, 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 March 31, 2000, we had approximately $380.2 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 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.
RECENT DEVELOPMENTS
On May 12, 2000, Y&R and WPP Group plc ("WPP") announced that they had
entered into a definitive merger agreement dated as of May 11, 2000 providing
for a business combination of Y&R and WPP. The transaction is structured as a
merger of Y&R with a subsidiary of WPP and is subject to the approval of each
company's stockholders and other customary conditions. Subject to the terms of
the definitive merger agreement, by virtue of the merger, each share of common
stock, par value $.01 per share, of Y&R, together with any associated preferred
share purchase rights, will be converted into the right to receive .835 American
Depositary Shares of WPP. Each American Depositary Share of WPP represents five
ordinary shares, of nominal value 10p each, of WPP, and Y&R stockholders will be
entitled to elect to receive WPP ordinary shares in lieu of the American
Depositary Shares. Pursuant to the indenture governing the notes, upon
consummation of the merger, the notes will not be convertible into shares of Y&R
but will be convertible at the conversion price into .835 of an American
Depositary Share of WPP for each share of Y&R common stock into which such notes
would be convertible if the merger were not to occur. No designated event offer,
as described in "Description of Notes--Repurchase at the Option of Holders,"
will be made to the holders of the notes in connection with the merger.
Subject to completion of the merger, WPP intends, with the cooperation
of Y&R, to solicit the consent of the holders of the notes to amend the
indenture relating to those notes to provide that Y&R's obligation under the
indenture to file with the SEC and distribute to noteholders annual and
quarterly financial information may be satisfied by distributing to noteholders
the same financial information WPP distributes to its shareholders. If the
requisite consent of the noteholders is obtained and the merger is completed,
Y&R has been informed by WPP that WPP will fully and unconditionally guarantee
Y&R's obligations under those notes and Y&R will discontinue filing periodic
reports with the SEC under the Exchange Act.
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.................................. $37.13 $60.69
Third Quarter (through July 7, 2000)............ $57.06 $59.25
On July 7, 2000, the last sale price of our common stock as reported on
the New York Stock Exchange Composite Tape was $57.94. As of June 28, 2000,
there were approximately 1,006 holders of record of shares of common stock.
On June 15, 1999, September 15, 1999, December 15, 1999, March 15, 2000
and June 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, March 1, 2000 and June 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.
RATIO OF EARNINGS TO FIXED CHARGES (COVERAGE DEFICIENCY)
<TABLE>
Quarter
Ended
March 31, Year Ended December 31,
--------- --------------------------------------------------------
2000 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges 4.94x 6.38x $(83,530) 1.58x $(247,926) 1.21x
(deficiency in the coverage of fixed
charges by earnings before fixed
charges, in thousands)
</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 the first quarter of
2000, in connection with (i) the gain on the sale of certain assets and rights
known as Y&R Teamspace to eMotion Inc., (ii) gains on the sale of certain
marketable securities and (iii) additional consideration received in the first
quarter of 2000 as a result of achieving revenue and operating profit
performance targets of the Brand Dialogue assets contributed to Luminant
Worldwide Corporation in 1999, totaling $10.8 million, the ratio of earnings to
fixed charges would have been 4.13x for the quarter ended March 31, 2000.
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.
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. 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 designated
event 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. No
designated event offer will be made to the holders of the notes in connection
with the proposed merger of WPP and Y&R.
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;
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 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, 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.
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.
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.
Pursuant to the indenture, upon consummation of the merger, the notes
will not be convertible into shares of Y&R but will be convertible at the
conversion price into .835 of an American Depositary Share of WPP for each share
of Y&R common stock into which such notes would be convertible if the merger
were not to occur.
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 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
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:
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 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
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
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
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.
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.
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.
"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.
"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.
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
or 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, or persons that have a "functional currency" other than
the U.S. dollar.
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 U.S.
Holder's adjusted tax basis in the notes. A U.S. Holder's tax basis in the notes
generally will equal the cost of the notes to the U.S. Holder, increased by the
amount of any market discount (as discussed below) previously taken into income
by the U.S. Holder or decreased by any bond premium amortized by the U.S. Holder
with respect to the notes and any principal payments received by the U.S.
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 U.S. Holder 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 U.S. Holder's tax basis in the shares
of common stock received upon conversion of the notes will equal the U.S.
Holder's aggregate basis in the notes exchanged therefor (less any portion
thereof allocable to a fractional share). The holding period of the shares of
common stock received by the U.S. Holder upon conversion of notes generally
will include the period during which the U.S. 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.
In the event the proposed merger between WPP and Y&R, as discussed
above under "Recent Developments," is consummated, the notes will no longer be
convertible into Y&R common stock but instead will be exchangeable for WPP
Americn Depositary Shares ("ADSs"). A U.S. Holder generally will be subject to
U.S. federal income tax on the exchange of notes into WPP ADSs as discussed
above under "--Sale, Exchange, Redemption or Retirement of Notes."
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 U.S. 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 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). U.S. 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 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 U.S. 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 U.S. 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 U.S.
Persons have the authority to control all of the trust's substantial decisions.
Sale, Exchange, Retirement 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, retirement or redemption of
notes or 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.
Conversion or Exchange 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 Y&R 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 as
discussed above under "--Sale, Exchange, Retirement or Redemption of Notes or
Shares of Common Stock."
In the event the proposed merger between WPP and Y&R, as discussed
above under "Recent Developments," is consummated, the notes will no longer be
convertible into common stock but instead will be exchangeable for WPP ADSs. A
Non-U.S. Holder generally will not be subject to U.S. federal income tax on the
exchange of notes into WPP ADSs as discussed above under "--Sale, Exchange,
Retirement or Redemption of Notes or Shares 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 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 holder provides its 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 holder's U.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 Y&R 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 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 U.S. 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.
CERTAIN UNITED KINGDOM INCOME TAX CONSIDERATIONS
In the event the proposed merger between WPP and Y&R, as discussed
above under "Recent Developments," is consummated, holders who exchange notes
for WPP ADSs may be subject to U.K. income, withholding, or other taxes on
dividends received on, gain or loss on sale or other disposition of, or other
tax consequences as a result of the ownership of such WPP ADSs under U.K. law.
Holders are urged to consult their own tax advisors regarding the U.K. tax
consequences of acquiring, holding and disposing of the notes, common stock, or
WPP ADSs, or converting or exchanging the notes, and the effect that their
particular circumstances may have on such tax consequences.
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, amount of notes, if any,
and number of shares, if any, beneficially owned by the selling securityholder
intending to sell such notes and/or common stock and the amount 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.
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 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.
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.
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..................................... 10,000
Total.......................................................... $168,377.25
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 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, 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.
(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
provided 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 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).
24.1 Power of Attorney (included on signature pages).*
24.2 Power of Attorney.
25 Statement regarding Eligibility of Trustee on Form T-1.*
-------------------
* Previously filed
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
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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York on July 10, 2000.
YOUNG & RUBICAM INC.
By: /s/ Stephanie W. Abramson
-----------------------------------
Name: Stephanie W. Abramson
Title: Executive Vice President and
General Counsel
<PAGE>
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 Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
Signature Title Date
--------- ----- ----
<S> <C> <C>
*
--------------------------------- Chairman and Chief Executive Officer of Y&R July 10, 2000
Thomas D. Bell, Jr. (principal executive officer)
*
--------------------------------- Chairman and Chief Executive Officer of Y&R July 10, 2000
Edward H. Vick Advertising and Director
*
--------------------------------- Vice Chairman, President, Chief Operating July 10, 2000
Michael J. Dolan Officer and Chief Financial Officer of Y&R
and Director
(principal financial officer)
*
--------------------------------- Senior Vice President, Finance July 10, 2000
Jacques Tortoroli (principal accounting officer)
*
--------------------------------- Director July 10, 2000
Richard S. Bodman
*
--------------------------------- Director July 10, 2000
F. Warren Hellman
*
--------------------------------- Director July 10, 2000
Michael H. Jordan
*
--------------------------------- Director July 10, 2000
Sir Christopher Lewinton
*
--------------------------------- Director July 10, 2000
John F. McGillicuddy
*
--------------------------------- Director July 10, 2000
Dr. Judith Rodin
*
--------------------------------- Director July 10, 2000
Alan D. Schwartz
* By: /s/ Stephanie W. Abramson
--------------------------------
Stephanie W. Abramson
Attorney-in-Fact
</TABLE>
<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).
24.1 Power of Attorney (included on signature pages).*
24.2 Power of Attorney.
25 Statement regarding Eligibility of Trustee on Form T-1.*
-------------------------
* Previously filed
