<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 29, 2000
REGISTRATION NOS. 333-43650 AND 333-43640
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
<TABLE>
<S> <C>
AMENDMENT NO. 1 AMENDMENT NO. 1
TO TO
FORM F-4 FORM S-4
REGISTRATION STATEMENT REGISTRATION STATEMENT
UNDER UNDER
THE SECURITIES ACT OF 1933 THE SECURITIES ACT OF 1933
------------------------ ------------------------
WPP GROUP PLC YOUNG & RUBICAM INC.
(Exact name of Registrant as specified in its (Exact name of Registrant as specified in its
charter) charter)
ENGLAND AND WALES DELAWARE
(State or other jurisdiction of incorporation or (State or other jurisdiction of incorporation or
organization) organization)
NONE 13-1493710
(I.R.S. Employer Identification Number) (I.R.S. Employer Identification Number)
7311 7311
(Primary Standard Industrial Classification Code (Primary Standard Industrial Classification Code
Number) Number)
27 FARM STREET 285 MADISON AVENUE
LONDON W1X 6RD NEW YORK, NEW YORK 10017
ENGLAND (212) 210-3000
(011 44) 20 7408 2204
(Address including zip code and telephone number (Address including zip code and telephone number
of Registrant's principal executive offices) of Registrant's principal executive offices)
CT CORPORATION STEPHANIE W. ABRAMSON, ESQ.
1633 BROADWAY EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
NEW YORK, NEW YORK 10019 YOUNG & RUBICAM INC.
(212) 315-7920 285 MADISON AVENUE
NEW YORK, NY 10017
(212) 210-3000
(Name, address and telephone number of agent for (Name, address and telephone number of agent for
service) service)
</TABLE>
------------------------------
COPIES TO:
<TABLE>
<S> <C> <C> <C>
Paul W. G. Richardson Arthur Fleischer, Jr., Philip S. Reiss, Esq. Patricia A. Vlahakis,
Group Finance Director Esq. Curt C. Myers, Esq. Esq.
WPP Group plc Kenneth R. Blackman, Esq. Carol B. Weinstein, Esq. Wachtell, Lipton, Rosen &
27 Farm Street Stuart Z. Katz, Esq. Davis & Gilbert LLP Katz
London W1X 6RD Fried, Frank, Harris, 1740 Broadway 51 West 52nd Street
England Shriver & Jacobson New York, NY 10019 New York, NY 10019
(011 44) 20 7408 2204 One New York Plaza (212) 468-4800 (212) 403-1000
New York, NY 10004
(212) 859-8000
</TABLE>
------------------------
EACH REGISTRANT HEREBY AMENDS ITS 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 THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
CONSENT SOLICITATION AND PROSPECTUS
SOLICITATION OF CONSENTS TO PROPOSED AMENDMENTS
OF THE INDENTURE (AND RELATED REGISTRATION AGREEMENT) GOVERNING THE
3% CONVERTIBLE SUBORDINATED NOTES DUE 2005
OF
YOUNG & RUBICAM INC.
(CUSIP NOS. 987425AA3 AND 987425AB1)
------------------------
PROSPECTUS
FOR
$287,500,000 AGGREGATE PRINCIPAL AMOUNT OF
3% CONVERTIBLE SUBORDINATED NOTES DUE 2005
OF
YOUNG & RUBICAM INC.
FULLY AND UNCONDITIONALLY GUARANTEED
BY
WPP GROUP PLC
AND
AMERICAN DEPOSITARY SHARES REPRESENTING FIVE ORDINARY SHARES OF
WPP GROUP PLC
ISSUABLE UPON CONVERSION OF THE NOTES
------------------
As you may be aware, Young & Rubicam Inc. and WPP Group plc recently entered
into a merger agreement. If the proposed merger is completed, Y&R will become a
wholly owned indirect subsidiary of WPP and, in accordance with their terms,
your notes, which are currently convertible into Y&R common stock, will become
convertible into American depositary shares of WPP, at a conversion price of
$87.856 per WPP ADS (equal to a conversion rate of 11.382 WPP ADSs per $1,000
principal amount of the notes), subject to adjustment under various
circumstances. Each WPP ADS represents five ordinary shares of WPP.
In connection with the proposed merger, Y&R is soliciting your consent to
proposed amendments to the indenture and the related registration agreement
which, if adopted, would, following completion of the merger:
- permit WPP to satisfy Y&R's obligation under the indenture to prepare and
furnish certain financial information by (1) filing with the SEC all
periodic reports WPP is required to file under the Securities Exchange Act
of 1934 and (2) furnishing to you and the indenture trustee all financial
information WPP furnishes to holders of its ADSs; and
- release Y&R from its obligation under the registration agreement to
maintain a shelf registration statement for the resale of the notes and
the shares issuable upon conversion of the notes.
If we adopt the proposed amendments, following the completion of the merger:
- WPP will irrevocably, fully and unconditionally guarantee, to the fullest
extent permitted by law, Y&R's payment obligations under your notes; and
- we will register the guaranteed notes and the WPP ADSs issuable upon
conversion of those notes under the Securities Act of 1933, as amended,
and, as a result, unless you are an affiliate of WPP or Y&R, those notes
and ADSs will not be subject to any restrictions on resale that may be
applicable to your existing notes and the Y&R common stock issuable upon
conversion of your existing notes.
The consent solicitation period will expire at 5:00 p.m., New York City
time, on September 29, 2000, unless we extend it.
Like your existing notes, the guaranteed notes will not be listed on any
securities exchange or on any automated dealer quotation system. The WPP ADSs
are quoted on the Nasdaq National Market under the symbol "WPPGY." The WPP
ordinary shares trade on the London Stock Exchange under the symbol "WPP."
The accompanying consent solicitation and prospectus explains the proposed
amendments and the procedures for providing your consent. Please read these
materials carefully.
YOU SHOULD ALSO CAREFULLY CONSIDER THE RISK FACTORS DESCRIBED BEGINNING ON
PAGE 17.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES DESCRIBED IN THIS
CONSENT SOLICITATION AND PROSPECTUS OR DETERMINED IF THIS CONSENT SOLICITATION
AND PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THIS CONSENT SOLICITATION AND PROSPECTUS DOES NOT CONSTITUTE
AN OFFER OF SECURITIES, AND NO SOLICITATION OF CONSENTS IS BEING MADE, IN ANY
JURISDICTION WHERE AN OFFER OR SOLICITATION WOULD BE ILLEGAL.
This consent solicitation and prospectus is dated August 29, 2000 and was
first mailed to noteholders on
August 30, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
SUMMARY..................................................... 1
RISK FACTORS................................................ 17
The performance of the merged company will be affected by
its ability to retain key personnel..................... 17
We may lose existing clients as a result of the merger.... 17
We may not realize the cost savings and other benefits we
expect from the merger.................................. 18
The market price of the WPP ADSs and ordinary shares may
be subject to downward pressure for a period of time as
a result of sales of Y&R common stock and WPP shares by
Y&R stockholders........................................ 18
Our ability to repurchase guaranteed notes if a designated
event occurs is subject to limitations.................. 18
The guaranteed notes will be subordinated to senior
indebtedness of Y&R..................................... 19
The WPP guarantee will be unsecured and will rank equally
with the other unsecured obligations of WPP............. 19
There is no public trading market for the guaranteed
notes................................................... 19
FORWARD-LOOKING STATEMENTS.................................. 20
THE CONSENT SOLICITATION.................................... 21
THE PROPOSED AMENDMENTS..................................... 25
MATERIAL TAX CONSEQUENCES................................... 29
THE COMPANIES............................................... 37
DESCRIPTION OF THE GUARANTEED NOTES AND THE WPP GUARANTEE... 38
DESCRIPTION OF WPP ORDINARY SHARES.......................... 56
DESCRIPTION OF WPP AMERICAN DEPOSITARY SHARES............... 60
EXCHANGE RATES.............................................. 66
MARKET PRICE AND DIVIDEND DATA.............................. 67
LEGAL OPINIONS.............................................. 69
EXPERTS..................................................... 69
APPENDIX A -- Form of Proposed Amendments................... A-1
APPENDIX B -- Unaudited Pro Forma Condensed Consolidated
Financial Information..................................... B-1
</TABLE>
i
<PAGE>
THIS CONSENT SOLICITATION AND PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND
FINANCIAL INFORMATION ABOUT WPP AND Y&R FROM DOCUMENTS FILED WITH THE SEC THAT
ARE NOT INCLUDED IN OR DELIVERED WITH THIS CONSENT SOLICITATION AND PROSPECTUS.
WPP WILL PROVIDE YOU WITH COPIES OF THIS INFORMATION RELATING TO WPP, WITHOUT
CHARGE, UPON WRITTEN OR ORAL REQUEST TO:
WPP GROUP PLC
C/O WPP GROUP USA, INC.
WORLDWIDE PLAZA
309 WEST 49TH STREET
NEW YORK, NEW YORK 10019
ATTENTION: PAUL W. G. RICHARDSON
TELEPHONE NUMBER: (212) 632-2200
OR
WPP GROUP PLC
27 FARM STREET
LONDON W1X 6RD
ENGLAND
ATTENTION: ANDREA HARRIS, ESQ.
TELEPHONE NUMBER: (011 44) 20 7408 2204
Y&R WILL PROVIDE YOU WITH COPIES OF THIS INFORMATION RELATING TO Y&R,
WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST TO:
YOUNG & RUBICAM INC.
285 MADISON AVENUE
NEW YORK, NEW YORK 10017
ATTENTION: INVESTOR RELATIONS
TELEPHONE NUMBER: (212) 210-3000
IN ORDER TO RECEIVE TIMELY DELIVERY OF THE DOCUMENTS IN ADVANCE OF THE
SCHEDULED EXPIRATION OF THE CONSENT SOLICITATION, YOU SHOULD MAKE YOUR REQUEST
NO LATER THAN SEPTEMBER 22, 2000.
IN ADDITION, IF YOU HAVE QUESTIONS ABOUT THE CONSENT SOLICITATION, YOU MAY
CONTACT:
MACKENZIE PARTNERS, INC.
156 FIFTH AVENUE
NEW YORK, NY 10010
(800) 322-2885
ii
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS CONSENT
SOLICITATION AND PROSPECTUS. IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. YOU SHOULD READ CAREFULLY THE ENTIRE CONSENT SOLICITATION AND
PROSPECTUS AND THE ADDITIONAL DOCUMENTS REFERRED TO IN THIS CONSENT SOLICITATION
AND PROSPECTUS TO FULLY UNDERSTAND THE MATTERS DESCRIBED IN THIS SUMMARY.
THE COMPANIES (SEE PAGE 37)
Y&R. Young & Rubicam Inc. is a world leader in marketing and communications
services, operating through a network of preeminent companies in advertising,
perception management and public relations, brand identity and design
consultancy, database marketing, customer relationship management and healthcare
communications. Y&R, together with its subsidiaries, employs approximately
15,000 people in over 300 offices in over 70 countries around the world. Y&R's
principal executive offices are located at 285 Madison Avenue, New York, New
York, 10017, Telephone: (212) 210-3000.
WPP. WPP Group plc, an English company, is one of the leading
communications services companies in the world. Through its 70 operating
companies, it provides clients with advertising, media investment management,
information and consultancy, public relations and public affairs, branding and
identity, healthcare and specialist communications services. WPP, together with
its subsidiaries and associates, employs approximately 39,000 people in 950
offices in 92 countries around the world. WPP's principal executive offices are
located at 27 Farm Street, London W1X 6RD, England, Telephone:
(011 44) 20 7408 2204.
THE MERGER
On May 11, 2000, WPP and Y&R entered into a merger agreement. If the
proposed merger is approved by our respective shareholders and the other
conditions to the completion of the merger are satisfied or waived, including
our receipt of necessary regulatory approvals, Y&R will merge with, and become a
wholly owned indirect subsidiary of, WPP. Upon completion of the merger, each
outstanding share of Y&R common stock will be converted into a right to receive
.835 of an American depositary share of WPP, each WPP ADS representing five
ordinary shares of WPP. We have scheduled separate shareholders meetings on
September 28, 2000 and September 29, 2000 for Y&R and WPP, respectively. At
these two meetings, our respective shareholders will consider and vote on the
merger.
As required by the indenture governing your notes, we intend, immediately
before the merger becomes effective, to enter into a supplemental indenture
which will provide that, after we complete the merger, your notes, which are
currently convertible into Y&R common stock, will be convertible into WPP ADSs.
The conversion price will be $73.36, the conversion price currently applicable
to your notes, for each .835 of a WPP ADS, or $87.856 ($73.36 divided by .835)
for each whole WPP ADS, subject to adjustment under various circumstances. This
represents a conversion rate of 11.382 WPP ADSs per $1,000 principal amount of
the notes.
THE CONSENT SOLICITATION (SEE PAGE 21)
<TABLE>
<S> <C>
The Solicitation; the Proposed
Amendments........................... In connection with the merger, Y&R is soliciting your
consent to the following proposed amendments to the
indenture governing your notes and the related
registration agreement:
- THE FINANCIAL INFORMATION AMENDMENT. The indenture
currently provides that, whether or not required by the
rules and regulations of the SEC, so long as any notes
are outstanding,
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
Y&R must file with the SEC and furnish to the indenture
trustee and to noteholders all quarterly and annual
financial information regarding Y&R required to be
contained in a SEC quarterly report on Form 10-Q and an
annual report on Form 10-K. We are proposing an
amendment to the indenture that would permit WPP to
satisfy this and various other informational
requirements of the indenture on behalf of Y&R, so long
as Y&R is a wholly owned subsidiary of WPP, by:
(1) filing with the SEC all periodic reports WPP is
required to file under Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934, as amended; and
(2) furnishing to you and the indenture trustee all
financial information WPP furnishes to the holders of
its ADSs.
As a foreign private issuer under SEC rules, WPP is
subject to fewer reporting requirements than Y&R and
WPP's financial information is presented in accordance
with generally accepted accounting principles in the
U.K. and reconciled to generally accepted accounting
principles in the U.S. See "The Proposed
Amendments--The Financial Information Amendment" on
page 25.
- THE REGISTRATION AGREEMENT AMENDMENT. The registration
agreement currently requires Y&R to maintain an
effective shelf registration statement for the resale
of the notes and the shares issuable upon conversion of
the notes until approximately January 20, 2002 (or
earlier under some circumstances). A shelf registration
statement filed by Y&R on Form S-3 (Registration
No. 333-34948) was declared effective on July 10, 2000.
The shelf registration statement allows holders of
existing notes who are listed as selling security
holders in the prospectus related to that registration
statement to transfer their notes subject to prospectus
delivery requirements under the Securities Act. Holders
who transfer notes could, however, be subject to civil
liability under the Securities Act for material
misstatements, if any, in the prospectus delivered in
connection with that transfer. After any notes are
transferred pursuant to the shelf registration
statement, those notes (and shares issuable upon
conversion of those notes) would be registered under
the Securities Act and would be freely transferable,
unless held by an affiliate, and would not be subject
to the prospectus delivery requirements or the civil
liability provisions under the Securities Act.
In connection with the consent solicitation, we will
register the notes and the WPP ADSs issuable upon
conversion of the notes under the Securities Act. As a
result of this registration, if the proposed amendments
are adopted, the guaranteed notes (and the WPP ADSs
issuable upon conversion of those
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
notes) would immediately be freely transferable, unless
held by an affiliate, even if not previously
transferred pursuant to the shelf registration
statement. Moreover, you will be permitted to transfer
guaranteed notes without delivering any prospectus that
may otherwise be required to be delivered and without
being subject to liability under the Securities Act to
which you may have otherwise been subject. Therefore,
we are proposing an amendment to the registration
agreement and related provisions of the indenture that
would release Y&R from its obligation to maintain a
shelf registration statement.
In this consent solicitation and prospectus, we refer to
the proposed amendment regarding the furnishing of
financial statements and other information as the
"FINANCIAL INFORMATION AMENDMENT" and the proposed
amendment with respect to Y&R's registration obligation as
the "REGISTRATION AGREEMENT AMENDMENT" and we sometimes
refer to these amendments together as the "PROPOSED
AMENDMENTS."
What You Will Receive.................. If the proposed amendments are adopted, following
completion of the merger:
- WPP will irrevocably, fully and unconditionally
guarantee, to the fullest extent permitted by law,
Y&R's payment obligations under the terms of your
notes. We sometimes refer to your notes, as guaranteed
by WPP, as "GUARANTEED NOTES."
- We will register under the Securities Act the
guaranteed notes and the WPP ADSs issuable upon
conversion of the guaranteed notes. As a result, unless
you are an affiliate of WPP or Y&R, the guaranteed
notes and the WPP ADSs issuable upon conversion of the
guaranteed notes will not be subject to any
restrictions on resale that may be applicable to your
existing notes and the Y&R shares currently issuable
upon conversion of the existing notes. If the proposed
amendments are adopted, unless you are an affiliate of
WPP or Y&R, your guaranteed notes and the WPP ADSs
issuable upon conversion of those guaranteed notes
automatically will be freely transferable without
further registration.
Reasons for and Purpose of the Proposed
Amendments........................... THE FINANCIAL INFORMATION AMENDMENT. Y&R is soliciting
your consent to the proposed financial information
amendment so that, after the merger, we may save
considerable expense by discontinuing the preparation of
separate financial information regarding Y&R:
- We expect that, if we complete the merger and WPP
guarantees Y&R's payment obligations under the notes,
Y&R will be exempt from the provisions of the Exchange
Act that now require it to prepare and file periodic
reports and financial information with the SEC.
Accordingly, if we receive the requisite consents and
we adopt the proposed amendments and WPP guarantees
your notes, after the
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
merger, Y&R will be able to discontinue the preparation
of separate financial information necessary to comply
with the reporting rules under the Exchange Act.
- After we complete the merger, you will be a holder of
notes convertible into WPP ADSs and, if the proposed
amendments are adopted, guaranteed by WPP. We believe
that, under these circumstances, the Y&R financial
information the indenture currently requires Y&R to
prepare and furnish is not likely to be as meaningful
to you or material to an investor considering an
investment in the notes as would information about WPP.
Accordingly, the financial information amendment would
permit WPP to furnish financial information regarding
WPP, although you should be aware that, as a foreign
private issuer under SEC rules, WPP is subject to fewer
reporting requirements than Y&R. See "The Proposed
Amendments--The Financial Information Amendment" on
page 25.
THE REGISTRATION AGREEMENT AMENDMENT. Similarly, Y&R is
soliciting your consent to the registration agreement
amendment, so that, after the merger, we may be released
from the expense required to maintain the shelf
registration statement:
- If we complete the merger and the proposed amendments
are adopted, your existing notes will automatically
convert into registered guaranteed notes. As described
above in "--The Solicitation; the Proposed Amendments,"
the guaranteed notes and the ADSs isssuable upon
conversion of those notes will not be subject to any
restrictions on resale that may be applicable to your
existing notes and the Y&R common stock issuable upon
conversion of those notes, and will be freely
transferable without further registration (other than
by current affiliates of Y&R and WPP).
For the reasons described above, we recommend that you
consent to the proposed amendments. See "The Proposed
Amendments--The Financial Information Amendment--Reasons
for and Purpose of the Financial Information Amendment" on
page 26 and "The Proposed Amendments--The Registration
Agreement Amendment--Reasons for and Purpose of the
Registration Agreement Amendment" on page 28.
Conditions to the Proposed
Amendments........................... The adoption of the proposed amendments and the issuance
of WPP's guarantee of Y&R's payment obligation under the
notes is conditioned upon:
- our receipt of the requisite consents of noteholders
and Y&R having so certified to the indenture trustee;
and
- our completion of the merger, which is subject to
several conditions, including approval of WPP's and
Y&R's shareholders and the approval of various
regulatory authorities as described in "--Regulatory
Approvals" below.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
If the conditions to our adoption of the proposed
amendments are satisfied, WPP and Y&R expect to execute
and deliver to the indenture trustee a supplemental
indenture containing the proposed amendment to the
indenture and WPP's guarantee of Y&R's payment obligations
under the notes. Y&R also expects to execute an amendment
to the registration agreement. The supplemental indenture
and the amendment to the registration agreement will be
effective as soon as they are executed. See "The Consent
Solicitation" on page 21.
Requisite Consents; Record Date;
Outstanding Notes.................... In order to adopt the proposed amendments, we must obtain
the valid and unrevoked consents of registered holders of
a majority in aggregate principal amount of the notes
outstanding at the close of business on August 28, 2000,
the record date for determining the noteholders entitled
to deliver consents in connection with this consent
solicitation. As of the close of business on the record
date, notes with an aggregate principal amount of $287.5
million were outstanding. To our knowledge, no director or
executive officer of WPP or Y&R or any of their affiliates
held any notes at that time.
Expiration Date of the Solicitation.... The solicitation period will expire at 5:00 p.m. New York
City time on September 29, 2000, unless we extend the
period. We reserve the right to extend the solicitation
period. If the solicitation period expires prior to
completion of the merger, we will not adopt the proposed
amendments and WPP will not issue its guarantee until the
merger is completed. During any period between the time we
certify to the trustee that we have received the requisite
consents (which is expected to occur promptly after the
expiration of the solicitation period) and the completion
of the merger, the consents will be effective and
irrevocable. See "The Consent Solicitation--Expiration
Date; Extension of the Consent Solicitation Period;
Amendment; Termination" on page 21.
Amendment and Termination of the
Solicitation......................... We may terminate the consent solicitation at any time, and
we may amend the consent solicitation under the
circumstances described under "The Consent
Solicitation--Expiration Date; Extension of the Consent
Solicitation Period; Amendment; Termination" on page 21.
Consequences to Non-Consenting
Holders.............................. If we receive the requisite consents and execute the
supplemental indenture and the amendment to the
registration agreement, they will be binding upon each
holder of notes, and your notes will automatically become
registered guaranteed notes, regardless of whether or not
you delivered your consent.
Procedures for Consenting.............. In accordance with the indenture, only those persons who
are registered holders of the notes as of the close of
business on August 28, 2000, the record date, may deliver
a letter of consent to the proposed amendments. Registered
holders may consent to the proposed amendments by
delivering an executed letter of
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
consent to the Information Agent at the address set forth
on the back cover of this consent solicitation and
prospectus before the expiration of the solicitation
period. If you are a beneficial owner of notes held
through a broker, bank or other financial institution, in
order to consent to the proposed amendments, you must
arrange for the broker, bank or other financial
institution to:
- deliver an executed letter of consent to the
Information Agent on your behalf or to you for
forwarding to the Information Agent, in either case
before the expiration of the solicitation period; or
- forward to you an executed proxy authorizing you to
deliver a letter of consent with respect to your notes.
You must then deliver an executed letter of consent,
together with this proxy, to the Information Agent
before the expiration of the solicitation period.
We describe the procedures you must follow in order to
deliver a consent more fully under "The Consent
Solicitation--Consent Procedures" on page 22.
Revocation of Consent.................. A registered holder of a note may revoke its consent by
delivering to the Information Agent or the indenture
trustee a properly completed and executed written notice
of revocation before the date that Y&R certifies to the
indenture trustee that we have obtained the requisite
consents to the proposed amendments. If the conditions to
our adoption of the proposed amendments are satisfied, we
expect that Y&R will deliver this certification to the
indenture trustee promptly after completion of the
solicitation period. If you are a beneficial owner of
notes held through a bank, broker or other financial
institution, in order to revoke a consent previously
delivered, you must arrange for the bank, broker or other
financial institution to:
- deliver an executed notice of revocation to the
Information Agent on your behalf or to you for
forwarding to the Information Agent, in either case
before Y&R delivers to the indenture trustee the
certification referred to above; or
- forward an executed proxy authorizing you to deliver
notice of revocation. You must then deliver an executed
notice of revocation, together with this proxy, to the
Information Agent before Y&R delivers to the indenture
trustee the certification referred to above.
Tax Consequences....................... For a discussion of the principal United States federal
income tax consequences of the adoption of the proposed
amendments, see "Material Tax Consequences" on page 29.
</TABLE>
6
<PAGE>
PRINCIPAL TERMS OF YOUR EXISTING NOTES AND THE GUARANTEED NOTES (SEE PAGE 38)
<TABLE>
<S> <C>
Issuer................................. Young & Rubicam Inc.
Principal.............................. $287,500,000.
Interest............................... Your existing notes bear, and the guaranteed notes will
bear, interest at 3% per annum. Interest on your
guaranteed notes will accrue from the most recent date to
which interest has been paid on your existing notes.
Maturity............................... January 15, 2005, unless earlier redeemed, repurchased or
converted.
Interest Payment Dates................. January 15 and July 15 of each year.
Guarantee*............................. The existing notes are not subject to any guarantee. If
the proposed amendments are adopted, WPP will irrevocably,
fully and unconditionally guarantee the due and punctual
payment of the principal of, interest on and other amounts
payable with respect to your notes. If Y&R does not make
any payments on the guaranteed notes when they are due,
WPP will be obligated to make those payments to the
fullest extent permitted by law.
Conversion*............................ If we complete the merger, whether or not the proposed
amendments are adopted, your notes, which are currently
convertible into Y&R common stock, will become convertible
into WPP ADSs at a conversion price of $73.36, the
conversion price currently applicable to your notes, for
each .835 of a WPP ADS, or $87.856 for each whole ADS,
subject to adjustment under various circumstances. This
represents a conversion rate of 11.382 WPP ADSs per $1,000
principal amount of the notes. Each WPP ADS represents
five ordinary shares of WPP. As is the case with respect
to your existing notes, your right to convert guaranteed
notes that have been called for redemption will terminate
at the close of business on the business day immediately
preceding the date of redemption.
Mandatory Redemption................... None.
Optional Redemption.................... As is the case with your existing notes, on or after
January 20, 2003, Y&R may, at its option, on one or more
occasions, redeem the guaranteed notes, in whole or in
part, for cash at the redemption prices set forth in the
indenture, plus accrued and unpaid interest to the date of
redemption. See "Description of the Guaranteed Notes and
the WPP Gurarantee--Optional Redemption" on page 39.
Repurchase at the Option of Holders
Upon a Change of Control or
Termination of Trading............... Upon a "designated event," a term we define on page 42 of
this consent solicitation and prospectus, you will have
the right, subject to various restrictions and conditions,
to require Y&R to purchase all or any part of your
guaranteed notes at a purchase price equal to 100% of the
principal amount of your guaranteed notes, plus accrued
and unpaid interest to the date of the purchase. See
"Description of the Guaranteed Notes and the WPP
Guarantee--Repurchase at the Option of Holders" on
page 39.
</TABLE>
------------------------
* Indicates difference from your existing notes.
7
<PAGE>
<TABLE>
<S> <C>
Ranking of Guaranteed Notes............ As is the case with your existing notes, the guaranteed
notes will be general unsecured obligations of Y&R and
will be subordinated in right of payment to all existing
and future senior debt of Y&R. WPP's guarantee, which will
obligate WPP to make any payment to the fullest extent
permitted by law on the guaranteed notes Y&R fails to make
as a result of the indenture's subordination provision or
otherwise, will constitute a general unsecured obligation
of WPP ranking on a parity with all other unsecured and
unsubordinated obligations of WPP. Like your existing
notes, the guaranteed notes will be effectively
subordinated to all existing and future indebtedness of
Y&R's subsidiaries. WPP's guarantee will also be
effectively subordinated to all existing and future
indebtedness of WPP's subsidiaries including, after
completion of the merger, Y&R. The indenture does not, and
the supplemental indenture to be entered into in
connection with this consent solicitation will not,
contain any limitation on the incurrence of indebtedness
and other liabilities by WPP, Y&R or their respective
subsidiaries. However, the ability of WPP and its
subsidiaries to incur additional indebtedness is limited
by a credit agreement to which WPP is a party. See
"Description of the Guaranteed Notes and the WPP
Guarantee--Ranking of Notes" on page 46.
Use of Proceeds........................ We will not receive any proceeds from the transaction
contemplated by this consent solicitation and prospectus.
Trading................................ As is the case with your existing notes, the guaranteed
notes will not be listed on any securities exchange or on
any automated dealer quotation system. Although your
existing notes were designated for trading in the Portal
Market, no established trading market has developed for
your notes. The WPP ADSs are quoted on the Nasdaq National
Market under the symbol "WPPGY," and WPP's ordinary shares
trade on the London Stock Exchange under the symbol "WPP."
Tax Treatment of Conversion of Notes... Whether or not we adopt the proposed amendments, after the
merger, upon conversion of your notes into WPP ADSs you
will generally recognize a gain or loss in an amount equal
to the difference between the fair market value of the WPP
ADSs (and any cash for fractional shares) you receive and
the adjusted tax basis in your notes before the
conversion. In contrast, if you are a U.S. holder and
convert your existing notes into Y&R common stock before
the merger, you will not recognize a gain or loss as a
result of the conversion, except for any gain with respect
to cash you receive instead of fractional shares. In
addition, the exchange of Y&R common stock for WPP ADSs in
the merger will generally be tax-free, except for any gain
with respect to cash received instead of fractional
shares. Therefore, you should consider whether to convert
your notes into Y&R common stock prior to the merger. See
"Material Tax Consequences--Certain U.S. Federal Income
Tax Consequences Applicable to U.S. Holders of Notes" on
page 30.
</TABLE>
8
<PAGE>
REGULATORY APPROVALS
We are not required to obtain any regulatory approvals in connection with
the consent solicitation. However, the merger is subject to a number of
customary regulatory conditions, including the expiration or early termination
of the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and approval by the European Commission
under the merger control laws of the European Union. The waiting period under
the HSR Act expired on July 20, 2000 without our receiving a request for
additional information. On August 24, 2000, the European Commission issued its
decision to clear the merger. We have also made relevant filings with the
competition authorities in Argentina, Australia, Brazil, Hungary, Poland and
South Africa. Although we do not expect regulatory authorities to raise any
significant objections in connection with their decisions regarding the merger,
we cannot be certain that we will obtain all required regulatory approvals or
that these approvals will not contain terms, conditions or restrictions that
would be detrimental to the combined company after the merger.
CURRENCIES AND EXCHANGE RATES
References in this consent solicitation and prospectus to "dollars," "$" or
" CENTS" are to the currency of the United States and references to "pounds
sterling," "pounds," "L," "pence" or "p" are to the currency of the United
Kingdom. There are 100 pence to each pound. Solely for your convenience, this
consent solicitation and prospectus contains translations of pounds sterling
amounts into U.S. dollars at specified rates. You should not take these
translations as assurances that the pounds sterling amounts currently represent
U.S. dollar amounts or could be converted into U.S. dollars at the rate
indicated or at any other rate, at any time.
In this consent solicitation and prospectus, unless otherwise stated, pounds
sterling have been translated, solely for convenience, into U.S. dollars at a
rate of $1.5130 per L1.00, the noon buying rate as reported by Bloomberg on
June 30, 2000. On August 28, 2000, the latest practicable date for which
exchange rate information was available before the printing of this consent
solicitation and prospectus, the noon buying rate was $1.4716 per L1.00. These
translations should not be construed as a representation that the U.S. dollar
amounts actually represent, or could be converted into, pounds sterling at the
rates indicated.
The period end, average and range of high and low U.S. dollar/pound sterling
exchange rates for the five years ended December 31, 1999, and the six months
ended June 30, 2000, are presented in the section entitled "Exchange Rates" on
page 66.
9
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
We present below selected historical financial data of WPP and Y&R for each
of the five years ended December 31, 1999 and selected historical financial data
for the six months ended June 30, 2000 and 1999. We derived the selected
historical financial data of WPP and Y&R for each of the five years ended
December 31, 1999 (apart from the selected historical financial data for WPP and
Y&R for 1995 and 1996 and the selected historical balance sheet data for Y&R for
1997) from, and you should read the data in conjunction with, the annual audited
consolidated financial statements of WPP and Y&R, including the notes to those
financial statements, which we have incorporated by reference into this consent
solicitation and prospectus. We derived the selected historical financial data
for the six month period ended June 30, 2000 and 1999 from, and you should read
the data in conjunction with, the unaudited interim consolidated financial
statements of WPP and Y&R for those periods, including the notes thereto, which
we have incorporated by reference into this consent solicitation and prospectus.
The WPP and Y&R selected historical financial data for 1995 and 1996 and the
selected historical balance sheet data for Y&R for 1997 have been derived from
their respective annual audited consolidated financial statements for those
years, which, in accordance with SEC rules, we have not incorporated by
reference into this consent solicitation and prospectus.
WPP reports its financial results in accordance with U.K. GAAP and Y&R
reports its financial results in accordance with U.S. GAAP. The main differences
between U.S. GAAP and U.K. GAAP that are relevant to WPP's consolidated
financial statements are presented in WPP's Annual Report on SEC Form 20-F for
the year ended December 31, 1999, which reconcile WPP's financial information
for the years ended December 31, 1997, 1998 and 1999 to U.S. GAAP. We have
incorporated WPP's Annual Report on SEC Form 20-F by reference into this consent
solicitation and prospectus. See "--Where You Can Find More Information" below.
SELECTED HISTORICAL FINANCIAL DATA FOR WPP
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
------------------------------ ---------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------------------- -------- ------------------- -------- -------- -------- --------
L $ L L $ L L L L
(IN MILLIONS, EXCEPT PER ORDINARY SHARE AND ADS AMOUNTS AND RATIO
INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PROFIT & LOSS ACCOUNT DATA
U.K. GAAP
Turnover (gross billings)...... 5,655.9 8,557.4 4,445.1 9,345.9 14,140.3 8,000.1 7,287.3 7,084.0 6,553.1
Revenue........................ 1,209.1 1,829.4 1,017.3 2,172.6 3,287.1 1,918.4 1,746.7 1,691.3 1,554.9
Profit attributable to ordinary
shareowners.................. 93.1 140.9 75.3 172.8 261.4 140.3 116.0 100.0 68.7
Earnings per ordinary share
Basic........................ 12.3p 18.6 CENTS 10.0p 22.9p 34.6 CENTS 19.1p 15.8p 13.6p 9.4p
Diluted...................... 12.0p 18.2 CENTS 9.8p 22.5p 34.0 CENTS 18.8p 15.7p 13.5p 9.4p
Earnings per ADS
Basic........................ 61.5p 93.0 CENTS 50.0p 114.5p 173.0 CENTS 95.5p 79.0p 68.0p 47.0p
Diluted...................... 60.0p 91.0 CENTS 49.0p 112.5p 170.0 CENTS 94.0p 78.5p 67.5p 47.0p
Cash dividends per ordinary
share........................ 1.2p 1.82 CENTS 1.0p 3.1p 4.69 CENTS 2.56p 2.13p 1.70p 1.31p
Cash dividends per ADS......... 6.0p 9.08 CENTS 5.0p 15.5p 23.45 CENTS 12.80p 10.65p 8.50p 6.55p
Ratio of earnings to fixed
charges...................... 5.02x 5.02x n/a 5.35x 5.35x 5.29x 4.93x 4.19x 3.22x
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
------------------------------ ---------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------------------- -------- ------------------- -------- -------- -------- --------
L $ L L $ L L L L
(IN MILLIONS, EXCEPT PER ORDINARY SHARE AND ADS AMOUNTS AND RATIO
INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. GAAP
Turnover (gross billings)...... 5,655.9 8,557.4 4,445.1 9,345.9 14,140.3 8,000.1 7,287.3 7,084.0 6,553.1
Revenue........................ 1,209.1 1,829.4 1,017.3 2,172.6 3,287.1 1,918.4 1,746.7 1,691.3 1,554.9
Net Income..................... 68.7 103.9 43.3 106.8 161.6 99.5 80.2 67.1 25.7
Earnings per ordinary share
Basic........................ 9.1p 13.8 CENTS 5.8p 14.2p 21.5 CENTS 13.5p 10.9p 9.1p 3.5p
Diluted...................... 8.8p 13.3 CENTS 5.6p 13.8p 20.9 CENTS 13.2p 10.8p 9.0p 3.5p
Earnings per ADS
Basic........................ 45.5p 69.0 CENTS 29.0p 71.0p 107.5 CENTS 67.5p 54.5p 45.5p 17.5p
Diluted...................... 44.0p 66.5 CENTS 28.0p 69.0p 104.5 CENTS 66.0p 54.0p 45.0p 17.5p
Ratio of earnings to fixed
charges...................... 5.02x 5.02x n/a 3.72x 3.72x 4.54x 4.21x 3.45x 2.28x
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
------------------------------ ---------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------------------- -------- ------------------- -------- -------- -------- --------
L $ L L $ L L L L
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
U.K. GAAP
Total assets................... 3,619.5 5,476.3 2,630.3 3,206.4 4,851.3 2,452.5 1,979.3 1,894.8 1,881.2
Long-term obligations.......... 830.6 1,256.7 548.6 731.7 1,107.1 479.4 296.0 359.9 417.5
U.S. GAAP
Total assets................... 4,145.5 6,272.1 3,231.6 3,726.3 5,637.9 3,059.2 2,675.7 2,629.2 2,760.9
Long-term obligations.......... 701.9 1,062.0 453.2 599.6 907.2 378.3 258.4 356.9 422.1
</TABLE>
<TABLE>
<CAPTION>
INTERIM
DIVIDEND YEARS ENDED DECEMBER 31,
------------------- ------------------------------
2000 1999 1999 1998 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OTHER DATA
U.S. dollar equivalent dividends per WPP ordinary
share(1)(2).......................................... 1.82 CENTS 1.63 CENTS 4.78 CENTS 4.07 CENTS 3.53 CENTS
U.S. dollar equivalent dividends per WPP ADS(1)(2)..... 9.08 CENTS 8.14 CENTS 23.9 CENTS 20.4 CENTS 17.7 CENTS
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995
-------------- --------------
<S> <C> <C> <C>
OTHER DATA
U.S. dollar equivalent dividends per WPP ordinary
share(1)(2).......................................... 2.87 CENTS 2.03 CENTS
U.S. dollar equivalent dividends per WPP ADS(1)(2)..... 14.4 CENTS 10.2 CENTS
</TABLE>
--------------------------
(1) WPP's dividend with respect to each year is comprised of an interim dividend
paid in November and a final dividend paid in July of the next year, subject
to approval by WPP's share owners. On August 14, 2000, WPP's board of
directors declared an interim dividend for 2000, which we expect will be
paid on November 20, 2000 to WPP's registered share owners as of
September 15, 2000. See "Market Price and Dividend Data--Dividend Data" on
page 67.
(2) U.S. dollar equivalent dividend amounts were obtained by translating the
equivalent dividend paid in U.K. pounds sterling into U.S. dollars using the
closing exchange rate, as reported by Bloomberg for pounds sterling on each
of the payment dates for those dividends. The U.S. dollar equivalent
dividend amount of the 2000 interim dividend was obtained by translating the
dividend declared in U.K. pounds sterling into U.S. dollars using the
exchange rate of $1.5130 per L1.00, the noon buying rate in New York City on
June 30, 2000 for cable transfers in U.K. pounds sterling as certified for
customs purposes by the Federal Reserve Bank of New York.
11
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF Y&R
(U.S. GAAP)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
------------------- -----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- --------- --------
$ $ $ $ $ $ $
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIO INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues............................................ 943 798 1,717 1,522 1,383 1,222 1,085
Income (loss) before extraordinary charge........... 69 50 167 (82) (24) (238) 1
Net income (loss)(1)................................ 69 50 167 (86) (24) (238) 1
Earnings (loss) per common share(1)
Basic:
Income (loss) before extraordinary charge(2).... 0.95 0.75 2.43 (1.34) (0.51) n/a n/a
Net income (loss)(2)............................ 0.95 0.75 2.43 (1.42) (0.51) n/a n/a
Diluted:
Income (loss) before extraordinary charge(2).... 0.83 0.61 2.02 (1.34) (0.51) n/a n/a
Net income (loss)(2)............................ 0.83 0.61 2.02 (1.42) (0.51) n/a n/a
Cash dividends per common share..................... 5.0 CENTS 2.5 CENTS 7.5 CENTS -- -- n/a n/a
Ratio of earnings to fixed charges (deficiency in
the coverage of fixed charges by earnings before
fixed charges)(3)................................. 5.09x n/a 6.38x $(83,530) 1.58x $(247,926) 1.21x
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
------------ -----------------------------------------------------
2000 1999 1998 1997 1996 1995
------------ -------- -------- -------- --------- --------
$ $ $ $ $ $
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets......................................... 2,365 2,414 1,635 1,538 1,599 1,227
Long-term obligations................................ 434 276 176 481 328 365
Mandatorily redeemable equity securities............. -- -- -- 508 363 --
</TABLE>
--------------------------
(1) Y&R's net income for 1999 reflects the aggregate after-tax effect of
approximately $51 million in connection with the net gain recognized on the
sale of certain assets of Brand Dialogue in exchange for an ownership
interest in Luminant Worldwide Corporation and additional consideration
received as a result of achieving revenue and operating profit performance
targets of the Brand Dialogue contributed assets. Y&R's net loss in 1998
includes (A) operating charges of $234.4 million associated with the initial
public offering of shares of common stock of Y&R in May 1998 and consisting
of non-recurring, non-cash compensation charges resulting from the vesting
of shares of restricted stock allocated to employees and (B) an
extraordinary loss on the retirement of debt of $4.4 million. Y&R's net loss
in 1997 includes other operating charges of $11.9 million for non-cash asset
impairment write-downs. Y&R's net loss in 1996 includes pretax operating
charges of $315.4 million primarily related to compensation charges recorded
in connection with Y&R's recapitalization in that year.
(2) Y&R's earnings per share for 1996 and 1995 cannot be computed because prior
to its recapitalization Y&R's capital structure consisted of both common
stock and limited partnership units in predecessor entities.
(3) 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 (A) income (loss) before income taxes, (B) dividends from
unconsolidated companies, and (C) 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 income, totaling $12.2 million,
recorded in the six months ended June 30, 2000, in connection with (A) the
gain on the sale of certain assets and rights known as Y&R Teamspace to
eMotion Inc. and (B) other net gains from investing activities in the first
half of 2000, including additional consideration received as a result of
achieving revenue and operating profit performance targets of the Brand
Dialogue assets contributed to Luminant Worldwide Corporation in 1999, the
ratio of earnings to fixed charges would have been 4.65x for the six months
ended June 30, 2000. Excluding the effects of the income recorded in
connection with the 1999 net pre-tax gain on
12
<PAGE>
the sale of certain assets of Y&R's 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 Y&R's 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.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
WPP and Y&R are providing the following pro forma consolidated financial
information to give you a better picture of what the results of operations and
financial position of the combined businesses of WPP and Y&R might have looked
like had the merger occurred on an earlier date. We are providing this
information for illustrative purposes only. This information does not purport to
represent what the results of operations or financial position of WPP would have
been if the merger had actually occurred on that earlier date. This information
is also not necessarily indicative of what WPP's future operating results or
consolidated financial position will be.
See "Unaudited Pro Forma Condensed Consolidated Financial Information"
attached as Appendix B to this consent solicitation and prospectus for a more
detailed explanation of this analysis.
BASIS OF PREPARATION
The unaudited pro forma consolidated financial information has been prepared
in accordance with U.K. GAAP, which differs in certain respects from U.S. GAAP.
The Unaudited Pro Forma Consolidated Financial Information has been derived
from: (1) the audited historical consolidated profit and loss account of WPP for
the year ended December 31, 1999, (2) the audited historical consolidated
statement of operations of Y&R for the year ended December 31, 1999 except for
turnover (gross billings) data which are unaudited, (3) the unaudited historical
consolidated profit and loss account of WPP for the six month period ended
June 30, 2000 and the unaudited historical consolidated balance sheet of WPP at
June 30, 2000, (4) the unaudited historical consolidated statement of operations
of Y&R for the six months ended June 30, 2000 and the unaudited historical
consolidated balance sheet of Y&R at June 30, 2000, (5) unaudited
reclassifications to conform Y&R's historical financial information to WPP's
presentation under U.K. GAAP, (6) unaudited adjustments to conform Y&R's
historical financial information with WPP's disclosed accounting policies under
U.K. GAAP, and (7) with respect to unaudited balance sheet data, the unaudited
pro forma adjustments described in the Notes to the Unaudited Pro Forma
Condensed Consolidated Financial Information attached as Appendix B to this
consent solicitation and prospectus. No pro forma adjustments were required to
be made in the preparation of the unaudited pro forma condensed consolidated
profit and loss account data.
WPP intends to account for the merger as an acquisition under U.K. GAAP and
as a purchase under U.S. GAAP. The pro forma consolidated financial information
attached as Appendix B to this consent solicitation and prospectus has been
prepared on this basis.
UNAUDITED PRO FORMA PROFIT AND LOSS ACCOUNT DATA
The unaudited pro forma profit and loss account data for the year ended
December 31, 1999 assumes that the merger took place on January 1, 1999, the
first day of the financial period presented in the Unaudited Pro Forma Condensed
Consolidated Financial Information attached as Appendix B to this consent
solicitation and prospectus. The unaudited pro forma profit and loss account
data for the
13
<PAGE>
six months ended June 30, 2000 assumes that the merger took place on January 1,
1999. This data has been prepared in accordance with the methodology described
above under "--Basis of Preparation."
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
--------------------- -----------------------
2000 1999
--------------------- -----------------------
L $ L $
(IN MILLIONS, EXCEPT PER ORDINARY SHARE AND
ADS AMOUNTS AND RATIO INFORMATION)
<S> <C> <C> <C> <C>
UNAUDITED PRO FORMA PROFIT & LOSS ACCOUNT DATA
U.K. GAAP
Turnover (gross billings)....................... 8,359.3 12,647.6 14,619.0 22,118.5
Revenue......................................... 1,809.9 2,738.4 3,234.0 4,893.0
Profit attributable to ordinary shareowners..... 118.6 179.4 281.1 425.3
Basic earnings per ordinary share............... 11.2p 16.9 CENTS 27.0p 40.9 CENTS
Diluted earnings before exceptional items per
ordinary share................................ 12.2p 18.5 CENTS 22.9p 34.6 CENTS
Diluted earnings per ordinary share............. 10.6p 16.0 CENTS 25.2p 38.1 CENTS
Basic earnings per ADS.......................... 56.0p 84.5 CENTS 135.0p 204.5 CENTS
Diluted earnings before exceptional items per
ADS........................................... 61.0p 92.5 CENTS 114.5p 173.0 CENTS
Diluted earnings per ADS........................ 53.0p 80.0 CENTS 126.0p 190.5 CENTS
Ratio of earnings to fixed charges.............. 4.42x 4.42x 5.35x 5.35x
U.S. GAAP
Turnover (gross billing)........................ 8,359.3 12,647.6 14,619.0 22,118.5
Revenue......................................... 1,809.9 2,738.4 3,234.0 4,893.0
Net Income...................................... 65.1 98.5 112.3 169.9
Basic earnings per ADS.......................... 30.5p 46.0 CENTS 53.0p 80.0 CENTS
Diluted earnings per ADS........................ 29.0p 44.0 CENTS 50.0p 75.5 CENTS
Ratio of earnings to fixed charges.............. 5.04x 5.04x 4.64x 4.64x
</TABLE>
UNAUDITED PRO FORMA BALANCE SHEET DATA
The unaudited pro forma balance sheet data we provide below assumes that the
merger took place on June 30, 2000, and has been prepared in accordance with the
methodology described above under "--Basis of Preparation."
<TABLE>
<CAPTION>
AT JUNE 30, 2000
---------------------
L $
(IN MILLIONS)
<S> <C> <C>
UNAUDITED PRO FORMA BALANCE SHEET DATA
U.K. GAAP
Total assets................................................ 9,018.0 13,644.2
Total long-term obligations................................. 1,168.2 1,767.5
Equity share owner's funds.................................. 4,235.9 6,408.9
U.S. GAAP
Total assets................................................ 9,728.7 14,719.5
Total long-term obligations................................. 1,164.4 1,761.7
Share owner's equity........................................ 4,942.8 7,478.5
</TABLE>
14
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
WPP files annual and special reports and other information and Y&R files
annual, quarterly and special reports, proxy statements and other information
with the SEC. You may read and copy any reports, statements or other information
on file at the SEC's public reference room located at 450 Fifth Street NW,
Washington, D.C. 20549 or at one of the SEC's other public reference rooms in
New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms. The SEC filings are also
available to the public from commercial document retrieval services. The Y&R
filings and some of the most recent WPP filings, as well as the respective
registration statements filed by WPP and Y&R of which this consent solicitation
and prospectus forms a part, are available at the Internet world wide web site
maintained by the SEC at WWW.SEC.GOV.
We expect that, if we complete the merger and adopt the proposed amendments
and WPP guarantees Y&R's payment obligations under the notes, Y&R will be exempt
from any information and reporting requirements of the Exchange Act to which it
may be subject. This exemption could be maintained so long as Y&R remains a
wholly owned subsidiary of WPP and WPP discloses certain financial information
regarding Y&R. WPP intends to disclose this information as necessary to maintain
this exemption from the reporting requirements of the Exchange Act. If at any
time after December 31, 2000 the notes are held by less than 300 holders of
record, Y&R's obligation to comply with the reporting requirements of the
Exchange Act would be suspended whether or not Y&R is then maintaining the
exemption described above. At that time, it will no longer be necessary for Y&R
to maintain the exemption or for WPP to continue to disclose any financial
information regarding Y&R. In calculating the number of holders of record of the
notes, each DTC participant holding notes through DTC would count as a separate
holder of record. In any event, WPP expects to continue to make periodic report
filings under the Exchange Act with respect to itself.
WPP has filed a registration statement on Form F-4 to register with the SEC
the guarantee relating to the guaranteed notes and WPP ordinary shares
underlying the WPP ADSs you will receive upon conversion of the notes. A
registration statement on Form F-6 in respect of the WPP ADSs has also been
filed. Y&R has filed a registration statement on Form S-4 to register with the
SEC the guaranteed notes which will be substituted for the existing notes in
connection with the adoption of the proposed amendments. This consent
solicitation and prospectus is also a part of WPP's registration statement on
Form F-4 and Y&R's registration statement on Form S-4 and constitutes a
prospectus of WPP and Y&R, as well as being a consent solicitation statement
with respect to solicitation of consents to adopt the proposed amendments.
The SEC permits WPP and Y&R to "incorporate by reference" information into
this consent solicitation and prospectus. This means that we can disclose
important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this consent solicitation and prospectus, except for any information
superseded by information contained directly in this consent solicitation and
prospectus.
This consent solicitation and prospectus incorporates by reference the
documents filed as exhibits to the registration statements of which this consent
solicitation and prospectus is a part, as well as the documents set forth below
that have been previously filed with the SEC. These documents contain important
information about WPP and Y&R and their respective financial conditions.
<TABLE>
<S> <C>
WPP SEC FILINGS (FILE NO. 000-16350) PERIOD OR FILING DATE
Annual Report on Form 20-F Year ended December 31, 1999
Reports on Form 6-K Filed on April 27, 2000, June 27, 2000,
August 5, 2000, August 15, 2000 and August 28,
2000
Y&R SEC FILINGS (FILE NO. 001-14093) PERIOD OR FILING DATE
Annual Report on Form 10-K Year ended December 31, 1999
Quarterly Reports on Form 10-Q Quarters ended March 31, 2000 and
June 30, 2000
Current Report on Form 8-K Filed on May 16, 2000
</TABLE>
15
<PAGE>
WPP and Y&R also incorporate by reference into this consent solicitation and
prospectus additional documents that they may file with the SEC from the date of
this consent solicitation and prospectus to the date of the adoption of the
proposed amendments. These include Annual Reports on Forms 10-K and 20-F,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, any Reports on
Form 6-K designated as being incorporated by reference into this consent
solicitation and prospectus, as well as proxy statements filed by Y&R.
The WPP ADSs are quoted on the Nasdaq National Market. The WPP ordinary
shares are admitted to the Official List of the U.K. Listing Authority and trade
on the main market of the London Stock Exchange. The WPP ordinary shares also
trade on German stock exchanges in Berlin, Frankfurt, Munich and Stuttgart.
Shares of Y&R common stock are listed on the NYSE. The shares of Y&R common
stock will be delisted following completion of the merger. You may inspect any
periodic reports, proxy statements and other information filed with the SEC by
Y&R at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
You can obtain any of these documents we have incorporated by reference
through WPP or Y&R as described below, or the SEC or the SEC's Internet world
wide web site as described above. Documents incorporated by reference are
available without charge, excluding all exhibits unless an exhibit has been
specifically incorporated by reference into this consent solicitation and
prospectus. You may obtain documents incorporated by reference into this consent
solicitation and prospectus by requesting them in writing, by telephone or by
e-mail from the appropriate company at the following addresses:
<TABLE>
<S> <C> <C>
WPP Group plc WPP Group plc Young & Rubicam Inc.
c/o WPP Group USA, Inc. 27 Farm Street 285 Madison Avenue
Worldwide Plaza London WIX 6RD New York, NY 10017
309 West 49th Street England Tel: (212) 210-3000
New York, NY 10019 Tel: (011 44) 20 7408 2204 Attention: Investor Relations
Tel: (212) 632-2200 Attention: Andrea Harris, Esq.
Attention: Paul W. G.
Richardson
</TABLE>
If you would like to request documents from WPP or Y&R, please do so by
September 22, 2000 to receive them before the expiration date of the consent
solicitation.
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE INTO THIS CONSENT SOLICITATION AND PROSPECTUS IN DETERMINING WHETHER
TO CONSENT TO THE PROPOSED AMENDMENTS. NO ONE HAS BEEN AUTHORIZED TO PROVIDE YOU
WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN, OR INCORPORATED BY
REFERENCE INTO, THIS CONSENT SOLICITATION AND PROSPECTUS. THIS CONSENT
SOLICITATION AND PROSPECTUS IS DATED AUGUST 29, 2000. YOU SHOULD NOT ASSUME THAT
THE INFORMATION CONTAINED IN, OR INCORPORATED BY REFERENCE INTO, THIS CONSENT
SOLICITATION AND PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE.
NEITHER OUR MAILING OF THIS CONSENT SOLICITATION AND PROSPECTUS TO YOU NOR THE
CONVERSION OF YOUR EXISTING NOTES TO GUARANTEED NOTES SHALL CREATE ANY
IMPLICATION TO THE CONTRARY. INFORMATION CONTAINED IN THIS CONSENT SOLICITATION
AND PROSPECTUS REGARDING WPP HAS BEEN PROVIDED BY WPP, AND INFORMATION CONTAINED
IN THIS CONSENT SOLICITATION AND PROSPECTUS REGARDING Y&R HAS BEEN PROVIDED BY
Y&R.
16
<PAGE>
RISK FACTORS
An investment in the notes, and the WPP ADSs, and the underlying WPP
ordinary shares, into which the notes will be convertible after the merger,
involves a number of risks. You should consider carefully the following
information about these risks, together with the other information included in
and incorporated by reference into this consent solicitation and prospectus. In
addition, you should note that a shelf registration statement filed by Y&R on
Form S-3 (Registration No. 333-34948) covering resales of your existing notes
and the shares of Y&R common stock issuable upon conversion of those notes
became effective on July 10, 2000. In that registration statement, Y&R has
described various risk factors that could be applicable to an investment in the
existing notes and/or in the shares of Y&R common stock issuable upon conversion
of those notes if the merger and the transactions proposed in this consent
solicitation and prospectus (including registration of the notes and WPP's
agreement to guarantee the notes) are not completed.
THE PERFORMANCE OF THE MERGED COMPANY WILL BE AFFECTED BY ITS ABILITY TO RETAIN
KEY PERSONNEL.
Because our respective employees, including our creative, research, media,
account and practice group specialists, and their skills and relationships with
clients, are among our most important assets, the performance of the post-merger
combined company will be affected by its ability to retain these employees after
the completion of the merger.
Other than 22 senior executives and other key employees who have entered
into employment agreements with Y&R in connection with the merger agreement,
personnel of Y&R are generally not subject to employment contracts and therefore
may terminate their employment at any time. Furthermore, those 22 individuals
with employment agreements may voluntarily terminate their employment at any
time, although in doing so they would forfeit their rights under the employment
agreements to receive salary, bonuses, benefits and other compensation.
Upon completion of the merger, all unvested stock options held by employees
of Y&R, other than those received by employees in Y&R's annual stock option
grant made in April 2000 and those granted thereafter, will become fully vested
and immediately exercisable for WPP shares. Y&R employees, other than a group of
senior Y&R executives who have agreed not to sell two-thirds of their stock and
options for one year ending May 11, 2001, will be free to sell the WPP shares
they receive upon exercise of these options. In addition, under Y&R's change in
control severance plan and under the employment agreements entered into by the
22 senior executives and other key employees of Y&R, senior and key employees of
Y&R will be entitled to receive severance payments if their employment is
terminated by the combined company without cause, or if they terminate their
employment for good reason, after completion of the merger.
We cannot assure you that employees of Y&R or WPP, including senior
executives and key employees, will not terminate their employment in connection
with or after completion of the merger. If the combined company is unable to
retain Y&R's and WPP's senior executives and key employees, or attract qualified
personnel to replace any employees who leave, the business of the combined
company may be materially and adversely impacted.
WE MAY LOSE EXISTING CLIENTS AS A RESULT OF THE MERGER.
The performance of the combined company will be affected by its ability to
retain the existing clients of WPP and Y&R and attract new clients. Our ability
to retain existing clients and attract new clients may, in some cases, be
limited by clients' policies on conflicts of interest. These policies can in
some cases prevent one agency, and, in limited circumstances, different agencies
within the same holding company, from performing similar services for competing
products or companies. Although we do not believe that clients will terminate
relationships where conflicts exist, those conflicts could result in clients
terminating their relationship with the agencies of the combined company or
reducing the projects for which they retain those agencies. Moreover, because of
the combined company's larger number of clients, there could be a greater
likelihood of conflict with potential new clients in the
17
<PAGE>
future. If the combined company fails to maintain existing clients or attract
new clients, its business may be materially and adversely impacted.
WE MAY NOT REALIZE THE COST SAVINGS AND OTHER BENEFITS WE EXPECT FROM THE
MERGER.
We expect that the merger will result in cost savings and other benefits to
the combined company. In that regard, we have quantified to date estimated
pre-tax annual cost savings of $30 million that we expect to result from the
merger by the end of 2001. We also expect to realize various other benefits.
However, our cost savings estimate is inherently subject to significant
uncertainties and contingencies, many of which are beyond the control of WPP and
Y&R. There can be no assurances that the combined company will achieve these
cost savings, and actual savings may vary materially from this estimate. In
particular, the combined company's ability to successfully realize these cost
savings and benefits and the timing of this realization may be affected by a
variety of factors, including:
- its broad geographic areas of operations and the resulting potential
complexity of implementing cost savings;
- the failure to fully develop or carry out its cost savings implementation
plans; and
- unexpected events, including major changes in the advertising, marketing
and communications services industries.
If the cost savings or benefits we expect are not realized or are delayed,
the market price of the WPP ADSs and ordinary shares could be adversely
affected.
THE MARKET PRICE OF THE WPP ADSS AND ORDINARY SHARES MAY BE SUBJECT TO DOWNWARD
PRESSURE FOR A PERIOD OF TIME AS A RESULT OF SALES OF Y&R COMMON STOCK AND WPP
SHARES BY Y&R STOCKHOLDERS.
In connection with the merger, stockholders of Y&R may sell a significant
number of shares of Y&R common stock, or the WPP ADSs or ordinary shares they
will receive in the merger. These sales could adversely affect the market price
for the WPP ADSs and ordinary shares for a period of time before and after
completion of the merger. You should be aware that:
- some U.S. mutual funds, state pension funds and other investors are not
permitted to hold equity securities of non-U.S. companies;
- some mutual funds and other investors hold shares of Y&R because it is
included in the S&P 500 Index, and WPP shares are not included in that
index; and
- as of May 15, 2000, the last date for which this information is available,
employees of Y&R held an aggregate of approximately 9,600,000 shares of
Y&R common stock received pursuant to equity grants made by Y&R, and as of
August 4, 2000, they held options to acquire approximately 23 million
shares of Y&R common stock. Approximately 21 million of these options will
be fully vested and immediately exercisable upon the completion of the
merger.
Contemporaneously with the execution of the merger agreement, WPP entered
into sale restriction agreements with senior executives, and a former senior
executive of Y&R, under which they have agreed not to sell a total of
approximately six million shares of their Y&R common stock and/or the shares
received upon the exercise of stock options (and, following completion of the
merger, the WPP shares they will receive in the merger or upon the exercise of
stock options that will become exercisable for WPP shares) for the one year
period ending May 11, 2001, unless the covered executive is either terminated
without "cause" or resigns for "good reason" as defined in the sale restriction
agreements prior to May 11, 2001.
OUR ABILITY TO REPURCHASE GUARANTEED NOTES IF A DESIGNATED EVENT OCCURS IS
SUBJECT TO LIMITATIONS.
Our ability to repurchase guaranteed notes upon the occurrence of a
designated event, a term we define on page 41 of this consent solicitation and
prospectus, 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
18
<PAGE>
financing, to pay the repurchase price for all guaranteed 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 complete a repurchase. In addition, future
credit agreements or other agreements relating to our indebtedness may contain
prohibitions or restrictions on our ability to complete a repurchase. In the
event a designated event occurs at a time when these prohibitions or
restrictions are in effect, we could seek the consent of our lenders and lenders
to our subsidiaries to enable us to repurchase guaranteed notes or could attempt
to refinance the borrowings that contain these prohibitions or restrictions. If
we do not obtain these consents or repay these borrowings, we will be
effectively prohibited from repurchasing the guaranteed notes. In this case, our
failure to repurchase the guaranteed notes would constitute an event of default
under the indenture. Any default may, in turn, cause a default under our other
debt.
THE GUARANTEED NOTES WILL BE SUBORDINATED TO SENIOR INDEBTEDNESS OF Y&R.
The guaranteed notes will be unsecured and will be subordinated in right of
payment to all future indebtedness of Y&R and its subsidiaries ranking senior to
the notes. The guaranteed notes also will be effectively subordinated to the
indebtedness and other obligations, including trade payables, of all
subsidiaries of Y&R. Although we expect that after completion of the merger Y&R
will have no indebtedness outstanding that would constitute senior debt, 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
Y&R and its subsidiaries could adversely affect Y&R's ability to pay its
obligations on the guaranteed notes. In addition, in the event of bankruptcy,
liquidation or reorganization of Y&R or upon acceleration of the guaranteed
notes due to an event of default under the indenture and in various other
events, the assets of Y&R will be available to pay obligations on the guaranteed
notes only after all of Y&R's 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
guaranteed notes then outstanding. If, as a result of the foregoing, Y&R is
unable to pay its obligations under the guaranteed notes, it will be necessary
for you to rely on WPP's guarantee to receive payment. See "Description of the
Guaranteed Notes and the WPP Guarantee--Ranking of Notes" on page 46.
THE WPP GUARANTEE WILL BE UNSECURED AND WILL RANK EQUALLY WITH THE OTHER
UNSECURED OBLIGATIONS OF WPP.
The WPP guarantee will be a direct, unsecured obligation of WPP which will
rank equally with all other unsecured obligations of WPP. WPP's obligation with
respect to its guarantee will also be effectively subordinated to all
indebtedness and other obligations, including trade payables, of WPP's
subsidiaries. Although WPP and its subsidiaries are limited in their ability to
incur additional indebtedness by a credit agreement entered into on August 7,
2000 with various lenders, the indenture itself will not place any restrictions
on the incurrence of additional indebtedness and other liabilities by WPP or any
of its subsidiaries. The incurrence of additional indebtedness and other
liabilities by WPP and its subsidiaries could adversely affect WPP's ability to
pay its obligations under the WPP guarantee. See "Description of the Guaranteed
Notes and the WPP Guarantee--Ranking of Notes" on page 46.
THERE IS NO PUBLIC TRADING MARKET FOR THE GUARANTEED NOTES.
There is no established public trading market for the existing notes and
there can be no assurance as to the liquidity of any market for the guaranteed
notes that may develop, the ability of holders of the guaranteed notes to sell
those notes, the price at which the holders of guaranteed 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 guaranteed 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 our operating results.
19
<PAGE>
FORWARD-LOOKING STATEMENTS
This consent solicitation and prospectus, and the documents we are
incorporating by reference, contain forward-looking statements about Y&R and
WPP. Forward-looking statements are statements that are not historical facts and
include financial projections and estimates and their underlying assumptions;
statements regarding plans, objectives and expectations with respect to future
operations, products and services; and statements regarding future performance.
Forward-looking statements are generally identified by the words "expects,"
"anticipates," "believes," "intends," "estimates" and similar expressions.
The forward-looking statements in this consent solicitation and prospectus
are subject to various risks and uncertainties, most of which are difficult to
predict and are generally beyond the control of WPP and Y&R. Accordingly, actual
results may differ materially from those expressed in, or implied by, the
forward-looking statements. The risks and uncertainties to which forward-looking
statements are subject include:
- those we discuss under "Risk Factors;"
- those we discuss or identify in our public filings with the SEC;
- growth and expansion opportunities;
- market positions;
- the conduct of worldwide operations;
- earnings improvements;
- cost savings;
- revenue growth;
- benefits anticipated from the merger;
- gains and losses of clients and client business and projects;
- changes in the marketing and communications budgets of clients;
- changes in management or ownership of clients;
- retention of, and ability to attract, qualified employees; and
- the effects of:
-- foreign exchange rate fluctuations;
-- regional, national and international economic conditions, including
changes in interest rates and the performance of the financial
markets;
-- changes in industry rates of compensation;
-- changes in regional, national and international laws;
-- regulations and taxes;
-- changes in competition and pricing environments;
-- the occurrence of natural disasters;
-- regional, national and international market and industry conditions;
and
-- regional, national and international political conditions.
The actual results, performance or achievement by Y&R, WPP or the combined
company could differ significantly from those expressed in, or implied by, our
forward-looking statements. Accordingly, we cannot assure you that any of the
events anticipated by the forward-looking statements will occur, or if they do,
what impact they will have on the results of operations and financial conditions
of Y&R, WPP or the combined company following the merger.
20
<PAGE>
THE CONSENT SOLICITATION
THE SOLICITATION
Y&R is soliciting your consent to the proposed amendments to the indenture
governing your notes and the related registration agreement upon the terms and
subject to the conditions of this consent solicitation and prospectus, the
accompanying letter of consent, applicable law and, to the extent applicable,
the indenture. If we receive the requisite consents to adopt the proposed
amendments and we complete the merger, WPP will irrevocably, fully and
unconditionally guarantee Y&R's payment obligations under the terms of your
notes to the fullest extent permitted by law. In addition, if we adopt the
proposed amendments, the guaranteed notes and the WPP ADSs issuable upon
conversion of those notes will be registered under the Securities Act. As a
result, unless you are an affiliate of WPP or Y&R, these guaranteed notes and
the WPP ADSs issuable upon conversion of those notes will not be subject to any
restrictions that may be applicable to the resale of your existing notes, and
the Y&R common stock issuable upon conversion of your existing notes and your
guaranteed notes and the WPP ADSs will be freely transferable without further
registration. We describe the proposed amendments under "The Proposed
Amendments" beginning on page 25 and the WPP guarantee under "Description of the
Guaranteed Notes and the WPP Guarantee--The WPP Guarantee" on page 39.
REQUISITE CONSENTS; RECORD DATE; OUTSTANDING NOTES
In order to adopt the proposed amendments, we must obtain the valid and
unrevoked consents of registered holders of a majority in aggregate principal
amount of all notes outstanding at the close of business on August 28, 2000, the
record date for determining the noteholders entitled to deliver consents in
connection with this consent solicitation. As of the close of business on the
record date, notes with an aggregate principal amount of $287,500,000 were
outstanding. Accordingly, to obtain the requisite consents, we must receive the
consent of the holders of at least $143,751,000 aggregate principal amount of
notes.
Because we must obtain consents from holders of a majority in aggregate
principal amount of all notes outstanding, the failure of a holder to deliver,
or cause to be delivered, a consent with respect to any notes (including any
failures resulting from broker non-votes) will have the same effect as if that
holder had marked "DOES NOT CONSENT" to the proposed amendments on the letter of
consent.
To our knowledge, no director or executive officer of WPP or Y&R or any of
their affiliates held any notes as of the close of business on the record date.
EXPIRATION DATE; EXTENSION OF THE CONSENT SOLICITATION PERIOD; AMENDMENT;
TERMINATION
The solicitation period will expire at 5:00 p.m., New York City time, on
September 29, 2000, unless we extend this period. If, at that time, we have
obtained the requisite consents, Y&R will so certify to the indenture trustee,
and the consents will become effective and irrevocable. We refer to the time Y&R
delivers this certification as the "CONSENT CERTIFICATION TIME." In the event
that we do not receive the requisite consents prior to the expiration of the
solicitation period, we reserve the right to extend the solicitation period on
one or more occasions. If we extend the solicitation period, we will give oral
or written notice of this extension to the indenture trustee and make a public
announcement of this extension by no later than 9:00 a.m. (Eastern time) on the
next business day after the scheduled expiration date of the solicitation
period.
If the merger has been completed at the consent certification time, the
proposed amendments and WPP's guarantee will become effective at that time.
However, if the merger has not been completed at the consent certification time,
we will not adopt the proposed amendments and WPP will not issue its guarantee
until the merger is completed. During any period between the consent
certification time and the completion of the merger, the consents will be
effective and irrevocable.
We also reserve the right, exercisable in our sole discretion, to terminate
the consent solicitation and not adopt the proposed amendments, whether or not
we have received the requisite consents, by
21
<PAGE>
giving oral or written notice of termination to the indenture trustee and making
a public announcement of termination. In the event that we terminate the consent
solicitation or we do not adopt the proposed amendments, WPP will not fully and
unconditionally guarantee the notes and the notes and the shares issuable upon
conversion will not be registered under the Securities Act, unless transferred
to a non-affiliate after July 10, 2000 pursuant to Y&R's shelf registration
statement, and will remain subject to any existing resale restrictions. We also
reserve the right, subject to applicable laws, to amend this consent
solicitation in any respect by giving oral or written notice of the amendment to
the indenture trustee and making a public announcement of the amendment.
If we make any public announcement in connection with the consent
solicitation, we will disseminate it to noteholders in a manner reasonably
designed to inform noteholders of the announced change on a timely basis.
Without limiting the manner in which we may choose to make a public
announcement, except as may be required by applicable law, we will have no
obligation to publish, advertise or otherwise communicate any public
announcement other than by issuing a release to the Dow Jones News Service.
CONSEQUENCES TO NON-CONSENTING HOLDERS
If we execute the supplemental indenture and the amendment to the
registration agreement providing for the proposed amendments, they will be
binding on each holder of notes, and the existing notes of each holder will
automatically become registered guaranteed notes, regardless of whether or not
that holder delivered its consent.
CONSENT PROCEDURES
In order to consent to the proposed amendments, a noteholder must execute
and deliver to the Information Agent at the address set forth on the back cover
of this consent solicitation and prospectus a copy of the accompanying letter of
consent, or cause a letter of consent to be delivered to the Information Agent
on the noteholder's behalf, before the expiration of the solicitation period in
accordance with the following procedures.
In accordance with the indenture governing the notes, only registered
holders of the notes as of the close of business on the record date may execute
and deliver to the Information Agent before the expiration of the solicitation
period a letter of consent with respect to the proposed amendments. Currently,
substantially all of the outstanding notes are represented by a single, global
note registered in the name of a nominee of The Depository Trust Company, or
DTC. We expect that DTC will authorize its participants, which include banks,
brokers and other financial institutions, to execute letters of consent with
respect to the notes they hold through DTC as if the participants were the
registered holders of those notes. Accordingly, for purposes of the consent
solicitation, when we use the term "registered holders," we include bank,
brokers and other financial institutions that are participants of DTC.
If you are a beneficial owner of notes held through a bank, broker or other
financial institution, to consent to the proposed amendments, you must arrange
for the bank, broker or other financial institution that is the registered
holder to either (1) execute a letter of consent and deliver it either to the
Information Agent on your behalf or to you for forwarding to the Information
Agent before the expiration of the solicitation period or (2) forward a duly
executed proxy from the registered holder authorizing you to execute and deliver
a letter of consent with respect to the notes on behalf of the registered
holder. You must deliver an executed letter of consent, together with this
proxy, to the Information Agent before the expiration of the solicitation
period. Beneficial owners of notes are urged to contact the bank, broker or
other financial institution through which they hold their notes to obtain a
valid proxy or to direct that a letter of consent be executed and delivered in
respect of their notes.
Giving a consent will not affect a holder's right to sell or transfer the
notes. All consents received before the expiration date and not revoked prior to
the consent certification time will be effective notwithstanding a transfer of
those notes subsequent to the record date.
22
<PAGE>
REGISTERED HOLDERS OF NOTES AS OF THE RECORD DATE WHO WISH TO CONSENT SHOULD
MAIL, HAND DELIVER OR SEND BY OVERNIGHT COURIER OR FACSIMILE THEIR PROPERLY
COMPLETED AND EXECUTED LETTERS OF CONSENT, A COPY OF WHICH ACCOMPANIES THIS
CONSENT SOLICITATION AND PROSPECTUS, TO THE INFORMATION AGENT AT THE ADDRESS SET
FORTH ON THE BACK COVER PAGE OF THIS CONSENT SOLICITATION AND PROSPECTUS, IN
ACCORDANCE WITH THE INSTRUCTIONS SET FORTH IN THIS CONSENT SOLICITATION AND
PROSPECTUS AND ON THE ACCOMPANYING LETTER OF CONSENT. LETTERS OF CONSENT SHOULD
BE DELIVERED TO THE INFORMATION AGENT, NOT TO WPP, Y&R OR THE INDENTURE TRUSTEE.
HOWEVER, WE RESERVE THE RIGHT TO ACCEPT ANY LETTER OF CONSENT RECEIVED BY WPP,
Y&R OR THE INDENTURE TRUSTEE.
All letters of consent that are properly completed, executed and delivered
to the Information Agent, and not revoked prior to the consent certification
time, will be given effect in accordance with the specifications of those
letters of consent. Registered holders who desire to consent to the proposed
amendments should mark the "CONSENTS" box on, and complete, sign and date, the
letter of consent accompanying this consent solicitation and prospectus and
mail, deliver or send by overnight courier or facsimile (confirmed by the
consent certification time by physical delivery) the signed letter of consent to
the Information Agent at the address set forth on the back cover page of this
consent solicitation and prospectus and on the accompanying letter of consent,
all in accordance with the instructions contained in this document and in the
letter of consent. If none of the boxes in the letter of consent is marked, but
the letter of consent is otherwise properly completed and signed, the registered
holder will be deemed to have consented to the proposed amendments.
Letters of consent delivered by the registered holder(s) of notes as of the
record date must be executed in exactly the same manner as those registered
holder(s) name(s) appear(s) on the certificates representing the notes or on the
position listings of DTC, as applicable. If notes to which a letter of consent
relate are registered in the names of two or more joint holders, all of those
holders must sign the letter of consent. If a letter of consent is signed by a
trustee, partner, executor, administrator, guardian, attorney-in-fact, officer
of a corporation or other person acting in a fiduciary or representative
capacity, that person must so indicate when signing. In addition, if a letter of
consent relates to less than the total principal amount of notes registered in
the name of a holder, the registered holder must list the serial numbers and
principal amount of notes registered in the name of that holder to which the
letter of consent relates. If notes are registered in different names, separate
letters of consent must be signed and delivered with respect to each registered
note. If a letter of consent is executed by a person other than the registered
holder, then it must be accompanied by a proxy executed by the registered
holder.
All questions as to the validity, form and eligibility regarding the consent
procedures will be determined by WPP and Y&R, which determination will be
conclusive and binding, subject only to final review as may be prescribed by the
indenture trustee concerning proof of execution and ownership. We also reserve
the right, subject to any final review that the indenture trustee prescribes for
proof of execution and ownership, to waive any defects or irregularities in
connection with deliveries of particular letters of consent. Our interpretations
of the terms and conditions of the consent solicitation shall be conclusive and
binding.
REVOCATION OF CONSENTS
Each properly completed and executed letter of consent will be counted,
notwithstanding any transfer of the notes to which the letter of consent
relates, unless the procedure for revoking consents described below has been
followed.
Prior to the consent certification time, any registered holder of notes as
of the close of business on the record date may revoke any consent given as to
its notes or any portion of its notes (in integral multiples of $1,000). A
registered holder of notes may revoke a consent by delivering to the Information
Agent at the address set forth on the back cover page of this consent
solicitation and prospectus or the indenture trustee a written notice of
revocation of the consent (which may be in the form of a subsequently dated
letter of consent marked with a specification, i.e., "CONSENTS" or
23
<PAGE>
"DOES NOT CONSENT") containing the name of the registered holder, the serial
numbers of the notes to which the revocation relates, the principal amount of
notes to which the revocation relates and the signature of the registered
holder. Only a registered holder of notes as of the record date is entitled to
revoke a consent previously given.
A beneficial owner of notes who is not the registered holder as of the
record date of notes in respect of which the beneficial owner desires to revoke
a previously delivered consent must arrange with the registered holder to either
(1) execute and deliver to the Information Agent on the beneficial owner's
behalf, or to the beneficial owner for forwarding to the Information Agent by
the beneficial owner, in either case before the consent solicitation time, a
notice of revocation of any consent already given with respect to those notes or
(2) forward a duly executed proxy from the registered holder authorizing the
beneficial holder to deliver a notice of revocation on behalf of the registered
holder as to that consent. To revoke the consent, the beneficial owner must
deliver an executed notice of revocation, together with this proxy, to the
Information Agent before the consent certification time.
Any notice of revocation must be executed by a registered holder in the same
manner as the holder's name appears on the letter of consent to which the
revocation relates. If a notice of revocation is signed by a trustee, partner,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, that person must
so indicate when signing and must submit with the notice of revocation
appropriate evidence of authority to execute the revocation. A revocation of a
consent will be effective only as to the notes listed on the applicable notice
of revocation and only if that notice of revocation complies with the procedures
for revocation of consents described in this consent solicitation and
prospectus.
We reserve the right to contest the validity of any revocation, and all
questions as to validity, including time of receipt of any revocation will be
determined by Y&R and WPP. Our determination will be conclusive and binding
subject only to any final review as may be prescribed by the indenture trustee
concerning proof of execution and ownership. None of Y&R, WPP, any of their
affiliates, the Information Agent, the indenture trustee or any other person
will be under any duty to give notification of any defects or irregularities
with respect to any revocation nor will any of them be liable for failure to
give any notification.
INFORMATION; ASSISTANCE
We have retained MacKenzie Partners, Inc. to act as the Information Agent in
connection with the consent solicitation. You may direct requests for assistance
in completing or delivering letters of consent or for additional copies of this
consent solicitation and prospectus to the Information Agent at 156 Fifth
Avenue, New York, NY 10010, or by telephone at (800) 322-2885. The Information
Agent will also be responsible for collecting letters of consent and notices of
revocation. You may also contact your bank, broker or other financial
institution for assistance concerning the consent solicitation.
The Information Agent will receive reasonable and customary compensation for
its services, will be reimbursed by Y&R (and, if the merger is not completed,
Y&R will be reimbursed by WPP) for various reasonable out-of-pocket expenses and
will be indemnified against various liabilities in connection with the consent
solicitation, including liabilities under the federal securities laws.
No fees or commissions (other than fees to the Information Agent as
described above) will be payable by Y&R or WPP to brokers, dealers or other
persons for soliciting consents of noteholders pursuant to the consent
solicitation. Y&R, however, upon request, will reimburse brokers, dealers and
commercial banks for customary mailing and handling expenses incurred by them in
forwarding this consent solicitation and prospectus and related materials to the
beneficial owners of notes held by them as a nominee or in a fiduciary capacity.
If the merger is not completed, WPP will reimburse Y&R for out-of-pocket fees or
expenses incurred by Y&R in connection with the consent solicitation. No broker,
dealer, commercial bank or trust company has been authorized to act as the agent
of Y&R, WPP or the Information Agent for purposes of the consent solicitation.
24
<PAGE>
THE PROPOSED AMENDMENTS
We describe below the proposed financial information and registration
agreement amendments to the indenture governing the notes and the related
registration agreement. This description is only a summary and is qualified in
its entirety by reference to (1) the relevant terms of the indenture and the
registration agreement as currently in effect and the terms of the proposed
amendments which we have set forth in Appendix A to this consent solicitation
and prospectus and (2) the forms of the supplemental indenture and registration
agreement amendment containing the proposed amendments. The indenture and the
registration agreement and the forms of the supplemental indenture and
registration agreement amendment, all of which are included as exhibits to the
registration statements of which the consent solicitation and prospectus forms a
part, are incorporated by reference into this document. Copies of the indenture,
registration agreement and the forms of the supplemental indenture and
registration agreement amendment are available from WPP or Y&R as set forth
under "Summary--Where You Can Find More Information" on page 15. The forms of
the supplemental indenture and registration agreement amendment may be modified
or supplemented prior to their execution in a manner that would not require us
to obtain additional consents. Noteholders should carefully review the proposed
amendments, including the text of the material provisions set forth in
Appendix A, prior to delivering letters of consents. For the reasons described
below, we recommend that you consent to the proposed amendments.
THE FINANCIAL INFORMATION AMENDMENT
DESCRIPTION OF THE FINANCIAL INFORMATION AMENDMENT. The indenture currently
provides that, whether or not required by the rules and regulations of the SEC,
so long as any notes are outstanding, Y&R must 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 Conditions and Results of Operations" and, with respect to Y&R's
annual financial statements only, a report on the annual consolidated financial
statements by Y&R's independent auditors.
We are proposing to amend the indenture to permit WPP to satisfy, on behalf
of Y&R, Y&R's obligation under this provision (so long as Y&R is a wholly owned
subsidiary of WPP) by preparing and filing with the SEC all periodic reports WPP
is required to file under the Exchange Act and furnishing noteholders and the
indenture trustee with all financial information WPP furnishes to the holders of
WPP ADSs.
We are also proposing to amend the indenture to eliminate a provision which
would require Y&R, if it is at any time not subject to the periodic reporting
requirements of the Exchange Act, to provide, upon request, to holders of notes
and shares issued upon conversion of the notes, and to any prospective purchaser
designated by any such holder, the information required by Rule 144A(d)(4) under
the Securities Act. To satisfy the informational requirements of
Rule 144A(d)(4), Y&R would be required to furnish a brief statement of nature of
Y&R's business and the products and services it offers, its most recent balance
sheet and a profit and loss and retained earnings statement and similar
financial information for the prior two years.
We describe below the reports WPP is currently required to file with the
SEC, the financial and other information WPP furnishes to holders of WPP ADSs
and our reasons for and the purpose of the financial information amendment.
WPP REPORTS AND INFORMATION. As a foreign private issuer under SEC rules,
under the Exchange Act, WPP is required to file with the SEC an annual report on
Form 20-F within six months after the end of each fiscal year. This annual
report contains, among other things, a description of WPP's businesses, the
nature of the trading market for WPP ADSs and ordinary shares, tax matters
applicable to owners of WPP shares, a "Management's Discussion and Analysis of
Financial Condition and Results of Operations," information regarding directors
and officers of WPP and their compensation, including compensation information
regarding WPP's chief executive and the four other most highly
25
<PAGE>
compensated employees, and audited financial statements for WPP prepared in
accordance with U.K. GAAP, including a reconciliation of those financial
statements to U.S. GAAP.
WPP is also required to furnish to the SEC reports on Form 6-K containing
all material information, including press releases and financial results, that
WPP makes or is required to make public under U.K. law, files or is required to
file with any exchange on which WPP's securities trade (if made public by the
exchange) or distributes or is required to distribute to its security holders.
Because WPP is a foreign private issuer under SEC rules, WPP is not required
under the Exchange Act to file quarterly reports after the end of each fiscal
quarter.
In contrast, as a U.S. reporting company, Y&R is currently required to file
with the SEC an Annual Report on Form 10-K within 90 days after the end of each
fiscal year; a Quarterly Report on Form 10-Q within 45 days after the end of
each fiscal quarter; and Current Reports on Form 8-K upon the occurrence of
various corporate events. Y&R is also required to mail to its stockholders in
advance of each annual meeting of stockholders an annual report containing
audited financial statements and a proxy statement that complies with the
requirements of the Exchange Act.
Although WPP, as a foreign private issuer under SEC rules, is exempt from
the rules under the Exchange Act regarding the furnishing of annual reports and
a proxy statement, under the rules of the Nasdaq National Market, WPP is
required to distribute to the holders of its ADSs an annual report containing
audited financial statements a reasonable period of time before WPP's annual
general meeting of its share owners. WPP currently furnishes holders of its
ordinary shares and ADSs with its Annual Report and Accounts, which contain
audited financial statements prepared in conformity with U.K. GAAP, including
U.S. GAAP reconciliations, a discussion of WPP's financial results comparable to
the management's discussion and analysis that is contained in Y&R's Annual
Reports on Form 10-K and compensation information similar to that contained in
Y&R's proxy statements. WPP also furnishes those holders with semi-annual
interim reports, which include unaudited interim financial information prepared
in conformity with U.K. GAAP, and notices of meetings of share owners and
related documents in accordance with the rules of the London Stock Exchange. In
addition, the merger agreement between WPP and Y&R requires WPP to amend,
effective upon completion of the merger, its agreement with the depositary of
the WPP ADSs, to require WPP to furnish to the depositary sufficient copies of
all reports distributed by WPP to holders of its ordinary shares for
distribution to holders of WPP ADSs in the same manner as those reports are
distributed to holders of WPP ordinary shares. WPP plans to introduce quarterly
reporting in 2002. See "Description of WPP American Depositary Shares" on
page 60.
REASONS FOR AND PURPOSE OF THE FINANCIAL INFORMATION AMENDMENT. Y&R is
soliciting your consent to the proposed financial information amendment so that,
after the merger, we may save considerable expense by discontinuing the
preparation of separate financial information regarding Y&R, which is not likely
to be meaningful to you as a noteholder or required to be prepared under SEC
regulations.
After we complete the merger, you will be the holder of guaranteed notes
that will be convertible into WPP ADSs and, if the proposed amendments are
adopted, guaranteed by WPP. We believe that under these circumstances, the
detailed quarterly and annual financial information regarding Y&R that the
indenture currently requires Y&R to prepare and furnish is not likely to be
meaningful to you as a noteholder or material to an investor considering an
investment in the guaranteed notes. The financial information amendment would
permit WPP to furnish to you financial information regarding WPP instead of
information regarding Y&R.
Moreover, we expect that if we complete the merger and WPP guarantees Y&R's
payment obligations under the notes, Y&R will be exempt from the provisions of
the Exchange Act that now require Y&R to prepare and file Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and
the related financial information. This exemption could continue in effect so
long as Y&R remains a wholly owned subsidiary of WPP and WPP discloses certain
separate financial information regarding Y&R. Under SEC rules, to maintain this
exemption, WPP would be required to disclose in a footnote to WPP's financial
statements condensed consolidating financial
26
<PAGE>
information, including information on Y&R's assets and liabilities, results of
operations and cash flows in a level of detail similar to that currently
reflected in Y&R's interim financial statements. This information would be
presented in columnar form alongside separate columns providing similar
information for WPP and subsidiaries of WPP other than Y&R on a combined basis,
consolidating adjustments and total consolidated amounts for WPP and its
subsidiaries, including Y&R. We intend to disclose the necessary information as
required to maintain Y&R's exemption from the reporting requirements of the
Exchange Act. Accordingly, if you consent and we adopt the proposed financial
information amendment, Y&R will be able to cease preparation of the separate
financial information necessary to comply as a reporting issuer under the
Exchange Act.
If at any time after December 31, 2000, the notes are held by less than 300
holders of record, Y&R's obligation to comply with the reporting requirements of
the Exchange Act would be suspended whether or not Y&R is then maintaining the
exemption described above. At that time, it will then no longer be necessary for
Y&R to maintain the exemption described above or for WPP to continue to disclose
any financial information regarding Y&R. In calculating the number of holders of
record of the notes, each DTC participant holding notes through DTC would count
as a separate holder. In any event, WPP expects to continue to make periodic
report filings under the Exchange Act with respect to itself.
Furthermore, the notes were originally offered and sold pursuant to an
exemption from registration under the Securities Act. Accordingly, until the
time that a resale of a note or the shares issuable upon conversion of the note
is effected pursuant to registration under the Securities Act, that note or
those shares may only be resold pursuant to the shelf registration statement as
described below or pursuant to an exemption from the registration requirements
of the Securities Act. Rule 144A provides one of these exemptions if some
requirements are met, including the availability of certain financial
information regarding the issuer of the applicable securities such as that
required by Rule 144A(d)(4). As we describe below under "--Registration
Agreement Amendment," if the proposed amendments are adopted, the guaranteed
notes will have been registered under the Securities Act. As a result, unless
you are an affiliate of WPP or Y&R, you will be permitted to resell your
guaranteed notes and the WPP ADSs issuable upon conversion of the guaranteed
notes without relying on the exemption provided by Rule 144A. Accordingly, we
are proposing to eliminate the obligation under the indenture to provide
information under Rule 144A(d)(4) described under "--Description of the
Financial Information Amendment" above.
REGISTRATION AGREEMENT AMENDMENT
DESCRIPTION OF THE REGISTRATION AGREEMENT AMENDMENT. Neither the original
notes nor the shares issuable upon conversion of those notes were registered
under the Securities Act. As a result, noteholders could not offer or sell their
notes or those shares within the "United States" or for the account or benefit
of "U.S. Persons," as both these terms are defined in Regulation S under the
Securities Act, except in a transaction registered under the Securities Act or
in transactions exempt from, or not subject to the registration requirements of,
the Securities Act.
So that noteholders may have the opportunity to resell their notes and the
shares issuable upon conversion of the notes in a registered transaction, Y&R
entered into a registration agreement requiring it to keep a shelf registration
statement to allow for such resales continually effective, until the earliest
of:
- January 27, 2002;
- the date when the notes or the shares issuable upon conversion of the
notes may be sold by non-affiliates of Y&R pursuant to paragraph (k) of
Rule 144 (or any similar provision then in force) under the Securities
Act;
- the date when the notes or shares issuable upon conversion of the notes
are transferred pursuant to Rule 144 under the Securities Act (or any
similar provision then in force); and
- the date when all the notes or the shares issuable upon conversion of the
notes are sold pursuant to the shelf registration statement.
27
<PAGE>
On April 17, 2000, Y&R filed with the SEC a shelf registration statement
covering resales by holders of the notes and the shares issuable upon conversion
of the notes. This registration statement was declared effective on July 10,
2000. The shelf registration statement allows holders of existing notes who are
listed as selling security holders in the prospectus related to that
registration statement to transfer their notes subject to prospectus delivery
and other requirements. After any notes are transferred pursuant to the shelf
registration statement, those notes (and shares issuable upon conversion of
those notes) would be registered under the Securities Act and would be freely
transferable, unless held by an affiliate, and would not be subject to the
prospectus delivery requirements or the civil liability provisions under the
Securities Act.
Under the registration agreement, if the shelf registration statement ceases
to be effective or cannot otherwise be used for a period of time that exceeds
90 days in the aggregate in any 12-month period, Y&R is required to pay to
holders of notes, and holders' shares issuable upon conversion of the notes, in
each case that have not yet been registered and who have complied with their
obligations under the registration agreement, certain additional amounts.
We are proposing an amendment to the registration agreement that would
release Y&R from its obligation to maintain an effective shelf registration
statement.
REASONS FOR AND PURPOSE OF THE REGISTRATION AGREEMENT AMENDMENT. We are
proposing the registration agreement amendment because if the proposed
amendments are adopted, your existing notes will automatically become guaranteed
notes registered under the Securities Act. The guaranteed notes and the WPP ADSs
issuable upon conversion of the existing notes will therefore not be subject to
any existing restrictions on resale and will be freely transferable without
further registration, unless you are an affiliate of WPP or Y&R. Accordingly, as
a general matter, the maintenance of a continuously effective shelf registration
statement will not be necessary.
In addition, under the current registration agreement, a holder of notes or
shares issuable upon conversion of the notes who wishes to sell these securities
pursuant to the shelf registration statement is:
- required to be named as a selling security holder in the related
prospectus and to deliver a prospectus to purchasers;
- subject to certain of the civil liability provisions under the Securities
Act in connection with such sales; and
- bound by the provisions of the registration agreement that are applicable
to such holder, including certain indemnification and contribution rights
or obligations.
If the proposed amendments are adopted, you will be permitted to resell your
notes and shares issuable upon conversion of the notes without becoming subject
to any of the foregoing requirements.
OTHER PROVISIONS OF THE INDENTURE, THE REGISTRATION AGREEMENT AND THE EXHIBITS
THERETO
Other provisions of the indenture and the registration agreement may be
amended to make technical and conforming changes resulting from the proposed
amendments. We will also make conforming changes to the exhibits attached to
those documents.
CONDITIONS TO THE PROPOSED AMENDMENTS
The adoption of the proposed amendments is conditioned on (1) our receiving
the requisite consents to the proposed amendments and Y&R having so certified to
the indenture trustee and (2) our having completed the merger.
If the conditions to our adoption of the proposed amendments and WPP's
guarantee are satisfied, WPP and Y&R expect to execute and deliver to the
indenture trustee a supplemental indenture containing the proposed amendment to
the indenture, including WPP's full and unconditional guarantee of Y&R's payment
obligations under the notes. Y&R also expects to execute the proposed amendment
to the registration agreement. The supplemental indenture and the amendment to
the registration agreement will be effective as soon as they are executed.
28
<PAGE>
MATERIAL TAX CONSEQUENCES
The following is a summary of the material United States federal income tax
consequences to holders of the notes resulting from the proposed amendments to
the indenture governing the notes, the holding, conversion and disposition of
the notes and the holding and disposition of WPP ADSs or ordinary shares. Except
where otherwise noted, this summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), administrative pronouncements, judicial decisions
and existing and proposed U.S. Treasury Regulations, all as in effect on the
date of this consent solicitation and prospectus and all of which are subject to
change, possibly with retroactive effect. Neither WPP nor Y&R has requested, and
they do not intend to request, a ruling from the U.S. Internal Revenue Service
(the "IRS") with respect to any of the U.S. federal income tax consequences
described below, and, as a result, there can be no assurance that the IRS will
not disagree with or challenge any of the conclusions set forth in this consent
solicitation and prospectus. This summary assumes that the notes are held as
capital assets and does not address the tax consequences that may be relevant to
a holder subject to special U.S. tax rules, including, but not limited to,
dealers in securities or foreign currency, banks, trusts, insurance companies,
tax-exempt organizations, persons that hold notes as part of a straddle, hedge
against currency risk or constructive sale or conversion transaction, persons
that have a functional currency other than the U.S. dollar and investors in
pass-through entities. Moreover, this discussion does not address any aspect of
state or local tax considerations.
This discussion also does not address all aspects of U.S. federal income
taxation or U.K. taxation that may be relevant to a U.S. holder of notes or a
U.S. holder of WPP ADSs or ordinary shares in light of their particular
circumstances. For instance, the discussion does not address all aspects of U.S.
federal income taxation or U.K. taxation to an owner of a note or WPP ADSs or
ordinary shares:
- who is resident or, in the case of an individual owner of a note or WPP
ADSs or ordinary shares, ordinarily resident, in the U.K. for purposes of
the U.K.-U.S. Income Tax Treaty of December 31, 1975 and the U.K.-U.S.
Estate and Gift Tax Treaty of October 19, 1978;
- who carries on a trade in the U.K., which for this purpose includes a
profession or vocation in the U.K. through a branch or agency, and where
the notes, WPP ADSs or ordinary shares are or have been used, held or
acquired for the purpose of that trade, branch or agency; or
- who is an individual and who has, on or after March 17, 1998, ceased to be
resident or ordinarily resident for tax purposes in the U.K. and continues
to be neither resident nor ordinarily resident in the U.K. for a period of
less than five complete years of assessment for U.K. tax purposes.
As used in this document, the term "U.S. holder" means a beneficial owner of
a note or WPP ADSs or ordinary shares, that is, for U.S. federal income tax
purposes, (a) a citizen or individual resident of the United States, (b) a
corporation or partnership created or organized in or under the laws of the
United States or any political subdivision thereof, (c) an estate the income of
which is subject to United States federal income taxation regardless of its
source or (d) a trust if, in general, the trust is subject to the supervision of
a court within the Untied States and the control of one or more United States
persons as described in Section 7701(a)(30) of the Code. The term "non-U.S.
holder" means a beneficial owner of a note, guaranteed note or WPP ADSs or
ordinary shares, other than a U.S. holder.
An individual may, subject to certain exceptions, be deemed to be a U.S.
resident alien (as opposed to a nonresident alien) by virtue of being present in
the United States for at least 31 days in the calendar year and for an aggregate
of at least 183 days during a three-year period ending in the current calendar
year (counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year and one-sixth of
the days present in the second preceding year). U.S. resident aliens are subject
to United States federal income tax as if they were U.S. citizens.
29
<PAGE>
For purposes of the discussion below, we assume that the notes are publicly
traded property within the meaning of U.S. Treasury Regulations because actual
prices of recent sales transactions appear on a system of general circulation.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PROPOSED AMENDMENTS AND WPP
GUARANTEE
For U.S. federal income tax purposes, a modification of a debt instrument
results in a deemed exchange if the modification is significant. Under
applicable U.S. Treasury Regulations, a modification is significant, and
therefore results in exchange treatment, if, based on all the facts and
circumstances and taking into account certain modifications of the debt
instrument collectively, the degree to which legal rights or obligations are
altered is economically significant.
Under applicable U.S. Treasury Regulations, the conversion of the existing
notes into notes guaranteed by WPP will constitute a significant modification
only if the guarantee by WPP results in a change in payment expectations. For
these purposes, a change in payment expectations, as defined in the U.S.
Treasury Regulations, would occur only if (a) as a result of the transaction
there is a substantial enhancement of the obligor's capacity to meet the payment
obligations under the notes, and (b) such enhancement results in a change to an
adequate capacity from a primarily speculative capacity of the obligor to meet
its payment obligations under the notes. We do not believe that the adoption of
the proposed amendments to the indenture and the conversion of the existing
notes into notes guaranteed by WPP would give rise to a change in payment
expectations as that term is used in the U.S. Treasury Regulations. However,
since there may be an increase in the credit rating of the notes as a result of
the guarantee by WPP, it is possible that the IRS could assert that such an
increase created a change in payment expectations, and thus resulted in a
significant modification, under the U.S. Treasury Regulations. If the adoption
of the proposed amendments and the issuance of WPP's guarantee were
characterized as a significant modification and therefore resulted in a deemed
exchange of existing notes, such exchange should constitute a tax-free
recapitalization, in which a U.S. holder would not recognize any gain or loss. A
U.S. holder should have a tax basis in the guaranteed notes equal to the
adjusted tax basis in the existing notes and should also have the same holding
period in the guaranteed notes as in the existing notes.
If the adoption of the proposed amendments and the issuance of the WPP
guarantee were treated as a deemed exchange, but not as a recapitalization, a
holder would generally recognize gain or loss equal to the difference between
(a) the fair market value of the guaranteed notes on the date of the deemed
exchange (accrual basis holders may be required to use the face amount of the
guaranteed notes instead of their fair market value) and (b) such holder's
adjusted tax basis in its existing notes. In general, subject to market discount
rules discussed below, any such gain or loss should be capital gain or loss and
would generally be long-term capital gain or loss if the holder had held the
note for more than a year.
The remainder of this summary assumes that the proposed amendments to the
indenture and the conversion of the existing notes into notes guaranteed by WPP
do not result in a deemed exchange for U.S. federal income tax purposes. We urge
noteholders to consult their own tax advisors regarding the federal, state,
local and foreign tax consequences (including the possibility that a holder
could recognize ordinary income under the original issue and market discount
rules) in the event the IRS were to conclude that such an exchange occurred.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES APPLICABLE TO U.S. HOLDERS OF NOTES
TAXATION OF STATED INTEREST. 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
30
<PAGE>
(including a conversion into WPP ADSs) measured by the difference between
(a) 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 (b) the U.S.
holder's adjusted tax basis in the notes. A U.S. holder's adjusted tax basis in
the notes generally will equal the cost of the notes to the U.S. holder (or, in
the case of a note acquired as a result of the conversion of an existing note,
the tax basis of that note) 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 (except with respect to amounts received upon a disposition attributable to
accrued but unpaid interest or accrued market discount not previously included
in income, which in either case will be taxable as ordinary income) if the note
has been held or deemed held for more than one year at the time of the sale or
exchange, including the period before the notes are guaranteed by WPP.
CONVERSIONS OF NOTES TO WPP 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
under "--Sale, Exchange, Redemption or Retirement of Notes" above.
A U.S. holder of notes that prior to the merger exercises its right to
convert its notes into Y&R common stock will not recognize gain or loss as a
result of the conversion. Each U.S. holder of notes is therefore urged to
consider whether to convert its notes into Y&R common stock prior to the merger.
AMORTIZABLE PREMIUM. If a U.S. holder of a note purchases a note at a cost
greater than the amount payable at maturity, the holder 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 principal 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 Y&R common stock (prior to the merger) or WPP ADSs or ordinary
shares (after the merger) pursuant to the conversion feature, the amount of such
accrued market discount generally will be taxable as ordinary income upon the
conversion of the notes to Y&R common stock (prior to the merger) or WPP ADSs or
ordinary shares (after the merger). In addition, a 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.
31
<PAGE>
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.
ADJUSTMENTS TO CONVERSION RATE--CONSTRUCTIVE DIVIDENDS. If at any time
(a) WPP makes a distribution to its share owners or purchases ordinary shares in
a tender offer and such distribution or purchase would be taxable to such share
owners as a dividend for U.S. federal income tax purposes (e.g., distributions
of evidences of indebtedness or assets of WPP, but generally not stock dividends
or rights to subscribe for ordinary shares) and, pursuant to the antidilution
provisions of the indenture, the conversion rate of the notes is increased, or
(b) the conversion rate of the notes is increased at the discretion of WPP, 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 ordinary shares could, in some
circumstances, give rise to deemed dividend income to U.S. holders of such
ordinary shares.
CERTAIN U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO NON-U.S. HOLDERS OF
NOTES
INTEREST ON NOTES. Payment on a note by Y&R or any paying agent to a
"non-U.S. holder" 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 (a) 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 (including by virtue of
ownership of WPP ADSs or ordinary shares) and is not a controlled foreign
corporation related to Y&R through stock ownership and (b) the beneficial owner
of the note provides a statement signed under penalty 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). Non-U.S. holders who do not meet the
forgoing requirement may nevertheless avoid U.S. federal income tax or
withholding tax under the provisions of an applicable income tax treaty.
SALE, EXCHANGE, RETIREMENT OR REDEMPTION OF NOTES. In general, a non-U.S.
holder will not be subject to U.S. federal income tax on gain realized (except
with respect to amounts received upon a disposition attributable to accrued but
unpaid interest which are subject to the rules discussed under "--Interest on
Notes" above) on the sale, exchange, retirement or redemption of notes,
including conversion into WPP ADSs, unless (a) such gain is effectively
connected with the conduct by the holder of a trade or business in the United
States or (b) 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 (1) such gain or income is attributable to an office or other
fixed place of business maintained in the United States by such holder or
(2) such holder has a tax home in the United States.
CONVERSION OF NOTES TO 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 under "--Sale, Exchange, Retirement or Redemption of Notes" above.
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 (including by virtue of ownership of
WPP ADSs or ordinary shares) and, at the time of such holder's death, payments
of interest on such note would
32
<PAGE>
not have been effectively connected with the conduct by such holder of a trade
or business in the United States.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF OWNING WPP ADSS AND ORDINARY
SHARES
In general, for U.S. federal income tax purposes, U.S. holders of WPP ADSs
will be treated as the owners of the underlying WPP ordinary shares, and
deposits and withdrawals of WPP ordinary shares by U.S. holders in exchange for
WPP ADSs will not be subject to U.S. federal income tax.
TAXATION OF DIVIDENDS. For U.S. federal income tax purposes, a U.S. holder
will generally include in gross income the amount of any dividend paid by WPP
plus, provided that certain tax elections are made, as discussed more fully
below, the full amount of any U.K. tax credit considered to be received
(unreduced by any applicable U.K. withholding tax), to the extent paid out of
WPP's current and/or accumulated earnings and profits (as determined for U.S.
federal income tax purposes), as ordinary income when the dividend is actually
received by the U.S. holder in the case of WPP ordinary shares or constructively
received by the U.S. holder in the case of dividends paid to the depositary with
respect to WPP ADSs. The dividend will generally not be eligible for the
dividends-received deduction generally allowed to U.S. corporations in respect
of dividends received from other U.S. corporations. Distributions in excess of
WPP's current and/or accumulated earnings and profits, as determined for U.S.
federal income tax purposes, will be treated as a non-taxable return of capital
to the extent of the U.S. holder's tax basis in the WPP ADSs or ordinary shares
and thereafter as capital gain.
The amount of the dividend includible in the income of a U.S. holder will be
the U.S. dollar value of the dividend (including, provided that certain tax
elections are made, any U.K. tax credit considered to be received as described
below), determined at the spot rate on the date that dividend is includible in
the income of the U.S. holder, regardless of whether the payment is in fact
converted into U.S. dollars. A U.S. holder will have a basis in any pounds
sterling distributed by WPP equal to the U.S. dollar value of the pounds
sterling on the date it is actually or constructively received by the U.S.
holder, in the case of WPP ordinary shares, or by the depositary, in the case of
WPP ADSs. Generally, any gain or loss resulting from currency exchange
fluctuations during the period from the date the dividend payment is includible
in income to the date that payment is converted into U.S. dollars will be
treated as ordinary income or loss. This gain or loss will generally be income
from sources within the U.S. for foreign tax credit limitation purposes.
Under the U.K.-U.S. Income Tax Treaty, a beneficial owner of WPP shares and
of any cash dividend paid on WPP shares who is a U.S. person for U.S. federal
income tax purposes and who is eligible for benefits under the U.K.-U.S. Income
Tax Treaty with respect to income derived in connection with those shares (an
"eligible U.S. holder") who receives a dividend from WPP may be entitled to a
foreign tax credit for any U.K. tax withheld; provided such eligible U.S. holder
makes an election to be treated as receiving the tax credit due under the
U.K.-U.S. Income Tax Treaty. If an eligible U.S. holder is so entitled, the
foreign tax credit generally would be equal to one-ninth of any cash dividend
received and would give rise to additional dividend income in the same amount.
For foreign tax credit limitation purposes, WPP expects that dividends paid by
WPP will be income from sources outside of the U.S., but generally will be
treated separately, together with other items of "passive income" or, in the
case of certain holders, "financial services income."
It is possible that, after the merger, WPP will be at least 50% owned by
persons treated as U.S. persons under the Code. Under Section 904(g) of the
Code, dividends paid by a non-U.S. corporation that is at least 50% owned by
U.S. persons may be treated as U.S. source income rather than non-U.S. source
income for foreign tax credit purposes to the extent the non-U.S. corporation
has more than an insignificant amount of U.S. source income. The effect of this
rule may be to treat a portion of the dividends paid by WPP as U.S. source
income. This treatment may affect adversely an eligible U.S. holder's ability to
use foreign tax credits. Under these circumstances, Section 904(g)(10) of the
Code may permit an eligible U.S. holder to elect to treat WPP dividends as
non-U.S. source income for
33
<PAGE>
foreign tax credit limitation purposes, if the dividend income is separated from
other income items for purposes of calculating the holder's foreign tax credit.
Although there is no form prescribed for making this election, applicable U.S.
Treasury Regulations suggest that the election is made by claiming the credit in
the manner described in this paragraph.
Eligible U.S. holders that do not elect, or are not permitted, to claim a
foreign tax credit may instead claim a deduction for foreign tax withheld. Each
U.S. holder is urged to consult his or her tax advisor concerning whether the
U.S. holder is eligible for benefits under the U.K.-U.S. Income Tax Treaty and
whether, and to what extent, a foreign tax credit or deduction will be available
with respect to dividends received from WPP.
Each eligible U.S. holder that relies on the U.K.-U.S. Income Tax Treaty
should consider disclosing this reliance on the eligible U.S. holder's U.S.
federal income tax return. A U.S. holder that fails to disclose reliance on a
treaty where this disclosure is required could be subject to penalties under
U.S. federal income tax law.
TAXATION OF CAPITAL GAINS. Upon a sale or other disposition of WPP ADSs or
ordinary shares, a U.S. holder will recognize gain or loss for U.S. federal
income tax purposes in an amount equal to the difference between the U.S. dollar
value of the amount realized and the U.S. holder's tax basis, determined in U.S.
dollars, in the WPP ADSs or ordinary shares. Gain or loss recognized will be
long-term capital gain or loss with respect to WPP ADSs or ordinary shares held
for more than 12 months at the time of the sale or other disposition and any
gain recognized generally will be income from sources within the U.S. for
foreign tax credit limitation purposes.
A U.S. holder that is liable for both U.S. federal income tax and U.K. tax
on a sale or other disposition of WPP ADSs or ordinary shares should consult
with his or her tax advisor to determine the U.S. holder's entitlement to credit
the U.K. tax against the U.S. holder's U.S. federal income tax liability.
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 of the notes, WPP ADSs or ordinary shares with
respect to certain non-corporate 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 WPP ADSs or
ordinary shares, and backup withholding at a rate of 31% may apply unless the
payee certifies that it is not a "U.S. person" (as defined in the Code) 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 from the sale of a note or WPP ADSs or ordinary
shares effected outside the United States by a foreign office of a foreign
"broker" (as defined in applicable U.S. Treasury Regulations), provided that
such broker (a) derives less than 50 percent of its gross income for certain
periods from the conduct of a trade or business in the United States, (b) is not
a controlled foreign corporation for U.S. federal income tax purposes and
(c) 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.
34
<PAGE>
Payment of the proceeds of the sale of a note or WPP ADSs or ordinary shares
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 of a note 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.
UNITED KINGDOM TAX CONSEQUENCES OF OWNING WPP ADSS AND ORDINARY SHARES
TAXATION OF DISTRIBUTIONS. An individual WPP share owner resident in the
U.K. generally will be entitled to a tax credit (the "U.K. tax credit") in
respect of any dividend received. The amount of the U.K. tax credit is equal to
one-ninth of the CASH dividend or 10% of the aggregate of the cash dividend and
the U.K. tax credit.
Under the terms of the U.K.-U.S. Income Tax Treaty, an eligible U.S. holder
may be entitled to receive from U.K. Inland Revenue, in respect of a cash
dividend, a cash payment equal to the amount of the U.K. tax credit to which an
individual resident in the U.K. for tax purposes would have generally been
entitled had that resident received the dividend. Such payment will be reduced
by an amount of U.K. tax to be withheld from that payment equal to 15% of the
sum of the dividend and the amount of the U.K. tax credit (the "U.K. Withholding
Tax"). Under the U.K.-U.S. Income Tax Treaty, the U.K. Withholding Tax cannot
exceed the amount of the U.K. tax credit. As a result, at current levels of the
U.K. tax credit, an eligible U.S. holder would not be entitled to receive any
cash payment in respect of the U.K. tax credit for dividends paid by WPP. For
example, if an eligible U.S. holder receives a dividend (solely for illustrative
purposes) of 90, the U.S. holder would be entitled to a U.K. tax credit of 10.
However, since the maximum amount of U.K. Withholding Tax, which would be 15% of
100, exceeds the amount of the U.K. tax credit, no actual treaty payment would
be made and the U.S. holder would receive only the cash dividend, which in this
case would be 90.
Under U.S. Revenue Procedure 2000-13, 2000-6 I.R.B. 515, an eligible U.S.
holder may elect to be treated as receiving the U.K. tax credit in respect of a
dividend paid by WPP without affirmatively making a claim to U.K. Inland
Revenue. An eligible U.S. holder would make this election by so indicating on
U.S. IRS Form 8833 (Treaty-Based Return Position Disclosure Under Section 6114
or 7701(b)) and filing the completed Form 8833 with the U.S. holder's federal
income tax return for the relevant year. An eligible U.S. holder that makes this
election will be treated as having received an additional dividend equal to the
gross amount of the U.K. tax credit (unreduced by the amount of U.K. Withholding
Tax), which additional dividend must be included in the U.S. holder's gross
income, and as having paid the applicable U.K. Withholding Tax due under the
treaty, on the date of the dividend distribution. However, as mentioned above,
the amount of the U.K. Withholding Tax cannot exceed the amount of the U.K. tax
credit and, accordingly, an eligible U.S. holder will be considered to have paid
U.K. Withholding Tax only to the extent of the U.K. tax credit. Following the
example above, an eligible U.S. holder that made this election would be treated
for U.S. federal income tax purposes as receiving a dividend of 100 and as
having paid U.K. Withholding Tax of 10.
TAXATION OF CAPITAL GAINS. A U.S. holder who is neither resident nor
ordinarily resident for tax purposes in the U.K. will not generally be liable
for U.K. tax on capital gains realized on the disposal of WPP ADSs or ordinary
shares.
INHERITANCE AND GIFT TAXES. WPP ADSs and ordinary shares are assets
situated in the U.K. for the purposes of U.K. inheritance tax. An individual who
is domiciled in the U.S. and who is not a national of the U.K. for purposes of
the U.K.-U.S. Estate and Gift Tax Treaty, however, will generally not be subject
to U.K. inheritance tax in respect of the WPP ADSs or ordinary shares on the
individual's death or on a gift of the WPP ADSs or ordinary shares during the
individual's lifetime, provided that
35
<PAGE>
any applicable U.S. federal gift or estate tax liability is paid. In the
exceptional case where the WPP ADSs or ordinary shares are subject both to U.K.
inheritance tax and to U.S. federal gift or estate tax, the U.K.-U.S. Estate and
Gift Tax Treaty generally provides for any tax paid in the U.K. to be credited
against tax payable in the U.S. or for any tax paid in the U.S. to be credited
against tax payable in the U.K. based on priority rules set out in that treaty.
STAMP DUTY AND STAMP DUTY RESERVE TAX. Y&R will be liable for all U.K.
stamp duty, stamp duty reserve tax or similar U.K. governmental charges that may
be payable pursuant to the deposit agreement relating to the WPP ADSs or
ordinary shares in connection with the conversion of notes into WPP ADSs after
the merger. No stamp duty or stamp duty reserve tax will be payable on the
conversion of existing notes to guaranteed notes, provided that any relevant
documentation is not executed in the U.K. and provided further that such
documentation is retained outside the U.K. No stamp duty will be payable on the
acquisition or transfer of WPP ADSs or beneficial ownership of WPP ADSs,
provided that the instrument of transfer is not executed in the U.K. and
provided further that the instrument of transfer is not brought into the U.K. An
agreement for the transfer of WPP ADSs or beneficial ownership of WPP ADSs will
not give rise to a liability for stamp duty reserve tax.
A transfer for value of the WPP ordinary shares will generally be subject to
AD VALOREM stamp duty or to stamp duty reserve tax. Stamp duty will arise on the
execution of an instrument to transfer WPP ordinary shares. Stamp duty reserve
tax will arise on the entry into an agreement to transfer WPP ordinary shares
but the charge may be canceled if stamp duty has been paid. Stamp duty and stamp
duty reserve tax are normally a liability of the purchaser. Any transfer for
value of the underlying WPP ordinary shares represented by WPP ADSs, but not a
transfer of the WPP ADSs themselves, may give rise to a liability on the
transferee to U.K. stamp duty or stamp duty reserve tax. The rate of stamp duty
payable is 0.5% of the consideration rounded to the nearest L5, and 0.5% of the
consideration in the case of stamp duty reserve tax. On a transfer of WPP
ordinary shares from the custodian of the depositary to a holder of a WPP ADS
upon cancellation of the WPP ADS, only a fixed stamp duty of L5.00 per
instrument of transfer will be payable.
THE TAX SUMMARY SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION PURPOSES
AND DOES NOT DISCUSS ALL ASPECTS OF TAXATION THAT MAY BE RELEVANT TO A
PARTICULAR HOLDER IN LIGHT OF HIS OR HER PARTICULAR CIRCUMSTANCES. ACCORDINGLY,
EACH HOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE SPECIFIC TAX
CONSEQUENCES TO THAT HOLDER, INCLUDING THE APPLICATION AND EFFECT OF STATE AND
LOCAL TAX LAWS.
36
<PAGE>
THE COMPANIES
WPP
WPP is one of the leading communications services companies in the world.
Through its 70 operating companies, it provides clients with advertising, media
investment management, information and consultancy, public relations and public
affairs, branding and identity, healthcare and specialist communications
services. WPP employs 39,000 people (including associates) in 950 offices in 92
countries. WPP's clients include more than 300 of the Fortune 500 and over
one-third of the Nasdaq 100. In the year ended December 31, 1999, WPP had annual
turnover (gross billings) of approximately $14 billion, revenues of
approximately $3.3 billion and pre-tax profits of approximately $386.4 million.
During the six months ended June 30, 2000, WPP had annual turnover (gross
billings) of approximately $8.6 billion, revenues of approximately $1.8 billion
and pre-tax profits of approximately $208.3 million. At June 30, 2000, net
assets were $582.1 million.
WPP operates through a number of established national and international
marketing and communications companies. Among these are the well known
advertising networks Ogilvy & Mather Worldwide and J. Walter Thompson Company;
MindShare in media investment management; Research International and Millward
Brown in information and consultancy; the worldwide public relations and public
affairs companies Hill and Knowlton and Ogilvy Public Relations Worldwide; a
wide range of specialist communications companies including the Enterprise
Identity Group, specializing in branding and corporate identity; and
CommonHealth, specializing in healthcare communications. WPP's ten largest
clients in 1999 were American Express, Ford, IBM, Johnson & Johnson, Kellogg,
Nestle, Philip Morris, Schering-Plough, Unilever and Warner Lambert.
At the time the merger is completed, the board of directors of WPP will
consist of 16 directors. Y&R has designated four of its current directors --
Michael J. Dolan, F. Warren Hellman, Michael H. Jordan and Sir Christopher
Lewinton -- for election to WPP's board. The other directors will be current
members of WPP's board of directors. After completion of the merger, the former
Y&R directors on the WPP board will have the right to designate, at any time
before June 30, 2001, a fifth Y&R designee for appointment as a director of WPP.
Y&R
Since its founding 75 years ago, Y&R has evolved from a single New
York-based advertising agency to the sixth largest consolidated marketing and
communications organization in the world based on 1999 revenues. Y&R operates
through recognized market leaders, including:
- Young & Rubicam Advertising (full-service advertising);
- Dentsu, Young & Rubicam (full-service advertising in the Asia/Pacific
region);
- Y&R 2.1 (full-service on-line and off-line advertising and marketing
services);
- The Bravo Group and Kang & Lee (multi-cultural marketing and
communications);
- impiric (customer relationship management, direct marketing and sales
promotion);
- KnowledgeBase Marketing (customer relationship marketing);
- Brand Dialogue (digital interactive branding and digital commerce);
- The Media Edge (media planning, buying and placement services);
- The Digital Edge (Internet media planning, buying and placement services);
- Burson-Marsteller (perception management and public relations);
- Cohn & Wolfe (full-service public relations);
- Robinson Lerer & Montgomery (strategic corporate public relations);
- Landor Associates (branding consultation and design services); and
- Sudler & Hennessey (healthcare communications).
Y&R's executive offices are located at 285 Madison Avenue, New York, New
York 10017; telephone (212) 210-3000.
37
<PAGE>
DESCRIPTION OF THE GUARANTEED NOTES AND THE WPP GUARANTEE
GENERAL
The notes were originally issued pursuant to a indenture, dated as of
January 20, 2000, between Y&R and The Bank of New York, as indenture trustee. As
required by the indenture, WPP and Y&R intend, immediately before the merger
becomes effective, to enter into a supplemental indenture with the indenture
trustee which will provide that, after we complete the merger, your notes will
be convertible into WPP ADSs. The conversion price will be $73.36, the
conversion price applicable to your existing notes, for each .835 of a WPP ADS,
or $87.856 ($73.36 divided by .835) for each whole ADS. This represents a
conversion rate of 11.382 WPP ADSs per $1,000 principal amount of the notes.
If we adopt the proposed amendments, WPP, Y&R and the trustee will enter
into a second supplemental indenture, setting forth the amendments to the
indenture described under "The Proposed Amendments" on page 25, and providing
for WPP's guarantee of Y&R's payment obligations under the notes. In connection
with the second supplemental indenture, Y&R will also enter an amendment to the
registration agreement relating to the notes reflecting the amendments to that
agreement described under "The Proposed Amendments" on page 25.
The indenture and the registration agreement and the forms of the
supplemental indenture and registration agreement amendment, all of which are
included as exhibits to the registration statements of which this consent
solicitation and prospectus forms a part, are incorporated by reference into
this document. Copies of the indenture, registration agreement and the forms of
the supplemental indenture and registration agreement amendment are available
from WPP or Y&R as set forth under "Summary--Where You Can Find More
Information" on page 15.
The following is a summary of various provisions of the indenture, the forms
of supplemental indentures, the registration agreement and the form of amendment
to the registration agreement. Although we believe that we have summarized the
material terms of these documents, this summary is not complete and is qualified
in its entirety by reference to those documents. The following summary applies
to both your existing notes and the guaranteed notes, except where we have noted
differences. The definitions of certain terms used in the following summary are
set forth under the heading "--Definitions" on page 54.
PRINCIPAL, MATURITY AND INTEREST
The notes are limited in aggregate principal amount to $287,500,000. The
notes bear interest at 3% per annum and mature on January 15, 2005.
Y&R will pay interest on the notes semiannually on January 15 and July 15 of
each year commencing on July 15, 2000, to registered holders at the close of
business on the January 1 or July 1 immediately preceding the interest payment
dates. Y&R will compute interest on the basis of a 360-day year consisting of
twelve 30-day months. If the proposed amendments and the WPP guarantee are
adopted, interest on the guaranteed notes will accrue from the most recent date
to which interest has been paid on your existing notes.
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, Y&R may make
payment at that place on the next succeeding business day, and no interest will
accrue for the intervening period.
Y&R has appointed the indenture 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. Y&R 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.
Y&R 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
38
<PAGE>
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 as provided in the
indenture. Y&R 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" on
page 54.
THE WPP GUARANTEE
If the proposed amendments are adopted, WPP will enter into a supplemental
indenture and fully and unconditionally guarantee to each holder of a note that
has been authenticated and delivered by the indenture trustee, the due and
punctual payment of the principal of and any premium and interest on that note
(and any additional amounts payable in respect of the notes), when and as the
same shall become due and payable, whether at the stated maturity of the notes,
by declaration of acceleration, call for redemption or otherwise, in accordance
with the terms of the notes and of the indenture as supplemented and to the
fullest extent permitted by law. The guarantee will be a direct, unsubordinated
and unsecured obligation of WPP and will rank equally with all other
unsubordinated and unsecured obligations of WPP.
OPTIONAL REDEMPTION
Y&R may not redeem the notes prior to January 20, 2003. On and after
January 20, 2003, Y&R may redeem the notes at its 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.
Y&R 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 Y&R
redeems the notes during the 12-month period beginning January 15 of the years
indicated, January 20 in the case of 2003, the redemption price will be:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2003............................ 101.20%
2004............................ 100.60%
</TABLE>
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 Y&R fails to redeem the notes.
MANDATORY REDEMPTION
We are not be 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 referred to in the indenture as a
"designated event," which includes a change of control of Y&R or a termination
of trading of the securities into which the notes are convertible, each holder
of notes will have the right to require Y&R to repurchase all or any part, equal
to $1,000 or an integral multiple thereof of the holder's notes pursuant to the
offer described below, at a purchase price equal to 100% of the principal amount
of the notes, together with accrued and unpaid interest and additional amounts,
if any, on the notes to the payment date for the designated event.
39
<PAGE>
Within 30 days following any designated event, unless Y&R has previously
given the holders notice of its intention to redeem the notes in whole pursuant
to the provisions set forth under the heading "--Optional Redemption" above, Y&R
will mail a notice to each holder stating:
- 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;
- the purchase price and the purchase date, which will be no earlier than
30 days, nor later than 60 days following the date notice is mailed,
unless a later date is required by applicable law;
- 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;
- that, unless Y&R defaults in the payment of the designated event payment,
all notes accepted for payment pursuant to the designated event offer will
cease to (1) accrue interest and additional amounts, if applicable, from
and after the designated event payment date and (2) have conversion rights
after the designated event payment date;
- 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;
- 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 the holder is withdrawing its election to have those
notes purchased, and if the paying agent receives it no later than the
close of business on the second business day preceding the designated
event payment date;
- 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
- the instructions and any other information necessary to enable holders to
accept a designated event offer or effect withdrawal of such acceptance.
Y&R 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, Y&R will, to the extent lawful:
- accept for payment notes or portions thereof validly tendered pursuant to
the designated event offer;
- 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
- 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 Y&R has 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 for payment 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 Y&R to the holder of the notes. Y&R will publicly announce
40
<PAGE>
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 and the supplemental indentures will not contain any other provisions
that permit the holders of the notes to require Y&R to repurchase or redeem the
notes in the event of a takeover, recapitalization or similar restructuring of
Y&R or WPP.
Subject to the limitations on mergers, consolidations and sales of assets
described in "--Merger, Consolidation or Sale of Assets" below, Y&R and WPP may
enter into various transactions, including acquisitions, refinancings or other
recapitalizations, that would not be a designated event under the indenture, as
supplemented, but that could increase the amount of indebtedness, including
senior debt, outstanding at that time or otherwise affect Y&R's or WPP's capital
structure or credit ratings.
Y&R's ability to repurchase notes upon the occurrence of a designated event
and, with respect to the guaranteed notes, WPP's ability to satisfy its
guarantee of any such repurchase 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 in the future be
parties to credit agreements and other agreements that restrict the transfer of
funds to Y&R or WPP that would be necessary to permit Y&R to, or WPP to satisfy
its guarantee of Y&R's obligation 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, however,
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 as supplemented. Any default
may, in turn, cause a default under our other debt.
Moreover, the occurrence of a designated event may permit acceleration of
our other debt.
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:
- 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 Y&R's
directors;
- Y&R consolidates with or merges into any other person, or any other person
merges into Y&R, and, in the case of any such transaction, Y&R's
outstanding common stock is reclassified into or exchanged for any other
property or securities, unless Y&R's 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;
- Y&R and Y&R's subsidiaries, taken as a whole, sell, assign, convey,
transfer or lease all or substantially all of the assets of Y&R or of Y&R
and Y&R's subsidiaries, taken as a whole, other than to one or more of
Y&R's wholly owned subsidiaries; or
- any time the continuing directors do not constitute a majority of Y&R's
board of directors, or, if applicable, a successor corporation to Y&R;
41
<PAGE>
provided, however, that:
- a change of control under the first three bullets above will not be deemed
to have occurred if the daily market price per share of common stock of
Y&R 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 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
- a change of control under the first three bullets above will 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.
The definition of change of control in the indenture includes a provision
relating to the sale, assignment, conveyance, transfer or lease of "all or
substantially all" of the assets of Y&R or of Y&R and Y&R's 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 guaranteed notes to require Y&R to repurchase your notes as a result
of a sale, assignment, conveyance, transfer or lease of less than all of the
assets of Y&R or Y&R and its 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 Y&R's board of directors who (1) was a member of Y&R's board of
directors on January 20, 2000 or (2) was nominated for election or elected to
Y&R's board of directors with the approval of a majority of the continuing
directors who were members of Y&R's board at the time of their nomination or
election. We expect that the persons who will become members of Y&R's board in
connection with the merger will be approved by at least a majority of the
continuing directors.
A "termination of trading" will be deemed to have occurred if the Y&R common
stock and, after the merger, the WPP ADSs, 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.
No designated event offer will be made in connection with the merger of Y&R
and WPP.
SELECTION AND NOTICE
If Y&R is redeeming less than all of the notes, the indenture 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 indenture trustee deems fair and appropriate. No notes of $1,000
in principal amount or less will be redeemed in part. Y&R 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 Y&R is 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. Y&R 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 the notes
or portions of the notes called for redemption unless there is a default in the
payment of the redemption price for the notes.
42
<PAGE>
REGISTRATION OF NOTES
Under the existing registration agreement, Y&R is required to maintain a
shelf registration statement covering resales by holders of notes and the shares
issuable upon conversion of the notes. If the proposed registration agreement
amendment is adopted, Y&R would be relieved of this obligation. See "The
Proposed Amendments" on page 25.
CONVERSION
The holder of any note currently has the right, exercisable at any time
before 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 Y&R
common stock, at the conversion price of $73.36, subject to adjustment. After we
complete the merger, whether or not we adopt the proposed amendments or WPP
guarantees the notes, the holder of any note will have the right, exercisable at
any time before January 14, 2000, to convert the principal amount of its notes,
or any portion of its notes that is an integral multiple of $1,000, into WPP
ADSs at a conversion price of $73.36 for each .835 of a WPP ADS, or $87.856 for
each whole ADS, subject to adjustment as described below. The following is a
summary of the conversion rights of the notes after the merger that will be set
forth in the first supplemental indenture, which will be entered into by WPP and
Y&R immediately prior to the merger.
If Y&R has 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 that 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 WPP ADSs, or underlying WPP ordinary shares, issued upon conversion of
notes. We will not issue fractional ADSs, or any ordinary shares representing
those fractions, upon conversion. Instead, we will make a cash adjustment for
any fractional interest in an ADS.
The owners of a note may exercise their right of conversion by delivering to
The Depository Trust Company, or 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 WPP ADSs or ordinary shares eligible for trading on Euroclear or
Clearstream Banking. To convert a note held in certificated form into WPP ADSs,
a holder must:
- 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;
- surrender the note to the conversion agent;
- if required by the conversion agent, furnish appropriate endorsements and
transfer documents; and
- if required, pay any transfer or similar taxes.
The date when all of the foregoing requirements have been satisfied will be
the date of surrender for conversion. The notice of conversion can be obtained
from the indenture trustee at its corporate trust office or the office of the
conversion agent.
As promptly as practicable on or after any conversion date, WPP will
instruct the ADS depositary to issue and deliver to the indenture trustee a
receipt or receipts for the number of WPP ADSs issuable upon conversion,
together with payment for any fraction of an ADS in an amount determined
43
<PAGE>
on the basis of the daily market price, as described below, of the ADSs on the
trading day prior to the applicable conversion date. The indenture trustee in
its capacity as conversion agent, or if the indenture trustee is not the
conversion agent, the conversion agent, will deliver the receipt or receipts to
the noteholder.
The ordinary shares of WPP underlying the ADSs issuable upon conversion of
the notes will be credited as fully paid and no further contributions will be
required to be made to WPP in respect of those shares. 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 WPP ADSs or the underlying WPP
ordinary shares, will be made upon conversion. Holders of WPP ADSs issued upon
conversion will not be entitled to receive any dividends payable to holders of
WPP ADSs 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:
- the issuance of WPP ordinary shares as a dividend or distribution on the
ordinary shares, unless the number of ordinary shares represented by each
WPP ADS simultaneously increases in proportion to the dividend or
distribution;
- the subdivision or combination of the WPP ordinary shares, unless the
number of ordinary shares represented by each WPP ADS simultaneously
decreases in proportion to the subdivision or combination;
- the issuance to all holders of WPP ordinary shares of rights or warrants
to subscribe for WPP ordinary shares, or securities convertible into WPP
ordinary shares, at a price per WPP ordinary shares less than the then
current market price of WPP ordinary shares, determined as set forth
below;
- the distribution by WPP of shares of capital 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 WPP ordinary shares;
- distributions, by dividend or otherwise, to all holders of WPP ordinary
shares exclusively in cash, excluding any cash that is distributed as part
of a distribution requiring a conversion price
44
<PAGE>
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 WPP ordinary
shares within the 12 months preceding the date fixed for determining
the WPP share owners 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 WPP or any of its subsidiaries for WPP
ordinary shares concluded within the 12 months preceding the date
fixed for determining the WPP share owners entitled to the
distribution not triggering a conversion price adjustment, exceeds
12 1/2% of the product of the current market price per WPP ordinary
share on the date fixed for determining the WPP share owners entitled
to the distribution times the number of shares outstanding on that
date;
- payment of an excess payment in respect of a tender offer or other
negotiated transaction consummated by WPP or any of its subsidiaries for
WPP ordinary shares, if the aggregate amount of that excess payment,
together with the aggregate amount of:
(1) cash distributions made to all holders of WPP ordinary shares 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 WPP or any of its subsidiaries for WPP
ordinary shares 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 ADSs outstanding on that date; or
- changes to the number of WPP ordinary shares represented by each WPP ADS.
In the event of a distribution to all holders of WPP ordinary shares of
rights to subscribe for additional shares of WPP, other than those rights and
warrants referred to in the third bullet above, WPP 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 ADSs, an appropriate number of the rights.
WPP 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 WPP reclassifies or changes its outstanding ordinary shares, 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 consolidates with
or merges into any person, other than a merger where WPP is the continuing
company and which does not result in a reclassification or change in the
ordinary shares other than a change in par value described above, or transfers
all or substantially all of its 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 into WPP ADSs immediately
before the transaction.
The first supplemental indenture will also provide that if rights, warrants
or options expire unexercised, WPP will readjust the conversion price to take
into account the actual number of such warrants, rights or options which were
exercised.
45
<PAGE>
In the first supplemental indenture, the "current market price" of WPP
ordinary shares on any date will be deemed to be: (1) the average of the daily
market prices for the WPP ADSs for the shorter of:
- 30 consecutive business days ending on the last full trading day on the
Nasdaq National Market, or any other exchange or market which is the
primary trading exchange or market for the WPP ADSs, prior to the time of
determination; or
- 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 Nasdaq National Market, or any other exchange or market
which is the primary trading exchange or market for the WPP ADSs prior to
the time of determination;
divided by (2) the number of WPP ordinary shares then represented by a WPP
ADS.
An "excess payment" is the excess of (1) the aggregate of the cash and fair
market value, as determined by WPP's board of directors, whose determination
shall be conclusive evidence of the fair market value, of other consideration
paid by WPP or any of its 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, WPP 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 WPP's board of
directors has made a determination that the reduction would be in the best
interests of WPP, which determination will be conclusive. WPP may, at its
option, make reductions in the conversion price, in addition to those set forth
above, as WPP's board of directors deems advisable to avoid or diminish any
income tax to holders of WPP ADSs or ordinary shares resulting from any dividend
or distribution of stock, or rights to acquire stock, or any event treated as a
dividend or distribution for U.S. federal income tax purposes. See "Material Tax
Consequences--Certain U.S. Federal Income Tax Consequences Applicable to U.S.
Holders of Notes--Adjustments to Conversion Rate--Constructive Dividends" on
page 32.
RANKING OF NOTES
The notes are general unsecured obligations of Y&R and are subordinated in
right of payment to all of Y&R's existing and future senior debt. WPP's
guarantee, which will obligate WPP to make any payments on the notes Y&R does
not make as a result of subordination provisions or otherwise, will constitute a
general unsecured obligation of WPP ranking on a parity with all other unsecured
and unsubordinated obligations of WPP. The existing notes are effectively
subordinated to all indebtedness and other liabilities of Y&R's subsidiaries.
The WPP guarantee is effectively subordinated to all indebtedness and other
liabilities of WPP's subsidiaries. The indenture does not, and after the
supplemental indentures are executed, will not, restrict the amount of senior
debt or other indebtedness of Y&R, WPP or any of their respective subsidiaries.
WPP is a party to a credit agreement dated August 7, 2000 with certain financial
institutions which provides for a $700 million revolving credit facility. This
credit agreement limits the amount of indebtedness WPP and its subsidiaries may
incur. Under this credit agreement, WPP has agreed that for each 12 month period
ending on June 30 and December 31, it will maintain a ratio of "Consolidated
EBITDA" and "Interest Receivable" to "Interest Expense" (each as defined in the
credit agreement) of at least 4. In addition, WPP's subsidiaries taken as a
whole may not incur additional indebtedness of an amount greater than 25% of
WPP's "Consolidated EBITDA." This credit agreement is included as an exhibit to
the registration statements of which this consent solicitation and prospectus
forms a part and is incorporated by reference into this document. This
description of certain provisions of the credit agreement is qualified in its
entirety by reference to the credit agreement.
46
<PAGE>
Y&R's obligation to make payments of the principal of, and premium, if any,
interest, and additional amounts, if any, on, and any other amounts due on the
notes will be subordinated in right of payment to the prior payment in full of
all Y&R's 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
by or on behalf of Y&R unless:
- full payment of amounts then due on all Y&R senior debt has been made or
duly provided for pursuant to the terms of the instrument governing the
senior debt; or
- at the time for, and immediately after giving effect to, any payment,
redemption, purchase or other acquisition, there shall not exist under any
Y&R senior debt or any agreement pursuant to which any Y&R 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 of Y&R notify the indenture trustee that a default has
occurred and is continuing and would give the holders of the designated senior
debt the right to accelerate the maturity of the designated senior debt, Y&R
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 guaranteed notes and
Y&R 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 indenture trustee by the holders or the
representative of the holders of the designated senior debt, on the earlier of:
- the date on which the default is cured or waived; or
- 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 of Y&R or the representative of the holders have
accelerated the maturity of the designated senior debt, Y&R 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 of Y&R during any consecutive 365-day period.
Y&R 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:
- any distribution of our assets in connection with any dissolution,
winding-up, liquidation or reorganization of our company; or
- 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, Y&R
will give prompt written notice to the holders of senior debt or to the
trustee(s) for senior debt of the acceleration. Y&R may not pay the principal
of, premium, if any, interest or additional amounts, if any, on or any other
amounts due on the guaranteed notes until five business days after the holders
or trustee(s) of senior debt receive notice of the acceleration and, thereafter,
Y&R 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 amended indenture otherwise permit payment at that time.
47
<PAGE>
MERGER, CONSOLIDATION OR SALE OF ASSETS
The indenture provides that Y&R may not consolidate or merge with or into
any person 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:
- (a) Y&R is the surviving corporation or (b) the person formed by or
surviving any consolidation or merger, if other than Y&R, 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;
- the corporation formed by or surviving any consolidation or merger, if
other than Y&R, 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 indenture trustee, under the notes and the
supplemental indenture;
- the sale, assignment, transfer, lease, conveyance or other disposition of
all or substantially all of Y&R's 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 guaranteed
notes and the supplemental indenture;
- immediately after the transaction, no default or event of default exists;
or
- Y&R or the surviving corporation has delivered to the indenture 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.
The indenture currently provides that, whether or not required by the rules and
regulations of the SEC, so long as any notes are outstanding, Y&R must 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 financial statements, a report by our independent auditors. If the
proposed amendments are adopted, this provision will be deemed satisfied, so
long as Y&R is a wholly owned subsidiary of WPP, if WPP prepares and files with
the SEC all periodic reports WPP is required to file under the Exchange Act and
furnishes noteholders and the indenture trustee with all financial information
WPP furnishes to the holders of WPP ADSs.
The indenture also provides that, if Y&R is at any time not subject to the
periodic reporting requirements of the Exchange Act, Y&R must provide to holders
of notes and shares issued upon conversion of the notes and to any prospective
purchaser designated by any such holder, upon request, the information required
by Rule 144A(d)(4) under the Securities Act. If the proposed amendments are
adopted and the merger is completed, the notes will have been registered under
the Securities Act and you will not be required to rely on Rule 144A or any
other exemption under the Securities Act to transfer or sell your notes.
Therefore, we are proposing to remove the requirement currently contained in the
indenture regarding Rule 144A(d)(4) described above. See "The Proposed
Amendments--The Financial Information Amendment" on page 25.
EVENTS OF DEFAULT AND REMEDIES
The indenture provides that each of the following constitutes an event of
default:
- default for 30 days in the payment when due of interest on or additional
amounts payable with respect to the notes;
48
<PAGE>
- default in payment when due of principal of the notes at maturity, upon
redemption or otherwise, including Y&R's failure to purchase the
guaranteed notes when required as described under the heading
"--Repurchase at the Option of Holders" above;
- Y&R's 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;
- 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 Y&R or any of its material subsidiaries, or the
payment of which is guaranteed by Y&R or any of its material subsidiaries,
whether the indebtedness or guarantee existed on 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 this 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;
- failure by Y&R or any material subsidiary of Y&R 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
- certain events of bankruptcy or insolvency with respect to Y&R or any of
its 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 indenture
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 Y&R or any of its
material subsidiaries, 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 indenture 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 indenture 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:
- 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 guaranteed notes;
or
- 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.
49
<PAGE>
Y&R is required to deliver to the trustee annually a statement regarding
compliance with the indenture, and Y&R is 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
The notes are currently represented, and will continue to be represented, by
a global note, except as set forth below under "Certificated Notes." The global
note has been deposited with the indenture 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:
- a limited purpose trust company organized under the laws of the State of
New York;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- 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:
- securities brokers and dealers;
- banks;
- trust companies;
- clearing corporations; and
- various other organizations.
Access to DTC's book-entry system is also available to others, including
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 amended indenture and the guaranteed 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
50
<PAGE>
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 amended indenture and, if applicable, those of Euroclear and
Clearstream Banking.
Y&R 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 these
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 indenture trustee nor any paying agent will have any responsibility or
liability for:
- any aspect of the records relating to, or payments made on account of,
beneficial ownership interests in the global note;
- maintaining, supervising or reviewing any records relating to the
beneficial ownership interests;
- any other aspect of the relationship between DTC and its participants; or
- 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
amended 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 of 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
51
<PAGE>
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 various 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 indenture 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.
CERTIFICATED NOTES
Unless the purchaser of notes 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
Y&R has initially appointed the indenture 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 supplemental 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 guaranteed notes to be
redeemed.
All notes that Y&R or any of its 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. Y&R will not hold or resell any of
these guaranteed notes or issue any new notes to replace any of these guaranteed
notes or any other notes that any holder has converted pursuant to the
supplemental indenture.
We will treat the registered holder of a note as the owner of the note for
all purposes.
52
<PAGE>
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 guaranteed notes,
including consents obtained in connection with a tender offer or exchange offer
for guaranteed 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
guaranteed notes:
- reduce the amount of notes whose holders must consent to an amendment,
supplement or waiver;
- reduce the principal of or change the fixed maturity of any note or alter
the provisions with respect to the redemption of the guaranteed notes;
- reduce the rate of or change the time for payment of interest on any
guaranteed note;
- waive a default in the payment of principal of or premium, if any, or
interest or additional amounts, if any, on any guaranteed notes, except a
rescission of acceleration of the guaranteed notes by the holders of at
least a majority in aggregate principal amount of the guaranteed notes and
a waiver of the payment default that resulted from the acceleration;
- make any guaranteed note payable in money other than that stated in the
guaranteed notes;
- make any change in the provisions of the supplemental indenture relating
to waivers of past defaults or the rights of holders of guaranteed notes
to receive payments of principal of or premium, if any, or interest or
additional amounts, if any, payable on the guaranteed notes;
- waive a redemption payment with respect to any guaranteed note;
- impair the right to convert the notes;
- modify the conversion or subordination provisions of the indenture in a
manner adverse to the holders of the notes; or
- make any change in the amendment and waiver provisions described above.
Notwithstanding the foregoing, without the consent of any holder of
guaranteed notes, we and the trustee may amend or supplement the supplemental
indenture or the guaranteed notes:
- to cure any ambiguity, defect or inconsistency;
- to provide for uncertificated notes in addition to or in place of
definitive notes;
- to provide for the succession of another person to us and the assumption
by the successor to our covenants and obligations under the supplemental
indenture;
- to evidence and provide for the acceptance of the appointment under the
indenture of a successor trustee;
- to make any change that would provide any additional rights or benefits to
the holders of the guaranteed notes or that does not adversely affect the
legal rights under the indenture of any such holder;
- 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
- to comply with requirements of the SEC in order to qualify, or maintain
the qualifications of, the supplemental indenture under the Trust
Indenture Act.
53
<PAGE>
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 as supplemented and the guaranteed notes are governed by and
construed in accordance with the laws of the State of New York.
CONCERNING THE INDENTURE TRUSTEE
The indenture contains limitations on the rights of the indenture trustee,
should it become a creditor of Y&R, 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 Y&R; however, if the indenture 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 guaranteed
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 supplemental indenture will provide 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 supplemental
indenture at the request of any holder of guaranteed 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 which will be used in the
supplemental 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:
- (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
54
<PAGE>
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;
- 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
- 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 Y&R 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, Y&R 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 subsidiary of Y&R 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 Y&R's 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:
- indebtedness of or amounts owed by Y&R for compensation to employees, or
for goods, services or materials purchased in the ordinary course of
business;
- indebtedness of Y&R to one of its subsidiaries; or
- any liability for federal, state, local or other taxes owed or owing by
Y&R.
55
<PAGE>
DESCRIPTION OF WPP ORDINARY SHARES
GENERAL
Whether or not noteholders approve the proposed amendments, in accordance
with the terms of the indenture governing the notes after the merger, your notes
will become convertible in WPP ADSs at a conversion price of $73.36 per .835 of
a WPP ADS, as a conversion price of $87.856 for each whole ADS, subject to
adjustment. This represents a conversion rate of 11.382 WPP ADSs, per $1,000
principal amount of notes. Each WPP ADS represents five ordinary shares of WPP.
The following information is a summary of the material terms of the ordinary
shares, nominal value 10p each, as specified in WPP's articles of association as
presently in effect. You are encouraged to read WPP's memorandum and articles of
association which are an exhibit to the registration statement of which this
consent solicitation and prospectus forms a part. See also "Description of WPP
American Depositary Shares" on page 60.
The deposit agreement among Citibank, N.A., WPP and ADS holders governs the
rights of holders of WPP ADSs as described in "Description of WPP American
Depositary Shares" on page 60. You should be aware that these rights are
different from the rights of the owners of WPP ordinary shares.
All of the issued WPP ordinary shares are fully paid. WPP ordinary shares
are represented in certificated form and also in uncertificated form under
"CREST." CREST is an electronic settlement system in the United Kingdom which
enables WPP ordinary shares to be evidenced other than by a physical certificate
and transferred electronically rather than by delivery of a physical
certificate. All WPP ordinary shares, including those underlying the WPP ADSs to
be issued upon conversion of the notes:
- may be represented by certificates in registered form issued (subject to
the terms of issue of the shares) by WPP's registrars, Computershare
Services PLC, P.O. Box 82, The Pavilions, Bridgewater Road, Bristol BS99
7NH, England; or
- may be in uncertificated form with the relevant CREST member account being
credited with the WPP ordinary shares issued.
As of August 18, 2000, there were 778,963,425 WPP ordinary shares
outstanding of which 14,901,875 were represented by WPP ADSs. In connection with
the merger, WPP will issue to Y&R stockholders and option holders approximately
400 million ordinary shares represented by WPP ADSs, except to the extent that
Y&R stockholders elect to receive the ordinary shares underlying those WPP ADSs.
Under English law, persons who are neither residents nor nationals of the
U.K. may freely hold, vote and transfer ordinary shares in the same manner and
under the same terms as U.K. residents or nationals.
DIVIDENDS
If recommended by the directors of WPP, WPP share owners may, by ordinary
resolution, declare final dividends, but no dividends may be declared in excess
of the amount recommended by the directors. The directors may also pay interim
dividends without share owner approval. No dividend may be paid other than out
of profits available for distribution under the U.K. Companies Act. Dividends on
WPP ordinary shares will be announced and paid in pounds sterling. Dividends
with respect to ordinary shares underlying WPP ADSs will be converted into U.S.
dollars by the ADS depositary and distributed to the holders of WPP ADSs as
described in "Description of WPP American Depositary Shares--Share Dividends and
Other Distributions" on page 60.
56
<PAGE>
WPP's articles of association permit a scrip dividend scheme under which
registered owners of WPP ordinary shares may be given the opportunity to elect
to receive fully paid WPP ordinary shares instead of cash, or a combination of
shares and cash, with respect to future dividends.
VOTING RIGHTS
Every holder of WPP ordinary shares present in person or (being a
corporation) present by a duly authorized representative at a meeting of share
owners has one vote on a vote taken by a show of hands and on a poll every
holder of WPP ordinary shares who is present in person or by proxy has one vote
for each share of which he is the holder. Voting at any meeting of share owners
is by a show of hands unless a poll is demanded. A poll may be demanded by:
- the chairman of the meeting;
- at least five share owners having the right to vote at the meeting;
- any share owner or share owners representing one-tenth or more of the
total voting rights for all the members having the right to vote at the
meeting; or
- a share owner or share owners holding shares conferring a right to vote at
the meeting on which the aggregate sum paid up is equal to not less than
one-tenth of the total sum paid up on all the shares conferring such
right.
WPP has agreed that it will include for consideration by its share owners,
at the first annual general meeting after completion of the merger, a resolution
to amend its articles of association to provide, among other things, that all
special and extraordinary resolutions are to be taken on a poll.
Ordinary resolutions decided on a show of hands must be approved by at least
a majority of the share owners present in person or by proxy. If a poll is
demanded, the resolution conducted on a poll must be approved by holders of at
least a majority of the votes cast. Both special and extraordinary resolutions
require the affirmative vote of at least 75% of the votes cast in person or by
proxy to be approved. If a poll is demanded, the special or extraordinary
resolution conducted on a poll must be approved by at least 75% of the votes
cast.
Registered holders of WPP ordinary shares may appoint a proxy to attend and
vote on their behalf at any share owners meeting. WPP has agreed in the merger
agreement that it will include for consideration by its share owners, at the
first annual general meeting after completion of the merger, a resolution to
amend WPP's articles of association to permit proxies to speak at share owners
meetings.
Registered holders of WPP ADSs may vote the ordinary shares underlying their
ADSs by supplying voting instructions to the ADS depositary, who will endeavor
to vote the ordinary shares underlying the ADSs in accordance with those
instructions.
WPP has agreed in the merger agreement that it will include for
consideration by its share owners, at the first annual general meeting after
completion of the merger, a resolution to amend its articles of association to
permit holders of WPP ADSs to attend, speak and vote at share owners meetings.
LIQUIDATION RIGHTS
In the event of the liquidation of WPP, after payment of all liabilities and
applicable deductions under U.K. laws, including under Section 719 of the U.K.
Companies Act 1985 or Section 187 of the U.K. Insolvency Act 1986, which enables
the liquidator to make payments to employees or former employees on the
cessation or transfer of WPP's business, the remaining assets will be divided
equally among the holders of the WPP ordinary shares. The liquidator, however,
may divide among the share owners IN SPECIE the whole or any part of the
remaining assets and may determine how such division should be carried out as
among the share owners if the liquidator is authorized to do so by extraordinary
resolution of the share owners.
57
<PAGE>
PREEMPTIVE RIGHTS AND NEW ISSUES OF SHARES
Under Section 80 of the U.K. Companies Act, directors are, with certain
exceptions, unable to allot relevant securities without the authority of the
share owners in a general meeting. Relevant securities as defined in the U.K.
Companies Act would include WPP ordinary shares or securities convertible into
WPP ordinary shares. In addition, Section 89 of the U.K. Companies Act imposes
further restrictions on the issue of equity securities (as defined in the U.K.
Companies Act, which would include WPP ordinary shares and securities
convertible into ordinary shares) which are, or are to be, paid up wholly in
cash and not first offered to existing share owners.
WPP's articles of association allow share owners in a general meeting to
authorize the directors, for a period up to five years, to allot relevant
securities generally up to an aggregate nominal amount fixed by the share
owners, and to allot equity securities for cash other than in connection with a
rights issue. In accordance with institutional investor guidelines, the nominal
amount of relevant securities to be fixed by share owners is normally restricted
to one-third of the existing issued ordinary share capital, and the amount of
equity securities to be issued for cash other than in connection with a rights
issue is restricted to 5% of the existing issued ordinary share capital. At
WPP's annual general meeting in 2000, these amounts were fixed at L25,693,103
and L3,892,894, respectively.
At WPP's extraordinary general meeting convened in connection with the
merger, WPP's share owners will vote on a proposed resolution to authorize the
WPP board to allot equity securities for cash on a non-preemptive basis up to an
aggregate nominal amount of L7,662,089.
The authorities referred to above granted to the directors at the annual
general meeting in 2000 expire on June 25, 2005.
DISCLOSURE OF INTERESTS IN SHARES
The U.K. Companies Act gives WPP the power to require persons whom it
believes to have an interest in its voting shares, to disclose certain
information with respect to those interests. Failure to supply the information
required may lead to disenfranchisement of the relevant shares and a prohibition
on their transfer and receipt of dividends and payments in respect of those
shares. In this context, the term "interest" is widely defined and will
generally include an interest of any kind whatsoever in voting shares, including
any interest of a holder of a WPP ADS. See "Description of WPP American
Depositary Shares--Disclosure of Interests" on page 64.
CHANGES IN CAPITAL
WPP share owners may pass an ordinary resolution to do any of the following:
- increase its share capital by the creation of new shares of such amount as
the resolution prescribes;
- consolidate and divide all or any of its share capital into new shares of
a larger amount than its existing shares;
- divide some or all of WPP's shares into shares of a smaller nominal
amount; and
- cancel any shares which have not, at the date of the relevant resolution,
been taken or agreed to be taken by any person and reduce the amount of
its authorized share capital by the amount of the shares so canceled.
WPP will also be able to:
- with the authority of share owners by special resolution, purchase its own
shares; and
- by special resolution and, where required by the U.K. Companies Act, with
the sanction of the court, reduce its share capital, any capital
redemption reserve, share premium account or any other undistributable
reserve.
58
<PAGE>
TRANSFER OF SHARES
Except as described in this paragraph, WPP's articles of association will
not restrict the transferability of WPP ordinary shares. WPP ordinary shares
will be able to be transferred by an instrument in any usual form or in any form
acceptable to the directors. The board may refuse to register a transfer:
- if it is of shares which are not fully paid;
- if it is of shares on which WPP has a lien;
- if it is not stamped and duly presented for registration, together with
the share certificate and evidence of title as the board reasonably
requires;
- if it is with respect to more than one class of shares;
- if it is in favor of more than four persons jointly; or
- in certain circumstances, if the holder has failed to provide the required
particulars to the investigating power referred to under "--Disclosure of
Interests in Shares" above.
WPP may not refuse to register transfers of WPP ordinary shares if this
refusal would prevent dealings in the shares on the London Stock Exchange from
taking place on an open and proper basis.
If the board refuses to register a transfer of a share, it shall, within two
months after the date on which the transfer was lodged, send to the transferee
notice of the refusal.
The registration of transfers may be suspended at any time and for any
period as the directors may determine. The register of share owners may not be
closed for more than 30 days in any year.
GENERAL MEETINGS AND NOTICES
A share owner who is not registered on WPP's register of share owners with
an address in the U.K. and who has not supplied to WPP an address within the
U.K. for the purpose of giving notice will not be entitled to receive notices
from WPP. In certain circumstances, WPP will be able to give notices to share
owners by advertisement in newspapers in the U.K. Holders of WPP ADSs will be
entitled to receive notices under the terms of the deposit agreement relating to
WPP ADSs. See "Description of WPP American Depositary Shares--Voting Rights" on
page 62. Under English law, WPP is required to hold an annual general meeting of
share owners within 15 months after the preceding annual general meeting and,
subject to the foregoing, the meeting may be held at a time and place determined
by the directors.
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
English law does not permit WPP to exempt any director or officer from any
liability arising from negligence, default breach of duty or breach of trust
against WPP.
English law also does not permit WPP to indemnify a director or officer
against any liability arising from negligence, default, breach of duty or breach
of trust against the company, except that indemnification is allowed for
liabilities incurred in proceedings in which judgment is entered in favor of the
director or officer or the director or officer is acquitted, or the director or
officer is held liable, but the court finds that he or she acted honestly and
reasonably and that relief should be granted. WPP's articles of association
provide that to the extent permitted by the U.K. Companies Act, every director
or other officer or an auditor of WPP is to be indemnified against liabilities
he incurs in the actual or purported discharge of his duties or exercise of his
power. The U.K. Companies Act enables companies to purchase and maintain
insurance for directors, officers and auditors against any liability arising
from negligence, default, breach of duty or breach of trust against the company.
WPP maintains directors' and officers' insurance.
REGISTRAR
The registrar for WPP ordinary shares is Computershare Services PLC,
P.O. Box 82, The Pavilions, Bridgewater Road, Bristol BS99 7NH, England.
59
<PAGE>
DESCRIPTION OF WPP AMERICAN DEPOSITARY SHARES
GENERAL
Whether or not noteholders approve the proposed amendments, in accordance
with the terms of the indenture governing the notes, after the merger, your
notes will be convertible into WPP ADSs at a conversion price of $73.36 per .835
of a WPP ADS, or a conversion price of $87.856 for each whole ADS, subject to
adjustment. This represents a conversion rate of 11.382 WPP ADSs per $1,000
principal amount of the notes.
Citibank, N.A. as depositary will issue WPP ADSs to you in the form of a
certificated American depositary receipt upon conversion of your notes. Each ADS
will represent an ownership interest in, and the right to receive, five WPP
ordinary shares, which WPP will deposit with the custodian, which currently is
Citibank, N.A.--London Branch. Each ADS will also represent securities, cash or
other property deposited with the depositary but not distributed to ADS holders.
The depositary's principal office is located at 111 Wall Street, 5th Floor, New
York, New York 10043, and the custodian's principal office is located at 11 Old
Jewry, London EC2R 8DB, England.
Because the depositary will be the legal owner of the underlying ordinary
shares, ADS holders will generally exercise their rights as share owners through
the depositary.
You may hold ADSs either directly or indirectly through your broker or
financial institution. If you hold ADSs directly, you are an ADS holder. This
description assumes you hold your ADSs directly. If you hold the ADSs
indirectly, you must rely on the procedures of your broker or financial
institution to assert the rights of ADS holders described in this section. You
should consult with your broker or financial institution to find out what those
procedures are.
The following is a summary of the deposit agreement between WPP, the
depositary and the holders of ADSs. Because it is a summary, it does not contain
all the information that may be important to you. For more complete information,
you should read the deposit agreement and the American depositary receipts
evidencing the ADSs. We describe in "Summary--Where You Can Find More
Information" on page 15 how you can obtain copies of the deposit agreement and
the ADSs. In addition, you may inspect the deposit agreement and the ADR, at the
principal office of the depositary and at the office of the custodian.
As of August 18, there were 2,980,375 WPP ADSs outstanding.
We describe the information that WPP is required to file with the SEC under
the Exchange Act and the information it delivers to holders of ADSs under "The
Proposed Amendments--The Financial Information Amendment" on page 25.
SHARE DIVIDENDS AND OTHER DISTRIBUTIONS
HOW WILL ADS HOLDERS RECEIVE DIVIDENDS AND OTHER DISTRIBUTIONS ON THE ADSS?
The depositary will pay to the ADS holders the cash dividends or other
distributions it or the custodian receives on shares or other deposited
securities, after deducting its fees and expenses. The ADS holders will receive
these distributions in proportion to the number of ordinary shares their ADSs
represent. However, before making any distribution, the depositary will deduct
any withholding taxes that must be paid under applicable laws. See "Material Tax
Consequences" on page 29.
- CASH. The depositary will, promptly after payment, convert into U.S.
dollars any cash dividend or distribution WPP pays on the ordinary shares.
If conversion into U.S. dollars is not possible on a reasonable basis or
if a necessary governmental approval cannot be obtained on a reasonable
basis, the depositary may distribute the pounds sterling only to those ADS
holders to whom it is practicable to do so or hold the pounds sterling it
cannot convert for the account of
60
<PAGE>
the ADS holders who have not been paid. The depositary will not invest the
pounds sterling and it will not be liable for any interest. The depositary
will distribute only whole U.S. dollars and cents.
- SHARES. If WPP distributes ordinary shares as a dividend or free
distribution, the depositary will either distribute new ADSs representing
the distributed shares or, if new ADSs are not distributed, the ADSs then
outstanding will also represent the distributed shares. If the depositary
distributes new ADSs, it will only distribute whole ADSs and will sell
shares which would require it to issue a fractional ADS and distribute the
net proceeds to the ADS holders otherwise entitled to those shares.
- RIGHTS TO RECEIVE ADDITIONAL SHARES. If WPP offers holders of ordinary
shares any rights, including rights to subscribe for additional shares,
the depositary may, after consulting with WPP and if requested by WPP,
distribute these rights to the holders of ADSs. If the depositary
determines that it is not legal or not feasible to make these rights
available to the holder of ADSs, the depositary may sell the rights and
allocate the net proceeds to holders' accounts and, to the extent
practicable distribute the net proceeds to the holders of ADSs in the same
way it distributes cash. If WPP does not instruct the depositary
otherwise, the depositary may allow rights that are not distributed or
sold to lapse.
U.S. securities laws may restrict the distribution of rights or the
securities for which the rights are exercisable. The depositary will not
offer holders of ADSs rights unless the offer and distribution of those
rights and the securities to which the rights are exercisable are either
exempt from registration or have been registered under the Securities Act.
The deposit agreement does not obligate WPP to register under the
Securities Act those rights or the securities for which they are
exercisable.
- OTHER DISTRIBUTIONS. The depositary will send to the ADS holders anything
else WPP distributes on deposited securities by any means the depositary
thinks is legal, fair and practical. If it cannot make the distribution in
that way, the depositary may decide to sell what WPP distributed and
distribute the net proceeds, in the same way as it distributes cash.
The deposit agreement does not obligate WPP to take any other action to
permit the distribution of ADSs, shares, rights or anything else to ADS holders.
DEPOSIT, WITHDRAWAL AND CANCELLATION
HOW DOES THE DEPOSITARY ISSUE ADSS?
The depositary will issue the ADSs that noteholders are entitled to receive
upon conversion of their guaranteed notes in certificated ADR form, against
deposit of the underlying ordinary shares. The depositary will issue ADSs to any
person who deposits ordinary shares, along with any appropriate instruments of
transfer, or endorsement, with the custodian. As a condition to issuing the ADSs
for deposited ordinary shares, the depositary may require delivery of evidence
of any necessary approvals of the governmental agency in England, if any, which
is responsible for regulating currency exchange at that time, and an agreement
transferring any rights as a share owner to receive dividends or other property.
Upon payment of its fees and of any taxes or charges, including stamp taxes or
stock transfer taxes or fees, the depositary will register the appropriate
number of ADSs in the names requested by the person depositing the ordinary
shares and will issue certificated ADRs representing ADSs or, if the depositing
person specifically requests, deliver the ADRs at the depositary's principal
office to the persons requested. THESE TAXES OR CHARGES WILL NOT BE PAYABLE BY
NOTEHOLDERS IN CONNECTION WITH THEIR RECEIPT OF WPP ADSS UPON CONVERSION OF
THEIR NOTES.
61
<PAGE>
HOW DO ADS HOLDERS CANCEL AN ADS AND OBTAIN ORDINARY SHARES?
Subject to applicable law, holders of ADSs may submit a written request to
withdraw ordinary shares and turn in their ADRs, at the principal office of the
depositary. Ordinary shares that an ADS holder withdraws will be delivered in
registered form or by electronic delivery. Upon payment of its fees and of any
taxes or charges, including stamp taxes or stock transfer taxes and fees, the
depositary will deliver the deposited securities underlying the ADSs at the
office of the custodian, unless delivered electronically. The depositary may,
however, deliver at its principal office any dividends or distributions with
respect to the ordinary shares represented by the ADSs being turned in, or any
proceeds from the sale of any dividends, distributions or rights, which may be
held by the depositary. Alternatively, at the request, risk and expense of the
ADS holder, the depositary will deliver the ordinary shares at its principal
office in New York City.
VOTING RIGHTS
HOW DO ADS HOLDERS VOTE?
As soon as practicable after the depositary receives notice of any meeting
of WPP share owners, the depositary will fix a record date with respect to that
meeting for the purpose of allowing the ADS holders to give the depositary
instructions as to how to vote. The depositary will notify all registered
holders of ADSs as of that record date and deliver various materials to the ADS
holders. These materials will (1) describe the meeting time, place and the
matters to be voted on and (2) explain how the ADS holder may instruct the
depositary to vote the ordinary shares underlying the holder's ADSs. For
instructions to be valid, the depositary must receive them on or before the date
specified in the instructions. The depositary will, to the extent practical,
subject to applicable law and the provisions of the memorandum and articles of
association of WPP, vote the underlying ordinary shares as you instruct. The
depositary will only vote as you instruct. The depositary and its agents are not
responsible for failing to carry out voting instructions or for the manner of
carrying out voting instructions. If a holder of ADSs holds the ADSs through a
brokerage account or in a "street name" the holder must instruct the registered
holder to instruct the depositary with regard to voting the ordinary shares
underlying the ADSs.
Although a holder of WPP ADSs is currently not entitled to attend, speak and
vote at WPP share owner meetings, WPP has agreed in the merger agreement that it
will include for consideration by its share owners at the first annual general
share owners meeting after completion of the merger a resolution to amend WPP's
articles of association to permit holders of ADSs to attend, speak and vote at
share owners meetings.
62
<PAGE>
FEES AND EXPENSES
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
FOR: ADS HOLDERS MUST PAY:
<S> <C>
- Each issuance of an ADR, including $5.00 (or less) per 100 ADSs
issuances as result of a share dividend,
share split or an exchange of shares for
the underlying WPP ordinary shares
- Each surrender of an ADR, including if the $5.00 (or less) per 100 ADSs
deposit agreement terminates
- Each cash distribution $2.00 (or less) per 100 ADSs
- Transfer and registration of ordinary Registration or transfer fees
shares on WPP's share register from or to
the name of the depositary or its agent
when ordinary shares are deposited or
withdrawn
- Transfers of ADRs $1.50 (or less) per ADR certificate
- Conversion of pounds sterling to U.S. Fees and expenses incurred by the depositary
dollars
- Cable, telex, facsimile transmission and Fees and expenses incurred by the depositary
delivery expenses, if expressly provided in
the agreement
- As necessary Certain taxes and governmental charges the
depositary or the custodian has to pay on any
ADS or ordinary share underlying an ADS, for
example, stock transfer taxes, stamp duty
reserve tax or withholding taxes
------------------------------------------------------------------------------------------
</TABLE>
NO TAXES OR CHARGES WILL BE PAYABLE BY NOTEHOLDERS IN CONNECTION WITH THEIR
RECEIPT OF WPP ADSS UPON CONVERSION OF THEIR NOTES.
PAYMENT OF TAXES
The depositary may deduct the amount of any taxes owed from any payments to
the ADS holders. It may also restrict the transfer of ADSs or restrict the
withdrawal of underlying deposited securities until the ADS holders pay any
taxes owed on the ADSs or the underlying ordinary shares. It may also sell
deposited shares to pay any taxes owed. The ADS holders will remain liable if
the proceeds of the sale are not enough to pay the taxes. If the depositary
sells deposited shares, it will, if appropriate, reduce the number of ADSs held
to reflect the sale and pay any proceeds, or send any property, remaining after
it has paid the taxes.
RECLASSIFICATIONS, RECAPITALIZATIONS AND MERGERS
If WPP:
- Changes the nominal or par value of any of the WPP ordinary shares;
- Reclassifies, splits or consolidates any of the WPP ordinary shares;
- Distributes securities on any of the WPP ordinary shares that are not
distributed to you; or
63
<PAGE>
- Recapitalizes, reorganizes, merges, consolidates or sells its assets,
then:
(1) the cash, shares or other securities received by the depositary will
become new deposited securities under the deposit agreement, and each ADS
will automatically represent its equal share of the new deposited
securities; and
(2) the depositary will, if WPP asks it to, issue new ADSs or ask holders of
ADSs to surrender their outstanding ADSs in exchange for new ADSs
identifying the new deposited securities.
DISCLOSURE OF INTERESTS
The obligation of a holder of WPP ordinary shares and other persons with an
interest in the shares to disclose information to WPP under English law also
applies to holders of ADSs and any other persons with an interest in the ADSs.
The consequences for failure to comply with these provisions will be the same
for holders of ADSs and any other persons with an interest as for a holder of
WPP ordinary shares. See "Description of WPP Ordinary Shares--Disclosure of
Interests in Shares" on page 58.
AMENDMENT AND TERMINATION
HOW MAY THE DEPOSIT AGREEMENT BE AMENDED?
WPP may agree with the depositary to amend the deposit agreement and the WPP
ADRs without the consent of holders of the ADSs for any reason. If the amendment
adds or increases fees or charges, except for taxes and governmental charges, or
prejudices any substantial right of the ADS holders, it will only become
effective 60 days after the depositary notifies the ADS holders of the
amendment. AT THE TIME AN AMENDMENT BECOMES EFFECTIVE, HOLDERS OF THE ADSS ARE
CONSIDERED, BY CONTINUING TO HOLD THEIR ADSS, TO CONSENT TO THE AMENDMENT AND TO
BE BOUND BY THE DEPOSIT AGREEMENT AS AMENDED. HOWEVER, NO AMENDMENT WILL IMPAIR
THE RIGHT OF HOLDERS OF THE ADSS TO RECEIVE THE DEPOSITED SECURITIES IN EXCHANGE
FOR THEIR ADSS.
HOW MAY THE DEPOSIT AGREEMENT BE TERMINATED?
The depositary will terminate the deposit agreement if WPP asks it to do so,
in which case it must notify the holder of the ADSs at least 30 days before
termination. The depositary may also resign by providing written notice of its
resignation to WPP. This resignation will be effective upon the earlier of
(1) 60 days or (2) WPP's appointment of a successor depositary. If the
depositary notifies WPP of its resignation and WPP fails to appoint a new
depositary within 60 days, the depositary may terminate the depositary agreement
without the approval of WPP by notifying holders of the ADSs at least 30 days
prior to the termination.
If any ADSs remain outstanding after termination, the depositary will stop
registering the transfer of ADSs, will stop distributing dividends to ADS
holders, and will not give any further notices or do anything else under the
deposit agreement other than:
- collect dividends and distributions on the deposited securities;
- sell rights and other property offered to holders of deposited securities;
and
- deliver ordinary shares and other deposited securities upon cancellation
of ADSs.
At any time after six months after termination of the deposit agreement, the
depositary may sell any remaining deposited securities. After that, the
depositary will hold the money it received on the sale, as well as any cash it
is holding under the agreement, for the pro rata benefit of the ADS holders that
have not surrendered their ADSs. It will not invest the money and has no
liability for interest. The
64
<PAGE>
depositary's only obligations will be to account for the money and cash. After
termination, WPP's only obligations will be with respect to indemnification of,
and to pay specified amounts to, the depositary.
ADS HOLDER'S RIGHT TO RECEIVE THE ORDINARY SHARES UNDERLYING THE ADSS
You have the right to cancel your ADSs and withdraw the underlying ordinary
shares at any time except:
- due to temporary delays caused by the depositary or WPP closing its
transfer books, the deposit of ordinary shares in connection with voting
at a share owners meeting, or the payment of dividends;
- when the ADS holder owes money to pay fees, taxes and similar charges; or
- when it is necessary to prohibit withdrawals in order to comply with any
laws or governmental regulations that apply to ADSs or to the withdrawal
of ordinary shares or other deposited securities.
This right of withdrawal may not be limited by any provision of the deposit
agreement.
LIMITATIONS ON OBLIGATIONS AND LIABILITY TO ADS HOLDERS
The deposit agreement expressly limits the obligations of WPP and the
depositary. It also limits the liability of WPP and the depositary. WPP and the
depositary:
- are only obligated to perform those obligations as are specifically set
forth in the deposit agreement in good faith and using its reasonable
judgment;
- are not liable if either of them is prevented or delayed by law, any
provision of the WPP memorandum and articles of association or
circumstances beyond their control from performing their obligations under
the agreement;
- are not liable if either of them exercises, or fails to exercise,
discretion permitted under the agreement;
- have no obligation to become involved in a lawsuit or proceeding related
to the ADSs or the deposit agreement on your behalf or on behalf of any
other party unless they are indemnified to their satisfaction;
- may rely upon any advice of or information from any legal counsel,
accountants, any person depositing ordinary shares, any ADS holder or any
other person whom they believe in good faith is competent to give them
that advice or information; and
- may rely and shall be protected in acting upon any written notice,
request, direction or other document believed by them in good faith to be
genuine and to have been signed or presented by the proper party or
parties.
In the deposit agreement, WPP and the depositary agree to indemnify each
other under specified circumstances.
The depositary and its agents are not liable for any failure to carry out
any instructions to vote any of the ordinary shares, for the manner in which any
of these votes are cast or for the effect of these votes.
The depositary may own and deal in any class of securities of WPP and its
affiliates and in ADSs.
REQUIREMENTS FOR DEPOSITARY ACTIONS
Before the depositary will issue or register the transfer of an ADS, make a
distribution on an ADS, or permit withdrawal of ordinary shares, WPP or the
depositary may require:
- payment of taxes or other governmental charges, and transfer or
registration fees charged by third parties for the transfer of any shares
or other deposited securities, as well as the fees and expenses of the
depositary;
65
<PAGE>
- production of satisfactory proof of the identity of the person presenting
ordinary shares for deposit or ADSs upon withdrawal, and of the
genuineness of any signature or other information they deem necessary; and
- compliance with regulations the depositary may establish consistent with
the deposit agreement, including presentation of transfer documents.
The depositary may refuse to deliver, transfer, or register transfers of
ADSs generally when the transfer books of the depositary are closed or at any
time if the depositary or WPP, in good faith thinks it advisable to do so.
EXCHANGE RATES
This table sets forth, for each period indicated, the high and low exchange
rates for one pound sterling expressed in U.S. dollars, the average exchange
rate during that period, and the exchange rate at the end of that period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED ----------------------------------------------------
JUNE 30, 2000 1999 1998 1997 1996 1995
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
High.................................. $1.6537 $1.6765 $1.7222 $1.7035 $1.7123 $1.6440
Low................................... 1.4702 1.5515 1.6114 1.5775 1.4948 1.5302
Average............................... 1.5694 1.6146 1.6602 1.6397 1.5733 1.5803
Period End............................ 1.5130 1.6150 1.6628 1.6427 1.7123 1.5535
</TABLE>
As of August 28, 2000, the latest practicable date for which exchange rate
information was available prior to the printing of this document, the exchange
rate for one pound sterling expressed in U.S. dollars was $1.4716.
This table sets forth, for each period indicated, the high and low exchange
rates for one U.S. dollar expressed in pounds sterling, the average exchange
rate during that period, and the exchange rate at the end of that period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED ---------------------------------------------------
JUNE 30, 2000 1999 1998 1997
---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
High.................................. L0.6802 L0.6445 L0.6205 L0.6339
Low................................... 0.6047 0.5965 0.5807 0.5870
Average............................... 0.6372 0.6193 0.6023 0.6099
Period End............................ 0.6609 0.6192 0.6014 0.6088
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
High.................................. L0.6690 L0.6535
Low................................... 0.5840 0.6083
Average............................... 0.6356 0.6328
Period End............................ 0.5840 0.6437
</TABLE>
As of August 28, 2000, the latest practicable date for which exchange rate
information was available prior to the printing of this document, the exchange
rate for one U.S. dollar was L0.6795.
All of the exchange rate information set forth above is based on the noon
buying rates in New York City for cable transfer in pounds sterling as certified
for customs purposes by the Federal Reserve Bank of New York on the relevant
dates.
66
<PAGE>
MARKET PRICE AND DIVIDEND DATA
MARKET PRICES
The primary trading market for the WPP ordinary shares is the London Stock
Exchange, where they are traded under the ticker symbol "WPP." The WPP ordinary
shares are also traded on German stock exchanges in Berlin, Frankfurt, Munich,
and Stuttgart. WPP ADSs, each representing five ordinary shares, are issued by a
depositary and are quoted on the Nasdaq National Market, where their ticker
symbol is "WPPGY."
The table below sets forth, for the calendar quarters indicated, the highest
and lowest middle-market quotations for the ordinary shares as derived from the
Daily Official List on the London Stock Exchange and the range of high and low
bid prices of WPP ADSs as quoted on the Nasdaq National Market.
<TABLE>
<CAPTION>
WPP
ORDINARY
SHARES WPP ADSS(1)
------------------- -------------------------
HIGH LOW HIGH LOW
-------- -------- ----------- -----------
(L PER WPP ($ PER ADS)
ORDINARY
SHARE)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
First Quarter............................................. 3.43 2.43 29 3/16 20 1/4
Second Quarter............................................ 4.27 3.43 35 3/4 28 3/4
Third Quarter............................................. 4.67 2.71 38 1/2 22 13/16
Fourth Quarter............................................ 3.78 2.02 32 3/8 18
YEAR ENDED DECEMBER 31, 1999
First Quarter............................................. 5.49 3.59 44 3/8 30 7/16
Second Quarter............................................ 5.75 4.98 46 39 3/4
Third Quarter............................................. 6.27 5.39 50 7/16 42 11/16
Fourth Quarter............................................ 9.96 5.70 83 1/8 47 1/2
YEAR ENDED DECEMBER 31, 2000
First Quarter............................................. 13.24 8.68 102 9/16 70 1/8
Second Quarter............................................ 11.20 7.10 88 56 1/4
Third Quarter (through August 25, 2000)................... 9.89 8.50 73 5/8 62 3/16
</TABLE>
------------------------
(1) With effect from November 16, 1999, WPP split its existing ADSs on a
two-for-one basis so that a WPP ADS is now equivalent to five ordinary
shares. Comparative figures for prior periods have been restated
accordingly.
On August 25, 2000, the last trading day for which information was available
prior to the printing of this consent solicitation and prospectus, the last
middle market quotation of the ordinary shares on the London Stock Exchange was
L8.79 per ordinary share and the high and low bid prices for the WPP ADSs as
quoted on the Nasdaq National Market were $66.125 and $64.0625, respectively.
As of August 18, 2000 the last date prior to the printing of this consent
solicitation and prospectus for which it was practicable for us to obtain
information, there were approximately 10,727 registered holders of WPP ordinary
shares and 462 registered holders of WPP ADSs.
DIVIDEND DATA
The following table sets forth dividends announced and paid in respect of
WPP ADSs and ordinary shares, on a per ADS and per ordinary share basis for the
periods indicated, but does not include the associated U.K. tax credit that may
be available to beneficial owners of WPP ADSs or
67
<PAGE>
ordinary shares who are resident in the U.S. for tax purposes. See "Material Tax
Consequences--United Kingdom Tax Consequences of Owning WPP ADSs and Ordinary
Shares" on page 35. The percentage of any dividend represented by the associated
U.K. tax credit has varied over the periods indicated. As of April 6, 1999, the
U.K. tax credit is now effectively completely set off by the amount of
applicable U.K. withholding taxes. The U.K. tax credit is currently one-ninth of
the cash dividend.
Dividends have been translated from pounds sterling per WPP ADS into U.S.
dollars using the closing exchange rate as reported by Bloomberg on the date the
dividends were paid. Dividends have historically been paid semi-annually, with
the regular interim dividend paid in November and the regular final dividend
paid in July of the next year, subject to approval by WPP's share owners. See
"Exchange Rates" on page 66 and "Description of WPP Ordinary Shares--Dividends"
on page 56 and "Description of WPP American Depositary Shares--Share Dividends
and Other Distributions" on page 60.
<TABLE>
<CAPTION>
DIVIDENDS PER WPP ORDINARY
SHARE AND WPP ADS(1)
------------------------------
INTERIM FINAL TOTAL
-------- -------- --------
<S> <C> <C> <C>
1995
Ordinary Share............................................ 0.445p 0.865p 1.310p
ADS....................................................... 3.5 CENTS 6.7 CENTS 10.2 CENTS
1996
Ordinary Share............................................ 0.556p 1.144p 1.7p
ADS....................................................... 4.7 CENTS 9.7 CENTS 14.4 CENTS
1997
Ordinary Share............................................ 0.70p 1.43p 2.13p
ADS....................................................... 5.9 CENTS 11.8 CENTS 17.7 CENTS
1998
Ordinary Share............................................ 0.84p 1.72p 2.56p
ADS....................................................... 7.0 CENTS 13.4 CENTS 20.4 CENTS
1999
Ordinary Share............................................ 1.00p 2.1p 3.1p
ADS....................................................... 8.1 CENTS 15.8 CENTS 23.9 CENTS
2000
Ordinary Share............................................ 1.20p n/a n/a
ADS....................................................... 9.08 CENTS n/a n/a
</TABLE>
------------------------
(1) With effect from November 16, 1999, WPP split its existing ADSs on a
two-for-one basis so that a WPP ADS is now equivalent to five ordinary
shares. Comparative figures for prior periods have been restated
accordingly.
68
<PAGE>
LEGAL OPINIONS
The validity of the WPP guarantee has been passed upon for WPP by Fried,
Frank, Harris, Shriver & Jacobson (a partnership including professional
corporations), New York, New York, as to certain matters of New York law and by
Allen & Overy, as to certain matters of United Kingdom law.
The validity of the WPP ordinary shares underlying the WPP ADSs issuable
upon conversion of the guaranteed notes has been passed upon for WPP by Allen &
Overy.
The validity of the notes has been passed upon for Y&R by Stephanie W.
Abramson, Executive Vice President, General Counsel and Secretary of Y&R.
Ms. Abramson is also a stockholder of Y&R and a holder of options to purchase
shares of Y&R common stock.
EXPERTS
The consolidated financial statements of Y&R as of December 31, 1999 and
1998, and for each of the three years in the period ended December 31, 1999
incorporated into this consent solicitation and prospectus by reference to Y&R's
Annual Report on Form 10-K 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.
The audited consolidated financial statements of WPP as of December 31, 1999
and 1998, and for each of the three years in the period ended December 31, 1999
incorporated by reference into this consent solicitation and prospectus to WPP's
Annual Report on Form 20-F for the year ended December 31, 1999, have been
audited by Arthur Andersen, independent auditors, as indicated in their report
with respect hereto, and are included in reliance upon the authority of said
firm as experts in giving those reports.
69
<PAGE>
APPENDIX A
FORM OF PROPOSED AMENDMENTS
This Appendix sets forth the text of the material provisions of the proposed
amendments to the Indenture between Young & Rubicam Inc. and The Bank of New
York, as trustee, governing Y&R's 3% Convertible Subordinated Notes due 2005 and
to the related Registration Agreement substantially in the form in which they
would be adopted. Proposed additions are italicized and proposed deletions are
in brackets. Note that this text may be modified or supplemented in connection
with our adoption of the proposed amendments in a manner that would not require
us to obtain additional consents.
FINANCIAL INFORMATION AMENDMENT
Section 4.02 of the Indenture would be amended to read in its entirety (with
the deleted paragraph set forth in brackets below) as follows:
SECTION 4.02 SEC Reports. The Company will comply with the requirements of
TIA Section 314(a). In addition, whether or not required by the rules and
regulations of the SEC, so long as any Securities are outstanding, the Company
will file with the SEC and furnish (without exhibits) to the Trustee and to the
holders of Securities all quarterly and annual financial information 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 Conditions and Results of
Operations" and, with respect to annual consolidated financial statements only,
a report on the annual consolidated financial statements by the Company's
independent accountants. The Company shall not be required to file any report or
other information with the SEC if the SEC does not permit such filing. Delivery
of such reports, information and documents to the Trustee is for informational
purposes only and the Trustee's receipt thereof shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein, including the Company's compliance with any of
its covenants hereunder.
[Deleted: In addition, if the Company at any time is not subject to either
Section 13 or 15(d) of the Exchange Act, the Company will provide to each holder
and beneficial owner of Securities and shares of Common Stock issued upon
conversion of Securities, and to any prospective purchaser designated by any
such holder or beneficial owner, upon request, the information required pursuant
to Rule 144A(d)(4) of the Securities Act.]
The foregoing requirements shall be deemed satisfied so long as the Company
is a wholly owned subsidiary of WPP, if WPP prepares and files with the SEC all
reports and other documents required to be filed by WPP pursuant to
Section 13(a) or Section 15(d) of the Exchange Act and WPP furnishes or causes
to be furnished to the Trustee and each holder of Securities, on the same basis
and in the same manner as furnished to holders of all WPP ADSs financial
information furnished by WPP or the ADS Depositary to holders of WPP ADSs.
REGISTRATION AGREEMENT AMENDMENT
The following provision would be added to the Registration Agreement:
7. Release. As of , 2000, the Company shall be released from
its obligations under Sections 2 and 3 of this Agreement, and from and after
such date, the Company shall have no further obligations thereunder.
A-1
<PAGE>
APPENDIX B
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
INTRODUCTORY NOTE
The following Unaudited Pro Forma Condensed Consolidated Financial
Information gives pro forma effect to the merger, after giving effect to the pro
forma adjustments described in the accompanying notes. We have prepared this
financial information from, and you should read it in conjunction with, the
historical consolidated financial statements, including applicable notes
thereto, of WPP and Y&R that we have incorporated by reference into this consent
solicitation and prospectus. For information on how to obtain any of those
documents, see "Summary--Where You Can Find More Information" on page 16 in the
consent solicitation and prospectus to which this Unaudited Pro Forma Condensed
Consolidated Financial Information is an Appendix.
We have provided the Unaudited Pro Forma Condensed Consolidated Financial
Information for illustrative purposes only. This information does not purport to
represent what the actual results of operations or the financial position of WPP
would have been if the merger had actually occurred on the dates assumed and
does not necessarily indicate what WPP's future operating results or
consolidated financial position will be.
We have prepared the Unaudited Pro Forma Condensed Consolidated Financial
Information in accordance with U.K. GAAP, which differs in certain respects from
U.S. GAAP. The Notes to the financial statements included in WPP's Annual Report
on Form 20-F for the year ended December 31, 1999 describe the principal
differences between U.K. GAAP and U.S. GAAP as they relate to WPP. We have
included in the Notes to the Unaudited Pro Forma Condensed Consolidated
Financial Information a summary of the estimated material adjustments to profit
attributable to ordinary share owners and equity share owners' funds which would
be required if U.S. GAAP had been applied.
WPP will account for the merger as an acquisition under U.K. GAAP in
accordance with Financial Reporting Standard 6, "Acquisitions and Mergers." WPP
will account for the merger as a purchase for U.S. GAAP purposes in accordance
with APB Opinion No. 16, "Business Combinations."
The historical financial statements of Y&R were prepared in accordance with
U.S. GAAP. For purposes of presenting the Unaudited Pro Forma Condensed
Consolidated Financial Information, we have adjusted Y&R's historical audited
consolidated statement of operations for the year ended December 31, 1999,
unaudited consolidated statement of operations for the six months ended
June 30, 2000 and unaudited consolidated balance sheet at June 30, 2000 to
include (1) unaudited amounts for turnover (gross billings) and cost of sales,
(2) unaudited reclassifications to conform Y&R's historical financial
information to WPP's presentation under U.K. GAAP and (3) unaudited adjustments
to conform Y&R historical financial information with WPP's disclosed accounting
policies under U.K. GAAP as described in the Notes to the Unaudited Pro Forma
Condensed Consolidated Financial Information.
The pro forma adjustments reflected in the balance sheet data included in
the Unaudited Pro Forma Condensed Consolidated Financial Information reflect
estimates made by WPP management and assumptions that it believes to be
reasonable. The Unaudited Pro Forma Condensed Consolidated Financial Information
does not take into account any synergies, including cost savings, or any
severance and restructuring costs, which may or are expected to occur as a
result of the merger.
The pro forma amounts pertaining to the consolidated WPP entity in the
unaudited pro forma consolidated financial information are presented in pounds
sterling. Solely for convenience, we have translated the pro forma amounts into
U.S. dollars using a rate of L1.00 to $1.5130, the noon buying rate in New York
City on June 30, 2000 for cable transfers in U.K. pounds sterling as certified
for customs purposes by the Federal Reserve Bank of New York. You should not
construe these translations as a representation that the U.K pounds sterling
amounts actually represent, or could be converted into, U.S. dollars at this
rate.
B-1
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT DATA
FOR THE SIX MONTHS ENDED JUNE 30, 2000
The following unaudited pro forma condensed consolidated profit and loss
account data for the six months ended June 30, 2000, presented as if the merger
took place on January 1, 2000, are derived from (1) the unaudited historical
consolidated profit and loss account of WPP for that period, (2) Y&R's
historical unaudited statement of operations for that period, (3) unaudited
reclassifications to conform Y&R's historical financial information to WPP's
presentation under U.K. GAAP and (4) unaudited adjustments to conform Y&R's
historical statement of operations with WPP's disclosed accounting policies
under U.K. GAAP. No pro forma adjustments were required to be made in
preparation of the unaudited pro forma condensed profit and loss data for the
six months ended June 30, 2000 set forth below.
We prepared the information provided below from, and you should read this
information in conjunction with, the historical consolidated financial
statements, including applicable notes of WPP and Y&R, which we have
incorporated by reference into this consent solicitation and prospectus.
<TABLE>
<CAPTION>
WPP Y&R PRO FORMA
-------- -------- ----------------------
L L L $
-------- -------- -------- --------
(IN MILLIONS EXCEPT PER SHARE AND PER ADS
AMOUNTS)
<S> <C> <C> <C> <C>
TURNOVER (GROSS BILLINGS)................................... 5,655.9 2,703.4 8,359.3 12,647.6
Cost of Sales............................................... (4,446.8) (2,102.6) (6,549.4) (9,909.2)
-------- -------- -------- --------
REVENUE..................................................... 1,209.1 600.8 1,809.9 2,738.4
Direct Costs................................................ (138.0) -- (138.0) (208.8)
-------- -------- -------- --------
GROSS PROFIT................................................ 1,071.1 600.8 1,671.9 2,529.6
Operating Costs............................................. (924.6) (524.1) (1,448.7) (2,191.9)
OPERATING PROFIT BEFORE EXCEPTIONAL CHARGE.................. 146.5 76.7 223.2 337.7
Exceptional operating charge................................ -- (36.7) (36.7) (55.5)
OPERATING PROFIT............................................ 146.5 40.0 186.5 282.2
Income from Associates...................................... 14.2 2.4 16.6 25.1
PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST AND
TAXATION.................................................. 160.7 42.4 203.1 307.3
PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST, TAXATION AND
EXCEPTIONAL CHARGE........................................ 160.7 79.1 239.8 362.8
Net interest payable on similar charges..................... (23.0) (5.2) (28.2) (42.7)
-------- -------- -------- --------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION............... 137.7 37.2 174.9 264.6
Taxation on profit on ordinary activities before exceptional
item...................................................... (41.3) (28.9) (70.2) (106.2)
Exceptional tax credit arising on exercised stock options... -- 18.1 18.1 27.4
-------- -------- -------- --------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION................ 96.4 26.4 122.8 185.8
Minority interests.......................................... (3.3) (0.9) (4.2) (6.4)
-------- -------- -------- --------
PROFIT ATTRIBUTABLE TO ORDINARY SHARE OWNERS................ 93.1 25.5 118.6 179.4
======== ======== ======== ========
EARNINGS PER SHARE
Basic earnings per ordinary share........................... 12.3p 35.1p 11.2p 16.9 CENTS
Diluted earnings before exceptional items per ordinary
share..................................................... 12.0p 52.8p 12.2p 18.5 CENTS
Diluted earnings per ordinary share......................... 12.0p 31.2p 10.6p 16.0 CENTS
EARNINGS PER ADS
Basic earnings per ADS...................................... 61.5p n/a 56.0p 84.5 CENTS
Diluted earnings before exceptional items per ADS........... 60.0p n/a 61.0p 92.5 CENTS
Diluted earnings per ADS.................................... 60.0p n/a 53.0p 80.0 CENTS
</TABLE>
THE NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION
ARE AN INTEGRAL PART OF THIS DATA.
B-2
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT DATA
FOR THE YEAR ENDED DECEMBER 31, 1999
The following unaudited pro forma condensed consolidated profit and loss
account data for the year ended December 31, 1999, presented as if the merger
took place on January 1, 1999, are derived from (1) the audited historical
consolidated profit and loss account of WPP for that period, (2) Y&R's audited
historical statement of operations for that period, except for turnover (gross
billings) and cost of sales data which are unaudited, (3) unaudited
reclassifications to conform Y&R's historical financial statements to WPP's
presentation under U.K. GAAP and (4) unaudited adjustments to conform Y&R's
historical statement of operations with WPP's disclosed accounting policies
under U.K. GAAP. No pro forma adjustments were required to be made in the
preparation of the unaudited pro forma condensed consolidated profit and loss
account data for the year ended December 31, 1999 set forth below. We prepared
the information provided below from, and you should read this information in
conjunction with, the historical consolidated financial statements, including
applicable notes of WPP and Y&R, which we have incorporated by reference into
this consent solicitation and prospectus.
<TABLE>
<CAPTION>
WPP Y&R PRO FORMA
--------- --------- -----------------------
L L L $
--------- --------- ---------- ----------
(IN MILLIONS, EXCEPT PER SHARE AND PER ADS
AMOUNTS)
<S> <C> <C> <C> <C>
TURNOVER (GROSS BILLINGS).................................. 9,345.9 5,273.1 14,619.0 22,118.5
Cost of Sales.............................................. (7,173.3) (4,211.7) (11,385.0) (17,225.5)
--------- --------- ---------- ----------
REVENUE.................................................... 2,172.6 1,061.4 3,234.0 4,893.0
Direct Costs............................................... (317.3) -- (317.3) (480.1)
--------- --------- ---------- ----------
GROSS PROFIT............................................... 1,855.3 1,061.4 2,916.7 4,412.9
Operating Costs............................................ (1,591.8) (923.4) (2,515.2) (3,805.5)
--------- --------- ---------- ----------
OPERATING PROFIT........................................... 263.5 138.0 401.5 607.4
Income from Associates..................................... 27.3 6.6 33.9 51.3
--------- --------- ---------- ----------
PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST AND
TAXATION................................................. 290.8 144.6 435.4 658.7
Net interest payable and similar charges................... (35.4) (9.2) (44.6) (67.5)
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION.............. 255.4 135.4 390.8 591.2
Tax on profit on ordinary activities before exceptional
item..................................................... (76.6) (50.6) (127.2) (192.5)
Exceptional tax credit arising on exercised stock
options.................................................. -- 26.2 26.2 39.7
TAX ON PROFIT ON ORDINARY ACTIVITIES....................... (76.6) (24.4) (101.0) (152.8)
--------- --------- ---------- ----------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION............... 178.8 111.0 289.8 438.4
Minority interests......................................... (6.0) (2.7) (8.7) (13.1)
--------- --------- ---------- ----------
PROFIT ATTRIBUTABLE TO ORDINARY SHARE OWNERS............... 172.8 108.3 281.1 425.3
========= ========= ========== ==========
EARNINGS PER SHARE
Basic earnings per ordinary share.......................... 22.9p 157.6p 27.0p 40.9 CENTS
Diluted earnings before exceptional tax credit per ordinary
share.................................................... 22.5p 99.0p 22.9p 34.6 CENTS
Diluted earnings per ordinary share........................ 22.5p 130.6p 25.2p 38.1 CENTS
EARNINGS PER ADS
Basic earnings per ADS..................................... 114.5p n/a 135.0p 204.5 CENTS
Diluted earnings before exceptional tax credit per ADS..... 112.5p n/a 114.5p 173.0 CENTS
Diluted earnings per ADS................................... 112.5p n/a 126.0p 190.5 CENTS
</TABLE>
THE NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION
ARE AN INTEGRAL PART OF THIS DATA.
B-3
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT JUNE 30, 2000
The following unaudited pro forma condensed consolidated balance sheet at
June 30, 2000 is derived from (1) the unaudited historical consolidated balance
sheet of WPP at June 30, 2000, (2) the unaudited historical consolidated balance
sheet of Y&R at June 30, 2000, (3) unaudited reclassifications to conform Y&R's
audited historical balance sheet to WPP's presentation under U.K. GAAP,
(4) unaudited adjustments to conform Y&R's historical balance sheet to WPP's
disclosed accounting policies under U.K. GAAP, and (5) the unaudited pro forma
adjustments described in the Notes to the Unaudited Pro Forma Condensed
Consolidated Financial Information. These unaudited pro forma adjustments were
determined as if the merger had occurred on June 30, 2000. We prepared the
information provided below from, and you should read this information in
conjunction with, the historical consolidated financial statements, including
applicable notes of WPP and Y&R, which we have incorporated by reference into
this consent solicitation and prospectus.
<TABLE>
<CAPTION>
PRO FORMA
WPP Y&R ADJUSTMENTS PRO FORMA
-------- -------- ----------- -------------------
L L L L $
-------- -------- ----------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
FIXED ASSETS
Intangible assets
Corporate brands.......................................... 350.0 -- -- 350.0 529.6
Goodwill-existing......................................... 511.0 251.2 (251.2) 511.0 773.1
Goodwill-resulting from the transaction................... -- -- 3,964.3 3,964.3 5,997.9
Tangible assets............................................. 211.1 127.7 30.9 369.7 559.4
Investments................................................. 448.9 159.6 (36.2) 572.3 865.9
-------- -------- ------- -------- --------
1,521.0 538.5 3,707.8 5,767.3 8,725.9
CURRENT ASSETS
Stocks and work in progress................................. 198.1 75.8 -- 273.9 414.4
Debtors..................................................... 1,336.3 753.1 -- 2,089.4 3,161.3
Debtors within working capital facility:
Gross debts............................................... 396.3 -- -- 396.3 599.6
Non-returnable proceeds................................... (228.1) -- -- (228.1) (345.1)
Cash at bank and in hand.................................... 395.9 105.2 218.1 719.2 1,088.1
-------- -------- ------- -------- --------
2,098.5 934.1 218.1 3,250.7 4,918.3
CREDITORS: amounts falling due within
one year.................................................. (2,404.2) (1,097.1) (92.7) (3,594.0) (5,437.7)
NET CURRENT LIABILITIES..................................... (305.7) (163.0) 125.4 (343.3) (519.4)
TOTAL ASSETS LESS CURRENT LIABILITIES....................... 1,215.3 375.5 3,833.2 5,424.0 8,206.5
CREDITORS: amounts falling due after more
than one year............................................. (754.9) (330.5) -- (1,085.4) (1,642.2)
PROVISIONS FOR LIABILITIES AND CHARGES...................... (75.7) (7.1) -- (82.8) (125.3)
-------- -------- ------- -------- --------
NET ASSETS.................................................. 384.7 37.9 3,833.2 4,255.8 6,439.0
-------- -------- ------- -------- --------
CAPITAL AND RESERVES
Called up share capital..................................... 77.9 0.5 39.9 118.3 179.0
Reserves.................................................... 296.6 27.7 3,793.3 4,117.6 6,229.9
-------- -------- ------- -------- --------
EQUITY SHARE OWNERS' FUNDS.................................. 374.5 28.2 3,833.2 4,235.9 6,408.9
Minority interests.......................................... 10.2 9.7 -- 19.9 30.1
-------- -------- ------- -------- --------
TOTAL CAPITAL EMPLOYED...................................... 384.7 37.9 3,833.2 4,255.8 6,439.0
-------- -------- ------- -------- --------
</TABLE>
THE NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION
ARE AN INTEGRAL PART OF THIS DATA.
B-4
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
1. TRANSLATION OF Y&R CONSOLIDATED FINANCIAL STATEMENTS
Y&R presents its financial statements in U.S. dollars. Solely for
convenience, the results of Y&R, as adjusted and restated to conform with WPP's
disclosed accounting policies under U.K. GAAP, have been translated into pounds
sterling using a rate of $1.6178 to L1.00, the average exchange rate for the
year ended December 31, 1999 and $1.57 to L1.00, the average exchange rate for
the six months ended June 30, 2000. The balance sheet has been translated into
pounds sterling using a rate of $1.5166 to L1.00, the closing rate on June 30,
2000.
These translations should not be construed as a representation that the U.S.
dollar amounts actually represent, or could be converted into, U.K. pounds
sterling at the rates indicated.
2. UNAUDITED PRO FORMA ACQUISITION ADJUSTMENTS
The Unaudited Pro Forma Condensed Consolidated Financial Information records
the merger as being accounted for as an acquisition with the excess of the fair
value of the consideration over the fair value of net assets acquired being
allocated to goodwill.
The Unaudited Pro Forma Condensed Consolidated Financial Information assumes
that WPP will issue 4.175 WPP ordinary shares, equivalent to .835 of a WPP ADS,
in exchange for each Y&R common share. The total purchase price assumed is based
upon the WPP closing middle market quotation on June 30, 2000 of L9.65 and the
number of Y&R shares in existence on June 30, 2000 of 73.2 million combined with
23.6 million stock options multiplied by the exchange ratio of 4.175. This also
assumes that 404 million new WPP ordinary shares will be issued in connection
with the merger. In calculating the number of new WPP shares to be issued, no
account has been taken of (1) any Y&R common shares issued since June 30, 2000;
(2) any Y&R stock options issued since June 30, 2000; (3) any WPP ordinary
shares to be issued in respect of the Y&R 3% convertible notes; or (4) any new
WPP ordinary shares that will have to be issued as consideration for certain
previous acquisitions by Y&R.
Estimated professional fees of L55.6 million (primarily legal, investment
bankers' and accountants' fees) and stamp duty of L37.1 million related to the
acquisition are assumed to be accounted for as acquisition costs and share issue
costs, respectively. These transaction costs of L92.7 million are expected to be
paid on completion of the merger and as a result have been accrued in the pro
forma net assets statement (creditors: amounts falling due within one year).
A preliminary allocation of the purchase price has been performed for
purposes of the Unaudited Pro Forma Condensed Consolidated Financial Information
based on initial appraisal estimates and other valuation studies which are in
process and which WPP believes are reasonable. The final allocation is subject
to completion of these studies, which is expected to be within the next twelve
months. It is expected that as a result of these studies further adjustments may
be required, particularly
B-5
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
2. UNAUDITED PRO FORMA ACQUISITION ADJUSTMENTS (CONTINUED)
in relation to taxation and other balance sheet accounts. A summary, in
accordance with U.K. GAAP, is shown below:
<TABLE>
<CAPTION>
AT
JUNE 30, 2000
-------------
L
(IN MILLIONS)
<S> <C>
Share consideration (L40.4 million share capital; L3,821.0
million share premium).................................... 3,898.5
Professional fees........................................... 55.6
Total purchase consideration................................ 3,954.1
Less:
Fair value of net liabilities acquired (see below)........ 228.3
Proceeds on exercise of Y&R options (a)................... (218.1)
-------
Goodwill.................................................... 3,964.3
=======
</TABLE>
Goodwill arising on the transaction has been assumed to have an indefinite
useful economic life and has therefore not been amortized. Under U.K. GAAP,
goodwill assumed to have an indefinite life is subject to an annual impairment
review conducted in accordance with FRS 11 "Impairment of Fixed Assets and
Goodwill."
Explanation of goodwill adjustments:
(a) Proceeds from the assumed exercise of 21,459,668 Y&R options outstanding
at June 30, 2000 which are or become exercisable as a result of the
merger.
Fair value adjustments relate to intangible fixed assets, tangible fixed
assets, fixed asset investments and the proceeds from the exercise of Y&R stock
options.
<TABLE>
<CAPTION>
AT
JUNE 30, 2000
-------------
L
(IN MILLIONS)
<S> <C>
Book value of net assets in accordance with U.K. GAAP....... 37.9
Fair value adjustments:
Elimination of existing goodwill(a)......................... (251.2)
Revaluation of 285 Madison Avenue(b)........................ 30.9
Revaluation of listed investments(c)........................ (30.0)
Elimination of treasury stock(d)............................ (6.2)
Minority interest........................................... (9.7)
------
Fair value of net liabilities acquired...................... (228.3)
------
</TABLE>
Explanation of fair value adjustments:
(a) Eliminates the existing Y&R goodwill which will be assumed in the WPP
goodwill arising as a result of the merger.
(b) Revalues the freehold office owned by Y&R at 285 Madison Avenue to the
estimated fair market value.
(c) Revalues the listed investments held by Y&R to their fair market value
based upon the market price at June 30, 2000.
(d) Eliminates treasury stock held as an asset on the balance sheet which
will be cancelled on completion under the terms of the merger agreement.
B-6
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
3. EARNINGS PER SHARE
Unaudited pro forma earnings per share is calculated based on the weighted
average number of shares outstanding during the period, adjusted as if the
merger had taken place at the beginning of the period. The weighted average
number of shares is calculated using the average weighted number of WPP shares
during the respective periods aggregated with the weighted average number of Y&R
shares during the respective periods, multiplied by 4.175, the number of WPP
ordinary shares underlying the exchange ratio.
Diluted earnings per share takes into account the exercise of WPP employee
share options where these are expected to be diluted, aggregated with the number
of Y&R options expected to be dilutive, multiplied by 4.175, the number of WPP
ordinary shares underlying the exchange ratio. The number of shares used in the
June 30, 2000 calculation of pro forma number of shares also includes the
dilutive impact of the Y&R 3% convertible notes.
<TABLE>
<CAPTION>
BASIC NUMBER OF SHARES (MILLIONS)
-----------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
------------------------------- -------------------------------
WPP Y&R PRO FORMA WPP Y&R PRO FORMA
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Weighted average............................. 757.5 72.6 n/a 753.3 68.7 n/a
Multiplication factor........................ n/a 4.175 n/a n/a 4.175 n/a
----- ----- ------- ----- ----- -------
Weighted average, new WPP shares............. 757.5 303.1 1,060.6 753.3 286.8 1,040.1
----- ----- ------- ----- ----- -------
</TABLE>
Unaudited pro forma basic earnings per share have been calculated using
unaudited pro forma earnings of L118.6 million for the six months ended June 30,
2000 and unaudited pro forma earnings of L281.1 million for the year ended
December 31, 1999.
<TABLE>
<CAPTION>
DILUTED NUMBER OF SHARES (MILLIONS)
-----------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
------------------------------- -------------------------------
WPP Y&R PRO FORMA WPP Y&R PRO FORMA
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Weighted average............................. 775.2 86.4 n/a 768.7 82.9 n/a
Multiplication factor........................ n/a 4.175 n/a n/a 4.175 n/a
Weighted average, new WPP shares (U.K.
GAAP)...................................... 775.2 360.7 1,135.9 768.7 346.1 1,114.8
Weighted average number of share options
issued with exercise criteria not yet
satisfied.................................. 5.2 n/a 5.2 5.4 n/a 5.4
----- ----- ------- ----- ----- -------
Weighted average, new WPP shares (U.S.
GAAP)...................................... 780.4 360.7 1,141.1 774.1 346.1 1,120.2
===== ===== ======= ===== ===== =======
</TABLE>
Unaudited pro forma diluted earnings per share have been calculated using
unaudited pro forma earnings of L120.1 million for the six months ended June 30,
2000 (which includes L1.5 million in respect of the elimination of interest
arising in the six months to June 30, 2000 in respect of the Y&R 3% convertible
notes in 2000) and unaudited pro forma earnings of L281.1 million for the year
ended December 31, 1999.
Unaudited pro forma diluted earnings before exceptional items per ordinary
share have been calculated using earnings of L138.7 million for the six months
ended June 30, 2000 and L254.9 million for the year ended December 31, 1999,
which reflect the removal of the Y&R exceptional operating
B-7
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
3. EARNINGS PER SHARE (CONTINUED)
charge in respect of treasury stock (for the six months ended June 30, 2000
only) and the Y&R exceptional tax credits arising on the exercise of stock
options.
Basic and diluted earnings per ADS have been calculated as detailed above,
multiplied by a factor of 5.
4. U.S. TO U.K. GAAP ADJUSTMENTS TO HISTORICAL Y&R FINANCIAL STATEMENTS
The following tables show the impact of the unaudited U.K. GAAP adjustments
on Y&R's historical financial statements (as conformed to WPP presentation
format) to restate these figures in accordance with WPP's accounting policies
under U.K. GAAP.
<TABLE>
<CAPTION>
UNAUDITED
Y&R U.S. TO U.K. Y&R
AS REPORTED IN GAAP AS RESTATED IN
UNAUDITED RESTATED PROFIT AND LOSS ACCOUNT ACCORDANCE WITH RECLASSIFICATIONS ADJUSTMENTS ACCORDANCE WITH
FOR THE YEAR ENDED DECEMBER 31, 1999 U.S. GAAP (SEE NOTE (1)) (SEE NOTE (2)) U.K. GAAP
------------------------------------------ --------------- ----------------- -------------- -----------------------------
$ $ $ L
(IN MILLIONS) (IN MILLIONS) (IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Turnover (gross billings).................. -- 8,530.9 (a) 8,530.9 5,273.1
Cost of Sales.............................. -- (6,813.7)(a) (6,813.7) (4,211.7)
======== ===== ======== ========== ==========
Revenue.................................... 1,717.2 -- 1,717.2 1,061.4
Operating Costs............................ (1,509.1) 15.2 (b) (1,493.9) (923.4)
-------- ----- -------- ---------- ----------
Operating Profit/(loss).................... 208.1 15.2 223.3 138.0
Non-operating exceptional item............. 85.0 (85.0)(c) -- --
Income from associates..................... -- 10.6 (i) -- 10.6 6.6
-------- ----- -------- ---------- ----------
Profit/(loss) on ordinary activities before
interest & taxation...................... 293.1 10.6 (69.8) 233.9 144.6
Net interest payable & similar charges..... (14.9) -- (14.9) (9.2)
-------- ----- -------- ---------- ----------
Profit on ordinary activities before
taxation................................. 278.2 10.6 (69.8) 219.0 135.4
Taxation on profit on ordinary activities
before exceptional items................. (111.3) (42.4)(vii)
(6.1)(i) 78.0 (f) (81.8) (50.6)
Exceptional tax credit on exercised stock
options.................................. -- 42.4 (vii) -- 42.4 26.2
-------- ----- -------- ---------- ----------
Tax on profit on ordinary activities....... (111.3) (6.1) 78.0 (39.4) (24.4)
-------- ----- -------- ---------- ----------
Profit on ordinary activities after
taxation................................. 166.9 4.5 8.2 179.6 111.0
Equity in net income of unconsolidated
affiliates............................... 4.5 (4.5)(i) -- -- --
Minority interests......................... (4.3) -- (4.3) (2.7)
-------- ----- -------- ---------- ----------
Profit attributable to ordinary share
owners................................... 167.1 -- 8.2 175.3 108.3
-------- ----- -------- ---------- ----------
</TABLE>
The accompanying notes to the unaudited restatements form an integral part of
this data.
B-8
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
4. U.S. TO U.K. GAAP ADJUSTMENTS TO HISTORICAL Y&R FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
UNAUDITED
Y&R U.S. TO U.K. Y&R
AS REPORTED IN GAAP AS RESTATED IN
UNAUDITED RESTATED PROFIT AND LOSS ACCOUNT ACCORDANCE WITH RECLASSIFICATIONS ADJUSTMENTS ACCORDANCE WITH
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2000 U.S. GAAP (SEE NOTE (1)) (SEE NOTE (2)) U.K. GAAP
-------------------------------------------- --------------- ----------------- -------------- -----------------------------
$ $ $ L
(IN MILLIONS) (IN MILLIONS) (IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Turnover (gross billings)................... -- -- 4,244.3 (a) 4,244.3 2,703.4
Cost of Sales............................... (3,301.0)(a) (3,301.0) (2,102.6)
======== ======== ======== ========== ==========
Revenue..................................... 943.3 -- 943.3 600.8
Operating Costs............................. (833.7) 10.9 (b) (822.8) (524.1)
Operating exceptional item.................. -- (57.6)(g) (57.6) (36.7)
-------- -------- -------- ---------- ----------
Operating Profit/(loss)..................... 109.6 (46.7) 62.9 40.0
Non-operating exceptional item.............. 12.2 (12.2)(c) -- --
Income from associates...................... -- 3.8 (i) 3.8 2.4
-------- -------- -------- ---------- ----------
Profit/(loss) on ordinary activities before
interest & taxation....................... 121.8 3.8 (58.9) 66.7 42.4
Net interest payable & similar charges...... (8.1) (8.1) (5.2)
-------- -------- -------- ---------- ----------
Profit on ordinary activities before
taxation.................................. 113.7 3.8 (58.9) 58.6 37.2
Taxation on profit on ordinary activities
before exceptional items.................. (45.4) (28.2)(vii)
(1.6)(i) 29.9 (f) (45.3) (28.9)
Exceptional tax credit on exercised stock
options................................... -- 28.2 (vii) -- 28.2 18.1
-------- -------- -------- ---------- ----------
Tax on profit on ordinary activities........ (45.4) (1.6) 29.9 (17.1) (10.8)
-------- -------- -------- ---------- ----------
Profit on ordinary activities after
taxation.................................. 68.3 2.2 (29.0) 41.5 26.4
Equity in net income of unconsolidated
affiliates................................ 2.2 (2.2)(i) -- -- --
Minority interests.......................... (1.3) (1.3) (0.9)
-------- -------- -------- ---------- ----------
Profit attributable to ordinary share
owners.................................... 69.2 -- (29.0) 40.2 25.5
-------- -------- -------- ---------- ----------
<CAPTION>
UNAUDITED RESTATED NET ASSET STATEMENT AS AT JUNE 30, 2000
----------------------------------------------------------
FIXED ASSETS
<S> <C> <C> <C> <C>
Intangible assets.................................. 371.9 (4.2)(ii) (73.6)(b)
Goodwill........................................... 86.8 (e) 380.9
Tangible fixed assets.............................. 189.4 4.2 (ii) 193.6
Investments in associated undertakings............. 35.1 -- -- 35.1
Other investments.................................. 151.9 9.5 (vi) 45.6 (d) 207.0
Other assets....................................... 197.6 (197.6)(iii) -- --
-------- -------- -------- ----------
945.9 (188.1) 58.8 816.6
-------- -------- -------- ----------
CURRENT ASSETS
Stocks & work in progress.......................... 115.0 115.0
Debtors............................................ 1,130.7 13.8 (iv) -- --
-- 197.6 (iii) (199.9)(f) 1,142.2
Cash at bank & in hand............................. 173.3 (13.8)(iv) 159.5
-------- -------- -------- ----------
1,419.0 197.6 (199.9) 1,416.7
-------- -------- -------- ----------
CREDITORS: amounts falling due within one year..... (1,665.2) 0.5 (v) 0.8 (h) (1,663.9)
-------- -------- -------- ----------
Net Current Liabilities............................ (246.2) 198.1 (199.1) (247.2)
-------- -------- -------- ----------
Total Assets less Current Liabilities.............. 699.7 10.0 (140.3) 569.4
-------- -------- -------- ----------
CREDITORS: amounts falling due after more than one year.. (434.3) 10.2 (v) (86.8)(e)
9.7 (f) (501.2)
PROVISIONS FOR LIABILITIES AND CHARGES............. (10.7)(v) (10.7)
-------- -------- -------- ----------
NET ASSETS......................................... 265.4 9.5 (217.4) 57.5
-------- -------- -------- ----------
<CAPTION>
UNAUDITED RESTATED NET ASSET STATEMENT AS AT JUNE 30, 2000
----------------------------------------------------------
FIXED ASSETS
<S> <C>
Intangible assets..................................
Goodwill........................................... 251.2
Tangible fixed assets.............................. 127.7
Investments in associated undertakings............. 23.1
Other investments.................................. 136.5
Other assets....................................... --
----------
538.5
----------
CURRENT ASSETS
Stocks & work in progress.......................... 75.8
Debtors............................................ --
753.1
Cash at bank & in hand............................. 105.2
----------
934.1
----------
CREDITORS: amounts falling due within one year..... (1,097.1)
----------
Net Current Liabilities............................ (163.0)
----------
Total Assets less Current Liabilities.............. 375.5
----------
CREDITORS: amounts falling due after more than one year..
(330.5)
PROVISIONS FOR LIABILITIES AND CHARGES............. (7.1)
----------
NET ASSETS......................................... 37.9
----------
</TABLE>
The accompanying notes to the unaudited restatements form an integral part of
this data.
B-9
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
NOTE 1--RECLASSIFICATIONS
Reclassifications have been made to the Y&R historical financial information
presented under U.S. GAAP to conform to WPP's presentation and disclosed
accounting policies under U.K. GAAP. None of these reclassifications impact net
income or net assets except as described in (vi) below.
These reclassifications include the following items:
(I) EQUITY ACCOUNTING
In accordance with U.K. GAAP, the investor's share of operating profit or
loss of associated undertakings and joint ventures is shown separately on
the face of the profit and loss account and the investor's share of the
taxation charge of associated undertakings and joint ventures is included
within the taxation charge shown in the profit and loss account. Under
U.S. GAAP, net after-tax profits or losses are included in the income
statement as a single line item.
(II) INTANGIBLE FIXED ASSETS
Certain intangible fixed assets have been reclassified as tangible fixed
assets in accordance with WPP's disclosed accounting policies.
(III) DEBTORS
Deferred income taxes and other noncurrent assets have been reclassified
under debtors within current assets to conform with WPP's balance sheet
presentation under U.K. GAAP.
(IV) CASH
Financial instruments with an initial maturity of up to three months have
been reclassified from cash and cash equivalents to other current assets,
included within debtors.
(V) PENSION LIABILITIES
Pension liabilities have been reclassified from creditors: amounts falling
due within one year and creditors: amounts falling due after more than one
year to provisions for liabilities and charges.
(VI) TREASURY STOCK
Under U.S. GAAP when a company acquires its own shares (treasury stock) the
cost of the shares acquired is shown as a reduction from capital. Under
WPP's presentation, such shares are shown within investments included within
fixed assets. This increased net assets at June 30, 2000 by $9.5 million.
(VII) EXCEPTIONAL TAX CREDIT ON EXERCISED STOCK OPTIONS
For U.K. GAAP presentation purposes within this restatement, the cash
benefit for tax purposes relating to stock options exercised has been
separately presented as an exceptional tax credit.
B-10
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
NOTE 2--U.S. TO U.K. GAAP ADJUSTMENTS
Accounting principles generally accepted in the U.K. differ in certain
material respects from those generally accepted in the U.S. The differences
which are material to restating the historical consolidated financial statements
of Y&R to conform to WPP's disclosed accounting policies under U.K. GAAP are set
out below.
(A) TURNOVER (GROSS BILLINGS) AND COST OF SALES
In accordance with the presentation adopted by WPP, turnover (gross
billings) comprises the gross amounts billed to clients in respect of
commission-based income together with the total of other fees earned. Cost of
sales comprises media payments and production costs. Such amounts have not been
included in the historical audited financial statements of Y&R and have been
extracted from unaudited underlying accounting records for the purposes of this
restatement.
(B) GOODWILL
In accordance with U.K. GAAP and FRS 10 "Goodwill and Intangible Assets,"
goodwill resulting from acquisitions made by Y&R on or after January 1, 1998 has
been capitalized as an intangible asset. WPP has assumed that this goodwill has
an indefinite life and as a result no amortization has been provided. Under U.K.
GAAP, goodwill assumed to have an indefinite life is subject to an annual
impairment review in accordance with FRS 11 "Impairment of Fixed Assets and
Goodwill."
Goodwill resulting from acquisitions made by Y&R before January 1, 1998 has
been fully written off against equity share owners' funds, in accordance with
the then preferred treatment adopted by WPP under U.K. GAAP.
Under U.S. GAAP, goodwill resulting from a business combination accounted
for as a purchase is amortized over its estimated useful life, not to exceed 40
years. Y&R's management evaluates the carrying value of Y&R's tangible and
intangible assets each year, or whenever events or circumstances indicate that
these assets may be impaired. Intangible assets are determined to be impaired if
the future anticipated undiscounted cash flows arising from the use of the
intangible assets are less than their carrying value. If an impairment is deemed
to have occurred, the asset is written down to its fair value.
This adjustment increased operating profit for the year ended December 31,
1999 by $15.2 million and for the six month period ended June 30, 2000 by
$10.9 million. The adjustment reduced goodwill (intangibles) by $73.6 million as
at June 30, 2000.
(C) NON-OPERATING EXCEPTIONAL ITEMS
In 1999, in accordance with U.S. GAAP, Young & Rubicam recognized a gain on
the sale of certain assets of Brand Dialogue in exchange for a minority
ownership interest in Luminant and additional consideration received in the
fourth quarter of 1999 as a result of achieving revenue and operating profit
performance targets of the Brand Dialogue assets. During the six months ended
June 30, 2000, Y&R recognized further gains largely relating to (a) additional
consideration received in relation to Brand Dialogue and (b) the sale of certain
assets and rights known as Y&R Teamspace in exchange for an operating interest
in eMotion Inc. Under U.K. GAAP, these gains would be included in the statement
of total recognized gains and losses which has not been separately presented.
This reduced profit on ordinary activities before interest and taxation by
$85.0 million for the year ended December 31, 1999 and by $12.2 million for the
six months ended June 30, 2000.
B-11
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
NOTE 2--U.S. TO U.K. GAAP ADJUSTMENTS (CONTINUED)
(D) MARKETABLE INVESTMENTS
In accordance with U.K. GAAP and WPP's acccounting policy, marketable
investments that represent an interest of less than 20% are stated at cost less
provision for diminution in value. Under U.S. GAAP, where such investments are
listed investments and are "available for sale," they are marked to market and
any resulting unrealized gain or loss is recorded in share owners' funds. This
increased fixed asset investments by $45.6 million at June 30, 2000.
(E) CONTINGENT CONSIDERATION
In accordance with U.K. GAAP and WPP's accounting policy, a liability has
been reflected for contingent consideration in instances where management
considers the likelihood of payment probable. Under U.S. GAAP, contingent
consideration is not recognized until the outcome of the contingency is
determined beyond a reasonable doubt. This increased goodwill (intangible
assets) and creditors: amounts falling due after more than one year by
$86.8 million at June 30, 2000.
(F) DEFERRED TAXES
Under U.K. GAAP, deferred tax assets are accounted for only to the extent
that it is considered probable that a liability or asset will materialize in the
foreseeable future. Under U.S. GAAP, deferred taxes are accounted for on all
timing differences and a valuation allowance is established in respect of those
deferred tax assets where it is more likely than not that some portion will
remain unrealized. This reduced the tax charge in the profit and loss account
for the year ended December 31, 1999 by $78.0 million, and for the six month
period ended June 30, 2000, by $29.9 million. The adjustment reduced debtors by
$199.9 million and creditors: amounts falling due in more then one year by
$9.7 million at June 30, 2000.
(G) TREASURY STOCK
Under U.K. GAAP, if repurchased treasury stock is used for the purpose of
satisfying Y&R's obligation upon exercise of stock options issued to employees,
Y&R should record as an operating cost, the excess of the cost of repurchasing
the treasury stock over the proceeds from employees on exercising stock options.
Under U.S. GAAP, this difference is recorded as a reduction of shareholders'
equity. For the six month period ended June 30, 2000, under U.K. GAAP, this
results in a charge of $57.6 million which has been reflected as an operating
exceptional item within this restatement. For the year ended December 31, 1999,
the difference between the proceeds on exercise of employee share options less
the cost of satisfying these options is not material.
(H) PENSION LIABILITY
Under U.S. GAAP Y&R recognized an additional pension liability through
shareholders' equity. An adjustment of $0.8 million has been made at June 30,
2000 to eliminate this liability as it is not applicable under U.K. GAAP.
5. COST SAVINGS
WPP and Y&R have quantified to date estimated pre-tax annual cost savings of
$30 million that they expect to result from the merger by the year ending
December 31, 2001. The Unaudited Pro Forma Consolidated Condensed Finanical
Information does not contain an adjustment to reflect these
B-12
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
5. COST SAVINGS (CONTINUED)
estimated cost savings. There can be no assurance that anticipated cost savings
will be achieved in the expected amounts or at the times anticipated.
6.RECONCILIATION OF UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL
INFORMATION FROM U.K. GAAP TO U.S. GAAP
The tables below set out the principal adjustments to profit and share
owners funds reflected in the Unaudited Pro Forma Consolidated Condensed
Financial Information which would be required if U.S. GAAP had been applied.
Note 3 above sets out the explanation for these adjustments.
NET INCOME
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
L
(IN MILLIONS,
EXCEPT PER ADS
AMOUNTS)
<S> <C>
Unaudited Pro Forma Profit Attributable to Ordinary Share
Owners Under U.K. GAAP.................................... 281.1
U.S. GAAP Adjustments:
Goodwill amortization--existing....................... (42.1)
Amortization of additional goodwill and other
separately identifiable intangibles arising as a
result of the transaction........................... (124.1)
Executive compensation................................ (58.4)
Deferred tax items.................................... 3.3
Gain on sale of certain assets of Brand Dialogue...... 52.5
------
Unaudited Pro Forma Net Income as Adjusted for U.S. GAAP.... 112.3
Earnings per ADS (U.S. GAAP)
Basic................................................. 53.0p
Diluted............................................... 50.0p
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 2000
--------------
L
(IN MILLIONS,
EXCEPT PER ADS
AMOUNTS)
<S> <C>
Unaudited Pro Forma Profit Attributable to Ordinary Share
Owners Under U.K. GAAP.................................... 118.6
U.S. GAAP Adjustments:
Goodwill amortization--existing....................... (21.9)
Amortization of additional goodwill and other
separately identifiable intangibles arising as a
result of the transaction........................... (62.0)
Executive compensation................................ (5.4)
Deferred tax items.................................... (8.7)
Gain on sale of certain assets of Brand Dialogue and
TeamSpace........................................... 7.8
Eliminate exceptional charge arising in respect of
treasury stock...................................... 36.7
-----
Unaudited Pro Forma Net Income as adjusted for U.S. GAAP.... 65.1
Earnings per ADS (U.S. GAAP)
Basic................................................. 30.5p
Diluted............................................... 29.0p
</TABLE>
B-13
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
6.RECONCILIATION OF UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL
INFORMATION FROM U.K. GAAP TO U.S. GAAP (CONTINUED)
SHARE OWNERS' FUNDS
<TABLE>
<CAPTION>
AT
JUNE 30, 2000
-------------
L
(IN MILLIONS)
<S> <C>
Unaudited Pro Forma Share Owners' Funds Under U.K. GAAP..... 4,235.9
U.S. GAAP Adjustments:
Capitalization of goodwill arising on acquisition (net
of accumulated amortization and amounts capitalized
under U.K. GAAP)...................................... 474.8
Revaluation of investments marked to market............. 74.1
Shares owned by Employee Share Ownership Plan........... (113.3)
Deferred tax items...................................... 275.1
Other................................................... (3.8)
-------
Unaudited Pro Forma Share Owners' Funds Under U.S. GAAP..... 4,942.8
-------
</TABLE>
7. SEGMENTAL INFORMATION
The tables below present unaudited pro forma segment information, including
Y&R segments presented to conform with the segments as reported by WPP and to
U.K. GAAP.
Contribution by Geographical Area:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1999 JUNE 30, 2000
------------------- -------------------
L MILLIONS REVENUE PBIT(1) REVENUE PBIT(1)
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
North America............................. 1,533.6 223.1 884.8 143.7
United Kingdom............................ 529.5 58.3 290.0 27.9
Continental Europe........................ 691.3 93.0 353.6 44.8
Asia Pacific, Latin America, Africa and
Middle East............................. 479.6 61.0 281.5 23.4
------- ----- ------- -----
3,234.0 435.4 1,809.9 239.8
======= ===== ======= =====
</TABLE>
Contribution by Operating Sector:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1999 JUNE 30, 2000
------------------- -------------------
L MILLIONS REVENUE PBIT(1) REVENUE PBIT(1)
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Advertising & media investment
management............................... 1,525.6 240.5 830.9 128.2
Information & consultancy.................. 419.7 42.1 239.5 22.5
Public relations & public affairs.......... 374.6 42.0 247.1 36.1
Branding & identity, healthcare and
specialist communications................ 914.1 110.8 492.4 53.0
------- ----- ------- -----
3,234.0 435.4 1,809.9 239.8
======= ===== ======= =====
</TABLE>
------------------------
(1) "PBIT" means profit on ordinary activities before interest, taxation and
exceptional items.
B-14
<PAGE>
Questions concerning the terms of the solicitation should be directed to the
Information Agent at the telephone number set forth below. Deliveries of letters
of consents should be made to the Information Agent at the address or facsimile
number set forth below (facsimiles should be confirmed by physical delivery).
Requests for additional copies of this consent solicitation and prospectus or
the accompanying letter of consent should be directed to the Information Agent
at the telephone number and address set forth below.
THE INFORMATION AGENT IS:
MACKENZIE PARTNERS, INC.
156 FIFTH AVENUE
NEW YORK, NY 10010
TELEPHONE: (800) 322-2885
FACSIMILE: (212) 929-0308
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 128 of WPP Group plc's Articles of Association provides:
"Subject to the provisions of and to the extent permitted by the Companies
Act 1985 and every other statute, statutory instrument, regulation or order
for the time being in force concerning companies registered under that Act,
every director or other officer or auditor of the Company shall be
indemnified out of the assets of the Company against all liabilities
incurred by him in actual or purported execution or discharge of his duty or
the exercise or purported exercise of his powers or otherwise in relation to
or in connection with his duties, powers or offices but,
(a) this indemnity shall not apply to any liability to the extent that it is
recovered from any other person; and
(b) the indemnity is subject to such officer or auditor taking all
reasonable steps to effect such recovery, to the intent that the
indemnity shall not apply where an alternative right of recovery is
available and capable of being enforced."
Section 310 of the U.K. Companies Act 1985 (as amended by Section 137 of the
U.K. Companies Act 1989) applicable to WPP Group plc, a public limited company
incorporated under the laws of England and Wales, provides as follows:
"310. PROVISIONS EXEMPTING OFFICERS AND AUDITORS FROM LIABILITY
(1) This section applies to any provision, whether contained in a company's
articles or in any contract with the company or otherwise, for exempting
any officer of the company or any person (whether an officer or not)
employed by the company as auditor from, or indemnifying him against, any
liability which by virtue of any rule of law would otherwise attach to
him in respect of any negligence, default, breach of duty or breach of
trust of which he may be guilty in relation to the company.
(2) Except as provided by the following subsection, any such provision is
void.
(3) This section does not prevent a company
(a) from purchasing and maintaining for any such officer or auditor
insurance against any such liability, or
(b) from indemnifying any such officer or auditor against any liability
incurred by him
(i) in defending any proceedings (whether civil or criminal) in which
judgment is given in his favour or he is acquitted, or
(ii) in connection with any application under section 144(3) or
(4) (acquisition of shares by innocent nominee) or section 727
(general power to grant relief in case of honest and reasonable
conduct) in which relief is granted to him by the court."
Section 727 of the UK Companies Act 1985 provides as follows:
"727. POWER OF COURT TO GRANT RELIEF IN CERTAIN CASES:
"(1) If in any proceedings for negligence, default, breach of duty or breach
of trust against an officer of a company or a person employed by a
company as auditor (whether he is or is not an officer of the company) it
appears to the court hearing the case that that officer or person is or
may be liable in respect of the negligence, default, breach of duty or
breach of trust, but that he has acted honestly and reasonably, and that
having regard to all the circumstances of
II-1
<PAGE>
the case (including those connected with his appointment) he ought fairly
to be excused for the negligence, default, breach of duty or breach of
trust, that court may relieve him, either wholly or partly, from his
liability on such terms as it thinks fit.
(2) If any such officer or person as above-mentioned has reason to apprehend
that any claim will or might be made against him in respect of any
negligence, default, breach of duty or breach of trust, he may apply to
the court for relief; and the court on the application has the same power
to relieve him as under this section it would have had if it had been a
court before which proceedings against that person for negligence,
default, breach of duty or breach of trust had been brought.
(3) Where a case to which subsection (1) applies is being tried by a judge
with a jury, the judge, after hearing the evidence, may, if he is
satisfied that the defendant or defender ought in pursuance of that
subsection to be relieved either in whole or in part from the liability
sought to be enforced against him, withdraw the case in whole or in part
from the jury and forthwith direct judgment to be entered for the
defendant or defender on such terms as to costs or otherwise as the judge
may think proper."
WPP maintains directors' and officers' insurance coverage, which, subject to
policy terms and limitations will include coverage to reimburse WPP for amounts
that it may be required or permitted by law to pay directors or officers of WPP.
ITEM 21.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
2 Amended and Restated Agreement and Plan of Merger, dated as
of May 11, 2000, by and among WPP Group plc, Young & Rubicam
Inc., York Merger Corp. and York II Merger Corp.
(incorporated herein by reference to Exhibit 2 of the
Registration Statement on Form F-4/A filed by WPP Group plc
with the Securities and Exchange Commission on August 25,
2000 (Reg. No. 333-40516)).
4.1 Memorandum and Articles of Association of WPP Group plc
(incorporated herein by reference to Exhibit 1(a) of WPP's
Annual Report on Form 20-F for the fiscal year ended
December 31, 1998 filed with the Securities and Exchange
Commission (File No. 000-16350)).
4.2 Amended and Restated Deposit Agreement, dated as of October
24, 1995, among WPP Group plc, Citibank, N.A., as
Depositary, and all holders and beneficial owners from time
to time of American Depositary Receipts issued thereunder
(incorporated herein by reference to Exhibit (a) of the
Registration Statement on Form F-6 filed by WPP Group plc
with the Securities and Exchange Commission on October 31,
1996 (Reg. No. 333-5906)).
4.3 Amendment No. 1 to Amended and Restated Deposit Agreement,
dated as of November 9, 1999, by and among WPP Group plc,
Citibank, N.A., as Depositary, and all holders and
beneficial owners from time to time of American Depositary
Receipts issued thereunder (incorporated herein by reference
to Exhibit (a)(i) of Amendment No. 1 to the Registration
Statement on Form F-6 filed by WPP Group plc with the
Securities and Exchange Commission on November 9, 1999 (Reg.
No. 333-5906)).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
4.4 Form of Amendment No. 2 to Amended and Restated Deposit
Agreement, to be dated as of the effective date of the
merger, among WPP Group plc, Citibank, N.A., as Depositary,
and all holders and beneficial owners from time to time of
American Depositary Receipts issued thereunder (incorporated
herein by reference to Exhibit (a)(i) of Amendment No. 2 to
the Registration Statement on Form F-6, filed with the
Securities and Exchange Commission on June 30, 2000 (Reg.
No. 333-5906)).
4.5 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 Young & Rubicam Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1999 (File No.
001-14093)).
4.6 Form of Note (included in Exhibit 4.5).
4.7 Form of First Supplemental Indenture.
4.8 Form of Second Supplemental Indenture.
4.9 Registration Agreement dated as of January 20, 2000 between
Young & Rubicam Inc. 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. (incorporated by reference from Exhibit
4.3 to the Registration Statement on Form S-3 filed by Young
& Rubicam Inc. with the Securities and Exchange Commission
on April 17, 2000 (Reg. No. 333-34948)).
4.10 Form of Amendment to Registration Agreement.
5.1 Opinion of Allen & Overy regarding validity of ordinary
shares and the guarantee of WPP Group plc being registered.
5.2 Opinion of Fried, Frank, Harris, Shriver & Jacobson
regarding validity of the guarantee being registered.
5.3 Opinion of Stephanie W. Abramson, Esq. regarding validity of
the notes being registered.
8 Opinion of Fried, Frank, Harris, Shriver & Jacobson
regarding United States tax consequences of the proposed
amendments to the notes.
10 Revolving Credit Facility and Term Out Facility Agreement
dated August 7, 2000 by and among WPP Group plc and the
parties thereto (incorporated herein by reference to
Exhibit 99.1 to WPP Group plc's Report of Foreign Private
Issuer on Form 6-K, filed with the Securities and Exchange
Commission on August 28, 2000 (File No. 000-16350)).
12.1 Y&R Statement of Ratios of Earnings to Fixed Charges.
12.2 WPP Statement of Ratios of Earnings to Fixed Charges.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Arthur Andersen.
23.3 Consent of Allen & Overy (included in the opinion filed as
Exhibit 5.1 to this Registration Statement and incorporated
herein by reference).
23.4 Consents of Fried, Frank, Harris, Shriver & Jacobson
(included in the opinions filed as Exhibits 5.2 and 8 to
this Registration Statement and incorporated herein by
reference).
23.5 Consent of Stephanie W. Abramson (included in the opinion
filed as Exhibit 5.3 to this Registration Statement and
incorporated herein by reference).
*24 WPP Group plc Powers of Attorney.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
25 Statement of eligibility of trustee on Form T-1.
99 Form of Letter of Consent and related documents.
(b) Financial Statement Schedules. All supporting schedules have
been omitted because they are either not required, are not
applicable or because equivalent information has been
included in the financial statements, the notes thereto or
elsewhere herein.
(c) Reports, Opinions and Appraisals. None.
</TABLE>
------------------------
* Previously filed.
ITEM 22. UNDERTAKINGS.
(a) 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.
(b) (1) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use
of a prospectus which is part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form
with respect to reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other Items of the
applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act and is
used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement and
will not be used until such amendment is effective, and that, for
purposes 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 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: (i) to respond to requests for
information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt
of such request, and to send the incorporated documents by first
II-4
<PAGE>
class mail or other equally prompt means; and (ii) hereby undertakes to
arrange or provide for a facility in the U.S. for the purpose of responding
to such requests. The undertaking in subparagraph (i) above include
information contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, WPP Group plc,
the registrant with respect to the Registration Statement on Form F-4/A,
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-3 and has duly caused the Registration
Statement on Form F-4/A to be signed on its behalf by the undersigned, thereunto
duly authorized in the city of London, England, on August 29, 2000.
<TABLE>
<S> <C> <C>
WPP GROUP PLC
By: /s/ PAUL W. G. RICHARDSON
-----------------------------------------
Name: Paul W. G. Richardson
Title: Group Finance Director
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form F-4/A has been signed by the following persons in
the following capacities as of August 29, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ HAMISH MAXWELL*
------------------------------------------- Chairman (non-executive) of the board of
Hamish Maxwell directors
/s/ SIR MARTIN SORRELL*
------------------------------------------- Group chief executive
Sir Martin Sorrell (Principal Executive Officer)
/s/ PAUL W. G. RICHARDSON
------------------------------------------- Group finance director
Paul W. G. Richardson (Principal Financial Officer)
/s/ PAUL DELANEY*
------------------------------------------- Director of Group Treasury
Paul Delaney (Principal Accounting Officer)
/s/ BRIAN J. BROOKS*
------------------------------------------- Executive director
Brian J. Brooks
/s/ JEREMY J. D. BULLMORE*
------------------------------------------- Non-executive director
Jeremy J. D. Bullmore
/s/ ESTHER DYSON*
------------------------------------------- Non-executive director
Esther Dyson
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ STEVEN HEYER*
------------------------------------------- Non-executive director
Steven Heyer
/s/ MASAO INAGAKI*
------------------------------------------- Non-executive director
Masao Inagaki
/s/ JOHN B. H. JACKSON*
------------------------------------------- Non-executive director
John B. H. Jackson
/s/ CHRISTOPHER MACKENZIE*
------------------------------------------- Non-executive director
Christopher Mackenzie
/s/ STANLEY W. MORTEN*
------------------------------------------- Non-executive director
Stanley W. Morten
/s/ JOHN A. QUELCH*
------------------------------------------- Non-executive director
John A. Quelch
/s/ ERIC R. SALAMA*
------------------------------------------- Non-executive director
Eric R. Salama
/s/ JOEL E. SMILOW*
------------------------------------------- Non-executive director
Joel E. Smilow
/s/ MARY ELLEN HOWE*
------------------------------------------- Authorized representative in the U.S.
Mary Ellen Howe
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ PAUL W. G. RICHARDSON
--------------------------------------
Paul W. G. Richardson
ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
2 Amended and Restated Agreement and Plan of Merger, dated as
of May 11, 2000, by and among WPP Group plc, Young & Rubicam
Inc., York Merger Corp. and York II Merger Corp.
(incorporated herein by reference to Exhibit 2 of the
Registration Statement on Form F-4/A filed by WPP Group plc
with the Securities and Exchange Commission on August 25,
2000 (Reg. No. 333-40516)).
4.1 Memorandum and Articles of Associates of WPP Group plc
(incorporated herein by reference to Exhibit 1(a) of WPP's
Annual Report on Form 20-F for the fiscal year ended
December 31, 1998 filed with the Securities and Exchange
Commission (File No. 000-16350)).
4.2 Amended and Restated Deposit Agreement, dated as of October
24, 1995, among WPP Group plc, Citibank, N.A., as
Depositary, and all holders and beneficial owners from time
to time of American Depositary Receipts issued thereunder
(incorporated herein by reference to Exhibit (a) of the
Registration Statement on Form F-6 filed by WPP Group plc
with the Securities and Exchange Commission on October 31,
1996 (Reg. No. 333-5906)).
4.3 Amendment No. 1 to Amended and Restated Deposit Agreement,
dated as of November 9, 1999, by and among WPP Group plc,
Citibank, N.A., as Depositary, and all holders and
beneficial owners from time to time of American Depositary
Receipts issued thereunder (incorporated herein by reference
to Exhibit (a)(i) of Amendment No. 1 to the Registration
Statement on Form F-6 filed by WPP Group plc with the
Securities and Exchange Commission on November 9, 1999 (Reg.
No. 333-5906)).
4.4 Form of Amendment No. 2 to Amended and Restated Deposit
Agreement, to be dated as of the effective date of the
merger, among WPP Group plc, Citibank, N.A., as Depositary,
and all holders and beneficial owners from time to time of
American Depositary Receipts issued thereunder (incorporated
herein by reference to Exhibit (a)(i) of Amendment No. 2 to
the Registration Statement on Form F-6, filed with the
Securities and Exchange Commission on June 30, 2000 (Reg.
No. 333-5906)).
4.5 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 Young & Rubicam Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1999 (File No.
001-14093)).
4.6 Form of Note (included in Exhibit 4.5).
4.7 Form of First Supplemental Indenture.
4.8 Form of Second Supplemental Indenture.
4.9 Registration Agreement dated as of January 20, 2000 between
Young & Rubicam Inc. 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. (incorporated by reference from Exhibit
4.3 to the Registration Statement on Form S-3 filed by Young
& Rubicam Inc. with the Securities and Exchange Commission
on April 17, 2000 (Reg. No. 333-34948)).
4.10 Form of Amendment to Registration Agreement.
5.1 Opinion of Allen & Overy regarding validity of ordinary
shares and the guarantee of WPP Group plc being registered.
5.2 Opinion of Fried, Frank, Harris, Shriver & Jacobson
regarding validity of the guarantee being registered.
5.3 Opinion of Stephanie W. Abramson regarding validity of the
notes being registered.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
8 Opinion of Fried, Frank, Harris, Shriver & Jacobson
regarding United States tax consequences of the proposed
amendments to the notes.
10 Revolving Credit Facility and Term Out Facility Agreement
dated August 7, 2000 by and among WPP Group plc and the
parties thereto (incorporated herein by reference to
Exhibit 99.1 to WPP Group plc's Report of Foreign Private
Issuer on Form 6-K, filed with the Securities and Exchange
Commission on August 28, 2000 (File No. 000-16350)).
12.1 Y&R Statement of Ratios of Earnings to Fixed Charges.
12.2 WPP Statement of Ratios of Earnings to Fixed Charges.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Arthur Andersen.
23.3 Consent of Allen & Overy (included in the opinion filed as
Exhibit 5.1 to this Registration Statement and incorporated
herein by reference).
23.4 Consents of Fried, Frank, Harris, Shriver & Jacobson
(included in the opinions filed as Exhibits 5.2 and 8 to
this Registration Statement and incorporated herein by
reference).
23.5 Consent of Stephanie W. Abramson (included in the opinion
filed as Exhibit 5.3 to this Registration Statement and
incorporated herein by reference).
*24 WPP Group plc Powers of Attorney.
25 Statement of eligibility of trustee on Form T-1.
99 Form of Letter of Consent and related documents.
</TABLE>
------------------------
* Previously filed.
