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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________to________________
Commission file number 1-6686
THE INTERPUBLIC GROUP OF COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-1024020
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1271 Avenue of the Americas, New York, New York 10020
(Address of principal executive offices) (Zip Code)
(212) 399-8000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to
file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes
X . No .
Indicate the number of shares outstanding of each
of the issuer's classes of common stock, as of the
latest practicable date.
Common Stock outstanding at April 30, 1996:
79,230,414 shares.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
I N D E X
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet
March 31, 1996 and
December 31, 1995 3-4
Consolidated Income Statement
Three months ended March 31, 1996
and 1995 5
Consolidated Statement of Cash Flows
Three months ended March 31, 1996
and 1995 6
Notes to Consolidated Financial Statements 7
Computation of Earnings Per Share 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
INDEX TO EXHIBITS 13
2
PART I - FINANCIAL INFORMATION
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
ASSETS
MARCH 31, DECEMBER 31,
1996 1995
Current Assets:
Cash and cash equivalents (includes
certificates of deposit: 1996-$106,717;
1995-$114,182) $ 322,874 $ 418,448
Marketable securities, at cost which
approximates market 44,760 38,926
Receivables (less allowance for doubtful
accounts: 1996-$22,593; 1995-$21,941) 2,078,745 2,320,248
Expenditures billable to clients 135,684 108,165
Prepaid expenses and other current assets 95,172 88,611
Total current assets 2,677,235 2,974,398
Other Assets:
Investment in unconsolidated affiliates 126,766 119,473
Deferred taxes on income 100,862 103,497
Other investments and miscellaneous assets 143,604 144,963
Total other assets 371,232 367,933
Fixed Assets, at cost:
Land and buildings 75,568 76,813
Furniture and equipment 369,206 360,653
444,774 437,466
Less accumulated depreciation 248,685 240,274
196,089 197,192
Unamortized leasehold improvements 83,268 82,075
Total fixed assets 279,357 279,267
Intangible Assets (less accumulated
amortization: 1996-$164,056;
1995-$157,673) 655,114 638,168
Total assets $3,982,938 $4,259,766
See accompanying notes to consolidated financial statements.
3
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands Except Per Share Data)
LIABILITIES AND STOCKHOLDERS' EQUITY
MARCH 31, DECEMBER 31,
1996 1995
Current Liabilities:
Payable to banks $ 148,649 $ 162,524
Accounts payable 2,064,824 2,291,208
Accrued expenses 235,095 256,408
Accrued income taxes 111,074 116,557
Total current liabilities 2,559,642 2,826,697
Noncurrent Liabilities:
Long-term debt 194,086 170,262
Convertible subordinated debentures 113,923 113,235
Deferred compensation and reserve
for termination allowances 228,798 235,325
Accrued postretirement benefits 47,687 46,461
Other noncurrent liabilities 92,947 102,909
Minority interests in consolidated
subsidiaries 18,160 15,171
Total noncurrent liabilities 695,601 683,363
Stockholders' Equity:
Preferred Stock, no par value
shares authorized: 20,000,000
shares issued:none
Common Stock, $.10 par value
shares authorized: 150,000,000
shares issued:
1996 - 89,979,141
1995 - 89,630,568 8,998 8,963
Additional paid-in capital 460,123 446,931
Retained earnings 710,862 704,946
Adjustment for minimum pension
liability (9,088) (9,088)
Cumulative translation adjustments (102,200) (93,436)
1,068,695 1,058,316
Less:
Treasury stock, at cost:
1996 - 10,723,107 shares
1995 - 10,002,567 shares 301,553 268,946
Unamortized expense of restricted
stock grants 39,447 39,664
Total stockholders' equity 727,695 749,706
Total liabilities and stockholders'
equity $3,982,938 $4,259,766
See accompanying notes to consolidated financial statements. 4
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
THREE MONTHS ENDED MARCH 31
(Dollars in Thousands Except Per Share Data)
1996 1995
Revenue $ 492,209 $ 447,436
Other income 13,951 12,984
Gross income 506,160 460,420
Costs and expenses:
Operating expenses 466,109 425,592
Interest 9,525 7,927
Total costs and expenses 475,634 433,519
Income before provision for income taxes 30,526 26,901
Provision for income taxes:
United States - federal 8,418 5,941
- state and local 2,084 2,560
Foreign 2,624 3,066
Total provision for income taxes 13,126 11,567
Income of consolidated companies 17,400 15,334
Income applicable to minority interests (1,828) (788)
Equity in net income of unconsolidated
affiliates 2,260 630
Net income $ 17,832 $ 15,176
Weighted average number of common shares 79,252,013 77,578,599
Earnings per common and common equivalent
share $ .23 $ .20
Cash dividends per common share $ .155 $ .14
See accompanying notes to consolidated financial statements
5
PAGE
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31
(Dollars in Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995
Net income $ 17,832 $ 15,176
Adjustments to reconcile net income to
cash used in operating activities:
Depreciation and amortization of fixed assets 13,127 14,945
Amortization of intangible assets 6,383 6,578
Amortization of restricted stock awards 4,025 3,749
Equity in net income of unconsolidated
affiliates (2,260) (630)
Income applicable to minority interests 1,828 788
Translation losses 560 952
Other (5,438) (6,351)
Changes in assets and liabilities, net of acquisitions:
Receivables 201,093 221,942
Expenditures billable to clients (27,594) (4,247)
Prepaid expenses and other assets (9,331) (7,588)
Accounts payable and accrued expenses (213,114) (310,690)
Accrued income taxes 1,541 (13,655)
Deferred income taxes (7,183) (1,153)
Deferred compensation and reserve for termination
allowances (8,294) (838)
Net cash used in operating activities (26,825) (81,022)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions (9,589) (1,661)
Capital expenditures (14,251) (16,236)
Proceeds from sales of assets 177 (127)
Net purchases of marketable securities (6,897) (1,533)
Other investments and miscellaneous assets (2,350) (2,643)
Investments in unconsolidated affiliates (5,998) (5,868)
Net cash used in investing activities (38,908) (28,068)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term borrowings 921 7,990
Proceeds from long-term debt 25,000 15,000
Payments of long-term debt (13,487) (13,486)
Treasury stock acquired (30,180) (18,303)
Issuance of common stock 5,542 13,583
Cash dividends (11,916) (10,635)
Net cash used in financing activities (24,120) (5,851)
Effect of exchange rates on cash and cash
equivalents (5,721) 12,446
Decrease in cash and cash equivalents (95,574) (102,495)
Cash and cash equivalents at beginning of year 418,448 413,709
Cash and cash equivalents at end of quarter $322,874 $311,214
See accompanying notes to consolidated financial statements.
6
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Consolidated Financial Statements
(a) In the opinion of management, the consolidated balance sheet as of
March 31, 1996, the consolidated income statements for the three
months ended March 31, 1996 and 1995 and the consolidated statement of
cash flows for the three months ended March 31, 1996 and 1995, contain
all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of
operations and cash flows at March 31, 1996 and for all periods
presented.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in The
Interpublic Group of Companies, Inc.'s (the "Company's") December 31,
1995 annual report to stockholders.
(b) Statement of Financial Accounting Standards (SFAS) No. 95, "Statement
of Cash Flows" requires disclosures of specific cash payments and
noncash investing and financing activities. The Company considers all
highly liquid investments with a maturity of three months or less to
be cash equivalents. Income tax cash payments were approximately
$12.5 million and $19.6 million in the first three months of 1996 and
1995, respectively. Interest payments during the first three months
were approximately $5.9 million and $6.1 million in 1996 and 1995,
respectively.
7
Exhibit 11
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Dollars in Thousands Except Per Share Data)
Three Months Ended March 31
Primary 1996 1995
Net income $ 17,832 $ 15,176
Add:
Dividends paid net of related income tax
applicable to restricted stock 76 93
Net income, as adjusted $ 17,908 $ 15,269
Weighted average number of common shares
outstanding 76,995,040 75,293,122
Weighted average number of incremental shares
in connection with restricted stock
and assumed exercise of stock options 2,256,973 2,285,477
Total 79,252,013 77,578,599
Earnings per common and common equivalent
share $ .23 $ .20
Three Months Ended March 31
Fully Diluted 1996 1995
Net income $ 17,832 $ 15,176
Add:
Dividends paid net of related income tax
applicable to restricted stock 89 106
Net income, as adjusted $ 17,921 $ 15,282
Weighted average number of common shares
outstanding 76,995,040 75,293,122
Weighted average number of incremental shares
in connection with restricted stock
and assumed exercise of stock options 2,610,143 2,684,497
Total 79,605,183 77,977,619
Earning per common and common equivalent
share $ .23 $ .20
The effect of the conversion of subordinated debentures has been
excluded as it is anti-dilutive.
8
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Working capital at March 31, 1996 was $117.6 million, a decrease of $30.1
million from December 31, 1995. The ratio of current assets to current
liabilities remained relatively unchanged from December 31, 1995 at
approximately 1.0 to 1.
Historically, cash flow from operations has been the primary source of
working capital and management believes that it will continue to be in the
future. The principal use of the Company's working capital is to provide
for the operating needs of its advertising agencies, which include payments
for space or time purchased from various media on behalf of its clients.
The Company's practice is to bill and collect from its clients in
sufficient time to pay the amounts due media. Other uses of working
capital include the payment of cash dividends, acquisitions, capital
expenditures and the reduction of long-term debt. In addition, during the
first three months of 1996, the Company acquired 693,301 shares of its own
stock for approximately $30.2 million for the purpose of fulfilling the
Company's obligations under its various compensation plans.
9
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31,
1995
Total revenue for the three months ended March 31, 1996 increased $44.8
million, or 10.0%, to $492.2 million compared to the same period in 1995.
Domestic revenue increased 18.1% from 1995 levels. Foreign revenue
increased 5.3% during the first quarter of 1996 compared to 1995. Other
income increased by $1.0 million during the first quarter of 1996.
Operating expenses increased $40.5 million or 9.5% during the three months
ended March 31, 1996 compared to the same period in 1995. Interest expense
increased by $1.6 million during the first quarter of 1996, as compared to
the same period in 1995.
Net losses from exchange and translation of foreign currencies for the
three months ended March 31, 1996 were approximately $.5 million versus $.8
million for the same period in 1995. The decrease in 1996 is primarily due
to decreased translation losses in Brazil.
The effective tax rate for the three months ended March 31, 1996 and 1995
was 43.0%.
The difference between the effective and statutory rates is primarily due
to foreign losses with no tax benefit, losses from translation of foreign
currencies which provided no tax benefit, state and local taxes, foreign
withholding taxes on dividends and nondeductible goodwill expense.
10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10(a) Supplemental Agreement Made As Of
January 1, 1996 To An Executive
Severance Agreement Between The
Interpublic Group of Companies, Inc. and
Frank B. Lowe.
Exhibit 10(b) Credit Agreement dated March 14, 1996,
between The Interpublic Group of
Companies, Inc. And Suntrust Bank,
Atlanta.
Exhibit 10(c) Note, dated March 14, 1996, of
Registrant
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during
the quarter ended March 31, 1996.
11
PAGE
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
THE INTERPUBLIC GROUP OF COMPANIES, INC.
(Registrant)
Date: May 15, 1996 By /S/ PHILIP H. GEIER, JR
PHILIP H. GEIER, JR.
Chairman of the Board
President and Chief Executive
Officer
Date: May 15, 1996 By /S/ EUGENE P. BEARD
EUGENE P. BEARD
Vice Chairman -
Finance and Operations
12
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit No. Description
Exhibit 10(a) Supplemental Agreement Made As Of
January 1, 1996 To An Executive
Severance Agreement Between The
Interpublic Group of Companies, Inc. and
Frank B. Lowe.
Exhibit 10(b) Credit Agreement dated March 14, 1996,
between The Interpublic Group of
Companies, Inc. And Suntrust Bank,
Atlanta.
Exhibit 10(c) Note, dated March 14, 1996, of
Registrant.
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule
13
Exhibit 10(a)
SUPPLEMENTAL AGREEMENT
SUPPLEMENTAL AGREEMENT made as of January 1, 1996, by
and between THE INTERPUBLIC GROUP OF COMPANIES, INC., a
corporation of the State of Delaware (hereinafter referred to as
the "Corporation") and FRANK B. LOWE (hereinafter referred to as
"Executive").
W I T N E S S E T H:
WHEREAS, the Corporation and Executive are parties to
an Executive Severance Agreement made as of January 1, 1991
(hereinafter referred to as the "Agreement"); and
WHEREAS, the Corporation and Executive desire to amend
the Agreement;
NOW, THEREFORE, in consideration of the mutual promises
herein and in the Agreement set forth, the parties hereto,
intending to be legally bound, agree as follows:
i. Section 6.1 of the Agreement is hereby
amended effective January 1, 1996, so as to
delete "five" and to substitute therefor
"ten".
2. Except as hereinabove amended, the Agreement shall
continue in full force and effect.
PAGE
3. This Supplemental Agreement shall be governed by
the laws of the State of New York.
THE INTERPUBLIC GROUP OF
COMPANIES, INC.
By: C. KENT KROEBER
FRANK B. LOWE
EXHIBIT 10(C)
TERM NOTE
U.S. $25,000,000
March 14, 1996
New York, New York
FOR VALUE RECEIVED, THE INTERPUBLIC GROUP OF COMPANIES, INC.,
a Delaware Corporation (the "Borrower"), hereby promises to pay to
the order of SUNTRUST BANK (the "Bank"), the principal sum of
TWENTY-FIVE MILLION AND NO/ 100 United States Dollars (U.S.
$25,000,000.), plus all accrued and unpaid interest thereon.
Principal shall be due and payable in the following three
installments: $8,333,333.33 on March 14, 2001; $8,333,333.33 on
March 14, 2002; and $8,333,333.34 on March 14, 2003.
Interest shall be payable at the rate and on the dates
provided in the Credit Agreement.
All such payments of principal and interest shall be made in
lawful money of the United States of America in Federal or other
immediately available funds at the office of the Bank located at
711 Fifth Avenue, 5th Floor, New York, New York 10022, or at such
other place as the holder hereof may designate.
This note is the Term Note referred to in the Credit Agreement
dated as of March 14, 1996, between the Borrower and the Bank, as
the same may be amended from time to time (the "Credit Agreement").
Terms defined in the Credit Agreement are used herein with same
meanings. Reference is made to the Credit Agreement for provisions
prohibiting prepayment hereof and providing for the acceleration of
the maturity hereof.
THE INTERPUBLIC GROUP OF COMPANIES, INC.
By: THOMAS J. VOLPE
Title: Senior Vice President-Financial
Operations
Exhibit 10(b)
CREDIT AGREEMENT
BETWEEN
THE INTERPUBLIC GROUP OF COMPANIES, INC.
AND
SUNTRUST BANK, ATLANTA
__________________________
US$25,000,000
___________________________
Dated as of March 14, 1996
TABLE OF CONTENTS
SECTION PAGE
SECTION 1
INTERPRETATIONS AND DEFINITIONS
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms and Determinations. . . . . . . . . 5
SECTION 2
TERMS OF THE TERM LOAN
2.1 Commitment of the Bank . . . . . . . . . . . . . . . 6
2.2 Termination and Reduction of Commitment. . . . . . . 6
2.3 Disbursement of Term Loan. . . . . . . . . . . . . . 6
2.4 Principal Payments . . . . . . . . . . . . . . . . . 6
2.5 Interest Payments. . . . . . . . . . . . . . . . . . 7
2.6 Payment Method . . . . . . . . . . . . . . . . . . . 7
2.7 No Setoff or Deduction . . . . . . . . . . . . . . . 8
2.8 Payment on Non-Business Day; Payment Computations 8
2.9 Indemnification. . . . . . . . . . . . . . . . . . . 8
2.10 Additional Costs . . . . . . . . . . . . . . . . . . 9
SECTION 3
CONDITIONS OF LENDING
3.1 Conditions of Lending. . . . . . . . . . . . . . . . 11
SECTION 4
REPRESENTATIONS AND WARRANTIES
4.1 Corporate Existence and Power. . . . . . . . . . . . 12
PAGE
4.2 Corporate and Governmental Authorization;
Contravention. . . . . . . . . . . . . . . . . . . . 12
4.3 Binding Effect . . . . . . . . . . . . . . . . . . . 12
4.4 Financial Information. . . . . . . . . . . . . . . . 12
4.5 Litigation . . . . . . . . . . . . . . . . . . . . . 13
4.6 Compliance with ERISA. . . . . . . . . . . . . . . . 13
4.7 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 13
4.8 Subsidiaries . . . . . . . . . . . . . . . . . . . . 13
SECTION 5
COVENANTS
5.1 Information. . . . . . . . . . . . . . . . . . . . . 14
5.2 Maintenance of Property; Insurance . . . . . . . . . 16
5.3 Conduct of Business and Maintenance of Existence. . 16
5.4 Compliance with Laws . . . . . . . . . . . . . . . . 16
5.5 Inspection of Property, Books and Records. . . . . . 17
5.6 Cash Flow to Total Borrowed Funds. . . . . . . . . . 17
5.7 Total Borrowed Funds to Consolidated Net Worth . . . 17
5.8 Minimum Consolidated Net Worth . . . . . . . . . . . 17
5.9 Negative Pledge. . . . . . . . . . . . . . . . . . . 18
5.10 Consolidations, Mergers and Sales of Assets. . . . . 19
5.11 Use of Proceeds. . . . . . . . . . . . . . . . . . . 19
SECTION 6
EVENTS OF DEFAULT
6.1 Events of Default. . . . . . . . . . . . . . . . . . 20
SECTION 7
MISCELLANEOUS
7.1 Notices. . . . . . . . . . . . . . . . . . . . . . . 23
7.2 Amendments and Waivers; Cumulative Remedies. . . . . 23
7.3 Successors and Assigns . . . . . . . . . . . . . . . 23
7.4 Expenses; Documentary Taxes; Indemnification . . . . 24
7.5 Counterparts . . . . . . . . . . . . . . . . . . . . 25
7.6 Headings; Table of Contents. . . . . . . . . . . . . 25
7.7 Governing Law. . . . . . . . . . . . . . . . . . . . 25
PAGE
CREDIT AGREEMENT
AGREEMENT dated as of March 14, 1996 between THE INTERPUBLIC
GROUP OF COMPANIES, INC., a Delaware corporation (the
"Borrower"), and SUNTRUST BANK, ATLANTA, a Georgia banking
corporation (the "Bank").
SECTION 1
INTERPRETATIONS AND DEFINITIONS
1.1 Definitions. The following terms, as used herein,
shall have the following respective meanings:
"Benefit Arrangement" means, at any time, an employee
benefit plan within the meaning of Section 3(3) of ERISA
which is not a Plan or a Multiemployer Plan and which is
maintained or otherwise contributed to by any member of the
ERISA Group.
"Business Day" means a day other than a Saturday,
Sunday or other day on which the Bank is not open to the
public for carrying on substantially all of its banking
functions.
"Cash Flow" means the sum of net income of the Borrower
and its Consolidated Subsidiaries (plus any amount by which
net income has been reduced by reason of the recognition of
post-retirement and post-employment benefit costs prior to
the period in which such benefits are paid), depreciation
expenses, amortization costs and changes in deferred taxes,
provided that such sum shall not be adjusted for any
increase or decrease in deferred taxes resulting from Quest
& Associates, Inc., a Subsidiary of the Borrower, investing
in a portfolio of computer equipment leases (it being
further understood that such increase or decrease in
deferred taxes relating to such investment shall not exceed
$25,000,000).
"Code" means the Internal Revenue Code of 1986, as
amended, and any successor statute thereto.
"Commitment" means the commitment of the Bank to make
the Term Loan pursuant to Section 2.1 in the principal
amount of $25,000,000.
PAGE
"Consolidated Subsidiary" means at any date any
Subsidiary or other entity the accounts of which would be
consolidated with those of the Borrower in its consolidated
financial statements as of such date.
"Consolidated Net Worth" means at any date the
consolidated stockholders' equity of the Borrower and its
Consolidated Subsidiaries as such appear on the financial
statements of the Borrower determined in accordance with
generally accepted accounting principles (plus any amount by
which retained earnings has been reduced by reason of the
recognition of post-retirement and post-employment benefit
costs prior to the period in which such benefits are paid
and without taking into account the effect of cumulative
currency translation adjustments).
"Debt" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed
money, including reimbursement obligations for letters of
credit, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase
price of property or services, except trade accounts payable
arising in the ordinary course of business, (iv) all
obligations of such Person as lessee under capital leases,
(v) all Debt of others secured by a Lien on any asset of
such Person, whether or not such Debt is assumed by such
Person, and (vi) all Debt of others Guaranteed by such
Person, but in each case specified in (i) through (vi)
excludes obligations arising in connection with securities
repurchase transactions.
"Default" means any condition or event which
constitutes an Event of Default or which with the giving of
notice or lapse of time, or both, would become an Event of
Default.
"Dollars" and the sign "$" mean lawful money of the
United States of America.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
PAGE
"ERISA Group" means the Borrower and all members of a
controlled group of corporations and all trades or
businesses (whether or not incorporated) under common
control which, together with the Borrower, are treated as a
single employer under Section 414(b) or (c) of the Code.
"Event of Default" has the meaning set forth in Section
6 hereof.
"Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or
indirectly guaranteeing any Debt or other obligation of any
other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Debt or
other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, to maintain
financial statement conditions or otherwise) or (ii) entered
into for the purpose of assuring in any other manner the
obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect
thereof (in whole or in part), provided that the term
Guarantee shall not include endorsements for collection or
deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Interest Payment Date" means subject to Section 2.4
hereof, the 14th day of each March, June, September and
December occurring after the date hereof, commencing with
the first such day occurring after the date of this
Agreement, except that an adjustment will be made if any
Interest Payment Date would otherwise fall on a day that is
not a New York Banking Day and a London Banking Day so that
the Interest Payment Date will be the first following day
that is a New York Banking Day and a London Banking Day,
unless that day falls in the next calendar month, in which
case the Interest Payment Date will be the first preceding
day that is a New York Banking Day and a London Banking Day.
PAGE
"Lien" means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or other encumbrance
of any kind in respect of such asset. For purposes of this
Agreement, the Borrower or any Subsidiary shall be deemed to
own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under
any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
"London Banking Day" means any day in which dealings
and deposits in U.S. dollars are transacted in the London
interbank market.
"Material Plan" means at any time a Plan or Plans
having aggregate unfunded benefit liabilities (within the
meaning of Section 4001(a)(18) of ERISA) in excess of
$25,000,000.
"Maturity Date" means the Interest Payment Date
occurring on March 14, 2003.
"Multiemployer Plan" means at any time an employee
pension benefit plan that is a "multiemployer plan" within
the meaning of Section 4001(a)(3) of ERISA to which any
member of the ERISA Group is then making or accruing an
obligation to make contributions or has within the preceding
five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA
Group during such five year period.
"New York Banking Day" means any day other than a
Saturday, a Sunday or a day on which commercial banks in New
York City are required or authorized to be closed.
"Overdue Rate" means a rate per annum that is equal to
the sum of three percent (3%) per annum plus the per annum
rate in effect under the Term Note.
"PBGC" means the Pension Benefit Guaranty Corporation
or any entity succeeding to any or all of its functions
under ERISA.
"Participant" has the meaning set forth in Section 7.3.
PAGE
"Person" means an individual, a corporation, a
partnership, an association, a business trust or any other
entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means at any time a defined benefit pension plan
(other than a Multiemployer Plan) which is covered by Title
IV of ERISA or subject to the minimum funding standards
under Section 412 of the Code and either (i) is maintained,
or contributed to, by any member of the ERISA Group for
employees of any member of the ERISA Group or (ii) has at
any time within the preceding five years been maintained, or
contributed to, by any Person which was at such time a
member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Regulation U" means Regulation U of the Board of
Governors of the Federal Reserve System, as in effect from
time to time.
"Significant Subsidiary" or "Significant Group of
Subsidiaries" at any time of determination means any
Consolidated Subsidiary or group of Consolidated
Subsidiaries, respectively, which, individually or in the
aggregate, together with its or their Subsidiaries, accounts
or account for more than 10% of the consolidated gross
revenues of the Borrower and its Consolidated Subsidiaries
for the most recently ended fiscal year or for more than 10%
of the total assets of the Borrower and its Consolidated
Subsidiaries as of the end of such fiscal year; provided
that in connection with any determination with respect to a
Significant Group of Subsidiaries under (x) Section 6.1.(e),
there shall be a payment default, failure or other event (of
the type described therein but without regard to the
principal amount of such obligation) of each Consolidated
Subsidiary included in such group, (y) Sections 6.1.(f) and
(g) and the last sentence of Section 5.10, the condition or
event described therein shall exist with respect to each
Consolidated Subsidiary included in such group or (z)
Section 6.1.(i), there shall be a final judgment (of the
type specified therein but without regard to the amount of
such judgment) rendered against each Consolidated Subsidiary
included in such group.
PAGE
"Subsidiary" means any corporation or other entity of
which securities or other ownership interests having
ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions is
at the time directly or indirectly owned by the Borrower.
"Term Loan" means the borrowing under Section 2.3
evidenced by the Term Note and made pursuant to Section 2.1.
"Term Note" means any promissory note of the Borrower
evidencing the Term Loan, in substantially the form annexed
hereto as Exhibit A, as amended or modified from time to
time and together with any promissory note or notes issued
in exchange or replacement therefor.
"Total Borrowed Funds" means at any date, without
duplication, (i) all outstanding obligations of the Borrower
and its Consolidated Subsidiaries for borrowed money, (ii)
all outstanding obligations of the Borrower and its
Consolidated Subsidiaries evidenced by bonds, debentures,
notes or similar instruments and (iii) any outstanding
obligations of the type set forth in (i) or (ii) of any
other Person Guaranteed by the Borrower and its Consolidated
Subsidiaries, it being understood that the obligation to
repurchase securities transferred pursuant to a securities
repurchase agreement shall not be deemed to give rise to any
amount of Total Borrowed Funds pursuant to this definition.
1.2 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be
made, and all financial statements required to be delivered
hereunder, shall be prepared in accordance with generally
accepted accounting principles as in effect from time to time,
applied on a basis consistent (except for changes concurred in by
the Borrower's independent public accountants) with the most
recent audited consolidated financial statements of the Borrower
and its Consolidated Subsidiaries delivered to the Bank.
PAGE
SECTION 2
TERMS OF THE LOANS
2.1 Commitment of the Bank. The Bank agrees, subject
to the terms and conditions of this Agreement, to make a
single Term Loan to the Borrower, and the Borrower agrees to
borrow such Term Loan from the Bank, on March 14, 1996, in
the principal amount of $25,000,000.
2.2 Termination and Reduction of Commitment. Neither
the Borrower nor the Bank shall have the right to terminate
or reduce the Commitment.
2.3 Disbursement of Term Loan. (a) Subject to the
terms and conditions of this Agreement, the proceeds of the
Term Loan shall be made available to the Borrower by
depositing the proceeds thereof, in immediately available
funds, in an account maintained and designated by the
Borrower at the Bank or by wire transfer or otherwise as
requested by the Borrower.
(b) The Term Loan made under this Section 2.3 shall be
evidenced by the Term Note, and the Term Loan shall be due
and payable and bear interest as provided in Sections 2.4
and 2.5. The Bank is hereby authorized by the Borrower to
record on the schedule attached to the Term Note, or in its
books and records, the amount of each payment of principal
thereon, and the other information provided for on such
schedule, which schedule or books and records, as the case
may be, shall constitute prima facie evidence of the
information so recorded, provided, however, that failure of
the Bank to record, or any error in recording, any such
information shall not relieve the Borrower of its obligation
to repay the outstanding principal amount of the Term Loan,
all accrued interest thereon and other amounts payable with
respect thereto in accordance with the terms of this
Agreement.
2.4. Principal Payments.
(a) Unless earlier payment is required under this
Agreement pursuant to Section 6.1, the Borrower shall pay to
the Bank the outstanding principal amount of the Term Loan
in
PAGE
the following three installments: $8,333,333.33 on March 14,
2001; $8,333,333.33 on March 14, 2002; and $8,333,333.34 on
March 14, 2003.
(b) The Borrower may prepay all (but not less than
all) of the outstanding principal amount of the Term Loan,
on any Interest Payment Date provided, that the Borrower
shall have paid to the Bank, together with such prepayment
of principal, all accrued interest on the principal amount
prepaid to the date of prepayment and the amount, if any, of
the prepayment indemnity determined pursuant to Section 2.9
to be payable to the Bank. The Borrower shall give the Bank
not more than ten, and not less than five, London Banking
Days' notice of any proposed prepayment specifying the
prepayment date and the person or persons authorized to
notify the Bank of acceptance of the terms of prepayment
referred to in the next succeeding sentence. The Bank shall
provide oral notice to a person so specified by the Borrower
on the second London Banking Day prior to the proposed
prepayment date of the amount, if any, of the prepayment
indemnity which shall be paid in connection with such
proposed prepayment by the Borrower or the Bank, as the case
may be, pursuant to Section 2.9. At the time of such oral
notice, such person shall state whether the Borrower elects
to make such proposed prepayment on such terms. If the
Borrower so elects to make such prepayment, the notice of
prepayment given by the Borrower shall be irrevocable and
the entire outstanding principal amount of the Term Loan,
together with such accrued interest and any such additional
sum payable pursuant to Section 2.9, shall become due and
payable on the specified prepayment date. The Bank may, but
shall not be obligated to, provide written confirmation of
such election to the Borrower, but any failure of the Bank
to provide such confirmation shall not affect the obligation
of the Borrower to make such prepayment on the agreed terms.
2.5 Interest Payments. The Borrower shall pay
interest to the Bank on the unpaid principal amount of the
Term Loan, for the period commencing on the date such Term
Loan is made until such Term Loan is paid in full, on each
Interest Payment Date and at maturity (whether at stated
maturity, by acceleration or otherwise), at the per annum
rate of 6.97%. Notwithstanding the foregoing, the Borrower
shall pay interest
PAGE
on demand at the Overdue Rate on the outstanding principal
amount of the Term Loan and any other amount payable by the
Borrower hereunder (other than interest) which is not paid
in full when due (whether at stated maturity, by
acceleration or otherwise) for the period commencing on the
due date thereof until the same is paid in full.
2.6 Payment Method. (a) All payments to be made by
the Borrower hereunder will be made in Dollars and in
immediately available funds to the Bank at its address set
forth in Section 7.1 not later than 3:00 p.m. Atlanta time
on the date on which such payment shall become due.
Payments received after 3:00 p.m. Atlanta time shall be
deemed to be payments made prior to 3:00 p.m. Atlanta time
on the next succeeding Business Day.
(b) At the time of making each such payment, the
Borrower shall, subject to the other terms and conditions of
this Agreement, specify to the Bank that obligation of the
Borrower hereunder to which such payment is to be applied.
In the event that the Borrower fails to so specify the
relevant obligation or if an Event of Default shall have
occurred and be continuing, the Bank may apply such payments
as it may determine in its sole discretion to obligations of
the Borrower to the Bank arising under this Agreement.
2.7 No Setoff or Deduction. All payments of principal
and interest on the Term Note and other amounts payable by
the Borrower hereunder shall be made by the Borrower without
setoff or counterclaim, and free and clear of, and without
deduction or withholding for, or on account of, any present
or future taxes, levies, imposts, duties, fees, or
assessments imposed by any governmental authority, or by any
department, agency or other political subdivision or taxing
authority.
2.8 Payment on Non-Business Day; Payment Computations.
Except as otherwise provided in this Agreement to the
contrary, whenever any interest on the Term Loan or any
other amount due hereunder becomes due and payable on a day
which is not a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day. Computations
of interest and other amounts due under this Agreement shall
be made on
PAGE
the basis of a year of 360 days for the actual number of
days elapsed, including the first day but excluding the last
day of the relevant period.
2.9 Indemnification.
(a) In the event that the Borrower shall make any
optional prepayment pursuant to Section 2.4 (b), the
Borrower will pay to the Bank, if a positive number, and the
Bank will pay to the Borrower, if a negative number, a
prepayment indemnity equal to the amount determined in
accordance with clause (c) below.
(b) In the event that the principal of, and accrued
interest on, the Term Loan shall become due and payable
prior to scheduled maturity under Section 6, the Borrower
will pay to the Bank a prepayment indemnity equal to the
amount, if a positive number, determined in accordance with
clause (c) below.
(c) The amount payable by the Borrower pursuant to
clauses (a) or (b) above, or by the Bank pursuant to clause
(a) above, shall be the amount (expressed as a positive
number) determined by the Bank in good faith to be necessary
to preserve the economic equivalent of the yield anticipated
to be earned by the Bank in connection with the Term Loan
and to compensate the Bank for any other losses and costs
(including loss of bargain and loss of funding) that it may
incur as a result of such prepayment or acceleration of, the
Term Loan. If the Bank determines that it would gain or
benefit from such occurrence, the Bank's loss will be an
amount (expressed as a negative number) equal to the amount
of the gain or benefit as determined by the Bank. Unless
such quotations are not ascertainable, are not deemed by
Bank to reasonably preserve such economic equivalent or the
determination is being made due to an Event of Default
specified in Section 6.1 (g), the amount payable by the
Borrower or the Bank pursuant to this Section 2.9 shall be
determined by the Bank on the basis of quotations obtained
by the Bank in its discretion from one or more dealers or
other counterparties in the interest rate swap market for an
interest rate swap (i) with payment dates coincident with
the
PAGE
Interest Payment Dates hereunder after the date of such
occurrence, (ii) with a notional amount equal to the
principal amount of the Term Loan scheduled to be
outstanding after such date, and (iii) pursuant to which
such dealer or other counterparty is the fixed rate payor
and the Bank is the floating rate payor at the three-month
London interbank offered rate.
(d) The parties agree that the amounts payable under
this Section 2.9 are a reasonable pre-estimate of loss and
not a penalty. Such amounts are payable for the loss of
bargain and payment of such amounts shall not in any way
reduce, affect or impair the obligations of the Borrower
under this Agreement to pay the principal amount of, and
interest on, the Term Loan. The Bank shall provide a
certificate by an officer of the Bank to confirm the amounts
payable under this Section 2.9 and such certificate of the
Bank shall, in the absence of manifest error, constitute
prima facie evidence of such amount payable under this
Section 2.9.
2.10 Additional Costs. If the Bank shall have
determined that the adoption, after the date hereof, of any
applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance
by the Bank with any request or directive regarding a
capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has
or would have the effect of reducing the rate of return on
the Bank's capital as a consequence of its obligations
hereunder to a level below that which the Bank could have
achieved but for such adoption, change or compliance (taking
into consideration the Bank's policies with respect to
capital adequacy) by an amount deemed by the Bank to be
material, then from time to time, within 15 days after
demand by the Bank, the Borrower shall pay to the Bank such
additional amount or amounts as will compensate the Bank for
such reduction. A certificate by an officer of the Bank
claiming compensation under this Section and setting forth
the additional amount or amounts to be paid to it hereunder
shall, in the absence of manifest error, constitute
prima facie evidence of such amount. In determining such
amount, the Bank may use any reasonable averaging and
attribution methods.
PAGE
SECTION 3
CONDITIONS OF LENDING
3.1 Conditions of Lending. The obligation of the Bank
to make the Term Loan hereunder is subject to the
performance by the Borrower of all its obligations under
this Agreement and to the satisfaction of the following
further conditions:
(a) receipt by the Bank of a duly executed Term Note;
(b) that on the date the Term Loan is made no Default
or Event of Default shall have occurred and be continuing;
(c) that the representations and warranties contained
in this Agreement shall be true on and as of the date of the
Term Loan;
(d) receipt by the Bank of an opinion of counsel to
the Borrower as to the matters referred to in Sections
4.1,4.2, 4.3, 4.5 and 4.8 hereof, and covering such other
matters as the Bank may reasonably request, dated the date
of the Term Loan, satisfactory in form and substance to the
Bank;
(e) receipt by the Bank of certified copies of all
corporate action taken by the Borrower to authorize the
execution, delivery and performance of this Agreement and
the Term Note, and the Term Loan hereunder and such other
corporate documents and other papers as the Bank may
reasonably request;
(f) receipt by the Bank of a certificate of a duly
authorized officer of the Borrower as to the incumbency, and
setting forth a specimen signature, of each of the persons
(i) who has signed this Agreement on behalf of the Borrower;
(ii) who will sign the Term Note on behalf of the Borrower;
and
PAGE
(iii) who will, until replaced by other persons duly
authorized for that purpose, act as the representatives of
the Borrower for the purpose of signing documents in
connection with this Agreement and the transactions
contemplated hereby; and
(g) receipt by the Bank of such other documents,
evidence, materials and information with respect to the
matters contemplated hereby as the Bank may reasonably
request.
The Borrower shall be deemed to have made a representation and
warranty to the Bank at the time of the making of the Term Loan
to the effects set forth in clauses (b) and (c) of this Section
3.
PAGE
SECTION 4
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the Bank
that:
4.1 Corporate Existence and Power. The Borrower is a
corporation duly organized, incorporated, validly existing and in
good standing under the laws of the State of its incorporation,
and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to
carry on its business as now conducted.
4.2 Corporate and Governmental Authorization;
Contravention. The execution, delivery and performance by the
Borrower of this Agreement and the Term Note are within the
Borrower's corporate powers, have been duly authorized by all
necessary corporate action, require no action by or in respect
of, or filing with, any governmental body, agency or official and
do not contravene, or constitute a default under, any provision
of applicable law or regulation or of the certificate of
incorporation or by-laws of the Borrower or of any judgment,
injunction, order, decree, material agreement or other instrument
binding upon the Borrower or result in the creation or imposition
of any Lien on any asset of the Borrower or any of its
Consolidated Subsidiaries.
4.3 Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower and the Term Note, when
executed and delivered in accordance with this Agreement, will
constitute a valid and binding obligation of the Borrower.
4.4 Financial Information.
(a) The consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as at December 31, 1994 and
the related consolidated statements of income and retained
earnings and cash flows of the Borrower and its Consolidated
Subsidiaries for the fiscal year then ended, certified by
Price Waterhouse, certified public accountants, and set
forth in the Borrower's most recent Annual Report on Form
10-K, a copy of which has been delivered to the Bank, fairly
present in conformity with generally accepted accounting
principles,
PAGE
the consolidated financial position of the Borrower and its
Consolidated Subsidiaries at such date and the consolidated
results of operations for such fiscal year;
(b) Since December 31, 1994 there has been no material
adverse change in the business, financial position or
results of operations of the Borrower and its Consolidated
Subsidiaries, considered as a whole except for the early
adoption in 1995 of FASB 121--Accounting For The Impairment
Of Long-Lived Assets And For Long-Lived Assets To Be
Disposed Of.
4.5 Litigation. There is no action, suit or proceeding
pending against, or to the knowledge of the Borrower threatened
against, the Borrower or any of its Consolidated Subsidiaries
before any court or arbitrator or any governmental body, agency
or official in which there is a significant probability of an
adverse decision which would materially adversely affect the
business, consolidated financial position or consolidated results
of operations of the Borrower and its Consolidated Subsidiaries
taken as a whole or which in any manner draws into question the
validity of this Agreement or the Term Note.
4.6 Compliance with ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards
of ERISA and the Code with respect to each Plan and is in
compliance in all material respects with the presently applicable
provisions of ERISA and the Code except where the failure to
comply would not have a material adverse effect on the Borrower
and its Consolidated Subsidiaries taken as a whole. No member of
the ERISA Group has incurred any unsatisfied material liability
to the PBGC or a Plan under Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007 of ERISA.
4.7 Taxes. United States Federal income tax returns of the
Borrower and its Consolidated Subsidiaries have been examined and
closed through the fiscal year ended December 31, 1987. The
Borrower and its Consolidated Subsidiaries have filed all United
States Federal income tax returns and all other material tax
returns which are required to be filed by them and have paid all
taxes due reported on such returns or pursuant to any assessment
received by the Borrower or any Consolidated Subsidiary, to the
extent that such assessment has become due. The charges, accruals
PAGE
and reserves on the books of the Borrower and its Consolidated
Subsidiaries in respect of taxes or other governmental charges
are, in the opinion of the Borrower, adequate except for those
which are being contested in good faith by the Borrower.
4.8 Subsidiaries. Each of the Borrower's Consolidated
Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted, all to the
extent material to the Borrower and its Subsidiaries taken as a
whole.
PAGE
SECTION 5
COVENANTS
So long as the Term Loan shall be in effect, the Borrower
agrees that:
5.1 Information. The Borrower will deliver to the Bank:
(a) as soon as available and in any event within 95
days after the end of each fiscal year of the Borrower, a
consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as at the end of such year, and
consolidated statements of income and retained earnings and
statement of cash flows of the Borrower and its Consolidated
Subsidiaries for such year, setting forth in each case in
comparative form the figures for the preceding fiscal year,
all reported on by Price Waterhouse or other independent
certified public accountants of nationally recognized
standing;
(b) as soon as available and in any event within 50
days after the end of each of the first three quarters of
each fiscal year of the Borrower, an unaudited consolidated
balance sheet of the Borrower and its Consolidated
Subsidiaries as at the end of such quarter and the related
unaudited consolidated statements of income and retained
earnings and statement of cash flows of the Borrower and its
Consolidated Subsidiaries for such quarter and for the
portion of the Borrower's fiscal year ended at the end of
such quarter setting forth in each case in comparative form
the figures for the corresponding quarter and the
corresponding portion of the Borrower's previous fiscal
year, all certified (subject to changes resulting from
year-end adjustments) as to fairness of presentation, in
conformity with generally accepted accounting principles
(other than as to footnotes) and consistency (except to the
extent of any changes described therein and permitted by
generally accepted accounting principles) by the chief
financial officer or the chief accounting officer of the
Borrower;
PAGE
(c) simultaneously with the delivery of each set of
financial statements referred to in clauses (a) and (b)
above, a certificate of the chief financial officer or the
chief accounting officer of the Borrower (i) setting forth
in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements
of Sections 5.6 to 5.8, inclusive, on the date of such
financial statements and (ii) stating whether any Default
has occurred and is continuing on the date of such
certificate and, if any Default then has occurred and is
continuing, setting forth the details thereof and the action
which the Borrower is taking or proposes to take with
respect thereto;
(d) within 10 days of the chief executive officer,
chief operating officer, principal financial officer or
principal accounting officer of the Borrower obtaining
knowledge of any event or circumstance known by such person
to constitute a Default, if such Default is then continuing,
a certificate of the principal financial officer or the
principal accounting officer of the Borrower setting forth
the details thereof and within five days thereafter, a
certificate of either of such officers setting forth the
action which the Borrower is taking or proposes to take with
respect thereto;
(e) promptly upon the mailing thereof to the
shareholders of the Borrower generally, copies of all
financial statements, reports and proxy statements so
mailed;
(f) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and
any registration statements on Form S-8 or its equivalent)
and annual, quarterly or monthly reports which the Borrower
shall have filed with the Securities and Exchange
Commission;
(g) if and when the chief executive officer, chief
operating officer, principal financial officer or principal
accounting officer of the Borrower obtains knowledge that
any member of the ERISA Group (i) has given or is required
to give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan
which might constitute grounds for a termination of such
Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give
notice of any such reportable
PAGE
event, a copy of the notice of such reportable event given
or required to be given to the PBGC; (ii) has received
notice of complete or partial withdrawal liability under
Title IV of ERISA or notice that any Multiemployer Plan is
in reorganization, is insolvent or has been terminated, a
copy of such notice; or (iii) has received notice from the
PBGC under Title IV of ERISA of an intent to terminate,
impose liability in excess of $1,000,000 (other than for (i)
contributions of less than $5,000,000 under Section 302 of
ERISA or Section 412 of the Code; (ii) premiums under
Section 4007 of ERISA, or (iii) penalties under Section 4071
of ERISA) in respect of, or appoint a trustee to administer
any Plan, a copy of such notice;
(h) if at any time the value of all "margin stock" (as
defined in Regulation U) owned by the Borrower and its
Consolidated Subsidiaries exceeds (or would, following
application of the proceeds of the Term Loan hereunder,
exceed) 25% of the value of the total assets of the Borrower
and its Consolidated Subsidiaries, in each case as
reasonably determined by the Borrower, prompt notice of such
fact; and
(i) from time to time such additional information
regarding the financial position or business of the Borrower
as the Bank may reasonably request;
provided, however, that the Borrower shall be deemed to have
satisfied its obligations under clauses (a) and (b) above if and
to the extent that the Borrower has provided to the Bank pursuant
to clause (f) the periodic reports on Forms 10-Q and 10-K
required to be filed by the Borrower with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended, for the quarterly and annual periods described
in such clauses (a) and (b).
5.2 Maintenance of Property; Insurance.
(a) The Borrower will maintain or cause to be
maintained in good repair, working order and condition all
properties used and useful in the business of the Borrower
and each Consolidated Subsidiary and from time to time will
make or cause to be made all appropriate repairs, renewals
and
PAGE
replacement thereof, except where the failure to do so would
not have a material adverse effect on the Borrower and its
Consolidated Subsidiaries taken as a whole.
(b) The Borrower will maintain or cause to be
maintained, for itself and its Consolidated Subsidiaries,
all to the extent material to the Borrower and its
Consolidated Subsidiaries taken as a whole, physical damage
insurance on all real and personal property on an all risks
basis, covering the repair and replacement cost of all such
property and consequential loss coverage for business
interruption and extra expense, public liability insurance
in an amount not less than $10,000,000 and such other
insurance of the kinds customarily insured against by
corporations of established reputation engaged in the same
or similar business and similarly situated, of such type and
in such amounts as are customarily carried under similar
circumstances.
5.3 Conduct of Business and Maintenance of Existence. The
Borrower will continue, and will cause each Consolidated
Subsidiary to continue, to engage predominantly in business of
the same general type as now conducted by the Borrower and its
Consolidated Subsidiaries, and, except as otherwise permitted by
Section 5.10 hereof, will preserve, renew and keep in full force
and effect, and will cause each Consolidated Subsidiary to
preserve, renew and keep in full force and effect their
respective corporate existence and their respective rights and
franchises necessary in the normal conduct of business, all to
the extent material to the Borrower and its Consolidated
Subsidiaries taken as a whole.
5.4 Compliance with Laws. The Borrower will comply, and
cause each Consolidated Subsidiary to comply, in all material
respects with all applicable laws, ordinances, rules,
regulations, and requirements of governmental authorities
(including, without limitation, ERISA and the rules and
regulations thereunder and all federal, state and local statutes
laws or regulations or other governmental restrictions relating
to environmental protection, hazardous substances or the cleanup
or other remediation thereof), except where the necessity of
compliance therewith is contested in good faith by appropriate
proceedings or where the failure to comply would not have a
material adverse effect on the Borrower and its Consolidated
Subsidiaries taken as a whole.
PAGE
5.5 Inspection of Property, Books and Records.
(a) The Borrower will keep, and will cause each
Consolidated Subsidiary to keep, proper books of record and
account in accordance with sound business practice so as to
permit its financial statements to be prepared in accordance
with generally accepted accounting principles; and will
permit representatives of the Bank at the Bank's expense to
visit and inspect any of the Borrower's properties, to
examine and make abstracts from any of the Borrower's
corporate books and financial records and to discuss the
Borrower's affairs, finances and accounts with the principal
officers of the Borrower and its independent public
accountants, all at such reasonable times and as often as
may reasonably be necessary to ensure compliance by the
Borrower with its obligations hereunder.
(b) With the consent of the Borrower (which consent
will not be unreasonably withheld) or, if an Event of
Default has occurred and is continuing, without the
requirement of any such consent, the Borrower will permit
representatives of the Bank, at the Bank's expense, to visit
and inspect any of the properties of and to examine the
corporate books and financial records of any Consolidated
Subsidiary and make copies thereof or extracts therefrom and
to discuss the affairs, finances and accounts of such
Consolidated Subsidiary with its and the Borrower's
principal officers and the Borrower's independent public
accountants, all at such reasonable times and as often as
the Bank may reasonably request.
5.6 Cash Flow to Total Borrowed Funds. The ratio of Cash
Flow to Total Borrowed Funds shall not be less than .30 for any
consecutive four quarters, such ratio to be calculated at the end
of each quarter on a trailing four quarter basis.
5.7 Total Borrowed Funds to Consolidated Net Worth. Total
Borrowed Funds will not exceed 85% of Consolidated Net Worth at
the end of any quarter of any fiscal year.
5.8 Minimum Consolidated Net Worth. Consolidated Net Worth
will at no time be less than $550,000,000 plus 25% of the
PAGE
consolidated net income of the Borrower at the end of each fiscal
quarter for each fiscal year commencing after the fiscal year
ending December 31, 1994.
5.9 Negative Pledge. Neither the Borrower nor any
Consolidated Subsidiary will create, assume or suffer to exist
any Lien on any asset now owned or hereafter acquired by it,
except for:
(a) Liens existing on the date hereof;
(b) any Lien existing on any asset of any corporation
at the time such corporation becomes a Consolidated
Subsidiary and not created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or
assumed for the purpose of financing all or any part of the
cost of acquiring such asset, provided that such Lien
attaches to such asset concurrently with or within 90 days
after the acquisition thereof;
(d) any Lien on any asset of any corporation existing
at the time such corporation is merged into or consolidated
with the Borrower or a Consolidated Subsidiary and not
created in contemplation of such event;
(e) any Lien existing on any asset prior to the
acquisition thereof by the Borrower or a Consolidated
Subsidiary and not created in contemplation of such
acquisition;
(f) any Lien created in connection with capitalized
lease obligations, but only to the extent that such Lien
encumbers property financed by such capital lease obligation
and the principal component of such capitalized lease
obligation is not increased;
(g) Liens arising in the ordinary course of its
business which (i) do not secure Debt and (ii) do not in the
aggregate materially impair the operation of the business of
the Borrower and its Consolidated Subsidiaries, taken as a
whole;
PAGE
(h) any Lien arising out of the refinancing,
extension, renewal or refunding of any Debt secured by any
Lien permitted by any of the foregoing clauses of this
Section, provided that such Debt is not increased and is not
secured by any additional assets;
(i) Liens securing taxes, assessments, fees or other
governmental charges or levies, Liens securing the claims of
materialmen, mechanics, carriers, landlords, warehousemen
and similar Persons, Liens incurred in the ordinary course
of business in connection with workmen's compensation,
unemployment insurance and other similar laws, Liens to
secure surety, appeal and performance bonds and other
similar obligations not incurred in connection with the
borrowing of money, and attachment, judgment and other
similar Liens arising in connection with court proceedings
so long as the enforcement of such Liens is effectively
stayed and the claims secured thereby are being contested in
good faith by appropriate proceedings;
(j) Liens not otherwise permitted by the foregoing
clauses of this Section securing Debt in an aggregate
principal amount at any time outstanding not to exceed 10%
of Consolidated Net Worth;
(k) any Lien(s) on any asset of Quest & Associates,
Inc., a Subsidiary of Borrower, created in connection with
the August 1995 investment by Quest & Associates, Inc., in a
portfolio of computer equipment leases; and
(l) any Liens on property arising in connection with a
securities repurchase transaction.
5.10 Consolidations, Mergers and Sales of Assets. The
Borrower will not (i) consolidate or merge with or into any other
Person (other than a Subsidiary of the Borrower) unless the
Borrower's shareholders immediately before the merger or
consolidation are to own more than 70% of the combined voting
power of the resulting entity's voting securities or (ii) sell,
lease or otherwise transfer all or substantially all of the
Borrower's business or assets to any other Person (other than a
Subsidiary of the Borrower). The Borrower will not permit any
Significant
PAGE
Subsidiary or (in a series of related transactions) any
Significant Group of Subsidiaries to consolidate with, merge with
or into or transfer all of any substantial part of its assets to
any Person other than the Borrower or a Subsidiary of the
Borrower.
5.11 Use of Proceeds. The proceeds of the Term Loan will be
used for general corporate purposes, including the making of
acquisitions. No part of the proceeds of the Term Loan hereunder
will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate of buying or carrying any
"margin stock" in violation of Regulation U. If requested by the
Bank, the Borrower will furnish to the Bank in connection with
the Term Loan hereunder a statement in conformity with the
requirements of Federal Reserve Form U-l referred to in
Regulation U.
PAGE
SECTION 6
EVENTS OF DEFAULT
6.1 Events of Default. If any one or more of the following
events ("Events of Default") shall have occurred and be
continuing:
(a) the Borrower shall fail to pay (i) any principal
of the Term Note when due or (ii) interest on the Term Note
within four days after the same has become due; or
(b) the Borrower shall fail to observe or perform any
covenant contained in Section 5.1(d) or Sections 5.6 to 5.8
or 5.10 hereof; or
(c) the Borrower shall fail to observe or perform any
covenant or agreement contained in this Agreement (other
than those covered by clause (a) or (b) above) for 30 days
after written notice thereof has been given to the Borrower
by the Bank; or
(d) any representation, warranty or certification made
by the Borrower in this Agreement or in any certificate,
financial statement or other document delivered pursuant to
this Agreement shall prove to have been incorrect in any
material respect upon the date when made or deemed made; or
(e) (1) the Borrower or any Significant Subsidiary or
Significant Group of Subsidiaries defaults in any payment at
any stated maturity of principal of or interest on any other
obligation for money borrowed (or any capitalized lease
obligation, any obligation under a purchase money mortgage,
conditional sale or other title retention agreement or any
obligation under notes payable or drafts accepted
representing extensions of credit) beyond any period of
grace provided with respect thereto or (2) the Borrower or
any Significant Subsidiary or Significant Group of
Subsidiaries defaults in any payment other than at any
stated maturity of principal of or interest on any other
obligation for money borrowed (or any capitalized lease
obligation, any obligation under a purchase money mortgage,
conditional sale or other title retention agreement or any
obligation under notes payable or drafts
PAGE
accepted representing extensions of credit) beyond any
period of grace provided with respect thereto, or the
Borrower or any Significant Subsidiary or Significant Group
of Subsidiaries fails to perform or observe any other
agreement, term or condition contained in any agreement
under which any such obligation is created (or if any other
event thereunder or under any such agreement shall occur and
be continuing), and the effect of such default with respect
to a payment other than at any stated maturity, failure or
other event is to cause, or to permit the holder or holders
of such obligation (or a trustee on behalf of such holder or
holders) to cause, such obligation to become due or to
require the purchase thereof prior to any stated maturity;
Provided that the aggregate amount of all obligations as to
which any such payment defaults (whether or not at stated
maturity), failures or other events shall have occurred and
be continuing exceeds $10,000,000 and provided, further,
that it is understood that the obligations referred to
herein exclude those obligations arising in connection with
securities repurchase transactions; or
(f) the Borrower or any Significant Subsidiary or
Significant Group of Subsidiaries shall commence a voluntary
case or other proceeding seeking liquidation, reorganization
or other relief with respect to itself or its debts under
any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, or shall consent
to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or
other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become due, or shall
take any corporate action to authorize any of the foregoing;
or
(g) an involuntary case or other proceeding shall be
commenced against the Borrower or any Significant Subsidiary
or Significant Group of Subsidiaries seeking liquidation,
reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a
trustee,
PAGE
receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, and such
involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or an
order for relief shall be entered against the Borrower or
any Significant Subsidiary or Significant Group of
Subsidiaries under the federal bankruptcy laws as now or
hereafter in effect; or
(h) any member of the ERISA Group shall fail to pay
when due any amount or amounts aggregating in excess of
$1,000,000 which it shall have become liable to pay to the
PBGC or to a Plan under Title IV of ERISA (except where such
liability is contested in good faith by appropriate
proceedings as permitted under Section 5.4); or notice of
intent to terminate a Material Plan (other than any multiple
employer plan within the meaning of Section 4063 of ERISA)
shall be filed under Title IV of ERISA by any member of the
ERISA Group, any plan administrator or any combination of
the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate, to impose liability in
excess of $1,000,000 (other than for (i) contributions of
less than $5,000,000 under Section 302 of ERISA or Section
412 of the Code (ii) premiums under Section 4007 of ERISA or
(iii) penalties under Section 4071 of ERISA) in respect of,
or to cause a trustee to be appointed to administer any such
Material Plan; or
(i) judgments or orders for the payment of money in
excess of $10,000,000 in the aggregate shall be rendered
against the Borrower or any Significant Subsidiary or
Significant Group of Subsidiaries and such judgments or
orders shall continue unsatisfied and unstayed for a period
of 60 days; or
(j) any person or group of persons (within the meaning
of Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act")), other than the Borrower
or any of its Subsidiaries, becomes the beneficial owner
(within the meaning of Rule 13d-3 under the 1934 Act) of 30%
or more of the combined voting power of the Borrower's then
outstanding voting securities; or a tender offer or exchange
offer (other than an offer by the Borrower or a Subsidiary)
pursuant to which 30% or more of the combined voting power
of
PAGE
the Borrower's then outstanding voting securities was
purchased, expires; or during any period of two consecutive
years, individuals who, at the beginning of such period,
constituted the Board of Directors of the Borrower cease for
any reason to constitute at least a majority thereof, unless
the election or the nomination for the election by the
Borrower's stockholders of each new director was approved by
a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period;
then, and in every such event, (1) in the case of any of the
Events of Default specified in paragraphs (f) or (g) above, the
principal of and accrued interest on the Term Note shall
automatically become due and payable without presentment, demand,
protest or other notice or formality of any kind, all of which
are hereby expressly waived and (2) in the case of any other
Event of Default specified above, the Bank may, by notice in
writing to the Borrower, declare the Term Note and all other sums
payable under this Agreement to be, and the same shall thereupon
forthwith become, due and payable without presentment, demand,
protest or other notice or formality of any kind, all of which
are hereby expressly waived.
SECTION 7
MISCELLANEOUS
7.1 Notices. Unless otherwise specified herein all
notices, requests, demands or other communications to or from the
parties hereto shall be sent by United States mail, certified,
return receipt requested, telegram, telex or facsimile, and shall
be deemed to have been duly given upon receipt thereof. In the
case of a telex, receipt of such communication shall be deemed to
occur when the sender receives its answer back. In the case of a
facsimile, receipt of such communication shall be deemed to occur
when the sender confirms such receipt by telephone. Any such
notice, request, demand or communication shall be delivered or
addressed as follows:
(a) if to the Borrower, to it at 1271 Avenue of the
Americas, New York, New York 10020; Attention: Vice
President and Treasurer (with a copy at the same address to
the Vice President and General Counsel);
(b) if to the Bank, to it at 711 Fifth Avenue, 5th
Floor, New York, New York 10022; Attention: Allison Vella;
or at such other address or telex number as any party hereto may
designate by written notice to the other party hereto.
7.2 Amendments and Waivers; Cumulative Remedies.
(a) None of the terms of this Agreement may be waived,
altered or amended except by an instrument in writing duly
executed by the Borrower and the Bank.
(b) No failure or delay by the Bank in exercising any
right, power or privilege hereunder or the Term Note shall
operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or
privilege. The rights and remedies provided herein shall be
cumulative and not exclusive of any rights or remedies
provided by law.
PAGE
7.3 Successors and Assigns.
(a) The provisions of this Agreement shall be binding
upon and shall inure to the benefit of the Borrower and the
Bank, except that the Borrower may not assign or otherwise
transfer any of its rights and obligations under this
Agreement except as provided in Section 5.10 hereof, without
the prior written consent of the Bank which the Bank shall
not unreasonably delay or withhold.
(b) The Bank may at any time grant to one or more
banks or other institutions (each a "Participant")
participating interests in the Term Loan. In the event of
any such grant by the Bank of a participating interest to a
Participant, whether or not upon notice to the Borrower the
Bank shall remain responsible for the performance of its
obligations hereunder, and the Borrower shall continue to
deal solely and directly with the Bank in connection with
the Bank's rights and obligations under this Agreement. Any
agreement pursuant to which the Bank may grant such a
participating interest shall provide that the Bank shall
retain the sole right and responsibility to enforce the
obligations of the Borrower hereunder including, without
limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; provided that
such participation agreement may provide that the Bank will
not agree to any modification, amendment or waiver of this
Agreement which (i) reduces the principal of or rate of
interest on the Term Loan or (ii) postpones the date fixed
for any payment of principal of or interest on the Term Loan
without the consent of the Participant. The Borrower agrees
that each Participant shall be entitled to the benefits of
Section 2 with respect to its participating interest.
(c) No Participant or other transferee of the Bank's
rights shall be entitled to receive any greater payment
under Section 2 than the Bank would have been entitled to
receive with respect to the rights transferred, unless such
transfer is made with the Borrower's prior written consent.
PAGE
7.4 Expenses; Documentary Taxes; Indemnification.
(a) The Borrower shall pay (i) all out-of-pocket
expenses and internal charges of the Bank (including
reasonable fees and disbursements of counsel) in connection
with any Default hereunder and (ii) if there is an Event of
Default, all out-of-pocket expenses incurred by the Bank
(including reasonable fees and disbursements of counsel) in
connection with such Event of Default and collection and
other enforcement proceedings resulting therefrom. The
Borrower shall indemnify the Bank against any transfer
taxes, documentary taxes, assessments or charges made by any
governmental authority by reason of the execution and
delivery of this Agreement or the Term Note.
(b) The Borrower agrees to indemnify the Bank and hold
the Bank harmless from and against any and all liabilities,
losses, damages, costs and expenses of any kind (including,
without limitation, the reasonable fees and disbursements of
counsel for the Bank in connection with any investigative,
administrative or judicial proceeding, whether or not the
Bank shall be designated a party thereto) which may be
incurred by the Bank relating to or arising out of any
actual or proposed use of proceeds of the Term Loan
hereunder or any merger or acquisition involving the
Borrower; provided, that the Bank shall not have the right
to be indemnified hereunder for its own gross negligence or
willful misconduct as determined by a court of competent
jurisdiction.
7.5 Counterparts. This Agreement may be signed in any
number of counterparts with the same effect as if the signatures
thereto and hereto were upon the same instrument.
7.6 Headings; Table of Contents. The section and
subsection headings used herein and the Table of Contents have
been inserted for convenience of reference only and do not
constitute matters to be considered in interpreting this
Agreement.
7.7 Governing Law. This Agreement and the Term Note shall
be construed in accordance with and governed by the law of the
State of New York.
PAGE
IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed and delivered by their proper and duly
authorized officers as of March 14, 1996.
THE INTERPUBLIC GROUP OF COMPANIES, INC.
By: THOMAS J. VOLPE
Title: Senior Vice President-Financial Operations
SUNTRUST BANK, ATLANTA
By: SMITH BROOKHART IV
Title: Group Vice President