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<SEC-DOCUMENT>0000891092-02-000433.txt : 20020415
<SEC-HEADER>0000891092-02-000433.hdr.sgml : 20020415
ACCESSION NUMBER: 0000891092-02-000433
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20011231
FILED AS OF DATE: 20020328
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: OMNICOM GROUP INC
CENTRAL INDEX KEY: 0000029989
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311]
IRS NUMBER: 131514814
STATE OF INCORPORATION: NY
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-10551
FILM NUMBER: 02590542
BUSINESS ADDRESS:
STREET 1: 437 MADISON AVE
CITY: NEW YORK
STATE: NY
ZIP: 10022
BUSINESS PHONE: 2124153700
MAIL ADDRESS:
STREET 1: 437 MADISON AVE
CITY: NEW YORK
STATE: NY
ZIP: 10022
FORMER COMPANY:
FORMER CONFORMED NAME: DOYLE DANE BERNBACH INC
DATE OF NAME CHANGE: 19781226
FORMER COMPANY:
FORMER CONFORMED NAME: DOYLE DANE BERNBACH GROUP INC
DATE OF NAME CHANGE: 19861117
FORMER COMPANY:
FORMER CONFORMED NAME: DOYLE DANE BERNBACH INTERNATIONAL INC
DATE OF NAME CHANGE: 19850604
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>e13177_10-k.txt
<DESCRIPTION>FORM 10-K
<TEXT>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: December 31, 2001
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 1-10551
----------
OMNICOM GROUP INC.
(Exact name of registrant as specified in its charter)
New York 13-1514814
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
437 Madison Avenue, New York, NY 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 415-3600
Securities Registered Pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of each class on which Registered
- ---------------------------- -----------------------
Common Stock, $.15 Par Value New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
----------
The registrant has (1) 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 and (2) been subject to such filing requirements for the past 90 days.
Disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is
not contained herein and will not be contained in the definitive proxy or
information statements incorporated by reference in Part III of this form 10-K
or any amendment to this Form 10-K.
----------
At March 26, 2002, 188,732,914 shares of Omnicom Common Stock, $.15 par
value, were outstanding; the aggregate market value of the voting stock held by
nonaffiliates at March 26, 2002 was $16,920,464,000.
Certain portions of Omnicom's definitive proxy statement relating to its
annual meeting of shareholders scheduled to be held on May 21, 2002 are
incorporated by reference into Part III of this report.
================================================================================
<PAGE>
OMNICOM GROUP INC.
----------
ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 2001
INDEX AND CROSS-REFERENCE SHEET
PURSUANT TO INSTRUCTIONS G(4) AND H AND FORM 10-K
Page
----
PART I
Item 1. Business ................................................... 1
Item 2. Properties ................................................. 2
Item 3. Legal Proceedings .......................................... 3
Item 4. Submission of Matters to a Vote of Security Holders ........ 3
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters ...................................... 4
Item 6. Selected Financial Data .................................... 4
Items 7/7A. Management's Discussion and Analysis of Financial
Condition and Results of Operations; Critical
Accounting Policies; and Quantitative and
Qualitative Disclosures about Market Risk ................ 5
Item 8. Financial Statements and Supplementary Data ................ 12
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ...................... 12
PART III
Item 10. Directors and Executive Officers of the Registrant ......... 13
Item 11. Executive Compensation ..................................... 13
Item 12. Security Ownership of Certain Beneficial Owners
and Management ........................................... 13
Item 13. Certain Relationships and Related Transactions ............. 13
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K ...................................... 14
Index to Financial Statements .............................. 14
Index to Financial Statement Schedules ..................... 14
Exhibit Index .............................................. 14
Signatures ............................................................... 16
Management Report ........................................................ F-1
Report of Independent Public Accountants ................................. F-2
Consolidated Financial Statements ........................................ F-3
Notes to Consolidated Financial Statements ............................... F-7
- ----------
* The information called for by Items 10, 11, 12 and 13, to the extent not
included in this document, is incorporated herein by reference to the
information to be included under the captions "Election of Directors,"
"Management's Stock Ownership," "Director Compensation" and "Executive
Compensation" in Omnicom's definitive proxy statement, which is expected
to be filed by April 10, 2002.
<PAGE>
PART I
Introduction
This report is both our 2001 annual report to shareholders and our 2001
annual report on Form 10-K required under the federal securities laws. The
specific items of Form 10-K are set forth in the index and cross-reference sheet
appearing on the inside cover of this report.
We are a holding company; our business is conducted through subsidiaries.
For convenience of reference, however, the terms "Omnicom," "we" or "us" mean
Omnicom Group Inc. and our subsidiaries unless the context indicates otherwise.
Statements of our beliefs or expectations regarding future events are
"forward-looking statements" within the meaning of the federal securities laws.
These statements are subject to various risks and uncertainties, including as a
result of the specific factors identified under the caption "Risks" on page 2
and elsewhere in this report. There can be no assurance that these beliefs or
expectations will not change or be affected by actual future events.
1. Business
Our Business: We are one of the largest marketing and corporate
communications companies in the world. Our company was formed through a 1986
combination of three marketing and corporate communications networks, BBDO,
Doyle Dane Bernbach and Needham Harper.
Since then, we have grown our strategic holdings to over 1,500 subsidiary
agencies operating in more than 100 countries. Our agencies provide an extensive
range of marketing and corporate communications services, including:
advertising
brand consultancy
crisis communications
custom publishing
database management
digital and interactive marketing
direct marketing
directory and business-to-business advertising
employee communications
environmental design
field marketing
healthcare communications
marketing research
media planning and buying
multi-cultural marketing
non-profit marketing
promotional marketing
public affairs
public relations
recruitment communications
specialty communications
sports and event marketing
Marketing and corporate communications services are provided to clients
through global, pan-regional and national independent agency brands. Our brands
include:
BBDO Worldwide
DDB Worldwide
TBWA Worldwide
AWE
Abbott Mead Vickers
Accel Healthcare
Adelphi Group
Alcone Marketing Group
Arnell Group
Bernard Hodes Group
Brodeur Worldwide
Carlson and Partners
Clark & Weinstock
Claydon Heeley Jones Mason
Cline Davis & Mann
Cone
Corbett Healthcare Group
CPM
Davie-Brown
Dieste, Harmel & Partners
Direct Partners
Doremus
Eden Communications Group
Element 79 Partners
Fleishman-Hillard
Footsteps
Gavin Anderson & Company
Goodby, Silverstein & Partners
Grizzard
GSD&M
Harrison & Star Business Group
Horrow Sports Ventures
ICON
Integrated Merchandising Services
Integer Group
Interbrand
Kaleidoscope
Ketchum
Ketchum Directory Advertising
KPR
Lieber Levett Koenig Farese Babcock
Live Web
Lyons Lavey Nickel Swift
M/A/R/C Research
MarketStar
Martin/Williams
Merkley Newman Harty & Partners
Millsport
Moss Dragoti
New Solutions
Novus
OMD Worldwide
PhD
PentaMark Worldwide
Porter Novelli International
Pauffley
PGC Advertising
Proximity Worldwide
Radiate Sports & Entertainment Group
Rapp Collins Worldwide
Russ Reid Company
Smythe Dorward Lambert
Targetbase
TARGIS Healthcare Communications
Worldwide
Tequila
The Designory
The Marketing Arm
TicToc
Tracy Locke Partnership
The Promotion Network
Tribal DDB
U.S. Marketing & Promotions
Washington Speakers Bureau
Wolff Olins
Zimmerman & Partners Advertising
@tmosphere Interactive
1 Health Communications
1
<PAGE>
The various components of our business and material factors affecting us
in 2001 are discussed in our "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" which begins on page 5 of this report.
Geographic Regions: Our total consolidated revenue is about evenly divided
between U.S. and non-U.S. operations. For financial information concerning
domestic and foreign operations and segment reporting, see note 5 to our
consolidated financial statements at pages F-12 of this report. For financial
information concerning our acquisitions in 2001, see note 2 to our consolidated
financial statements on page F-10 of this report.
Our Clients: We had over 5,000 clients in 2001, many of which were served
by more than one of our agency brands. Our 10 largest and 200 largest clients in
the aggregate accounted for 17% and 48%, respectively, of our 2001 consolidated
revenue. Our largest client was served by 20 of our agency brands last year.
This client accounted for 5.4% of our 2001 consolidated revenue. No other client
accounted for more than 2.5% of our consolidated revenue.
Our Employees: We employed over 57,000 people at December 31, 2001. We are
not party to any significant collective bargaining agreements. See our
management discussion and analysis at page 5 of this report for a discussion of
the effect of salary and related costs on our 2001 results of operations.
Risks: We face risks typical of marketing and corporate communications
services companies and other services businesses generally, including risks
arising out of changes in general economic conditions, competitive factors,
client communication requirements, and the hiring and retention of key
employees. In addition, due to our international operations, we are subject to
translation risk associated with currency fluctuations, exchange controls and
similar risks discussed in our management discussion and analysis at pages 5 to
12 of this report. For financial information on our operations by geographic
area, see note 5 to our consolidated financial statements at page F-12 of this
report.
Our revenue is dependent upon marketing and corporate communication
requirements of our clients and tends to be highest in the second and fourth
quarters of the calendar year. See our management discussion and analysis
beginning on page 5 of this report for a discussion of the effect of market
conditions, September 11th and other factors on our 2001 results of operations.
Government agencies and consumer groups have from time to time directly or
indirectly affected or attempted to affect the scope, content and manner of
presentation of advertising and other marketing communications. We believe the
total volume of advertising and marketing communications will not be materially
affected by future legislation or regulation, although the scope, content and
manner of presentation will likely continue to change.
2. Properties
We maintain office space in many of the major cities around the world,
including our principal corporate offices in New York City. Substantially all of
our office space is leased. Certain of our leases are subject to rent reviews
under various escalation clauses and certain of our leases require our payment
of various operating expenses, which may also be subject to escalation. Our
consolidated rent expense was $305.4 million in 2001, $258.9 million in 2000 and
$237.1 million in 1999, after reduction for rents received from subleases of
$8.0 million, $7.2 million and $13.8 million, respectively. Our obligations for
future minimum base rents under terms of noncancellable real estate and other
operating leases, reduced by rents to be received from existing noncancellable
subleases, are (in millions):
Net Rent
--------
2002 ................................. $343.4
2003 ................................. 300.0
2004 ................................. 255.0
2005 ................................. 212.0
2006 ................................. 191.4
Thereafter ........................... 988.2
See note 10 to our consolidated financial statements on page F-18 of this
report for a discussion of our lease commitments, including our leased
properties.
2
<PAGE>
3. Legal Proceedings
We are involved from time to time in various legal proceedings in the
ordinary course of business. We do not presently expect that these proceedings
will have a material adverse effect on our financial position or results of
operations.
4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of our shareholders during the last
quarter of 2001.
3
<PAGE>
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters
Our common shares are listed on the New York Stock Exchange under the
symbol "OMC". On March 26, 2002, we had 3,756 holders of record of our common
shares. The table below shows the range of quarterly high and low sales prices
reported on the New York Stock Exchange Composite Tape for our common shares and
the dividends paid per share for these periods.
Dividends Paid
Period High Low Per Share
------ ---- --- --------------
Q1 2000............................ $100.94 $75.50 $0.175
Q2 2000............................ 99.19 81.69 0.175
Q3 2000............................ 91.00 68.13 0.175
Q4 2000............................ 93.00 70.13 0.175
Q1 2001............................ $ 95.45 $76.69 $0.175
Q2 2001............................ 98.20 78.00 0.200
Q3 2001............................ 89.20 59.10 0.200
Q4 2001............................ 90.69 61.25 0.200
Q1 2002*........................... $ 97.35 $83.66 $0.200
* through March 26th, 2002
We are subject to a number of financial tests under the terms of our
credit facilities and were in compliance with those tests as of December 31,
2001. We are not aware of any restrictions on our ability to continue to pay
dividends. See note 3 of the notes to our consolidated financial statements for
a description of our borrowing facilities at page F-10 of this report.
Since the beginning of last year, we sold $850.0 million of convertible
notes due in 2031 and $900.0 million of convertible notes due in 2032 in
separate transactions. For information about these transactions see notes 4 and
14 to our consolidated financial statements at pages F-11 to F-12 and F-22. We
initially sold the $850.0 million of convertible notes in 2001 to Merrill Lynch,
Pierce, Fenner & Smith Incorporated for net cash proceeds of $830.2 million and
the $900.0 million of convertible notes in 2002 to J.P. Morgan Securities Inc.,
Goldman Sach & Co. and Salomon Smith Barney Inc. for net cash proceeds of $905.0
million. The investment banks, in both transactions, resold them to a small
number of qualified institutional buyers in transactions exempt from
registrations under the federal securities laws because they did not involve
public offerings.
6. Selected Financial Data
The following selected financial data should be read in conjunction with
our consolidated financial statements and related notes which begin on page F-1,
as well as our management discussion and analysis which begins on page 5 of this
report.
<TABLE>
<CAPTION>
(Dollars in Thousands Except Per Share Amounts)
--------------------------------------------------------------------------------------
2001 2000 1999 1998 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
For the year:
Revenue ............................. $ 6,889,406 $ 6,154,230 $ 5,130,545 $ 4,290,946 $ 3,296,224
Net income .......................... 503,142 498,795(a) 362,882 278,845 217,300
Earnings per common share,
excluding Razorfish gain
Basic ............................. 2.75 2.49 2.07 1.61 1.30
Diluted ........................... 2.70 2.40 2.01 1.57 1.28
Earnings per common share,
including Razorfish gain
Basic ............................. 2.85
Diluted ........................... 2.73
Dividends declared per common
share ............................. 0.775 0.700 0.625 0.525 0.450
At year end:
Total assets ........................ $10,617,414 $ 9,853,707 $ 9,017,637 $ 7,121,968 $ 5,114,364
Long-term obligations:
Long-term debt .................... 490,105 1,105,419 263,149 268,913 123,165
Convertible debentures ............ 850,000 229,968 448,483 448,497 218,500
Deferred compensation and
other liabilities ............... 296,980 296,921 300,746 269,966 166,492
</TABLE>
- ----------
(a) Includes $63.8 million after-tax gain on sale of Razorfish shares.
4
<PAGE>
7/7A. Management's Discussion and Analysis of Financial Condition and Results of
Operations; Critical Accounting Policies; and Quantitative and Qualitative
Information about Market Risk
Financial Results from Operations-- 2001 Compared with 2000
Revenue: Our consolidated worldwide revenue for 2001 increased 11.9% to
$6,889.4 million from $6,154.2 million in 2000. This is a result of growth in
our domestic operations of 14.1% to $3,717.0 million from $3,258.2 million in
2000, and growth in our international operations of 9.5% to $3,172.4 million
from $2,896.0 million in 2000.
Foreign exchange impacts reduced our international revenue by $174.0
million during the year, reducing our international growth by 6.0% and our
overall growth by 2.8%. The most significant impacts came from the Euro and the
British Pound as these markets represented 70.0% of our international
operations. The effect of acquisitions, net of divestitures, increased our
worldwide revenue by 6.3%, domestic revenue by 6.8% and international revenue by
5.7%. The balance of the increase in revenue represents net new business wins
and additional revenue from expanding the scope of services provided to existing
clients.
In addition to expanding our client base, expanding the scope of services
and the extension of additional services to clients, several market trends
continued to affect our business. These trends include clients increasingly
expanding the focus of their brand strategies from a national market to the
global market. And, in an effort to gain greater efficiency and effectiveness
from their marketing dollars, clients are increasingly requiring greater
coordination of their traditional advertising and marketing activities and
tending to concentrate these activities with a smaller number of service
providers.
Due to a variety of factors, including the trends mentioned above, in the
normal course of business, our agencies both gain and lose clients each year.
The net result in 2001 and historically each year for Omnicom as a whole, was an
overall gain in new business. Due to our multiple independent agency structure
and the breadth of our service offerings and geographic reach, our agencies have
more than 5,000 active client relationships in the aggregate. Our single largest
client in 2001 represented 5.4% of worldwide revenue and no other client
represented more than 2.5%. Our 10 largest and 200 largest clients represented
17.0% and 48.0% of our worldwide revenue, respectively.
Revenue from our domestic operations increased in 2001 by 14.1% over 2000.
Excluding foreign exchange impacts, revenue from our international operations,
increased by 15.5% over 2000, primarily the result of the strong performance of
our agencies in the E.U. and other international markets and several
acquisitions in Asia. Additional geographic information relating to our business
is contained in note 5 to our consolidated financial statements at page F-12 of
this report.
Driven by clients' continuous demand for more effective and efficient
branding activities, we strive to provide through various client centric agency
networks that are organized to meet specific client objectives, an extensive
range of marketing and corporate communications services. These services include
advertising, brand consultancy, crisis communications, custom publishing,
database management, digital and interactive marketing, direct marketing,
directory and business-to-business advertising, employee communications,
environmental design, field marketing, healthcare communications, marketing
research, media planning and buying, multi-cultural marketing, non-profit
marketing, promotional marketing, public affairs, public relations, recruitment
communications, sports and event marketing, and other specialty communications.
In an effort to monitor the changing needs of our clients and to further expand
the scope of our services to key clients, we monitor revenue by marketing
discipline and group them into the following four categories: traditional media
advertising, customer relationship management (CRM), public relations and
specialty communications.
Traditional media advertising revenue represented 43.6%, or $3,006.3
million, of our worldwide revenue during 2001, as compared to 44.2%, or $2,718.9
million, in 2000. The remainder of our revenue, 56.4%, or $3,883.1 million, in
2001 and 55.8%, or $3,435.4 million, in 2000, was related to our other marketing
and corporate communication services. The breakdown of this revenue was 30.8%
CRM, 14.3% public relations and 11.3% specialty communications. Revenue for
these services in 2001 increased when compared to 2000 by 16.5% for CRM, 4.3%
for public relations and 15.9% for specialty communications.
September 11th and Market Conditions: The tragic events of September 11th
adversely impacted our business. We experienced disruptions in client spending
patterns related to the cancellation and postponement of activities. As a
result, operating margins deteriorated during the third quarter. This decline
occurred primarily
5
<PAGE>
because we had only a limited ability to adjust our cost structure in response
to the sudden reduction in revenues.
We do not believe September 11th permanently impacted any of our agencies.
While the specific effects of September 11th began to dissipate over the
remainder of 2001, overall economic conditions remained weak. We believe that
the diversity of our clients across industries, the broad range of services our
agencies provide, the diversity of our geographic locations and the flexibility
of certain elements of our cost structure mitigated much of the economic impact
on our business as a whole.
Operating Expenses: Our 2001 worldwide operating expense increased 12.2%
to $5,921.2 million from $5,276.1 million in 2000.
The most significant component of our cost structure is salary and related
costs, which increased by $316.2 million to $3,949.6 million in 2001 from
$3,633.4 the prior year. These expenses function as a semi-variable component of
our cost structure due to our ability to adjust workforce levels and incentive
compensation to mitigate fluctuations in the performance of our individual
agencies. Accordingly, to compensate for the impact of September 11th and weak
economic conditions, in 2001 we reduced these costs as a percentage of revenue
to 57.3% from 59.0% in 2000.
Our remaining operating expenses, which primarily consist of occupancy
costs, depreciation, amortization and client service costs, increased by $328.9
million to $1,971.6 million in 2001 from $1,642.7 the prior year. These costs
are generally less variable and are adjusted in response to business trends over
time. As a result, these expenses increased as a percentage of revenue to 28.6%
in 2001 from 26.7% in 2000.
In the first quarter of 2001, we recorded a $2.9 million after tax charge
($4.9 million pre-tax) for the cumulative effect of adopting, effective January
1, 2001, a new accounting principle applicable to financial instruments,
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). The charge resulted from
our accounting for a hedge of our net Yen investments. We utilized cross
currency interest rate swap contracts to hedge our net Yen investments.
Consistent with our policy with respect to derivative instruments and hedging
activities, and in accordance with SFAS No. 133, when the spot rate is declared
as the underlying hedge of a net investment, any ineffectiveness is recorded in
operating income or expense. During the first quarter of 2001, the Company
replaced the contract with a floating rate cross currency swap contract. As a
result, minimal ineffectiveness will result for the remaining term of up to five
years.
Operating Margin: Our operating margin declined for the year to 14.1% from
14.3% in 2000 (exclusive of a gain of $110.0 million pre-tax and $63.8 million
after-tax, on a portion of our investment in Razorfish, Inc.). The reduction was
primarily the result of the effects of September 11th and subsequent further
weakening of economic conditions. Including the Razorfish gain in 2000, our
operating margin was 16.1%.
Net Interest Expense: Our net interest expense for 2001 decreased to $72.8
million from $76.5 million in 2000. This decrease resulted from the conversion
of our 4 1/4% convertible subordinated debentures at the end of 2000 and the
general lowering of short-term interest rates as the year progressed. These
benefits were partially offset by increased borrowings used to fund acquisitions
and stock repurchases completed during the year. In 2002, we expect the
conversion of our 2 1/4% convertible subordinated debentures, which occurred at
the end of 2001, to further reduce reported interest expense.
Income Taxes: Our consolidated effective income tax rate was 39.3% in 2001
as compared to 40.3% in 2000 (exclusive of the tax impact of the Razorfish
gain). The decrease was primarily attributable to the implementation of various
planning and restructuring initiatives designed to reduce the tax inefficiency
of our holding company structure, as well as the lowering of statutory rates in
several international markets. Including the Razorfish gain in 2000, our
consolidated effective income tax rate was 40.5%.
Equity in Affiliates and Minority Interests: In 2001, our equity in
affiliates increased by 15.6% to $12.6 million from $10.9 million in 2000. The
increase resulted from new acquisitions of affiliated companies and increased
ownership of existing affiliated companies, partially offset by increased
ownership in certain affiliates that resulted in their consolidation during the
year and lower earnings of certain affiliates.
In 2001, minority interests decreased by 3.3% to $52.8 million from $54.6
million in 2000. The decrease was primarily due to lower earnings of certain
subsidiaries, partially offset by our taking increased ownership
6
<PAGE>
positions in certain affiliates that resulted in their subsequent consolidation
and the related recognition of their minority interests.
Earnings Per Share (EPS): Our net income for 2001 increased by 15.7% to
$503.1 million from $435.0 million in 2000 (exclusive of the Razorfish gain) and
our diluted EPS increased by 12.5% to $2.70 from $2.40. While our net income in
2001 was positively impacted by the conversion of the 4 1/4% Convertible
Subordinated Debentures at the end of 2000, the shares associated with the
conversion of these debentures were included in computing diluted EPS for both
2001 and 2000. Foreign exchange impacts had the effect of reducing diluted EPS
in 2001 versus 2000 by $0.06. Including the Razorfish gain, our net income
increased by 1.0% to $503.1 million from $498.8 million in 2000 and our diluted
EPS decreased by 1.1% to $2.70 from $2.73 in 2000.
Financial Results from Operations-- 2000 Compared with 1999
Revenue: Our consolidated worldwide revenue for 2000 increased 20.0% to
$6,154.2 million from $5,130.5 million in 1999. This was a result of growth in
domestic operations of 28.6% to $3,258.2 million from $2,532.9 million in 1999,
and growth in international operations of 11.5% to $2,896.0 million from
$2,597.6 million in 1999.
Foreign exchange impacts reduced our international revenue by $285.5
million during the year, reducing our international growth by 11.0 % and overall
growth by 5.6%. The most significant impacts came from the Euro and the British
Pound as these markets represented 72% of our international business. The effect
of acquisitions, net of divestitures, increased our worldwide revenue by 8.9%,
our domestic revenue by 10.8% and our international revenue by 7.1%. The balance
of the increase represents net new business wins and additional revenue from
expanding the scope of services to existing clients.
Revenue from our domestic operations increased in 2000 by 28.6% over 1999.
Excluding foreign exchange impacts, revenue from our international operations
increased by 22.5% over 1999, primarily the result of the strong performance by
our agencies based in the E.U. and several acquisitions in the United Kingdom
and France. Additional geographic information relating to our business is
contained in note 5 to our consolidated financial statements at page F-12 of
this report.
Traditional media advertising revenue represented 44.2%, or $2,718.9
million, of our worldwide revenue during 2000 as compared to 46.7%, or $2,396.5,
million in 1999. The remainder of our revenue, 55.8%, or $3,435.4 million, in
2000 and 53.3%, or $2,734.1 million, in 1999, was related to our other marketing
and corporate communication services. The breakdown of this revenue was 29.6%
CRM, 15.3% public relations and 10.9% specialty communications. Revenue for
these services in 2000 increased when compared to 1999 by 28.3% for CRM, 24.6%
for public relations and 20.4% specialty communications.
Operating Expenses: Our 2000 worldwide operating expenses increased 19.7%
to $5,276.1 million from $4,406.4 million in 1999. The most significant
component of our cost structure was salary and related costs, which increased by
$579.4 million to $3,633.4 million in 2000 from $3,054.0 in 1999. Salary and
related costs represented about 59.0% of our total revenue in each of 2000 and
1999. The remaining operating expenses, primarily consisting of occupancy costs,
depreciation, amortization and client service costs, increased to 26.7% of our
total revenue to $1,642.7 in 2000 from 26.4% in 1999.
Net Interest Expense: Our net interest expense for 2000 increased to $76.5
million from $50.4 million in 1999. This increase was due to an increase in
interest rates and higher average borrowings during 2000. The higher average
borrowings were the result of acquisition payments and share repurchases during
the year.
Operating Margin: Our operating margin increased to 14.3% (exclusive of a
gain of $110.0 million pre-tax and $63.8 million after-tax on a portion of our
investment in Razorfish), as compared to 14.1% in 1999. We were able to improve
our operating margin in 2000 by enhancing our operating leverage and through our
continued emphasis on cost control and corporate purchasing efficiencies.
Including the Razorfish gain in 2000, operating margins were 16.1%.
Income Taxes: Our consolidated effective income tax rate was 40.3% in 2000
(excluding the tax impact of the Razorfish gain) as compared to 40.6% in 1999.
The decrease was primarily attributable to the implementation of various
planning and restructuring initiatives designed to reduce the tax inefficiency
of our
7
<PAGE>
holding company structure, as well as the lowering of statutory rates in several
international markets. Including the tax impact of the Razorfish gain, our
consolidated effective income tax rate was 40.5%.
Equity in Affiliates and Minority Interests: In 2000, our equity in
affiliates decreased by 29.2% to $10.9 million from $15.4 million in 1999. This
decrease resulted from our taking an increased ownership position in certain
affiliates that resulted in the subsequent consolidation of their income in our
2000 financial statements and non-cash losses from restructuring actions taken
by one of our affiliated companies.
In 2000, minority interests increased by 3.1% to $54.6 million from $52.9
million in 1999. The increase was primarily due to acquisitions, including
increased ownership positions in some of our affiliates that resulted in their
subsequent consolidation and higher earnings at subsidiaries where minority
interests are held by third parties.
Earnings Per Share (EPS): Our net income for 2000 increased by 19.9% from
$362.9 million in 1999 (excluding the Razorfish gain) and diluted EPS increased
by 19.4% to $2.40 (excluding the Razorfish gain) from $2.01. Foreign exchange
impacts reduced EPS by $0.10. Including the Razorfish gain, our consolidated net
income increased by 37.5% to $498.8 million in 2000 from $362.9 million in 1999
and our diluted EPS increased to $2.73 from $2.01 in 1999.
Critical Accounting Policies and New Accounting Pronouncements
We are a holding company. Our business is conducted through more than
1,500 subsidiary agencies operating in more than 100 countries. Our agencies
provide a broad range of marketing and corporate communications services to more
than 5000 clients representing nearly every industry sector.
We have prepared the following supplemental summary of accounting policies
to assist in better understanding our financial statements and the related
management discussion and analysis. Readers are encouraged to consider this
supplement together with our consolidated financial statements and the related
notes to our consolidated financial statements for a more complete understanding
of accounting policies discussed below.
Estimates: Readers are reminded that the preparation of financial
statements in conformity with generally accepted accounting principles, or
"GAAP," requires management to make estimates and assumptions. These estimates
and assumptions affect the reported amounts of assets and liabilities and the
disclosures of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenue and expenses during a
reporting period. Actual results can differ from those estimates, and it is
possible that the differences could be material.
Revenue: A small portion of our contractual arrangements with clients
includes performance incentive provisions designed to link a portion of our
revenue to our performance relative to both quantitative and qualitative goals.
This revenue has historically been less than 2.0% of our annual consolidated
revenue. We recognize this portion of revenue when the specific quantitative
goals are achieved, or when our performance against qualitative goals is
determined by our clients. Additional information about revenue appears in note
1 to our consolidated financial statements on pages F-7 to F-10 of this report.
Acquisitions: We have historically made and expect to continue to make
acquisitions. In making these acquisitions, the price we pay is determined by
various factors, including our prior experience and judgement. The amount we
paid for acquisitions, including cash, stock and assumption of net liabilities
totaled $844.7 million in 2001 and $849.8 million in 2000. These acquisitions
were accounted for as purchases.
Most of our acquisitions have been relatively small transactions made
consistent with our strategy of building our various agency brands through the
extension of their service capabilities and geographic reach. The intangibles
that result from these acquisitions principally result from the purchased
companies know-how, reputation, experience and geographic location. These
intangibles have been amortized on a straight-line basis over a period not to
exceed 40 years and have been written down if, and to the extent, they have been
determined to be impaired.
Additional information about acquisitions appears in notes 1 and 2 to our
consolidated financial statements on pages F-7 to F-10 of this report and
information about changes in GAAP relative to accounting for acquisitions is
described in New Accounting Pronouncements on pages F-21 to F-22 of this report.
8
<PAGE>
Other Investments: Management continually monitors the value of its
investments to determine whether an other than temporary impairment has
occurred. A variety of factors are considered when making this determination
including the current market value of the investment and the financial condition
and prospects of the investee.
In May 2001, the Company received a non-voting non-participating preferred
stock interest in a newly formed company, Seneca Investments LLC, in exchange
for its contribution of Communicade, the Company's subsidiary that conducted its
e-services industry investment activities. The common shareholder of Seneca, who
owns all the common stock, is an established private equity investment firm. We
did not recognize a gain or loss on Seneca's formation, and management believes
that the carrying value of our Seneca investment approximated its fair value at
December 31, 2001. Additional information about Seneca is contained in note 6 to
our consolidated financial statements at pages F-13 to F-14 of this report.
New Accounting Pronouncements: In June 2001, the FASB issued Statement of
Financial Accounting Standards No. 141, Business Combinations (SFAS 141), and
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets (SFAS 142). The FASB also issued Statement of Financial
Accounting Standards No. 143, Accounting for Asset Retirement Obligations (SFAS
143) in June 2001, and Statement of Financial Accounting Standards No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144), in
August 2001.
SFAS 141 requires all business combinations initiated after June 30, 2001
to be accounted for under the purchase method. SFAS 141 superseded Accounting
Pronouncement Bulletin ("APB") Opinion No. 16, Business Combinations, and
Statement of Financial Accounting Standards No. 38, Accounting for
Preacquisition Contingencies of Purchased Enterprises, and is effective for all
business combinations initiated after June 30, 2001. Given that all of our
acquisitions in 2000 and 2001 were accounted for under the purchase method, the
adoption of SFAS 141 on July 1, 2001 and the cessation of goodwill amortization
on post July 1, 2001 acquisitions as required by SFAS 142, as discussed below,
was not material to our 2001 consolidated results of operations or financial
position.
SFAS 142 addresses the financial accounting and reporting for acquired
goodwill and other intangible assets. SFAS 142 supersedes APB Opinion No. 17,
Intangible Assets. Effective January 1, 2002, companies are no longer required
to amortize goodwill and other intangible assets that have indefinite lives, but
these assets will be subject to periodic testing for impairment. Additionally,
goodwill acquired in a business combination for which the acquisition date was
after June 30, 2001 is no longer required to be amortized. Had the cessation of
goodwill amortization expense been in effect on January 1, 2001, diluted EPS
would have been increased by an amount estimated at $0.42 to $0.47.
We expect to complete the required impairment testing by the end of the
second quarter of 2002 and are currently evaluating the effect that such
adoption may have on our future consolidated results of operations and financial
position. However, at this time we do not expect that the results of the
impairment testing will be material to our 2002 consolidated results of
operations or financial position.
SFAS 143 establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal obligations
associated with the retirement of tangible long-lived assets. SFAS 143 is
effective in fiscal years beginning after June 15, 2002, and we plan to adopt
SFAS 143 effective January 1, 2003. The impact of SFAS 143 on our financial
statements will depend on a variety of factors, including interpretative
guidance from the FASB. However, we do not expect that the adoption will have a
material impact on our consolidated results of operations or financial position.
SFAS 144 establishes a single accounting model for the impairment or
disposal of long-lived assets, including discontinued operations. SFAS 144
superseded Statement of Financial Accounting Standards No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
and APB Opinion No. 30, Reporting the Results of Operations-Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions. The provisions of SFAS 144 are
effective for fiscal years beginning after December 15, 2001, and we intend to
adopt SFAS 144 effective January 1, 2002. We do not expect that the adoption
will have a material impact on our consolidated results of operations or
financial position.
9
<PAGE>
Quantitative and Qualitative Disclosures Regarding Market Risk
Our results of operations are subject to the risk of currency exchange
rate fluctuations related to our international operations. Our net income is
subject to risk from the translation of the revenue and expenses of our foreign
operations, which are generally denominated in the local currency. There are
also economic risks associated with intercompany cash movements when we move
money across different currency markets. While our agencies operate in more than
100 countries and invoice clients in more than 70 different currencies, our
major international markets are the E.U., the United Kingdom, Japan, Brazil and
Canada.
We periodically purchase derivative financial instruments as part of
managing our exposure to currency exchange fluctuations. Derivative financial
instruments are also subject to counterparty risk. Counterparty risk arises from
the inability of a counterparty to meet its obligations. To mitigate
counterparty risk, we enter into derivative contracts with major well-known
banks and financial institutions that have credit ratings at least equal to our
own. Generally, we use forward exchange contracts with maturities ranging up to
90 days to hedge our foreign currency assets and liabilities. To a lesser extent
to hedge our net Yen investments we have in place several currency and interest
rate swaps with various maturity dates ranging up to five years.
Our derivative activities are limited in volume and confined to risk
management activities related to our international operations. We have
established a centralized reporting system to evaluate the effects of changes in
interest rates, currency exchange rates and other relevant market risks. We
periodically determine the potential loss from market risk by performing a
value-at-risk computation. Value-at-risk analysis is a statistical model that
utilizes historic currency exchange and interest rate data to measure the
potential impact on future earnings of our existing portfolio of derivative
financial instruments. The value-at-risk analysis we performed on our December
31, 2001 portfolio of derivative financial instruments indicated that the risk
of loss was immaterial. This overall system is designed to enable us to initiate
remedial action, if appropriate.
At December 31, 2001, we had numerous forward foreign exchange contracts
outstanding with an aggregate notional principal of $387 million, most of which
were denominated in our major international market currencies. These contracts
predominantly hedged certain intercompany cash movements which were not recorded
in the respective company's functional currency. The terms of these contracts
were generally 90 days or less. Additionally, at December 31, 2001, we had
several cross currency interest rate swaps in place with an aggregate notational
principal amount of 16,300 million Yen with maturities up to five years. See
note 12 to our consolidated financial statements at pages F-20 to F-21 of this
report for information about the fair value of each type of derivative.
Liquidity and Capital Resources
Liquidity: We had cash and cash equivalents totaling $472.2 million and
$516.8 million at December 31, 2001 and 2000, respectively. Net cash provided by
our operating activities was $775.6 million in 2001 compared to $685.9 million
in 2000. Our operating cash flows in 2001, which are impacted by our clients'
spending patterns, reflected revenue and net income growth and an increase in
the cash provided resulting from a decrease in accounts receivable, partially
offset by a decrease in cash provided resulting from decreases in accounts
payable and decreases in accrued taxes, advance billings and other liabilities
which include accruals for incentive compensation. At December 31, 2001 and
2000, our current liabilities exceeded our current assets by $1,410.0 million
and $1,258.2 million, respectively. This occurs primarily because we generally
require payment from our clients before paying vendors for media and other
pass-through expenditures.
Net cash flows used in our investing activities in 2001 were $947.9
million, including $818.8 million used for acquisitions, net of cash acquired,
and $149.4 million used for capital expenditures. Of the $818.8 million used for
acquisitions and investments, $156.8 million related to acquisitions completed
in prior years.
Net cash flows from our financing activities in 2001 were $170.8 million,
including net borrowings of $354.7 million and proceeds from option exercise
payments and employee stock purchase plan contributions of $65.4 million, offset
by dividends paid to shareholders of $135.7 million, repayments of deposits
received from affiliates of $53.5 million and payments to repurchase stock of
$60.1 million.
10
<PAGE>
Capital Resources: We maintain two revolving credit facilities with two
consortia of banks. In the second quarter 2001, we extended our 364-day, $1.0
billion revolving credit facility. This facility, which primarily supports our
issuance of commercial paper, was renewed under substantially the same terms as
had previously been in effect, including a provision which allows us to convert
all amounts outstanding at its expiration on April 25, 2002 into a one-year term
loan. During 2001, we issued $45.3 billion of commercial paper and we redeemed
$45.9 billion. The average term of the commercial paper issued was eight days.
At December 31, 2001, $269.6 million of our commercial paper was outstanding at
interest rates ranging from 2.2% to 2.7% under the $1 billion credit facility.
We also have a $500 million five-year revolving credit facility which expires on
June 30, 2003. No borrowings were outstanding under this revolving credit
facility at December 31, 2001.
We had short-term bank loans of $169.1 million at December 31, 2001,
primarily comprised of bank overdrafts by our international subsidiaries which
are treated as unsecured loans pursuant to the subsidiaries' bank agreements.
In February 2001, we issued $850.0 million aggregate principal amount of
zero-coupon notes due 2031. These notes are senior, unsecured zero-coupon
securities that are convertible into 7.7 million common shares, implying a
conversion price of $110.01 per common share, subject to normal anti-dilution
adjustments. These notes are convertible at the specified ratio only upon the
occurrence of certain events, including if our common shares trade above certain
levels, if we effect extraordinary transactions or if our long-term debt ratings
are downgraded by least three notches from their current level to Baa3 or lower
by Moody's Investors Services, Inc. or BBB or lower by Standard & Poor's Ratings
Services. These events would not, however, result in an adjustment of the number
of shares issuable upon conversion. Holders of the notes due 2031 have the right
to put the notes back to us for, at our election, cash, stock or a combination
of both, in February of each year and we have the right to redeem the notes for
cash beginning in 2006. There are no events that accelerate the noteholders' put
rights. Beginning in February 2006, if the market price of our common shares
exceeds certain thresholds, we may be required to pay contingent cash interest
on the notes equal to the amount of dividends that would be paid on the common
shares into which the notes are contingently convertible.
In March 2002, we issued $900.0 million aggregate principal amount of
zero-coupon notes due 2032. The notes are senior, unsecured zero-coupon
securities that are convertible into 8.2 million common shares, implying a
conversion price of $110.01 per common share, subject to normal anti-dilution
adjustments. These notes are convertible at the specified ratio only upon the
occurrence of certain events including if our common shares trade above certain
levels, if we effect extraordinary transactions or if our long-term debt ratings
are downgraded at least three notches from their current level to Baa3 or lower
by Moody's Investors Services, Inc. or BBB or lower by Standard & Poor's Ratings
Services. These events would not, however, result in an adjustment of the number
of shares issuable upon conversion. Holders of the notes due 2032 have the right
to put the notes back to us for, at our election, cash, stock or a combination
of both, in July of each year beginning in July 2003 and we have the right to
redeem the notes for cash beginning in 2007. There are no events that accelerate
the noteholders' put rights. Beginning in August 2007, if the market price of
our common shares exceeds certain thresholds, we may be required to pay
contingent cash interest on the notes equal to the amount of dividends that
would be paid on the common shares into which the notes are contingently
convertible.
On December 31, 2001, we redeemed our 2 1/4% Convertibled Subordinate
Debentures, which had a scheduled maturity in 2013. The debentures were
convertible into 4.6 million common shares. Prior to redemption, substantially
all of the bondholders exercised their conversion rights. These debentures were
issued in 1998.
We believe that our operating cash flow combined with our available lines
of credit and our access to the capital markets are sufficient to support our
foreseeable cash requirements, including working capital, capital expenditures,
acquisitions and dividends.
Additional information about our indebtedness is included in notes 3 and 4
of our consolidated financial statements at pages F-10 to F-12 of this report.
11
<PAGE>
Contractual and Commercial Obligations: We enter into numerous contractual
and commercial undertakings in the normal course of our business. The following
table summarizes information about certain of our obligations as of December 31,
2001. The table should be read together with note 3 (bank loans and lines of
credit), note 4 (long-term debt and convertible debentures), note 10
(commitments and contingent liabilities), note 11(fair value of financial
instruments) and note 12 (financial instruments and market risk) to our
consolidated financial statements at pages F-10 to F-20 of this report.
<TABLE>
<CAPTION>
Due in Due in Due
less than 1 1 to 5 after 5 Total
Year Years Years Due
----------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Contractual Obligations at
December 31, 2001
Long-term debt ..................................... $ 40,444 $ 486,448 $ 3,657 $ 530,549
Senior convertible notes ........................... -- -- 850,000 850,000
Lease obligations .................................. 343,446 958,505 988,226 2,290,177
-------- ---------- ---------- ----------
Total contractual cash obligations ................. $383,890 $1,444,953 $1,841,883 $3,670,726
======== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Due in Due in Due
less than 1 1 to 5 after 5 Total
Year Years Years Due
----------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Other Commercial Commitments at
December 31, 2001
Lines of credit ......................................... $169,056 $ -- $ -- $169,056
Guarantees and letters of credit ........................ -- 27,515 -- 27,515
-------- ------- ------- --------
Total commercial commitments ............................ $169,056 $27,515 $ -- $196,571
======== ======= ======= ========
</TABLE>
In the normal course of business, our agencies enter into various media
commitments on behalf of our clients. These commitments are included in our
accounts payable balance when the media services are delivered by the providers.
Historically, we have not experienced significant losses for media commitments
entered into on behalf of our clients and we believe that we do not have any
substantial exposure to potential losses of this nature in the future.
In addition, we have various commitments related to acquisitions completed
in the current and prior years that may require additional future purchase price
payments that would result in additional intangible assets on our balance sheet.
These payments are contingent upon the businesses achieving minimum
predetermined performance goals. Formulas for these contingent future payments
vary from acquisition to acquisition. These commitments are not reflected on the
balance sheet because they are highly contingent upon future events. The
payments made in 2001, 2000 and 1999 for acquisitions completed in prior years
were $156.8 million, $183.9 million and $137.0 million, respectively.
8. Financial Statements and Supplementary Data
Our financial statements and supplementary data are included at the end of
this report beginning on page F-1 of this report. See the index appearing on
page 14 of this report.
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
None.
12
<PAGE>
PART III
Executive Officers
The executive officers of Omnicom Group Inc. are:
<TABLE>
<CAPTION>
Name Position Age
---- -------- -----
<S> <C> <C>
Bruce Crawford............. Chairman 73
John D. Wren............... President and Chief Executive Officer 49
Philip J. Angelastro....... Senior Vice President and Controller 37
James A. Cannon............ Vice Chairman and Chief Financial Officer of BBDO Worldwide 63
Jean-Marie Dru............. President and Chief Executive Officer of TBWA Worldwide 55
Thomas L. Harrison......... Chairman and Chief Executive Officer of Diversified Agency Services 54
Peter Mead................. Vice Chairman 62
Robert Profusek............ Executive Vice President 51
Keith L. Reinhard.......... Chairman and Chief Executive Officer of DDB Worldwide 67
Allen Rosenshine........... Chairman and Chief Executive Officer of BBDO Worldwide 63
Barry J. Wagner............ Secretary and General Counsel 61
Randall J. Weisenburger.... Executive Vice President and Chief Financial Officer 43
</TABLE>
All of the executive officers have held their present positions at Omnicom
for at least five years except as specified below.
Philip Angelastro was promoted to Senior Vice President in January 2002
and was made Controller on February 1, 1999. Mr. Angelastro joined the Company
in June 1997 as Vice President of Finance of Diversified Agency Services after
being a Partner at Coopers & Lybrand LLP.
Jean-Marie Dru was appointed President and Chief Executive Officer of TBWA
Worldwide in March 2001. He had previously been President International of TBWA
Worldwide. Mr. Dru was co-founder and Chairman of BDDP Group, which merged with
TBWA in 1998. Prior to BDDP, he was CEO of Young & Rubicam Paris.
Thomas Harrison has served as Chairman and Chief Executive Officer of the
Diversified Agency Services since May 1998, having previously served as its
President since February 1997. He also has served as Chairman of the Diversified
Healthcare Communications Group since its formation in 1994.
Peter Mead was appointed Vice Chairman on May 16, 2000. He had previously
been Group Chief Executive of Abbot Mead Vickers plc and Joint Chairman of AMV
BBDO.
Robert Profusek joined the Company on May 15, 2000 as Executive Vice
President. He previously headed the transactional practice group of Jones, Day,
Reavis & Pogue, a global law firm.
Randall Weisenburger joined the Company in September 1998 and became
Executive Vice President and Chief Financial Officer on January 1, 1999. Mr.
Weisenburger was previously President and Chief Executive Officer of Wasserstein
Perella Management Partners.
Additional information about our directors and executive officers appears
under the captions "Election of Directors," "Management's Stock Ownership,"
"Director Compensation" and "Executive Compensation" in our 2002 proxy
statement.
13
<PAGE>
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements: Page
----
Management Report ................................................ F-1
Report of Independent Public Accountants ......................... F-2
Consolidated Statements of Income for the Three
Years Ended December 31, 2001 .................................. F-3
Consolidated Balance Sheets at December 31, 2001 and 2000 ........ F-4
Consolidated Statements of Shareholders' Equity for
the Three Years Ended December 31, 2001 ........................ F-5
Consolidated Statements of Cash Flows for the Three
Years Ended December 31, 2001 .................................. F-6
Notes to Consolidated Financial Statements ....................... F-7
Quarterly Results of Operations (Unaudited) ...................... F-23
(a)(2) Financial Statement Schedules:
Schedule II -- Valuation and Qualifying Accounts (for
the three years ended December 31, 2001) ....................... S-1
All other schedules are omitted because they are not applicable.
(a)(3) Exhibits:
Exhibit
Numbers Description
------ --------
(3)(i) Certificate of Incorporation (Exhibit 4.1 to our
Registration Statement No. 333-46303 and incorporated herein
by reference).
(ii) Amendment to Certificate of Incorporation (Exhibit A to our
2000 Proxy Statement filed on April 11, 2000 and
incorporated herein by reference).
(iii) By-laws (incorporated by reference to our Annual Report on
Form 10-K for the year ended December 31, 1987).
4.1 Fiscal Agency Agreement, dated June 24, 1998, in connection
with our issuance of 1,000,000,000 5.20% Notes due 2005 (the
"5.20% Notes") (Exhibit 4.1 to our Quarterly Report on Form
10-Q for the quarter ended June 30, 1998 ("the 6-30-98 10Q")
and incorporated herein by reference).
4.2 Subscription Agreement, dated June 22, 1998, in connection
with our issuance of the 5.20% Notes (Exhibit 4.2 to our
6-30-98 10-Q and incorporated herein by reference).
4.3 Deed of Covenant, dated June 24, 1998, in connection with
our issuance of the 5.20% Notes (Exhibit 4.3 to the 6-30-98
10-Q and incorporated herein by reference).
4.4 Indenture, dated February 7, 2001, between Chase Manhattan
Bank, as trustee, and us in connection with our issuance of
$850,000,000 Liquid Yield Option Notes due 2031 (Exhibit 4.1
to our Registration Statement on Form S-3 (Reg. No.
333-55386) and incorporated herein by reference).
4.5 Form of Liquid Yield Option Notes due 2031 (included in
Exhibit 4.4 above)
4.6 Indenture between Omnicom Group Inc. and JP Morgan Chase
Bank, dated as of March 6, 2002 in connection with our
issuance of $900,000,000 zero coupon zero yield convertible
notes due 2032.
4.7 Form of Zero Coupon Zero Yield Convertible Notes due 2032
(included in Exhibit 4.6)
4.8 Registration Rights Agreement, dated March 1, 2002, by and
between Omnicom Group Inc. and J.P. Morgan Securities Inc.,
Goldman Sachs & Co. and Salomon Smith Barney Inc.
10.1 Amendment No. 1, dated July 7, 2000, to $500,000,000 Amended
and Restated Credit Agreement, dated as of February 20,
1998, among Omnicom Finance Inc., Omnicom Finance PLC,
Omnicom Capital Inc., Omnicom Group Inc., ABN AMRO Bank
N.V., New
14
<PAGE>
York Branch, and the financial institutions party thereto
(Exhibit 10.2 to our quarterly report on Form 10-Q for the
quarter ended June 30, 2000 (the "6-30-00 10-Q") and
incorporated herein by reference).
10.2 364-Credit Agreement, dated as of April 30, 1999 (Exhibit
10.2 to our quarterly report in Form 10-Q for the quarter
ended March 31, 1999 (the "3-31-99 10-Q")) amended and
restated April 26, 2001, among Omnicom Finance Inc., Omnicom
Finance PLC, Omnicom Capital Inc., the financial
institutions party thereto, Citibank, N.A., as
Administrative Agent, The Bank of Nova Scotia, as
Documentation Agent. The Chase Manhattan Bank, Fleet
National Bank and San Paolo IMI SPA as Syndication Agents.
10.3 List of Contents of Exhibits to the 364-Day Credit
Agreement, dated as of April 30, 1999 (Exhibit 10.2 to our
"3-31-99 10-Q" and incorporated herein by reference).
10.4 Guaranty, dated as of April 30, 1999, made by Omnicom Group
Inc. (Exhibit 10.3 to our 3-31-99 10-Q and incorporated
herein by reference).
10.5 Amended and Restated 1998 Incentive Compensation Plan,
(Exhibit B to our Proxy Statement, dated April 11, 2000, and
incorporated herein by reference).
10.6 Restricted Stock Plan for Non-employee Directors (Exhibit
10.10 to our Annual Report on Form 10-K for the year ended
December 31, 1999 and incorporated herein by reference).
10.7 Standard form of our Executive Salary Continuation Plan
Agreement (Exhibit 10.24 to our Annual Report on Form 10-K
for the year ended December 31, 1998 and incorporated herein
by reference).
10.8 Standard form of the Director Indemnification Agreement
(Exhibit 10.25 to our Annual Report on Form 10-K for the
year ended December 31, 1989 and incorporated herein by
reference).
10.9 Severance Agreement, dated July 6, 1993, between Keith
Reinhard and DDB Worldwide Communications Group, Inc.
(Exhibit 10.11 to our Annual Report on Form 10-K for the
year ended December 31, 1993 and incorporated herein by
reference).
10.10 Long-Term Shareholder Value Plan, dated March 19, 2002,
(Exhibit Ref 4.4 to our Registration Statement on Form S-8
No. 333-84498 and incorporated herein by reference).
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney from Bernard Brochand, Robert J.
Callander, James A. Cannon, Leonard S. Coleman, Jr., Bruce
Crawford, Susan S. Denison, Jean-Marie Dru, Peter Foy,
Michael Greenlees, Thomas L. Harrison, John R. Murphy, John
R. Purcell, Keith L. Reinhard, Linda Johnson Rice, Allen
Rosenshine and Gary L. Roubos.
99.1 Letter to SEC pursuant to Temporary Note 3T to Article 3 of
Regulation S-X.
(b) Reports on Form 8-K:
We did not file any reports on Form 8-K during the fourth quarter of 2001.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
OMNICOM GROUP INC.
March 26, 2002 By: /s/ RANDALL J. WEISENBURGER
----------------------------------
Randall J. Weisenburger
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
----------------- -------- ---------
<S> <C> <C>
/s/ BRUCE CRAWFORD Chairman and Director March 26, 2002
- ------------------------------------------
(Bruce Crawford)
/s/ JOHN D. WREN Chief Executive Officer March 26, 2002
- ------------------------------------------ and President and Director
(John D. Wren)
/s/ RANDALL J. WEISENBURGER Executive Vice President and March 26, 2002
- ------------------------------------------ Chief Financial Officer
(Randall J. Weisenburger)
/s/ PHILIP J. ANGELASTRO Senior Vice President and Controller March 26, 2002
- ------------------------------------------ (Principal Accounting Officer)
(Philip J. Angelastro)
- ------------------------------------------ Director
(Bernard Brochand)
/s/ ROBERT J. CALLANDER* Director March 26, 2002
- ------------------------------------------
(Robert J. Callander)
/s/ JAMES A. CANNON* Director March 26, 2002
- ------------------------------------------
(James A. Cannon)
/s/ LEONARD S. COLEMAN, JR.* Director March 26, 2002
- ------------------------------------------
(Leonard S. Coleman, Jr.)
/s/ SUSAN S. DENISON* Director March 26, 2002
- ------------------------------------------
(Susan S. Denison)
/s/ JEAN-MARIE DRU* Director March 26, 2002
- ------------------------------------------
(Jean-Marie Dru)
/s/ PETER FOY* Director March 26, 2002
- ------------------------------------------
(Peter Foy)
- ------------------------------------------ Director
(Michael Greenlees)
/s/ THOMAS L. HARRISON* Director March 26, 2002
- ------------------------------------------
(Thomas L. Harrison)
/s/ JOHN R. MURPHY* Director March 26, 2002
- ------------------------------------------
(John R. Murphy)
/s/ JOHN R. PURCELL* Director March 26, 2002
- ------------------------------------------
(John R. Purcell)
/s/ KEITH L. REINHARD* Director March 26, 2002
- ------------------------------------------
(Keith L. Reinhard)
- ------------------------------------------ Director
(Linda Johnson Rice)
/s/ ALLEN ROSENSHINE* Director March 26, 2002
- ------------------------------------------
(Allen Rosenshine)
/s/ GARY L. ROUBOS* Director March 26, 2002
- ------------------------------------------
(Gary L. Roubos)
*By /s/ BARRY J. WAGNER Attorney-in-fact March 26, 2002
--------------------------------------
Barry J. Wagner
</TABLE>
16
<PAGE>
MANAGEMENT REPORT
Omnicom Group Inc. management is responsible for the integrity of the
financial data reported by Omnicom. Management uses its best judgement to ensure
that the financial statements present fairly, in all material respects,
Omnicom's consolidated financial position and results of operations. These
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States.
Omnicom's system of internal controls, augmented by a program of internal
audits, is designed to provide reasonable assurance that assets are safeguarded
and records are maintained to substantiate the preparation of financial
information in accordance with accounting principles generally accepted in the
United States. Underlying this concept of reasonable assurance is the premise
that the cost of controls should not exceed the benefits derived therefrom.
The financial statements have been audited by independent public
accountants. Their report expresses the independent accountant's judgement as to
the fairness of management's reported operating results, cash flows and
financial position. This judgement is based on the procedures described in the
second paragraph of their report.
Omnicom's Audit Committee meets periodically with representatives of
financial management, internal audit and the independent public accountants to
assure that each group believes they are properly discharging their
responsibilities. To aid in ensuring independence, the Audit Committee
communicates directly and separately with the independent public accountants,
internal audit and financial management to discuss the results of their audits,
the adequacy of internal accounting controls and the quality of financial
reporting.
/s/ JOHN D. WREN /s/ RANDALL J. WEISENBURGER
- ------------------------------------- ----------------------------------
John D. Wren Randall J. Weisenburger
Chief Executive Officer and President Executive Vice President and Chief
Financial Officer
February 18, 2002
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Shareholders of Omnicom Group Inc.:
We have audited the accompanying consolidated balance sheets of Omnicom
Group Inc. (a New York corporation) and subsidiaries as of December 31, 2001 and
2000, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
2001. These financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Omnicom Group Inc. and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule on page S-1 is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic financial statements
and, in our opinion, fairly states, in all material respects, the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
Arthur Andersen LLP
New York, New York
February 18, 2002 (except with respect to the matter discussed in Note 14, as to
which the date is March 20, 2002)
F-2
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
(Dollars in Thousands
Except Per Share Data)
-----------------------------------------
2001 2000 1999
----------- ----------- -----------
REVENUE ........................... $ 6,889,406 $ 6,154,230 $ 5,130,545
OPERATING EXPENSES:
Salaries and related costs ...... 3,949,644 3,633,357 3,054,018
Office and general expenses ..... 1,971,578 1,642,783 1,352,397
----------- ----------- -----------
5,921,222 5,276,140 4,406,415
----------- ----------- -----------
OPERATING PROFIT .................. 968,184 878,090 724,130
REALIZED GAIN ON SALE OF
RAZORFISH SHARES ................ -- 110,044 --
NET INTEREST EXPENSE .............. 72,799 76,517 50,422
----------- ----------- -----------
INCOME BEFORE INCOME TAXES ........ 895,385 911,617 673,708
INCOME TAXES ...................... 352,128 369,140 273,247
----------- ----------- -----------
INCOME AFTER INCOME TAXES ......... 543,257 542,477 400,461
EQUITY IN AFFILIATES .............. 12,667 10,914 15,368
MINORITY INTERESTS ................ (52,782) (54,596) (52,947)
----------- ----------- -----------
NET INCOME ........................ $ 503,142 $ 498,795 $ 362,882
=========== =========== ===========
NET INCOME PER COMMON SHARE:
Basic ........................... $ 2.75 $ 2.85 $ 2.07
Diluted ......................... $ 2.70 $ 2.73 $ 2.01
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-3
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
December 31,
(Dollars in Thousands)
----------------------------
2001 2000
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents .................... $ 472,151 $ 516,817
Short-term investments at market,
which approximates cost .................... 44,848 59,722
Accounts receivable, less allowance
for doubtful accounts of $79,183
and $72,745 (Schedule II) .................. 3,720,790 3,857,182
Billable production orders in
process, at cost ........................... 382,750 403,565
Prepaid expenses and other current assets .... 613,285 529,597
------------ ------------
Total Current Assets ......................... 5,233,824 5,366,883
FURNITURE, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, at cost, less accumulated
depreciation and amortization of
$618,661 and $557,210 ........................ 547,801 483,105
INVESTMENTS IN AFFILIATES ...................... 186,156 432,664
GOODWILL AND OTHER INTANGIBLES, less
accumulated amortization of $497,500
and $410,396 ................................. 3,934,512 2,988,809
DEFERRED TAX BENEFITS .......................... 100,418 98,404
OTHER ASSETS ................................... 614,703 483,842
------------ ------------
$ 10,617,414 $ 9,853,707
============ ============
L I A B I L I T I E S A N D S H A R E H O L D E R S' E Q U I T Y
CURRENT LIABILITIES:
Accounts payable ............................ $ 4,303,152 $ 4,351,039
Advance billings ............................ 640,750 630,502
Current portion of long-term debt ........... 40,444 29,307
Bank loans .................................. 169,056 72,813
Accrued taxes ............................... 366,820 327,136
Other accrued liabilities ................... 1,123,565 1,214,255
------------ ------------
Total Current Liabilities ................... 6,643,787 6,625,052
------------ ------------
LONG-TERM DEBT ................................. 490,105 1,015,419
CONVERTIBLE DEBENTURES ......................... 850,000 229,968
DEFERRED COMPENSATION AND OTHER LIABILITIES .... 296,980 296,921
MINORITY INTERESTS ............................. 158,123 137,870
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 10)
SHAREHOLDERS' EQUITY:
Preferred stock, $1.00 par value, 7,500,000
shares authorized, none issued ............. -- --
Common stock, $0.15 par value, 1,000,000,000
shares authorized, 198,669,254 and
194,102,812 shares issued in 2001 and
2000, respectively ......................... 29,800 29,115
Additional paid-in capital ................... 1,400,138 1,166,076
Retained earnings ............................ 1,619,874 1,258,568
Unamortized restricted stock ................. (125,745) (119,796)
Accumulated other comprehensive (loss) income (295,358) (232,063)
Treasury stock, at cost, 8,040,688 and
10,023,674 shares in 2001 and
2000, respectively ........................... (450,290) (553,423)
------------ ------------
Total Shareholders' Equity ............... 2,178,419 1,548,477
------------ ------------
$ 10,617,414 $ 9,853,707
============ ============
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-4
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Three Years Ended December 31, 2001
(Dollars in Thousands)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Unamortized Other
Comprehensive ------------------------ Paid-in Retained Restricted Comprehensive
Income Shares Par Value Capital Earnings Stock (Loss) Income
------------- ----------- --------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1998 ...... 186,654,985 $ 93,328 $ 720,343 $ 628,742 $ (58,060) $ (94,781)
Comprehensive income:
Net income ..................... $362,882 362,882
Unrealized gain on
investments, net of income
taxes of $290,233 ............ 417,653 417,653
Translation adjustments,
net of taxes of $25,726 ...... (37,638) (37,638)
-------
Comprehensive income ........... 742,897
=======
Dividends declared ............. (109,573)
Amortization of restricted
shares ....................... 27,812
Shares transactions under
employee stock plans ......... 306,381 152 58,197 (55,671)
Shares issued for acquisitions.. 127,069 64 7,136
Conversion of 4.25%
debentures ................... (5)
Purchase of treasury shares ....
Cancellation of shares ......... (2,274) (1) (177)
Gain on initial public
offering of common
stock of affiliates .......... 22,660
------- ----------- -------- ---------- ---------- --------- ---------
Balance December 31, 1999 ...... 187,086,161 93,543 808,154 882,051 (85,919) 285,234
Comprehensive Income:
Net Income ................... 498,795 498,795
Unrealized loss on
investments net of taxes
of $251,589 ................ (372,764) (372,764)
Translation adjustments,
net of taxes of $54,912 .... (80,707) (80,707)
Reclassification adjustment
for gain on sale of securities
net of taxes of $46,218 ...... (63,826) (63,826)
-------
Comprehensive (loss) ........... (18,502)
=======
Dividends Declared ............. (122,278)
Amortization of restricted
shares ....................... 39,098
Shares transactions under
employee stock plans ......... 65,521 (72,975)
Shares issued for acquisitions . 81,508 12 10,080
Conversion of 4.25%
debentures ................... 6,935,143 1,040 216,841
Purchase of treasury shares ....
Adjustment for change in
par value .................... (65,480) 65,480
----------- -------- ---------- ---------- --------- ---------
Balance December 31, 2000 ...... 194,102,812 29,115 1,166,076 1,258,568 (119,796) (232,063)
Comprehensive Income:
Net Income ................... 503,142 503,142
Unrealized gain on
investments net of taxes
of $11,518 ................. 18,976 18,976
Translation adjustments,
net of taxes of $49,939 ...... (82,271) (82,271)
--------
Comprehensive income ........... $439,847
========
Dividends Declared ............. (141,836)
Amortization of restricted
shares ....................... 47,078
Shares transactions under
employee stock plans ......... 28,477 (53,027)
Shares issued for acquisitions . 25,538 4 3,891
Conversion of 2.25%
debentures ................... 4,614,443 692 254,995
Purchase of treasury shares .... (49,200)
Cancellation of shares ......... (73,539) (11) (4,101)
----------- -------- ---------- ---------- --------- ---------
Balance December 31, 2001 ...... 198,669,254 $ 29,800 $1,400,138 $1,619,874 $(125,745) $(295,358)
=========== ======== ========== ========== ========= =========
<CAPTION>
Total
Treasury Shareholders'
Stock Equity
---------- -------------
<S> <C> <C>
Balance December 31, 1998 ...... $(244,062) $1,045,510
Comprehensive income:
Net income ..................... 362,882
Unrealized gain on
investments, net of income
taxes of $290,233 ............ 417,653
Translation adjustments,
net of taxes of $25,726 ...... (37,638)
Comprehensive income ...........
Dividends declared ............. (109,573)
Amortization of restricted
shares ....................... 27,812
Shares transactions under
employee stock plans ......... 100,037 102,715
Shares issued for acquisitions.. 7,200
Conversion of 4.25%
debentures ................... 19 14
Purchase of treasury shares .... (286,159) (286,159)
Cancellation of shares ......... (178)
Gain on initial public
offering of common
stock of affiliates .......... 22,660
--------- ----------
Balance December 31, 1999 ...... (430,165) 1,552,898
Comprehensive Income:
Net Income ................... 498,795
Unrealized loss on
investments net of taxes
of $251,589 ................ (372,764)
Translation adjustments,
net of taxes of $54,912 .... (80,707)
Reclassification adjustment
for gain on sale of securities
net of taxes of $46,218 ...... (63,826)
Comprehensive (loss) ...........
Dividends Declared ............. (122,278)
Amortization of restricted
shares ....................... 39,098
Shares transactions under
employee stock plans ......... 107,291 99,837
Shares issued for acquisitions . 5,939 16,031
Conversion of 4.25%
debentures ................... 594 218,475
Purchase of treasury shares .... (237,082) (237,082)
Adjustment for change in
par value ....................
--------- ----------
Balance December 31, 2000 ...... (553,423) 1,548,477
Comprehensive Income:
Net Income ................... 503,142
Unrealized gain on
investments net of taxes
of $11,518 ................. 18,976
Translation adjustments,
net of taxes of $49,939 ...... (82,271)
Comprehensive income ...........
Dividends Declared ............. (141,836)
Amortization of restricted
shares ....................... 47,078
Shares transactions under
employee stock plans ......... 106,583 82,033
Shares issued for acquisitions . 3,441 7,336
Conversion of 2.25%
debentures ................... (54) 255,633
Purchase of treasury shares .... (10,949) (60,149)
Cancellation of shares ......... 4,112
--------- ----------
Balance December 31, 2001 ...... $(450,290) $2,178,419
========= ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-5
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
(Dollars in Thousands)
-----------------------------------------
2001 2000 1999
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income ................................................................... $ 503,142 $ 498,795 $ 362,882
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of tangible assets ......................... 114,661 103,903 97,080
Amortization of goodwill and other intangible assets ..................... 96,305 82,669 70,823
Minority interests ....................................................... 52,782 54,596 52,947
Earnings of affiliates less than (in excess of) dividends received ....... 15,711 33,430 (8,333)
Tax benefit on employee stock plans ...................................... 16,640 49,837 68,260
Provisions for losses on accounts receivable ............................. 30,739 25,989 14,399
Amortization of restricted shares ........................................ 47,078 39,098 27,812
Gain on sale of Razorfish shares ......................................... -- (110,044) --
Decrease (increase) in accounts receivable ............................... 200,836 (513,646) (648,009)
Decrease (increase) in billable production orders in process ............. 23,117 (97,736) (13,246)
(Increase) decrease in prepaid expenses and other current assets ......... (33,021) (124,854) 9,886
Increase in other assets, net ............................................ (55,282) (29,649) (26,772)
(Decrease) increase in accounts payable .................................. (88,866) 277,295 786,608
(Decrease) increase in accrued taxes, advance billings
and other liabilities ................................................. (148,282) 396,196 178,217
----------- ----------- -----------
Net Cash Provided by Operating Activities .................................... 775,560 685,879 972,554
----------- ----------- -----------
Cash Flows From Investing Activities:
Capital expenditures ..................................................... (149,423) (150,289) (130,349)
Payment for purchases of equity interests in
subsidiaries and affiliates, net of cash acquired ..................... (818,819) (795,686) (694,184)
Purchases of long-term and short-term investments ........................ (105,916) (292,939) (59,213)
Proceeds from sales of investments ....................................... 126,306 204,340 111,271
----------- ----------- -----------
Net Cash Used in Investing Activities ........................................ (947,852) (1,034,574) (772,475)
----------- ----------- -----------
Cash Flows From Financing Activities:
Net increase (decrease) in short-term borrowings ......................... 76,789 24,543 (15,748)
Net proceeds from issuances of convertible debentures
and long-term debt obligations ........................................ 1,144,369 792,995 92,578
Repayments of principal of long-term debt obligations .................... (866,445) (85,988) (85,713)
Share transactions under employee stock plans ............................ 65,392 50,001 34,456
(Repayments to) deposits from affiliates ................................. (53,479) (140,056) 93,105
Dividends paid ........................................................... (135,676) (122,278) (103,882)
Purchase of treasury shares .............................................. (60,149) (237,082) (286,159)
----------- ----------- -----------
Net Cash Provided by (Used In) Financing Activities .......................... 170,801 282,135 (271,363)
----------- ----------- -----------
Effect of exchange rate changes on cash and cash equivalents ............. (43,175) 6,950 (1,070)
----------- ----------- -----------
Net Decrease in Cash and Cash Equivalents .................................... (44,666) (59,610) (72,354)
Cash and Cash Equivalents at Beginning of Period ............................. 516,817 576,427 648,781
----------- ----------- -----------
Cash and Cash Equivalents at End of Period ................................... $ 472,151 $ 516,817 $ 576,427
=========== =========== ===========
Supplemental Disclosures:
Income taxes paid ........................................................ $ 233,827 $ 227,492 $ 235,256
----------- ----------- -----------
Interest paid ............................................................ $ 84,693 $ 118,077 $ 78,835
=========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-6
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Principles of Consolidation. The accompanying consolidated financial
statements include the accounts of Omnicom Group Inc. and its domestic and
international subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Revenue Recognition. Substantially all revenue is derived from fees for
services. Additionally, we earn commissions from the placement of advertisements
in various media. Revenue is realized when the service is performed, in
accordance with the terms of the contractual arrangement, and upon completion of
the earnings process, including when services are rendered, upon presentation
date for media, when costs are incurred for radio and television production and
when print production is completed and collection is reasonably assured.
A small portion of our contractual arrangements with clients includes
performance incentive provisions which allow us to earn additional revenues as a
result of our performance relative to both quantitative and qualitative goals.
The Company recognizes the incentive portion of revenue under these arrangements
when specific quantitative goals are achieved, or when performance against
qualitative goals is determined by the Company's clients.
The Securities and Exchange Commission (SEC) issued Staff Accounting
Bulletin (SAB) 101, Revenue Recognition in Financial Statements, in December
1999. The SAB summarizes certain of the SEC staff's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
The Company's revenue recognition policies are in compliance with SAB 101.
Billable Production. Billable production orders in process consist
principally of costs incurred on behalf of clients when providing corporate
communications services to clients. Such amounts are generally invoiced to
clients at various times over the course of the production process.
Investments Available for Sale. Investments available for sale are
comprised of the following two categories of investments.
Short-term investments and time deposits with financial institutions, which
consist principally of investments with original maturity dates between three
months and one year and are therefore classified as current assets.
Long-term investments are included in other assets in the Company's balance
sheet and are comprised of minority ownership interests in certain publicly
traded marketing and corporate communications services companies where the
Company does not exercise significant influence over the operating and financial
policies of the investee. The Company accounts for these investments under the
cost method. The book value of these investments is adjusted to market value
with any unrealized gains or losses recorded to comprehensive income. The
Company periodically evaluates these investments to determine if there have been
any non-temporary declines in value. A variety of factors are considered when
determining if a decline in market value below book value is non-temporary,
including, among others, the financial condition and prospects of the investee,
as well as the Company's investment intent.
Cost-Based Investments. Cost-based long-term investments are primarily
comprised of preferred equity interests in non-public marketing and corporate
communications services companies where the Company does not exercise
significant influence over the operating and financial policies of the investee.
These minority interests are accounted for under the cost method and are
included in the Company's other assets account. These investments are
periodically evaluated to determine if there have been any non-temporary
declines below book value. A variety of factors are considered when determining
if a decline in fair value below book value is non-temporary, including, among
others, the financial condition and prospects of the investee, as well as the
Company's investment intent.
Common Stock. During 2000, the par value of common stock was decreased from
$.50 to $.15 per share and the number of authorized common shares was increased
from 300 million shares to 1 billion shares.
F-7
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Treasury Stock. The Company accounts for treasury share purchases at cost.
The reissuance of treasury shares is accounted for at the average cost. Gains or
losses on the reissuance of treasury shares are accounted for as additional
paid-in capital and do not affect reported results of operations.
Foreign Currency Translation. The Company's financial statements were
prepared in accordance with the requirements of Statement of Financial
Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation."
Substantially all of the Company's foreign subsidiaries use their local currency
as their functional currency in accordance with SFAS 52. Accordingly, the
currency impacts of the translation of the balance sheets of the Company's
foreign subsidiaries to U.S. dollar statements are included as translation
adjustments in other accumulated comprehensive income. The income statements of
foreign subsidiaries are translated at average exchange rates for the year. Net
foreign currency transaction gains included in net income were $1.1 million in
2001, $1.7 million in 2000 and $9.9 million in 1999.
Earnings Per Common Share. Basic earnings per share is based upon the
weighted average number of common shares outstanding during each year. Diluted
earnings per share is based on the above, plus, if dilutive, common share
equivalents which include outstanding options and restricted shares and
adjustments for the assumed conversion of the Company's 2 1/4% and 4 1/4%
Convertible Subordinated Debentures. For purposes of computing diluted earnings
per share for the years ended December 31, 2001, 2000 and 1999, respectively,
2,821,850, 2,688,589 and 3,046,904 shares were assumed to have been outstanding
related to common share equivalents and 4,599,909, 11,468,018 and 11,551,936
shares in 2001, 2000 and 1999, respectively were assumed to have been converted
related to the Company's convertible subordinated debentures. Additionally, the
assumed increase in net income related to the after tax interest cost of
convertible debentures and the after tax compensation expense related to
dividends on restricted shares used in the computations was $9,728,117,
$17,939,255 and $17,968,000 for the years ended December 31, 2001, 2000 and
1999, respectively. The number of shares used in the computations were as
follows:
2001 2000 1999
----------- ----------- -----------
Basic EPS computation............ 182,867,900 174,881,000 175,285,900
Diluted EPS computation.......... 190,289,700 189,037,600 189,884,800
The Company's 2 1/4% Convertible Subordinated Debentures were converted in
the fourth quarter of 2001 and its 4 1/4% Convertible Subordinated Debentures
were converted in the fourth quarter of 2000 (see Note 4).
Gains and Losses on Issuance of Stock in Affiliates and Subsidiaries.
Gains and losses on the issuance of stock in equity method affiliates and
consolidated subsidiaries are recognized directly in the Company's shareholders'
equity through an increase or decrease to additional paid-in capital in the
period in which the sale occurs and do not affect reported results of
operations.
Severance Agreements. Arrangements with certain present and former
employees provide for continuing payments for periods up to 10 years after
cessation of their full-time employment in consideration for agreements by the
employee not to compete with the Company and to render consulting services
during the post-employment period. Such payments, the amounts of which are also
subject to certain limitations, including the Company's operating performance
during the post-employment period, are expensed in such periods.
Depreciation of Furniture and Equipment and Amortization of Leasehold
Improvements. Depreciation charges are computed on a straight-line basis over
the estimated useful lives of furniture and equipment, up to 10 years. Leasehold
improvements are amortized on a straight-line basis over the lesser of the terms
of the related lease or the useful life of these assets.
Goodwill and Other Intangibles. The intangible values associated with the
Company's business consist predominantly of the value of the Company's agency
brands and worldwide networks and the value of the Company's client
relationships, know-how, reputation and experience. Intangibles are amortized on
a straight-line basis over a period not to exceed 40 years. The intangibles are
written down if, and to the extent, they are determined to be impaired.
Intangibles are considered to be impaired if the future anticipated undiscounted
cash flows arising from the use of the intangibles is less than the net
unamortized cost of the intangibles. The Company's worldwide agency networks
have been operating for an average of over 60 years. Relationships with
F-8
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
significant clients in the corporate communications services industry are
typically long-term in nature and the Company's largest clients have on average
been clients for more than 30 years. The Company makes acquisitions consistent
with its strategy of building its various agency brands through the extension of
their service capabilities and geographic reach. The intangibles that result
from these acquisitions represent acquisition costs in excess of the fair value
of tangible net assets acquired and consist primarily of the know-how,
reputation, experience and the geographic coverage of the purchased businesses.
In accordance with SFAS 142 -- Goodwill and Other Intangible Assets (see Note
13), goodwill acquired resulting from a business combination for which the
acquisition date was after June 30, 2001 is no longer amortized. Additionally,
certain intangible assets are required to be valued and amortized over their
estimated useful lives. Beginning in 2002, goodwill and other intangible assets
with indefinite lives will no longer be amortized, but are to be periodically
tested for impairment in accordance with SFAS 142 (see Note 13).
Deferred Taxes. Deferred income taxes are provided for the temporary
difference between the financial reporting basis and tax basis of the Company's
assets and liabilities. Deferred tax benefits result principally from recording
certain expenses in the financial statements which are not currently deductible
for tax purposes and from differences between the tax and book basis of assets
and liabilities recorded in connection with acquisitions. Deferred tax
liabilities result principally from deductions recorded for tax purposes, in
excess of that recorded in the financial statements and non-cash, unrealized
financial statement gains associated with investments and capital transactions
including initial public offerings of common stock by affiliates.
Cash Flows. The Company's cash equivalents are primarily comprised of
investments in overnight interest-bearing deposits, commercial paper and money
market instruments with original maturity dates of three months or less.
The following supplemental schedule summarizes the fair value of non-cash
assets acquired, cash paid, common shares issued, which are valued at the then
market value of the shares, and the liabilities assumed in connection with the
acquisition of equity interests in subsidiaries and affiliates, for each of the
years specified below:
(Dollars in Thousands)
2001 2000 1999
---------- ---------- ----------
Fair value of non-cash assets acquired... $1,207,806 $1,122,385 $1,059,443
Cash paid, net of cash acquired.......... (818,819) (795,686) (694,184)
Value of common shares issued............ (7,336) (16,031) (7,200)
---------- ---------- ----------
Liabilities assumed...................... $ 381,651 $ 310,668 $ 358,059
========== ========== ==========
Concentration of Credit Risk. The Company provides marketing and corporate
communications services to over 5,000 clients who operate in nearly every
industry sector and in more than 100 countries. The Company grants credit to
qualified clients in the ordinary course of business. Due to the diversified
nature of the Company's client base, the Company does not believe that we are
exposed to a concentration of credit risk.
Derivative Financial Instruments. The Company adopted Statement Financial
Accounting Standard (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities", on January 1, 2001. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value.
Derivatives that are not hedges must be adjusted to fair value through the
consolidated statement of income. If the derivative is a hedge, depending on the
nature of the hedge, changes in the fair value of the derivative will either be
offset against the change in fair value of the hedged assets, liabilities or
firm commitments through earnings or recognized in other comprehensive income
until the hedged item is recognized in earnings. The ineffective portion of the
change in fair value of a derivative used as a hedge is required to be
immediately recognized in the statement of income.
The Company's derivative financial instruments consist principally of
forward foreign exchange contracts and interest rate and cross-currency swaps.
For derivative financial instruments to qualify for hedge accounting
F-9
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the following criteria must be met: (1) the hedging instrument must be
designated as a hedge; (2) the hedged exposure must be specifically identifiable
and expose the Company to risk; and (3) it must be highly probable that a change
in fair value of the derivative financial instrument and an opposite change in
the fair value of the hedged exposure will have a high degree of correlation.
The majority of the Company's derivative activity relates to forward
foreign economic exchange contracts. The Company executes these contracts in the
same currency as the hedged exposure, whereby 100% correlation is achieved based
on spot rates. Gains and losses on derivative financial instruments which are
hedges of foreign currency assets or liabilities are recorded at market value
and changes in market value are recognized in the statement of income in the
current period. Gains and losses on derivative financial instruments which are
hedges of net investments, are recorded to accumulated comprehensive income as
translation adjustments to the extent of change in the spot exchange rate. The
remaining difference is recorded in the statement of income in the current
period. Derivative financial instruments which do not qualify as hedges are
recorded in the balance sheet as either an asset or liability and are revalued
to the current market rate and any gains or losses are recorded in the statement
of income in the current period.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Reclassifications. Certain prior year amounts have been reclassified to
conform with the 2001 presentation.
2. Acquisitions
During 2001, the Company made 39 acquisitions whose aggregate cost, in cash
or by issuance of the Company's common stock and the assumption of net
liabilities, totaled $844.7 million, including intangible assets of $839.1
million. Valuations of these companies were based on a number of factors,
including geographic coverage, service offerings, competitive position and
reputation.
Most of our acquisitions have been relatively small transactions made
consistent with our strategy of building our various agency brands through the
extension of their service capabilities and geographic reach. The intangibles
that result from these acquisitions principally result from the purchased
companies know-how, reputation, experience and geographic coverage. These
intangibles have been amortized on a straight-line basis over a period not to
exceed 40 years.
Certain acquisitions completed in 2001 and prior years require payments in
future years contingent upon the future performance of the acquired businesses
and their ability to achieve certain predetermined goals. Formulas for these
contingent future payments vary from acquisition to acquisition. Included in the
aggregate cost of $844.7 million are payments of $156.8 million made in 2001
related to acquisitions completed in prior years.
3. Bank Loans and Lines of Credit
Bank loans of $169.1 million and $72.8 million at December 31, 2001 and
2000, respectively, are primarily comprised of the bank overdrafts of our
international subsidiaries, which are treated as unsecured loans pursuant to our
bank agreements. The weighted average interest rate on the borrowings
outstanding as of December 31, 2001 and 2000 was 4.6% and 6.1%, respectively.
At December 31, 2001 and 2000, the Company had committed lines of credit
aggregating $1,832.8 million and $1,871.7 million, respectively. The unused
portion of these credit lines was $1,394.1 million and $967.4 million at
December 31, 2001 and 2000, respectively. The lines of credit, including the
credit facilities discussed below, are generally extended to us on terms that
the banks grant to their most creditworthy borrowers.
F-10
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In the second quarter 2001, the Company extended its 364-day, $1 billion
revolving credit facility (the "$1 billion credit facility"). The facility,
which primarily supports the issuance of commercial paper, was renewed under
substantially the same terms as had previously been in effect, including a
provision which allows the Company to convert all amounts outstanding at the
expiration on April 25, 2002 into a one-year term loan.
The Company had $269.6 million of commercial paper borrowings outstanding
supported by the $1 billion facility with interest rates ranging from 2.2% to
2.7% as of December 31, 2001, with various maturity dates through January 30,
2002. Commercial paper is included in long-term debt in the consolidated balance
sheet, as it is the Company's intention to refinance these borrowings on a
long-term basis through continued commercial paper borrowings supported by the
available bank facilities (see note 4) or other long-term financing.
On February 20, 1998, the Company established a $500 million revolving
credit agreement (the "$500 million credit facility"), expiring on June 30,
2003. There were no borrowings under this credit facility at December 31, 2001
and 2000.
The gross amount of commercial paper issued and redeemed under the
Company's commercial paper programs during 2001 was $45.3 billion and $45.9
billion, respectively, and during 2000 $13.4 billion was issued and $12.5
billion was redeemed.
The credit facilities contain financial covenants limiting the ratio of
total consolidated indebtedness to total consolidated capitalization, the ratio
of debt to cash flow and investments in and loans to affiliates and
unconsolidated subsidiaries. At December 31, 2001, the Company was in compliance
with these covenants.
4. Long-Term Debt and Convertible Debentures
Long-term debt and convertible debentures outstanding as of December 31,
2001 and 2000 consisted of the following:
(Dollars in Thousands)
2001 2000
---------- ----------
U.S. Dollar commercial paper with an average interest
rate of 2.5% and 6.8% in 2001 and 2000, respectively $ 269,618 $ 831,486
French Franc 5.20% Notes, due in 2005 ................ 135,603 143,714
Floating Rate Loan Notes, due in 2001 ................ -- 9
Other notes and loans at rates from 2.9% to 6.6%,
due through 2006 ................................... 125,328 69,517
---------- ----------
530,549 1,044,726
Less current portion ................................. 40,444 29,307
---------- ----------
Total long-term debt ............................. $ 490,105 $1,015,419
========== ==========
Zero-Coupon Convertible Notes due 2031 ............... $ 850,000 $ --
2 1/4% Convertible Subordinated Debentures, due 2013.. -- 229,968
---------- ----------
Total convertible debentures ..................... $ 850,000 $ 229,968
========== ==========
For the years ended December 31, 2001, 2000 and 1999, the Company incurred
gross interest expense on its borrowings of $90.9 million, $116.7 million and
$84.9 million, respectively.
Commercial paper is issued under the Company's credit facilities described
in Note 3.
On June 24, 1998, the Company issued French Franc 1 billion of 5.2% notes.
The notes are unsecured, obligations of the Company. Unless previously redeemed,
or purchased and cancelled, the notes mature on June 24, 2005.
In March 1998, the Company issued $178.6 million aggregate principal amount
unsecured floating rate loan notes. A substantial portion of these notes were
redeemed by the Company during 2000. The remaining balance was repaid in 2001.
F-11
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The $850.0 million aggregate principal amount of zero-coupon notes due 2031
were issued by the Company in February 2001. These notes are senior, unsecured
zero-coupon securities that are convertible into 7.7 million common shares,
implying a conversion price of $110.01 per common share, subject to normal
anti-dilution adjustments. These notes are convertible at the specified ratio
only upon the occurrence of certain events, including if the Company's common
shares trade above certain levels, if the Company effects extraordinary
transactions or if the Company's long-term debt ratings are downgraded by least
three notches from their current level to Baa3 or lower by Moody's Investors
Services, Inc. or BBB or lower by Standard & Poor's Ratings Services. These
events would not, however, result in an adjustment of the number of shares
issuable upon conversion. Holders of the notes due 2031 have the right to put
the notes back to the Company for, at the Company's election, cash, stock or a
combination of both, in February of each year and the Company has the right to
redeem the notes for cash beginning in 2006. There are no events that accelerate
the noteholders' put rights. Beginning in February 2006, if the market price of
the Company's common shares exceeds certain thresholds, the Company may be
required to pay contingent cash interest on the notes equal to the amount of
dividends that would be paid on the common shares into which the notes are
contingently convertible.
On January 6, 1998, the Company issued $230.0 million of 2 1/4% convertible
subordinated debentures with a scheduled maturity in 2013. The debentures were
redeemed by the Company on December 31, 2001 upon the issuance of 4.6 million
common shares.
On January 3, 1997, the Company issued $218.5 million of 4 1/4% convertible
subordinated debentures with a scheduled maturity in 2007. The debentures were
redeemed on December 29, 2000 upon the issuance of 6.9 million common shares.
Aggregate stated maturities of long-term debt and convertible debentures
are as follows:
(Dollars in Thousands)
2002................................................. $ 40,444
2003................................................. 301,453
2004................................................. 16,169
2005................................................. 7,632
2006................................................. 161,194
Thereafter........................................... 853,657
5. Segment Reporting
The Company's wholly and partially owned businesses operate within the
marketing and corporate communications services operating segment. These
businesses provide communications services to clients on a global, pan-regional
and national basis. The businesses have similar cost structures, and are subject
to the same general economic and competitive risks. A summary of the Company's
revenue and long-lived assets by geographic area for the years then ended, and
as of December 31, 2001, 2000 and 1999 is presented below:
<TABLE>
<CAPTION>
(Dollars in Thousands)
---------------------------------------------------------------------------------------
United United Euro Other
States Kingdom Denominated International Consolidated
---------- ---------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
2001
Revenue .......................... $3,717,011 $805,188 $1,413,795 $953,412 $6,889,406
Long-Lived Assets ................ 310,556 93,355 61,555 82,335 547,801
2000
Revenue .......................... $3,258,193 $811,401 $1,284,977 $799,659 $6,154,230
Long-Lived Assets ................ 254,654 93,653 59,562 75,236 483,105
1999
Revenue .......................... $2,532,917 $720,047 $1,204,688 $672,893 $5,130,545
Long-Lived Assets ................ 219,590 101,989 61,876 61,267 444,722
</TABLE>
F-12
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Equity and Cost Based Investments
Equity Investments. The Company has 111 unconsolidated affiliates accounted
for under the equity method. The affiliates offer marketing and corporate
communications services similar to those offered by the Company. The equity
method is used when the Company has an ownership of less than 50% but exercises
significant influence over the operating and financial policies of the
affiliate. The following table summarizes the balance sheets and income
statements of the Company's unconsolidated affiliates, as of December 31, 2001,
2000 and 1999 and for the years then ended:
(Dollars in Thousands)
------------------------------
2001 2000 1999
-------- -------- --------
Current assets............................ $582,257 $926,792 $912,791
Non-current assets........................ 142,128 302,073 241,385
Current liabilities....................... 443,461 682,719 692,927
Non-current liabilities................... 108,212 62,955 65,978
Minority interests........................ 4,734 7,796 1,002
Gross revenue............................. 378,423 816,717 522,103
Costs and expenses........................ 316,132 740,267 467,745
Net income................................ 43,773 45,076 23,662
The Company's equity interest in the net income of these affiliates was
$12.7 million, $10.9 million and $15.4 million for 2001, 2000 and 1999,
respectively. The Company's equity interest in the net assets of these
affiliated companies was $116.8 million, $205.2 million and $174.0 million at
December 31, 2001, 2000 and 1999, respectively. In addition, the Company's total
investment in affiliates includes the excess of acquisition costs over the fair
value of tangible net assets acquired. These excess acquisition costs are being
amortized on a straight-line basis over a period not to exceed 40 years.
In 2001, 2000 and 1999, the Company disposed of shares held in certain
affiliates. The resulting impact of these disposals was not material to the
Company's consolidated results of operations or financial position.
Cost Based Investments. The Company's cost based investments at December
31, 2001 were primarily comprised of preferred stock interests representing
equity interests of less than 20% in various marketing and corporate
communications services companies. This method is used when the Company owns
less than a 20% equity interest and does not exercise significant influence over
the operating and financial policies of the investee.
The total cost basis of these investments, which are included in other
assets on the Company's balance sheet, as of December 31, 2001 and 2000 was
$318.8 million and $238.5 million, respectively. The following is a summary of
significant transactions involving cost based investments in the past three
years.
2001. In May 2001, the Company received a non-voting non-participating
preferred stock interest in a newly formed company, Seneca Investments LLC, in
exchange for its contribution of Communicade, the Company's subsidiary that
conducted its e-services industry investment activities. The common shareholder
of Seneca, who owns all the common stock, is an established private equity
investment firm. Upon formation, no debt was assumed by Seneca and no
distributions were made to shareholders. The Company has no commitment
obligating it to advance funds or provide other capital to Seneca. The preferred
stock is nonvoting (except on certain extraordinary events) and is entitled to
preferential dividends at a rate of 8.5% compounded semiannually and is
redeemable on the 10th anniversary of issuance or earlier upon the occurrence of
certain extraordinary events. Unpaid dividends accrue on a cumulative basis. No
dividends were paid by Seneca or accrued by the Company in 2001. Seneca had no
outstanding indebtedness at December 31, 2001.
The transaction was accounted for in accordance with SFAS 140, Accounting
for Transfers and Servicing Financial Assets and Extinguishments of Liabilities,
and resulted in no gain or loss being recognized by the Company on Seneca's
formation. Management believes that the carrying value of its preferred
investment in Seneca of $280 million at December 31, 2001 approximated its fair
value.
F-13
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2000. In 2000, the Company sold a portion of its ownership interest in
Razorfish Inc., which was recorded under the cost method of accounting and
included in other assets at December 31, 2000 and 1999. As a result of the sale,
the Company realized a pre-tax gain of $110.0 million. Included in consolidated
net income for the year ended December 31, 2000 is $63.8 million ($0.33 per
diluted share) related to this transaction and comprehensive income was adjusted
to reflect the reclassification of the gain from unrealized to realized. The
remaining shares were owned by Communicade at the time of Seneca's formation.
During 2000, certain companies in which the Company had investments
completed initial public offerings. Accordingly, the Company adjusted the
carrying value of its equity holdings to reflect the market value and recorded
an unrealized gain to comprehensive income. During the balance of the year, the
market value of these companies declined thereby reducing the total value of the
Company's cost based investments and accumulated comprehensive income. At
December 31, 2000, the aggregate market value of these investments was below
their aggregate original cost. Based on management's consideration of the
factors described in Footnote 1, Investments Available for Sale, it was
determined there had not been a non-temporary decline in the fair value of these
investments below their book value. Accordingly, no adjustment to the December
31, 2000 book value was recorded.
1999. Razorfish completed an initial public offering in April 1999. The
Company owned 32.4% of Razorfish's equity immediately following their initial
public offering and accounted for this investment under the equity method.
Consistent with the Company's accounting policy and based on its offering price
of $16 per share, an after-tax gain of $5.1 million was recognized by the
Company in shareholders' equity as a direct increase to additional paid-in
capital. During the fourth quarter of 1999, the Company's ownership interest in
Razorfish was diluted below 20%. Given that the Company no longer exercised
significant influence and as a result of the dilution of its ownership below
20%, the Company discontinued accounting for its investment under the equity
method.
In 1999, the Company owned 36% of Agency.com and accounted for its
investment under the equity method. In December 1999, Agency.com completed an
initial public offering. Based on its offering price of $26 per share, an after
tax gain of $17.6 million was recognized by the Company in shareholders' equity
as a direct increase to additional paid-in capital. The Agency.com shares were
owned by Communicade at the time of Seneca's formation.
7. Employee Stock Plans
The Company's current incentive compensation plan was adopted in 1998 (the
"1998 Plan") and amended in 2000. Under the Plan, 8,250,000 shares of common
stock of the Company were reserved for options and other awards, of which up to
2,250,000 were for restricted stock awards. As of December 31, 2001, 3,929,849
were available for future grants, of which 1,592,349 were available for
restricted stock awards. Pursuant to the plan, the exercise price of options
awarded may not be less than 100% of the market price of the stock at the date
of grant. Options become exercisable 30% on each of the first two anniversary
dates of the grant date with the final 40% becoming exercisable three years from
the grant date.
Under the terms of the Company's long-term shareholder value plan,
9,000,000 shares of common stock were reserved for stock option awards to key
employees of the Company at an exercise price that is no less than 100% of the
market price of the stock at the date of the grant. The options can become
exercisable after the sixth anniversary date of grant. The shares can become
exercisable prior to this anniversary date in increments of one-third if the
market value for the Company's common stock increases compared to the market
price on the date of grant by at least 50%, 75% and 100%, respectively. At
December 31, 2001, options for 3,267,275 million shares were available for
future grants.
F-14
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The status of the Company's 1998 incentive compensation plan, the long term
shareholder value plan and all prior incentive compensation plans for the past
three years is as follows:
<TABLE>
<CAPTION>
2001 2000 1999
--------------------------- --------------------------- ----------------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
---------- -------------- ---------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Shares under option,
beginning of year .................. 9,547,138 $ 57.50 8,299,387 $ 46.37 7,190,800 $ 23.16
Options granted under:
incentive compensation plans ....... 3,542,500 81.10 2,452,500 78.31 3,467,234 74.65
long term shareholder value plan ... 5,732,725 66.84 -- -- -- --
Options exercised .................... (1,058,540) 39.83 (1,204,749) 23.15 (2,304,647) 16.44
Options forfeited .................... (20,000) 42.69 -- -- (54,000) 46.91
---------- ------- --------- ------- --------- -----------
Shares under option, end of year ..... 17,743,823 $ 66.30 9,547,138 $ 57.50 8,299,387 $ 46.37
========== ======= ========= ======= ========= ===========
Options exercisable at year-end ...... 5,456,848 4,142,888 3,270,887
========== ========= =========
</TABLE>
The following table summarizes the information above about options
outstanding and options exercisable at December 31, 2001:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------ -----------------------------
Weighted Average
Range of Exercise Options Remaining Weighted Average Options Weighted Average
Prices (in dollars) Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- ------------------- ----------- -------------- --------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$10.02 123,800 1 year $10.02 123,800 $10.02
12.11 to 26.27 280,361 2 years 12.13 280,361 12.13
12.94 340,000 3 years 12.94 340,000 12.94
19.72 360,000 4 years 19.72 360,000 19.72
24.28 739,500 5 years 24.28 739,500 24.28
39.75 to 66.40 1,166,161 6 years 43.64 1,166,161 43.64
44.62 to 91.22 3,106,276 7 years 76.02 1,765,276 75.30
78.32 to 84.00 2,377,500 8 years 78.57 681,750 78.58
62.35 to 87.16 9,250,225 9 years 72.27 -- --
---------- ---------
17,743,823 5,456,848
========== =========
</TABLE>
Pro Forma. As permitted by SFAS No. 123, "Accounting for Stock Based
Compensation", the Company intends to continue to apply the accounting
provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
and to make annual pro forma disclosures of the effect of adopting the fair
value method of accounting for employee stock options and similar instruments.
The weighted average fair value, calculated on the basis summarized below,
of each option granted was as follows; 2001: $21.45, 2000: $24.85 and 1999:
$20.91. The fair value of each option grant has been determined as of the date
of grant using the Black-Scholes option valuation model and with the following
assumptions (without adjusting for the risk of forfeiture and lack of
liquidity):
2001 2000 1999
--------------- --------------- --------------
Expected option lives........ 5 years 5 years 5 years
Risk free interest rate...... 4.0% - 4.9% 5.0% - 6.7% 4.8% - 6.3%
Expected volatility.......... 28.58% - 30.79% 21.88% - 26.49% 18.36% - 21.2%
Dividend yield............... 0.9% - 1.4% 0.6% - 0.9% 0.7% - 0.8%
F-15
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Using compensation cost for grants of the Company's stock options and
shares issued under the employee stock purchase plan ("ESPP"), determined based
on the fair value at the grant or issuance date in 2001, 2000 and 1999,
consistent with the provisions of SFAS No. 123, the effect on the Company's net
income and net income per share would have been as follows:
<TABLE>
<CAPTION>
Dollars in Thousands Except Per Share Data
--------------------------------------------------------
Excluding Including
The Razorfish the Razorfish
Gain Gain
2001 2000 2000 1999
-------- ------------- ------------- --------
<S> <C> <C> <C> <C>
Net income, as reported........................ $503,142 $434,969 $498,795 $362,882
Net income, pro forma.......................... 455,702 411,824 475,650 347,643
Basic net income per share, as reported........ 2.75 2.49 2.85 2.07
Basic net income per share, pro forma.......... 2.49 2.36 2.72 1.98
Diluted net income per share, as reported...... 2.70 2.40 2.73 2.01
Diluted net income per share, pro forma........ 2.47 2.29 2.62 1.93
</TABLE>
Restricted Shares. Changes in outstanding shares of restricted stock for
the three years ended December 31, 2001 were as follows:
2001 2000 1999
--------- --------- ---------
Restricted shares at beginning of year 2,493,505 2,602,281 2,703,612
Number granted ..................... 649,915 904,429 935,263
Number vested ...................... (830,822) (906,197) (983,251)
Number forfeited ................... (85,576) (107,008) (53,343)
--------- --------- ---------
Restricted shares at end of year ..... 2,227,022 2,493,505 2,602,281
========= ========= =========
All restricted shares were sold at a price per share equal to their par
value. The difference between par value and market value on the date of the
grant is charged to shareholders' equity and then amortized to expense over the
period of restriction. The restricted shares vest in 20% annual increments
provided the employee remains in the employ of the Company.
Restricted shares may not be sold, transferred, pledged or otherwise
encumbered until the restrictions lapse. Under most circumstances, the employee
must resell the shares to the Company at par value if the employee ceases
employment prior to the end of the period of restriction.
The charge to operations in connection with these restricted stock awards
for the years ended December 31, 2001, 2000 and 1999 amounted to $47.1 million,
$39.1 million and $27.8 million, respectively.
ESPP. The Company has an employee stock purchase plan that enables
employees to purchase the Company's common stock through payroll deductions over
each plan quarter at 85% of the market price on the last trading day of the plan
quarter. Purchases are limited to 10% of eligible compensation as defined by the
plan. During 2001, 2000 and 1999 employees purchased 323,269, 311,171 and 63,408
shares, respectively, all of which were treasury shares, for which $23.7
million, $22.3 million and $4.8 million respectively, was paid to the Company.
For this plan, 2,302,152 shares remain reserved at December 31, 2001.
F-16
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Income Taxes
Income before income taxes and the provision for taxes on income consisted
of the amounts shown below:
Years Ended December 31,
(Dollars in Thousands)
-------------------------------------
2001 2000 1999
-------- -------- --------
Income before incomes taxes:
Domestic .......................... $588,322 $534,913 $314,338
International ..................... 307,063 376,704 359,370
-------- -------- --------
Total ........................... $895,385 $911,617 $673,708
======== ======== ========
Provision for taxes on income:
Current:
Federal ......................... $155,414 $153,786 $ 80,401
State and local ................. 32,214 36,391 30,577
International ................... 123,770 159,389 144,228
-------- -------- --------
311,398 349,566 255,206
-------- -------- --------
Deferred:
Federal ......................... 39,643 16,326 9,499
State and local ................. 7,178 2,402 381
International ................... (6,091) 846 8,161
-------- -------- --------
40,730 19,574 18,041
-------- -------- --------
Total ........................... $352,128 $369,140 $273,247
======== ======== ========
The Company's effective income tax rate varied from the statutory federal
income tax rate as a result of the following factors:
2001 2000 1999
---- ---- ----
Statutory federal income tax rate ................... 35.0% 35.0% 35.0%
Non-deductible amortization of goodwill ............. 2.9 2.6 3.2
State and local taxes on income, net of federal
income tax benefit ................................ 2.8 3.0 3.0
International subsidiaries' tax rate differentials .. (0.2) 1.1 1.3
Other ............................................... (1.2) (1.2) (1.9)
---- ---- ----
Effective rate ...................................... 39.3% 40.5% 40.6%
==== ==== ====
The 2000 effective tax rate, exclusive of the sale of Razorfish shares,
was 40.3%.
Deferred income taxes are provided for the temporary difference between
the financial reporting basis and tax basis of the Company's assets and
liabilities. Deferred tax assets result principally from recording certain
expenses in the financial statements which are not currently deductible for tax
purposes and from differences between the tax and book basis of assets and
liabilities recorded in connection with acquisitions. Deferred tax liabilities
result principally from non-cash, unrealized financial statement gains
associated with investments and capital transactions, including initial public
offerings of common stock by affiliates, and expenses which are currently
deductible for tax purposes, but have not yet been expensed in the financial
statements.
F-17
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Deferred tax assets (liabilities) as of December 31, 2001 and 2000
consisted of the amounts shown below (dollars in millions):
2001 2000
------ ------
Unrealized gains on investments in and capital
transactions of, affiliates .......................... $(40.2) $(37.8)
Imputed interest ....................................... (20.8) 0.0
Basis differences arising from acquisitions ............ 83.3 76.2
Compensation and severance ............................. 83.2 73.3
Deductible intangibles ................................. 9.5 18.7
Amortization and depreciation of tangible assets ....... 8.5 4.0
Lease accruals ......................................... 6.0 3.1
Other, net ............................................. 25.0 7.3
------ ------
$154.5 $144.8
====== ======
Current deferred tax assets as of December 31, 2001 and 2000 were $54.1
million and $46.4 million, respectively, and were included in prepaid expenses
and other current assets. Non-current deferred tax assets as of December 31,
2001 and 2000 were $100.4 million and $98.4 million, respectively. The Company
has concluded that it is probable that it will be able to realize these deferred
tax assets in future periods.
A provision has been made for additional income and withholding taxes on
the earnings of international subsidiaries and affiliates that will be
distributed.
9. Employee Retirement Plans
The Company's international and domestic subsidiaries provide retirement
benefits for their employees primarily through defined contribution plans.
Company contributions to the plans, which are determined by the boards of
directors of the subsidiaries, have generally been in amounts up to 15% (the
maximum amount deductible for U.S. federal income tax purposes) of total
eligible compensation of participating employees. Expenses related to the
Company's contributions to these plans in 2001 were $69.2 million, in 2000 were
$82.0 million and in 1999 were $77.2 million.
The Company's pension plans are primarily related to non-U.S. businesses.
These plans are not subject to the Employee Retirement Income Security Act of
1974. Substantially all of these plans are funded by fixed premium payments to
insurance companies which undertake to provide specific benefits to the
individuals covered. Pension expense recorded for these plans in 2001 was $14.9
million, in 2000 was $11.1 million and in 1999 was $8.5 million.
Certain subsidiaries of the Company have executive retirement programs
under which benefits will be paid to participants or to their beneficiaries over
15 years beginning at age 65 or death. In addition, other subsidiaries have
individual deferred compensation arrangements with certain executives which
provide for payments over varying terms upon retirement, cessation of employment
or death. Some of the Company's domestic subsidiaries provide life insurance and
medical benefits for retired employees. Eligibility requirements vary by
subsidiary, but generally include attainment of a specified combined age plus a
years of service factor. The costs related to these benefits were not material
to the 2001, 2000, and 1999 consolidated results of operations or financial
position. The Company's obligation with respect to these programs is included in
deferred compensation and other liabilities on the balance sheet.
10. Commitments and Contingent Liabilities
At December 31, 2001, the Company was committed under operating leases,
principally for office space in many of the major cities around the world.
Certain leases are subject to rent reviews with various escalation
F-18
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
clauses and require payment of various operating expenses which may also be
subject to escalation clauses. Rent expense for the years ended December 31,
2001, 2000 and 1999 was reported as follows:
(Dollars in Thousands)
2001 2000 1999
-------- -------- --------
Office Rent .................... $313,449 $266,195 $251,070
Third Party Sublease ........... (8,046) (7,280) (13,871)
-------- -------- --------
Total Office Rent .............. 305,403 258,915 237,199
Equipment Rent ................. 147,338 127,901 104,383
-------- -------- --------
Total Rent ..................... $452,741 $386,816 $341,582
======== ======== ========
Future minimum base rents under terms of noncancellable operating leases,
reduced by rents to be received from existing noncancellable subleases, are as
follows:
(Dollars in Thousands)
Gross Rent Sublease Rent Net Rent
---------- ------------- --------
2002 ....................... $356,062 $(12,616) $343,446
2003 ....................... 311,100 (11,070) 300,030
2004 ....................... 264,294 (9,280) 255,014
2005 ....................... 218,481 (6,432) 212,049
2006 ....................... 198,972 (7,560) 191,412
Thereafter ................. 996,689 (8,463) 988,226
The present value of the gross future minimum base rents under
noncancellable operating leases is $1,527 million. Where appropriate, management
has established liabilities for the difference between the cost of leased
premises that were vacated and anticipated sublease income.
The Company is involved in various routine legal proceedings incidental to
the ordinary course of its business. The Company does not presently expect that
these proceedings will have a material adverse effect on its consolidated
financial position or results of operations.
11. Fair Value of Financial Instruments
The following table presents the carrying amounts and fair values of the
Company's financial instruments at December 31, 2001 and 2000. Amounts in
parentheses represent liabilities.
<TABLE>
<CAPTION>
2001 2000
-------------------------- --------------------------
(Dollars in Thousands) (Dollars in Thousands)
Carrying Fair Carrying Fair
Amount Value Amount Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash, cash equivalents and short-term
investments ........................... $ 516,999 $ 516,999 $ 576,539 $ 576,539
Other investments ....................... 318,807 318,807 238,494 238,494
Long-term debt and convertible debentures (1,380,549) (1,399,022) (1,274,694) (1,439,019)
Financial Commitments
Cross currency interest rate swaps .... (11,626) (11,626) (31,682) (31,682)
Forward foreign exchange contracts .... -- (749) -- (2,799)
Guarantees ............................ -- (19,435) -- (78,271)
Letters of credit ..................... -- (8,080) -- (2,358)
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
Short-term investments:
Short-term investments which consist primarily of short-term investments
and investments in short-term interest bearing instruments with original
maturity dates between three months and one year are carried at cost which
approximates fair value.
F-19
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other investments:
Other investments are carried at cost, which approximates fair value. The
Company's investment in Seneca represents $280.0 million of the balance at
December 31, 2001. Refer to note 6 for additional information about this
investment.
Long-term debt and convertible debentures:
A portion of the Company's long-term debt includes floating rate debt, the
carrying value of which approximates fair value. The Company's long-term debt
also includes convertible debentures and fixed rate senior debt. The fair value
of these instruments was determined by reference to quotations available in
markets where these issues were traded.
Financial commitments:
The estimated fair values of derivative positions are based upon
quotations received from independent, third party banks and represent the net
amount required to terminate the positions, taking into consideration market
rates and counterparty credit risk. The fair values of guarantees and letters of
credit are based upon the face value of the underlying instruments.
12. Financial Instruments and Market Risk
The Company adopted Statement Financial Accounting Standard (SFAS) No.
133, "Accounting for Derivative Instruments and Hedging Activities," on January
1, 2001. SFAS No. 133 establishes accounting and reporting standards requiring
that derivative instruments which meet the SFAS 133 definition of a derivative
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value.
Derivatives that are not hedges must be adjusted to fair value through
earnings. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in fair value of the hedged assets, liabilities or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of the change in fair
value of a derivative used as a hedge is required to be immediately recognized
in the Company's statement of income.
In the first quarter of 2001, the Company recorded a $2.9 million after
tax charge in earnings ($4.9 million pre-tax) for the cumulative effect of
adopting SFAS No. 133. The charge resulted from the Company's accounting for a
hedge of its net Yen investments. The Company utilized cross currency interest
rate swap contracts to hedge its net Yen investments. Consistent with the
Company's policy with respect to derivative instruments and hedging activities
and in accordance with SFAS No. 133, the Company designated the change in Yen
spot rates as the hedged risk in its net Yen investments. Since the contract was
a hedge of the Yen net investments, the change in the fair value of the contract
attributable to changes in spot rates, which was the effective portion of the
hedge, was recorded as an offset in the cumulative translation account, the same
account in which translation gains and losses on the net Yen investment are
recorded. All other changes in the fair value of the contract were recorded
currently in operating income or expense as ineffectiveness. During the first
quarter of 2001, the Company replaced the contract with a floating rate cross
currency swap contract. As a result, minimal ineffectiveness will result for the
remaining term.
The Company's derivative activities are limited in volume and confined to
risk management activities related to our international operations. The Company
has established a centralized reporting system to evaluate the effects of
changes in interest rates, currency exchange rates and other relevant market
risks. The Company periodically determines the potential loss from market risk
by performing a value-at-risk computation. Value-at-risk analysis is a
statistical model that utilizes historic currency exchange and interest rate
data to measure the potential impact on future earnings of the Company's
existing portfolio of derivative financial instruments. The value-at-risk
analysis the Company performed on the Company's December 31, 2001 portfolio of
derivative financial instruments indicated that the risk of loss was immaterial.
Counterparty risk arises from the inability of
F-20
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
a counterparty to meet its obligations. To mitigate counterparty risk, the
Company enters into derivative contracts with major well-known banks and
financial institutions that have credit ratings at least equal to that of the
Company. This system is designed to enable the Company to initiate remedial
action, if appropriate.
At December 31, 2001 and 2000, the Company had Japanese Yen 16,300 million
aggregate notional principal amount of cross currency interest rate swaps with
maturities of up to five years. The swaps effectively hedge the Company's net
investment in Japanese Yen denominated assets.
The Company enters into forward foreign exchange contracts primarily to
hedge intercompany cash movements between subsidiaries operating in different
currency markets. Changes in market value of the forward contracts are included
in the income statement and are offset by the corresponding change in value of
the underlying asset or liability being hedged. The terms of these contracts are
generally ninety days or less. At December 31, 2001 and 2000, the aggregate
amount of intercompany receivables and payables subject to this hedge program
was $387 million and $254 million, respectively. The table below summarizes by
major currency the notional principal amounts of the Company's forward foreign
exchange contracts outstanding at December 31, 2001 and 2000. The "buy" amounts
represent the U.S. dollar equivalent of commitments to purchase the respective
currency, and the "sell" amounts represent the U.S. dollar equivalent of
commitments to sell the respective currency. Refer to note 11 for a discussion
of the value of these instruments.
(Dollars in thousands)
Notional Principal Amount
-----------------------------------------------
2001 2000
--------------------- ---------------------
Company Company Company Company
Buys Sells Buys Sells
-------- -------- -------- --------
U.S. Dollar ................ $ 94,323 $ 4,182 $35,714 $ 22,224
Euro ....................... 8,940 177,255 24,423 94,757
Canadian Dollar ............ 11,927 6,290 -- 14,805
Swedish Krona .............. 2,923 5,534 3,140 3,663
Hong Kong Dollar ........... 6,757 5,152 5,783 3,929
Australian Dollar .......... 1,860 2,411 281 5,146
Swiss Franc ................ 716 2,333 807 3,811
Singapore Dollar ........... 4,527 4,056 3,487 5,083
Greek Drachma .............. -- -- 1,107 1,669
Norwegian Kroner ........... -- 14,310 -- 10,728
Danish Kroner .............. 7,220 14,800 -- 12,686
Japanese Yen ............... -- 11,516 -- 1,057
-------- -------- ------- --------
Total .................... $139,193 $247,839 $74,742 $179,558
======== ======== ======= ========
The derivative financial instrument existing during the years ended
December 31, 2001 and 2000 were entered into for the purpose of hedging certain
specific currency risks. As a result of these financial instruments, the Company
reduced financial risk in exchange for foregoing any gain (reward) which might
have occurred if the markets moved favorably. In using derivative financial
instruments, management exchanged the risks of the financial markets for
counterparty risk. To minimize counterparty risk the Company only enters into
derivative contracts with major well-known banks and financial institutions that
have credit ratings equal to or better than the Company's credit rating.
13. New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, Business Combinations (SFAS
141), and Statement of Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets (SFAS 142). The FASB also issued Statement of Financial
Accounting Standards No. 143, Accounting for Asset Retirement Obligations (SFAS
143), in June 2001, and Statement of Financial Accounting Standards No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144), in
August 2001.
SFAS 141 requires all business combinations initiated after June 30, 2001
be accounted for under the purchase method. SFAS 141 superseded Accounting
Pronouncement Bulletin ("APB") Opinion No. 16, Business Combinations, and
Statement of Financial Accounting Standards No. 38, Accounting for
F-21
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Preacquisition Contingencies of Purchased Enterprises, and is effective for all
business combinations initiated after June 30, 2001. Given that all of the
Company's acquisitions in 2000 and 2001 were accounted for under the purchase
method, the adoption of SFAS 141 on July 1, 2001 and the cessation of goodwill
amortization on post July 1, 2001 acquisitions as required by SFAS 142, as
discussed below, was not material to the Company's 2001 results of operations
and financial position.
SFAS 142 addresses the financial accounting and reporting for acquired
goodwill and other intangible assets. SFAS 142 supersedes APB Opinion No. 17,
Intangible Assets. Effective January 1, 2002 companies are no longer required to
amortize goodwill and other intangibles that have indefinite lives, but these
assets will be subject to periodic testing for impairment. Additionally,
goodwill acquired in a business combination for which the acquisition date was
after June 1, 2001 is no longer required to be amortized. The Company will adopt
SFAS 142 effective January 1, 2002. The Company is currently evaluating the
effect that such adoption may have on our future consolidated results of
operations and financial position. The Company expects to complete the required
impairment testing by the end of the second quarter of 2002. However, at this
time the Company does not expect that the results of the impairment testing will
be material to the Company's 2002 results of operations and financial position.
SFAS 143 establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal obligations
associated with the retirement of tangible long-lived assets. SFAS 143 is
effective in fiscal years beginning after June 15, 2002, with early adoption
permitted. Consistent with the requirements, the Company plans to adopt SFAS 143
effective January 1, 2003. The impact of SFAS 143 on the Company's financial
statements will depend on a variety of factors, including interpretative
guidance from the FASB. However, the Company does not expect that the adoption
will have a material impact on the Company's consolidated results of operations
and financial position.
SFAS 144 establishes a single accounting model for the impairment or
disposal of long-lived assets, including discontinued operations. SFAS 144
superseded Statement of Financial Accounting Standards No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of
and APB Opinion No. 30, Reporting the Results of Operations-Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions. The provisions of SFAS 144 are
effective in fiscal years beginning after December 15, 2001, with early adoption
permitted and, in general, are to be applied prospectively. Consistent with the
requirements of SFAS 144, the Company intends to adopt SFAS 144 effective
January 1, 2002. The Company does not expect that the adoption will have a
material impact on the Company's consolidated results of operations and
financial position.
14. Subsequent Events
In March 2002, the Company issued $900.0 million aggregate principal
amount of zero-coupon notes due 2032. The notes are senior, unsecured
zero-coupon securities that are convertible into 8.2 million common shares,
implying a conversion price of $110.01 per common share, subject to normal
anti-dilution adjustments. These notes are convertible at the specified ratio
only upon the occurrence of certain events including if the Company's common
shares trade above certain levels, if the Company effects extraordinary
transactions or if the Company's long-term debt ratings are downgraded at least
three notches from their current level to Baa3 or lower by Moody's Investors
Services, Inc. or BBB or lower by Standard & Poor's Ratings Services. These
events would not, however, result in an adjustment of the number of shares
issuable upon conversion. Holders of the notes due 2032 have the right to put
the notes back to the Company for, at the Company's election, cash, stock or a
combination of both, in July of each year beginning in July 2003 and the Company
has the right to redeem the notes for cash beginning in 2007. There are no
events that accelerate the noteholders' put rights. Beginning in August 2007, if
the market price of the Company's common shares exceeds certain thresholds, the
Company may be required to pay contingent cash interest on the notes equal to
the amount of dividends that would be paid on the common shares into which the
notes are contingently convertible.
The net proceeds of the issuance of these notes were $905.0 million. The
Company used $280.6 million of these proceeds to repurchase 3.0 million of the
Company's common shares. The balance of the net proceeds were initially applied
by the Company to reduce short-term borrowings pending use for working capital
and other general corporate purposes.
F-22
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
Quarterly Results of Operations (Unaudited)
The following table sets forth a summary of the Company's unaudited
quarterly results of operations for the years ended December 31, 2001 and 2000,
in thousands of dollars except for per share amounts. During the first quarter
of 2000, the Company sold a portion of its ownership interest in Razorfish Inc.
As a result of the sale, the Company realized a pre-tax gain of $110 million.
Included in net income for the first quarter is $63.8 million related to this
transaction.
Quarter
-------------------------------------------------
First Second Third Fourth
---------- ---------- ---------- ----------
Revenue
2001 ................... $1,601,133 $1,746,788 $1,571,012 $1,970,473
2000 ................... 1,379,014 1,520,245 1,452,523 1,802,448
Realized Gain on Sale of
Razorfish Shares
2001 ................... -- -- -- --
2000 ................... 110,044 -- -- --
Income Before Income Taxes
2001 ................... 170,975 271,667 164,090 288,653
2000 ................... 262,410 237,624 158,755 252,828
Income Taxes
2001 ................... 67,723 107,613 64,340 112,452
2000 ................... 108,468 96,256 64,552 99,864
Income After Income Taxes
2001 ................... 103,252 164,054 99,750 176,201
2000 ................... 153,942 141,368 94,203 152,964
Equity in Affiliates
2001 ................... 408 2,880 2,521 6,858
2000 ................... 876 2,629 3,107 4,302
Minority Interests
2001 ................... (8,380) (15,568) (9,916) (18,918)
2000 ................... (11,281) (16,610) (11,646) (15,059)
Net Income
2001 ................... 95,280 151,366 92,355 164,141
2000 ................... 143,537 127,387 85,664 142,207
Basic Net Income Per Share
2001 ................... 0.52 0.83 0.50 0.89
2000 ................... 0.82(1) 0.73 0.49 0.81
Diluted Net Income Per Share
2001 ................... 0.52 0.81 0.50 0.87
2000 ................... 0.78(1) 0.70 0.48 0.78
- ----------
(1) These amounts include the realized gain on sale of Razorfish shares.
Excluding this gain, the basic and diluted earnings per share amounts in
the first quarter of 2000 were $0.46 and $0.45, respectively.
F-23
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Schedule II
OMNICOM GROUP INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
For the Three Years Ended December 31, 2001
<TABLE>
<CAPTION>
(Dollars in Thousands)
===============================================================================================================================
Column A Column B Column C Column D Column E
- -------------------------------------------------------------------------------------------------------------------------------
Additions Deductions
----------- -----------------------------
Balance at Charged Removal of Balance
Beginning to Costs Uncollectible Translation at End of
Description of Period and Expenses Receivables (1) Adjustments Period
- -------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Valuation accounts deducted from
assets to which they apply --
allowance for doubtful accounts:
December 31, 2001 ......................... $72,745 $30,739 $23,764 $ 537 $79,183
December 31, 2000 ......................... 53,720 25,989 5,224 1,740 72,745
December 31, 1999 ......................... 55,764 14,399 16,007 436 53,720
</TABLE>
- ----------
(1) Net of acquisition date balances in allowance for doubtful accounts of
companies acquired of $3.1 million, $7.7 million and $6.1 million in 2001,
2000 and 1999, respectively.
S-1
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.6
<SEQUENCE>3
<FILENAME>e13177ex4_6.txt
<DESCRIPTION>INDENTURE
<TEXT>
EXHIBIT 4.6
OMNICOM GROUP INC.
Zero Coupon Zero Yield Convertible Notes
due 2032
----------
INDENTURE
Dated as of March 6, 2002
----------
JPMORGAN CHASE BANK
TRUSTEE
----------
<PAGE>
CROSS REFERENCE TABLE*
Indenture
TIA Section Section
- ----------- -------
310(a)(1)..................................................................7.09
(a)(2)..................................................................7.09
(a)(3)..................................................................N.A.
(a)(4)..................................................................N.A.
(b)...............................................................7.08; 7.10
(c).....................................................................N.A.
311(a).....................................................................7.13
(b).....................................................................7.13
(c).....................................................................N.A.
312(a).....................................................................2.05
(b)....................................................................12.03
(c)....................................................................12.03
313(a).....................................................................7.14
(b)(1)..................................................................N.A.
(b)(2)..................................................................7.14
(c)....................................................................12.02
(d).....................................................................7.14
314(a)........................................................4.02; 4.03; 12.02
(b).....................................................................N.A.
(c)(1).................................................................12.04
(c)(2).................................................................12.04
(c)(3)..................................................................N.A.
(d).....................................................................N.A.
(e)....................................................................12.05
(f).....................................................................N.A.
315(a).....................................................................7.01
(b)..............................................................7.15; 12.02
(c).....................................................................7.01
(d).....................................................................7.01
(e).....................................................................6.11
316(a) (last sentence).....................................................2.08
(a)(1)(A)...............................................................6.05
(a)(1)(B)...............................................................6.04
(a)(2)..................................................................N.A.
(b).....................................................................6.07
317(a)(1)..................................................................6.08
(a)(2)..................................................................6.09
(b).....................................................................2.04
318(a)....................................................................12.01
N.A. means Not Applicable.
- ----------
* Note: This Cross Reference Table shall not, for any purpose, be deemed to
be part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.......................................................1
SECTION 1.02 Other Definitions.................................................6
SECTION 1.03 Incorporation by Reference of Trust Indenture Act.................7
SECTION 1.04 Rules of Construction.............................................7
SECTION 1.05 Acts of Holders...................................................7
ARTICLE 2
THE SECURITIES
SECTION 2.01 Form and Dating...................................................9
SECTION 2.02 Execution and Authentication.....................................10
SECTION 2.03 Registrar, Paying Agent, Conversion Agent and
Bid Solicitation Agent.........................................11
SECTION 2.04 Paying Agent to Hold Money and Securities in Trust...............11
SECTION 2.05 Securityholder Lists.............................................12
SECTION 2.06 Transfer and Exchange............................................12
SECTION 2.07 Replacement Securities...........................................13
SECTION 2.08 Outstanding Securities; Determinations of Holders' Action........14
SECTION 2.09 Temporary Securities.............................................15
SECTION 2.10 Cancellation.....................................................15
SECTION 2.11 Persons Deemed Owners............................................15
SECTION 2.12 Global Securities................................................15
SECTION 2.13 CUSIP Numbers....................................................20
ARTICLE 3
REDEMPTION AND PURCHASES
SECTION 3.01 Right to Redeem; Notices to Trustee..............................20
SECTION 3.02 Selection of Securities to Be Redeemed...........................20
SECTION 3.03 Notice of Redemption.............................................21
SECTION 3.04 Effect of Notice of Redemption...................................22
SECTION 3.05 Deposit of Redemption Price......................................22
SECTION 3.06 Securities Redeemed in Part......................................22
SECTION 3.07 Conversion Arrangement on Call for Redemption....................22
SECTION 3.08 Purchase of Securities at Option of the Holder...................23
SECTION 3.09 Purchase of Securities at Option of the Holder
upon Change in Control.........................................30
SECTION 3.10 Effect of Purchase Notice or Change in
Control Purchase Notice........................................32
SECTION 3.11 Deposit of Purchase Price or Change in
Control Purchase Price.........................................34
- ----------
* Note: This Table of Contents shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE>
SECTION 3.12 Securities Purchased in Part.....................................34
SECTION 3.13 Covenant to Comply with Securities Laws upon
Purchase of Securities.........................................34
SECTION 3.14 Repayment to the Company.........................................34
SECTION 3.15 Clean-up Call by the Company.....................................35
ARTICLE 4
COVENANTS
SECTION 4.01 Payment of Securities............................................35
SECTION 4.02 SEC and Other Reports............................................35
SECTION 4.03 Compliance Certificate...........................................36
SECTION 4.04 Further Instruments and Acts.....................................36
SECTION 4.05 Maintenance of Office or Agency..................................36
SECTION 4.06 Delivery of Certain Information..................................36
SECTION 4.07 Calculation of Original Issue Discount...........................37
ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01 When Company May Merge or Transfer Assets........................37
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default................................................38
SECTION 6.02 Acceleration.....................................................40
SECTION 6.03 Other Remedies...................................................41
SECTION 6.04 Waiver of Past Defaults..........................................41
SECTION 6.05 Control by Majority..............................................41
SECTION 6.06 Limitation on Suits..............................................41
SECTION 6.07 Rights of Holders to Receive Payment.............................42
SECTION 6.08 Collection Suit by Trustee.......................................42
SECTION 6.09 Trustee May File Proofs of Claim.................................42
SECTION 6.10 Priorities.......................................................43
SECTION 6.11 Undertaking for Costs............................................43
SECTION 6.12 Waiver of Stay, Extension or Usury Laws..........................44
ARTICLE 7
TRUSTEE
SECTION 7.01 Duties and Responsibilities of the Trustee;
During Default; Prior to Default...............................44
SECTION 7.02 Certain Rights of the Trustee....................................45
SECTION 7.03 Trustee Not Responsible for Recitals, Disposition
of Securities or Application of Proceeds Thereof...............47
SECTION 7.04 Trustee and Agents May Hold Securities; Collections, Etc.........47
SECTION 7.05 Moneys Held by Trustee...........................................47
SECTION 7.06 Compensation and Indemnification of Trustee and
Its Prior Claim................................................47
SECTION 7.07 Right of Trustee to Rely on Officers' Certificate, Etc...........48
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SECTION 7.08 Conflicting Interests............................................49
SECTION 7.09 Persons Eligible for Appointment as Trustee......................49
SECTION 7.10 Resignation and Removal; Appointment of Successor Trustee........49
SECTION 7.11 Acceptance of Appointment by Successor Trustee...................50
SECTION 7.12 Merger, Conversion, Consolidation or Succession to
Business of Trustee............................................51
SECTION 7.13 Preferential Collection of Claims Against the Company............51
SECTION 7.14 Reports by the Trustee...........................................51
SECTION 7.15 Trustee to Give Notice of Default, But May Withhold in
Certain Circumstances............................................51
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01 Discharge of Liability on Securities.............................52
SECTION 8.02 Repayment to the Company.........................................52
ARTICLE 9
AMENDMENTS
SECTION 9.01 Without Consent of Holders.......................................52
SECTION 9.02 With Consent of Holders..........................................53
SECTION 9.03 Compliance with Trust Indenture Act..............................54
SECTION 9.04 Revocation and Effect of Consents, Waivers and Actions...........54
SECTION 9.05 Notation on or Exchange of Securities............................54
SECTION 9.06 Trustee to Sign Supplemental Indentures..........................54
SECTION 9.07 Effect of Supplemental Indentures................................54
ARTICLE 10
CONVERSION
SECTION 10.01 Conversion Privilege............................................54
SECTION 10.02 Conversion Procedure............................................56
SECTION 10.03 Fractional Shares...............................................57
SECTION 10.04 Taxes on Conversion.............................................57
SECTION 10.05 Company to Provide Stock........................................58
SECTION 10.06 Adjustment for Change in Capital Stock..........................58
SECTION 10.07 Adjustment for Rights Issue.....................................59
SECTION 10.08 Adjustment for Other Distributions..............................60
SECTION 10.09 When Adjustment May Be Deferred.................................62
SECTION 10.10 When No Adjustment Required.....................................62
SECTION 10.11 Notice of Adjustment............................................62
SECTION 10.12 Voluntary Increase..............................................63
SECTION 10.13 Notice of Certain Transactions..................................63
SECTION 10.14 Reorganization of Company; Special Distributions................63
SECTION 10.15 Company Determination Final.....................................64
SECTION 10.16 Trustee's Adjustment Disclaimer.................................64
SECTION 10.17 Simultaneous Adjustments........................................64
SECTION 10.18 Successive Adjustments..........................................64
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SECTION 10.19 Rights Issued in Respect of Common Stock
Issued upon Conversion.........................................64
ARTICLE 11
PAYMENT OF INTEREST
SECTION 11.01 Interest Payments...............................................65
SECTION 11.02 Defaulted Interest..............................................65
SECTION 11.03 Interest Rights Preserved.......................................66
ARTICLE 12
MISCELLANEOUS
SECTION 12.01 Trust Indenture Act Controls....................................66
SECTION 12.02 Notices ........................................................66
SECTION 12.03 Communication by Holders with Other Holders.....................67
SECTION 12.04 Certificate and Opinion as to Conditions Precedent..............67
SECTION 12.05 Statements Required in Certificate or Opinion...................68
SECTION 12.06 Separability Clause.............................................68
SECTION 12.07 Rules by Trustee, Paying Agent, Conversion Agent and Registrar..68
SECTION 12.08 Calculations....................................................68
SECTION 12.09 Legal Holidays..................................................68
SECTION 12.10 GOVERNING LAW...................................................68
SECTION 12.11 No Recourse Against Others......................................69
SECTION 12.12 Successors......................................................69
SECTION 12.13 Multiple Originals..............................................69
EXHIBITS
Exhibit A-1 Form of Face of Global Security
Exhibit A-2 Form of Certificated Security
Exhibit B-1 Transfer Certificate
Exhibit B-2 Form of Letter to Be Delivered by Accredited Investors
Exhibit C Projected Payment Schedule
iv
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INDENTURE dated as of March 6, 2002 between OMNICOM GROUP INC., a New York
corporation (the "Company"), and JPMorgan Chase Bank, a New York banking
corporation (the "Trustee").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Company's Zero Coupon Zero
Yield Convertible Notes due 2032 (the "Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.
"144A Global Security" means a permanent Global Security in the form of
the Security attached hereto as Exhibit A-1, and that is deposited with and
registered in the name of the Depositary, representing Securities sold in
reliance on Rule 144A under the Securities Act.
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For purposes of this definition, "control"
when used with respect to any specified person means the power to direct or
cause the direction of the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Applicable Procedures" means, with respect to any transfer or transaction
involving a Global Security or beneficial interest therein, the rules and
procedures of the Depositary for such Security, in each case to the extent
applicable to such transaction and as in effect from time to time.
"Board of Directors" means either the board of directors of the Company or
any duly authorized committee of such board.
"Business Day" means each day of the year other than a Saturday or a
Sunday on which banking institutions in the City of New York are not required or
authorized to close.
"Capital Stock" for any corporation means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) stock issued by that corporation.
"Certificated Securities" means Securities that are in the form of the
Securities attached hereto as Exhibit A-2.
<PAGE>
"Common Stock" means the shares of Common Stock, $0.15 par value, of the
Company as it exists on the date of this Indenture or any other shares of
Capital Stock of the Company into which the Common Stock shall be reclassified
or changed.
"Company" means the party named as the "Company" in the first paragraph of
this Indenture until a successor replaces it pursuant to the applicable
provisions of this Indenture and, thereafter, shall mean such successor. The
foregoing sentence shall likewise apply to any subsequent such successor or
successors.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any two Officers.
"Contingent Cash Interest" means, with respect to a Security, the interest
paid in accordance with paragraph 5 of the Securities.
"Contingent Additional Principal" of any Security means the difference
between the Initial Principal Amount at Maturity and the Principal Amount at
Maturity of the Security, if any.
"Conversion Value" of a Security, means, as of any date of determination,
the Sale Price per share of the Common Stock of the Company on such
determination date multiplied by the number of shares of Common Stock then
issuable upon conversion of $1,000 Initial Principal Amount at Maturity of a
Security.
"Corporate Trust Office" means the principal office of the Trustee at
which at any time its corporate trust business shall be administered, which
office at the date hereof is located at 450 West 33rd Street, New York, NY
10001, Attention: Institutional Trust Services, or such other address as the
Trustee may designate from time to time by notice to the Company, or the
principal corporate trust office of any successor Trustee (or such other address
as a successor Trustee may designate from time to time by notice to the
Company).
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Global Securities" means Securities that are in the form of the
Securities attached hereto as Exhibit A-1, and to the extent that such
Securities are required to bear the Legend required by Section 2.06(f), such
Securities will be in the form of a 144A Global Security.
"Holder" or "Securityholder" means a person in whose name a Security is
registered on the Registrar's books.
"Indebtedness" means, at any date, without duplication, obligations of the
Company (other than nonrecourse obligations) for borrowed money or evidenced by
bonds, debentures, notes or similar instruments of the Company.
2
<PAGE>
"Indenture" means this Indenture, as amended or supplemented from time to
time in accordance with the terms hereof, including the provisions of the TIA
that are deemed to be a part hereof.
"Initial Principal Amount at Maturity" of any Security means $1,000.00 per
$1,000.00 face amount of such Security.
"Institutional Accredited Investor" means an institutional "accredited
investor" as described in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act.
"Institutional Accredited Investor Security" means a Security in the form
of the Security attached hereto as Exhibit A-2, representing Securities sold to
Institutional Accredited Investors.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Issue Date" means March 6, 2002.
"July 31, 2022 Average Conversion Value" means the average of the
Conversion Values of the Securities for each of the 20 trading days preceding
July 31, 2022.
"Officer" means the Chairman of the Board, the Vice Chairman, the Chief
Executive Officer, the President, any Executive Vice President, any Senior Vice
President, any Vice President, the Treasurer or the Secretary or any Assistant
Treasurer or Assistant Secretary of the Company.
"Officers' Certificate" means a written certificate containing the
information specified in Sections 12.04(1) and 12.05, signed in the name of the
Company by any two Officers, and delivered to the Trustee. An Officers'
Certificate given pursuant to Section 4.03 needs only to be signed by the
principal, executive, financial or accounting Officer of the Company and need
not contain the information specified in Sections 12.04 and 12.05.
"Opinion of Counsel" means a written opinion containing the information
specified in Sections 12.04 and 12.05, from legal counsel who is reasonably
acceptable to the Trustee. The counsel may be an employee of, or counsel to, the
Company or the Trustee.
"person" or "Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Principal Amount at Maturity" of a Security means $1,000 per $1,000.00
face amount of such Security, except as the same may be increased pursuant to
paragraph 4 of the Security.
"Redemption Date" or "redemption date" means the date specified for
redemption of the Securities in accordance with the terms of the Securities and
this Indenture.
3
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"Redemption Price" or "redemption price" has the meaning set forth in
paragraph 6 of the Securities.
"Responsible Officer" means, when used with respect to the Trustee, any
officer with direct responsibility for the administration of this Indenture or
any other officer of the Trustee to whom any corporate trust matter is referred
because of such person's knowledge of and familiarity with the particular
subject.
"Restricted Security" means a Security required to bear the restrictive
legend set forth in the form of Security set forth in Exhibits A-1 and A-2 of
this Indenture.
"Rule 144A" means Rule 144A under the Securities Act (or any successor
provision), as it may be amended from time to time.
"Sale Price" of Capital Stock on any date means the closing per share sale
price (or, if no closing sale price is reported, the average of the bid and ask
prices or, if more than one in either case, the average of the average bid and
the average ask prices) on such date as reported in the composite transactions
for the principal United States securities exchange on which the Common Stock is
traded or, if the Common Stock is not listed on a United States national or
regional securities exchange, as reported by the National Association of
Securities Dealers Automated Quotation System or by the National Quotation
Bureau Incorporated. In the absence of such quotation, the Company shall be
entitled to determine the Sale Price on the basis of such quotations as it
considers appropriate.
"SEC" means the Securities and Exchange Commission.
"Securities" means any of the Company's Zero Coupon Zero Yield Convertible
Notes due 2032 issued under this Indenture.
"Securityholder" or "Holder" means a person in whose name a Security is
registered on the Registrar's books.
"Significant Subsidiary" means a Subsidiary of the Company, including its
Subsidiaries, which meets any of the following conditions:
(a) the Company's and its other Subsidiaries' investments in and
advances to the Subsidiary exceed 20 percent of the total assets of
the Company and its Subsidiaries consolidated as of the end of any
two of the three most recently completed fiscal years; or
(b) the Company's and its other Subsidiaries' proportionate share of the
total assets of the Subsidiary exceeds 20 percent of the total
assets of the Company and its Subsidiaries consolidated as of the
end of any two of the three most recently completed fiscal years; or
(c) the Company's and its other Subsidiaries' equity in the income from
continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principles of the
Subsidiary exceeds 20 percent of such income of
4
<PAGE>
the Company and its Subsidiaries consolidated as of the end of any
two of the three most recently completed fiscal years,
it being understood and agreed that the inclusion of a Subsidiary on any list of
Subsidiaries or of "significant subsidiaries" within the meaning of Regulation
S-K (or any successor rule or regulation) under the Securities Act for purposes
of any filing with the SEC or otherwise shall not be considered in making the
determination as to whether such Subsidiary meets the definition of "Significant
Subsidiary" for purposes of this Indenture.
"Special Record Date" means for the payment of any Defaulted Interest, the
date fixed by the Trustee pursuant to Section 11.02.
"Stated Maturity", when used with respect to any Security or any
installment of Contingent Cash Interest thereon, means the date specified in
such Security as the fixed date on which an amount equal to the Principal Amount
at Maturity of such Security or such installment of Contingent Interest is due
and payable.
"Subsidiary" means (i) a corporation, a majority of whose Capital Stock
with voting power, under ordinary circumstances, to elect directors is, at the
date of determination, directly or indirectly owned by the Company, by one or
more Subsidiaries of the Company or by the Company and one or more Subsidiaries
of the Company, (ii) a partnership in which the Company or a Subsidiary of the
Company holds a majority interest in the equity capital or profits of such
partnership, or (iii) any other person (other than a corporation or partnership)
in which the Company, a Subsidiary of the Company or the Company and one or
more Subsidiaries of the Company, directly or indirectly, at the date of
determination, has (x) at least a majority equity ownership interest or (y) the
power to elect or direct the election of a majority of the directors or other
governing body of such person.
"TIA" means the Trust Indenture Act of 1939 as in effect on the date of
this Indenture, provided, however, that in the event the TIA is amended after
such date, TIA means, to the extent required by any such amendment, the TIA as
so amended.
"trading day" means a day during which trading in securities generally
occurs on the New York Stock Exchange or, if the Common Stock is not listed on
the New York Stock Exchange, on the principal other national or regional
securities exchange on which the Common Stock is then listed or, if the Common
Stock is not listed on a national or regional securities exchange, on the
National Association of Securities Dealers Automated Quotation System or, if the
Common Stock is not quoted on the National Association of Securities Dealers
Automated Quotation System, on the principal other market on which the Common
Stock is then traded.
"Trustee" means the party named as the "Trustee" in the first paragraph of
this Indenture until a successor replaces it pursuant to the applicable
provisions of this Indenture and, thereafter, shall mean such successor. The
foregoing sentence shall likewise apply to any subsequent such successor or
successors.
5
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SECTION 1.02 Other Definitions.
-------------------------------
Defined in
Term Section
- ---- -------
"Act"....................................................................1.05(a)
"Agent Members"..........................................................2.12(e)
"Associate"..............................................................3.09(a)
"Average Sale Price".......................................................10.01
"Bankruptcy Law"............................................................6.01
"Bid Solicitation Agent"....................................................2.03
"cash"...................................................................3.08(b)
"Change in Control"......................................................3.09(a)
"Change in Control Purchase Date"........................................3.09(a)
"Change in Control Purchase Notice"......................................3.09(c)
"Change in Control Purchase Price".......................................3.09(a)
"Company Notice".........................................................3.08(e)
"Company Notice Date"....................................................3.08(c)
"Conversion Agent"..........................................................2.03
"Conversion Date"..........................................................10.02
"Conversion Rate"..........................................................10.01
"Custodian".................................................................6.01
"Defaulted Interest".......................................................11.02
"Depositary".............................................................2.01(a)
"DTC"....................................................................2.01(a)
"Event of Default"..........................................................6.01
"Exchange Act"...........................................................3.08(d)
"Exchange Party" ..........................................................10.02
"Ex-Dividend Date"......................................................10.08(b)
"Ex-Dividend Time".........................................................10.01
"Extraordinary Cash Dividend"...........................................10.08(a)
"Institutional Accredited Investors".....................................2.01(b)
"Legal Holiday"............................................................12.09
"Legend".................................................................2.06(f)
"Market Price"...........................................................3.08(d)
"Measurement Period"....................................................10.08(a)
"noncontingent bond method".................................................4.07
"Notice of Default".........................................................6.01
"Paying Agent"..............................................................2.03
"Payment Date"...........................................................3.08(a)
"Purchase Date"..........................................................3.08(a)
"Purchase Notice"........................................................3.08(a)
"Purchase Party".........................................................3.08(i)
"Purchase Price".........................................................3.08(a)
"QIBs"...................................................................2.01(a)
"Registrar".................................................................2.03
"Relevant Cash Dividends"...............................................10.08(a)
6
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"Rights"...................................................................10.19
"Rights Agreement".........................................................10.19
"Rule 144A Information".....................................................4.06
"Securities Act".........................................................3.08(d)
"Time of Determination"....................................................10.01
"Zero Coupon Zero Yield Convertible Notes Market Price".................Exh. A-1
SECTION 1.03 Incorporation by Reference of Trust Indenture Act. Whenever
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04 Rules of Construction. Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to
it in accordance with generally accepted accounting principles as in
effect from time to time;
(c) "or" is not exclusive;
(d) "including" means including, without limitation; and
(e) words in the singular include the plural, and words in the plural
include the singular.
SECTION 1.05 Acts of Holders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by their agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such
7
<PAGE>
instrument or instruments are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and conclusive in favor of the
Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to such officer the execution thereof.
Where such execution is by a signer acting in a capacity other than such
signer's individual capacity, such certificate or affidavit shall also
constitute sufficient proof of such signer's authority. The fact and date of the
execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which the Trustee
deems sufficient.
(c) The ownership of Securities shall be proved by the register for the
Securities or by a certificate of the Registrar.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
(e) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by or pursuant to a resolution of the Board of Directors, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such record date, but only the Holders
of record at the close of business on such record date shall be deemed to be
Holders for purposes of determining whether Holders of the requisite proportion
of outstanding Securities have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other Act,
and for that purpose the outstanding Securities shall be computed as of such
record date; provided that no such authorization, agreement or consent by the
Holders on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than six months
after the record date.
8
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ARTICLE 2
THE SECURITIES
SECTION 2.01 Form and Dating. The Securities and the Trustee's certificate
of authentication shall be substantially in the form of Exhibits A-1 and A-2,
which are a part of this Indenture. The Securities may have notations, legends
or endorsements required by law, stock exchange rule or usage (provided that any
such notation, legend or endorsement required by usage is in a form acceptable
to the Company). The Company shall provide any such notations, legends or
endorsements to the Trustee in writing. Each Security shall be dated the date of
its authentication.
(a) 144A Global Securities. Securities offered and sold within the United
States to qualified institutional investors as defined in Rule 144A ("QIBs") in
reliance on Rule 144A shall be issued initially in the form of a 144A Global
Security, which shall be deposited with the Trustee at its Corporate Trust
Office, as custodian for the Depositary and registered in the name of The
Depository Trust Company ("DTC") or the nominee thereof (such depositary, or any
successor thereto, and any such nominee being hereinafter referred to as the
"Depositary"), duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate Principal Amount of the 144A Global
Securities may from time to time be increased or decreased by adjustments made
on the records of the Trustee and the Depositary as hereinafter provided.
(b) Institutional Accredited Investor Securities. Except as provided in
this Section 2.01, 2.06 or 2.12, owners of beneficial interests in Global
Securities will not be entitled to receive physical delivery of Certificated
Securities. Securities offered and sold within the United States to
institutional accredited investors as defined in Rule 501(a)(1), (2), (3) and
(7) under the Securities Act ("Institutional Accredited Investors") shall be
issued, initially, in the form of an Institutional Accredited Investor Security
in accordance with the procedures in Section 2.12, duly executed by the Company
and authenticated by the Trustee as hereinafter provided.
(c) Global Securities in General. Each Global Security shall represent
such of the outstanding Securities as shall be specified therein and each shall
provide that it shall represent the aggregate Principal Amount at Maturity of
outstanding Securities from time to time endorsed thereon and that the aggregate
Principal Amount at Maturity of outstanding Securities represented thereby may
from time to time be reduced or increased, as appropriate, to reflect exchanges,
redemptions and conversions.
Any adjustment of the aggregate Principal Amount at Maturity of a Global
Security to reflect the amount of any increase or decrease in the Principal
Amount at Maturity of outstanding Securities represented thereby shall be made
by the Trustee in accordance with instructions given by the Holder thereof as
required by Section 2.12 hereof and shall be made on the records of the Trustee
and the Depositary.
(d) Book-Entry Provisions. This Section 2.01(d) shall apply only to Global
Securities deposited with or on behalf of the Depositary.
9
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The Company shall execute and the Trustee shall, in accordance with this
Section 2.01(d), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depositary, (b) shall
be delivered by the Trustee to the Depositary or pursuant to the Depositary's
instructions and (c) shall bear legends substantially to the following effect:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE
& CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY
OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS
OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF
THE INDENTURE REFERRED TO ON THE REVERSE HEREOF."
(e) Certificated Securities. Securities not issued as interests in the
Global Securities will be issued in certificated form substantially in the form
of Exhibit A-2 attached hereto. The Form of the Reverse Side of the Security in
Exhibit A-1 will be incorporated into Exhibit A-2.
SECTION 2.02 Execution and Authentication. The Securities shall be
executed on behalf of the Company by any Officer, under its corporate seal
reproduced thereon, if required by applicable law. The signature of the Officer
and/or corporate seal on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at the time of the execution of the Securities the proper Officers of the
Company shall bind the Company, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the authentication and delivery
of such Securities or did not hold such offices at the date of authentication of
such Securities.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual or facsimile
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signature of a Responsible Officer, and such certificate upon any Security shall
be conclusive evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder.
The Trustee shall authenticate and deliver Securities for original issue
in the aggregate Initial Principal Amount at Maturity of up to $900,000,000 upon
a Company Order without any further action by the Company. The aggregate Initial
Principal Amount at Maturity outstanding at any time may not exceed the amount
set forth in the foregoing sentence, except as provided in Section 2.07.
The Securities shall be issued only in registered form without coupons and
only in denominations of $1,000 of Initial Principal Amount at Maturity or any
integral multiple thereof.
SECTION 2.03 Registrar, Paying Agent, Conversion Agent and Bid
Solicitation Agent. The Company shall maintain an office or agency where
Securities may be presented for registration of transfer or for exchange
("Registrar"), an office or agency where Securities may be presented for
purchase or payment ("Paying Agent") and an office or agency where Securities
may be presented for conversion ("Conversion Agent"). The Company shall also
appoint a bid solicitation agent (the "Bid Solicitation Agent") to act pursuant
to paragraph 5 of the Securities. The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Company may have one or more
co-registrars, one or more additional paying agents and one or more additional
conversion agents. The term Paying Agent includes any additional paying agent,
including any named pursuant to Section 4.05. The term Conversion Agent includes
any additional conversion agent, including any named pursuant to Section 4.05.
If the Company fails to maintain a Registrar, Paying Agent, Conversion
Agent or Bid Solicitation Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.06. The
Company or any Subsidiary or an Affiliate of either of them may act as Paying
Agent, Registrar, Conversion Agent or co-registrar. None of the Company or any
Subsidiary or any Affiliate of either of them may act as Bid Solicitation Agent.
The Company initially appoints the Trustee as Registrar, Conversion Agent,
Paying Agent and Bid Solicitation Agent in connection with the Securities.
SECTION 2.04 Paying Agent to Hold Money and Securities in Trust. Except as
otherwise provided herein, (including Section 3.11 hereof), not later than 10:00
a.m., New York City time, on each due date of payments in respect of any
Security, the Company shall deposit with the Paying Agent a sum of money (in
immediately available funds if deposited on the due date) or Common Stock, if
the requirements for payments in Common Stock are satisfied, sufficient to make
such payments when so becoming due. The Company shall require each Paying Agent
(if other than the Trustee) to agree in writing that the Paying Agent shall hold
in trust for the benefit of Securityholders or the Trustee all money and Common
Stock held by the Paying Agent for the making of payments in respect of the
Securities and shall notify the Trustee of any default by the Company in making
any such payment. At any time during the continuance of any such default, the
Paying Agent shall, upon the written request of the Trustee, forthwith pay to
the Trustee all money and Common Stock so held in trust. If the Company, a
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Subsidiary or an Affiliate of either of them acts as Paying Agent, it shall
segregate the money and Common Stock held by it as Paying Agent and hold it as a
separate trust fund. The Company at any time may require a Paying Agent to pay
all money and Common Stock held by it to the Trustee and to account for any
funds and Common Stock disbursed by it. Upon doing so, the Paying Agent shall
have no further liability for the money or Common Stock.
SECTION 2.05 Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall cause to be furnished to the Trustee at least
semiannually on January 1 and July 1 a listing of Securityholders dated within
15 days of the date on which the list is furnished and at such other times as
the Trustee may request in writing a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of
Securityholders.
SECTION 2.06 Transfer and Exchange. Subject to Section 2.12 hereof, (a)
upon surrender for registration of transfer of any Security, together with a
written instrument of transfer satisfactory to the Registrar duly executed by
the Securityholder or such Securityholder's attorney duly authorized in writing,
at the office or agency of the Company designated as Registrar or co-registrar
pursuant to Section 2.03, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of any authorized denomination or
denominations, of a like aggregate Principal Amount at Maturity. The Company
shall not charge a service charge for any registration of transfer or exchange,
but the Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges that may be imposed in connection with
the registration of transfer or exchange of the Securities from the
Securityholder requesting such registration of transfer or exchange.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination or denominations, of a like aggregate
Principal Amount at Maturity, upon surrender of the Securities to be exchanged,
together with a written instrument of transfer satisfactory to the Registrar
duly executed by the Securityholder or such Securityholder's attorney duly
authorized in writing, at such office or agency. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive.
The Company shall not be required to make, and the Registrar need not
register, transfers or exchanges of Securities selected for redemption (except,
in the case of Securities to be redeemed in part, the portion thereof not to be
redeemed) or any Securities in respect of which a Purchase Notice or Change in
Control Purchase Notice has been given and not withdrawn by the Holder thereof
in accordance with the terms of this Indenture (except, in the case of
Securities to be purchased in part, the portion thereof not to be purchased) or
any Securities for a period of 15 days before the mailing of a notice of
redemption of Securities to be redeemed.
(b) Notwithstanding any provision to the contrary herein, so long as a
Global Security remains outstanding and is held by or on behalf of the
Depositary, transfers of a Global Security, in whole or in part, shall be made
only in accordance with Section 2.12 and this Section
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2.06(b). Transfers of a Global Security shall be limited to transfers of such
Global Security in whole, or in part, to nominees of the Depositary or to a
successor of the Depositary or such successor's nominee.
(c) Successive registrations and registrations of transfers and exchanges
as aforesaid may be made from time to time as desired, and each such
registration shall be noted on the register for the Securities.
(d) Any Registrar appointed pursuant to Section 2.03 hereof shall provide
to the Trustee such information as the Trustee may reasonably require in
connection with the delivery by such Registrar of Securities upon registration
of transfer or exchange of Securities.
(e) No Registrar shall be required to make registrations of transfer or
exchange of Securities during any periods designated in the text of the
Securities or in this Indenture as periods during which such registration of
transfers and exchanges need not be made.
(f) If Securities are issued upon the registration of transfer, exchange
or replacement of Securities subject to restrictions on transfer and bearing the
legends set forth on the form of Security attached hereto as Exhibits A-1 and
A-2 setting forth such restrictions (collectively, the "Legend"), or if a
request is made to remove the Legend on a Security, the Securities so issued
shall bear the Legend, or the Legend shall not be removed, as the case may be,
unless there is delivered to the Company and the Registrar such satisfactory
evidence, which shall include an Opinion of Counsel, as may be reasonably
required by the Company and the Registrar, that neither the Legend nor the
restrictions on transfer set forth therein are required to ensure that transfers
thereof comply with the provisions of Rule 144A or Rule 144 under the Securities
Act or that such Securities are not "restricted" within the meaning of Rule 144
under the Securities Act. Upon (i) provision of such satisfactory evidence, or
(ii) notification by the Company to the Trustee and Registrar of the sale of
such Security pursuant to a registration statement that is effective at the time
of such sale, the Trustee, at the written direction of the Company, shall
authenticate and deliver a Security that does not bear the Legend. If the Legend
is removed from the face of a Security and the Security is subsequently held by
an Affiliate of the Company, the Legend shall be reinstated.
SECTION 2.07 Replacement Securities. If (a) any mutilated Security is
surrendered to the Trustee, or (b) the Company and the Trustee receive evidence
to their satisfaction of the destruction, loss or theft of any Security, and
there is delivered to the Company and the Trustee such security or indemnity as
may be required by them to save each of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
protected purchaser, the Company shall execute and upon its written request the
Trustee shall authenticate and deliver, in exchange for any such mutilated
Security or in lieu of any such destroyed, lost or stolen Security, a new
Security of like tenor and Principal Amount at Maturity, bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, or is about to be purchased by the
Company pursuant to Article 3 hereof, the Company in its discretion may, instead
of issuing a new Security, pay or purchase such Security, as the case may be.
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Upon the issuance of any new Securities under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.08 Outstanding Securities; Determinations of Holders' Action.
Securities outstanding at any time are all the Securities authenticated by the
Trustee, except for those cancelled by it or delivered to it for cancellation,
those paid pursuant to Section 2.07 and those described in this Section 2.08 as
not outstanding. A Security does not cease to be outstanding because the Company
or an Affiliate thereof holds the Security; provided, however, that in
determining whether the Holders of the requisite Principal Amount of Securities
have given or concurred in any request, demand, authorization, direction,
notice, consent or waiver hereunder, Securities owned by the Company or any
other obligor upon the Securities or any Affiliate of the Company or such other
obligor shall be disregarded and deemed not to be outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Securities which a Responsible Officer of the Trustee knows to be so owned shall
be so disregarded. Subject to the foregoing, only Securities outstanding at the
time of such determination shall be considered in any such determination
(including, without limitation, determinations pursuant to Articles 6 and 9).
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a protected purchaser.
If the Paying Agent holds, in accordance with this Indenture, on a
Redemption Date, or on or prior to the Business Day following the Purchase Date
or a Change in Control Purchase Date, or on Stated Maturity, money or
securities, if permitted hereunder, sufficient to pay Securities payable on that
date, then such Securities shall cease to be outstanding and Contingent
Additional Principal and Contingent Cash Interest, if any, on such Securities
shall cease to accrue; provided that, if such Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this Indenture or
provision therefor satisfactory to the Trustee has been made.
If a Security is converted in accordance with Article 10, then from and
after the time of conversion on the Conversion Date, such Security shall cease
to be outstanding and
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Contingent Additional Principal and Contingent Cash Interest, if any, shall
cease to accrue on such Security.
SECTION 2.09 Temporary Securities. Pending the preparation of definitive
Securities, the Company may execute, and upon Company Order the Trustee shall
authenticate and deliver, temporary Securities which are printed, lithographed,
typewritten, photocopied or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 2.03,
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like Principal Amount at
Maturity of definitive Securities of authorized denominations. Until so
exchanged the temporary Securities shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities.
SECTION 2.10 Cancellation. The Company may at any time deliver to the
Trustee for cancellation any Securities previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and all
Securities so delivered shall be promptly cancelled by the Trustee. The Company
may not issue new Securities to replace Securities it has paid or delivered to
the Trustee for cancellation or that any Holder has converted pursuant to
Article 10. No Securities shall be authenticated in lieu of or in exchange for
any Securities cancelled as provided in this Section, except as expressly
permitted by this Indenture. All cancelled Securities held by the Trustee shall
be disposed of by the Trustee and the Trustee shall deliver a certificate of
destruction to the Company.
SECTION 2.11 Persons Deemed Owners. Prior to due presentment of a Security
for registration of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name such Security is
registered as the owner of such Security for the purpose of receiving payment of
principal of the Security or the payment of any Redemption Price, Purchase Price
or Change in Control Purchase Price in respect thereof, and Contingent Cash
Interest, if any, thereon, for the purpose of conversion and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 2.12 Global Securities. (a) Notwithstanding any other provisions
of this Indenture or the Securities, (A) transfers of a Global Security, in
whole or in part, shall be made only in accordance with Section 2.06 and Section
2.12(a)(i), (B) transfer of a beneficial interest in a Global Security for a
Certificated Security shall comply with Section 2.06 and Section 2.12(a)(ii)
below, and (C) transfers of a Certificated Security shall comply with Section
2.06 and Section 2.12(a)(iii) and (iv) below.
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(i) Transfer of Global Security. A Global Security may not be
transferred, in whole or in part, to any Person other than the Depositary
or a nominee or any successor thereof, and no such transfer to any such
other Person may be registered; provided that this clause (i) shall not
prohibit any transfer of a Security that is issued in exchange for a
Global Security but is not itself a Global Security. No transfer of a
Security to any Person shall be effective under this Indenture or the
Securities unless and until such Security has been registered in the name
of such Person. Nothing in this Section 2.12(a)(i) shall prohibit or
render ineffective any transfer of a beneficial interest in a Global
Security effected in accordance with the other provisions of this Section
2.12(a).
(ii) Restrictions on Transfer of a Beneficial Interest in a Global
Security for a Certificated Security. A beneficial interest in a Global
Security may not be exchanged for a Certificated Security except upon
satisfaction of the requirements set forth below. Upon receipt by the
Trustee of a request for transfer of a beneficial interest in a Global
Security in accordance with Applicable Procedures for a Certificated
Security in the form satisfactory to the Trustee, together with:
(a) so long as the Securities are Restricted Securities,
certification, in the form set forth in Exhibit B-1, and, if
requested by the Company or the Registrar, certification in the form
set forth in Exhibit B-2, that such beneficial interest in the
Global Security is being transferred to an Institutional Accredited
Investor in accordance with subparagraphs (a)(1), (2), (3) or (7) of
Rule 501 under the Securities Act;
(b) written instructions from the Company to the Trustee to
make, or direct the Registrar to make, an adjustment on its books
and records with respect to such Global Security to reflect a
decrease in the aggregate Principal Amount at Maturity of the
Securities represented by the Global Security, such instructions to
contain information regarding the Depositary account to be credited
with such decrease; and
(c) if the Company or Registrar so requests, an Opinion of
Counsel or other evidence reasonably satisfactory to them as to the
compliance with the restrictions set forth in the Legend,
then the Trustee shall cause, or direct the Registrar to cause, in
accordance with the standing instructions and procedures existing between
the Depositary and the Registrar, the aggregate Principal Amount at
Maturity of Securities represented by the Global Security to be decreased
by the aggregate Principal Amount at Maturity of the Certificated Security
to be issued, shall issue such Certificated Security and shall debit or
cause to be debited to the account of the Person specified in such
instructions a beneficial interest in the Global Security equal to the
Principal Amount at Maturity of the Certificated Security so issued.
(iii) Transfer and Exchange of Certificated Securities. When
Certificated Securities are presented to the Registrar with a request:
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(x) to register the transfer of such Certificated Securities;
or
(y) to exchange such Certificated Securities for an equal
Principal Amount at Maturity of Certificated Securities of other
authorized denominations,
the Registrar shall register the transfer or make the exchange as
requested if its reasonable requirements for such transaction are met;
provided, however, that the Certificated Securities surrendered for
registration of transfer or exchange:
(a) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the
Company and the Registrar, duly executed by the Holder thereof or
his attorney duly authorized in writing; and
(b) so long as such Securities are Restricted Securities, such
Securities are being transferred or exchanged pursuant to an
effective registration statement under the Securities Act or
pursuant to clause (A), (B) or (C) below, and are accompanied by the
following additional information and documents, as applicable:
(A) if such Certificated Securities are being delivered
to the Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification from such
Holder to that effect; or
(B) if such Certificated Securities are being
transferred to the Company, a certification to that effect; or
(C) if such Certificated Securities are being
transferred pursuant to an exemption from registration, (i) a
certification to that effect (in the form set forth in
Exhibits B-1 and B-2, if requested by the Company or the
Registrar) and (ii) if the Company or Registrar so requests,
an opinion of counsel or other evidence reasonably
satisfactory to them as to the compliance with the
restrictions set forth in the Legend.
(iv) Restrictions on Transfer of a Certificated Security for a
Beneficial Interest in a Global Security. A Certificated Security may not
be exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below.
Upon receipt by the Trustee of a Certificated Security, duly endorsed or
accompanied by appropriate instruments of transfer, in form satisfactory to the
Trustee, together with:
(a) so long as the Securities are Restricted Securities,
certification, in the form set forth in Exhibit B-1, that such
Certificated Security is being transferred to a Qualified
Institutional Buyer in accordance with Rule 144A; and
(b) written instructions from the Company directing the
Trustee to make, or to direct the Registrar to make, an adjustment
on its books and records with respect to such Global Security to
reflect an increase in the aggregate
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Principal Amount at Maturity of the Securities represented by the
Global Security, such instructions to contain information regarding
the Depositary account to be credited with such increase,
then the Trustee shall cancel such Certificated Security and cause, or
direct the Registrar to cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Registrar, the aggregate Principal Amount at Maturity of Securities
represented by the Global Security to be increased by the aggregate
Principal Amount at Maturity of the Certificated Security to be exchanged,
and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global
Security equal to the Principal Amount at Maturity of the Certificated
Security so cancelled. If no Global Securities are then outstanding, the
Company shall issue and the Trustee shall authenticate, upon Company
Order, a new Global Security in the appropriate Principal Amount at
Maturity.
(b) Subject to the succeeding paragraph, every Security shall
be subject to the restrictions on transfer provided in the Legend
including the delivery of an Opinion of Counsel, if so provided.
Whenever any Restricted Security is presented or surrendered for
registration of transfer or for exchange for a Security registered
in a name other than that of the Holder, such Security must be
accompanied by a certificate in substantially the form set forth in
Exhibit B-1 or B-2, as may be requested by the Company or the
Registrar, dated the date of such surrender and signed by the Holder
of such Security, as to compliance with such restrictions on
transfer. The Registrar shall not be required to accept for such
registration of transfer or exchange any Security not so accompanied
by a properly completed certificate.
(c) The restrictions imposed by the Legend upon the
transferability of any Security shall cease and terminate when such
Security has been sold pursuant to an effective registration
statement under the Securities Act or transferred in compliance with
Rule 144 under the Securities Act (or any successor provision
thereto) or, if earlier, upon the expiration of the holding period
applicable to sales thereof under Rule 144(k) under the Securities
Act (or any successor provision). Any Security as to which such
restrictions on transfer shall have expired in accordance with their
terms or shall have terminated may, upon a surrender of such
Security for exchange to the Registrar in accordance with the
provisions of this Section 2.12 (accompanied, in the event that such
restrictions on transfer have terminated by reason of a transfer in
compliance with Rule 144 or any successor provision, by an Opinion
of Counsel having substantial experience in practice under the
Securities Act and otherwise reasonably acceptable to the Company,
addressed to the Company and in form acceptable to the Company, to
the effect that the transfer of such Security has been made in
compliance with Rule 144 or such successor provision), be exchanged
for a new Security, of like tenor and aggregate Principal Amount at
Maturity, which shall not bear the restrictive Legend. The Company
shall inform the Trustee of the effective date of any registration
statement registering the Securities under the Securities Act. The
Trustee shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the aforementioned
Opinion of Counsel or registration statement.
(d) As used in the preceding two paragraphs of this Section
2.12, the term "transfer" encompasses any sale, pledge, transfer,
hypothecation or other disposition of any Security.
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(e) The provisions of clauses (1), (2), (3) and (4) below
shall apply only to Global Securities:
(1) Notwithstanding any other provisions of this Indenture or
the Securities, except as provided in Section 2.12(a)(ii), a Global
Security shall not be exchanged in whole or in part for a Security
registered in the name of any Person other than the Depositary or
one or more nominees thereof, provided that a Global Security may be
exchanged for Securities registered in the names of any Person
designated by the Depositary in the event that (i) the Depositary
has notified the Company that it is unwilling or unable to continue
as Depositary for such Global Security or such Depositary has ceased
to be a "clearing agency" registered under the Exchange Act, and a
successor Depositary is not appointed by the Company within 90 days,
(ii) an Event of Default has occurred and is continuing with respect
to the Securities or (iii) the Company decides to discontinue use of
the system of book-entry transfer through DTC (or any successor
depositary). Any Global Security exchanged pursuant to clause (i)
above shall be so exchanged in whole and not in part, and any Global
Security exchanged pursuant to clause (ii) above may be exchanged in
whole or from time to time in part as directed by the Depositary.
Any Security issued in exchange for a Global Security or any portion
thereof shall be a Global Security; provided that any such Security
so issued that is registered in the name of a Person other than the
Depositary or a nominee thereof may be a Certificated Security.
(2) Securities issued in exchange for a Global Security or any
portion thereof shall be issued in definitive, fully registered
form, without interest coupons, shall have an aggregate Principal
Amount at Maturity equal to that of such Global Security or portion
thereof to be so exchanged, shall be registered in such names and be
in such authorized denominations as the Depositary shall designate
and shall bear the applicable legends provided for herein. Any
Global Security to be exchanged in whole shall be surrendered by the
Depositary to the Trustee, as Registrar. With regard to any Global
Security to be exchanged in part, either such Global Security shall
be so surrendered for exchange or, if the Trustee is acting as
custodian for the Depositary or its nominee with respect to such
Global Security, the Principal Amount at Maturity thereof shall be
reduced, by an amount equal to the portion thereof to be so
exchanged, by means of an appropriate adjustment made on the records
of the Trustee. Upon any such surrender or adjustment, the Trustee
shall authenticate and deliver the Security issuable on such
exchange to or upon the order of the Depositary or an authorized
representative thereof.
(3) Subject to the provisions of clause (5) below, the
registered Holder may grant proxies and otherwise authorize any
Person, including Agent Members (as defined below) and Persons that
may hold interests through Agent Members, to take any action which a
Holder is entitled to take under this Indenture or the Securities.
(4) In the event of the occurrence of any of the events
specified in clause (1) above, the Company will promptly make
available to the Trustee a reasonable supply of Certificated
Securities in definitive, fully registered form, without interest
coupons.
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(5) Neither any members of, or participants in, the Depositary
(collectively, the "Agent Members") nor any other Persons on whose
behalf Agent Members may act shall have any rights under this Indenture
with respect to any Global Security registered in the name of the
Depositary or any nominee thereof, or under any such Global Security,
and the Depositary or such nominee, as the case may be, may be treated
by the Company, the Trustee and any agent of the Company or the Trustee
as the absolute owner and Holder of such Global Security for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or
the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or such nominee, as the
case may be, or impair, as between the Depositary, its Agent Members
and any other Person on whose behalf an Agent Member may act, the
operation of customary practices of such Persons governing the exercise
of the rights of a Holder of any Security.
SECTION 2.13 CUSIP Numbers. The Company in issuing the Securities may use
"CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders; provided
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the CUSIP numbers.
ARTICLE 3
REDEMPTION AND PURCHASES
SECTION 3.01 Right to Redeem; Notices to Trustee. The Company, at its
option, may redeem the Securities in accordance with the provisions of
paragraphs 6 and 8 of the Securities. If the Company elects to redeem Securities
pursuant to paragraphs 6 and 8 of the Securities, it shall notify the Trustee in
writing of the Redemption Date, the Initial Principal Amount at Maturity of
Securities to be redeemed, the Redemption Price and the amount of Contingent
Cash Interest, if any, payable on the Redemption Date.
The Company shall give the notice to the Trustee provided for in this
Section 3.01 in writing on the same date as it provides notice thereof to
Holders, unless not all of the then outstanding Securities are called for
redemption, in which case the Company shall give notice to the Trustee, at least
45 days before the Redemption Date (unless, in either case, a shorter notice
shall be satisfactory to the Trustee).
SECTION 3.02 Selection of Securities to Be Redeemed. If fewer than all the
Securities are to be redeemed, the Trustee shall select the Securities to be
redeemed pro rata or by lot or by any other method the Trustee considers fair
and appropriate (so long as such method is not prohibited by the rules of any
stock exchange on which the Securities are then listed, if any). The Trustee
shall make the selection at least 30 days but not more than 60 days before the
Redemption Date from outstanding Securities not previously called for
redemption. The Trustee
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may select for redemption portions of the Initial Principal Amount at Maturity
of Securities that have denominations larger than $1,000 and integral multiples
thereof.
Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption. The
Trustee shall notify the Company promptly of the Securities or portions of
Securities to be redeemed.
If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed (so
far as may be) to be the portion selected for redemption. Securities which have
been converted during a selection of Securities to be redeemed may be treated by
the Trustee as outstanding for the purpose of such selection.
SECTION 3.03 Notice of Redemption. At least 30 days but not more than 60
days before a Redemption Date, the Company shall mail a notice of redemption by
first-class mail, postage prepaid, to each Holder of Securities to be redeemed.
The notice shall identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of Contingent Cash Interest, if
any, payable on the Redemption Date;
(3) the Conversion Rate;
(4) the name and address of the Paying Agent and Conversion Agent;
(5) that Securities called for redemption may be converted at any time
before the close of business on the Redemption Date;
(6) that Holders who want to convert Securities must satisfy the
requirements set forth in paragraph 9 of the Securities;
(7) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price and Contingent Cash
Interest, if any;
(8) if fewer than all the outstanding Securities are to be redeemed, the
certificate number and Principal Amount at Maturity of each Security
to be redeemed;
(9) that, unless the Company defaults in making payment of such
Redemption Price and accrued Contingent Cash Interest, if any, on
Securities called for redemption, will cease to accrue on and after
the Redemption Date; and
(10) the CUSIP number of the Securities.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at the Company's expense, provided that the Company
makes such request
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at least five Business Days (unless a shorter period shall be satisfactory to
the Trustee) prior to the date called for such notice of redemption.
SECTION 3.04 Effect of Notice of Redemption. Once notice of redemption is
given, Securities called for redemption become due and payable on the Redemption
Date and at the Redemption Price (together with accrued Contingent Cash
Interest, if any) stated in the notice, except for Securities which are
converted in accordance with the terms of this Indenture. Upon surrender to the
Paying Agent, such Securities shall be paid at the Redemption Price (together
with accrued Contingent Cash Interest, if any) stated in the notice.
SECTION 3.05 Deposit of Redemption Price. Prior to 10:00 a.m. (New York
City time) on the Redemption Date, the Company shall deposit with the Paying
Agent (or if the Company or a Subsidiary or an Affiliate of either of them is
the Paying Agent, shall segregate and hold in trust) money sufficient to pay the
Redemption Price of, and any accrued and unpaid Contingent Cash Interest with
respect to, all Securities to be redeemed on that date other than Securities or
portions of Securities called for redemption which on or prior thereto have been
delivered by the Company to the Trustee for cancellation or have been converted.
The Paying Agent shall as promptly as practicable return to the Company any
money not required for that purpose because of conversion of Securities pursuant
to Article 10. If such money is then held by the Company in trust and is not
required for such purpose, it shall be discharged from such trust.
SECTION 3.06 Securities Redeemed in Part. Upon surrender of a Security
that is redeemed in part, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder a new Security in an authorized
denomination equal in Initial Principal Amount at Maturity to the unredeemed
portion of the Security surrendered.
SECTION 3.07 Conversion Arrangement on Call for Redemption. In connection
with any redemption of Securities, the Company may arrange for the purchase and
subsequent conversion of any Securities called for redemption by an agreement
with one or more investment bankers or other purchasers to purchase such
Securities by paying to the Trustee in trust for the Securityholders, on or
prior to 10:00 a.m., New York City time, on the Redemption Date, an amount that,
together with any amounts deposited with the Trustee by the Company for the
redemption of such Securities, is not less than the Redemption Price of, and any
accrued and unpaid Contingent Cash Interest with respect to, such Securities.
Notwithstanding anything to the contrary contained in this Article 3, the
obligation of the Company to pay the Redemption Prices of such Securities shall
be deemed to be satisfied and discharged to the extent such amount is so paid by
such purchasers. If such an agreement is entered into, any Securities not duly
surrendered for conversion by the Holders thereof prior to the Redemption Date
may, at the option of the Company, be deemed, to the fullest extent permitted by
law, acquired by such purchasers from such Holders and (notwithstanding anything
to the contrary contained in Article 10) surrendered by such purchasers for
conversion, all as of immediately prior to the close of business on the Business
Day prior to the Redemption Date, subject to payment of the above amount as
aforesaid. The Trustee shall hold and pay to the Holders whose Securities are
selected for redemption any such amount paid to it for purchase and conversion
in the same manner as it would moneys deposited with it by the Company for the
redemption of Securities. Without the Trustee's prior written consent, no
arrangement between the Company and such purchasers for
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the purchase and conversion of any Securities shall increase or otherwise affect
any of the powers, duties, responsibilities or obligations of the Trustee as set
forth in this Indenture, and the Company agrees to indemnify the Trustee from,
and hold it harmless against, any loss, liability or expense arising out of or
in connection with any such arrangement for the purchase and conversion of any
Securities between the Company and such purchasers, including the costs and
expenses incurred by the Trustee in the defense of any claim or liability
arising out of or in connection with the exercise or performance of any of its
powers, duties, responsibilities or obligations under this Indenture.
SECTION 3.08 Purchase of Securities at Option of the Holder. (a) General.
Subject to paragraph (i) below, if a Holder exercises its right to require the
Company to purchase Securities pursuant to paragraph 7 of the Securities, such
Securities shall be purchased by the Company or a Purchase Party, if applicable,
pursuant to paragraph 7 of the Securities on each July 31, from July 31, 2003
through July 31, 2031 (each July 31 in the aforementioned period, or, if July 31
in the applicable period is not a Business Day, the next succeeding Business
Day, a "Purchase Date"), at a purchase price equal to (i) the Initial Principal
Amount at Maturity of the Security for any Purchase Date occurring prior to July
31, 2022 and (ii) the Initial Principal Amount at Maturity plus accrued
Contingent Additional Principal, if any, as of the relevant Purchase Date for
any Purchase Date occurring on or after July 31, 2022 through July 31, 2031
(each, a "Purchase Price," as applicable), at the option of the Holder thereof,
upon:
(1) delivery to the Paying Agent, by the Holder of a written notice
of purchase (a "Purchase Notice") at any time from the opening of business
on the date that is at least 20 Business Days prior to a Purchase Date
until the close of business on the Purchase Date stating:
(A) the certificate number of the Security which the Holder
will deliver to be purchased,
(B) the portion of the Initial Principal Amount at Maturity of
the Security which the Holder will deliver to be purchased, which
portion must be an Initial Principal Amount at Maturity of at least
$1,000 or an integral multiple thereof,
(C) that such Security shall be purchased as of the Purchase
Date pursuant to the terms and conditions specified in paragraph 7
of the Securities and in this Indenture, and
(D) in the event the Company elects, pursuant to Section
3.08(b), to pay the Purchase Price to be paid as of such Purchase
Date, in whole or in part, in shares of Common Stock but such
portion of the Purchase Price shall ultimately be payable to such
Holder entirely in cash because any of the conditions to payment of
the Purchase Price in Common Stock is not satisfied prior to the
close of business on such Purchase Date, as set forth in Section
3.08(d), whether such Holder elects (i) to withdraw such Purchase
Notice as to some or all of the Securities to which such Purchase
Notice relates (stating the Principal Amount at Maturity and
certificate numbers of the Securities as to which such withdrawal
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shall relate), or (ii) to receive cash in respect of the entire
Purchase Price for all Securities (or portions thereof) to which
such Purchase Notice relates; and
(2) delivery of such Security to the Paying Agent prior to, on or
after the Purchase Date (together with all necessary endorsements) at the
offices of the Paying Agent, such delivery being a condition to receipt by
the Holder of the Purchase Price therefor; provided, however, that such
Purchase Price shall be so paid pursuant to this Section 3.08 only if the
Security so delivered to the Paying Agent shall conform in all respects to
the description thereof in the related Purchase Notice, as determined by
the Company.
If a Holder, in such Holder's Purchase Notice and in any written notice of
withdrawal delivered by such Holder pursuant to the terms of Section 3.10, fails
to indicate such Holder's choice with respect to the election set forth in
clause (D) of Section 3.08(a)(1), such Holder shall be deemed to have elected to
receive cash in respect of the Purchase Price for all Securities subject to such
Purchase Notice in the circumstances set forth in such clause (D).
The Company or the Purchase Party, as applicable, shall purchase from the
Holder thereof, pursuant to this Section 3.08, a portion of a Security if the
Initial Principal Amount at Maturity of such portion is at least $1,000 or an
integral multiple of $1,000. Provisions of this Indenture that apply to the
purchase of all of a Security also apply to the purchase of such portion of such
Security.
Any purchase by the Company or the Purchase Party, as applicable,
contemplated pursuant to the provisions of this Section 3.08 shall be
consummated by the delivery of the consideration to be received by the Holder
(together with accrued and unpaid Contingent Cash Interest, if any) on the later
of (i) the fourth Business Day following the applicable Purchase Date (the
"Payment Date") and (ii) the time of delivery of the Security.
Notwithstanding anything herein to the contrary, any Holder delivering to
the Paying Agent the Purchase Notice contemplated by this Section 3.08(a) shall
have the right to withdraw such Purchase Notice at any time prior to the close
of business on the Business Day following the Purchase Date by delivery of a
written notice of withdrawal to the Paying Agent in accordance with Section
3.10.
The Paying Agent shall promptly notify the Company and any Purchase Party
of the receipt by it of any Purchase Notice or written notice of withdrawal
thereof.
(b) Company's Right to Elect Manner of Payment of Purchase Price. The
Securities to be purchased pursuant to Section 3.08(a) may be paid for, at the
election of the Company, in U.S. legal tender ("cash") or Common Stock, or in
any combination of cash and Common Stock, subject to the conditions set forth in
Sections 3.08(c) and (d). The Company shall designate, in the Company Notice
delivered pursuant to Section 3.08(e), whether the Securities will be purchased
for cash or Common Stock, or, if a combination thereof, the percentages of the
Purchase Price of Securities in respect of which cash or Common Stock will be
paid; provided that cash will be paid for fractional interests in Common Stock.
For purposes of determining the existence of potential fractional interests, all
Securities subject to purchase by
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the Company held by a Holder shall be considered together (no matter how many
separate certificates are to be presented). Each Holder whose Securities are
purchased pursuant to this Section 3.08 shall receive the same percentage of
cash or Common Stock in payment of the Purchase Price for such Securities,
except (i) as provided in Section 3.08(d) with regard to the payment of cash in
lieu of fractional shares of Common Stock and (ii) in the event that the Company
or any Purchase Party is unable to purchase the Securities of a Holder or
Holders for Common Stock because any necessary qualifications or registrations
of the Common Stock under applicable securities laws cannot be obtained, the
Company or any Purchase Party may purchase the Securities of such Holder or
Holders for cash. Except as provided in clause (ii) of the foregoing sentence,
the Company may not change its election with respect to the consideration (or
components or percentages of components thereof) to be paid once the Company has
given its Company Notice to Securityholders except pursuant to this Section
3.08(b) or pursuant to Section 3.08(d) in the event of a failure to satisfy,
prior to the close of business on the Purchase Date, any condition to the
payment of the Purchase Price, in whole or in part, in Common Stock.
At least three Business Days before the Company Notice Date, the Company
shall deliver an Officers' Certificate to the Trustee specifying:
(i) the manner of payment selected by the Company,
(ii) the information required by Section 3.08(e),
(iii) if the Company elects to pay the Purchase Price, or a specified
percentage thereof, in Common Stock, that the conditions to such manner of
payment set forth in Section 3.08(d) have been or will be complied with, and
(iv) whether the Company desires the Trustee to give the Company Notice
required by Section 3.08(e).
(c) Purchase with Cash. On each Payment Date, at the option of the
Company, the Purchase Price of Securities in respect of which a Purchase Notice
pursuant to Section 3.08(a) has been given, or a specified percentage thereof,
may be paid by the Company or the Purchase Party, if any, with cash equal to the
aggregate Purchase Price of such Securities. If the Company elects to purchase
Securities with cash, the Company Notice, as provided in Section 3.08(e), shall
be sent to Holders (and to beneficial owners as required by applicable law) not
less than 20 Business Days prior to the applicable Purchase Date (the "Company
Notice Date").
(d) Payment by Issuance of Common Stock. On each Payment Date, at the
option of the Company, the Purchase Price of Securities in respect of which a
Purchase Notice pursuant to Section 3.08(a) has been given, or a specified
percentage thereof, may be paid by the Company or the Purchase Party, if any, by
the issuance or transfer of a number of shares of Common Stock equal to the
quotient obtained by dividing (i) the amount of cash to which the
Securityholders would have been entitled had the Company elected to pay all or
such specified percentage, as the case may be, of the Purchase Price of such
Securities in cash by (ii) the Market Price of the Common Stock, subject to the
next succeeding paragraph.
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Fractional shares of Common Stock will not be issued in payment of the
Purchase Price. Instead the Company or the Purchase Party, if any, will pay cash
for the current market value of the fractional share. The current market value
of a fraction of a share shall be determined by multiplying the Market Price of
the Common Stock by such fraction and rounding the product to the nearest whole
cent. It is understood that if a Holder elects to have more than one Security
purchased, the number of shares of Common Stock shall be based on the aggregate
amount of Securities to be purchased.
If the Company elects to purchase the Securities by the issuance of shares
of Common Stock, the Company Notice, as provided in Section 3.08(e), shall be
sent to the Holders (and to beneficial owners as required by applicable law) not
later than the Company Notice Date.
The Company's right to exercise its election to purchase the Securities
pursuant to Section 3.08 through the issuance of shares of Common Stock shall be
conditioned upon:
(i) the Company's not having given its Company Notice of an election
to pay entirely in cash and its giving of timely Company Notice of
election to purchase all or a specified percentage of the Securities with
Common Stock as provided herein;
(ii) the registration of the shares of Common Stock to be issued in
respect of the payment of the Purchase Price under the Securities Act of
1933, as amended (the "Securities Act"), or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), in each case, if required;
(iii) any necessary qualification or registration under applicable
state securities laws or the availability of an exemption from such
qualification and registration; and
(iv) the receipt by the Trustee of an Officers' Certificate and an
Opinion of Counsel each stating that (A) the terms of the issuance of the
Common Stock are in conformity with this Indenture and (B) the shares of
Common Stock to be issued by the Company or transferred by a Purchase
Party in payment of the Purchase Price in respect of Securities have been
duly authorized and, when issued and delivered pursuant to the terms of
this Indenture in payment of the Purchase Price in respect of the
Securities, will be validly issued, fully paid and non-assessable and, to
the best of such counsel's knowledge, free from preemptive rights, and, in
the case of such Officers' Certificate, stating that conditions (i) and
(ii) above and the condition set forth in the second succeeding sentence
have been satisfied and, in the case of such Opinion of Counsel, stating
that condition (ii) above has been satisfied.
Such Officers' Certificate shall also set forth the number of shares of
Common Stock to be issued for each $1,000 Initial Principal Amount at Maturity
of Securities and the Sale Price of a share of Common Stock on each trading day
during the period commencing on the first trading day of the period during which
the Market Price is calculated and ending on the applicable Purchase Date. The
Company may elect to pay the Purchase Price (or any portion thereof) in Common
Stock only if the information necessary to calculate the Market Price is
published in a daily newspaper of national circulation. If the foregoing
conditions are not satisfied with respect to a Holder or Holders prior to the
close of business on the Payment Date
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and the Company has elected to purchase the Securities pursuant to this Section
3.08 through the issuance of shares of Common Stock, the Company or the Purchase
Party, as applicable, shall pay the entire Purchase Price of the Securities of
such Holder or Holders in cash.
The "Market Price" of the Common Stock means the average of the Sale
Prices of the Common Stock for the five trading day period ending on (if the
third Business Day prior to the applicable Purchase Date is a trading day, or if
not, then on the last trading day prior to) the third Business Day prior to the
applicable Purchase Date, appropriately adjusted to take into account the
occurrence, during the period commencing on the first of such trading days
during such five trading day period and ending on such Purchase Date (or other
date in question, for the purpose of adjusting the Conversion Rate), of any
event described in Section 10.06, 10.07 or 10.08; subject, however, to the
conditions set forth in Sections 10.09 and 10.10.
(e) Notice of Election. The Company's notice of election to purchase with
cash or Common Stock or any combination thereof shall be sent to the Holders
(and to beneficial owners as required by applicable law) in the manner provided
in Section 12.02 at the time specified in Section 3.08(c) or (d), as applicable
(the "Company Notice"). Such Company Notice shall state the manner of payment
elected and shall contain the following information:
In the event the Company has elected to pay the Purchase Price (or a
specified percentage thereof) with Common Stock, the Company Notice shall:
(1) state that each Holder will receive Common Stock with a Market
Price determined as of a specified date prior to the Purchase Date equal
to such specified percentage of the Purchase Price of the Securities held
by such Holder (except any cash amount to be paid in lieu of fractional
shares);
(2) set forth the method of calculating the Market Price of the
Common Stock; and
(3) state that because the Market Price of Common Stock will be
determined prior to the Purchase Date, Holders will bear the market risk
with respect to the value of the Common Stock to be received from the date
such Market Price is determined to the Purchase Date.
In any case, each Company Notice shall include a form of Purchase Notice
to be completed by a Securityholder and shall state:
(i) the Purchase Price, the Conversion Rate and, to the extent known
at the time of such notice, the amount of Contingent Cash Interest, if
any, that will be accrued and payable with respect to the Securities as of
the Purchase Date;
(ii) the name and address of the Paying Agent and the Conversion
Agent;
(iii) that Securities as to which a Purchase Notice has been given
may be converted pursuant to Article 10 hereof only if the applicable
Purchase Notice has been withdrawn in accordance with the terms of this
Indenture;
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(iv) that Securities must be surrendered to the Paying Agent to
collect payment of the Purchase Price and Contingent Cash Interest, if
any;
(v) that the Purchase Price for any Security as to which a Purchase
Notice has been given and not withdrawn, together with any accrued
Contingent Cash Interest payable with respect thereto, will be paid on the
later of the Payment Date and the time of surrender of such Security as
described in (iv);
(vi) the procedures the Holder must follow to exercise rights under
Section 3.08 and a brief description of those rights;
(vii) briefly, the conversion rights of the Securities;
(viii) the procedures for withdrawing a Purchase Notice (including,
without limitation, for a conditional withdrawal pursuant to the terms of
Section 3.08(a)(1)(D) or Section 3.10);
(ix) that, unless the Company defaults in making payment of such
Purchase Price, Contingent Additional Principal and Contingent Cash
Interest, if any, on Securities called for redemption will cease to accrue
in favor of the Holder surrendering such Securities immediately after the
Purchase Date; and
(x) the CUSIP number of the Securities.
At the Company's request, the Trustee shall give such Company Notice in
the Company's name and at the Company's expense; provided, however, that, in all
cases, the text of such Company Notice shall be prepared by the Company and may
include such other information, if any, as the Company deems appropriate so long
as it is consistent with this Indenture.
Upon determination of the actual number of shares of Common Stock to be
issued for each $1,000 Initial Principal Amount at Maturity of Securities, the
Company will promptly notify the Holders thereof and use its reasonable best
efforts to post this information on its web site or, at its option, otherwise
publicly disclose this information.
(f) Covenants of the Company. All shares of Common Stock delivered upon
purchase of the Securities shall be duly authorized, validly issued, fully paid
and nonassessable and free from preemptive rights and any lien or adverse claim
imposed by or on behalf of the Company.
The Company shall use its reasonable best efforts to list or cause to have
quoted any shares of Common Stock to be delivered in satisfaction of any
purchase of Securities on each national securities exchange or over-the-counter
or other domestic market on which the Common Stock is then listed or quoted, to
the extent not already so listed.
(g) Procedure upon Purchase. The Company or the Purchase Party, if any,
shall deposit cash (in respect of a cash purchase under Section 3.08(c) or for
fractional interests or Contingent Cash Interest, as applicable) or shares of
Common Stock, or a combination
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thereof, as applicable, at the time and in the manner as provided in Section
3.11, sufficient to pay the aggregate Purchase Price of, and any accrued and
unpaid Contingent Cash Interest with respect to, all Securities to be purchased
pursuant to this Section 3.08. As soon as practicable after the Purchase Date,
the Company or the Purchase Party, if any, shall deliver to each Holder entitled
to receive Common Stock through the Paying Agent, a certificate for the number
of full shares of Common Stock deliverable in payment of the Purchase Price and
cash in lieu of any fractional interests. The person in whose name the
certificate for Common Stock is registered shall be treated as a Holder of
record of shares of Common Stock on the Business Day following the Purchase
Date. Subject to Section 3.08(d), no payment or adjustment will be made for
dividends on the Common Stock the record date for which occurred on or prior to
the Purchase Date.
(h) Taxes. If a Holder of a Security is paid in Common Stock, the Company
shall pay any documentary, stamp or similar issue or transfer tax due on such
issue of shares of Common Stock. However, the Holder shall pay any such tax
which is due because the Holder requests the shares of Common Stock to be issued
in a name other than the Holder's name. The Paying Agent may refuse to deliver
the certificates representing the Common Stock being issued in a name other than
the Holder's name until the Paying Agent receives a sum sufficient to pay any
tax which will be due because the shares of Common Stock are to be issued in a
name other than the Holder's name. Nothing herein shall preclude any income tax
withholding required by law or regulations.
(i) The Company shall have the option, exercisable at any time or from
time to time, by an instrument in writing signed by the Company and provided to
the Paying Agent, to designate a, or change the existing designation of the,
financial institution to which Securities surrendered by a Holder for purchase
will be initially offered by the Paying Agent on behalf of a Holder for purchase
(a "Purchase Party"). If applicable, the Company shall enter into an agreement
with the Paying Agent, in form and substance reasonably satisfactory to the
Paying Agent, providing that, at the opening of business on each Business Day
during the period commencing 20 Business Days prior to the Purchase Date through
the Payment Date, the Paying Agent shall inform the Purchase Party as to the
aggregate Initial Principal Amount at Maturity of Securities surrendered for
purchase on the prior Business Day. The Purchase Party may accept for purchase
all or any of such Securities if it agrees, no later than the time specified in
the agreement between the Company and the Paying Agent (or, absent such
agreement, by the Payment Date), to deliver in payment therefor the Purchase
Price. Settlement of any such purchase shall take place no later than the
Payment Date. In the event that the Purchase Party fails to deliver the Purchase
Price by such Payment Date, the Purchase Party shall be in default of its
obligations and, instead of being purchased by the Purchase Party, the
Securities will be purchased by the Company in accordance with Section 3.08(g).
A Holder whose Securities are purchased in whole or in part shall be given a
written confirmation from the Paying Agent informing such Holder as to the
aggregate Principal Amount at Maturity of the Securities so purchased. The
agreement between the Company and the Paying Agent setting forth the procedures
to be followed in a purchase may be changed at any time by the Company and the
Paying Agent so long as such change does not, as evidenced by an Opinion of
Counsel delivered to the Paying Agent, adversely affect the rights under this
Indenture of a Holder who surrenders its Securities for purchase.
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SECTION 3.09 Purchase of Securities at Option of the Holder upon Change in
Control. (a) If on or prior to July 31, 2007 there shall have occurred a Change
in Control, all or a portion of the Securities of any Holder shall be purchased
by the Company, at the option of such Holder, at a purchase price specified in
paragraph 7 of the Securities (the "Change in Control Purchase Price"), as of
the date that is 35 Business Days after the occurrence of the Change in Control
(the "Change in Control Purchase Date"), subject to satisfaction by or on behalf
of the Holder of the requirements set forth in Section 3.09(c).
A "Change in Control" shall be deemed to have occurred at such time as
either of the following events shall occur:
(i) any person, including its affiliates and associates, other than
the Company, its subsidiaries or their employee benefit plans, files a
Schedule 13D or TO (or any successor schedules, forms or reports under the
Exchange Act) disclosing that such person has become the beneficial owner
of 50% or more of the voting power of the Common Stock or other Capital
Stock of the Company into which the Common Stock is reclassified or
changed, or
(ii) there shall be consummated any consolidation, merger or share
exchange of the Company pursuant to which the Common Stock is converted
into cash, securities or other property, in each case other than a
consolidation, merger or share exchange of the Company in which the
Holders of Common Stock immediately prior to the consolidation, merger or
share exchange have, directly or indirectly, at least a majority of the
total voting power in the aggregate of all classes of ordinary voting
stock of the continuing or surviving corporation immediately after the
consolidation, merger or share exchange.
Notwithstanding the foregoing provisions of this Section 3.09, a Change in
Control shall not be deemed to have occurred by virtue of the Company, any
Subsidiary, any employee stock ownership plan or any other employee benefit plan
of the Company or any Subsidiary, or any person holding Common Stock for or
pursuant to the terms of any such employee benefit plan, filing or becoming
obligated to file a report under or in response to Schedule 13D or Schedule TO
(or any successor schedule, form or report) under the Exchange Act disclosing
beneficial ownership by it of shares of Common Stock, whether in excess of 50%
or otherwise.
"Associate" shall have the meaning ascribed to such term in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act, as in effect on the
date hereof.
(b) Within 15 Business Days after the occurrence of a Change in Control,
the Company shall mail a written notice of Change in Control by first-class mail
to the Trustee and to each Holder (and to beneficial owners as required by
applicable law). The notice shall include a form of Change in Control Purchase
Notice to be completed by the Securityholder and shall state:
(1) briefly, the events causing a Change in Control and the date of
such Change in Control;
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(2) the date by which the Change in Control Purchase Notice pursuant
to this Section 3.09 must be given;
(3) the Change in Control Purchase Date and, to the extent known at
the time of such notice, the amount of Contingent Cash Interest, if any,
that will be accrued and payable with respect to the Securities as of the
Change in Control Purchase Date;
(4) the Change in Control Purchase Price;
(5) the name and address of the Paying Agent and the Conversion
Agent;
(6) the Conversion Rate and any adjustments thereto;
(7) that Securities as to which a Change in Control Purchase Notice
has been given may be converted, if otherwise convertible, pursuant to
Article 10 hereof only if the Change in Control Purchase Notice has been
withdrawn in accordance with the terms of this Indenture;
(8) that Securities must be surrendered to the Paying Agent to
collect payment;
(9) that the Change in Control Purchase Price for any Security as to
which a Change in Control Purchase Notice has been duly given and not
withdrawn, together with any accrued Contingent Cash Interest payable with
respect thereto, will be paid promptly following the later of the Change
in Control Purchase Date and the time of surrender of such Security as
described in (8) above;
(10) briefly, the procedures the Holder must follow to exercise
rights under this Section 3.09;
(11) briefly, the conversion rights of the Securities;
(12) the procedures for withdrawing a Change in Control Purchase
Notice;
(13) that, unless the Company defaults in making payment of such
Change in Control Purchase Price, Contingent Additional Principal and
Contingent Cash Interest, if any, on Securities called for redemption will
cease to accrue on and after the Redemption Date; and
(14) the CUSIP number of the Securities.
(c) A Holder may exercise its rights specified in Section 3.09(a) hereof
upon delivery of a written notice of purchase (a "Change in Control Purchase
Notice") to the Paying Agent at any time prior to the close of business on the
Change in Control Purchase Date, stating:
(1) the certificate number of the Security which the Holder will
deliver to be purchased;
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(2) the portion of the Initial Principal Amount at Maturity of the
Security which the Holder will deliver to be purchased, which portion must
be at least $1,000 in Initial Principal Amount at Maturity or an integral
multiple thereof, and
(3) that such Security shall be purchased pursuant to the terms and
conditions specified in paragraph 7 of the Securities.
The delivery of such Security to the Paying Agent prior to, on or after
the Change in Control Purchase Date (together with all necessary endorsements)
at the offices of the Paying Agent shall be a condition to the receipt by the
Holder of the Change in Control Purchase Price therefor; provided, however, that
such Change in Control Purchase Price shall be so paid pursuant to this Section
3.09 only if the Security so delivered to the Paying Agent shall conform in all
respects to the description thereof set forth in the related Change in Control
Purchase Notice.
The Company shall purchase from the Holder thereof, pursuant to this
Section 3.09, a portion of a Security if the Initial Principal Amount at
Maturity of such portion is at least $1,000 or an integral multiple of $1,000.
Provisions of this Indenture that apply to the purchase of all of a Security
also apply to the purchase of such portion of such Security.
Any purchase by the Company contemplated pursuant to the provisions of
this Section 3.09 shall be consummated by the delivery of the consideration to
be received by the Holder (together with accrued and unpaid Contingent Cash
Interest, if any) promptly following the later of the Change in Control Purchase
Date and the time of delivery of the Security to the Paying Agent in accordance
with this Section 3.09.
Notwithstanding anything herein to the contrary, any Holder delivering to
the Paying Agent the Change in Control Purchase Notice contemplated by this
Section 3.09(c) shall have the right to withdraw such Change in Control Purchase
Notice at any time prior to the close of business on the Change in Control
Purchase Date by delivery of a written notice of withdrawal to the Paying Agent
in accordance with Section 3.10.
The Paying Agent shall promptly notify the Company of the receipt by it of
any Change in Control Purchase Notice or written withdrawal thereof.
SECTION 3.10 Effect of Purchase Notice or Change in Control Purchase
Notice. Upon receipt by the Paying Agent of the Purchase Notice or Change in
Control Purchase Notice specified in Section 3.08(a) or Section 3.09(c), as
applicable, the Holder of the Security in respect of which such Purchase Notice
or Change in Control Purchase Notice, as the case may be, was given shall
(unless such Purchase Notice or Change in Control Purchase Notice is withdrawn
as specified in the following two paragraphs) thereafter be entitled to receive
solely the Purchase Price or Change in Control Purchase Price, as the case may
be, and any accrued and unpaid Contingent Cash Interest, with respect to such
Security through the Purchase Date or Change in Control Purchase Date, as
applicable. Such Purchase Price or Change in Control Purchase Price and
Contingent Cash Interest, if any, shall be paid to such Holder, subject to
receipts of funds and/or securities by the Paying Agent, promptly following the
later of (x) the Purchase Date or the Change in Control Purchase Date, as the
case may be, with respect to such
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Security (provided the conditions in Section 3.08(a) or Section 3.09(c), as
applicable, have been satisfied) and (y) the time of delivery of such Security
to the Paying Agent by the Holder thereof in the manner required by Section
3.08(a) or Section 3.09(c), as applicable. Securities in respect of which a
Purchase Notice or Change in Control Purchase Notice, as the case may be, has
been given by the Holder thereof may not be converted pursuant to Article 10
hereof on or after the date of the delivery of such Purchase Notice or Change in
Control Purchase Notice, as the case may be, unless such Purchase Notice or
Change in Control Purchase Notice, as the case may be, has first been validly
withdrawn as specified in the following two paragraphs.
A Purchase Notice or Change in Control Purchase Notice, as the case may
be, may be withdrawn by means of a written notice of withdrawal delivered to the
office of the Paying Agent in accordance with the Purchase Notice or Change in
Control Purchase Notice, as the case may be, at any time prior to the close of
business on the Purchase Date or the Change in Control Purchase Date, as the
case may be, specifying:
(1) the certificate number of the Security in respect of which such
notice of withdrawal is being submitted,
(2) the Initial Principal Amount at Maturity of the Security with
respect to which such notice of withdrawal is being submitted, and
(3) the Initial Principal Amount at Maturity, if any, of such
Security which remains subject to the original Purchase Notice or Change
in Control Purchase Notice, as the case may be, and which has been or will
be delivered for purchase by the Company.
A written notice of withdrawal of a Purchase Notice may be in the form set
forth in the preceding paragraph or may be in the form of (i) a conditional
withdrawal contained in a Purchase Notice pursuant to the terms of Section
3.08(a)(1)(D) or (ii) a conditional withdrawal containing the information set
forth in Section 3.08(a)(1)(D) and the preceding paragraph and contained in a
written notice of withdrawal delivered to the Paying Agent as set forth in the
preceding paragraph.
There shall be no purchase of any Securities pursuant to Section 3.08
(other than through the issuance of Common Stock in payment of the Purchase
Price, including cash in lieu of fractional shares) or 3.09 if there has
occurred (prior to, on or after, as the case may be, the giving, by the Holders
of such Securities, of the required Purchase Notice or Change in Control
Purchase Notice, as the case may be) and is continuing an Event of Default
(other than a default in the payment of the Purchase Price or Change in Control
Purchase Price, as the case may be, and any accrued and unpaid Contingent Cash
Interest with respect to such Securities). The Paying Agent will promptly return
to the respective Holders thereof any Securities (x) with respect to which a
Purchase Notice or Change in Control Purchase Notice, as the case may be, has
been withdrawn in compliance with this Indenture, or (y) held by it during the
continuance of an Event of Default (other than a default in the payment of the
Purchase Price or Change in Control Purchase Price, as the case may be, and any
accrued and unpaid Contingent Cash Interest with respect to such Securities) in
which case, upon such return, the Purchase Notice or Change in Control Purchase
Notice with respect thereto shall be deemed to have been withdrawn.
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SECTION 3.11 Deposit of Purchase Price or Change in Control Purchase
Price. Promptly following the Change in Control Purchase Date or on or prior to
10:00 a.m. (New York City Time) on the Payment Date, as the case may be, the
Company shall deposit with the Trustee or with the Paying Agent (or, if the
Company or a Subsidiary or an Affiliate of either of them is acting as the
Paying Agent, shall segregate and hold in trust as provided in Section 2.04) an
amount of money (in immediately available funds if deposited on such Business
Day) or Common Stock, if permitted hereunder, sufficient to pay the aggregate
Purchase Price or Change in Control Purchase Price, as the case may be, and any
accrued and unpaid Contingent Cash Interest with respect to, of all the
Securities or portions thereof which are to be purchased as of the Purchase Date
or Change in Control Purchase Date, as the case may be.
SECTION 3.12 Securities Purchased in Part. Any Security which is to be
purchased only in part shall be surrendered at the office of the Paying Agent
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing) and the Company shall execute and the Trustee shall
authenticate and deliver to the Holder of such Security, without service charge,
a new Security or Securities, of any authorized denomination as requested by
such Holder in aggregate Initial Principal Amount at Maturity equal to, and in
exchange for, the portion of the Initial Principal Amount at Maturity of the
Security so surrendered which is not purchased.
SECTION 3.13 Covenant to Comply with Securities Laws upon Purchase of
Securities. In connection with any offer to purchase or purchase of Securities
under Section 3.08 or 3.09 hereof (provided that such offer or purchase
constitutes an "issuer tender offer" for purposes of Rule 13e-4 (which term, as
used herein, includes any successor provision thereto) under the Exchange Act at
the time of such offer or purchase), the Company shall (i) comply with Rule
13e-4 and Rule 14e-1, if applicable, and any other tender offer rules under the
Exchange Act which may then be applicable, (ii) file the related Schedule TO (or
any successor schedule, form or report), if required, or any other schedule
required under the Exchange Act, and (iii) otherwise comply with all Federal and
state securities laws so as to permit the rights and obligations under Sections
3.08 and 3.09 to be exercised in the time and in the manner specified in
Sections 3.08 and 3.09.
SECTION 3.14 Repayment to the Company. The Trustee and the Paying Agent
shall return to the Company any cash or shares of Common Stock that remain
unclaimed as provided in paragraph 14 of the Securities, together with
dividends, if any, thereon, held by them for the payment of the Purchase Price
or Change in Control Purchase Price or Contingent Cash Interest, if any, as the
case may be; provided, however, that to the extent that the aggregate amount of
cash or shares of Common Stock deposited by the Company pursuant to Section 3.11
exceeds the aggregate Purchase Price or Change in Control Purchase Price, as the
case may be, and the accrued and unpaid Contingent Cash Interest with respect
to, of the Securities or portions thereof which the Company is obligated to
purchase as of the Purchase Date or Change in Control Purchase Date, as the case
may be, then promptly after the Business Day following the Purchase Date or
Change in Control Purchase Date, as the case may be, the Trustee shall return
any such excess to the Company together with dividends, if any, thereon.
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SECTION 3.15 Clean-up Call by the Company. If at least 90% in aggregate
Initial Principal Amount at Maturity of the Securities outstanding immediately
prior to the Change in Control are purchased by the Company on the Change in
Control Purchase Date, the Company may, within 90 days following the Change in
Control Purchase Date at its option, redeem all of the remaining Securities at
the Change in Control Purchase Price. All redemptions pursuant to this Section
3.15 shall be in accordance with the procedures in Section 3.03.
ARTICLE 4
COVENANTS
SECTION 4.01 Payment of Securities. The Company shall promptly make all
payments in respect of the Securities on the dates and in the manner provided in
the Securities or pursuant to this Indenture. Except as provided elsewhere in
this Indenture, any amounts to be given to the Trustee or Paying Agent, shall be
deposited with the Trustee or Paying Agent by 10:00 a.m., New York City time, by
the Company. Principal Amount at Maturity, Initial Principal Amount at Maturity
and Contingent Additional Principal, Redemption Price, Purchase Price, Change in
Control Purchase Price and Contingent Cash Interest, if any, shall be considered
paid on the applicable date due if on such date the Trustee or the Paying Agent
holds, in accordance with this Indenture, money or securities, if permitted
hereunder, sufficient to pay all such amounts then due.
The Company shall, to the extent permitted by law, pay cash interest on
overdue amounts at the rate per annum set forth in paragraph 1 of the
Securities, compounded semiannually, which interest shall accrue from the date
such overdue amount was originally due to the date payment of such amount,
including interest thereon, has been made or duly provided for. All such
interest shall be payable on demand. The accrual of such interest on overdue
amounts shall be in lieu of, and not in addition to, the continued accrual of
Contingent Additional Principal.
Notwithstanding any other provision hereof or of any Security, the Company
may, but will not be required to, in its sole discretion make any additional
payment on or in respect of the Securities and may fix a record date for any
such payment upon notice to the Trustee as if such payment were subject to
Section 1.05(e) hereof.
SECTION 4.02 SEC and Other Reports. The Company shall file with the
Trustee, within 15 days after it files such annual and quarterly reports,
information, documents and other reports with the SEC, copies of its annual
report and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act. In the event the Company is at any time
no longer subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, it shall continue to provide the Trustee with reports containing
substantially the same information as would have been required to be filed with
the SEC had the Company continued to have been subject to such reporting
requirements. In such event, such reports shall be provided at the times the
Company would have been required to provide reports had it continued to have
been subject to such
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reporting requirements. The Company also shall comply with the other provisions
of TIA Section 314(a).
SECTION 4.03 Compliance Certificate. The Company shall deliver to the
Trustee within 120 days after the end of each fiscal year of the Company
(beginning with the fiscal year ending on December 31, 2002) an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
SECTION 4.04 Further Instruments and Acts. Upon request of the Trustee,
the Company will execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.
SECTION 4.05 Maintenance of Office or Agency. The Company will maintain in
the Borough of Manhattan, the City of New York, an office or agency of the
Trustee, Registrar, Paying Agent and Conversion Agent where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer, exchange, purchase, redemption or conversion and where
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The office of JPMorgan Chase Bank, located at 450 West
33rd Street, New York, NY 10001 (Attention: Institutional Trust Services), shall
initially be such office or agency for all of the aforesaid purposes. The
Company shall give prompt written notice to the Trustee of the location, and of
any change in the location, of any such office or agency (other than a change in
the location of the office of the Trustee). If at any time the Company shall
fail to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the address of the Trustee set forth in Section
12.02.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York, for such purposes.
SECTION 4.06 Delivery of Certain Information. At any time when the Company
is not subject to Section 13 or 15(d) of the Exchange Act, upon the request of a
Holder or any beneficial Holder of Securities or shares of Common Stock issued
upon conversion thereof, the Company will promptly furnish or cause to be
furnished Rule 144A Information (as defined below) to such Holder or any
beneficial Holder of Securities or holder of shares of Common Stock issued upon
conversion of Securities, or to a prospective purchaser of any such security
designated by any such holder, as the case may be, to the extent required to
permit compliance by such Holder or Holders with Rule 144A under the Securities
Act in connection with the resale of any such security. "Rule 144A Information"
shall be such information as is specified pursuant to Rule 144A(d)(4) under the
Securities Act.
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SECTION 4.07 Calculation of Original Issue Discount. The Company agrees,
and each Holder and any beneficial holder of a Security by its purchase thereof
shall be deemed to agree, to treat, for United States federal income tax
purposes, the Securities as debt instruments that are subject to Section
1.1275-4(b) of the Treasury Regulations. For United States federal income tax
purposes, the Company shall accrue interest with respect to outstanding
Securities as original issue discount according to the "noncontingent bond
method," set forth in section 1.1275-4(b) of the Treasury Regulations, based on
a comparable yield of 6.69% compounded semiannually and the projected payment
schedule attached as Exhibit C to this Indenture. The Company shall file with
the Trustee promptly at the end of each calendar year (i) a written notice
specifying the amount of original issue discount for United States federal
income tax purposes (including daily rates and accrual periods) accrued on
outstanding Securities as of the end of such year and (ii) such other specific
information relating to such original issue discount as may then be relevant
under the Internal Revenue Code of 1986, as amended from time to time, including
the amount of any adjustment made under the noncontingent bond method to account
for the amount of any difference between the amount of an actual payment and the
amount of a projected payment.
THE COMPANY ACKNOWLEDGES AND AGREES, AND EACH HOLDER AND ANY BENEFICIAL
HOLDER OF A SECURITY BY ITS PURCHASE THEREOF SHALL BE DEEMED TO ACKNOWLEDGE AND
AGREE, THAT (I) THE COMPARABLE YIELD AND THE SCHEDULE OF PROJECTED PAYMENTS ARE
DETERMINED ON THE BASIS OF AN ASSUMPTION OF LINEAR GROWTH OF THE STOCK PRICE AND
A CONSTANT DIVIDEND YIELD AND ARE NOT DETERMINED FOR ANY PURPOSE OTHER THAN FOR
THE DETERMINATION OF INTEREST ACCRUALS AND ADJUSTMENTS THEREOF IN RESPECT OF THE
SECURITIES FOR UNITED STATES FEDERAL INCOME TAX PURPOSES AND (II) THE COMPARABLE
YIELD AND THE SCHEDULE OF PROJECTED PAYMENTS DO NOT CONSTITUTE A PROJECTION OR
REPRESENTATION REGARDING THE AMOUNTS PAYABLE ON THE SECURITIES.
ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01 When Company May Merge or Transfer Assets. The Company shall
not consolidate with or merge with or into any other person or convey, transfer
or lease its properties and assets substantially as an entirety to any person,
unless:
(a) either (1) the Company shall be the continuing corporation or
(2) the person (if other than the Company) formed by such consolidation or
into which the Company is merged or the person which acquires by
conveyance, transfer or lease the properties and assets of the Company
substantially as an entirety (i) shall be organized and validly existing
under the laws of the United States or any State thereof or the District
of Columbia and (ii) shall expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all of the obligations of the Company under the Securities and
this Indenture;
(b) immediately after giving effect to such transaction, no Default
shall have occurred and be continuing; and
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(c) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such transaction,
such supplemental indenture, comply with this Article 5 and that all
conditions precedent herein provided for relating to such transaction have
been satisfied.
For purposes of the foregoing, the conveyance, transfer or lease of the
properties and assets of one or more Subsidiaries (other than to the Company or
another Subsidiary), which, if such assets were owned by the Company, would
constitute all or substantially all of the properties and assets of the Company,
shall be deemed to be the transfer of all or substantially all of the properties
and assets of the Company, but a bona fide pledge or hypothecation will be
deemed not to be prohibited by this Indenture.
The successor person formed by such consolidation or into which the
Company is merged or the successor person to which such conveyance, transfer or
lease is made shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such successor had been named as the Company herein; and thereafter, except in
the case of a lease and obligations the Company may have under a supplemental
indenture pursuant to Section 10.14, the Company shall be discharged from all
obligations and covenants under this Indenture and the Securities. Subject to
Section 9.06, the Company, the Trustee and the successor person shall enter into
a supplemental indenture to evidence the succession and substitution of such
successor person and such discharge and release of the Company.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in the payment of the Principal Amount at
Maturity, Contingent Additional Principal, Redemption Price, Purchase
Price or Change in Control Purchase Price on any Security when the same
becomes due and payable at its Stated Maturity, upon redemption, upon
declaration, when due for purchase by the Company or otherwise;
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(2) the Company defaults in the payment of any Contingent Cash
Interest upon any Security, and such default shall continue for 30 days;
(3) the Company fails to comply with any of its agreements in the
Securities or this Indenture (other than those referred to in clauses (1)
and (2) above) upon receipt by the Company of Notice of Default by the
Trustee or by Holders of not less than 25% in aggregate Principal Amount
at Maturity of the Securities then outstanding and the Company fails to
cure (or obtain a waiver of) such Default within 60 days after receipt of
a Notice of Default;
(4) (A) the Company fails to make any payment by the end of any
applicable grace period after maturity of Indebtedness in an amount (taken
together with amounts in (B)) in excess of $100 million and continuance of
such failure, or (B) the acceleration of Indebtedness in an amount (taken
together with the amounts in (A)) in excess of $100 million because of a
default with respect to such Indebtedness without such Indebtedness having
been discharged or such acceleration having been cured, waived, rescinded
or annulled in case of (A) or (B) above, for a period of 30 days after
written notice to the Company by the Trustee or to the Company and the
Trustee by the Holders of not less than 25% in aggregate Principal Amount
at Maturity of the Securities then outstanding; however, if any such
failure or acceleration referred to in (A) or (B) above shall cease or be
cured, waived, rescinded or annulled, then the Event of Default by reason
thereof shall be deemed not to have occurred; or
(5) the Company, or any Significant Subsidiary, or any Subsidiaries
of the Company which in the aggregate would constitute a Significant
Subsidiary, pursuant to or under or within the meaning of any Bankruptcy
Law:
(A) commences a voluntary case or proceeding;
(B) consents to the entry of an order for relief against it in
an involuntary case or proceeding or the commencement of any case
against it;
(C) consents to the appointment of a Custodian of it or for
any substantial part of its property;
(D) makes a general assignment for the benefit of its
creditors;
(E) files a petition in bankruptcy or answer or consent
seeking reorganization or relief; or
(F) consents to the filing of such a petition or the
appointment of or taking possession by a Custodian; or
(6) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary or any Subsidiaries of the Company which in the aggregate
would constitute a
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Significant Subsidiary in an involuntary case or proceeding, or
adjudicates the Company or any Significant Subsidiary or any
Subsidiaries of the Company which in the aggregate would constitute
a Significant Subsidiary insolvent or bankrupt;
(B) appoints a Custodian of the Company or any Significant
Subsidiary or any Subsidiaries of the Company which in the aggregate
would constitute a Significant Subsidiary or for any substantial
part of its or their properties; or
(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary or any Subsidiaries of the Company which in
the aggregate would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 days.
"Bankruptcy Law" means Title 11, United States Code, or any similar
Federal or state law for the relief of debtors.
"Custodian" means any receiver, trustee, assignee, liquidator, custodian
or similar official under any Bankruptcy Law.
A Default under clause (3) or clause (4) above is not an Event of Default
until the Trustee notifies the Company, or the Holders of at least 25% in
aggregate Principal Amount at Maturity of the Securities at the time outstanding
notify the Company and the Trustee, of the Default and the Company does not cure
such Default (and such Default is not waived) within the time specified in
clause (3) or clause (4) above after actual receipt of such notice. Any such
notice must specify the Default, demand that it be remedied and state that such
notice is a "Notice of Default".
The Company will deliver to the Trustee, within five Business Days of
becoming aware of the occurrence of an Event of Default, written notice thereof.
In addition, the Company shall deliver to the Trustee, within 30 days after it
becomes aware of the occurrence thereof, written notice of any event which with
the giving of notice or the lapse of time, or both, would become an Event of
Default under clause (3) or clause (4) above, its status and what action the
Company is taking or proposes to take with respect thereto.
SECTION 6.02 Acceleration. If an Event of Default (other than an Event of
Default specified in Section 6.01(5) or (6)) occurs and is continuing, the
Trustee by Notice to the Company, or the Holders of at least 25% in aggregate
Principal Amount at Maturity of the Securities at the time outstanding by notice
to the Company and the Trustee, may declare the Initial Principal Amount at
Maturity plus any accrued and unpaid Contingent Cash Interest and Contingent
Additional Principal through the date of declaration to be immediately due and
payable. Upon such a declaration, such Initial Principal Amount at Maturity plus
accrued Contingent Additional Principal and the Contingent Cash Interest, if
any, shall be due and payable immediately. If an Event of Default specified in
Section 6.01(5) or (6) occurs and is continuing, the Initial Principal Amount at
Maturity plus accrued and unpaid Contingent Cash Interest and Contingent
Additional Principal, if any, on all the Securities shall become and be
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immediately due and payable without any declaration or other act on the part of
the Trustee or any Securityholders. The Holders of a majority in aggregate
Principal Amount at Maturity of the Securities at the time outstanding, by
notice to the Trustee (and without notice to any other Securityholder) may
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived except nonpayment of the Initial Principal Amount at
Maturity plus accrued and unpaid Contingent Cash Interest and Contingent
Additional Principal, if any, that have become due solely as a result of
acceleration and if all amounts due to the Trustee under Section 7.06 have been
paid. No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
SECTION 6.03 Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of the Initial Principal Amount at Maturity plus accrued Contingent Additional
Principal and Contingent Cash Interest, if any, on the Securities or to enforce
the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if the Trustee does not possess
any of the Securities or produce any of the Securities in the proceeding. A
delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of, or acquiescence in, the Event of Default. No remedy
is exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04 Waiver of Past Defaults. Subject to Section 6.02, the Holders
of a majority in aggregate Principal Amount at Maturity of the Securities at the
time outstanding, by notice to the Trustee (and without notice to any other
Securityholder), may waive an existing Default and its consequences except (1)
an Event of Default described in Section 6.01(1) or (2), (2) a Default in
respect of a provision that under Section 9.02 cannot be amended without the
consent of each Securityholder affected or (3) a Default which constitutes a
failure to convert any Security in accordance with the terms of Article 10. When
a Default is waived, it is deemed cured, but no such waiver shall extend to any
subsequent or other Default or impair any consequent right. This Section 6.04
shall be in lieu of Section 316(a)1(B) of the TIA and such Section 316(a)1(B) is
hereby expressly excluded from this Indenture, as permitted by the TIA.
SECTION 6.05 Control by Majority. The Holders of a majority in aggregate
Principal Amount at Maturity of the Securities at the time outstanding may
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or of exercising any trust or power conferred on the
Trustee. However, the Trustee may refuse to follow any direction that conflicts
with law or this Indenture or that the Trustee determines in good faith is
unduly prejudicial to the rights of other Securityholders or would involve the
Trustee in personal liability unless the Trustee is offered indemnity
satisfactory to it against loss, liability or expense. This Section 6.05 shall
be in lieu of Section 316(a)1(A) of the TIA and such Section 316(a)1(A) is
hereby expressly excluded from this Indenture, as permitted by the TIA.
SECTION 6.06 Limitation on Suits. A Securityholder may not pursue any
remedy with respect to this Indenture or the Securities unless:
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(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in aggregate Principal Amount at
Maturity of the Securities at the time outstanding make a written request
to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security
or indemnity satisfactory to the Trustee against any loss, liability or
expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of such notice, request and offer of security or indemnity;
and
(5) the Holders of a majority in aggregate Principal Amount of the
Securities at the time outstanding do not give the Trustee a direction
inconsistent with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of any
other Securityholder or to obtain a preference or priority over any other
Securityholder.
SECTION 6.07 Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment of
the Principal Amount at Maturity, Initial Principal Amount at Maturity plus
Contingent Additional Principal, Redemption Price, Purchase Price, Change in
Control Purchase Price or Contingent Cash Interest, if any, in respect of the
Securities held by such Holder, on or after the respective due dates expressed
in the Securities or any Redemption Date, and to convert the Securities in
accordance with Article 10, or to bring suit for the enforcement of any such
payment on or after such respective dates or the right to convert, shall not be
impaired or affected adversely without the consent of such Holder; provided that
this shall not affect the ability of Holders to waive acceleration pursuant to
Section 6.04 or rescind acceleration pursuant to Section 6.02.
SECTION 6.08 Collection Suit by Trustee. If an Event of Default described
in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
for the whole amount owing with respect to the Securities and the amounts
provided for in Section 7.06.
SECTION 6.09 Trustee May File Proofs of Claim. In case of the pendency of
any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Securities or the property of the
Company or of such other obligor or their creditors, the Trustee (irrespective
of whether the Principal Amount at Maturity, Initial Principal Amount at
Maturity plus Contingent Additional Principal, Redemption Price, Purchase Price,
Change in Control Purchase Price or Contingent Cash Interest, if any, in respect
of the Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand on the Company for the payment of any such amount) shall be entitled
and empowered, by intervention in such proceeding or otherwise,
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(a) to file and prove a claim for the whole amount of the Principal
Amount at Maturity, Initial Principal Amount at Maturity plus Contingent
Additional Principal, Redemption Price, Purchase Price, Change in Control
Purchase Price, or Contingent Cash Interest, if any, and to file such
other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel or any other amounts due the Trustee under Section
7.06) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.06.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10 Priorities. If the Trustee collects any money pursuant to
this Article 6, it shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.06;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for the Principal Amount at Maturity, Initial Principal Amount
at Maturity plus Contingent Additional Principal, Redemption Price,
Purchase Price, Change in Control Purchase Price or Contingent Cash
Interest, if any, as the case may be, ratably, without preference or
priority of any kind, according to such amounts due and payable on the
Securities; and
THIRD: the balance, if any, to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10. At least 15 days before such
record date, the Trustee shall mail to each Securityholder and the Company a
notice that states the record date, the payment date and the amount to be paid.
SECTION 6.11 Undertaking for Costs. In any suit for the enforcement of any
right or remedy under this Indenture or in any suit against the Trustee for any
action taken or omitted by it as Trustee, a court in its discretion may require
the filing by any party litigant (other than the Trustee) in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees and expenses,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims
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or defenses made by the party litigant. This Section 6.11 does not apply to a
suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by
Holders of more than 10% in aggregate Principal Amount at Maturity of the
Securities at the time outstanding. This Section 6.11 shall be in lieu of
Section 315(e) of the TIA and such Section 315(e) is hereby expressly excluded
from this Indenture, as permitted by the TIA.
SECTION 6.12 Waiver of Stay, Extension or Usury Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury or other law
wherever enacted, now or at any time hereafter in force, which would prohibit or
forgive the Company from paying all or any portion of the Principal Amount at
Maturity, Initial Principal Amount at Maturity plus Contingent Additional
Principal, Redemption Price, Purchase Price, Change in Control Purchase Price or
Contingent Cash Interest, if any, in respect of Securities, or any interest on
such amounts, as contemplated herein, or which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE 7
TRUSTEE
SECTION 7.01 Duties and Responsibilities of the Trustee; During Default;
Prior to Default. The Trustee, prior to the occurrence of an Event of Default
hereunder and after the curing or waiving of all such Events of Default which
may have occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture. In case an Event of Default hereunder
has occurred (which has not been cured or waived), the Trustee shall exercise
such of the rights and powers vested in it by this Indenture, and use the same
degree of care and skill in their exercise, as a prudent person would exercise
or use under the circumstances in the conduct of such person's own affairs.
No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct, except that
(a) prior to the occurrence of an Event of Default hereunder and
after the curing or waiving of all such Events of Default which may have
occurred:
(i) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture, and
the Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read
into this Indenture against the Trustee; and
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(ii) in the absence of bad faith on the part of the Trustee,
the Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any
statements, certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but in the case of
any such statements, certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer or Responsible Officers of the
Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the
direction of the Holders pursuant to Section 6.05 relating to the time,
method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the Trustee,
under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there shall be reasonable ground for believing that the
repayment of such funds or adequate indemnity against such liability is not
reasonably assured to it.
The provisions of this Section 7.01 are in furtherance of and subject to
Sections 315 and 316 of the TIA.
SECTION 7.02 Certain Rights of the Trustee. In furtherance of and subject
to the TIA and subject to Section 7.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate or any
other certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture, note, coupon, security or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless
other evidence in respect thereof be herein specifically prescribed); and
any resolution of the Board of Directors may be evidenced to the Trustee
by a copy thereof certified by the secretary or an assistant secretary of
the Company;
(c) the Trustee may consult with counsel of its selection and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted to be taken
by it hereunder in good faith and in accordance with such advice or
Opinion of Counsel;
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(d) the Trustee shall be under no obligation to exercise any of the
trusts or powers vested in it by this Indenture with the request, order or
direction of any of the Securityholders pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted
by it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Indenture;
(f) prior to the occurrence of an Event of Default hereunder and
after the curing or waiving of all such Events of Default, the Trustee
shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, appraisal, bond,
debenture, note, coupon, security or other paper or document unless
requested in writing to do so by the Holders of not less than a majority
in aggregate Principal Amount of the Securities then outstanding; provided
that, if the payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to
the Trustee by the security afforded to it by the terms of this Indenture,
the Trustee may require reasonable indemnity against such expenses or
liabilities as a condition to proceeding; the reasonable expenses of every
such investigation shall be paid by the Company or, if paid by the Trustee
or any predecessor trustee, shall be repaid by the Company upon demand;
and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys not regularly in its employ and the Trustee shall not be
responsible for any misconduct or negligence on the part of any such agent
or attorney appointed with due care by it hereunder.
(h) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, conclusively rely upon an Officer's Certificate;
(i) the Trustee may consult with counsel selected by it and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it
hereunder in good faith and in accordance with such advice or Opinion
Counsel.
(j) the Trustee shall not be deemed to have notice of any Default or
Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact
such a default is received by the Trustee at the Corporate Trust Office of
the Trustee, and such notice references the Securities and this Indenture;
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(k) the rights, privileges, protections, immunities and benefits
given to the Trustee, including, without limitation, its rights to be
indemnified, are extended to, and shall be enforceable by, the Trustee in
each of its capacities hereunder, and to each agent, custodian and other
Person employed to act hereunder; and
(l) the Trustee may request that the Company deliver an Officers'
Certificate setting forth the names of individuals and/or titles of
officers authorized at such time to take specified actions pursuant to
this Indenture, which Officers' Certificate may be signed by any person
authorized to sign an Officers' Certificate, including any person
specified as so authorized in any such certificate previously delivered
and not superseded.
If a Default occurs and if it is known to the Trustee, the Trustee shall
give to each Securityholder notice of the Default within 90 days after it occurs
unless such Default shall have been cured or waived before the giving of such
notice. Except in the case of a Default described in Section 6.01(1) or (2), the
Trustee may withhold the notice if and so long as a committee of its Responsible
Officers in good faith determines that withholding the notice is in the
interests of Securityholders. The second sentence of this Section 7.02 shall be
in lieu of the proviso to Section 315(b) of the TIA and such proviso is hereby
expressly excluded from this Indenture, as permitted by the TIA. The Trustee
shall not be deemed to have knowledge of a Default unless a Responsible Officer
of the Trustee has received written notice of such Default.
SECTION 7.03 Trustee Not Responsible for Recitals, Disposition of
Securities or Application of Proceeds Thereof. The recitals contained herein and
in the Securities, except the Trustee's certificates of authentication, shall be
taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representation as to the validity or sufficiency of this Indenture or of the
Securities. The Trustee shall not be accountable for the use or application by
the Company of any of the Securities or of the proceeds thereof.
SECTION 7.04 Trustee and Agents May Hold Securities; Collections, Etc..
The Trustee or any agent of the Company or the Trustee, in its individual or any
other capacity, may become the owner or pledgee of Securities with the same
rights it would have if it were not the Trustee or such agent and, subject to
Sections 7.08 and 7.13, if operative, may otherwise deal with the Company and
receive, collect, hold and retain collections from the Company with the same
rights it would have if it were not the Trustee or such agent.
SECTION 7.05 Moneys Held by Trustee. Subject to the provisions of Section
8.02 hereof, all moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required by
mandatory provisions of law. Neither the Trustee nor any agent of the Company or
the Trustee shall be under any liability for interest on any moneys received by
it hereunder.
SECTION 7.06 Compensation and Indemnification of Trustee and Its Prior
Claim. The Company covenants and agrees to pay to the Trustee from time to time,
and the Trustee shall be entitled to, such compensation (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust) to be agreed to in writing by
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the Trustee and the Company, and the Company covenants and agrees to pay or
reimburse the Trustee and each predecessor Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by or on behalf
of it in accordance with any of the provisions of this Indenture (including (i)
the reasonable compensation and the expenses and disbursements of its counsel
and of all agents and other persons not regularly in its employ and (ii)
interest at the prime rate on any disbursements and advances made by the Trustee
and not paid by the Company within five days after receipt of an invoice for
such disbursement or advance) except any such expense, disbursement or advance
as may arise from its negligence or bad faith. The Company also covenants to
indemnify the Trustee and each predecessor Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or bad faith
on its part, arising out of or in connection with the acceptance or
administration of this Indenture or the trusts hereunder and its duties
hereunder, including the costs and expenses of defending itself against or
investigating any claim of liability in the premises. The obligations of the
Company under this Section to compensate and indemnify the Trustee and each
predecessor Trustee and to pay or reimburse the Trustee and each predecessor
Trustee for expenses, disbursements and advances shall constitute additional
indebtedness hereunder and shall survive the satisfaction and discharge of this
Indenture. Such additional indebtedness shall be a senior claim to that of the
Securities upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the benefit of the Holders of particular
Securities, and the Securities are hereby effectively subordinated to such
senior claim to such extent. The provisions of this Section shall survive the
termination of this Indenture.
To secure the Company's payment obligations in this Section 7.06, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay the Principal
Amount at Maturity, Initial Principal Amount at Maturity plus accrued Contingent
Additional Principal, Redemption Price, Purchase Price, Change in Control
Purchase Price, Contingent Cash Interest, if any as the case may be, on
particular Securities.
The Company's payment obligations pursuant to this Section 7.06 shall
survive the discharge of this Indenture and the resignation or removal of the
Trustee. When the Trustee incurs expenses after the occurrence of a Default
specified in Section 6.01(5) or (6), the expenses including the reasonable
charges and expenses of its counsel, are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.07 Right of Trustee to Rely on Officers' Certificate, Etc.
Subject to Sections 7.01 and 7.02, whenever in the administration of the trusts
of this Indenture the Trustee shall deem it necessary or desirable that a matter
be proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted by it under the
provisions of this Indenture upon the faith thereof.
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SECTION 7.08 Conflicting Interests. If the Trustee has or shall acquire a
conflicting interest within the meaning of the TIA, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the TIA.
SECTION 7.09 Persons Eligible for Appointment as Trustee. The Trustee
shall at all times be a corporation or banking association having a combined
capital and surplus of at least $50,000,000. If such corporation or banking
association publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then,
for the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Trustee shall resign immediately in the manner and with the effect
specified in Section 7.10.
SECTION 7.10 Resignation and Removal; Appointment of Successor Trustee.
(a) The Trustee, or any trustee or trustees hereafter appointed, may at any time
resign with respect to one or more or all series of Securities by giving written
notice of resignation to the Company and by mailing notice thereof by first
class mail to the Holders of Securities at their last addresses as they shall
appear on the Security register. Upon receiving such notice of resignation, the
Company shall promptly appoint a successor trustee or trustees by written
instrument in duplicate, executed by authority of the Board of Directors, one
copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee or trustees. If no successor trustee shall have
been so appointed and have accepted appointment within 30 days after the mailing
of such notice of resignation, the resigning trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee, or any
Securityholder who has been a bona fide Holder of a Security for at least six
months may, subject to the provisions of Section 7.11, on behalf of himself and
all others similarly situated, petition any such court for the appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of Section
7.08 with respect to any Securities after written request therefor by the
Company or by any Securityholder who has been a bona fide Holder of a
Security for at least six months; or
(ii) the Trustee shall cease to be eligible in accordance with the
provisions of Section 7.09 and shall fail to resign after written request
therefor by the Company or by any Securityholder; or
(iii) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver or liquidator of the
Trustee or of its property shall be appointed, or any public officer shall
take charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation; or
(iv) the Company shall determine that the Trustee has failed to
perform its obligations under this Indenture in any material respect;
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then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors of the Company, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee, or,
subject to the provisions of Section 7.11, any Securityholder who has been a
bona fide Holder of a Security for at least six months may on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor trustee. If no successor
trustee shall have been appointed and have accepted appointment within 30 days
after a notice of removal has been given, the removed trustee may petition a
court of competent jurisdiction for the appointment of a successor trustee.
(c) The Holders of a majority in aggregate Principal Amount at
Maturity of the Securities at the time outstanding may at any time remove
the Trustee and appoint a successor trustee by delivering to the Trustee
so removed, to the successor trustee so appointed and to the Company the
evidence provided for in Section 1.05 of the action in that regard taken
by the Securityholders.
(d) Any resignation or removal of the Trustee and any appointment of
a successor trustee pursuant to any of the provisions of this Section 7.10
shall become effective upon acceptance of appointment by the successor
trustee as provided in Section 7.11.
SECTION 7.11 Acceptance of Appointment by Successor Trustee. Any successor
trustee appointed as provided in Section 7.10 shall execute and deliver to the
Company and to its predecessor trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become vested with all rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as trustee hereunder; but, nevertheless, on the written request of the
Company or of the successor trustee, upon payment of its charges then unpaid,
the trustee ceasing to act shall pay over to the successor trustee all moneys at
the time held by it hereunder and shall execute and deliver an instrument
transferring to such successor trustee all such rights, powers, duties and
obligations. Upon request of any such successor trustee, the Company shall
execute any and all instruments in writing for more fully and certainly vesting
in and confirming to such successor trustee all such rights and powers. Any
trustee ceasing to act shall, nevertheless, retain a prior claim upon all
property or funds held or collected by such trustee to secure any amounts then
due it pursuant to the provisions of Section 7.06.
No successor trustee shall accept appointment as provided in this Section
7.11 unless at the time of such acceptance such successor trustee shall be
qualified under the provisions of Section 7.08 and eligible under the provisions
of Section 7.09.
Upon acceptance of appointment by any successor trustee as provided in
this Section 7.11, the Company shall mail notice thereof by first class mail to
the Holders of Securities at their last addresses as they shall appear in the
register. If the acceptance of appointment is substantially contemporaneous with
the resignation, then the notice called for by the preceding sentence may be
combined with the notice called for by Section 7.10. If the
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Company fails to mail such notice within ten days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Company.
SECTION 7.12 Merger, Conversion, Consolidation or Succession to Business
of Trustee. Any corporation or banking association into which the Trustee may be
merged or converted or with which it may be consolidated, or any corporation or
banking association resulting from any merger, conversion or consolidation to
which the Trustee shall be a party, or any corporation or banking association
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided that such
corporation or banking association shall be qualified under the provisions of
Section 7.08 and eligible under the provisions of Section 7.09, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding. In case at the
time such successor to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor Trustee and deliver such Securities so authenticated; and, in
case at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor Trustee; and in all
such cases such certificate shall have the full force and effect that this
Indenture provides for the certificate of authentication of the Trustee;
provided, that the right to adopt the certificate of authentication of any
predecessor Trustee or to authenticate Securities in the name of any predecessor
Trustee shall apply only to its successor or successors by merger, conversion or
consolidation.
SECTION 7.13 Preferential Collection of Claims Against the Company. The
Trustee shall comply with the provisions of Section 311 of the TIA.
SECTION 7.14 Reports by the Trustee. (a) The Trustee shall transmit to
Holders and other persons such reports concerning the Trustee and its actions
under this Indenture as may be required pursuant to the TIA on or before July 15
in each year that such report is required, such reports to be dated as of the
immediately preceding May 15.
(b) A copy of each such report shall, at the time of such transmission to
Securityholders, be furnished to the Company and be filed by the Trustee with
each stock exchange upon which the Securities are listed and also with the SEC.
The Company agrees to notify the Trustee when and as the Securities become
admitted to trading on any national securities exchange.
SECTION 7.15 Trustee to Give Notice of Default, But May Withhold in
Certain Circumstances. The Trustee shall transmit to the Securityholders, as the
names and addresses of such Holders appear on the Security register, notice by
mail of all Defaults which have occurred, such notice to be transmitted within
90 days after the occurrence thereof, unless such defaults shall have been cured
before the giving of such; provided that, except in the case of Default in the
payment of the principal of, interest on, or other similar obligation with
respect to, any of the Securities, the Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive committee,
or a trust committee of directors or trustees and/or
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Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interests of the Securityholders.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01 Discharge of Liability on Securities. When (i) the Company
delivers to the Trustee all outstanding Securities (other than Securities
replaced pursuant to Section 2.07) for cancellation or (ii) all outstanding
Securities have become due and payable and the Company deposits with the Trustee
cash or, if expressly permitted by the terms of the Securities, Common Stock
sufficient to pay all amounts due and owing on all outstanding Securities (other
than Securities replaced pursuant to Section 2.07), and if in either case the
Company pays all other sums payable hereunder by the Company, then this
Indenture shall, subject to Section 7.06, cease to be of further effect. The
Trustee shall join in the execution of a document prepared by the Company
acknowledging satisfaction and discharge of this Indenture on demand of the
Company accompanied by an Officers' Certificate and Opinion of Counsel and at
the cost and expense of the Company.
SECTION 8.02 Repayment to the Company. The Trustee and the Paying Agent
shall return to the Company upon written request any money or securities held by
them for the payment of any amount with respect to the Securities that remains
unclaimed for two years, subject to applicable unclaimed property law. After
return to the Company, Holders entitled to the money or securities must look to
the Company for payment as general creditors unless an applicable abandoned
property law designates another person and the Trustee and the Paying Agent
shall have no further liability to the Securityholders with respect to such
money or securities for that period commencing after the return thereof.
ARTICLE 9
AMENDMENTS
SECTION 9.01 Without Consent of Holders. The Company and the Trustee may
amend this Indenture or the Securities without the consent of any
Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5 or Section 10.14;
(3) to secure the Company's obligations under the Securities and
this Indenture;
(4) to make any change that does not, as evidenced by an Opinion of
Counsel delivered to the Trustee, materially adversely affect the rights
of any Securityholder;
(5) to make any change in connection with the registration of the
Securities under the Securities Act or to comply with the TIA, or any
amendment thereto, or to
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comply with any requirement of the SEC in connection with the
qualification of the Indenture under the TIA;
(6) add to the Company's covenants or obligations under this
Indenture for the protection of the Holders or surrender any right, power
or option conferred by this Indenture on the Company, or
(7) to increase the Contingent Cash Interest or any other amount to
be paid to Holders.
SECTION 9.02 With Consent of Holders. With the written consent of the
Holders of at least a majority in aggregate Principal Amount at Maturity of the
Securities at the time outstanding, the Company and the Trustee may amend this
Indenture or the Securities. However, without the consent of each Securityholder
affected, an amendment to this Indenture or the Securities may not:
(1) make any change to the Principal Amount at Maturity of
Securities whose Holders must consent to an amendment;
(2) make any change in the manner or rate of accrual in connection
with Contingent Additional Principal, make any change in the manner of
calculation of, or that adversely affects the right to receive, Contingent
Cash Interest, reduce the rate of interest referred to in paragraph 1 of
the Securities, or extend the time for payment of or Contingent Cash
Interest, if any, on any Security;
(3) reduce the Principal Amount at Maturity, Initial Principal
Amount at Maturity or extend the Stated Maturity of any Security;
(4) reduce the Redemption Price, Purchase Price or Change in Control
Purchase Price of any Security;
(5) make any Security payable in money or securities other than that
stated in the Security;
(6) make any change in Section 6.04, Section 6.07 or this Section
9.02, except to increase any percentage set forth therein;
(7) make any change that adversely affects the right to convert any
Security;
(8) make any change that adversely affects the right to require the
Company to purchase the Securities in accordance with the terms thereof
and this Indenture; or
(9) impair the right to institute suit for the enforcement of any
payment with respect to, or conversion of, the Securities.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
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After an amendment under this Section 9.02 becomes effective, the Company
shall mail to each Holder a notice briefly describing the amendment.
SECTION 9.03 Compliance with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article shall comply with the TIA.
SECTION 9.04 Revocation and Effect of Consents, Waivers and Actions. Until
an amendment, waiver or other action by Holders becomes effective, a consent
thereto by a Holder of a Security hereunder is a continuing consent by the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same obligation as the consenting Holder's Security, even if
notation of the consent, waiver or action is not made on the Security. However,
any such Holder or subsequent Holder may revoke the consent, waiver or action as
to such Holder's Security or portion of the Security if the Trustee receives the
notice of revocation before the date the amendment, waiver or action becomes
effective. After an amendment, waiver or action becomes effective, it shall bind
every Securityholder.
SECTION 9.05 Notation on or Exchange of Securities. Securities
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article may, and shall if required by the Trustee, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Company shall so determine, new Securities so
modified as to conform, in the opinion of the Trustee and the Board of
Directors, to any such supplemental indenture may be prepared and executed by
the Company and authenticated and delivered by the Trustee in exchange for
outstanding Securities.
SECTION 9.06 Trustee to Sign Supplemental Indentures. The Trustee shall
sign any supplemental indenture authorized pursuant to this Article 9 if the
amendment contained therein does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may, but need
not, sign such supplemental indenture. In signing such supplemental indenture
the Trustee shall be entitled to receive, and (subject to the provisions of
Section 7.01) shall be fully protected in relying upon, in addition to the
documents required by Section 12.04, an Officers' Certificate and an Opinion of
Counsel stating that such amendment is authorized or permitted by this
Indenture.
SECTION 9.07 Effect of Supplemental Indentures. Upon the execution of any
supplemental indenture under this Article, this Indenture shall be modified in
accordance therewith, and such supplemental indenture shall form a part of this
Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
ARTICLE 10
CONVERSION
SECTION 10.01 Conversion Privilege. A Holder of a Security may convert
such Security into Common Stock at any time during the period stated in
paragraph 9 of the Securities. The number of shares of Common Stock issuable
upon conversion of a Security per
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$1,000 of Initial Principal Amount at Maturity thereof (the "Conversion Rate")
shall be that set forth in paragraph 9 in the Securities, subject to adjustment
as herein set forth.
A Holder may convert a portion of the Principal Amount at Maturity of a
Security if the portion to be converted is an Initial Principal Amount at
Maturity of at least $1,000 or an integral multiple thereof. Provisions of this
Indenture that apply to conversion of all of a Security also apply to conversion
of a portion of a Security.
"Average Sale Price" means the average of the Sale Prices of the Common
Stock for the shorter of
(i) 30 consecutive trading days ending on the last full trading day
prior to the Time of Determination with respect to the rights, warrants or
options or distribution in respect of which the Average Sale Price is
being calculated, or
(ii) the period (x) commencing on the date next succeeding the first
public announcement of (a) the issuance of rights, warrants or options or
(b) the distribution, in each case, in respect of which the Average Sale
Price is being calculated and (y) proceeding through the last full trading
day prior to the Time of Determination with respect to the rights,
warrants or options or distribution in respect of which the Average Sale
Price is being calculated (excluding days within such period, if any,
which are not trading days), or
(iii) the period, if any, (x) commencing on the date next succeeding
the Ex-Dividend Time with respect to the next preceding (a) issuance of
rights, warrants or options or (b) distribution, in each case, for which
an adjustment is required by the provisions of Section 10.06(4), 10.07 or
10.08 and (y) proceeding through the last full trading day prior to the
Time of Determination with respect to the rights, warrants or options or
distribution in respect of which the Average Sale Price is being
calculated (excluding days within such period, if any, which are not
trading days).
In the event that the Ex-Dividend Time (or in the case of a subdivision,
combination or reclassification, the effective date with respect thereto) with
respect to a dividend, subdivision, combination or reclassification to which
Section 10.06(1), (2), (3) or (5) applies occurs during the period applicable
for calculating "Average Sale Price" pursuant to the definition in the preceding
sentence, "Average Sale Price" shall be calculated for such period in a manner
determined by the Board of Directors to reflect the impact of such dividend,
subdivision, combination or reclassification on the Sale Price of the Common
Stock during such period.
"Time of Determination" means the time and date of the earlier of (i) the
determination of stockholders entitled to receive rights, warrants or options or
a distribution, in each case, to which Section 10.07 or 10.08 applies and (ii)
the time ("Ex-Dividend Time") immediately prior to the commencement of
"ex-dividend" trading for such rights, warrants or options or distribution on
the New York Stock Exchange or such other principal national or regional
exchange or market on which the Common Stock is then listed or quoted.
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SECTION 10.02 Conversion Procedure. To convert a Security a Holder must
satisfy the requirements in paragraph 9 of the Securities. The date on which the
Holder satisfies all those requirements is the conversion date (the "Conversion
Date").
The Company shall have the option, exercisable at any time or from time to
time, by an instrument in writing signed by the Company and provided to the
Conversion Agent, to designate a, or change the designation of the financial
institution to which Securities surrendered by a Holder for conversion will be
initially offered by the Conversion Agent on behalf of a Holder for exchange (an
"Exchange Party"). If applicable, the Company shall enter into an agreement with
the Conversion Agent, in form and substance reasonably satisfactory to the
Conversion Agent, providing that, at the opening of business on each Business
Day during the period from 20 Business Days prior to the Purchase Date to the
Payment Date, the Conversion Agent shall inform the Exchange Party as to the
aggregate Initial Principal Amount at Maturity of Securities surrendered for
exchange on the prior Business Day. The Exchange Party may accept for exchange
all or any of such Securities if it agrees, no later than the time specified in
the agreement between the Company and the Conversion Agent (or, absent such
agreement, by the Payment Date), to deliver in exchange therefor the number of
Common Shares and other property that would be issued on conversion of such
Securities in accordance with the terms of this Indenture. As soon as
practicable following the Conversion Date, the Exchange Party or the Company, as
the case may be, will deliver through the Conversion Agent a certificate for the
number of full shares of Common Stock into which any Security is converted,
together with any cash payment for fractional shares. Delivery to the Holder of
the full number of shares of Common Stock into which the Security is
convertible, together with any cash payment for such Holders' fractional shares,
will be deemed to satisfy the Company's obligation to pay the Principal Amount
at Maturity of the Security whether made by the Company or by the Exchange
Party. A Holder whose Securities are exchanged in whole or in part shall be
given a written confirmation from the Conversion Agent informing such Holder as
to the aggregate Principal Amount at Maturity of the Securities so exchanged.
For purposes of the following paragraphs, Securities for which the Company
provides the Common Shares shall be referred to as Securities which have been
"converted," while Securities for which the Exchange Party supplies Common
Shares shall be referred to as Securities which have been "exchanged." Any
Securities which have been exchanged shall remain outstanding. The agreement
between the Company and the Conversion Agent setting forth the procedures to be
followed in an exchange may be changed at any time, as evidenced by an Opinion
of Counsel delivered to the Paying Agent, so long as such change does not
adversely affect the rights under this Indenture of a Holder who surrenders its
Securities for conversion.
As soon as practicable after the Conversion Date, the Company or the
Exchange Party shall deliver to the Holder, through the Conversion Agent, a
certificate for the number of full shares of Common Stock issuable upon the
conversion and cash in lieu of any fractional share determined pursuant to
Section 10.03. The person in whose name the certificate is registered shall be
treated as a stockholder of record on and after the Conversion Date; provided,
however, that no surrender of a Security on any date when the stock transfer
books of the Company shall be closed shall be effective to constitute the person
or persons entitled to receive the shares of Common Stock upon such conversion
as the record holder or holders of such shares of Common Stock on such date, but
such surrender shall be effective to constitute the person or
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persons entitled to receive such shares of Common Stock as the record holder or
holders thereof for all purposes at the close of business on the next succeeding
day on which such stock transfer books are open; such conversion shall be at the
Conversion Rate in effect on the date that such Security shall have been
surrendered for conversion, as if the stock transfer books of the Company had
not been closed. Upon conversion of a Security, such person shall no longer be a
Holder of such Security.
No payment or adjustment will be made for dividends on, or other
distributions with respect to, any Common Stock except as provided in this
Article 10. On conversion of a Security, that portion of accrued Contingent
Additional Principal attributable to the period from the Issue Date of the
Security through the Conversion Date and (except as provided below) accrued
Contingent Cash Interest with respect to the converted Security through the
Conversion Date shall not be cancelled, extinguished or forfeited, but rather
shall be deemed to be paid in full to the Holder thereof through delivery of the
Common Stock (together with the cash payment, if any, in lieu of fractional
shares) in exchange for the Security being converted pursuant to the provisions
hereof; and the fair market value of such shares of Common Stock (together with
any such cash payment in lieu of fractional shares) shall be treated as issued,
to the extent thereof, first in exchange for Contingent Additional Principal
accrued through the Conversion Date and accrued Contingent Cash Interest, and
the balance, if any, of such fair market value of such Common Stock (and any
such cash payment) shall be treated as issued in exchange for the Initial
Principal Amount at Maturity of the Security being converted pursuant to the
provisions hereof.
If the Holder converts more than one Security at the same time, the number
of shares of Common Stock issuable upon the conversion shall be based on the
total Principal Amount at Maturity of the Securities converted.
If the last day on which a Security may be converted is a Legal Holiday,
the Security may be surrendered on the next succeeding day that is not a Legal
Holiday.
Upon surrender of a Security that is converted in part, the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder, a new
Security in an authorized denomination equal in Principal Amount at Maturity to
the unconverted portion of the Security surrendered.
SECTION 10.03 Fractional Shares. Fractional shares of Common Stock will
not be delivered upon conversion or exchange of a Security. Instead, the Company
or the Exchange Party will deliver cash for the current market value of the
fractional share. The current market value of a fractional share shall be
determined, to the nearest 1/1,000th of a share, by multiplying the Sale Price
of the Common Stock, on the last trading day prior to the Conversion Date, of a
full share by the fractional amount and rounding the product to the nearest
whole cent.
SECTION 10.04 Taxes on Conversion. If a Holder converts a Security, the
Company or the Exchange Party shall pay any documentary, stamp or similar issue
or transfer tax due on the issue of shares of Common Stock upon the conversion.
However, the Holder shall pay any such tax which is due because the Holder
requests the shares to be issued in a name other than the Holder's name. The
Conversion Agent or the Exchange Party may refuse to
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deliver the certificates representing the Common Stock being issued in a name
other than the Holder's name until the Conversion Agent or the Exchange Party
receives a sum sufficient to pay any tax which will be due because the shares
are to be issued in a name other than the Holder's name. Nothing herein shall
preclude any tax withholding required by law or regulations.
SECTION 10.05 Company to Provide Stock. The Company shall, prior to
issuance of any Securities under this Article 10, and from time to time as may
be necessary, reserve out of its authorized but unissued Common Stock a
sufficient number of shares of Common Stock to permit the conversion of the
Securities.
All shares of Common Stock delivered upon conversion of the Securities
shall be duly authorized, validly issued, fully paid and nonassessable and free
from preemptive rights and any lien or adverse claim.
The Company will endeavor promptly to comply with all federal and state
securities laws regulating the offer and delivery of shares of Common Stock upon
conversion of Securities, if any, and will list or cause to have quoted such
shares of Common Stock on each national securities exchange or in the
over-the-counter market or such other market on which the Common Stock is then
listed or quoted.
SECTION 10.06 Adjustment for Change in Capital Stock. If, after the Issue
Date of the Securities, the Company:
(1) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a greater
number of shares;
(3) combines its outstanding shares of Common Stock into a smaller
number of shares;
(4) pays a dividend or makes a distribution on its Common Stock in
shares of its Capital Stock (other than Common Stock or rights, warrants
or options for its Capital Stock); or
(5) issues by reclassification of its Common Stock any shares of its
Capital Stock (other than rights, warrants or options for its Capital
Stock),
then the conversion privilege and the Conversion Rate in effect immediately
prior to such action shall be adjusted so that the Holder of a Security
thereafter converted may receive the number of shares of Capital Stock of the
Company which such Holder would have owned immediately following such action if
such Holder had converted the Security immediately prior to such action.
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The adjustment shall become effective immediately after the record date in
the case of a dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification.
If after an adjustment a Holder of a Security upon conversion of such
Security may receive shares of two or more classes of Capital Stock of the
Company, the Conversion Rate shall thereafter be subject to adjustment upon the
occurrence of an action taken with respect to any such class of Capital Stock as
is contemplated by this Article 10 with respect to the Common Stock, on terms
comparable to those applicable to Common Stock in this Article 10.
SECTION 10.07 Adjustment for Rights Issue. If, after the Issue Date of the
Securities, the Company distributes any rights, warrants or options to all
holders of its Common Stock entitling them, for a period expiring within 60 days
after the record date for such distribution, to purchase shares of Common Stock
at a price per share less than the Sale Price of the Common Stock as of the Time
of Determination, the Conversion Rate shall be adjusted in accordance with the
formula:
R' = R x (O + N)
-------------------
(O + (N x P)/M)
where:
R' = the adjusted Conversion Rate.
R = the current Conversion Rate.
O = the number of shares of Common Stock outstanding on the record
date for the distribution to which this Section 10.07 is being applied.
N = the number of additional shares of Common Stock offered pursuant
to the distribution.
P = the offering price per share of the additional shares.
M = the Average Sale Price, minus, in the case of (i) a distribution
to which Section 10.06(4) applies or (ii) a distribution to which Section
10.08 applies, for which, in each case, (x) the record date shall occur on
or before the record date for the distribution to which this Section 10.07
applies and (y) the Ex-Dividend Time shall occur on or after the date of
the Time of Determination for the distribution to which this Section 10.07
applies, the fair market value (on the record date for the distribution to
which this Section 10.07 applies) of the
(1) Capital Stock of the Company distributed in respect of each
share of Common Stock in such Section 10.06(4) distribution and
(2) assets of the Company or debt securities or any rights, warrants
or options to purchase securities of the Company distributed in respect of
each share of Common Stock in such Section 10.08 distribution.
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The Board of Directors shall determine fair market values for the purposes
of this Section 10.07.
The adjustment shall become effective immediately after the record date
for the determination of shareholders entitled to receive the rights, warrants
or options to which this Section 10.07 applies. If all of the shares of Common
Stock subject to such rights, warrants or options have not been issued when such
rights, warrants or options expire, then the Conversion Rate shall promptly be
readjusted to the Conversion Rate which would then be in effect had the
adjustment upon the issuance of such rights, warrants or options been made on
the basis of the actual number of shares of Common Stock issued upon the
exercise of such rights, warrants or options.
No adjustment shall be made under this Section 10.07 if the application of
the formula stated above in this Section 10.07 would result in a value of R'
that is equal to or less than the value of R.
SECTION 10.08 Adjustment for Other Distributions. (a) If, after the Issue
Date of the Securities, the Company distributes to all holders of its Common
Stock any of its assets excluding distributions of Capital Stock or equity
interests referred to in Section 10.08(b), or debt securities or any rights,
warrants or options to purchase securities of the Company (including securities
or cash, but excluding (x) distributions of Capital Stock referred to in Section
10.06 and distributions of rights, warrants or options referred to in Section
10.07 and (y) cash dividends or other cash distributions that are paid out of
consolidated current net earnings or earnings retained in the business as shown
on the books of the Company unless such cash dividends or other cash
distributions are Extraordinary Cash Dividends) the Conversion Rate shall be
adjusted, subject to the provisions of Section 10.08(c), in accordance with the
formula:
R' = R x M
-----
M - F
where:
R' = the adjusted Conversion Rate.
R = the current Conversion Rate.
M = the Average Sale Price, minus, in the case of a distribution to
which Section 10.06(4) applies, for which (i) the record date shall occur
on or before the record date for the distribution to which this Section
10.08(a) applies and (ii) the Ex-Dividend Time shall occur on or after the
date of the Time of Determination for the distribution to which this
Section 10.08(a) applies, the fair market value (on the record date for
the distribution to which this Section 10.08(a) applies) of any Capital
Stock of the Company distributed in respect of each share of Common Stock
in such Section 10.06(4) distribution.
F = the fair market value (on the record date for the distribution
to which this Section 10.08(a) applies) of the assets, securities, rights,
warrants or options to be distributed in respect of each share of Common
Stock in the distribution to which this Section 10.08(a) is being applied
(including, in the case of cash dividends or other cash distributions
giving rise to an adjustment, all such cash distributed concurrently).
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The Board of Directors shall determine fair market values for the purposes
of this Section 10.08(a).
The adjustment shall become effective immediately after the record date
for the determination of shareholders entitled to receive the distribution to
which this Section 10.08(a) applies.
For purposes of this Section 10.08(a), the term "Extraordinary Cash
Dividend" shall mean any cash dividend with respect to the Common Stock the
amount of which, together with the aggregate amount of cash dividends on the
Common Stock to be aggregated with such cash dividend in accordance with the
provisions of this paragraph, equals or exceeds the threshold percentage set
forth in item (i) below. For purposes of item (i) below, the "Measurement
Period" with respect to a cash dividend on the Common Stock shall mean the 365
consecutive day period ending on the date prior to the Ex-Dividend Time with
respect to such cash dividend, and the "Relevant Cash Dividends" with respect to
a cash dividend on the Common Stock shall mean the cash dividends on the Common
Stock with Ex-Dividend Times occurring in the Measurement Period.
(i) If, upon the date prior to the Ex-Dividend Time with respect to
a cash dividend on the Common Stock, the aggregate amount of such cash
dividend together with the amounts of all Relevant Cash Dividends equals
or exceeds on a per share basis 5% of the Sale Price of the Common Stock
on the last trading day preceding the date of declaration by the Board of
Directors of the cash dividend with respect to which this provision is
being applied, then such cash dividend together with all Relevant Cash
Dividends, shall be deemed to be an Extraordinary Cash Dividend and for
purposes of applying the formula set forth above in this Section 10.08(a),
the value of "F" shall be equal to (y) the aggregate amount of such cash
dividend together with the amount of all Relevant Cash Dividends, minus
(z) the aggregate amount of all Relevant Cash Dividends for which a prior
adjustment in the Conversion Rate was previously made under this Section
10.08(a).
(ii) In making the determinations required by item (i) above, the
amount of cash dividends paid on a per share basis, and the amount of any
Relevant Cash Dividends specified in item (i) above, shall be
appropriately adjusted to reflect the occurrence during such period of any
event described in Section 10.06.
(b) If, after the Issue Date of the Securities, the Company pays a
dividend or makes a distribution to all holders of its Common Stock consisting
of Capital Stock of any class or series, or similar equity interests, of or
relating to a Subsidiary or other business unit of the Company, the Conversion
Rate shall be adjusted in accordance with the formula:
R' = R x (1 + F/M)
where:
R' = the adjusted Conversion Rate.
R = the current Conversion Rate.
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M = the average of the Sale Prices of the Common Stock for the 10
trading days commencing on and including the fifth trading day after the
date on which "ex-dividend trading" commences for such dividend or
distribution on the New York Stock Exchange or such other national or
regional exchange or market on which such securities are then listed or
quoted (the "Ex-Dividend Date").
F = the fair market value of the securities distributed in respect
of each share of Common Stock for which this Section 10.08(b) shall mean
the number of securities distributed in respect of each share of Common
Stock multiplied by the average of the Sale Prices of those securities
distributed for the 10 trading days commencing on and including the fifth
trading day after the Ex-Dividend Date.
(c) In the event that, with respect to any distribution to which
Section 10.08(a) would otherwise apply, the difference "M-F" as defined in
the formula set forth in Section 10.08(a) is less than $1.00 or "F" is
equal to or greater than "M", then the adjustment provided by Section
10.08(a) shall not be made and in lieu thereof the provisions of Section
10.14 shall apply to such distribution.
SECTION 10.09 When Adjustment May Be Deferred. No adjustment in the
Conversion Rate need be made unless the adjustment would require an increase or
decrease of at least 1% in the Conversion Rate. Any adjustments that are not
made shall be carried forward and taken into account in any subsequent
adjustment.
All calculations under this Article 10 shall be made to the nearest cent
or to the nearest 1/1,000th of a share, as the case may be.
SECTION 10.10 When No Adjustment Required. No adjustment need be made for
a transaction referred to in Section 10.06, 10.07, 10.08 or 10.14 if
Securityholders are to participate in the transaction on a basis and with notice
that the Board of Directors determines to be fair and appropriate in light of
the basis and notice on which holders of Common Stock participate in the
transaction. Such participation by Securityholders may include participation
upon conversion provided that an adjustment shall be made at such time as the
Securityholders are no longer entitled to participate.
No adjustment need be made for rights to purchase Common Stock pursuant to
a Company plan for reinvestment of dividends or interest.
No adjustment need be made for a change in the par value or no par value
of the Common Stock.
To the extent the Securities become convertible pursuant to this Article
10 into cash, no adjustment need be made thereafter as to the cash. Interest
will not accrue on the cash.
SECTION 10.11 Notice of Adjustment. Whenever the Conversion Rate is
adjusted, the Company shall promptly mail to Securityholders a notice of the
adjustment. The Company shall file with the Trustee and the Conversion Agent
such notice and a certificate from the Company's independent public accountants
briefly stating the facts requiring the adjustment and the manner of computing
it. The certificate shall be conclusive evidence that the adjustment
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is correct. Neither the Trustee nor any Conversion Agent shall be under any duty
or responsibility with respect to any such certificate except to exhibit the
same to any Holder desiring inspection thereof.
SECTION 10.12 Voluntary Increase. The Company from time to time may
increase the Conversion Rate by any amount for any period of time. Whenever the
Conversion Rate is increased, the Company shall mail to Securityholders and file
with the Trustee and the Conversion Agent a notice of the increase. The Company
shall mail the notice at least 15 days before the date the increased Conversion
Rate takes effect. The notice shall state the increased Conversion Rate and the
period it will be in effect.
A voluntary increase of the Conversion Rate does not change or adjust the
Conversion Rate otherwise in effect for purposes of Section 10.06, 10.07 or
10.08.
SECTION 10.13 Notice of Certain Transactions. If:
(1) the Company takes any action that would require an adjustment in
the Conversion Rate pursuant to Section 10.06, 10.07 or 10.08 (unless no
adjustment is to occur pursuant to Section 10.10); or
(2) the Company takes any action that would require a supplemental
indenture pursuant to Section 10.14; or
(3) there is a liquidation or dissolution of the Company;
then the Company shall mail to Securityholders and file with the Trustee and the
Conversion Agent a notice stating the proposed record date for a dividend or
distribution or the proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, binding share exchange, transfer,
liquidation or dissolution. The Company shall file and mail the notice at least
15 days before such date. Failure to file or mail the notice or any defect in it
shall not affect the validity of the transaction.
SECTION 10.14 Reorganization of Company; Special Distributions. If the
Company is a party to a transaction subject to Section 5.01 (other than a sale
of all or substantially all of the assets of the Company in a transaction in
which the holders of Common Stock immediately prior to such transaction do not
receive securities, cash or other assets of the Company or any other person) or
a merger or binding share exchange which reclassifies or changes its outstanding
Common Stock, the person obligated to deliver securities, cash or other assets
upon conversion of Securities shall enter into a supplemental indenture. If the
issuer of securities deliverable upon conversion of Securities is an Affiliate
of the successor Company, that issuer shall join in the supplemental indenture.
The supplemental indenture shall provide that the Holder of a Security may
convert it into the kind and amount of securities, cash or other assets which
such Holder would have received immediately after the consolidation, merger,
binding share exchange or transfer if such Holder had converted the Security
immediately before the effective date of the transaction, assuming (to the
extent applicable) that such Holder (i) was not a constituent person or an
Affiliate of a constituent person to such transaction; (ii) made no election
with respect thereto;
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and (iii) was treated alike with the plurality of non-electing Holders. The
supplemental indenture shall provide for adjustments which shall be as nearly
equivalent as may be practical to the adjustments provided for in this Article
10. The successor Company shall mail to Securityholders a notice briefly
describing the supplemental indenture.
If this Section applies, neither Section 10.06 nor 10.07 applies.
If the Company makes a distribution to all holders of its Common Stock of
any of its assets, or debt securities or any rights, warrants or options to
purchase securities of the Company that, but for the provisions of Section
10.08(c), would otherwise result in an adjustment in the Conversion Rate
pursuant to the provisions of Section 10.08, then, from and after the record
date for determining the holders of Common Stock entitled to receive the
distribution, a Holder of a Security that converts such Security in accordance
with the provisions of this Indenture shall upon such conversion be entitled to
receive, in addition to the shares of Common Stock into which the Security is
convertible, the kind and amount of securities, cash or other assets comprising
the distribution that such Holder would have received if such Holder had
converted the Security immediately prior to the record date for determining the
holders of Common Stock entitled to receive the distribution.
SECTION 10.15 Company Determination Final. Any determination that the
Company or the Board of Directors must make pursuant to Section 10.03, 10.06,
10.07, 10.08, 10.09, 10.10, 10.14 or 10.17 is conclusive.
SECTION 10.16 Trustee's Adjustment Disclaimer. The Trustee has no duty to
determine when an adjustment under this Article 10 should be made, how it should
be made or what it should be. The Trustee has no duty to determine whether a
supplemental indenture under Section 10.14 need be entered into or whether any
provisions of any supplemental indenture are correct. The Trustee shall not be
accountable for and makes no representation as to the validity or value of any
securities or assets issued upon conversion of Securities. The Trustee shall not
be responsible for the Company's failure to comply with this Article 10. Each
Conversion Agent shall have the same protection under this Section 10.16 as the
Trustee.
SECTION 10.17 Simultaneous Adjustments. In the event that this Article 10
requires adjustments to the Conversion Rate under more than one of Sections
10.06(4), 10.07 or 10.08, and the record dates for the distributions giving rise
to such adjustments shall occur on the same date, then such adjustments shall be
made by applying first, the provisions of Section 10.06, second, the provisions
of Section 10.08 and third, the provisions of Section 10.07.
SECTION 10.18 Successive Adjustments. After an adjustment to the
Conversion Rate under this Article 10, any subsequent event requiring an
adjustment under this Article 10 shall cause an adjustment to the Conversion
Rate as so adjusted.
SECTION 10.19 Rights Issued in Respect of Common Stock Issued upon
Conversion. Each share of Common Stock issued upon conversion of Securities
pursuant to this Article 10 shall be entitled to receive the appropriate number
of common stock or preferred stock purchase rights, as the case may be (the
"Rights"), if any, and the certificates representing the Common Stock issued
upon such conversion shall bear such legends, if any, in each case as may
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be provided by the terms of any shareholder rights agreement adopted by the
Company, as the same may be amended from time to time (in each case, a "Rights
Agreement"). Provided that such Rights Agreement requires that each share of
Common Stock issued upon conversion of Securities at any time prior to the
distribution of separate certificates representing the Rights be entitled to
receive such Rights, then, notwithstanding anything else to the contrary in this
Article 10, there shall not be any adjustment to the conversion privilege or
Conversion Rate as a result of the issuance of Rights, the distribution of
separate certificates representing the Rights, the exercise or redemption of
such Rights in accordance with any such Rights Agreement, or the termination or
invalidation of such Rights.
ARTICLE 11
PAYMENT OF INTEREST
SECTION 11.01 Interest Payments. Contingent Cash Interest on any Security
that is payable, and is punctually paid or duly provided for, on any applicable
payment date shall be paid to the person in whose name that Security is
registered at the close of business on the accrual date for such interest at the
office or agency of the Company maintained for such purpose. Each installment of
Contingent Cash Interest on any Security shall be paid in same-day funds by
transfer to an account maintained by the payee located inside the United States
if the Trustee shall have received proper wire transfer instructions from such
payee not later than the related accrual date or, if no such instructions shall
have been received, by check drawn on a bank in New York City mailed to the
payee at its address set forth on the Registrar's books. In the case of a
permanent Global Security, Contingent Cash Interest payable on any applicable
payment date will be paid to the Depositary, with respect to that portion of
such permanent Global Security held for its account by Cede & Co. for the
purpose of permitting such party to credit the interest received by it in
respect of such permanent Global Security to the accounts of the beneficial
owners thereof.
SECTION 11.02 Defaulted Interest. Except as otherwise specified with
respect to the Securities, any Contingent Cash Interest on any Security that is
payable, but is not punctually paid or duly provided for, within 30 days
following any applicable payment date (herein called "Defaulted Interest", which
term shall include any accrued and unpaid interest that has accrued on such
defaulted amount in accordance with paragraph 1 of the Securities), shall
forthwith cease to be payable to the registered Holder thereof on the relevant
accrual date, by virtue of having been such Holder, and such Defaulted Interest
may be paid by the Company, at its election in each case, as provided in clause
(1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the persons in whose names the Securities are registered at the close
of business on a special record date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company shall
notify the Trustee in writing of the amount of Defaulted
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Interest proposed to be paid on each Security and the date of the proposed
payment (which shall not be less than 20 days after such notice is
received by the Trustee), and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit on or prior to
the date of the proposed payment, such money when deposited to be held in
trust for the benefit of the persons entitled to such Defaulted Interest
as in this clause provided. Thereupon the Trustee shall fix a special
record date (the "Special Record Date") for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10 days
prior to the date of the proposed payment and not less than 10 days after
the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date and,
in the name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder of
Securities at his address as it appears on the list of Securityholders
maintained pursuant to Section 2.05 not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the persons in whose
names the Securities are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed payment
pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
SECTION 11.03 Interest Rights Preserved. Subject to the foregoing
provisions of this Article 11 and Section 2.06, each Security delivered under
this Indenture upon registration of transfer of or in exchange for or in lieu of
any other Security shall carry the rights to Contingent Cash Interest accrued
and unpaid, and to accrue, which were carried by such other Security.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01 Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies, or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 12.02 Notices. Any request, demand, authorization, notice, waiver,
consent or communication shall be in writing and delivered in person or mailed
by first-class mail, postage prepaid, addressed as follows or transmitted by
facsimile transmission (confirmed by guaranteed overnight courier) to the
following facsimile numbers:
if to the Company:
Omnicom Group Inc.
437 Madison Avenue, 9th Floor
New York, New York 10022
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Telephone No. (212) 415-3600
Facsimile No. (212) 817-6988
Attention: General Counsel
if to the Trustee:
JPMorgan Chase Bank
450 West 33rd Street
New York, New York 10001
Telephone No. (212) 946-3075
Facsimile No. (212) 946-8162
Attention: Institutional Trust Services
The Company or the Trustee by notice given to the other in the manner
provided above may designate additional or different addresses for subsequent
notices or communications.
Any notice or communication given to a Securityholder shall be mailed to
the Securityholder, by first-class mail, postage prepaid, at the
Securityholder's address as it appears on the registration books of the
Registrar and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not received by the addressee.
If the Company mails a notice or communication to the Securityholders, it
shall mail a copy to the Trustee and each Registrar, Paying Agent, Conversion
Agent or co-registrar.
SECTION 12.03 Communication by Holders with Other Holders. Securityholders
may communicate pursuant to TIA Section 312(b) with other Securityholders with
respect to their rights under this Indenture or the Securities. The Company, the
Trustee, the Registrar, the Paying Agent, the Conversion Agent and anyone else
shall have the protection of TIA Section 312(c).
SECTION 12.04 Certificate and Opinion as to Conditions Precedent. Upon any
request or application by the Company to the Trustee to take any action under
this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
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Notwithstanding the foregoing, it is understood that no Opinion of Counsel
or Officer's Certificate shall be required pursuant to this Section 12.04 in
connection with the initial issuance of the Securities or the issuance of Common
Stock upon the exercise of the conversion privilege.
SECTION 12.05 Statements Required in Certificate or Opinion. Each
Officers' Certificate or Opinion of Counsel with respect to compliance with a
covenant or condition provided for in this Indenture shall include:
(1) a statement that each person making such Officers' Certificate
or Opinion of Counsel has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
Officers' Certificate or Opinion of Counsel are based;
(3) a statement that, in the opinion of each such person, he has
made such examination or investigation as is necessary to enable such
person to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement that, in the opinion of such person, such covenant
or condition has been complied with.
SECTION 12.06 Separability Clause. In case any provision in this Indenture
or in the Securities shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 12.07 Rules by Trustee, Paying Agent, Conversion Agent and
Registrar. The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar, Conversion Agent and the Paying Agent may make
reasonable rules for their functions.
SECTION 12.08 Calculations. The calculation of the Purchase Price, Change
in Control Purchase Price, Conversion Rate, Market Price, Sale Price of the
Common Stock and each other calculation to be made hereunder (other than the
Market Price for the Securities) shall be the obligation of the Company. All
calculations made by the Company as contemplated pursuant to this Section 12.08
shall be final and binding on the Company and the Holders absent manifest error.
The Trustee, Paying Agent, Conversion Agent and Bid Solicitation Agent shall not
be obligated to recalculate, recompute or confirm any such calculations.
SECTION 12.09 Legal Holidays. A "Legal Holiday" is any day other than a
Business Day. If any specified date (including a date for giving notice) is a
Legal Holiday, the action shall be taken on the next succeeding day that is not
a Legal Holiday, and, if the action to be taken on such date is a payment in
respect of the Securities, no Contingent Additional Principal or Contingent Cash
Interest, if any, shall accrue for the intervening period.
SECTION 12.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE
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STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS.
SECTION 12.11 No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.
SECTION 12.12 Successors. All agreements of the Company in this Indenture
and the Securities shall bind its successor. All agreements of the Trustee in
this Indenture shall bind its successor.
SECTION 12.13 Multiple Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Indenture.
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IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed
this Indenture on behalf of the respective parties hereto as of the date first
above written.
OMNICOM GROUP INC.
By: /s/ Robert Profusek
------------------------
Executive Vice President
JPMORGAN CHASE BANK,
as Trustee
By /s/ Patrick Healy
------------------------
Name: Patrick Healy
Title: Vice President
<PAGE>
EXHIBIT A-1
[FORM OF FACE OF GLOBAL SECURITY]
FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THIS
SECURITY IS DEEMED TO BE ISSUED WITH AN INDETERMINATE AMOUNT OF ORIGINAL ISSUE
DISCOUNT FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. THE ISSUE DATE IS MARCH
6, 2002, AND THE YIELD TO MATURITY FOR PURPOSES OF ACCRUING ORIGINAL ISSUE
DISCOUNT IS 6.69% PER ANNUM. THE HOLDER OF THIS SECURITY MAY OBTAIN THE
PROJECTED PAYMENT SCHEDULE BY SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION
TO: OMNICOM GROUP INC., 437 MADISON AVENUE, 9TH FLOOR, NEW YORK, NEW YORK 10022,
ATTENTION: GENERAL COUNSEL.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS TO
NOMINEES OF THE DEPOSITORY TRUST COMPANY, OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY, THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
A-1-1
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WHICH OMNICOM GROUP INC. (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE
COMPANY OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG AS THIS SECURITY IS ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT
THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (C) OUTSIDE THE UNITED STATES TO NON-U.S. PERSONS IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPH (A)(1), (2),(3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (E) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHTS PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE
OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
THE FOREGOING LEGEND MAY BE REMOVED FROM THIS SECURITY ON SATISFACTION OF
THE CONDITIONS SPECIFIED IN THE INDENTURE.
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OMNICOM GROUP INC.
Zero Coupon Zero Yield Convertible Note due 2032
No. R- CUSIP: 681919 AL0
Issue Date: March 6, 2002
OMNICOM GROUP INC., a New York corporation, promises to pay to Cede & Co.
or registered assigns, the Initial Principal Amount at Maturity of
[_______________________________ ($________)], or if greater, the Principal
Amount at Maturity, on July 31, 2032.
This Security shall bear no interest other than Contingent Cash Interest,
if any, and Contingent Additional Principal will accrue as specified on the
other side of this Security. This Security is convertible as specified on the
other side of this Security.
Additional provisions of this Security are set forth on the other side of
this Security.
Dated: March 6, 2002 OMNICOM GROUP INC.
By
-------------------------------
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
JPMORGAN CHASE BANK,
as Trustee, certifies that this
is one of the Securities referred
to in the within-mentioned Indenture (as
defined on the other side of this Security).
By
-------------------------------
Authorized Officer
A-1-3
<PAGE>
[FORM OF REVERSE SIDE OF ZERO COUPON ZERO YIELD CONVERTIBLE NOTE]
Zero Coupon Zero Yield Convertible Note due 2032
1. Interest.
This Security shall not bear interest, except as specified in this
paragraph or in paragraph 5 hereof. If the Principal Amount at Maturity hereof
or any portion of such Principal Amount at Maturity is not paid when due
(whether upon acceleration pursuant to Section 6.02 of the Indenture, upon the
date set for payment of the Redemption Price pursuant to paragraph 6 hereof,
upon the date set for payment of the Purchase Price or Change in Control
Purchase Price pursuant to paragraph 7 hereof or upon the maturity of this
Security) or if Contingent Cash Interest, if any, due hereon or any portion of
such interest is not paid when due in accordance with paragraph 5 hereof, then
in each such case the overdue amount shall, to the extent permitted by law, bear
interest at the sum of the rate of 1% per annum plus a percentage per annum
equal to the rate of accrual of Contingent Additional Principal, if any,
compounded semiannually, which interest shall accrue from the date such overdue
amount was originally due to the date payment of such amount, including interest
thereon, has been made or duly provided for. All such interest shall be payable
on demand. The accrual of such interest on overdue amounts shall be in lieu of,
and not in addition to, the continued accrual of Contingent Additional
Principal.
2. Method of Payment.
Subject to the terms and conditions of the Indenture, and except as
otherwise provided in the Indenture, the Company or the Purchase Party will make
payments in respect of Redemption Prices, Purchase Prices, Change in Control
Purchase Prices and at maturity of this Security to Holders who surrender
Securities to a Paying Agent to collect such payments in respect of the
Securities. In addition, the Company will pay Contingent Cash Interest, if any.
The Company or the Purchase Party will pay cash amounts in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. However, the Company or the Purchase Party may make such cash
payments by check payable in such money if the Security is not registered in the
name of Cede & Co. or a nominee thereof. If the Security is registered in the
name of Cede & Co. or a nominee thereof, the Company or the Purchase Party may
make such cash payments by wire transfer. Any payment required to be made on any
day that is not a Business Day will be made on the next succeeding Business Day.
3. Paying Agent, Conversion Agent, Registrar and Bid Solicitation Agent.
Initially, JPMorgan Chase Bank, a New York banking corporation (the
"Trustee"), will act as Paying Agent, Conversion Agent, Registrar and Bid
Solicitation Agent. The Company may appoint and change any Paying Agent,
Conversion Agent, Registrar or co-registrar or Bid Solicitation Agent without
notice, other than notice to the Trustee, except that the Company will maintain
at least one Paying Agent in the State of New York, City of New York, Borough of
Manhattan, which shall initially be an office or agency of the Trustee. The
Company or any of its Subsidiaries or any of their Affiliates may act as Paying
Agent, Conversion Agent, Registrar or co-registrar. None of the Company, any of
its Subsidiaries or any of their Affiliates shall act as Bid Solicitation Agent.
A-1-4
<PAGE>
4. Indenture.
The Company issued the Securities under an Indenture dated as of March 6,
2002 (the "Indenture"), between the Company and the Trustee. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as in effect from
time to time (the "TIA"). Capitalized terms used herein and not defined herein
have the meanings ascribed thereto in the Indenture. The Securities are subject
to all such terms, and Securityholders are referred to the Indenture and the TIA
for a statement of those terms.
The Securities are general unsecured and unsubordinated obligations of the
Company limited to $900,000,000 aggregate Initial Principal Amount at Maturity
(subject to Section 2.07 of the Indenture). The Indenture does not limit other
indebtedness of the Company, secured or unsecured.
Before July 31, 2022, the Principal Amount at Maturity of a Security will
be equal to the Initial Principal Amount at Maturity of the Security. On or
after July 31, 2022, if the July 31, 2022 Average Conversion Value of a Security
is greater than the Initial Principal Amount at Maturity but less than or equal
to 220% of the Initial Principal Amount at Maturity, then the Principal Amount
at Maturity of a Security will be equal to the July 31, 2022 Average Conversion
Value of the Security; provided that if the July 31, 2022 Average Conversion
Value exceeds 200% of the Initial Principal Amount at Maturity, then the
Principal Amount at Maturity will equal 200% of the Initial Principal Amount at
Maturity. If the July 31, 2022 Average Conversion Value exceeds 220% of the
Initial Principal Amount at Maturity or is less than or equal than the Initial
Principal Amount at Maturity then the Principal Amount at Maturity will equal
the Initial Principal Amount at Maturity.
5. Contingent Cash Interest.
Subject to the accrual and record date provisions specified in this
paragraph 5, the Company shall pay contingent cash interest ("Contingent Cash
Interest") to the Holder of this Security during any six-month period (each a
"Contingent Interest Period") from August 1 to January 31 or from February 1 to
July 31, commencing on or after August 1, 2007, if the average of the Zero
Coupon Zero Yield Convertible Note Market Prices for each of the days in the
Five-Day Period with respect to such Contingent Interest Period equals or
exceeds 120% of the Initial Principal Amount at Maturity of this Security.
For any six-month period, the amount of Contingent Cash Interest payable
per $1,000 Initial Principal Amount at Maturity hereof in respect of any
Contingent Interest Period shall equal the amount of Regular Cash Dividends
payable by the Company per share of Common Stock during that Contingent Interest
Period multiplied by the number of shares of Common Stock into which $1,000
Initial Principal Amount at Maturity hereof is convertible pursuant to paragraph
9 hereof as of the accrual date for such Contingent Cash Interest.
During any Contingent Interest Period with respect to which Contingent
Cash Interest is payable, the Company will notify the Trustee upon its
declaration of each Regular Cash Dividend. Contingent Cash Interest, if any,
will accrue and be payable to Holders as of the
A-1-5
<PAGE>
record date for the Regular Cash Dividend giving rise to such accrued Contingent
Cash Interest. Such payments shall be paid on the payment date of the related
Regular Cash Dividend.
"Five-Day Period" means, with respect to any Contingent Interest Period,
the five trading days ending on the second trading day immediately preceding the
first day of such Contingent Interest Period; provided, however, that if the
Company shall have declared a Regular Cash Dividend on its Common Stock that is
payable during such Contingent Interest Period but for which the record date for
determining stockholders entitled thereto precedes the first day of such
Contingent Interest Period, then "Five-Day Period" shall mean, with respect to
such Contingent Interest Period, the five trading days ending on the second
trading day immediately preceding such record date.
"Regular Cash Dividends" means quarterly or other periodic cash dividends
on the Company's Common Stock as declared by the Board of Directors as part of
its cash dividend payment practices and that are not designated by the Board of
Directors as extraordinary or special or other nonrecurring dividends.
"Zero Coupon Zero Yield Convertible Note Market Price" means, as of any
date of determination, the average of the secondary market bid quotations per
$1,000 Principal Amount at Maturity obtained by the Bid Solicitation Agent for
$10 million Principal Amount at Maturity of Securities at approximately 4:00
p.m., New York City time, on such determination date from three independent
nationally recognized securities dealers in The City of New York (none of which
shall be an Affiliate of the Company) selected by the Company; provided,
however, if (a) at least three such bids are not obtained by the Bid
Solicitation Agent or (b) in the Company's reasonable judgment, the bid
quotations are not indicative of the secondary market value of the Securities as
of such determination date, then the Zero Coupon Zero Yield Convertible Note
Market Price for such determination date shall equal (i) the Conversion Rate in
effect as of such determination date multiplied by (ii) the average of the Sale
Prices of the Common Stock for each of the five trading days ending on such
determination date, appropriately adjusted to take into account the occurrence,
during the period commencing on the first of such trading days during such five
trading day period and ending on such determination date, of any event described
in Section 10.06, 10.07 or 10.08 (subject to the conditions set forth in
Sections 10.09 and 10.10) of the Indenture.
The Company will determine every six months, commencing August 1, 2007,
whether the conditions to the payment of Contingent Cash Interest have been
satisfied and, if so, the Company shall promptly notify the Holders of this
Security of such determination and shall use its reasonable best efforts to post
this information on its web site or, at its option, otherwise publicly disclose
this information.
6. Redemption at the Option of the Company.
No sinking fund is provided for the Securities. The Company cannot redeem
the Securities before July 31, 2007. On or after July 31, 2007, and before July
31, 2022 the Company may, at its option, redeem the Securities for cash at any
time in whole or from time to time in part at the Initial Principal Amount at
Maturity of the Securities.
A-1-6
<PAGE>
On or after July 31, 2022, the Company may redeem the Securities at any
time in whole or in part at the Initial Principal Amount at Maturity plus
accrued Contingent Additional Principal, if any. The price to be paid for any
such redemption is referred to as the "Redemption Price." The Securities will be
redeemable in integral multiples of $1,000 of Principal Amount at Maturity.
In addition to the Redemption Price payable with respect to all Securities
or portions thereof to be redeemed as of a Redemption Date, the Holders of such
Securities (or portions thereof) shall be entitled to receive accrued and unpaid
Contingent Cash Interest, if any, with respect thereto, which Contingent Cash
Interest shall be paid in cash on the Redemption Date.
7. Purchase by the Company at the Option of the Holder.
Subject to the terms and conditions of the Indenture, the Company shall
become obligated to purchase, at the option of the Holder, the Securities held
by such Holder on the following Purchase Dates and at the following Purchase
Prices per $1,000 Initial Principal Amount at Maturity, upon delivery of a
Purchase Notice containing the information set forth in the Indenture, at any
time from the opening of business on the date that is 20 Business Days prior to
such Purchase Date until the close of business on the Purchase Date and upon
delivery of the Securities to the Paying Agent by the Holder as set forth in the
Indenture.
Purchase Date Purchase Price
------------- --------------
July 31, 2003 through but Initial Principal Amount at
not including July 31, 2022 Maturity of the Security
July 31, 2022 through Initial Principal Amount at Maturity
July 31, 2031 of the Security plus accrued
Contingent Additional Principal, if any
The Purchase Price may be paid, at the option of the Company, in cash or
by the issuance and delivery of shares of Common Stock of the Company, or in any
combination thereof and may be paid by a Purchase Party if so designated by the
Company, in accordance with the terms of the Indenture.
At the option of the Holder and subject to the terms and conditions of the
Indenture, the Company shall become obligated to purchase the Securities held by
such Holder 35 Business Days after the occurrence of a Change in Control of the
Company occurring on or prior to July 31, 2007 for a Change in Control Purchase
Price equal to $1,000 per Security, which Change in Control Purchase Price shall
be paid in cash.
If at least 90% in aggregate Principal Amount at Maturity of the
Securities outstanding immediately prior to the Change in Control are purchased
on the Change in Control Purchase Date, the Company may, within 90 days
following the Change in Control Purchase Date, at its option, redeem for cash
all of the remaining Securities at a Redemption Price per Security equal to the
Initial Principal Amount at Maturity of such Security.
A-1-7
<PAGE>
In addition to the Purchase Price or Change in Control Purchase Price, as
the case may be, payable with respect to all Securities or portions thereof to
be purchased as of the Purchase Date or the Change in Control Purchase Date, as
the case may be, the Holders of such Securities (or portions thereof) shall be
entitled to receive accrued and unpaid Contingent Cash Interest, if any, with
respect thereto, which Contingent Cash Interest shall be paid in cash promptly
following the later of the Purchase Date or the Change in Control Purchase Date,
as the case may be and the time of delivery of such Securities to the Paying
Agent pursuant to the Indenture.
Holders have the right to withdraw any Purchase Notice or Change in
Control Purchase Notice, as the case may be, by delivering to the Paying Agent a
written notice of withdrawal in accordance with the provisions of the Indenture.
If cash (and/or securities if permitted under the Indenture) sufficient to
pay the Purchase Price or Change in Control Purchase Price, as the case may be,
of, together with any accrued and unpaid Contingent Cash Interest with respect
to, all Securities or portions thereof to be purchased as of the Purchase Date
or the Change in Control Purchase Date, as the case may be, is deposited with
the Paying Agent on or prior to the Business Day following the Change in Control
Purchase Date or the Payment Date, as the case may be, Contingent Additional
Principal and Contingent Cash Interest, if any, shall cease to accrue on such
Securities (or portions thereof) in favor of the Holder surrendering the
Securities for purchase immediately after such Purchase Date or Change in
Control Purchase Date, as the case may be, and the Holder surrendering such
Securities for purchase shall have no other rights as such (other than the right
to receive the Purchase Price or Change in Control Purchase Price, as the case
may be, and accrued and unpaid Contingent Cash Interest, if any, upon surrender
of such Security).
In certain circumstances, as provided in the Indenture, when a Holder
surrenders Securities for purchase, the Purchase Agent may first offer such
Securities to a financial institution chosen by the Company who will have the
option, but not the obligation, (unless separately agreed to by it and the
Company at the time) to purchase such Securities at the applicable Purchase
Price).
8. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Securities to be redeemed at
the Holder's registered address. If money sufficient to pay the Redemption Price
of, and accrued and unpaid Contingent Cash Interest, if any, with respect to,
all Securities (or portions thereof) to be redeemed on the Redemption Date is
deposited with the Paying Agent prior to or on the Redemption Date, immediately
after such Redemption Date, Contingent Additional Principal and Contingent Cash
Interest, if any, shall cease to accrue on such Securities or portions thereof.
Securities in denominations larger than $1,000 Initial Principal Amount at
Maturity may be redeemed in part but only in an Initial Principal Amount at
Maturity of at least $1,000 or in integral multiples thereof.
A-1-8
<PAGE>
9. Conversion.
Holders may surrender Securities for conversion into shares of Common
Stock only if at least one of the conditions described in (a) through (d) below
is satisfied. In addition, a Security for which a Holder has delivered a
Purchase Notice or a Change in Control Purchase Notice requiring the Company to
purchase the Security may be surrendered for conversion only if such notice is
withdrawn in accordance with the Indenture.
The initial Conversion Rate is 9.09 shares per $1,000 Initial Principal
Amount at Maturity of a Security, subject to adjustment upon the occurrence of
certain events described in the Indenture. A Holder otherwise entitled to a
fractional share will receive cash in an amount equal to the value of such
fractional share based on the Sale Price on the trading day immediately
preceding the Conversion Date.
The ability to surrender Securities for conversion will expire at the
close of business on July 31, 2032.
(a) Before July 31, 2022, Holders may surrender a Security for conversion at
the then-applicable conversion price during any calendar quarter,
commencing after March 31, 2002 if the average Conversion Values of the
Security for each of the last 20 trading days in the preceding calendar
quarter is greater than or equal to a specified percentage of the Initial
Principal Amount at Maturity; 125% for the quarter ending June 30, 2002,
and increasing 5% per quarter for each quarter thereafter up to a maximum
of 220% of the Initial Principal Amount at Maturity of the Security for
the quarter ending June 30, 2007. Thereafter, this percentage shall remain
at 220%. If the foregoing condition is satisfied at any time after July
31, 2003 and before July 31, 2022, then the Securities will become and
remain convertible at any time thereafter at the option of the Holder,
through maturity. On or after July 31, 2022, Holders may surrender a
Security for conversion during any calendar quarter if the average of the
Conversion Values of the Security for each of the last 20 trading days in
the preceding calendar quarter is greater than or equal to 110% of the
Principal Amount at Maturity of the Security. If the foregoing condition
is satisfied, then the Securities will become and remain convertible at
any time thereafter at the option of the Holder, through maturity.
(b) Holders may also surrender a Security for conversion at the
then-applicable conversion price at any time after the credit rating
assigned to the Securities is reduced to Baa3 or lower by Moody's
Investors Service, Inc. or BBB or lower by Standard & Poor's Ratings
Services, even if the credit rating assigned has subsequently been changed
to a higher rating.
(c) A Holder may surrender for conversion at the then-applicable conversion
price a Security with respect to which the Company has mailed a Redemption
Notice at any time prior to the close of business on the second Business
Day prior to the Redemption Date, even if it is not otherwise convertible
at that time.
(d) If the Company elects to
A-1-9
<PAGE>
o distribute to all Holders of Common Stock certain rights entitling
them to purchase, for a period expiring within 60 days, Common Stock
at less than the Sale Price at the time, or
o distribute to all Holders of Common Stock assets, debt securities or
certain rights to purchase securities of the Company, which
distribution has a per share value as determined by the Company's
Board of Directors exceeding 15% of the closing price of the Common
Stock on the day preceding the declaration date for such
distribution,
the Company must notify the Holders of Securities at least 20 days prior to the
Ex-Dividend Date for such distribution. Once the Company has given such notice,
Holders may surrender their Securities for conversion at the then-applicable
conversion price at any time thereafter until the earlier of the close of
business on the Business Day prior to the Ex-Dividend Date or the Company's
announcement that such distribution will not take place.
Contingent Cash Interest will not be paid on Securities that are
converted; provided, however that Holders of Securities surrendered for
conversion during the period from the close of business on any record date for
the Regular Cash Dividend giving rise to the obligation to pay Contingent Cash
Interest to the opening of business on the date on which such Contingent Cash
Interest is payable, shall be entitled to receive such Contingent Cash Interest
on the date on which such Contingent Cash Interest is payable. Except Securities
with respect to which the Company has mailed a Notice of Redemption, Securities
surrendered for conversion during such periods must be accompanied by payment of
an amount equal to the Contingent Cash Interest with respect thereto that the
registered Holder is to receive.
The Conversion Rate will not be adjusted for accrued Contingent Additional
Principal, if any, or Contingent Cash Interest, if any. As soon as practicable
following the Conversion Date, the Company will deliver through the Conversion
Agent a certificate for the number of full shares of Common Stock into which any
Security is converted, together with any cash payment for fractional shares.
Delivery to the Holder of the full number of shares of Common Stock into which
the Security is convertible, together with any cash payment for such Holder's
fractional shares, will be deemed to satisfy the Company's obligation to pay the
Principal Amount at Maturity of and any accrued Contingent Additional Principal
on the Security.
Subject to the provisions of this paragraph 9 and notwithstanding the fact
that any other condition to conversion has not been satisfied, in the event the
Company is a party to a consolidation, merger or binding share exchange pursuant
to which the Common Stock would be converted into cash, securities or other
property as set forth in Section 10.14 of the Indenture, the Securities may be
surrendered for conversion at any time from and after the date which is 15 days
prior to the date the Company announces the anticipated effective time until 15
days after the actual effective date of such transaction, and at the effective
time of such transaction the right to convert a Security into Common Stock will
be deemed to have changed into a right to convert it into the kind and amount of
cash, securities or other property which the Holder would have received if the
Holder had converted its Security immediately prior to the transaction. If the
transaction also constitutes a Change in Control, the Holder will be able to
require the Company to purchase all or a portion of its Securities as described
under paragraph 7 herein.
A-1-10
<PAGE>
To convert a Security, a Holder must (1) complete and manually sign the
conversion notice below (or complete and manually sign a facsimile of such
notice) and deliver such notice to the Conversion Agent, (2) surrender the
Security to the Conversion Agent, (3) furnish appropriate endorsements and
transfer documents if required by the Conversion Agent, the Company or the
Trustee and (4) pay any transfer or similar tax, if required. The "Conversion
Date" as used herein refers to the date on which all of the foregoing
requirements have been satisfied.
A Holder may convert a portion of a Security if the Initial Principal
Amount at Maturity of such portion is $1,000 or an integral multiple of $1,000.
No payment or adjustment will be made for dividends on the Common Stock except
as provided in the Indenture. On conversion of a Security, that portion of
accrued Contingent Additional Principal attributable to the period from the
Issue Date through the Conversion Date and (except as provided above) accrued
Contingent Cash Interest with respect to the converted Security shall not be
cancelled, extinguished or forfeited, but rather shall be deemed to be paid in
full to the Holder thereof through the delivery of the Common Stock (together
with the cash payment, if any, in lieu of fractional shares) in exchange for the
Security being converted pursuant to the terms hereof; and the fair market value
of such shares of Common Stock (together with any such cash payment in lieu of
fractional shares) shall be treated as issued, to the extent thereof, first in
exchange for Contingent Additional Principal accrued through the Conversion Date
and accrued Contingent Cash Interest, and the balance, if any, of such fair
market value of such Common Stock (and any such cash payment) shall be treated
as issued in exchange for the Initial Principal Amount at Maturity of the
Security being converted pursuant to the provisions hereof.
The Conversion Rate will be adjusted as provided in Article 10 of the
Indenture. However, no adjustment need be made if Securityholders may
participate in the transaction or in certain other cases. The Company from time
to time may voluntarily increase the Conversion Rate.
In certain circumstances as provided for in the Indenture, when a Holder
surrenders a Security for conversion, the Conversion Agent may first offer the
Security to a financial institution chosen by the Company who will have the
option, but not the obligation (unless separately agreed to by it and the
Company at the time) to agree to exchange those Securities for the number of
shares of Common Stock that the Holder of those Securities would have been
otherwise entitled to receive upon conversion, plus cash for any fractional
shares.
10. Conversion Arrangement on Call for Redemption.
In connection with any redemption of Securities (unless such Securities
have been surrendered by the close of business on the Redemption Date), the
Company may arrange for the purchase and conversion of any Securities called for
redemption by an agreement with one or more investment bankers or other
purchasers to purchase such Securities, as provided for in the Indenture.
A-1-11
<PAGE>
11. Defaulted Interest.
Except as otherwise specified with respect to the Securities, any
Defaulted Interest on any Security shall forthwith cease to be payable to the
registered Holder thereof on the relevant accrual date, by virtue of having been
such Holder, and such Defaulted Interest may be paid by the Company as provided
in Section 11.02 of the Indenture.
12. Denominations; Transfer; Exchange.
The Securities are in fully registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder may transfer
or exchange Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not transfer or exchange any Securities
selected for redemption (except, in the case of a Security to be redeemed in
part, the portion of the Security not to be redeemed) or any Securities in
respect of which a Purchase Notice or Change in Control Purchase Notice has been
given and not withdrawn (except, in the case of a Security to be purchased in
part, the portion of the Security not to be purchased) or any Securities for a
period of 15 days before the mailing of a Notice of Redemption of Securities to
be redeemed.
13. Persons Deemed Owners.
The registered Holder of this Security may be treated as the owner of this
Security for all purposes.
14. Unclaimed Money or Securities.
The Trustee and the Paying Agent shall return to the Company upon written
request any money or securities held by them for the payment of any amount with
respect to the Securities that remains unclaimed for two years, subject to
applicable unclaimed property laws. After return to the Company, Holders
entitled to the money or securities must look to the Company for payment as
general creditors unless an applicable abandoned property law designates another
person.
15. Amendment; Waiver.
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in aggregate Principal Amount at Maturity of the
Securities at the time outstanding and (ii) certain Defaults may be waived with
the written consent of the Holders of a majority in aggregate Principal Amount
at Maturity of the Securities at the time outstanding. Subject to certain
exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company and the Trustee may amend the Indenture or the
Securities to cure any ambiguity, omission, defect or inconsistency, to comply
with Article 5 or Section 10.14 of the Indenture, to secure the Company's
obligations under this Security or the Indenture, to make any change that does
not, as evidenced by an Opinion of Counsel delivered to the Trustee, materially
adversely affect the rights of any Securityholder, to make any change in
connection with the registration of the
A-1-12
<PAGE>
Securities under the Securities Act or to comply with the TIA, or any amendment
thereto, to comply with any requirement of the SEC in connection with the
qualification of the Indenture under the TIA, to add to the Company's covenants
or obligations under the Indenture for the protection of the Holders or to
surrender any right, power or option conferred by the Indenture on the Company,
or to increase the Contingent Cash Interest or any other amount to be paid to
Holders.
16. Defaults and Remedies.
Under the Indenture, Events of Default include (i) default in the payment
of the Principal Amount at Maturity, Contingent Additional Principal, Redemption
Price, Purchase Price or Change in Control Purchase Price on any Security when
the same becomes due and payable at its Stated Maturity, upon redemption, upon
acceleration, when due for purchase by the Company or otherwise; (ii) default in
payment of any Contingent Cash Interest upon any Security, and such default
shall continue for 30 days; (iii) failure by the Company to comply with other
agreements in the Indenture or the Securities, subject to notice and lapse of
time; (iv) (a) failure of the Company to make any payment by the end of any
applicable grace period after maturity of Indebtedness in an amount (taken
together with amounts in (b) below) in excess of $100,000,000, and continuance
of such failure or (b) the acceleration of Indebtedness in an amount (taken
together with amounts in (a) above) in excess of $100,000,000 because of a
default with respect to such Indebtedness without such Indebtedness having been
discharged or such acceleration having been cured, waived, rescinded or annulled
in case of (a) and (b) above, for a period of 30 days after written notice to
the Company by the Trustee or to the Company and the Trustee by the Holders of
not less than 25% in aggregate Principal Amount at Maturity of the Securities
then outstanding; however if any such failure or acceleration referred to in (a)
or (b) above shall cease or be cured, waived, rescinded or annulled, then the
Event of Default by reason thereof shall be deemed not to have occurred, or (v)
certain events of bankruptcy or insolvency affecting the Company or its
Significant Subsidiaries. If an Event of Default shall have occurred and be
continuing, either the Trustee, or the Holders of not less than 25% in aggregate
Principal Amount at Maturity of the Securities then outstanding may declare the
Initial Principal Amount at Maturity, plus any accrued and unpaid Contingent
Cash Interest and Contingent Additional Principal through the date of such
declaration, if any, to be immediately due and payable. In case of certain
events of bankruptcy or insolvency of the Company, the Initial Principal Amount
at Maturity plus accrued and unpaid Contingent Cash Interest and Contingent
Additional Principal, if any, shall automatically become immediately due and
payable.
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives indemnity or security reasonably satisfactory
to it. Subject to certain limitations, Holders of a majority in aggregate
Principal Amount at Maturity of the Securities at the time outstanding may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Securityholders notice of any continuing Default (except a Default
in payment of amounts specified in clause (i) or (ii) above) if it determines
that withholding notice is in their interests.
A-1-13
<PAGE>
17. Trustee Dealings with the Company.
Subject to certain limitations imposed by the TIA, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
18. Authentication.
This Security shall not be valid until an authorized signatory of the
Trustee manually signs the Trustee's Certificate of Authentication on the other
side of this Security.
19. Abbreviations.
Customary abbreviations may be used in the name of a Securityholder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. GOVERNING LAW.
THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THIS
SECURITY.
----------
The Company will furnish to any Securityholder upon written request and
without charge a copy of the Indenture. Requests may be made to:
Omnicom Group Inc.
437 Madison Avenue, 9th Floor
New York, New York 10022
Attention: General Counsel
A-1-14
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
- ------------------------------------
- ------------------------------------
(Insert assignee's soc. sec. or tax ID no.)
- ------------------------------------
- ------------------------------------
- ------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
_____________________ agent to transfer this Security on the books of the
Company. The agent may substitute another to act for him.
CONVERSION NOTICE
To convert this Security into Common Stock of the Company, check the box:
| |
|___|
To convert only part of this Security, state the Initial Principal Amount at
Maturity to be converted (which must be $1,000 or any integral multiple
thereof);
$
- ------------------------------------
If you want the stock certificate made out in another person's name, fill in the
form below:
- ------------------------------------
- ------------------------------------
(Insert other person's soc. sec. or tax ID no.)
- ------------------------------------
- ------------------------------------
- ------------------------------------
- ------------------------------------
(Print or type other person's name, address and zip code)
- ------------------------------------------------------------------------------
Date: _____________________ Your Signature:_________________________________
- ------------------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Security)
A-1-15
<PAGE>
EXHIBIT A-2
[Form of Certificated Security]
FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THIS
SECURITY IS DEEMED TO BE ISSUED WITH AN INDETERMINATE AMOUNT OF ORIGINAL ISSUE
DISCOUNT FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. THE ISSUE DATE IS MARCH
6, 2002, AND THE YIELD TO MATURITY FOR PURPOSES OF ACCRUING ORIGINAL ISSUE
DISCOUNT IS 6.69% PER ANNUM. THE HOLDER OF THIS SECURITY MAY OBTAIN THE
PROJECTED PAYMENT SCHEDULE BY SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION
TO: OMNICOM GROUP INC., 437 MADISON AVENUE, 9TH FLOOR, NEW YORK, NEW YORK 10022,
ATTENTION: GENERAL COUNSEL
[INCLUDE IF SECURITY IS A CERTIFICATED SECURITY TO BE HELD BY AN
INSTITUTIONAL ACCREDITED INVESTOR--IN CONNECTION WITH ANY TRANSFER, THE HOLDER
WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOLLOWING RESTRICTIONS.]
THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY, THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER,
SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE"), WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH OMNICOM GROUP INC. (THE
"COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903
OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (D) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1),
A-2-1
<PAGE>
(2),(3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, (E) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY'S AND THE TRUSTEE'S RIGHTS PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSE (D) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH
OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE
OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.
[THE FOREGOING LEGEND MAY BE REMOVED FROM THIS SECURITY ON SATISFACTION OF
THE CONDITIONS SPECIFIED IN THE INDENTURE.]
A-2-2
<PAGE>
OMNICOM GROUP INC.
Zero Coupon Zero Yield Convertible Notes due 2032
No. R- CUSIP: 681919 AL0
Issue Date: March 6, 2002
Initial Principal Amount at Maturity: $1,000.00
OMNICOM GROUP INC., a New York corporation, promises to pay to Cede & Co.
or registered assigns, the Initial Principal Amount at Maturity of , or if
greater, the Principal Amount at ______________________________ Maturity, on
July 31, 2032.
This Security shall not bear interest other than Contingent Cash Interest,
if any, and Contingent Additional Principal will accrue as specified on the
other side of this Security. This Security is convertible as specified on the
other side of this Security.
Additional provisions of this Security are set forth on the other side of
this Security.
Dated: March 6, 2002 OMNICOM GROUP INC.
By
-------------------------------
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
JPMorgan Chase Bank,
as Trustee, certifies that this
is one of the Securities referred
to in the within-mentioned Indenture (as
defined on the other side of this Security).
By
--------------------------------------
Authorized Officer
A-2-3
<PAGE>
EXHIBIT B-1
Transfer Certificate
In connection with any transfer of any of the Securities within the period
prior to the expiration of the holding period applicable to the sales thereof
under Rule 144(k) under the Securities Act of 1933, as amended (the "Securities
Act") (or any successor provision), the undersigned registered owner of this
Security hereby certifies with respect to $____________ Principal Amount at
Maturity of the above-captioned securities presented or surrendered on the date
hereof (the "Surrendered Securities") for registration of transfer, or for
exchange or conversion where the securities issuable upon such exchange or
conversion are to be registered in a name other than that of the undersigned
registered owner (each such transaction being a "transfer"), that such transfer
complies with the restrictive legend set forth on the face of the Surrendered
Securities for the reason checked below:
|_| A transfer of the Surrendered Securities is made to the Company or
any subsidiaries; or
|_| The transfer of the Surrendered Securities complies with Rule 144A
under the U.S. Securities Act of 1933, as amended (the "Securities
Act"); or
|_| The transfer of the Surrendered Securities is to an institutional
accredited investor, as described in Rule 501(a)(1), (2), (3) or (7)
of Regulation D under the Securities Act; or
|_| The transfer of the Surrendered Securities is pursuant to an
effective registration statement under the Securities Act, or
|_| The transfer of the Surrendered Securities is pursuant to an
offshore transaction in accordance with Rule 904 of Regulation S
under the Securities Act; or
|_| The transfer of the Surrendered Securities is pursuant to another
available exemption from the registration requirement of the
Securities Act.
and unless the box below is checked, the undersigned confirms that, to the
undersigned's knowledge, such Securities are not being transferred to an
"affiliate" of the Company as defined in Rule 144 under the Securities Act (an
"Affiliate").
|_| The transferee is an Affiliate of the Company.
DATE:
-------------------- -----------------------------------
Signature(s)
(If the registered owner is a corporation, partnership or
fiduciary, the title of the Person signing on behalf of
such registered owner must be stated.)
B-1-1
<PAGE>
EXHIBIT B-2
Form of Letter to Be Delivered by Accredited Investors
Omnicom Group Inc.
437 Madison Avenue, 9th Floor
New York, New York 10022
Attention: General Counsel
JPMorgan Chase Bank
450 West 33rd Street
New York, New York 10001
Attention: Institutional Trust Services
Dear Sirs:
We are delivering this letter in connection with the proposed transfer of
$_____________ Initial Principal Amount at Maturity of the Zero Coupon Zero
Yield Convertible Notes due 2032 (the "Notes") of Omnicom Group Inc. (the
"Company"), which are convertible into shares of the Company's Common Stock,
$0.15 par value per share (the "Common Stock") as specified in the Indenture.
We hereby confirm that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2) or (3) under the Securities Act of 1933, as amended (the
"Securities Act"), or an entity in which all of the equity owners are
accredited investors within the meaning of Rule 501(a)(1), (2) or (3)
under the Securities Act (an "Institutional Accredited Investor");
(ii) the purchase of Notes by us is for our own account or for the
account of one or more other Institutional Accredited Investors or as
fiduciary for the account of one or more trusts, each of which is an
"accredited investor" within the meaning of Rule 501(a)(7) under the
Securities Act and for each of which we exercise sole investment
discretion or (B) we are a "bank," within the meaning of Section 3(a)(2)
of the Securities Act, or a "savings and loan association" or other
institution described in Section 3(a)(5)(A) of the Securities Act that is
acquiring Notes as fiduciary for the account of one or more institutions
for which we exercise sole investment discretion;
(iii) we have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits and risks of
purchasing Debentures; and
(iv) we are not acquiring Notes with a view to distribution thereof
or with any present intention of offering or selling Notes or the Common
Stock issuable upon
B-2-1
<PAGE>
conversion thereof, except as permitted below; provided that the
disposition of our property and property of any accounts for which we are
acting as fiduciary shall remain at all times within our control.
We understand that the Notes were originally offered and sold in a
transaction not involving any public offering within the United States within
the meaning of the Securities Act and that the Notes and the shares of Common
Stock (the "Securities") issuable upon conversion thereof have not been
registered under the Securities Act, and we agree, on our own behalf and on
behalf of each account for which we acquire any Notes, that if in the future we
decide to resell or otherwise transfer such Securities prior to the date (the
"Resale Restriction Termination Date") which is two years after the later of the
original issuance of the Notes and the last date on which the Company or an
affiliate of the Company was the owner of the Security, such Securities may be
resold or otherwise transferred only (i) to the Company or any subsidiary
thereof, or (ii) for as long as the Notes are eligible for resale pursuant to
Rule 144A, to a person it reasonably believes is a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act) that purchases for its
own account or for the account of a qualified institutional buyer to which
notice is given that the transfer is being made in reliance on Rule 144A, or
(iii) to an Institutional Accredited Investor that is acquiring the Security for
its own account, or for the account of such Institutional Accredited Investor
for investment purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities Act, or (iv)
pursuant to another available exemption from registration under the Securities
Act (if applicable), or (v) pursuant to a registration statement which has been
declared effective under the Securities Act and, in each case, in accordance
with any applicable securities laws of any State of the United States or any
other applicable jurisdiction and in accordance with the legends set forth on
the Securities. We further agree to provide any person purchasing any of the
Securities other than pursuant to clause (v) above from us a notice advising
such purchaser that resales of such securities are restricted as stated herein.
We understand that the trustee or the transfer agent, as the case may be, for
the Securities will not be required to accept for registration of transfer any
Securities pursuant to (iii) or (iv) above except upon presentation of evidence
satisfactory to the Company that the foregoing restrictions on transfer have
been complied with. We further understand that any Securities will be in the
form of definitive physical certificates and that such certificates will bear a
legend reflecting the substance of this paragraph other than certificates
representing Securities transferred pursuant to clause (v) above.
We acknowledge that the Company, others and you will rely upon our
confirmations, acknowledgments and agreements set forth herein, and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
B-2-2
<PAGE>
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAW OF THE STATE OF NEW YORK.
(Name of Purchaser)
By:
--------------------------------------
Name:
Title:
Address:
B-2-3
<PAGE>
EXHIBIT C
Projected Payment Schedule*
Projected Payment per $1,000 per Initial
Semi-annual Period Ending Principal Amount at Maturity of a Security
------------------------- ------------------------------------------
July 31, 2002 --
January 31, 2003 --
July 31, 2003 --
January 31, 2004 --
July 31, 2004 --
January 31, 2005 --
July 31, 2005 --
January 31, 2006 --
July 31, 2006 --
January 31, 2007 --
July 31, 2007 --
January 31, 2008 5.2403
July 31, 2008 5.4174
January 31, 2009 5.6004
July 31, 2009 5.7896
January 31, 2010 5.9852
July 31, 2010 6.1874
January 31, 2011 6.3965
July 31, 2011 6.6126
January 31, 2012 6.8360
July 31, 2012 7.0670
January 31, 2013 7.3057
July 31, 2013 7.5525
January 31, 2014 7.8077
July 31, 2014 8.0715
January 31, 2015 8.3442
July 31, 2015 8.6261
January 31, 2016 8.9175
July 31, 2016 9.2188
January 31, 2017 9.5303
- ----------
* The comparable yield and the schedule of projected payments are determined
on the basis of an assumption of linear growth of the stock price and a
constant dividend yield and are not determined for any purpose other than
for the determination of interest accruals and adjustments thereof in
respect of the Securities for United States federal income tax purposes.
The comparable yield and the schedule of projected payments do not
constitute a projection or representation regarding the amounts payable on
Securities.
C-1
<PAGE>
Projected Payment per $1,000 per Initial
Semi-annual Period Ending Principal Amount at Maturity of a Security
------------------------- ------------------------------------------
July 31, 2017 9.8523
January 31, 2018 10.1851
July 31, 2018 10.5293
January 31, 2019 10.8850
July 31, 2019 11.2527
January 31, 2020 11.6329
July 31, 2020 12.0259
January 31, 2021 12.4322
July 31, 2021 12.8523
January 31, 2022 13.2865
July 31, 2022 13.7354
January 31, 2023 14.1994
July 31, 2023 14.6792
January 31, 2024 15.1751
July 31, 2024 15.6878
January 31, 2025 16.2178
July 31, 2025 16.7658
January 31, 2026 17.3322
July 31, 2026 17.9178
January 31, 2027 18.5231
July 31, 2027 19.1490
January 31, 2028 19.7959
July 31, 2028 20.4647
January 31, 2029 21.1561
July 31, 2029 21.8709
January 31, 2030 22.6098
July 31, 2030 23.3737
January 31, 2031 24.1634
July 31, 2031 24.9798
January 31, 2032 25.8237
July 31, 2032 6,269.603
C-2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.8
<SEQUENCE>4
<FILENAME>e13177ex4_8.txt
<DESCRIPTION>REGISTRATION RIGHTS AGREEMENT
<TEXT>
EXHIBIT 4.8
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as of March 6,
2002 by and between Omnicom Group Inc., a New York corporation (the "Company"),
and J.P. Morgan Securities Inc., Goldman Sachs & Co. and Salomon Smith Barney
Inc. (the "Initial Purchasers") pursuant to the Purchase Agreement, dated as of
March 1, 2002 (the "Purchase Agreement"), between the Company and the Initial
Purchasers. In order to induce the Initial Purchasers to enter into the Purchase
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement. The execution of this Agreement is a condition to the closing
under the Purchase Agreement.
The Company agrees with the Initial Purchasers, (i) for the benefit of the
Initial Purchasers and (ii) for the benefit of the beneficial owners (including
the Initial Purchasers) from time to time of the Securities (as defined herein)
and the beneficial owners from time to time of the Underlying Common Stock (as
defined herein) issued upon conversion of the Securities (each of the foregoing
a "Holder" and together the "Holders"), as follows:
Section 1. Definitions. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following terms shall have the following meanings:
"Affiliate" means, with respect to any specified person, an "affiliate,"
as defined in Rule 144, of such person.
"Amendment Effectiveness Deadline Date" has the meaning specified in
Section 2(d) hereof.
"Applicable Conversion Price" means, as of any date of determination, the
Applicable Principal Amount of Securities as of such date of determination
divided by the Conversion Rate in effect as of such date of determination or, if
no Securities are then outstanding, the Conversion Rate that would be in effect
were Securities then outstanding.
"Applicable Principal Amount" means $1,000 per Security or, if no
Securities are then outstanding, such sum calculated as if such Securities were
then outstanding.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in The City of New York are
authorized or obligated by law or executive order to close.
"Common Stock" means any shares of Common Stock, par value $0.15 per
share, of the Company and any other shares of common stock as may constitute
"Common Stock" for purposes of the Indenture, including the Underlying Common
Stock.
"Conversion Rate" has the meaning assigned to that term in the Indenture.
1
<PAGE>
"Damages Accrual Period" has the meaning specified in Section 2(e) hereof.
"Damages Payment Date" means each September 6 and March 6 in the case of
Securities and the Underlying Common Stock.
"Deferral Notice" has the meaning specified in Section 3(i) hereof.
"Deferral Period" has the meaning specified in Section 3(i) hereof.
"Effectiveness Deadline Date" has the meaning specified in Section 2(a)
hereof.
"Effectiveness Period" means the period of two years from the date the
Shelf Registration Statement is declared effective or such shorter period that
will terminate upon the earliest of the following: (A) when all the Securities
covered by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement, (B) when all shares of Common Stock issued upon
conversion of any such Securities that had not been sold pursuant to the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement and (C) when, in the written opinion of counsel to the Company, all
outstanding Registrable Securities held by persons which are not affiliates of
the Company may be resold without registration under the Securities Act pursuant
to Rule 144(k) under the Securities Act or any successor provision thereto.
"Event" has the meaning specified in Section 2(e) hereof.
"Event Termination Date" has the meaning specified in Section 2(e) hereof.
"Event Date" has the meaning specified in Section 2(e) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Filing Deadline Date" has the meaning specified in Section 2(a) hereof.
"Holder" has the meaning specified in the second paragraph of this
Agreement.
"Indenture" means the Indenture dated as of the date hereof between the
Company and the Trustee, pursuant to which the Securities are being issued.
"Initial Shelf Registration Statement" has the meaning specified in
Section 2(a) hereof.
"Issue Date" means March 6, 2002.
"Liquidated Damages Amount" has the meaning specified in Section 2(e)
hereof.
"Losses" has the meaning specified in Section 6 hereof.
"Material Event" has the meaning specified in Section 3(i) hereof.
2
<PAGE>
"Notice and Questionnaire" means a written notice delivered to the Company
containing substantially the information called for by the Selling
Securityholder Notice and Questionnaire attached as Annex A to the Offering
Memorandum of the Company issued March 1, 2002 relating to the Securities.
"Notice Holder" means, on any date, any Holder that has delivered a Notice
and Questionnaire to the Company on or prior to such date.
"Prospectus" means the prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A or Rule 415 promulgated under the
Securities Act), as amended or supplemented by any amendment or prospectus
supplement, including post-effective amendments, and all materials incorporated
by reference or explicitly deemed to be incorporated by reference in such
Prospectus.
"Purchase Agreement" has the meaning specified in the first paragraph of
this Agreement.
"Record Holder" means, with respect to any Damages Payment Date relating
to any Securities or Underlying Common Stock as to which any Liquidated Damages
Amount has accrued, the registered holder of such Securities or Underlying
Common Stock, as the case may be, on the immediately preceding July 15 or
January 15.
"Registrable Securities" means the Securities and the Underlying Common
Stock, until such securities have been converted or exchanged, and, at all times
subsequent to any such conversion or exchange, any securities into or for which
such securities have been converted or exchanged, and any security issued with
respect thereto upon any stock dividend, split or similar event until, in the
case of any such security, the earliest of (i) its effective registration under
the Securities Act and resale in accordance with the Registration Statement
covering it, (ii) the expiration of the holding period that would be applicable
thereto under Rule 144(k) were it not held by an Affiliate of the Company or
(iii) its sale to the public pursuant to Rule 144.
"Registration Expenses" has the meaning specified in Section 5 hereof.
"Registration Statement" means any registration statement of the Company
that covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits and
all materials incorporated by reference or explicitly deemed to be incorporated
by reference in such registration statement.
"Restricted Securities" has the meaning assigned to that term in Rule 144.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
"Rule 144A" means Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
3
<PAGE>
"SEC" means the U.S. Securities and Exchange Commission and any successor
agency.
"Securities" means the Zero Coupon Zero Yield Convertible Notes due 2032
of the Company to be purchased pursuant to the Purchase Agreement and issued
under the Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
"Shelf Registration Statement" means the Initial Shelf Registration
Statement and/or any Subsequent Shelf Registration.
"Subsequent Shelf Registration Statement" has the meaning specified in
Section 2(b) hereof.
"TIA" means the Trust Indenture Act of 1939, as amended.
"Trustee" means JPMorgan Chase Bank (or any successor entity), the Trustee
under the Indenture.
"Underlying Common Stock" means the Common Stock into which the Securities
are convertible or issued upon any such conversion.
Section 2. Shelf Registration. (a) The Company shall prepare and file or
cause to be prepared and filed with the SEC, as soon as practicable but in any
event by the date (the "Filing Deadline Date") 90 days after the Issue Date, a
Registration Statement for an offering to be made on a delayed or continuous
basis pursuant to Rule 415 of the Securities Act registering the resale from
time to time by Holders thereof of all of the Registrable Securities (the
"Initial Shelf Registration Statement"). The Initial Shelf Registration
Statement shall be on Form S-3 or another appropriate form permitting
registration of such Registrable Securities for resale by such Holders in
accordance with the methods of distribution elected by the Holders and set forth
in the Initial Shelf Registration Statement. The Company shall use reasonable
efforts to cause the Initial Shelf Registration Statement to be declared
effective under the Securities Act as promptly as is practicable but in any
event by the date (the "Effectiveness Deadline Date") that is 150 days after the
Issue Date, and to keep the Initial Shelf Registration Statement (or any
Subsequent Shelf Registration Statement) continuously effective under the
Securities Act until the expiration of the Effectiveness Period; provided,
however, that no Holder shall be entitled to have the Registrable Securities
held by it covered by such Shelf Registration Statement unless such Holder shall
have provided a Notice and Questionnaire in accordance with Section 2(d) and is
in compliance with Section 4. None of the Company's security holders (other than
the Holders of Registrable Securities) shall have the right to include any of
the Company's securities in the Shelf Registration Statement.
(b) If the Initial Shelf Registration Statement or any Subsequent Shelf
Registration Statement ceases to be effective for any reason at any time during
the Effectiveness Period (other than because all Registrable Securities
registered thereunder shall have been resold pursuant thereto or shall have
otherwise ceased to be Registrable Securities), the Company shall
4
<PAGE>
use all reasonable efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 30 days of
such cessation of effectiveness amend the Shelf Registration Statement in a
manner reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional Shelf Registration Statement
covering all of the securities that as of the date of such filing are
Registrable Securities (a "Subsequent Shelf Registration Statement"). If a
Subsequent Shelf Registration Statement is filed, the Company shall use all
reasonable efforts to cause the Subsequent Shelf Registration Statement to
become effective as promptly as is practicable after such filing and to keep
such Registration Statement (or subsequent Shelf Registration Statement)
continuously effective until the end of the Effectiveness Period.
(c) The Company shall supplement and amend the Shelf Registration
Statement if required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Shelf Registration Statement,
if required by the Securities Act or, as reasonably requested by the Initial
Purchasers or by the Trustee on behalf of the registered Holders.
(d) Each Holder of Registrable Securities agrees that if such Holder
wishes to sell Registrable Securities pursuant to a Shelf Registration Statement
and related Prospectus, it will do so only in accordance with this Section 2(d)
and Section 3(i). Each Holder of Registrable Securities wishing to sell
Registrable Securities pursuant to a Shelf Registration Statement and related
Prospectus agrees to deliver a Notice and Questionnaire to the Company at least
five Business Days prior to any intended distribution of Registrable Securities
under the Shelf Registration Statement. From and after the date the Initial
Shelf Registration Statement is declared effective, the Company shall, as
promptly as is practicable after the date a Notice and Questionnaire is
delivered, and in any event within five Business Days after such date, (i) if
required by applicable law, file with the SEC a post-effective amendment to the
Shelf Registration Statement or prepare and, if required by applicable law, file
a supplement to the related Prospectus or a supplement or amendment to any
document incorporated therein by reference or file any other required document
so that the Holder delivering such Notice and Questionnaire is named as a
selling security holder in the Shelf Registration Statement and the related
Prospectus in such a manner as to permit such Holder to deliver such Prospectus
to purchasers of the Registrable Securities in accordance with applicable law
and, if the Company shall file a post-effective amendment to the Shelf
Registration Statement, use reasonable efforts to cause such post-effective
amendment to be declared effective under the Securities Act as promptly as is
practicable, but in any event by the date (the "Amendment Effectiveness Deadline
Date") that is 30 days after the date such post-effective amendment is required
by this clause to be filed, (ii) provide such Holder copies of any documents
filed pursuant to Section 2(d)(i), and (iii) notify such Holder as promptly as
practicable after the effectiveness under the Securities Act of any
post-effective amendment filed pursuant to Section 2(d)(i); provided, that if
such Notice and Questionnaire is delivered during a Deferral Period, the Company
shall so inform the Holder delivering such Notice and Questionnaire and shall
take the actions set forth in clauses (i), (ii) and (iii) above upon expiration
of the Deferral Period in accordance with Section 3(i), provided, further, that
if under applicable law the Company has more than one option as to the type or
manner of making any such filing, it will make the required filing or filings in
the manner or of a type that is reasonably expected to result in the earliest
availability of the Prospectus for effecting resales of Registrable Securities.
Notwithstanding anything contained herein to the
5
<PAGE>
contrary, the Company shall be under no obligation to name any Holder that is
not a Notice Holder as a selling security holder in any Registration Statement
or related Prospectus; provided, however, that any Holder that becomes a Notice
Holder pursuant to the provisions of Section 2(d) of this Agreement (whether or
not such Holder was a Notice Holder at the time the Registration Statement was
declared effective) shall be named as a selling security holder in the
Registration Statement or related Prospectus in accordance with the requirements
of this Section 2(d).
(e) The parties hereto agree that the Holders of Registrable Securities
will suffer damages, and that it would not be feasible to ascertain the extent
of such damages with precision, if (i) the Initial Shelf Registration Statement
has not been filed on or prior to the Filing Deadline Date, (ii) the Initial
Shelf Registration Statement has not been declared effective under the
Securities Act on or prior to the Effectiveness Deadline Date, (iii) the Company
has failed to perform its obligations set forth in Section 2(d) hereof within
the applicable time periods required therein, (iv) the aggregate duration of
Deferral Periods in any period exceeds the number of days permitted in respect
of such period pursuant to Section 3(i) hereof or (v) the number of Deferral
Periods in any period exceeds the number permitted in respect of such period
pursuant to Section 3(i) (each of the events of a type described in any of the
foregoing clauses (i) through (v) are individually referred to herein as an
"Event," and the Filing Deadline Date in the case of clause (i), the
Effectiveness Deadline Date in the case of clause (ii), the dates by which the
Company is required to perform its obligations set forth in Section 2(d) in the
case of clause (iii) (including the filing of any post-effective amendment prior
to the Amendment Effectiveness Deadline Date), the date on which the aggregate
duration of Deferral Periods in any period exceeds the number of days permitted
by Section 3(i) hereof in the case of clause (iv), and the date of the
commencement of a Deferral Period that causes the limit on the number of
Deferral Periods in any period under Section 3(i) hereof to be exceeded in the
case of clause (v), being referred to herein as an "Event Date"). An Event shall
be deemed to continue until the "Event Termination Date," which shall be the
following dates with respect to the respective types of Events: (1) the date the
Initial Shelf Registration Statement is filed in the case of an Event of the
type described in clause (i), (2) the date the Initial Shelf Registration
Statement is declared effective under the Securities Act in the case of an Event
of the type described in clause (ii), (3) the date the Company performs its
obligations set forth in Section 2(d) in the case of an Event of the type
described in clause (iii) (including, without limitation, the date the relevant
post-effective amendment to the Shelf Registration Statement is declared
effective under the Securities Act), (4) termination of the Deferral Period that
caused the limit on the aggregate duration of Deferral Periods in a period set
forth in Section 3(i) to be exceeded in the case of the commencement of an Event
of the type described in clause (iv), and (5) termination of the Deferral Period
the commencement of which caused the number of Deferral Periods in a period
permitted by Section 3(i) to be exceeded in the case of an Event of the type
described in clause (v).
Accordingly, commencing on (and including) any Event Date and ending on
(but excluding) the next date on which no Events have occurred and are
continuing (a "Damages Accrual Period"), the Company agrees to pay, as
liquidated damages and not as a penalty, an amount (the "Liquidated Damages
Amount"), payable on the Damages Payment Dates to Record Holders of
then-outstanding Securities that are Registrable Securities and of
then-outstanding shares of Underlying Common Stock issued upon conversion of
Securities that are Registrable
6
<PAGE>
Securities, as the case may be, accruing, for each portion of such Damages
Accrual Period beginning on and including a Damages Payment Date (or, in respect
of the first time that the Liquidation Damages Amount is to be paid to Holders
on a Damages Payment Date as a result of the occurrence of any particular Event,
from the Event Date) and ending on but excluding the first to occur of (A) the
date of the end of the Damages Accrual Period or (B) the Next Damages Payment
Date, at a rate per annum equal to one-quarter of one percent (0.25%) for the
first 90-day period from the Event Date, and thereafter at a rate per annum
equal to one-half of one percent (0.50%) of the aggregate Applicable Principal
Amount of such Securities and the aggregate Applicable Conversion Price of such
shares of Underlying Common Stock, as the case may be, in each case determined
as of the Business Day immediately preceding the next Damages Payment Date;
provided, that in the case of a Damages Accrual Period that is in effect solely
as a result of an Event of the type described in clause (iii) of the immediately
preceding paragraph, such Liquidated Damages Amount shall be paid only to the
Holders that have delivered Notice and Questionnaires that caused the Company to
incur the obligations set forth in Section 2(d or 3(i)), the non-performance of
which is the basis of such Event; provided further, that any Liquidated Damages
Amount accrued with respect to any Securities or portion thereof called for
redemption on a redemption date or converted into Underlying Common Stock on a
conversion date prior to the Damages Payment Date, shall, in any such event, be
paid instead to the Holder who submitted such Securities or portion thereof for
redemption or conversion on the applicable redemption date or conversion date,
as the case may be, on such date (or promptly following the conversion date, in
the case of conversion). Notwithstanding the foregoing, no Liquidated Damages
Amounts shall accrue as to any Registrable Security from and after the earlier
of (x) the date such security is no longer a Registrable Security, (y)
expiration of the Effectiveness Period, and (z) the Redemption Date on which
such Registrable Security is purchased by the Company in connection with a
Change of Control (as defined in Section 3.09(a) of the Indenture). The rate of
accrual of the Liquidated Damages Amount with respect to any period shall not
exceed the rate provided for in this paragraph notwithstanding the occurrence of
multiple concurrent Events. Following the cure of all Events requiring the
payment by the Company of Liquidated Damages Amounts to the Holders of
Registrable Securities pursuant to this Section, the accrual of Liquidated
Damages Amounts will cease (without in any way limiting the effect of any
subsequent Event requiring the payment of Liquidated Damages Amounts by the
Company).
The Trustee shall be entitled, on behalf of Holders of Securities or
Underlying Common Stock, to seek any available remedy for the enforcement of
this Agreement, including for the payment of any Liquidated Damages Amount.
Notwithstanding the foregoing, the parties agree that the sole monetary damages
payable for a violation of the terms of this Agreement with respect to which
liquidated damages are expressly provided shall be such liquidated damages.
Nothing shall preclude a Notice Holder or Holder of Registrable Securities from
pursuing or obtaining specific performance or other equitable relief with
respect to this Agreement.
All of the Company's obligations set forth in this Section 2(e) that are
outstanding with respect to any Registrable Security at the time such security
ceases to be a Registrable Security shall survive until such time as all such
obligations with respect to such security have been satisfied in full
(notwithstanding termination of this Agreement pursuant to Section 8(k)).
7
<PAGE>
The parties hereto agree that the liquidated damages provided for in this
Section 2(e) constitute a reasonable estimate of the damages that may be
incurred by Holders of Registrable Securities by reason of the failure of the
Shelf Registration Statement to be filed or declared effective or available for
effecting resales of Registrable Securities in accordance with the provisions
hereof.
Section 3. Registration Procedures. In connection with the registration
obligations of the Company under Section 2 hereof, the Company shall:
(a) Before filing any Registration Statement or Prospectus or any
amendments or supplements thereto with the SEC, furnish to the Initial
Purchasers copies of all such documents proposed to be filed and use reasonable
efforts to reflect in each such document when so filed with the SEC such
comments as the Initial Purchasers reasonably shall propose within three
Business Days of the delivery of such copies to the Initial Purchasers.
(b) Subject to Section 3(c), prepare and file with the SEC such amendments
and post-effective amendments to each Registration Statement as may be necessary
to keep such Registration Statement continuously effective for the Effectiveness
Period; cause the related Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) under the Securities Act