-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Om9hr/J50DP0WvbKfICh4B7OnWtgnK1bobUYQWgz5aH9FNErbzBvUoYc5IEr1X6L Oc9wHQmSemCUS2agRWqmQg== 0000891092-04-005426.txt : 20041105 0000891092-04-005426.hdr.sgml : 20041105 20041105170345 ACCESSION NUMBER: 0000891092-04-005426 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041105 DATE AS OF CHANGE: 20041105 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10551 FILM NUMBER: 041123467 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 GROUP INC DATE OF NAME CHANGE: 19861117 FORMER COMPANY: FORMER CONFORMED NAME: DOYLE DANE BERNBACH INTERNATIONAL INC DATE OF NAME CHANGE: 19850604 FORMER COMPANY: FORMER CONFORMED NAME: DOYLE DANE BERNBACH INC DATE OF NAME CHANGE: 19781226 10-Q 1 e19576_10q.txt QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 10-Q ---------- (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended: September 30, 2004 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to ____________ Commission File Number: 1-10551 OMNICOM GROUP INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New York 13-1514814 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 437 Madison Avenue, New York, New York 10022 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (212) 415-3600 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports and (2) has been subject to such filing requirements for the past 90 days. YES _X_ NO ___ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12 b-2 of the Exchange Act). YES _X_ NO ___ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 186,326,700 (as of October 29, 2004) OMNICOM GROUP INC. AND SUBSIDIAIRES INDEX PART I. FINANCIAL INFORMATION Page No. -------- Item 1. Financial Statements Consolidated Condensed Balance Sheets - September 30, 2004 and December 31, 2003...................... 1 Consolidated Condensed Statements of Income - Three Months and Nine Months Ended September 30, 2004 and 2003............. 2 Consolidated Condensed Statements of Cash Flows - Nine Months Ended September 30, 2004 and 2003................. 3 Notes to Consolidated Condensed Financial Statements............. 4 Item 2. Management's Discussion and Analysis of Financial Condition And Results of Operations..................................... 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk................................................... 25 Item 4. Controls and Procedures.......................................... 26 PART II. OTHER INFORMATION Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities................................ 27 Item 6. Exhibits and Reports on Form 8-K................................. 27 Signatures....................................................... 29 Certifications of Senior Executive Officers OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Millions)
(Unaudited) September 30, December 31, 2004 2003 ------------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents ............................................. $ 429.1 $ 1,528.7 Short-term investments at market, which approximates cost ............. 24.2 20.2 Accounts receivable, less allowance for doubtful accounts of $63.5 and $69.7 ................................................. 4,514.4 4,530.0 Billable production orders in process, at cost ........................ 653.9 440.4 Prepaid expenses and other current assets ............................. 875.8 766.6 --------- --------- Total Current Assets ..................................... 6,497.4 7,285.9 --------- --------- FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost, less accumulated depreciation and amortization of $867.1 and $817.1 ... 601.3 596.8 INVESTMENTS IN AFFILIATES .................................................. 151.1 151.2 GOODWILL ................................................................... 6,159.5 5,886.2 INTANGIBLES, net of accumulated amortization of $154.7 and $127.8 .......... 107.8 121.4 DEFERRED TAX BENEFITS ...................................................... 264.3 264.6 OTHER ASSETS ............................................................... 348.1 313.9 --------- --------- TOTAL ASSETS ............................................. $14,129.5 $14,620.0 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable ...................................................... $ 4,926.1 $ 5,513.3 Advance billings ...................................................... 890.5 775.2 Current portion of long-term debt ..................................... 192.2 12.4 Bank loans ............................................................ 33.4 42.4 Accrued taxes ......................................................... 139.5 221.7 Other liabilities ..................................................... 1,152.0 1,197.5 --------- --------- Total Current Liabilities ................................ 7,333.7 7,762.5 --------- --------- LONG-TERM DEBT ............................................................. 19.8 197.3 CONVERTIBLE NOTES .......................................................... 2,339.3 2,339.3 DEFERRED COMPENSATION AND OTHER LIABILITIES ................................ 320.9 342.9 LONG TERM DEFERRED TAX LIABILITY ........................................... 296.2 204.1 MINORITY INTERESTS ......................................................... 174.7 187.3 SHAREHOLDERS' EQUITY: Common stock .......................................................... 29.8 29.8 Additional paid-in capital ............................................ 1,817.4 1,815.7 Retained earnings ..................................................... 2,780.6 2,419.0 Unamortized stock compensation ........................................ (200.9) (216.4) Accumulated other comprehensive income ................................ 122.8 109.7 Treasury stock ........................................................ (904.8) (571.2) --------- --------- Total Shareholders' Equity ............................... 3,644.9 3,586.6 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............... $14,129.5 $14,620.0 ========= =========
The accompanying notes to consolidated condensed financial statements are an integral part of these statements. 1 OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Dollars in Millions) (Unaudited)
Three Months Ended September 30, Nine Months Ended September 30, -------------------------------- ------------------------------- 2004 2003 2004 2003 -------- -------- -------- -------- REVENUE ............................... $2,319.0 $2,028.6 $6,958.1 $6,115.4 OPERATING EXPENSES: Salary and service costs ......... 1,659.5 1,412.2 4,906.7 4,199.4 Office and general expenses ...... 412.1 399.3 1,230.9 1,177.3 -------- -------- -------- -------- 2,071.6 1,811.5 6,137.6 5,376.7 -------- -------- -------- -------- OPERATING PROFIT ...................... 247.4 217.1 820.5 738.7 NET INTEREST EXPENSE: Interest expense ................. 12.3 15.4 36.8 42.8 Interest income .................. (3.5) (3.9) (10.2) (10.0) -------- -------- -------- -------- 8.8 11.5 26.6 32.8 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES ............ 238.6 205.6 793.9 705.9 INCOME TAXES .......................... 80.3 68.9 266.9 240.0 -------- -------- -------- -------- INCOME AFTER INCOME TAXES ............. 158.3 136.7 527.0 465.9 EQUITY IN AFFILIATES .................. 3.2 4.0 10.5 8.3 MINORITY INTERESTS .................... (16.2) (16.1) (50.5) (54.1) -------- -------- -------- -------- NET INCOME .................... $ 145.3 $ 124.6 $ 487.0 $ 420.1 ======== ======== ======== ======== NET INCOME PER COMMON SHARE: Basic ......................... $ 0.79 $ 0.66 $ 2.61 $ 2.25 Diluted ....................... $ 0.79 $ 0.66 $ 2.60 $ 2.25 DIVIDENDS DECLARED PER COMMON SHARE ... $ 0.225 $ 0.20 $ 0.675 $ 0.60
The accompanying notes to consolidated condensed financial statements are an integral part of these statements. 2 OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Dollars in Millions) (Unaudited)
Nine Months Ended September 30, 2004 2003 --------- ------- Cash flows from operating activities: Net income .................................................................... $ 487.0 $ 420.1 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of tangible assets............................................ 98.1 92.1 Amortization of intangible assets.......................................... 30.7 22.8 Minority interests......................................................... 50.5 54.1 Earnings of affiliates (in excess of) less than dividends received......... (4.0) 1.4 Net gain on investment activity............................................ (13.1) -- Tax benefit on employee stock plans........................................ 9.9 9.0 Amortization of stock compensation......................................... 89.6 100.1 Provisions for losses on accounts receivable............................... 8.7 6.4 Changes in assets and liabilities providing (requiring) cash net of acquisitions: (Decrease) increase in accounts receivable................................. (0.6) 118.0 Increase in billable production orders in process.......................... (211.0) (211.8) Increase in prepaid expenses and other current assets...................... (113.1) (73.7) Net change in other assets and liabilities................................. (131.4) (120.3) Increase in advanced billings.............................................. 113.2 42.9 Net increase (decrease) in accrued and deferred taxes...................... 16.8 (18.7) Decrease in accounts payable............................................... (583.9) (551.3) --------- ------- Net cash used for operating activities.................................. (152.6) (108.9) --------- ------- Cash flows from investing activities: Capital expenditures....................................................... (103.3) (95.6) Payments for purchases of equity interests in subsidiaries and affiliates, net of cash acquired........................................ (241.3) (271.1) Purchases of short-term investments........................................ (13.3) (4.2) Proceeds from sale of short-term investments............................... 10.9 11.7 --------- ------- Net cash used in investing activities................................... (347.0) (359.2) --------- ------- Cash flows from financing activities: Decrease in short-term borrowings.......................................... (8.6) (2.3) Proceeds from issuance of debt............................................. 2.4 602.1 Repayments of principal of long-term debt obligations...................... (14.5) (67.2) Dividends paid............................................................. (121.6) (111.8) Purchase of treasury shares................................................ (446.5) (25.9) Other, net................................................................. (27.2) (24.6) --------- ------- Net cash (used) provided by financing activities........................ (616.0) 370.3 --------- ------- Effect of exchange rate changes on cash and cash equivalents.................... 16.0 (5.3) --------- ------- Net decrease in cash and cash equivalents............................... (1,099.6) (103.1) Cash and cash equivalents at beginning of period................................ 1,528.7 667.0 --------- ------- Cash and cash equivalents at end of period...................................... $ 429.1 $ 563.9 ========= ======= Supplemental disclosures: Income taxes paid.......................................................... $ 168.4 $ 229.6 Interest paid.............................................................. $ 32.0 $ 53.7
The accompanying notes to consolidated condensed financial statements are an integral part of these statements. 3 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. We have prepared the consolidated condensed interim financial statements included herein without audit pursuant to Securities and Exchange Commission rules. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to these rules. 2. The accompanying financial statements reflect all adjustments, consisting of normally recurring accruals, which in the opinion of management are necessary for a fair presentation, in all material respects, of the information contained therein. Certain reclassifications have been made to the September 30, 2003 and December 31, 2003 reported amounts to conform them to the September 30, 2004 presentation. These statements should be read in conjunction with the consolidated financial statements and related notes included in our annual report on Form 10-K for the year ended December 31, 2003. 3. Results of operations for interim periods are not necessarily indicative of annual results. 4. In accordance with SFAS No. 123, "Accounting for Stock Based Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure, an amendment of FASB Statement No. 123," we elected, effective January 1, 2004, to account for stock-based employee compensation using the fair value method. As a result, the fair value of stock-based employee compensation, including unvested employee stock options issued and outstanding, were recorded as an expense in the current period utilizing the retroactive restatement method as set forth in SFAS 148. Accordingly, our results for the quarter and the nine months ended September 30, 2003 have been restated as if we had used the fair value method to account for stock-based employee compensation. Pre-tax stock-based employee compensation costs for the three months ended September 30, 2004 and 2003 were $28.0 million and $33.1 million, respectively, and for the nine months ended September 30, 2004 and 2003 were $89.6 million and $100.1 million, respectively. Also, in connection with the restatement, our December 31, 2003 balance sheet reflects an increase in the deferred tax benefit of $120.5 million, an increase in additional paid-in capital of $434.7 million, an increase in unamortized stock compensation of $92.6 million and a decrease in retained earnings of $221.6 million. The table below presents a reconciliation of net income and earnings per share, as reported, to the restated results for the quarter and the nine months ended September 30, 2003. 4 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
(Dollars in Millions, Except Per Share Amounts) ----------------------------------------------- Earnings Per Common Share ------------------------- Net Income Basic Diluted ---------- ----- ------- As reported, quarter ended September 30, 2003......... $135.3 $0.72 $0.72 Less fair value of stock options issued, net of taxes.......................................... 10.7 0.06 0.06 ------ ----- ----- Restated, quarter ended September 30, 2003............ $124.6 $0.66 $0.66 ====== ===== ===== As reported, nine months ended September 30, 2003..... $454.6 $2.43 $2.42 Less fair value of stock options issued, net of taxes.......................................... 34.5 0.18 0.17 ------ ----- ----- Restated, nine months ended September 30, 2003........ $420.1 $2.25 $2.25 ====== ===== =====
5. Basic earnings per share is based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share is based on the above, plus, if dilutive, common share equivalents which include outstanding options and restricted shares. No adjustments were made for any series of our zero-coupon convertible notes because the conversion criteria had not been met. For purposes of computing diluted earnings per share, 520,000 and 384,000 common share equivalents were assumed to be outstanding for the three months ended September 30, 2004 and 2003, respectively, and 1,257,000 and 142,000 common share equivalents were assumed to be outstanding for the nine months ended September 30, 2004 and 2003, respectively. The assumed increase in net income related to the after tax compensation expense related to dividends on restricted shares was $318.0 thousand and $281.0 thousand for the three months ended September 30, 2004 and 2003, respectively, and $917.0 thousand and $843.0 thousand for the nine months ended September 30, 2004 and 2003, respectively. The number of shares used in our EPS computations were:
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 2004 2003 2004 2003 ---- ---- ---- ---- Basic EPS Computation 184,080,000 187,499,000 186,259,000 187,076,000 Diluted EPS Computation 184,600,000 187,883,000 187,516,000 187,218,000
5 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) 6. Total comprehensive income and its components were:
(Dollars in Millions) --------------------- Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 2004 2003 2004 2003 ------ ------ ------ ------ Net income for the period...................... $145.3 $124.6 $487.0 $420.1 Foreign currency translation adjustment, net of income taxes of $8.2 and $7.1 and $7.0 and $77.6 for the three months and nine months ended September 30, 2004 and 2003, respectively......................... 15.2 13.2 13.1 144.1 ------ ------ ------ ------ Comprehensive income for the period............ $160.5 $137.8 $500.1 $564.2 ====== ====== ====== ======
7. All of our wholly and partially owned businesses operate within the advertising, marketing and corporate communications services industry. These agencies are organized into strategic platforms, client centric networks, geographic regions and operating groups. Our businesses provide communications services to similar type 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. Given these similarities, we have aggregated their results into one reporting segment. A summary of our revenue and long-lived assets by geographic area as of September 30, 2004 and 2003 is presented below:
(in millions of dollars) --------------------------------------------------------------------- United Euro United Other States Denominated Kingdom International Consolidated ------ ----------- ------- ------------- ------------ Revenue 3 Months Ended September 30, 2004 $1,261.3 $ 471.3 $255.5 $330.9 $2,319.0 2003 1,105.6 412.1 227.8 283.1 2,028.6 Revenue 9 Months Ended September 30, 2004 $3,781.6 $1,430.7 $777.4 $968.4 $6,958.1 2003 3,385.5 1,246.3 671.5 812.1 6,115.4 Long-lived Assets At September 30, 2004 $ 324.5 $ 99.4 $ 89.4 $ 88.0 $ 601.3 2003 308.1 88.3 86.0 90.0 572.4
8. Bank loans at September 30, 2004 of $33.4 million are primarily comprised of bank overdrafts of our international subsidiaries which are treated as unsecured loans pursuant to our bank agreements. In January 2004, in connection with the purchase of an office building, we assumed a mortgage of $17.1 million which is included in our long-term debt. On May 24, 2004, we amended and extended our existing revolving credit facilities with a consortium of banks, resulting in a five-year $1,500.0 million revolving credit facility which matures May 24, 2009, and a $500.0 million 364-day revolving credit facility with a maturity date of May 23, 2005. These facilities amended our previous three-year $835.0 million and $1,200.0 million, 364-day revolving credit 6 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) facilities, respectively. We are also an active participant in the commercial paper market with a $1,500.0 million program. Each of our bank credit facilities provides credit support for commercial paper issued under this program. As of September 30, 2004, no commercial paper was outstanding and we had no other borrowings outstanding under these credit facilities. The 364-day facility includes a provision which allows us to convert all amounts outstanding at expiration of the facility into a one-year term loan. The consortium consists of 27 banks, each committing a pro rata amount to the five-year and 364-day credit facilities. Citibank N.A. acts as administrative agent, ABN Amro acts as syndication agent and JPMorgan Chase Bank and HSBC Bank USA act as co-documentation agents for the facilities. Other significant lending institutions include Societe Generale, Bank of America, Wachovia and Sumitomo Mitsui. These facilities provide us with the ability to classify our borrowings under our revolving credit facilities or commercial paper issued that could come due within one year as long-term debt, as it is our intention to keep the borrowings outstanding on a long-term basis. 9. Included in operating income for the nine months ended September 30, 2004 is a pre-tax net gain of $13.1 million arising from investment activity described below. In March 2004, in connection with Seneca Investments LLC's ("Seneca") recapitalization, we agreed to exchange our remaining preferred stock in Seneca for a $24.0 million senior secured note and 40% of Seneca's outstanding common stock. The note, which is due in March 2007, bears interest at a rate of 6.25% per annum. Prior to Seneca's recapitalization, we were accounting for our investment under the cost recovery method. We now account for our investment using the equity method. The recapitalization transaction was required to be recorded at fair value and, accordingly, we recorded a net pre-tax gain of $24.0 million. This gain was partially offset by losses of $10.9 million on other cost-based investments. 10. In 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 148 (SFAS 148), "Accounting for Stock-Based Compensation - Transition and Disclosure - An Amendment of FASB No. 123". We adopted SFAS 123 effective January 1, 2004, as discussed in Note 4. In March 2004, the FASB issued for exposure a Proposed Statement of Financial Accounting Standards entitled "Share-Based Payment - an amendment of SFAS No. 123 and 95". The proposal requires that the fair value of employee stock-based compensation be expensed. Although the proposal differs from SFAS 123, as amended by SFAS 148, the new requirements will generally apply to newly granted stock or options to employees, or previously granted awards that are either modified or settled after January 1, 2004. In 7 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) October 2004, the FASB delayed the proposed effective date of the exposure draft to any interim or annual period beginning after June 15, 2005. We will continue to monitor the progress of the FASB with regard to the final requirements of this new standard. Effective for reporting periods beginning after March 31, 2004, the Emerging Issues Task Force ("EITF") of the FASB released issue No. 03-6, "Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings Per Share." The adoption of EITF No. 03-6 did not have an impact on our consolidated results of operation or financial position. On October 13, 2004, the FASB Board ratified EITF 04-8, "The Effect of Contingently Convertible Instruments on Diluted Earnings per Share." Adoption of EITF No. 04-8 is required for fiscal years ended after December 15, 2004. Assuming no changes are made prior to December 31, 2004 to our Liquid Yield Option Notes due 2031 and our Zero Coupon Zero Yield Notes due 2033, we estimate that EITF 04-8, which requires the use of the "if converted" method for these notes, would have reduced our Diluted EPS for the nine months ended September 30, 2004 by approximately 4.2% and it could reduce diluted EPS in future periods. The rule change will not effect the manner in which we calculate diluted EPS with respect to our 2032 Zero Coupon Convertible Notes, which as discussed in note 11 below, were recently amended. FASB Interpretation ("FIN") No. 46, "Consolidation of Variable Interest Entities - An Interpretation of ARB No. 51", as amended by FIN 46R was required to be adopted in the first reporting period ending after March 15, 2004. FIN 46 addresses the consolidation by business enterprises of variable interest entities, as defined in FIN 46, and is based on the concept that companies that control another entity through interests, other than voting interests, should consolidate the controlled entity. The FASB subsequently issued FIN 46R in December 2003 that modified certain provisions of FIN 46. The adoption of FIN 46 and FIN 46R did not have an impact on, or result in additional disclosure in our financial statements. 11. On August 12, 2004, we paid holders of our Zero Coupon Zero Yield Notes due 2032, $27.50 per $1,000 principal amount of notes as an incentive to the holders to not put their notes to us for repurchase. Additionally, the holders of the notes due 2032 consented to certain amendments to the indenture under which the notes were issued. None of the notes were put to us for repurchase and all noteholders consented to the amendments. The total payment to the noteholders of $24.5 million is being amortized ratably through the next put date. Under the amendments, we will pay cash, not shares of our common stock as originally provided for in the indenture, to noteholders for the initial principal amount of notes surrendered for conversion. The remainder of the conversion value will be paid in cash or shares of our common stock, at our election. We also amended the method by which contingent cash interest is determined. As a result of 8 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) this amendment the potential dilution from the 2032 notes will be included in our diluted EPS calculation using the "treasury stock" method and, as a result, will not be dilutive until the weighted average share price of our stock is greater than the $110.01 conversion price of the bonds. On October 21, 2004, we offered to pay holders of our Zero Coupon Zero Yield Notes due 2033, $2.50 per $1,000 principal amount of notes as an incentive to the holders who consented to an amendment to the indenture under which the notes were issued. Under the amendments, we would pay cash, not shares of common stock as originally provided for in the indenture, to noteholders for the initial principal amount of notes surrendered for conversion. The remainder of the conversion value would be paid in cash or shares, at our election. Only consenting noteholders will be bound by the amendments to the indenture. On November 4, 2004, the consent period expired and 73% of the noteholders consented to the amendments. We are in the process of amending the notes for which we have received consents. The total payment to consenting noteholders will be $1.1 million which we will amortize ratably through the next put date. Holders of our Liquid Yield Option Notes due 2031, Zero Coupon Zero Yield Notes due 2032 and Zero Coupon Zero Yield Notes due 2033, are permitted to require us to purchase their notes on dates specified in the indentures pursuant to which the respective notes were issued. On November 4, 2004, we waived our right to pay with shares of our common stock, for those notes being put to us for repurchase. We must now pay cash if these notes are put to us for repurchase. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Executive Summary We are a holding company which owns industry-leading advertising, marketing and corporate communications companies that span more than 30 marketing disciplines, 100 countries, 1,500 subsidiary agencies and 5,000 clients. On a global, pan-regional and local basis, our agencies provide traditional media advertising services as well as marketing services including customer relationship management, public relations and specialty communications. Given our size and breadth, we manage the business by monitoring several financial and non-financial performance indicators. The key indicators that we review focus on the areas of revenues and operating expenses. Revenue growth is analyzed by reviewing the components and mix of the growth, including growth by major geographic location, by major marketing discipline, from currency changes and from acquisition. Our revenue has historically been derived almost evenly from our domestic and international operations. For the three months ended September 30, 2004, our overall revenue growth was 14.3%, of which 4.0% was related to changes in foreign exchange rates and 1.9% was related to acquired entities. The remainder of our growth, 8.4%, was organic growth. For the first nine months of 2004, our overall revenue growth was 13.8%, of which 4.7% was related to changes in foreign exchange rates and 2.4% was related to acquired entities. The remainder of our revenue growth, 6.7%, was organic growth. However, we believe that between 1.5% to 2% of this growth in the quarter could be the result of clients shifting their marketing programs forward into the third quarter from the fourth quarter primarily related to the Olympics, rather than as a result of an increase in their annual spending plans. For the three months ended September 30, 2004 and for the first nine months of 2004, traditional media advertising represented about 42% and 43%, respectively, of our total revenue and grew by 10.7% and 12.3%, respectively. For the three months ended September 30, 2004 and in the first nine months of 2004, marketing services represented about 58% and 57%, respectively, of total revenue and grew by 17.0% and 14.9%, respectively. We measure operating expenses in two distinct cost categories: salary and service costs, and office and general expenses. Because we are a service business, we monitor these costs on a percentage of revenue basis. On an annual basis, salary and service costs tend to fluctuate in conjunction with changes in revenues, whereas office and general expenses, which are not directly related to servicing clients, normally tend to decrease as a percentage of revenues as revenues increase because a significant portion of these expenses are relatively fixed in nature. During the third quarter of 2004, salary and service costs increased from 69.6% of revenue to 71.6% of revenue. Office and general expenses decreased from 19.7% of revenue to 17.8% of revenue. During the first nine months of 2004, salary and service costs increased from 68.7% of revenue to 70.5% of revenue. Office and general expenses decreased from 19.3% of revenue to 17.7% of revenue. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Our net income for the third quarter of 2004 increased by 16.6% to $145.3 million from $124.6 million in the third quarter of 2003, and our diluted EPS increased by 19.7% to $0.79 from $0.66. Our net income for the first nine months of 2004 increased by 15.9% to $487.0 million from $420.1 million in the first nine months of 2003, and our diluted EPS increased by 15.6% to $2.60 from $2.25. In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation", as amended by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure, an amendment of FASB Statement No. 123", we elected to account for stock-based employee compensation using the fair value method effective January 1, 2004. As a result, the fair value of stock-based employee compensation, including unvested employee stock options issued and outstanding, were recorded as an expense in the current period utilizing the retroactive restatement method as set forth in SFAS 148. Accordingly, our results for the quarter ended September 30, 2003 and the nine months ended September 30, 2003 have been restated as if we had used the fair value method to account for stock-based employee compensation. Results of pre-tax stock-based employee compensation costs for the three months ended September 30, 2004 and 2003 included $28.0 million and $33.1 million, respectively, and for the nine months ended September 30, 2004 and 2003 included $89.6 million and $100.1 million, respectively. Also, in connection with the restatement, the December 31, 2003 balance sheet presented above reflects an increase in the deferred tax benefit of $120.5 million, an increase in additional paid-in capital of $434.7 million, an increase in unamortized stock compensation of $92.6 million and a decrease in retained earnings of $221.6 million. The following analysis gives further information about the changes in our financial performance on a quarterly and nine-month year-to-date basis. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Results of Operations: Third Quarter 2004 Compared to Third Quarter 2003 Revenue: Our third quarter of 2004 consolidated worldwide revenue increased 14.3% to $2,319.0 million from $2,028.6 million in the comparable period last year. The effect of foreign exchange impacts increased worldwide revenue by $82.0 million. Acquisitions, net of disposals, increased worldwide revenue by $37.8 million in the third quarter of 2004 and organic growth increased worldwide revenue by $170.6 million. The components of the third quarter 2004 revenue growth in the U.S. ("domestic") and the remainder of the world ("international") are summarized below ($ in millions):
Total Domestic International ----------------- ----------------- ---------------- $ % $ % $ % -------- ---- -------- ---- -------- ---- Third Quarter ended September 30, 2003 ... $2,028.6 -- $1,105.6 -- $ 923.0 -- Components of Revenue Changes: Foreign exchange impact................... 82.0 4.0% -- -- 82.0 8.9% Acquisitions.............................. 37.8 1.9% 33.3 3.0% 4.5 0.5% Organic................................... 170.6 8.4% 122.4 11.1% 48.2 5.2% -------- ---- -------- ---- -------- ---- Third Quarter ended September 30, 2004 ... $2,319.0 14.3% $1,261.3 14.1% $1,057.7 14.6% ======== ==== ======== ==== ======== ====
The components and percentages are calculated as follows: o The foreign exchange impact component shown in the table is calculated by first converting the current period's local currency revenue using the average exchange rates from the equivalent prior period to arrive at a constant currency revenue (in this case $2,237.0 million for the Total column in the table). The foreign exchange impact equals the difference between the current period revenue in U.S. dollars and the current period revenue in constant currency (in this case $2,319.0 million less $2,237.0 million for the Total column in the table). o The acquisition component shown in the table is calculated by aggregating the applicable prior period revenue of the acquired businesses. Netted against this number is the revenue of any business included in the prior period reported revenue that was disposed of subsequent to the prior period. o The organic component shown in the table is calculated by subtracting both the foreign exchange and acquisition revenue components from total revenue growth. o The percentage change shown in the table of each component is calculated by dividing the individual component amount by the prior period revenue base of that component (in this case $2,028.6 million for the Total column in the table). 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The components of revenue and revenue growth in our primary geographic markets for the third quarter of 2004 compared to the third quarter of 2003 are summarized below ($ in millions): $ Revenue % Growth --------- -------- United States.................. $1,261.3 14.1% Euro Denominated Markets....... 471.3 14.4% United Kingdom................. 255.5 12.2% Other.......................... 330.9 16.9% -------- ---- Total.......................... $2,319.0 14.3% ======== ==== As indicated, foreign exchange impacts increased our international revenue by $82.0 million during the quarter ended September 30, 2004. The most significant impacts resulted from the continued period-over-period strengthening of the Euro and the British Pound against the U.S. dollar, as our operations in these markets represented approximately 70.0% of our international revenue. Several long-term trends continue to positively affect our business, including our clients increasingly expanding the focus of their brand strategies from national markets to the global market. Additionally, 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 concentrating these activities with a smaller number of service providers. Driven by our clients' continuous demand for more effective and efficient branding activities, we strive to provide an extensive range of advertising, marketing and corporate communications services through various client-centric networks that are organized to meet specific client objectives. These services include advertising, brand consultancy, crisis communications, custom publishing, database management, digital and interactive marketing, direct marketing, directory advertising, entertainment marketing, environmental design, experiential marketing, field marketing, financial/corporate business-to-business advertising, graphic arts, healthcare communications, instore design, investor relations, marketing research, media planning and buying, multi-cultural marketing, non-profit marketing, organizational communications, package design, product placement, promotional marketing, public affairs, public relations, real estate advertising and marketing, recruitment communications, reputation consulting, retail marketing and sports and event marketing. 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 across a broad range of disciplines and group them into the following four categories: traditional media advertising, customer relationship management (referred to as CRM), public relations and specialty communications, as summarized below. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Dollars in Millions) -------------------------------------------------------------------------- 3rd Quarter % of 3rd Quarter % of $ % 2004 Revenue 2003 Revenue Growth Growth ----------- ------- ----------- ------- ------ ------ Traditional media advertising $ 967.8 41.8% $ 874.1 43.1% $ 93.7 10.7% CRM 826.3 35.6% 701.9 34.6% 124.4 17.7% Public relations 257.8 11.1% 226.2 11.1% 31.6 14.0% Specialty communications 267.1 11.5% 226.4 11.2% 40.7 18.0% -------- -------- ------ $2,319.0 $2,028.6 $290.4 14.3% ======== ======== ======
Certain reclassifications have been made to the third quarter 2003 amounts in the tables above to conform the numbers to the third quarter 2004 amounts presented. Operating Expenses: Our third quarter 2004 worldwide operating expenses increased $260.1 million, or 14.4%, to $2,071.6 million from $1,811.5 million in the third quarter of 2003, as shown below.
(Dollars in Millions) --------------------------------------------------------------------------------------- Three Months Ended September 30, --------------------------------------------------------------------------------------- 2004 2003 2004 vs 2003 ----------------------------- ----------------------------- ------------------ % % of % % of of Total Op. of Total Op. $ % $ Revenue Costs $ Revenue Costs Growth Growth -------- ------- --------- -------- ------- --------- ------ ------ Revenue ........................... $2,319.0 $2,028.6 $290.4 14.3% Operating expenses: Salary and service costs....... 1,659.5 71.6% 80.1% 1,412.2 69.6% 78.0% 247.3 17.5% Office and general expenses.... 412.1 17.8% 19.9% 399.3 19.7% 22.0% 12.8 3.2% -------- ---- ---- -------- ---- ---- ------ ---- Total Operating Costs.............. 2,071.6 89.3% 1,811.5 89.3% 260.1 14.4% Operating profit................... $ 247.4 10.7% $ 217.1 10.7% $ 30.3 14.0% ======== ======== ======
Salary and service costs, which are comprised of direct service costs and salary related costs, increased by $247.3 million, or 17.5%, and represented 80.1% of total operating expenses in the third quarter of 2004 versus 78.0% in the third quarter of 2003. These expenses also increased as a percentage of revenue to 71.6% in the third quarter of 2004 from 69.6% in the third quarter of 2003 primarily as a result of increased incentive compensation costs as well as increases in direct service costs, including increases in costs relating to new business initiatives and recruitment costs. This was partially offset by a reduction in severance costs and is consistent with our continued efforts to increase the variability of our cost structure on a location-by-location basis. Office and general expenses, which are comprised of office and equipment rent, depreciation and amortization of other intangibles, professional fees and other overhead expenses, increased by $12.8 million, or 3.2%, in the third quarter of 2004 compared to the same period in 2003. Office and general expenses decreased as a percentage of our total operating costs in the third quarter of 2004 to 19.9% versus 22.0% in the prior period. Additionally, as a percentage of revenue, office and general expenses decreased in the third quarter of 2004 to 17.8% from 19.7% in the third quarter of 2003, because these expenses are relatively fixed in 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) nature and do not necessarily change relative to our revenue growth or changes in our salary and services costs. Net Interest Expense: Our net interest expense in the third quarter of 2004 was $8.8 million, down from $11.5 million in the same period in 2003. The decrease in our gross interest expense of $3.1 million, was attributed to ratably amortizing the $25.4 million interest payment made in February 2003 related to our convertible notes due 2031 over the 12-month period ended in February 2004. No such payment was made in February 2004. This was partially offset by additional amortization expense related to the $6.7 million interest payment made in August 2003 and the $24.5 million interest payment made in August 2004, related to our convertible notes due 2032. Furthermore, interest expense relative to our (euro)152.4 million 5.20% Euro notes increased due to the foreign currency change of the Euro relative to the U.S. dollar in the second quarter of 2004. The $24.5 million interest payment made in August 2004 was paid to holders of our convertible notes due 2032 as an incentive to retain and not put their notes to us for repurchase. Additionally, the noteholders consented to certain amendments to the indenture under which the notes were issued. The $24.5 million interest payment was paid on August 12, 2004 and is being amortized ratably over the next 12 months and accordingly, interest expense will increase in the fourth quarter of 2004 compared to the fourth quarter of 2003. Income Taxes: Our consolidated effective income tax rate was 33.6% in the third quarter of 2004, which is comparable to our full-year and third quarter rate for 2003. Earnings Per Share (EPS): For the foregoing reasons, our net income in the third quarter of 2004 increased $20.7 million, or by 16.6% to $145.3 million from $124.6 million in the third quarter of 2003. Diluted earnings per share increased 19.7% to $0.79 in the third quarter of 2004, as compared to $0.66 in the prior year period for the reasons described above, as well as the impact of our purchase of treasury shares. 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Results of Operations: First Nine Months 2004 Compared to First Nine Months 2003 Revenue: Our first nine months of 2004 consolidated worldwide revenue increased 13.8% to $6,958.1 million from $6,115.4 million in the comparable period last year. The effect of foreign exchange impacts increased worldwide revenue by $287.1 million. Acquisitions, net of disposals, increased worldwide revenue by $144.7 million in the first nine months of 2004 and organic growth increased worldwide revenue by $410.9 million. The components of the first nine months of 2004 revenue growth in the U.S. ("domestic") and the remainder of the world ("international") are summarized below ($ in millions):
Total Domestic International ---------------- ---------------- ---------------- $ % $ % $ % -------- ---- -------- ---- -------- ---- Nine Months ended September 30, 2003... $6,115.4 -- $3,385.5 -- $2,729.9 -- Components of Revenue Changes: Foreign exchange impact................ 287.1 4.7% -- -- 287.1 10.5% Acquisitions........................... 144.7 2.4% 112.1 3.3% 32.6 1.2% Organic................................ 410.9 6.7% 283.9 8.4% 127.0 4.7% -------- ---- -------- ---- -------- ---- Nine Months ended September 30, 2004... $6,958.1 13.8% $3,781.6 11.7% $3,176.6 16.4% ======== ==== ======== ==== ======== ====
The components and percentages are calculate d as follows: o The foreign exchange impact component shown in the table is calculated by first converting the current period's local currency revenue using the average exchange rates from the equivalent prior period to arrive at a constant currency revenue (in this case $6,671.0 million for the Total column in the table). The foreign exchange impact equals the difference between the current period revenue in U.S. dollars and the current period revenue in constant currency (in this case $6,958.1 million less $6,671.0 million for the Total column in the table). o The acquisition component shown in the table is calculated by aggregating the applicable prior period revenue of the acquired businesses. Netted against this number is the revenue of any business included in the prior period reported revenue that was disposed of subsequent to the prior period. o The organic component shown in the table is calculated by subtracting both the foreign exchange and acquisition revenue components from total revenue growth. o The percentage change shown in the table of each component is calculated by dividing the individual component amount by the prior period revenue base of that component (in this case $6,115.4 million for the Total column in the table). The components of revenue and revenue growth in our primary geographic markets for the first nine months of 2004 compared to the first nine months of 2003 are summarized below ($ in millions): 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) $ Revenue % Growth --------- -------- United States................... $3,781.6 11.7% Euro Denominated Markets........ 1,430.7 14.8% United Kingdom.................. 777.4 15.8% Other........................... 968.4 19.3% -------- ---- Total........................... $6,958.1 13.8% ======== ==== As indicated, foreign exchange impacts increased our international revenue by $287.1 million during the first nine months ended September 30, 2004. The most significant impacts resulted from the continued period-over-period strengthening of the Euro and the British Pound against the U.S. dollar, as our operations in these markets represented approximately 70.0% of our international revenue. 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 across a broad range of disciplines and group them into the following four categories: traditional media advertising, customer relationship management (referred to as CRM), public relations and specialty communications, as summarized below.
(Dollars in Millions) ------------------------------------------------------------------------- Nine Months % of Nine Months % of $ % 2004 Revenue 2003 Revenue Growth Growth ----------- ------- ----------- ------- ------ ------ Traditional media advertising $3,004.9 43.2% $2,675.9 43.8% $329.0 12.3% CRM 2,385.1 34.3% 2,065.6 33.8% 319.5 15.5% Public relations 760.1 10.9% 686.2 11.2% 73.9 10.8% Specialty communications 808.0 11.6% 687.7 11.2% 120.3 17.5% -------- -------- ------ ---- $6,958.1 $6,115.4 $842.7 13.8% ======== ======== ====== ====
Certain reclassifications have been made to the first nine months of 2003 amounts in the tables above to conform the numbers to the first nine months of 2004 amounts presented. Operating Expenses: Our first nine months of 2004 worldwide operating expense increased $760.9 million, or 14.2%, to $6,137.6 million from $5,376.7 million in the first nine months of 2003, as shown below.
(Dollars in Millions) Nine Months Ended September 30, ------------------------------------------------------------------------------------------ 2004 2003 2004 vs 2003 ------------------------------ ------------------------------ ------------------ % % of % % of of Total Op. of Total Op. $ % $ Revenue Costs $ Revenue Costs Growth Growth -------- ------- --------- -------- ------- --------- ------ ------ Revenue ........................... $6,958.1 $6,115.4 $842.7 13.8% Operating expenses: Salary and service costs....... 4,906.7 70.5% 79.9% 4,199.4 68.7% 78.1% 707.3 16.8% Office and general expenses.... 1,230.9 17.7% 20.1% 1,177.3 19.3% 21.9% 53.6 4.6% -------- ---- ---- -------- ---- ---- ------ ---- Total Operating Costs.............. 6,137.6 88.2% 5,376.7 87.9% 760.9 14.2% Operating profit................... $ 820.5 11.8% $ 738.7 12.1% $ 81.8 11.1% ======== ======== ======
17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Salary and service costs increased by $707.3 million, or 16.8%, and represented 79.9% of total operating expenses in the first nine months of 2004 versus 78.1% in the first nine months of 2003. These expenses also increased as a percentage of revenue to 70.5% in the first nine months of 2004 from 68.7% in the first nine months of 2003, primarily, as a result of increased incentive compensation costs as well as increases in direct service costs, including increases in costs relating to new business initiatives and recruitment costs, and changes in the mix of our revenues. This was partially offset by a reduction in severance costs and is consistent with our continued efforts to increase the variability of our cost structure on a location-by-location basis and the positive impact in the first quarter of 2004 of previous cost actions. Office and general expenses increased by $53.6 million, or 4.6%, in the first nine months of 2004 compared to the same period in 2003. Office and general expenses decreased as a percentage of our total operating costs in the first nine months of 2004 to 20.1% versus 21.9% in the prior period. Additionally, as a percentage of revenue, office and general expenses decreased in the first nine months of 2004 to 17.7% from 19.3% in the first nine months of 2003 because these expenses are relatively fixed in nature. Included in office and general expense was a net gain of $13.1 million related to investment activity during the first quarter of 2004. In March 2004, in connection with Seneca's recapitalization, we agreed to exchange our remaining preferred stock in Seneca for a $24.0 million senior secured note and 40% of Seneca's outstanding common stock. The note, which is due in March 2007, bears interest at a rate of 6.25% per annum. The recapitalization transaction was required to be recorded at fair value and, accordingly, we recorded a pre-tax net gain of $24.0 million. This gain was partially offset by losses of $10.9 million on other cost-based investments. Excluding the net gain of $13.1 million, office and general expenses were 17.9% of revenue in the first nine months of 2004 compared to 19.3% of revenue in the first nine months of 2003 and operating margin decreased to 11.6% of revenue from 12.1% of revenue. In addition to the items discussed above, this decrease in operating margin resulted from $9.9 million of costs incurred in connection with the disposal of two non-strategic businesses. Net Interest Expense: Our net interest expense in the first nine months of 2004 was $26.6 million, down from $32.8 million in the same period in 2003. Our gross interest expense also decreased by $6.0 million which is attributed to ratably amortizing the $25.4 million interest payment made in February 2003 related to our convertible notes due 2031 over the preceding twelve-month period ended in February 2004. No such payment was made in February 2004. Interest cost savings also resulted from the issuance of $600.0 million convertible notes due 2033 in June 2003 at a zero percent interest rate. This was partially offset by additional amortization expense related to the $6.7 million interest payment made in 2003, amortization of debt issue costs related to the issuance of our $600 million convertible notes due 2033 and the $24.5 million interest payment made in August 2004, related to our convertible notes due 2032. In addition, interest expense relative to the (euro)152.4 million 5.20% Euro note increased due to the foreign currency change of the Euro relative to the U.S. dollar in 2004. 18 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Income Taxes: Our consolidated effective income tax rate was 33.6% in the first nine months of 2004, which is comparable to our full year rate for 2003. Earnings Per Share (EPS): For the foregoing reasons, our net income in the first nine months of 2004 increased $66.9 million, or by 15.9% to $487.0 million from $420.1 million in the first nine months of 2003. Diluted earnings per share increased 15.6% to $2.60 in the first nine months of 2004, as compared to $2.25 in the prior year period. 19 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Critical Accounting Policies To assist in better understanding our financial statements and the related management's discussion and analysis of those results, readers are encouraged to consider this information together with our discussion of our critical accounting policies under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2003 (the "2003 Form 10-K"), as well as our consolidated financial statements and the related notes included in our 2003 Form 10-K, for a more complete understanding of all of our accounting policies. New Accounting Pronouncements On June 30, 2004, the Emerging Issues Task Force ("EITF") of the Financial Accounting Standards Board ("FASB") reached a tentative conclusion with regard to EITF Issue No. 04-8, Accounting Issues Related to Certain Features of Contingently Convertible Debt and the Effect on Diluted Earnings per Share. This tentative conclusion was subsequently modified and ratified by the FASB on October 13, 2004 and will be effective beginning with our financial statements for the year ending December 31, 2004. EITF No. 04-8 requires companies to account for contingently convertible debt using the "if converted" method set forth in Statement of Financial Accounting Standard No. 128 for purposes of calculating diluted EPS. Therefore, contingently convertible debt would be included in the diluted EPS calculation as if the debt had been converted into common stock. EITF No. 04-8 applies to all contingently convertible debt instruments including our Liquid Yield Option Notes due 2031 and our Zero Coupon Zero Yield Notes due 2033 and requires retroactive application to the diluted EPS of all prior periods presented in the financial statements. We have amended our Zero Coupon Zero Yield Notes due 2032 so that the notes are compliant with EITF 90-19 "Instrument C" treatment and as a result will be included in our diluted EPS calculation using the "treasury stock" method set forth in SFAS 128. Consequently, the notes will not be dilutive until the weighted average share price of our common stock is greater than the $110.01 conversion price of the bonds. Further, EITF 04-8 permits the assumption that the amendment occurred at the beginning of the first period reported and accordingly, the manner in which we calculated diluted EPS with respect to our Zero Coupon Zero Yield Notes due 2032 in prior periods will not change. We expect that the impact of adopting EITF 04-8 will result in a decrease to our diluted EPS for the nine-months ended September 30, 2004 of 4.2%. Further, our previously reported twelve months ended December 31, 2003 diluted EPS would decrease by 1.5%. Additionally, we are finalizing the process of amending our Zero Coupon Zero Yield Notes due 2033. On November 4, 2004, we received consents from 73% of noteholders in response to our offer of October 21, 2004. We are in the process of amending the notes for which we have received consents. We are also considering amending the Liquid Yield Option Notes due 2031 in a similar fashion to the amendment made to our Zero Coupon Zero Yield Notes due 2032. We cannot predict whether these notes will be amended. 20 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Contingent Acquisition Obligations Certain of our acquisitions are structured with additional contingent purchase price obligations. We utilize contingent purchase price structures in an effort to minimize the risk to us associated with potential future negative changes in the performance of the acquired entity during the post-acquisition transition period. The amount of future contingent purchase price payments that we would be required to pay for prior acquisitions, assuming that the acquired businesses perform over the relevant future periods at their current profit levels, is approximately $361 million as of September 30, 2004. The ultimate amount payable cannot be predicted with reasonable certainty because it is dependent upon future results of operations of subject businesses and subject to changes in foreign currency exchange rates. In accordance with GAAP, we have not recorded a liability for these items on our balance sheet since the definitive amount is not determinable or distributable. Actual results can differ from these estimates and the actual amounts that we pay are likely to be different from these estimates. Our obligations change from period to period as a result of payments made during the current period, changes in the previous estimate of the acquired entities' performance, changes in foreign currency exchange rates and other factors. These differences could be significant. The contingent purchase price obligations as of September 30, 2004, calculated assuming that the acquired businesses perform over the relevant future periods at their current profit levels, are as follows: (Dollars in Millions) -------------------------------------------------------------- Remainder There- 2004 2005 2006 2007 after Total --------- ---- ---- ---- ----- ----- $26 $166 $63 $65 $41 $361 In addition, owners of interests in certain of our subsidiaries or affiliates have the right in certain circumstances to require us to purchase additional ownership stakes in those companies. Assuming that the subsidiaries and affiliates perform over the relevant periods at their current profit levels, the aggregate amount we could be required to pay in future periods is approximately $265 million, $148 million of which relate to obligations that are currently exercisable. The ultimate amount payable relating to these transactions will vary because it is dependent on the future results of operations of the subject businesses, the timing of the exercise of these rights, changes in foreign currency exchange rates and other factors. The actual amount that we pay is likely to be different from this estimate, and the difference could be significant. The obligations that exist for these agreements as of September 30, 2004, calculated using the assumptions above, are as follows: (Dollars in Millions) ----------------------------------------- Currently Not Currently Exercisable Exercisable Total ----------- -------------- ----- Subsidiary agencies $124 $107 $231 Affiliated agencies 24 10 34 ---- ---- ---- Total $148 $117 $265 ==== ==== ==== If these rights were exercised, there would likely be an increase in our net income as a result of our increased ownership and a reduction of minority interest expense. 21 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Liquidity and Capital Resources Our principal non-discretionary funding requirement is our working capital requirements. In addition, we have contractual obligations related to our debt and convertible notes, our recurring business operations primarily related to lease obligations, as well as certain contingent acquisition obligations related to acquisitions made in prior years. Our principal discretionary cash requirements include dividend payments to our shareholders, purchases of treasury stock, payments for strategic acquisitions and capital expenditures. We have a seasonal working capital cycle. Working capital requirements are lowest at year-end and higher during the quarters. This occurs because in the majority of our businesses we act as agent on behalf of our clients, including when we place media and incur production costs on their behalf. We generally require collection from our clients prior to our payment for the media and production cost obligations and these obligations are greatest at the end of the year. Historically, on an annual basis, our discretionary and non-discretionary spending has been funded from operating cash flow. However, during the year we manage liquidity by utilizing our credit facilities discussed below. Liquidity: We had cash and cash equivalents totaling $429.1 million and $1,528.7 million at September 30, 2004 and December 31, 2003, respectively. We also had short-term investments totaling $24.2 million and $20.2 million at September 30, 2004 and December 31, 2003, respectively. Consistent with our historical trends in the first nine months of the year, we had negative cash flow from operations of $152.6 million. We funded this deficit primarily with cash on hand and by managing our working capital. Capital Resources: On May 24, 2004, we amended and extended our existing revolving credit facilities with a consortium of banks, resulting in a five-year $1,500.0 million revolving credit facility which matures May 24, 2009, and a $500.0 million 364-day revolving credit facility with a maturity date of May 23, 2005. These facilities amended our previous three-year, $835.0 million and $1,200 million, 364-day revolving credit facilities. We are also an active participant in the commercial paper market with a $1,500.0 million program. Each of our bank credit facilities provide credit support for issuances under this program. As of September 30, 2004, no commercial paper was outstanding and we had no other borrowings outstanding under these credit facilities. The 364-day facility includes a provision which allows us to convert all amounts outstanding at expiration of the facility into a one-year term loan. The consortium consists of 27 banks, each committing a pro rata amount to the five-year and 364-day facilities. Citibank N.A. acts as administrative agent, ABN Amro acts as syndication agent and JPMorgan Chase Bank and HSBC Bank USA act as co-documentation agents for the facilities. Other significant lending institutions include Societe Generale, Bank of America, Wachovia and Sumitomo Mitsui. These facilities are a critical component in our analysis of the liquidity and 22 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) capital resources that provide us with the ability to classify our borrowings under our revolving credit facilities or commercial paper issued that could come due within one year as long-term debt, as it is our intention to keep the borrowings outstanding on a long-term basis. Debt: We had short-term bank loans of $33.4 million and $42.4 million at September 30, 2004 and December 31, 2003, respectively, which are comprised of domestic borrowings and bank overdrafts of our international subsidiaries and are treated as unsecured loans pursuant to our bank agreements. At September 30, 2004, we also had a total of $2,339.3 million aggregate principal amount of convertible notes outstanding, including $847.0 million Liquid Yield Option Notes due 2031, which were issued in February 2001, $892.3 million Zero Coupon Zero Yield Convertible Notes due 2032, which were issued in March 2002, and $600.0 million Zero Coupon Zero Yield Convertible Notes due 2033, which were issued in June 2003. On August 12, 2004, we paid holders of our Zero Coupon Zero Yield Notes due 2032, $27.50 per $1,000 principal amount of notes as an incentive to the holders to not put their notes to us for repurchase and to consent to certain amendments to the indenture under which the notes were issued. None of the notes were put to us for repurchase and all noteholders consented to the amendments. The total payment to the noteholders of $24.5 million is being amortized ratably over the next twelve months. Under the amendments, we will pay cash, not shares of our common stock as originally provided for in the indenture, to noteholders for the initial principal amount of notes surrendered for conversion. The remainder of the conversion value will be paid in cash or shares of our common stock, at our election. We also amended the method by which contingent cash interest is determined. At September 30, 2004, we had Euro-denominated bonds outstanding of (euro)152.4 million or $189.6 million. The bonds pay a fixed rate of 5.2% to maturity in June 2005. While an increase in the value of the Euro against the U.S. dollar will result in a greater liability for interest and principal, there will be a corresponding increase in the dollar value of our Euro-denominated net assets. Our outstanding debt and amounts available under these facilities as of September 30, 2004 ($ in millions) were as follows:
Debt Available Outstanding Credit ----------- --------- Bank loans (due in less than 1 year)................................... $ 33.4 -- $1,500.0 Million Revolver - due May 24, 2009......................... -- $1,500.0 $500.0 Million - due May 23, 2005...................................... -- 500.0 (euro)152.4 million 5.20% Euro notes - due June 24, 2005............. 189.6 -- Convertible notes - due February 7, 2031............................. 847.0 -- Convertible notes - due July 31, 2032................................ 892.3 -- Convertible notes - due June 15, 2033................................ 600.0 -- Loan notes and sundry - various through 2012......................... 22.4 -- -------- -------- Total...................................................................... $2,584.7 $2,000.0 ======== ========
23 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) 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 arising from working capital, outstanding debt, capital expenditures, dividends and acquisitions. 24 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk Our results of operations are subject to risk from the translation to the U.S. dollar of the revenue and expenses of our foreign operations, which are generally denominated in the local currency. For the most part, our revenues and the expenses incurred related to those revenues are denominated in the same currency. This minimizes the impact that fluctuations in exchange rates will have on profit margins. Our Annual Report on Form 10-K for the year ended December 31, 2003, provides a more detailed discussion of the market risks affecting our operations. As of September 30, 2004, no material change had occurred in our market risks from the disclosure contained in that 10-K. Forward-Looking Statements "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosures About Market Risk" set forth in this report contain disclosures which are forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include all statements that do not relate solely to historical or current facts, and can be identified by the use of words such as "may," "will," "expect," "project," "estimate," "anticipate," "envisage," "plan" or "continue." These forward-looking statements are based upon our current plans or expectations and are subject to a number of uncertainties and risks that could significantly affect current plans and anticipated actions and our future financial condition and results. The uncertainties and risks include, but are not limited to, changes in general economic conditions, competitive factors, client communication requirements, the hiring and retention of human resources and other factors. In addition, our international operations are subject to the risk of currency fluctuations, exchange controls and similar risks discussed above. As a consequence, current plans, anticipated actions and future financial condition and results may differ from those expressed in any forward-looking statements made by us or on our behalf, and those differences could be material. 25 ITEM 4. CONTROLS AND PROCEDURES We maintain disclosure controls and procedures designed to ensure that information required to be included in our SEC reports is recorded, processed, summarized, analyzed and reported within applicable time periods. During the 90-day period prior to the filing of this report, we conducted an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of our disclosure controls and procedures. Based on that evaluation, our CEO and CFO concluded that they believe that our disclosure controls and procedures were effective to ensure recording, processing, summarizing, analysis and reporting of information required to be included in our SEC reports on a timely basis. There have been no significant changes in our internal controls or other factors that could be reasonably expected to materially affect the effectiveness of these controls since that evaluation was completed. 26 PART II. OTHER INFORMATION Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities The following table presents information with respect to purchases of common stock of the Company made during the three months ended September 30, 2004 by us or any of our "affiliated purchasers".
(c) Total Number (d) (a) (b) of Shares Purchased Maximum Number Total Average As Part of Publicly of Shares that May Number of Price Paid Announced Plans Yet Be Purchased Under During the month: Shares Purchased (1) Per Share or Programs the Plans or Programs - ----------------- -------------------- ---------- ------------------- ---------------------- July 2004 1,014,800 $71.12 -- -- August 2004 1,229,900 $71.13 -- -- September 2004 -- $ -- -- -- --------- ------ ------ ------ Total 2,244,700 $71.13 -- -- ========= ====== ====== ======
(1) The shares were purchased in the open market for general corporate purposes. Item 6. Exhibit and Reports on Form 8-K (a) Exhibits 4.1 Second Supplemental Indenture, dated August 12, 2004, among Omnicom Group Inc., Omnicom Capital Inc., Omnicom Finance Inc. and JPMorgan Chase Bank, as trustee, to the Indenture, dated March 6, 2002, as amended by the First Supplemental Indenture, dated February 13, 2004. 4.2 Second Supplemental Indenture, dated November 4, 2004, among Omnicom Group Inc., Omnicom Capital Inc., Omnicom Finance Inc. and JP Morgan Chase Bank, as trustee, to the Indenture, dated February 7, 2001, as amended by the First Supplemental Indenture, dated February 13, 2004. 4.3 Third Supplemental Indenture, dated November 4, 2004, among Omnicom Group Inc., Omnicom Capital Inc., Omnicom Finance Inc. and JPMorgan Chase Bank, as trustee, to the Indenture, dated March 6, 2002, as amended by the First Supplemental Indenture, dated February 13, 2004 and the Second Supplemental Indenture dated August 12, 2004. 4.4 Second Supplemental Indenture, dated November 4, 2004, among Omnicom Group Inc., Omnicom Capital Inc., Omnicom Finance Inc. and JPMorgan Chase Bank, as trustee, to the Indenture, dated June 10, 2003, as amended by the First Supplemental Indenture, dated November 5, 2003. 27 31.1 Certification of Chief Executive Office and President required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. 31.2 Certification of Executive Vice President and Chief Financial Officer required by Rule 13a -14(a) under the Securities Exchange Act of 1934, as amended. 32.1 Certification of the Chief Executive Officer and President and the Executive Vice President and Chief Financial Officer required by Rule 13a-14(b) under the Exchange Act of 1934, as amended, and 18 U.S.C. ss. 1350. (b) Reports on Form 8-K On July 27, 2004, we furnished a Current Report on Form 8-K under Item 9 (Regulation FD Disclosure) and Item 12 (Results of Operations and Financial Condition), our press release announcing our financial results and the second quarter ended June 30, 2004 and the text of materials used in the related call at which such results were discussed. 28 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OMNICOM GROUP INC. November 5, 2004 /s/ Randall J. Weisenburger ----------------------------------- Randall J. Weisenburger Executive Vice President and Chief Financial Officer (on behalf of Omnicom Group Inc. and as Principal Financial Officer) 29 EX-4.1 2 e19576ex4_1.txt SECOND SUPPLEMENTAL INDENTURE Exhibit 4.1 Execution Version SECOND SUPPLEMENTAL INDENTURE This SECOND SUPPLEMENTAL INDENTURE (the "Supplemental Indenture") dated as of August 12, 2004 among OMNICOM GROUP INC., a New York corporation (the "Company"), OMNICOM CAPITAL INC., a Connecticut corporation ("OCI"), OMNICOM FINANCE INC., a Delaware corporation ("OFI" and together with the Company and OCI, the "Issuers"), and JPMORGAN CHASE BANK, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H: WHEREAS, the Issuers and the Trustee have heretofore executed and delivered to the Trustee an Indenture dated March 6, 2002, as amended by the First Supplemental Indenture, dated February 13, 2003 (as so amended, the "Indenture"), providing for the issuance of an aggregate principal amount of up to $900,000,000 of Zero Coupon Zero Yield Convertible Notes due 2032 (the "Securities"), all of which have been issued and $892,273,000 of which are outstanding on the date hereof; WHEREAS, the Issuers desire (i) to surrender their right to pay Securityholders who are converting their Securities pursuant to Article 10 of the Indenture with shares of Common Stock, (ii) to surrender their right to designate a financial institution to deliver shares of Common Stock upon conversion pursuant to Article 10 of the Indenture and (iii) to modify the method by which Contingent Cash Interest is determined; WHEREAS, it is in the best interests of the Issuers to surrender such rights and to modify the method by which Contingent Cash Interest is determined; WHEREAS, Sections 9.02(2) and 9.02(5) of the Indenture provides that the Issuers and the Trustee may amend or supplement the Indenture only with the consent of affected Securityholders; WHEREAS, all Securityholders have consented to this Supplemental Indenture and all outstanding Notes shall be bound by it; WHEREAS, an Opinion of Counsel has been delivered to the Trustee under Section 9.02; and WHEREAS, pursuant to Sections 9.02 and 9.06 of the Indenture, the Trustee and the Company are authorized to execute and deliver this Supplemental Indenture; NOW THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the Issuers and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Securities as follows: 1. Definitions. All capitalized terms used but not defined herein shall have the meanings given to such terms set forth in the Indenture. 2. Amendments. The Indenture be and hereby is amended as follows: 2.1 Section 10.02 of the Indenture is hereby amended and restated in its entirety to read as follows: "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"). As soon as practicable following the Conversion Date, the Issuers will deliver, directly or through the Conversion Agent, an amount in cash (the "Cash Amount") equal to the Initial Principal Amount at Maturity of the Securities surrendered for conversion. The difference, if positive, between the Conversion Value and the Initial Principal Amount at Maturity of the Securities surrendered for conversion (the "Premium") may be satisfied, at the option of the Issuers, exercisable at any time or from time to time, by an instrument in writing signed by the Issuers, by delivering to a Converting Holder, in addition to the Cash Amount, either (i) an amount in cash equal to the Premium or (ii) the number of whole shares of Common Stock equal to the quotient of (x) the Premium for such Securities divided by (y) the last reported Sales Price of the Company's Common Stock on the Conversion Date (if the Conversion Date is not a Business Day, then on the Business Day immediately preceding the Conversion Date), plus a cash payment for fractional shares determined pursuant to Section 10.03. At any time after which the Securities could be converted by action of the Holder, at the written request of a Holder, the Company will, within five calendar days of receipt of such request, notify such Holder whether the Premium will be satisfied in cash or Company Common Stock as aforesaid. Any such notice by the Company will be irrevocable for 60 calendar days (or such longer period as the Company may specify on the notice), and then may only be revoked after ten additional calendar days notice. All elections or notices contemplated to be given by the Company in this paragraph will be made or given by delivery of written notice to the Trustee as herein provided and to the Holder. In the event that the Issuers elect to satisfy the Premium with Common Shares, 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 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 -2- 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 Cash Amount, together with cash or Common Stock in respect of the Premium, in exchange for the Security being converted pursuant to the provisions hereof; and the fair market value of such cash or Common Stock in respect of the Premium shall be treated as delivered, to the extent thereof, first in exchange for Contingent Additional Principal accrued through the Conversion Date and accrued Contingent Cash Interest, and the Cash Amount shall be treated as delivered 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 Cash Amount, together with the cash or Common Stock in respect of the Premium, 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 Issuers 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." 2.2 Section 10.05 of the Indenture is hereby amended and restated in its entirety to read as follows: "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 satisfaction of the Premium with Common Stock upon 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." -3- 2.3 A new subparagaph (d), to read in its entirety as follows, will be added to the existing Section 10.08 of the Indenture: SECTION 10.08 Adjustment for Other Distributions. "(d) if the Company pays any Regular Cash Dividend during any quarterly fiscal period for which Contingent Cash Interest is payable, the Conversion Rate will be adjusted as of the record date for such Regular Cash Dividend based on the following formula: CR' = CR0 x SP0 --------- SP0 - C CR0 = the Conversion Rate in effect immediately prior to the record date for such Regular Cash Dividend CR' = the Conversion Rate in effect immediately after the record date for such Regular Cash Dividend; provided that (1) CR' shall not be less than 9.09 (except as adjusted pursuant to other provisions of this Indenture); and (2) when, if not for clause (1) CR' would be less than 9.09, CR0 will be equal to such CR' for purposes of making the next quarterly adjustment calculation. SP0 = the average of the last reported Sale Prices of the Common Stock for the ten consecutive Trading Days prior to the Business Day immediately preceding the record date of such Regular Cash Dividend C = the difference of (x) the amount in cash per share paid to holders of Common Stock in any quarterly period minus (y) the amount set forth for such quarterly fiscal period in Section 5 of the Notes divided by 9.09 (appropriately adjusted from time to time for any share dividends on, or subdivisions of, the Common Stock) Notice of any adjustment to the Conversion Rate as provided in this Section 10.08(d) need not be given to any Holder unless such adjustment, together with all prior adjustments pursuant to this Section 10.08(d) for which notice has not previously been given, would require an increase or decrease of at least 1% in the Conversion Rate; provided that the Company shall give Holders annual notice, within 120 days after the end of each fiscal year of the Company (beginning with the fiscal year ending on December 31, 2007), of all adjustments made pursuant to this Section 10.08(d) during such fiscal year. "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." -4- 2.4 Section 10.09 of the Indenture is hereby amended and restated in its entirety to read as follows: "SECTION 10.09 When Adjustment May Be Deferred. "Except for adjustments calculated pursuant to Section 10.08(d), 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." 2.5 Section 5 of Exhibit A-1 to the Indenture is hereby amended and restated in its entirety to read as follows: "5. Contingent Cash Interest. Subject to the record date provisions specified in this paragraph 5, the Issuers 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. Contingent Cash Interest, if any, will accrue from the first day of the applicable six-month period and be payable quarterly on January 31, April 30, July 31 and October 31 (each a "Contingent Interest Payment Date") of the relevant six-month period to Holders of the Security on the record date, which will be each October 15, January 15, April 15 and July 15 immediately preceding each applicable payment date set forth below. For any six-month period, the amount of Contingent Cash Interest payable on any Contingent Interest Payment Date per $1,000 Initial Principal Amount at Maturity thereof in respect of any Contingent Interest Period shall equal the amounts set forth below per $1,000 Initial Principal Amount at Maturity for each applicable six-month period.
Payment Date Quarterly Interest Payment Date Quarterly Interest October 31, 2007............... $2.11 April 30, 2020................. $3.51 January 31, 2008............... $2.11 July 31, 2020.................. $3.51 April 30, 2008................. $2.11 October 31, 2020............... $3.63 July 31, 2008.................. $2.11 January 31, 2021............... $3.63 October 31, 2008............... $2.22 April 30, 2021................. $3.63 January 31, 2009............... $2.22 July 31, 2021.................. $3.63 April 30, 2009................. $2.22 October 31, 2021............... $3.75 July 31, 2009.................. $2.22 January 31, 2022............... $3.75 October 31, 2009............... $2.34 April 30, 2022................. $3.75 January 31, 2010............... $2.34 July 31, 2022.................. $3.75 April 30, 2010................. $2.34 October 31, 2022............... $3.86 July 31, 2010.................. $2.34 January 31, 2023............... $3.86 October 31, 2010............... $2.46 April 30, 2023................. $3.86 January 31, 2011............... $2.46 July 31, 2023.................. $3.86
-5-
Payment Date Quarterly Interest Payment Date Quarterly Interest April 30, 2011................. $2.46 October 31, 2023............... $3.98 July 31, 2011.................. $2.46 January 31, 2024............... $3.98 October 31, 2011............... $2.57 April 30, 2024................. $3.98 January 31, 2012............... $2.57 July 31, 2024.................. $3.98 April 30, 2012................. $2.57 October 31, 2024............... $4.10 July 31, 2012.................. $2.57 January 31, 2025............... $4.10 October 31, 2012............... $2.69 April 30, 2025................. $4.10 January 31, 2013............... $2.69 July 31, 2025.................. $4.10 April 30, 2013................. $2.69 October 31, 2025............... $4.21 July 31, 2013.................. $2.69 January 31, 2026............... $4.21 October 31, 2013............... $2.81 April 30, 2026................. $4.21 January 31, 2014............... $2.81 July 31, 2026.................. $4.21 April 30, 2014................. $2.81 October 31, 2026............... $4.33 July 31, 2014.................. $2.81 January 31, 2027............... $4.33 October 31, 2014............... $2.93 April 30, 2027................. $4.33 January 31, 2015............... $2.93 July 31, 2027.................. $4.33 April 30, 2015................. $2.93 October 31, 2027............... $4.45 July 31, 2015.................. $2.93 January 31, 2028............... $4.45 October 31, 2015............... $3.04 April 30, 2028................. $4.45 January 31, 2016............... $3.04 July 31, 2028.................. $4.45 April 30, 2016................. $3.04 October 31, 2028............... $4.56 July 31, 2016.................. $3.04 January 31, 2029............... $4.56 October 31, 2016............... $3.16 April 30, 2029................. $4.56 January 31, 2017............... $3.16 July 31, 2029.................. $4.56 April 30, 2017................. $3.16 October 31, 2029............... $4.68 July 31, 2017.................. $3.16 January 31, 2030............... $4.68 October 31, 2017............... $3.28 April 30, 2030................. $4.68 January 31, 2018............... $3.28 July 31, 2030.................. $4.68 April 30, 2018................. $3.28 October 31, 2030............... $4.80 July 31, 2018.................. $3.28 January 31, 2031............... $4.80 October 31, 2018............... $3.39 April 30, 2031................. $4.80 January 31, 2019............... $3.39 July 31, 2031.................. $4.80 April 30, 2019................. $3.39 October 31, 2031............... $4.92 July 31, 2019.................. $3.39 January 31, 2032............... $4.92 October 31, 2019............... $3.51 April 30, 2032................. $4.92 January 31, 2020............... $3.51 July 31, 2032.................. $4.92
"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 -6- 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 Issuers) selected by the Issuers; provided, however, if (a) at least three such bids are not obtained by the Bid Solicitation Agent or (b) in the Issuers' 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 Issuers 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 Issuers shall promptly notify the Holders of this Security of such determination and shall use their reasonable best efforts to post this information on their web site or, at their option, otherwise publicly disclose this information." 2.6 Section 9 of Exhibit A-1 to the Indenture is hereby amended and restated in its entirety to read as follows: "9. Conversion. Holders may surrender Securities for conversion 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 Issuers 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 -7- 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 Issuers have 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 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 determining an 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 Issuers have mailed a Notice of Redemption, Securities surrendered for conversion during such periods must be accompanied by -8- 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 Issuers will deliver through the Conversion Agent, the Cash Amount, together with cash or a certificate for the number of full shares of Common Stock into which the Premium of any Security is converted, together with and any cash payment for fractional shares. Delivery to the Holder of the Cash Amount, together with such cash or shares of Common Stock deliverable in connection with the Premium, will be deemed to satisfy the Issuers' 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. 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 Issuers 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 Cash Amount, together with cash or Common Stock in respect of the Premium, in exchange for the Security being converted pursuant to the terms hereof; and the fair market value of such cash or Common Stock in respect of the Premium, shall be treated as delivered to the extent thereof, first in exchange for Contingent Additional Principal accrued through the Conversion Date and accrued Contingent Cash Interest, and the Cash Amount shall be treated as delivered in exchange for the Initial Principal Amount at Maturity of the Security being converted pursuant to the provisions hereof. -9- 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 Issuers who will have the option, but not the obligation (unless separately agreed to by it and the Issuers 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." 3. Separability Clause. In case any provision in this Supplemental Indenture 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. 4. Modification, Amendment and Waiver. The provisions of this Supplemental Indenture may not be amended, supplemented, modified or waived except by a execution of a Supplemental Indenture executed by the Issuers, the Company and, to the extent such amendment, supplement or waiver limits or impairs the rights of any Securityholder, by such Securityholder. Any such amendment shall comply with Article 9 of the Indenture. Until an amendment, waiver or other action by Securityholders becomes effective, a consent thereto by a Securityholder of a Security hereunder is a continuing consent by the Securityholder and every subsequent Securityholder of that Security or portion of the Security that evidences the same obligation as the consenting Securityholder's Security, even if notation of the consent, waiver or action is not made on the Security. However, any such Securityholder or subsequent Securityholder may revoke the consent, waiver or action as to such Securityholder'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. 5. Ratification of Indenture; Supplemental Indenture Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. In the event of a conflict between the terms and conditions of the Indenture and the terms and conditions of this Supplemental Indenture, then the terms and conditions of this Supplemental Indenture shall prevail. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. 6. Trust Indenture Acts Controls. If any provision of this Supplemental Indenture limits, qualifies or conflicts with any provision of the Trust Indenture Act of 1939, as amended ("TIA"), that is required under the TIA to be part of and govern any provision of this Supplemental Indenture, the provision of the TIA shall control. If any provision of this Supplemental Indenture modifies or excludes any provisions of the TIA that may be so modified or excluded, the provisions of the TIA shall be deemed to apply to the -10- Indenture as so modified or to be excluded by this Supplemental Indenture, as the case may be. 7. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW. 8. Trustee Makes No Representation. The statements herein are deemed to be those of the Company, OCI or OFI, as applicable. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture. 9. Multiple Originals. The parties may sign any number of copies of this Supplemental 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 Supplemental Indenture. 10. Effect of Headings. The Section headings herein are for convenience only and shall not effect the construction thereof. 11. Notices. Any request, demand, authorization, notice, waiver, consent or communication to any of the parties shall be made as set forth in Section 12.02 of the Indenture, as said Section may be amended hereby. 12. Successors. All agreements of each of the Company, OCI and OFI in respect of this Supplemental Indenture shall bind its successor. [Signature page follows] -11- IN WITNESS WHEREOF, this Supplemental Indenture has been duly executed by the Company, OCI and the Trustee as of the date first written above. OMNICOM GROUP INC. By: /s/ Randall J. Weisenburger ----------------------------------- Name: Randall J. Weisenburger Title: Executive Vice President and Chief Financial Officer OMNICOM CAPITAL INC. By: /s/ Dennis E. Hewitt ----------------------------------- Name: Dennis E. Hewitt Title: Chief Executive Officer OMNICOM FINANCE INC. By: /s/ Randall J. Weisenburger ----------------------------------- Name: Randall J. Weisenburger Title: Chief Executive Officer JPMORGAN CHASE BANK, as Trustee By: /s/ William G. Keenan ----------------------------------- Name: William G. Keenan Title: Vice President -12- EX-4.2 3 e19576ex4_2.txt SECOND SUPPLEMENTAL INDENTURE Exhibit 4.2 Execution Version SECOND SUPPLEMENTAL INDENTURE This SECOND SUPPLEMENTAL INDENTURE (the "Supplemental Indenture") dated as of November 4, 2004 among OMNICOM GROUP INC., a New York corporation (the "Company"), OMNICOM CAPITAL INC., a Connecticut corporation ("OCI"), OMNICOM FINANCE INC., a Delaware corporation ("OFI" and together with the Company and OCI, the "Issuers"), and JPMORGAN CHASE BANK, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H: WHEREAS, the Issuers and the Trustee have heretofore executed and delivered to the Trustee an Indenture dated February 7, 2001, as amended by the First Supplemental Indenture, dated February 13, 2004 (as so amended, the "Indenture"), providing for the issuance of an aggregate principal amount of up to $850,000,000 of Liquid Yield Option(TM) Notes due 2031 (the "Securities"), all of which have been issued and $847,031,000 of which are outstanding on the date hereof; WHEREAS, the Issuers desire to surrender their right under Section 3.08(b) of the Indenture to elect to pay for Securities being purchased by the Issuers pursuant to Section 3.08(a) of the Indenture with Common Stock; WHEREAS, it is in the best interests of the Issuers to surrender such right; WHEREAS, Section 9.01(6) of the Indenture provides that the Issuers and the Trustee may amend or supplement the Indenture without the consent of any Securityholder to surrender any right, power or option conferred by this Indenture on the Issuers; WHEREAS, an Opinion of Counsel and an Officer's Certificate have been delivered to the Trustee under Section 9.06; and WHEREAS, pursuant to Sections 9.01 and 9.06 of the Indenture, the Trustee and the Issuers are authorized to execute and deliver this Supplemental Indenture; NOW THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the Issuers and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Securities as follows: 1. Definitions. All capitalized terms used but not defined herein shall have the meanings given to such terms in the Indenture. 2. Amendments. The Indenture be and hereby is amended as follows: 2.1 Section 1.01 and Section 1.02 of the Indenture are hereby amended so that the cross-references to the following definitions contained in Section 1.02 are deleted from Section 1.02 and such definitions are inserted in Section 1.01 in their proper alphabetical order as follows: "cash" means U.S. legal tender; "Exchange Act" means the Securities Exchange Act of 1934, as amended; and "Securities Act" means the Securities Act of 1933, as amended. 2.2 Section 1.02 of the Indenture is hereby amended so that the following definitions are inserted in Section 1.02 in their proper alphabetical order as follows: "Issuers' Notice" ..........3.08(c); and "Issuers' Notice Date" ....3.08(b). 2.3 Section 1.02 and Section 12.08 of the Indenture are hereby amended so that the reference to the defined terms "Company Notice," "Company Notice Date" and "Market Price" are deleted from the aforementioned sections. 2.4 Section 3.08 of the Indenture is hereby amended and restated in its entirety to read as follows: "SECTION 3.08 Purchase of Securities at Option of the Holder. (a) General. If a Holder exercises its right to require the Issuers to purchase Securities pursuant to paragraph 7 of the Securities, such Securities shall be purchased by the Issuers pursuant to paragraph 7 of the Securities on each February 7 from February 7, 2002 through February 7, 2030 (each February 7 in the aforementioned period, a "Purchase Date"), at a purchase price equal to (i) the Issue Price of the Security for any Purchase Date occurring on or prior to February 7, 2021 and (ii) the Issue Price plus accrued Contingent Additional Principal, if any, as of the relevant Purchase Date for any Purchase Date occurring after February 7, 2021, 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 the third Business Day prior to such Purchase Date stating: (A) the certificate number of the Security which the Holder will deliver to be purchased, (B) the portion of the Principal Amount at Maturity of the Security which the Holder will deliver to be purchased, which portion must be a Principal Amount at Maturity of $1,000 or an integral multiple thereof, and (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 (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 -2- 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 Issuers. The Issuers shall purchase from the Holder thereof, pursuant to this Section 3.08, a portion of a Security if the Principal Amount at Maturity of such portion is $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 Issuers contemplated pursuant to the provisions of this Section 3.08 shall be consummated by the delivery of the cash consideration to be received by the Holder (including accrued and unpaid Contingent Cash Interest, if any) promptly following the later of the Purchase Date and 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 prior to 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 Issuers of the receipt by it of any Purchase Notice or written notice of withdrawal thereof. (b) Purchase with Cash. On each Purchase Date, the Purchase Price of Securities in respect of which a Purchase Notice pursuant to Section 3.08(a) has been given shall be paid by the Issuers with cash equal to the aggregate Purchase Price of such Securities. (c) The Issuers' Notice. The Issuers shall send a notice (the "Issuers' Notice") to the Holders (and to beneficial owners as required by applicable law) in the manner provided in Section 12.02 not less than 20 Business Days prior to the applicable Purchase Date (the "Issuers' Notice Date"). Each Issuers 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; (iv) that Securities must be surrendered to the Paying Agent to collect payment of the Purchase Price and Contingent Cash Interest, if any; -3- (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 promptly following the later of the Purchase 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 3.10); (ix) that, unless the Issuers default 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 on after the Purchase Date; and (x) the CUSIP number of the Securities. At the Issuers' request, the Trustee shall give such Issuers' Notice in the Issuers' name and at the Issuers' expense; provided, however, that, in all cases, the text of such Issuers' Notice shall be prepared by the Issuers. (d) Procedure upon Purchase. The Issuers shall deposit cash 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." 2.5 Section 3.10 of the Indenture is hereby amended and restated in its entirety to read as follows: "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. 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 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 -4- 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 Principal Amount at Maturity of the Security with respect to which such notice of withdrawal is being submitted, and (3) the 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 Issuers. There shall be no purchase of any Securities pursuant to Section 3.08 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." 2.6 The second paragraph of Section 7 of Exhibit A-1 to the Indenture is hereby amended and restated in its entirety to read as follows: "The Purchase Price shall be paid in cash." 3. Separability Clause. In case any provision in this Supplemental Indenture 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. 4. Modification, Amendment and Waiver. The provisions of this Supplemental Indenture may not be amended, supplemented, modified or waived except by a execution of a Supplemental Indenture executed by the Issuers, and, to the extent such amendment, supplement or waiver limits or impairs the rights of any Securityholder, by such Securityholder. Any such amendment shall comply with Article 9 of the Indenture. Until an amendment, waiver or other -5- action by Securityholders becomes effective, a consent thereto by a Securityholder of a Security hereunder is a continuing consent by the Securityholder and every subsequent Securityholder of that Security or portion of the Security that evidences the same obligation as the consenting Securityholder's Security, even if notation of the consent, waiver or action is not made on the Security. However, any such Securityholder or subsequent Securityholder may revoke the consent, waiver or action as to such Securityholder'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. 5. Ratification of Indenture; Supplemental Indenture Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. In the event of a conflict between the terms and conditions of the Indenture and the terms and conditions of this Supplemental Indenture, then the terms and conditions of this Supplemental Indenture shall prevail. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. 6. Trust Indenture Acts Controls. If any provision of this Supplemental Indenture limits, qualifies or conflicts with any provision of the Trust Indenture Act of 1939, as amended ("TIA"), that is required under the TIA to be part of and govern any provision of this Supplemental Indenture, the provision of the TIA shall control. If any provision of this Supplemental Indenture modifies or excludes any provisions of the TIA that may be so modified or excluded, the provisions of the TIA shall be deemed to apply to the Indenture as so modified or to be excluded by this Supplemental Indenture, as the case may be. 7. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW. 8. Trustee Makes No Representation. The statements herein are deemed to be those of the Company, OCI or OFI, as applicable. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture. 9. Multiple Originals. The parties may sign any number of copies of this Supplemental 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 Supplemental Indenture. 10. Effect of Headings. The Section headings herein are for convenience only and shall not effect the construction thereof. 11. Notices. Any request, demand, authorization, notice, waiver, consent or communication to any of the parties shall be made as set forth in Section 12.02 of the Indenture, as said Section may be amended hereby. -6- 12. Successors. All agreements of each of the Company, OCI and OFI in respect of this Supplemental Indenture shall bind its successor. [Signature page follows] -7- IN WITNESS WHEREOF, this Supplemental Indenture has been duly executed by the Company, OCI, OFI and the Trustee as of the date first written above. OMNICOM GROUP INC. By: /s/ Randall J. Weisenburger ---------------------------------- Name: Randall J. Weisenburger Title: Executive Vice President and Chief Financial Officer OMNICOM CAPITAL INC. By: /s/ Michael J. O'Brien ---------------------------------- Name: Michael J. O'Brien Title: Secretary OMNICOM FINANCE INC. By: /s/ Randall J. Weisenburger ---------------------------------- Name: Randall J. Weisenburger Title: Chief Executive Officer JPMORGAN CHASE BANK, as Trustee By: /s/ Carol Ng ---------------------------------- Name: Carol Ng Title: Vice President -8- EX-4.3 4 e19576ex4_3.txt THIRD SUPPLEMENTAL INDENTURE Exhibit 4.3 Execution Version THIRD SUPPLEMENTAL INDENTURE This THIRD SUPPLEMENTAL INDENTURE (the "Supplemental Indenture") dated as of November 4, 2004 among OMNICOM GROUP INC., a New York corporation (the "Company"), OMNICOM CAPITAL INC., a Connecticut corporation ("OCI"), OMNICOM FINANCE INC., a Delaware corporation ("OFI" and together with the Company and OCI, the "Issuers"), and JPMORGAN CHASE BANK, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H: WHEREAS, the Issuers and the Trustee have heretofore executed and delivered to the Trustee an Indenture dated March 6, 2002, as amended by the First Supplemental Indenture, dated February 13, 2004 and the Second Supplemental Indenture dated August 12, 2004 (as so amended, the "Indenture"), providing for the issuance of an aggregate principal amount of up to $900,000,000 of Zero Coupon Zero Yield Convertible Notes due 2032 (the "Securities"), all of which have been issued and $892,273,000 of which are outstanding on the date hereof; WHEREAS, the Issuers desire to surrender their right under Section 3.08(b) of the Indenture to elect to pay for Securities being purchased by the Issuers pursuant to Section 3.08(a) of the Indenture with Common Stock; WHEREAS, it is in the best interests of the Issuers to surrender such right; WHEREAS, Section 9.01(6) of the Indenture provides that the Issuers and the Trustee may amend or supplement the Indenture without the consent of any Securityholder to surrender any right, power or option conferred by this Indenture on the Issuers; WHEREAS, an Opinion of Counsel and an Officer's Certificate have been delivered to the Trustee under Section 9.06; and WHEREAS, pursuant to Sections 9.01 and 9.06 of the Indenture, the Trustee and the Issuers are authorized to execute and deliver this Supplemental Indenture; NOW THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the Issuers and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Securities as follows: 1. Definitions. All capitalized terms used but not defined herein shall have the meanings given to such terms in the Indenture. 2. Amendments. The Indenture be and hereby is amended as follows: 2.1 Section 1.01 and Section 1.02 of the Indenture are hereby amended so that the cross-references to the following definitions contained in Section 1.02 are deleted from Section 1.02 and such definitions are inserted in Section 1.01 in their proper alphabetical order as follows: "cash" means U.S. legal tender; "Exchange Act" means the Securities Exchange Act of 1934, as amended; and "Securities Act" means the Securities Act of 1933, as amended. 2.2 Section 1.02 of the Indenture is hereby amended so that the following definitions are inserted in Section 1.02 in their proper alphabetical order as follows: "Issuers' Notice"...........3.08(c); and "Issuers' Notice Date"....3.08(b). 2.3 Section 1.02 of the Indenture is hereby amended so that the cross-reference for the following definition is as follows: "Purchase Party".............3.08(e). 2.4 Section 1.02 and Section 12.08 of the Indenture are hereby amended so that the reference to the defined terms "Company Notice," "Company Notice Date" and "Market Price" are deleted from the aforementioned sections. 2.5 Section 3.08 of the Indenture is hereby amended and restated in its entirety to read as follows: "SECTION 3.08 Purchase of Securities at Option of the Holder. (a) General. Subject to paragraph (e) below, if a Holder exercises its right to require the Issuers to purchase Securities pursuant to paragraph 7 of the Securities, such Securities shall be purchased by the Issuers 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 -2- Initial Principal Amount at Maturity of at least $1,000 or an integral multiple thereof, and (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 (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 Issuers. The Issuers 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 Issuers or the Purchase Party, as applicable, contemplated pursuant to the provisions of this Section 3.08 shall be consummated by the delivery of the cash consideration to be received by the Holder (including 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 Issuers and any Purchase Party of the receipt by it of any Purchase Notice or written notice of withdrawal thereof. (b) Purchase with Cash. On each Payment Date the Purchase Price of Securities in respect of which a Purchase Notice pursuant to Section 3.08(a) has been given, shall be paid by the Issuers or the Purchase Party, if any, with cash equal to the aggregate Purchase Price of such Securities. (c) The Issuers' Notice. The Issuers shall send a notice (the "Issuers' Notice") to the Holders (and to beneficial owners as required by applicable law) in the manner provided in Section 12.02 not less than 20 Business Days prior to the applicable Purchase Date (the "Issuers' Notice Date"). Each Issuers' Notice shall include a form of Purchase Notice to be completed by a Securityholder and shall state: -3- (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; (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 3.10); (ix) that, unless the Issuers default 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 Issuers' request, the Trustee shall give such Issuers' Notice in the Issuers' name and at the Issuers' expense; provided, however, that, in all cases, the text of such Issuers' Notice shall be prepared by the Issuers and may include such other information, if any, as the Issuers deem appropriate so long as it is consistent with this Indenture. (d) Procedure upon Purchase. The Issuers or the Purchase Party, if any, shall deposit cash 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. (e) The Issuers shall have the option, exercisable at any time or from time to time, by an instrument in writing signed by the Issuers 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 Issuers shall enter into an agreement -4- 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 Issuers 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 Issuers in accordance with Section 3.08(d). 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 Issuers and the Paying Agent setting forth the procedures to be followed in a purchase may be changed at any time by the Issuers 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." 2.6 Section 3.10 of the Indenture is hereby amended and restated in its entirety to read as follows: "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 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 -5- 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 Issuers. There shall be no purchase of any Securities pursuant to Section 3.08 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." 2.7 The second paragraph of Section 7 of Exhibit A-1 to the Indenture is hereby amended and restated in its entirety to read as follows: "The Purchase Price shall be paid in cash and shall be paid by a Purchase Party if so designated by the Issuers, in accordance with the terms of the Indenture." 3. Separability Clause. In case any provision in this Supplemental Indenture 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. 4. Modification, Amendment and Waiver. The provisions of this Supplemental Indenture may not be amended, supplemented, modified or waived except by a execution of a Supplemental Indenture executed by the Issuers, and, to the extent such amendment, supplement or waiver limits or impairs the rights of any Securityholder, by such Securityholder. Any such amendment shall comply with Article 9 of the Indenture. Until an amendment, waiver or other action by Securityholders becomes effective, a consent thereto by a Securityholder of a Security hereunder is a continuing consent by the Securityholder and every subsequent Securityholder of that Security or portion of the Security that evidences the same obligation as the consenting Securityholder's Security, even if notation of the consent, waiver or action is not made on the Security. However, any such Securityholder or subsequent Securityholder may revoke the consent, waiver or action as to such Securityholder's Security or portion of the Security if the -6- 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. 5. Ratification of Indenture; Supplemental Indenture Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. In the event of a conflict between the terms and conditions of the Indenture and the terms and conditions of this Supplemental Indenture, then the terms and conditions of this Supplemental Indenture shall prevail. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. 6. Trust Indenture Acts Controls. If any provision of this Supplemental Indenture limits, qualifies or conflicts with any provision of the Trust Indenture Act of 1939, as amended ("TIA"), that is required under the TIA to be part of and govern any provision of this Supplemental Indenture, the provision of the TIA shall control. If any provision of this Supplemental Indenture modifies or excludes any provisions of the TIA that may be so modified or excluded, the provisions of the TIA shall be deemed to apply to the Indenture as so modified or to be excluded by this Supplemental Indenture, as the case may be. 7. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW. 8. Trustee Makes No Representation. The statements herein are deemed to be those of the Company, OCI or OFI, as applicable. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture. 9. Multiple Originals. The parties may sign any number of copies of this Supplemental 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 Supplemental Indenture. 10. Effect of Headings. The Section headings herein are for convenience only and shall not effect the construction thereof. 11. Notices. Any request, demand, authorization, notice, waiver, consent or communication to any of the parties shall be made as set forth in Section 12.02 of the Indenture, as said Section may be amended hereby. 12. Successors. All agreements of each of the Company, OCI and OFI in respect of this Supplemental Indenture shall bind its successor. -7- IN WITNESS WHEREOF, this Supplemental Indenture has been duly executed by the Company, OCI, OFI and the Trustee as of the date first written above. OMNICOM GROUP INC. By: /s/ Randall J. Weisenburger ----------------------------------- Name: Randall J. Weisenburger Title: Executive Vice President and Chief Financial Officer OMNICOM CAPITAL INC. By: /s/ Michael J. O'Brien ----------------------------------- Name: Michael J. O'Brien Title: Secretary OMNICOM FINANCE INC. By: /s/ Randall J. Weisenburger ----------------------------------- Name: Randall J. Weisenburger Title: Chief Executive Officer JPMORGAN CHASE BANK, as Trustee By: /s/ Carol Ng ----------------------------------- Name: Carol Ng Title: Vice President -8- EX-4.4 5 e19576ex4_4.txt SECOND SUPPLEMENTAL INDENTURE Exhibit 4.4 Execution Version SECOND SUPPLEMENTAL INDENTURE This SECOND SUPPLEMENTAL INDENTURE (the "Supplemental Indenture"), dated as of November 4, 2004, among OMNICOM GROUP INC., a New York corporation (the "Company"), OMNICOM CAPITAL INC., a Connecticut corporation ("OCI"), OMNICOM FINANCE INC., a Delaware corporation ("OFI" and together with the Company and OCI, the "Issuers"), and JPMORGAN CHASE BANK, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H: WHEREAS, the Issuers and the Trustee have heretofore executed and delivered to the Trustee an Indenture dated June 10, 2003, as amended by the First Supplemental Indenture, dated as of November 5, 2003 (as so amended, the "Indenture"), providing for the issuance of an aggregate principal amount of up to $600,000,000 of Zero Coupon Zero Yield Convertible Notes due 2033 (the "Securities"), all of which have been issued and are outstanding on the date hereof; WHEREAS, the Issuers desire to surrender their right under Section 3.08(b) of the Indenture to elect to pay for Securities being purchased by the Issuers pursuant to Section 3.08(a) of the Indenture with Common Stock; WHEREAS, it is in the best interests of the Issuers to surrender such right; WHEREAS, Section 9.01(6) of the Indenture provides that the Issuers and the Trustee may amend or supplement the Indenture without the consent of any Securityholder to surrender any right, power or option conferred by this Indenture on the Issuers; WHEREAS, an Opinion of Counsel and an Officer's Certificate have been delivered to the Trustee under Section 9.06; and WHEREAS, pursuant to Sections 9.01 and 9.06 of the Indenture, the Trustee and the Issuers are authorized to execute and deliver this Supplemental Indenture; NOW THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the Issuers and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Securities as follows: 1. Definitions. All capitalized terms used but not defined herein shall have the meanings given to such terms in the Indenture. 2. Amendments. The Indenture be and hereby is amended as follows: 2.1 Section 1.01 and Section 1.02 of the Indenture are hereby amended so that the cross-references to the following definitions contained in Section 1.02 are deleted from Section 1.02 and such definitions are inserted in Section 1.01 in their proper alphabetical order as follows: "cash" means U.S. legal tender; "Exchange Act" means the Securities Exchange Act of 1934, as amended; and "Securities Act" means the Securities Act of 1933, as amended. 2.2 Section 1.02 of the Indenture is hereby amended so that the following definitions are inserted in Section 1.02 in their proper alphabetical order as follows: "Issuers' Notice"...........3.08(c); and "Issuers' Notice Date"....3.08(b). 2.3 Section 1.02 of the Indenture is hereby amended so that the cross-reference for the following definition is as follows: "Purchase Party".............3.08(e). 2.4 Section 1.02 and Section 12.08 of the Indenture are hereby amended so that the reference to the defined terms "Company Notice," "Company Notice Date" and "Market Price" are deleted from the aforementioned sections. 2.5 Section 3.08 of the Indenture is hereby amended and restated in its entirety to read as follows: "SECTION 3.08 Purchase of Securities at Option of the Holder. (a) General. Subject to paragraph (e) below, if a Holder exercises its right to require the Issuers to purchase Securities pursuant to paragraph 7 of the Securities, such Securities shall be purchased by the Issuers or a Purchase Party, if applicable, pursuant to paragraph 7 of the Securities on June 15, 2006, 2008, 2010, 2013, 2018, 2023 and each June 15 thereafter annually through and including June 15, 2032, (if June 15 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 June 15, 2023 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 June 15, 2023 through June 15, 2032 (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 2 Initial Principal Amount at Maturity of at least $1,000 or an integral multiple thereof, and (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 (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 Issuers. The Issuers 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 Issuers or the Purchase Party, as applicable, contemplated pursuant to the provisions of this Section 3.08 shall be consummated by the delivery of the cash consideration to be received by the Holder (including 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 Issuers and any Purchase Party of the receipt by it of any Purchase Notice or written notice of withdrawal thereof. (b) Purchase with Cash. On each Payment Date the Purchase Price of Securities in respect of which a Purchase Notice pursuant to Section 3.08(a) has been given, shall be paid by the Issuers or the Purchase Party, if any, with cash equal to the aggregate Purchase Price of such Securities. (c) The Issuers' Notice. The Issuers shall send a notice (the "Issuers' Notice") to the Holders (and to beneficial owners as required by applicable law) in the manner provided in Section 12.02 not less than 20 Business Days prior to the applicable Purchase Date (the "Issuers' Notice Date"). Each Issuers' Notice shall include a form of Purchase Notice to be completed by a Securityholder and shall state: 3 (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; (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 3.10); (ix) that, unless the Issuers default 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 Issuers' request, the Trustee shall give such Issuers' Notice in the Issuers' name and at the Issuers' expense; provided, however, that, in all cases, the text of such Issuers' Notice shall be prepared by the Issuers and may include such other information, if any, as the Issuers deem appropriate so long as it is consistent with this Indenture. (d) Procedure upon Purchase. The Issuers or the Purchase Party, if any, shall deposit cash 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. (e) The Issuers shall have the option, exercisable at any time or from time to time, by an instrument in writing signed by the Issuers 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 Issuers shall enter into an agreement 4 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 Issuers 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 Issuers in accordance with Section 3.08(d). 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 Issuers and the Paying Agent setting forth the procedures to be followed in a purchase may be changed at any time by the Issuers 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." 2.6 Section 3.10 of the Indenture is hereby amended and restated in its entirety to read as follows: "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 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 5 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 Issuers. There shall be no purchase of any Securities pursuant to Section 3.08 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." 2.7 The second paragraph of Section 7 of Exhibit A-1 to the Indenture is hereby amended and restated in its entirety to read as follows: "The Purchase Price shall be paid in cash and shall be paid by a Purchase Party if so designated by the Issuers, in accordance with the terms of the Indenture." 3. Separability Clause. In case any provision in this Supplemental Indenture 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. 4. Modification, Amendment and Waiver. The provisions of this Supplemental Indenture may not be amended, supplemented, modified or waived except by a execution of a Supplemental Indenture executed by the Issuers, and, to the extent such amendment, supplement or waiver limits or impairs the rights of any Securityholder, by such Securityholder. Any such amendment shall comply with Article 9 of the Indenture. Until an amendment, waiver or other action by Securityholders becomes effective, a consent thereto by a Securityholder of a Security hereunder is a continuing consent by the Securityholder and every subsequent Securityholder of that Security or portion of the Security that evidences the same obligation as the consenting Securityholder's Security, even if notation of the consent, waiver or action is not made on the Security. However, any such Securityholder or subsequent Securityholder may revoke the consent, waiver or action as to such Securityholder's Security or portion of the Security if the 6 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. 5. Ratification of Indenture; Supplemental Indenture Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. In the event of a conflict between the terms and conditions of the Indenture and the terms and conditions of this Supplemental Indenture, then the terms and conditions of this Supplemental Indenture shall prevail. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. 6. Trust Indenture Acts Controls. If any provision of this Supplemental Indenture limits, qualifies or conflicts with any provision of the Trust Indenture Act of 1939, as amended ("TIA"), that is required under the TIA to be part of and govern any provision of this Supplemental Indenture, the provision of the TIA shall control. If any provision of this Supplemental Indenture modifies or excludes any provisions of the TIA that may be so modified or excluded, the provisions of the TIA shall be deemed to apply to the Indenture as so modified or to be excluded by this Supplemental Indenture, as the case may be. 7. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW. 8. Trustee Makes No Representation. The statements herein are deemed to be those of the Company, OCI or OFI, as applicable. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture. 9. Multiple Originals. The parties may sign any number of copies of this Supplemental 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 Supplemental Indenture. 10. Effect of Headings. The Section headings herein are for convenience only and shall not effect the construction thereof. 11. Notices. Any request, demand, authorization, notice, waiver, consent or communication to any of the parties shall be made as set forth in Section 12.02 of the Indenture, as said Section may be amended hereby. 12. Successors. All agreements of each of the Company, OCI and OFI in respect of this Supplemental Indenture shall bind its successor. 7 IN WITNESS WHEREOF, this Supplemental Indenture has been duly executed by the Company, OCI, OFI and the Trustee as of the date first written above. OMNICOM GROUP INC., By: /s/ Randall J. Weisenburger ---------------------------- Name: Randall J. Weisenburger Title: Executive Vice President and Chief Financial Officer OMNICOM CAPITAL INC., By: /s/ Michael J. O'Brien ---------------------------- Name: Michael J. O'Brien Title: Secretary OMNICOM FINANCE INC., By: /s/ Randall J. Weisenburger ---------------------------- Name: Randall J. Weisenburger Title: Chief Executive Officer JPMORGAN CHASE BANK, as Trustee, By: /s/ Carol Ng ---------------------------- Name: Carol Ng Title: Vice President 8 EX-31.1 6 e19576ex31-1.txt CERTIFICATION Exhibit 31.1 CERTIFICATION I, John D. Wren, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2004 of Omnicom Group Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 5, 2004 /s/ John D. Wren ------------------------------------- John D. Wren Chief Executive Officer and President EX-31.2 7 e19576ex31-2.txt CERTIFICATION Exhibit 31.2 CERTIFICATION I, Randall J. Weisenburger, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2004 of Omnicom Group Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 5, 2004 /s/ Randall J. Weisenburger ------------------------------------- Randall J. Weisenburger Executive Vice President and Chief Financial Officer EX-32.1 8 e19576ex32-1.txt CERTIFICATIONS Exhibit 32.1 CERTIFICATION OF QUARTERLY REPORT ON FORM 10-Q Pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, in connection with the filing of Omnicom Group Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned officers of Omnicom Group Inc. certifies that, to such officer's knowledge: o the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and o the information contained in the Report fairly presents, in all material aspects, the financial condition and results of operations of Omnicom Group Inc. as of the dates and for the periods expressed in the Report. Executed as of November 5, 2004. /s/ John D. Wren ----------------------------------- Name: John D. Wren Title: Chief Executive Officer and President /s/ Randall J. Weisenburger ----------------------------------- Name: Randall J. Weisenburger Title: Executive Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----