-----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, FOyEujSefpqZylU0ynv5MBL+m5/4CydBRcQO0kE/mBKUuatHMouCfIQQeCv91HTI xe/2lc+3GtRtQ16WmUS9Hw== 0000950123-04-000821.txt : 20040126 0000950123-04-000821.hdr.sgml : 20040126 20040126164557 ACCESSION NUMBER: 0000950123-04-000821 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20040126 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREY GLOBAL GROUP INC CENTRAL INDEX KEY: 0000043952 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 130802840 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-112208 FILM NUMBER: 04543796 BUSINESS ADDRESS: STREET 1: 777 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2125462000 MAIL ADDRESS: STREET 1: 777 THIRD AVE STREET 2: 777 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: GREY ADVERTISING INC /DE/ DATE OF NAME CHANGE: 19920703 S-3 1 y93424sv3.txt FORM S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 26, 2004 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 GREY GLOBAL GROUP INC. (Exact name of Registrant as Specified in Its Charter) DELAWARE 13-0802840 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) JOHN A. GRUDZINA, ESQ. 777 THIRD AVENUE C/O GREY GLOBAL GROUP INC. NEW YORK, NEW YORK 10017 777 THIRD AVENUE (212) 546-2000 NEW YORK, NEW YORK 10017 (Address, Including Zip Code, and Telephone (212) 546-2000 Number, (Name, Address, Including Zip Code, and Including Area Code, of Registrant's Principal Telephone Number, Executive Offices) Including Area Code, of Agent for Service)
COPIES TO: GREGORY A. FERNICOLA, ESQ. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP FOUR TIMES SQUARE NEW YORK, NEW YORK 10036 (212) 735-3000 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time following the effectiveness of this registration statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PER UNIT PRICE FEE - ------------------------------------------------------------------------------------------------------------------------- 5.0% Contingent Convertible Subordinated Debentures due 2033................ $150,000,000 100%(1)(2) $150,000,000(1)(2) $12,135 - ------------------------------------------------------------------------------------------------------------------------- Common Stock, par value $0.01 per share......... 207,183(3) $682.00(4) $ 34,869,296(4)(5) $ 2,820.93 - ------------------------------------------------------------------------------------------------------------------------- Total..................... -- -- -- $14,956.53 - ------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------
(Continued on next page.) THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Continued from previous page.) (1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(i) of the Securities Act of 1933, as amended. (2) Exclusive of accrued interest, if any. (3) Represents (a) the 156,055 shares of common stock that are initially issuable upon conversion of the 5.0% Contingent Convertible Subordinated Debentures due 2033 registered hereby based on the current conversion price of $961.20 per share of common stock, (b) 25,564 shares of common stock owned by Edward H. Meyer and (c) 25,564 shares of common stock issuable upon conversion of 25,564 shares of Limited Duration Class B Common Stock owned by Mr. Meyer. In addition to the shares set forth in the table, pursuant to Rule 416 under the Securities Act of 1933, as amended, the amount of common stock registered hereby also includes such indeterminate number of shares of common stock as may be issuable from time to time upon conversion of the debentures and the shares of Limited Duration Class B Common Stock as a result of stock splits, stock dividends and antidilution adjustments. (4) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(c) under the Securities Act of 1933 based on the closing price of the common stock on January 20, 2004. (5) Includes only 25,564 shares of common stock owned by Edward H. Meyer and 25,564 shares of common stock issuable upon conversion of 25,564 shares of Limited Duration Class B Common Stock owned by Mr. Meyer. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED JANUARY 26, 2004 GREY GLOBAL GROUP INC. - $150,000,000 5.0% CONTINGENT CONVERTIBLE SUBORDINATED DEBENTURES DUE 2033 AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE DEBENTURES - 51,128 ADDITIONAL SHARES OF COMMON STOCK This prospectus relates to the resale by various selling securityholders of $150,000,000 aggregate principal amount of our 5.0% contingent convertible subordinated debentures due 2033, shares of our common stock into which the debentures are convertible and 51,128 additional shares of common stock, all of which together are referred to as the offered securities. The offered securities may be offered and sold from time to time by the securityholders specified in this prospectus or their successors in interest. See "Selling Securityholders." The debentures and shares of our common stock into which the debentures are convertible are being registered pursuant to an agreement with the initial purchasers of the debentures. The 51,128 additional shares of common stock are being registered pursuant to an agreement with Edward H. Meyer, our chairman, president and chief executive officer. The selling securityholders will receive all of the proceeds from the sale of the securities under this prospectus. We will not receive any proceeds from the sale of securities under this prospectus by the selling securityholders. We will bear the expenses in connection with the offering, including filing fees and our legal and accounting fees, estimated at $153,135. Our common stock is listed on The NASDAQ National Market under the symbol "GREY." On January 15, 2004, the last reported sale price of the common stock on The NASDAQ National Market was $675.00. The debentures are not listed on any securities exchange or approved for quotation through any automated system. INVESTING IN OUR DEBENTURES AND COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 6. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is January 26, 2004. TABLE OF CONTENTS
PAGE ---- Summary..................................................... 1 Risk Factors................................................ 6 Special Note Regarding Forward Looking Statements........... 16 Use of Proceeds............................................. 16 Ratio of Earnings to Fixed Charges.......................... 16 Dividend Policy............................................. 17 Description of the Debentures............................... 18 Description of Capital Stock................................ 37 Certain United States Federal Income Tax Consequences....... 42 Selling Securityholders..................................... 47 Plan of Distribution........................................ 50 Legal Matters............................................... 51 Experts..................................................... 52 Where You Can Find More Information......................... 52
You should rely only on the information contained or incorporated or deemed to be incorporated by reference in this prospectus. We have not authorized anyone to provide you with different information. The offered securities are not being offered in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus speaks only as of the date of this prospectus and the information in the documents incorporated or deemed to be incorporated by reference in this prospectus speaks only as of the respective dates those documents were filed with the Securities and Exchange Commission (the "Commission"). This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed or incorporated by reference as exhibits to the registration statement of which this prospectus is a part and you may obtain copies of those documents as described below under "Where You Can Find More Information." i SUMMARY This summary contains basic information about us and this offering. Because it is a summary, it does not contain all of the information that you should consider before investing. You should read this entire prospectus and all the information that it incorporates by reference carefully, including the section entitled "Risk Factors", and our consolidated financial statements, the related notes and the management's discussion and analysis of our financial condition and results of operations for the periods covered by those financial statements, all of which are incorporated by reference into this prospectus, before making an investment decision. Unless the context indicates otherwise, all references in this prospectus to "our," "us" and "we" refer to Grey Global Group Inc. and its subsidiaries taken as a whole. GREY GLOBAL GROUP INC. We are one of the world's largest advertising, communications and marketing service companies. We operate in 83 countries around the world, providing our clients with services and expertise over a broad range of communications disciplines including mass market advertising, media planning and buying, direct marketing, healthcare marketing, public relations and public affairs, sales promotion, graphic design, corporate communications, event marketing, interactive communications, channel marketing and retail advertising support, and product branding. We service a diverse client base in all product categories including fast moving consumers goods, pharmaceutical products, entertainment and communications, technology and telecommunications, retail and automobiles. We commenced operations in 1917, were incorporated in New York in 1925 as Grey Advertising Inc. and reincorporated in Delaware in 1974. We changed our name to Grey Global Group Inc. in 2000. Our principal executive offices are located at 777 Third Avenue, New York, New York 10017 and our telephone number is (212) 546-2000. Our website is www.greyglobalgroup.com. The information contained on our website is not incorporated by reference in this prospectus. You can get more information regarding our business by reading our Annual Report on Form 10-K for the fiscal year ended December 31, 2002, our amendment to our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2003, June 30, 2003 and September 30, 2003 and the other reports we file with the Commission. See "Where You Can Find More Information." 1 THE OFFERING SECURITIES OFFERED............ $150,000,000 aggregate principal amount of our 5.0% Contingent Convertible Subordinated Debentures due 2033, shares of our common stock issuable upon conversion of the debentures and 51,128 additional shares of common stock. ISSUER........................ Grey Global Group Inc., a Delaware corporation. STATED MATURITY............... October 15, 2033. INTEREST PAYMENT DATES........ April 15 and October 15 of each year, beginning on April 15, 2004. CONTINGENT INTEREST........... In addition to regular interest on the debentures, beginning with the six-month interest period beginning on October 15, 2013, contingent interest will also accrue during any six-month interest period where the average trading price of a debenture for the five trading day period ending on the third trading day immediately preceding the first day of such six-month interest period equals $1,200 or more per $1,000 principal amount of debentures. During any period in which contingent interest accrues, it will be payable at a rate per annum equal to 0.50% of such average trading price. INTEREST PAYMENT DEFERRAL PROVISIONS.................... So long as we are not in default in the payment of interest on the debentures, we have the right to defer payments of interest, including contingent interest, on the debentures from time to time for successive periods, referred to as "extension periods", not exceeding ten consecutive semi-annual interest payment periods; provided that no such period may extend beyond the stated maturity of the debentures. Upon the termination of an extension period, we will pay all accrued and unpaid interest on the debentures, together with interest thereon (including interest on unpaid and deferred interest) at the rate specified for the debentures, compounded semi-annually. We must give notice of our deferral of an interest payment to the trustee no later than ten business days prior to the earlier of (i) the next succeeding interest payment date or (ii) the date we are required to give notice to The NASDAQ National Market (if the debentures are then listed thereon) or other applicable self-regulatory organization or to holders of the debentures of the record or payment date of such related interest payment. See "Description of the Debentures -- Option to Extend Interest Payment Period" and "Risk Factors -- We have the ability to defer payments of interest on the debentures, which will preclude you from receiving dividends or interest payments." CONVERSION RIGHTS............. Holders may surrender debentures for conversion into shares of our common stock prior to the maturity date in the following circumstances: - during any fiscal quarter if the last reported sale price of our common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the fiscal quarter immediately preceding the fiscal quarter in which the conversion occurs is more than 120% of the applicable conversion price per share of our common stock on that 30th trading day; 2 - if we have called the debentures for redemption and the redemption has not yet occurred; - subject to certain exceptions, during the five trading day period after any five consecutive trading day period in which the average trading price of $1,000 principal amount of the debentures for each day of such five-day period was less than 95% of the product of the last reported sale price of our common stock on that day multiplied by the number of shares of our common stock issuable upon conversion of $1,000 principal amount of the debentures; or - in connection with the occurrence of specified corporate transactions or events (including the declaration or payment of certain dividends or distributions and the occurrence of a change of control (as defined under "Description of the debentures)). See "Description of the Debentures -- Conversion Rights." Holders may convert any outstanding debentures into shares of our common stock at an initial conversion price per share of $961.20. This represents a conversion rate of approximately 1.0404 shares of common stock per $1,000 principal amount of debentures. The conversion price is subject to adjustment. We will not pay interest accrued and unpaid on any debentures that are converted into our common stock. If a holder of debentures converts after a record date for an interest payment but prior to the corresponding interest payment date, it will receive the interest payable on the interest payment date notwithstanding the conversion of such debentures prior to such interest payment date. However, at the time the holder surrenders those debentures for conversion, it must pay us an amount equal to the interest that will be paid on the interest payment date. The preceding sentence does not apply, however, to a holder that converts debentures that are called by us for redemption. In respect of any debenture presented for conversion, in lieu of delivering shares of our common stock upon conversion of that debenture, we may elect to pay the holder cash in an amount equal to the product of the number of shares of our common stock issuable upon conversion of that debenture and the average of the last reported sale price for our common stock for the five consecutive trading days following either: - our notice of our election to deliver cash, which we must give prior to the close of business on the second business day after the conversion date unless we have earlier given notice of redemption as described herein; or - the conversion date, if we have given notice of redemption of that debenture specifying that we intend to deliver cash upon conversion after the redemption notice. REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE OF CONTROL....................... In certain circumstances, if we undergo a change of control (as defined in the section of this prospectus titled "Description of the 3 Debentures -- Repurchase at Option of Holders Upon a Change of Control"), you will have the right, subject to certain conditions and restrictions, to require us to repurchase your debentures, in whole or in part, at 100% of the principal amount of the debentures to be repurchased, plus accrued and unpaid interest to, but excluding, the date of repurchase. We may choose to pay the repurchase price in: - cash; - at our option, subject to the satisfaction of certain conditions, in shares of our common stock or shares of common stock of the surviving corporation. The number of shares of common stock will equal the repurchase price divided by 95% of the average of the last reported sale price for our common stock for the five consecutive trading days immediately preceding and including the third trading day prior to the repurchase date; or - a combination of cash, shares of our common stock or shares of common stock of the surviving corporation. A change of control may constitute an event of default under our bank credit facility. Therefore, if we undergo a change of control without the approval of lenders, we may not be able to borrow under our bank credit facility, and we may not have other resources available to fund the repurchase of any debentures that you may require us to repurchase. See "Description of the Debentures -- Repurchase at Option of Holders Upon a Change of Control." RANKING....................... The debentures are our unsecured subordinated obligations. The debentures rank junior in right of payment to all of our existing and future senior debt (as defined under "Description of the Debentures"). We and our subsidiaries are not restricted by the debentures or the indenture under which the debentures are issued from incurring additional indebtedness or liens. As of September 30, 2003, we had approximately $262 million of senior debt outstanding (including a total of approximately $86 million of obligations of our subsidiaries secured by liens on our assets or guaranteed by us). In addition, the debentures are structurally subordinated to all other indebtedness and liabilities of our subsidiaries, which totaled approximately $1,615 million as of September 30, 2003. OPTIONAL REDEMPTION........... We may redeem the debentures, at our option, in whole or in part, from time to time on or after October 15, 2013 at a redemption price equal to 100% of the principal amount of the debentures, plus accrued and unpaid interest up to, but not including, the date of redemption. See "Description of the Debentures -- Optional Redemption." SINKING FUND.................. None. USE OF PROCEEDS............... The selling securityholders will receive all of the net proceeds from the sale of the offered securities. We will not receive any of the proceeds from the sale of any of these securities. 4 REGISTRATION REQUIREMENTS..... Pursuant to a registration rights agreement that we entered into in connection with the private offering of the debentures in October 2003, we have filed a shelf registration statement under the Securities Act of 1933 relating to the resale of the debentures and the common stock issuable upon conversion of the debentures. Pursuant to a registration rights agreement that we entered into with Edward H. Meyer in June 1986, we have included in the shelf registration statement 25,564 shares of common stock owned by Mr. Meyer, and 25,564 shares of common stock issuable upon conversion of a like number of shares of our Class B common stock owned by Mr. Meyer. This prospectus constitutes a part of that shelf registration statement. We filed the shelf registration statement solely to permit the resale of offered securities, and investors who purchase debentures or shares of common stock from selling securityholders in this offering will not be entitled to any registration rights under the registration rights agreement. In addition, under the registration rights agreement relating to the October 2003 private offering, selling securityholders may be required to discontinue the sale or other disposition of debentures and shares of common stock issued upon conversion of debentures pursuant to the shelf registration statement and to discontinue the use of this prospectus under certain circumstances specified in the registration rights agreement. BOOK-ENTRY; DELIVERY AND FORM.......................... The debentures are represented by one or more global debentures in fully registered form, without coupons, deposited with a custodian for, and registered in the name of a nominee of, The Depository Trust Company, or DTC. Beneficial interests in the global debentures are shown on, and transfers of those beneficial interests are effected only through, records maintained by DTC and its participants. See "Description of Debentures -- Book-Entry System; Delivery and Form and -- The Global Indentures". TAX CONSIDERATIONS............ Each holder agreed in the indenture to treat the debentures, for United States federal income tax purposes, as "contingent payment debt instruments" as provided in Treasury Regulation section 1.1275-4 and to be bound by our application of the Treasury regulations that govern contingent payment debt instruments, including our determination that the rate at which interest is deemed to accrue for United States federal income tax purposes is 9.40%, compounded semi-annually. Accordingly, each holder will recognize taxable income significantly in excess of cash received while the debentures are outstanding. In addition, a U.S. Holder will recognize ordinary income upon a sale, exchange, conversion, redemption or repurchase of the debentures at a gain. See "Certain United States Federal Income Tax Consequences". RISK FACTORS.................. See "Risk Factors" for a discussion of certain factors that you should carefully consider before investing in the debentures or our shares of common stock. 5 RISK FACTORS You should carefully consider the risks described below and all other information contained in this prospectus before determining whether or not to purchase offered securities. If any of the following risks, as well as other risks and uncertainties that are not yet identified or that we currently think are not material, actually occur, our business, financial condition and results of operations could be materially and adversely affected. In that event, the value of the debentures or our common stock could decline, and you may lose part or all of your investment. RISKS RELATING TO OUR BUSINESS WE MAY HAVE DIFFICULTY COMPETING IN THE HIGHLY COMPETITIVE MARKETING AND COMMUNICATIONS INDUSTRY. The advertising and other marketing communications and marketing services businesses are highly competitive. Our principal competitors in the advertising, direct marketing and perception management and public relations businesses are large multinational marketing and communications companies, as well as numerous smaller agencies that operate only in the United States or in one or more countries or local markets. We must compete with these other companies and agencies, several of which may have greater financial resources than we do and may be less leveraged than we are, to maintain existing client relationships and to obtain new clients and assignments. Many of our clients and the clients of our competitors are served by a number of other agencies within the marketing and communications industry. In many cases, clients' policies on conflicts of interest or desires to be served by multiple agencies result in one or more global agency networks representing a client only for a portion of its marketing and communications needs or only in particular geographic areas. In addition, the ability of agencies within marketing and communications organizations to acquire new clients or additional assignments from existing clients may be limited by the conflicts policy followed by many clients. We have arrangements with a number of our clients that restrict our ability to provide services to their competitors based on their conflicts policies. We have in the past been, and may in the future be, unable to take on new clients because such opportunities would require us to provide services to direct competitors of our existing clients. Our principal international competitors are global advertising agency networks, which are owned by holding companies, and separate agency networks within these holding companies may be able to perform services for competing products or for products of competing companies. If we fail to maintain existing clients or attract new clients, our business may be adversely impacted. In addition, from time to time, large multinational companies will seek to consolidate their accounts with one organization that can fulfill their marketing and communications needs worldwide. This trend towards consolidation of global accounts requires companies seeking to compete effectively in the international marketing and communications industry to make significant investments. We may not continue to benefit from this trend towards consolidation of global accounts. Finally, our industry experiences significant pricing competition. Should our industry experience further pricing competition, we may be unable to effectively compete with some of our competitors, whose financial position may make them better equipped to compete in such an environment. Competitive pressures may also require us to lower our prices for our services. Unless we are able to attract additional business, lowering our prices could have an adverse material impact on our revenue and result of operations. IF WE WERE TO LOSE ANY OF OUR LARGER CLIENTS OR IF OUR LARGE CLIENTS WERE TO SIGNIFICANTLY REDUCE THEIR MARKETING AND COMMUNICATIONS BUDGETS, OUR RESULTS OF OPERATIONS COULD BE SIGNIFICANTLY HARMED. The loss of one or more of our larger clients could weaken our financial condition and cause our business and results of operations to suffer. The Procter & Gamble Company, our largest client, represented approximately 10% of our consolidated income from fees and commissions in 2002. Our clients generally are able to reduce marketing and communications spending or cancel projects at any time for any reason, and may not continue to use our services to the same extent, or at all, in the future. The loss of substantial business from Procter & Gamble or our other large clients would likely have an adverse effect on our future operating 6 results. In addition, a significant delay or reduction in the budgets of any of our larger clients could weaken our financial condition and cause our business and results of operations to suffer. Historically, during periods with adverse economic conditions, our clients have cut their costs by reducing their marketing and communications budgets. We cannot assure you that we will retain Procter & Gamble or our other large clients or that they will not significantly delay or reduce their marketing and communications spending. WE MAY BE UNABLE TO COLLECT BALANCES DUE FROM ANY CLIENT THAT FILES FOR BANKRUPTCY OR BECOMES INSOLVENT. WE COMMIT TO MEDIA AND PRODUCTION PURCHASES ON BEHALF OF OUR CLIENTS, AND MAY BE OBLIGATED TO PAY FOR THESE COMMITTED PURCHASES ON THEIR BEHALF. We generally provide advertising and communications services to our clients in advance of our receipt of payment. In addition, we commit to media and production purchases on behalf of certain of our clients in certain markets. If one or more of our clients files for bankruptcy, or becomes insolvent or otherwise is unable to pay for the services we provide, we may be unable to collect balances due to us on a timely basis or at all. In addition, in that event, media companies may look to us to pay for media purchases to which we committed on behalf of these clients. OUR COMPETITIVE POSITION DEPENDS ON OUR ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL. Our ability to maintain our competitive position depends on retaining the services of our senior management and our creative, media and account personnel and practice group specialists, and their relationships with our clients. In particular, the loss of the services of key members of senior management could harm our business and results of operations. We currently have employment agreements with Edward H. Meyer, age 77, our chairman, president and chief executive officer, and Steven G. Felsher, our vice chairman, chief financial officer, secretary and treasurer. Mr. Meyer's employment agreement expires in December 2004. Mr. Felsher's employment agreement expires in July 2005, but will automatically be extended for one additional year unless notice is given by us or Mr. Felsher that the agreement will not be extended. Although we have employment agreements with some of our senior operating managers, employees generally are not subject to employment contracts and are, therefore, typically able to move within the industry with relative ease. If we were unable to continue to attract and retain additional key personnel, or if we were unable to retain and motivate our existing key personnel, we may not be able to compete effectively. WE MAY BE ADVERSELY AFFECTED BY GLOBAL ECONOMIC FLUCTUATIONS OR A DOWNTURN IN THE MARKETING AND COMMUNICATIONS INDUSTRY, WHICH IS CYCLICAL. OUR BUSINESS IS ALSO SUBJECT TO SEASONAL VARIATIONS. The marketing and communications industry is cyclical and as a result it is subject to downturns in general economic conditions and changes in client business and marketing budgets in the global regions in which we operate. For example, in 2001, our gross income decreased 2.4% from 2000 due to a reduction in client spending principally attributable to overall economic weakness and its impact on our business. A significant economic downturn, especially in regions or industries where our operations are heavily concentrated, could have a material adverse effect on our prospects, business, financial condition and operating results. Furthermore, we may face increased pricing pressures during such periods. In addition, our business generally has been seasonal with greater gross income earned in the second and fourth quarters, particularly the fourth quarter. As a result, cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are typically higher on our year-end balance sheet than at the end of any of the preceding three quarters. WE ARE SUBJECT TO REGULATIONS AND ARE EXPOSED TO POTENTIAL LIABILITIES THAT COULD RESTRICT OUR ACTIVITIES OR NEGATIVELY IMPACT OUR REVENUES. Advertising and marketing communications businesses are subject to government regulation, both domestic and foreign, relating to the truth in and fairness of advertising, labeling disclosures and warning requirements with respect to the advertising for certain products and other marketing related regulations. To ensure that our clients' communications with their customers do not violate these regulations, we must comply 7 with Federal Trade Commission regulations governing the marketing of products and services and with similar state regulations. Representatives within government bodies, both domestic and foreign, continue to initiate proposals to ban the advertising of specific products and to impose taxes on or deny deductions for advertising, which may have an adverse effect on advertising expenditures. In addition, from time to time, we may be, or may be joined as, a defendant in litigation brought against our clients by third parties, including our clients' competitors, governmental or regulatory bodies or consumers. These litigations could include claims alleging that: - advertising claims made with respect to our clients' products or services are false, deceptive or misleading; - our clients' products are defective or injurious; or - marketing and communications materials created for our clients infringe on the proprietary rights of third parties. If, in those circumstances, we are not insured under the terms of our insurance policies or are not indemnified under the terms of our agreements with clients or this indemnification is unavailable for these claims, then the damages, costs, expenses or attorneys' fees arising from any of these claims could have an adverse effect on our prospects, business, results of operations and financial condition. We cannot assure you that we will not be subject to claims against us or our clients by governmental agencies or that any such claims, regardless of merit, would not have a material adverse effect on our future operating performance. Although we maintain an insurance program, including insurance for advertising agency liability, this insurance may not be available, or if available may not be sufficient to cover all claims. Finally, our failure or inability to meet a client's expectations in the performance or completion of services could injure our business reputation or result in a claim for substantial damages against us regardless of our responsibility for such failure. In addition, in the course of providing marketing communications services to our clients we may be given access to confidential or proprietary client information. Although we have implemented policies to prevent such client information from being disclosed to unauthorized parties or used inappropriately, any such unauthorized disclosure or use could result in a claim against us for substantial damages. Our contractual provisions attempting to limit such damages may not be enforceable in all instances or may otherwise fail to protect us from liability or damages, which could adversely affect our future operating performance. WE FACE RISKS RELATING TO OUR FOREIGN OPERATIONS. We conduct operations in countries in Europe, Central and South America, Asia, Africa and the South Pacific. For the nine months ended September 30, 2003 and the years ended December 31, 2002 and 2001, approximately 55.5%, 53.7% and 55.7%, respectively, of our total commissions and fees were earned outside of North America. Such amounts are generally collected in the local currency. In addition, we generally pay operating expenses in the corresponding local currency. Fluctuations between the various local currencies in which we conduct our business and the U.S. dollar, in which we report our financial statements, can have a material adverse impact on our reported financial statements when the local currency is translated into U.S. dollars at the applicable exchange rate for inclusion in our financial statements. In addition to currency translation risk, we also incur currency transaction risk whenever we enter into a transaction using a different currency from the currency in which we receive revenues. In such instances we exchange such other currency for U.S. dollars and are therefore exposed to fluctuations between the applicable local currency and the U.S. dollar. In order to help to alleviate currency translation risk, we may enter into hedging transactions, which can lower our net income. Furthermore, since most of our indebtedness is in U.S. dollars, a strengthening of the U.S. dollar could make it more difficult for us to repay our indebtedness. Given the volatility of exchange rates, there can be no assurance that we will be able to manage our currency transaction and/or translation risks effectively, or that any volatility in currency exchange rates will not have a material adverse effect on our financial condition or results of operation. 8 We are also subject to taxation in foreign jurisdictions. In addition, transactions between us and our foreign subsidiaries may be subject to United States and foreign withholding taxes. Applicable tax rates in foreign jurisdictions differ from those of the United States, and change periodically. The extent, if any, to which we will receive credit in the United States for taxes we pay in foreign jurisdictions will depend upon the application of limitations set forth in the Internal Revenue Code of 1986, as well as the provisions of any tax treaties that may exist between the United States and such foreign jurisdictions. Our current or future international operations are subject to risks relating to, and might not succeed for a number of reasons including: - difficulties in staffing and managing foreign operations, as well as in implementing uniform cross-border information technology systems; - operational issues such as longer customer payment cycles and greater difficulties in collecting accounts receivable; - seasonal reductions in business activity; - language and cultural differences; - legal uncertainties inherent in transnational operations such as export and import regulations, tariffs and other trade barriers; - taxation issues; - unexpected changes in trading policies and regulatory requirements; - issues relating to uncertainties of laws and enforcement relating to the regulation and protection of intellectual property; and - general political and economic trends. In addition, if we were unable to remain in compliance with local laws in countries in which we conduct business, our prospects, business and results of operations could be harmed, and our financial condition could be weakened. We conduct business in various developing countries where the systems and bodies of commercial law and trade practices are evolving. Commercial laws in many of these countries are often vague, arbitrary, contradictory, inconsistently administered and retroactively applied. Under these circumstances, it is difficult for us to determine with certainty at all times the exact requirements of these local laws. If we are forced to discontinue certain of our international operations, we could incur material costs and our revenue and results of operations could be materially adversely affected. EDWARD H. MEYER BENEFICIALLY OWNS A MAJORITY OF THE COMBINED VOTING POWER OF ALL CLASSES OF OUR VOTING STOCK AND THEREFORE HAS SUBSTANTIAL INFLUENCE OVER US. As of September 30, 2003, Edward H. Meyer, our chairman, president and chief executive officer, beneficially owned approximately 18.2% of our common stock and 58.3% of our Class B common stock including (i) shares of common stock and Class B common stock issuable upon conversion of our 8 1/2% Convertible Subordinated Debentures owned by Mr. Meyer after giving effect to the assumed conversion thereof and (ii) shares of common stock issuable upon exercise of currently exercisable stock options owned by Mr. Meyer. As of such date, he also owned 100% of our Series I, Series II and Series III Preferred Stock. As of September 30, 2003, Mr. Meyer exercised voting power with respect to 70% of the combined voting power of all classes of our voting stock by virtue of: (i) his beneficial ownership of all of the foregoing securities; (ii) shares held pursuant to a voting trust agreement, as to which Mr. Meyer, as the trustee, exercises voting power; (iii) shares of common stock and Class B common stock held in our employee stock ownership plan as to which Mr. Meyer exercises shared voting power by virtue of his membership on the committee charged with its administration; (iv) shares of common stock and Class B common stock issuable upon conversion of our 8 1/2% Convertible Subordinated Debentures owned by Mr. Meyer after giving effect to the assumed conversion thereof; (v) shares of common stock issuable upon exercise of currently exercisable 9 stock options owned by Mr. Meyer, and; (vi) shares of common stock issuable upon exercise of stock options that are exercisable by beneficiaries under the voting trust agreement after giving effect to the assumed exercise thereof. On December 31, 2003, Mr. Meyer converted the 8 1/2% Convertible Subordinated Debentures into 25,564 shares of our common stock and 25,564 shares of our Class B common stock. On January 5, 2005, Mr. Meyer exercised options to purchase 40,000 shares of our common stock. As a result of Mr. Meyer's beneficial ownership of our voting stock, Mr. Meyer can elect all of the members of our board of directors. He can also exercise significant influence over our business and affairs. This includes any determination with respect to mergers or other business combinations, the acquisition or disposition of our assets, whether or not we incur indebtedness, the issuance of any additional common stock or other equity securities and the payment of dividends with respect to common stock. In addition, Mr. Meyer may exercise his influence over us according to interests that could differ from your interests as a holder of debentures. For example, he could pursue transactions that in his judgment enhance the value of his equity investment but that may involve risks to the holders of the debentures. WE MAY NOT BE SUCCESSFUL IN IDENTIFYING APPROPRIATE ACQUISITION CANDIDATES OR INVESTMENT OPPORTUNITIES, COMPLETING ACQUISITIONS OR INVESTMENTS ON SATISFACTORY TERMS OR INTEGRATING NEWLY ACQUIRED COMPANIES. Our business strategy includes increasing our share of clients' marketing expenditures by adding to or enhancing our existing marketing and communications capabilities and deepening our geographic presence. We implement this strategy in part by making selective and strategic acquisitions and investments. We may not be successful in identifying appropriate acquisition candidates or investment opportunities or consummating acquisitions or investments on terms satisfactory to us. In addition, we may not be successful in integrating newly acquired companies into our existing global network. Important factors for integration include realization of anticipated synergies and cost savings and the ability to retain and attract personnel and clients. We may use common stock, incur indebtedness, which may be long-term, expend cash or use any combination of common stock, indebtedness and cash for all or part of the consideration to be paid in future acquisitions. OUR REVOLVING CREDIT FACILITY AND OUR LOAN AGREEMENTS WITH THE PRUDENTIAL INSURANCE COMPANY OF AMERICA RESTRICT OUR ABILITY TO TAKE CERTAIN CORPORATE ACTIONS, INCLUDING MAKING DIVIDEND PAYMENTS. The current terms of our revolving credit facility and our loan agreements with The Prudential Insurance Company of America restrict our ability to (1) incur additional indebtedness, (2) declare or pay dividends or repurchase shares of our capital stock in an amount in excess of 50% of our pre-tax cash income for our immediately preceding fiscal year and (3) create or assume any lien upon any of our property or assets. They also limit the ability of our subsidiaries to incur additional indebtedness. OUR ORGANIZATIONAL DOCUMENTS, CERTAIN AGREEMENTS AND PROVISIONS OF DELAWARE LAW MAY DELAY, DETER OR PREVENT A CHANGE IN CONTROL OF US. Various provisions of our organizational documents, various agreements, and of the law of Delaware, where we are incorporated, may delay, deter or prevent a change in control of us not approved by our board of directors. These provisions include: - a classified board of directors; - cumulative voting for election of directors; - an additional vote to be cast by the chairman of the board in case of a tie in a vote by our board of directors; - voting rights of Mr. Edward Meyer, the holder of the Series I Preferred Stock, to elect one-fourth of our board of directors; - limitations on the ability of stockholders to amend, alter or repeal provisions of our organizational documents; 10 - authorization for our board of directors to issue without stockholder approval preferred stock with such terms as our board of directors may determine; - authorization for our board of directors to consider the interests of our clients and other customers, creditors, employees and other constituencies and our subsidiaries and the effect upon communities in which we and our subsidiaries do business, in evaluating proposed corporate transactions; - change of control provisions contained in our employment agreement with Edward H. Meyer that provide that upon our change of control, Mr. Meyer may terminate his employment, in which case we will have to pay Mr. Meyer the product of his total compensation and the greater of (i) the number of years remaining in the term of his employment or (ii) the number three. Mr. Meyer will also have the right to force us to buy all of our securities held by Mr. Meyer at the market price of those securities; and - change of control provisions contained in the voting trust agreement among us, Edward H. Meyer as trustee, and the beneficiaries named in the voting trust agreement, that provide that upon the threat of a change of control, no holder of trust shares may sell, transfer or dispose of any such shares, and no such person may withdraw any trust shares from the trust. Section 203 of the Delaware general corporation law imposes restrictions on mergers and other business combinations between us and any holder of 15% or more of our common stock. These provisions of our organizational documents, agreements and Delaware law, together with the control by Mr. Meyer of 70% of the combined voting power of all classes of our voting stock, could discourage potential acquisition proposals and could delay, deter or prevent a change in control of us, although a majority of our stockholders might consider these acquisition proposals, if made, to be desirable. These provisions also could make it more difficult for third parties to remove and replace the members of our board of directors. Moreover, these provisions could diminish the opportunities for a stockholder to participate in tender offers, including tender offers at prices above the then-current market price of our common stock, and may also inhibit increases in the market price of our common stock that could result from takeover attempts or speculation. THE MARKET PRICE OF OUR COMMON STOCK WILL FLUCTUATE, AND COULD FLUCTUATE SIGNIFICANTLY. The market price of our common stock will fluctuate, and could fluctuate significantly, in response to various factors and events, including the following: - the liquidity of the market for our common stock; - differences between our actual financial or operating results and those expected by investors and analysts; - changes in analysts' recommendations or projections; - changes in marketing and communications budgets of clients; - new statutes or regulations or changes in interpretations of existing statutes and regulations affecting our business; - changes in general economic or market conditions; and - broad market fluctuations. RISKS RELATED TO THE DEBENTURES WE HAVE THE ABILITY TO DEFER PAYMENTS OF INTEREST ON THE DEBENTURES, WHICH WILL PRECLUDE YOU FROM RECEIVING DIVIDENDS OR INTEREST PAYMENTS. So long as we are not in default in the payment of interest on the debentures, we have the right under the indenture governing the debentures to defer payments of interest, including contingent interest, on the 11 debentures by extending the interest payment period from time to time on the debentures for an extension period not exceeding 10 consecutive semi-annual interest periods, during which no interest shall be due and payable. If we exercise the right to extend an interest payment period, we may not during such extension period declare or pay dividends on, or redeem, purchase, acquire or make a distribution or liquidation payment with respect to, any of our common stock or preferred stock or make any payment of principal, interest or premium, if any, on, or repay, repurchase or redeem any of our debt securities that rank in right of payment pari passu with, or junior to, the debentures; provided that the foregoing will not apply (a) to repurchases, redemptions or other acquisitions of shares of our capital stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants, which contract, plan or arrangement is approved by our board of directors, (b) as a result of an exchange or conversion of any class or series of our capital stock for any other class or series of our capital stock, (c) to the purchase of fractional interests in shares of our capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged or (d) to stock dividends paid by us. Under our certificate of incorporation, we are authorized to issue up to 500,000 shares of preferred stock. We may from time to time offer shares of our preferred stock to the public. At September 30, 2003, we had 20,000 shares of Series I Preferred Stock, 5,000 shares of Series II Preferred Stock and 5,000 shares of Series III Preferred Stock outstanding. Prior to the termination of any extension period, we may further extend such extension period; provided that such extension period together with all such previous and further extensions thereof may not exceed 10 consecutive semi-annual interest periods. Upon the termination of any extension period and the payment of all amounts then due, we may commence a new extension period, subject to the above requirements. We may also prepay at any time all or any portion of the interest accrued during an extension period. Consequently, there could be multiple extension periods of varying lengths throughout the term of the debentures, not to exceed 10 consecutive semi-annual interest periods or to cause any extension beyond the maturity of the debentures. We have no current intention of exercising our right to defer payments of interest by extending the interest payment period on the debentures. However, should we elect to exercise such right in the future, the market price of the debentures is likely to be affected. A holder that disposes of its debentures during an extension period, therefore, might not receive the same return on its investment as a holder that continues to hold its debentures. In addition, as a result of the existence of our right to defer interest payments, the market price of the debentures may be more volatile than the market prices of other securities that are not subject to such deferrals. THE DEBENTURES ARE SUBORDINATED. The debentures are unsecured and subordinated in right of payment to all of our existing and future senior debt. For purposes of the subordination provisions of the indenture, senior debt includes, without limitation, all obligations in respect of (i) deferred compensation owed to employees who are not officers or directors of us or our subsidiaries, (ii) deferred ordinary course of business compensation owed to our or our subsidiaries' directors and officers to the extent that such deferred compensation has been fully vested and fully funded to a trust (or similar arrangement) established for the benefit of such director or officer pursuant to plans and arrangements in existence on the date the debentures were first issued, provided that the funds representing such deferred compensation need not be so vested and funded as of the date the debentures were first issued, (iii) all other deferred compensation owed to any of our directors, to the extent reflected as a liability in our balance sheet as of September 30, 2003 and deferred compensation accrued after September 30, 2003 consistent with past practice for services rendered by any of our directors after September 30, 2003, (iv) reasonable expense reimbursements due to our and our subsidiaries' employees and directors and (v) indebtedness to certain stockholders (other than officers or directors) who hold not more than 5% of our total voting power. In the event of our bankruptcy, liquidation or reorganization, upon acceleration of the debentures due to an event of default under the indenture and in other limited events, our assets will be available to pay obligations on the debentures only after all senior debt has been paid. As a result, there may not be sufficient assets remaining to pay amounts due on any or all of the outstanding debentures. 12 The indenture also provides that during a default in the payment of any senior debt and also during non-payment defaults under our credit facility, our loan agreements with The Prudential Insurance Company of America or our other senior debt with an aggregate principal amount of not less than $25 million, creditors of such senior debt may at their discretion prohibit us from paying principal or interest on the debentures until the default has been cured or waived or ceased to exist. We are not prohibited from incurring additional debt, including additional senior debt, under the indenture. If we were to incur additional debt or liabilities, our ability to pay our obligations on the debentures could suffer. As of September 30, 2003, we had approximately $262 million of senior debt outstanding (including a total of approximately $86 million of obligations of our subsidiaries secured by liens on our assets or guaranteed by us). See "Description of the Debentures -- Subordination." CREDITORS OF OUR SUBSIDIARIES WILL GET PAID BEFORE YOU WILL GET PAID. We operate our business in part through our subsidiaries. Accordingly, we are dependent upon the cash flows of, and receipt of dividends and advances from, or repayments of advances by, our subsidiaries in order to meet our debt obligations, including our obligations under the debentures. The debentures are structurally subordinated to the indebtedness and other obligations (including trade payables) of our subsidiaries. At September 30, 2003, the obligations of our subsidiaries aggregated approximately $1,615 million. Our subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due pursuant to the debentures or to make any funds available therefor, whether by dividends, loans or other payments, and do not guarantee the payment of interest, premium, if any, or principal on the debentures. Any of our rights to receive any assets of any of our subsidiaries upon any liquidation, dissolution, winding up, receivership, reorganization, assignment for the benefit of creditors, marshaling of assets and liabilities or any bankruptcy, insolvency or similar proceedings of us (and the consequent right of the holders of the debentures to participate in the distribution of, or to realize proceeds from, those assets) will be effectively subordinated to the claims of any such subsidiary's creditors (including trade creditors and holders of debt issued by such subsidiary). See "Description of the Debentures -- Subordination." THERE IS THE POTENTIAL FOR PRICE VOLATILITY AND A LACK OF A PUBLIC MARKET FOR THE DEBENTURES. We issued the debentures in October 2003 in a private offering made to "qualified institutional buyers," as defined in Rule 144A under the Securities Act. The offering was made through a group of investment banks, which we refer to as the "initial purchasers." Prior to that offering, there was no trading market for the debentures. Although the initial purchasers advised us at the time of that offering that they intended to make a market in the debentures, they are not obligated to do so and may discontinue such market making at any time without notice. Accordingly, there can be no assurance that any market for the debentures will develop or, if one does develop, that it will be maintained. If an active market for the debentures fails to develop or be sustained, the value of the debentures could be materially adversely affected. There is no public market for the debentures and we do not intend to apply for listing of the debentures on any securities exchange or for quotation of the debentures through any automated quotation system. The debentures issued to qualified institutional buyers in the October 2003 offering currently trade on the PORTAL Market. However, once debentures are sold under this prospectus, those debentures will no longer trade on the PORTAL market. WE EXPECT THAT THE TRADING VALUE OF THE DEBENTURES WILL BE SIGNIFICANTLY AFFECTED BY THE PRICE OF OUR COMMON STOCK AND OTHER FACTORS. The market price of the debentures is expected to be significantly affected by the market price of our common stock. This may result in greater volatility in the trading value of the debentures than would be expected for nonconvertible debt securities. In addition, the debentures have a number of features, including conditions to conversion, which, if not met, could result in a holder receiving less than the value of our common stock into which a debenture would otherwise be convertible. These features could adversely affect the value and the trading price of the debentures. Historically, our common stock has not experienced high 13 trading volume due to the relatively high price and limited public float of our common stock. Accordingly, no assurance can be given as to the liquidity of our common stock issuable upon conversion of the debentures. AFTER GIVING EFFECT TO THIS OFFERING, OUR LEVEL OF LEVERAGE AND DEBT SERVICE OBLIGATIONS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND PREVENT US FROM FULFILLING OUR OBLIGATIONS TO YOU UNDER THE DEBENTURES. As of September 30, 2003, we had approximately $350.2 million of indebtedness outstanding (including our redeemable preferred stock). We may not be able to generate cash sufficient to pay the principal of, interest on and other amounts due in respect of our indebtedness when due. We and our subsidiaries may also incur additional debt that may be secured. Our level of debt and debt service obligations could have important effects on your investment in the debentures. These effects may include: - making it more difficult for us to satisfy our obligations to you with respect to the debentures and our obligations to other persons with respect to our other debt; - limiting our ability to obtain additional financing on satisfactory terms to fund our working capital requirements, capital expenditures, acquisitions, investments, debt service requirements and other general corporate requirements; - increasing our vulnerability to general economic downturns, competition and industry conditions, which could place us at a competitive disadvantage compared to our competitors that are less leveraged; - increasing our exposure to rising interest rates because a portion of our borrowings is at variable interest rates; - reducing the availability of our cash flow to fund our working capital requirements, capital expenditures, acquisitions, investments and other general corporate requirements because we will be required to use a substantial portion of our cash flow to service debt obligations; and - limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate. Our ability to pay principal and interest on the debentures and to satisfy our other debt obligations will depend upon our future operating performance and the availability of refinancing debt. If we are unable to service our debt and fund our business, we may be forced to reduce or delay capital expenditures, seek additional debt financing or equity capital, restructure or refinance our debt or sell assets. We cannot assure you that we would be able to obtain additional financing, refinance existing debt or sell assets on satisfactory terms or at all. OUR REPORTED EARNINGS PER SHARE MAY BE MORE VOLATILE BECAUSE OF THE CONVERSION CONTINGENCY PROVISION OF THE DEBENTURES. Holders of the debentures may convert the debentures into our common stock upon the occurrence of certain events or conditions (including events related to the trading price of our common stock). Until any of these contingencies are met, the shares underlying the debentures will not be included in the calculation of reported earnings per share. Should any of these contingencies be met, reported earnings per share would be expected to decrease as a result of the inclusion of the underlying shares in the earnings per share calculation. An increase in volatility in our stock price could cause some of these conditions to be met in one quarter and not in a subsequent quarter, increasing the volatility of reported fully diluted earnings per share. YOU WILL RECOGNIZE INCOME FOR FEDERAL INCOME TAX PURPOSES SIGNIFICANTLY IN EXCESS OF CURRENT CASH PAYMENTS. We intend to treat the debentures as contingent payment debt instruments subject to U.S. federal income tax rules applicable to contingent payment debt instruments. Under that treatment, if you acquire debentures, you will be required to include amounts in income significantly in excess of the stated interest on the 14 debentures. Any gain you recognize will generally be ordinary interest income; any loss will be ordinary loss to the extent of interest on the debentures previously included in income and, thereafter, capital loss. There is some uncertainty as to the proper application of the Treasury regulations governing contingent payment debt instruments, and if our treatment were successfully challenged by the Internal Revenue Service, it might be determined that, among other things, you should have accrued interest income at a lower or higher rate, should not have recognized ordinary income upon the conversion, and should have recognized capital gain or loss, rather than ordinary income or loss upon a taxable disposition of the debentures. See "Certain United States Federal Income Tax Consequences." IF YOU HOLD DEBENTURES, YOU WILL NOT BE ENTITLED TO ANY RIGHTS WITH RESPECT TO OUR COMMON STOCK, BUT YOU WILL SUBJECT TO ANY CHANGES MADE WITH RESPECT TO OUR COMMON STOCK. If you hold debentures, you will not be entitled to any rights with respect to our common stock (including, without limitation, voting rights and rights to receive any dividends or other distributions on our common stock), but you will be subject to all changes affecting our common stock. You will only be entitled to rights on the common stock if and when we deliver shares of common stock to you in connection with conversion of your debentures. For example, in the event that an amendment is proposed to our certificate of incorporation or by-laws requiring stockholder approval and the record date for determining the stockholders of record entitled to vote on the amendment occurs prior to delivery to you of the common stock, you will not be entitled to vote on the amendment, although you will nevertheless be subject to any changes in the powers, preferences or special rights of our common stock. THE DEBENTURES ARE UNSECURED AND, THEREFORE, ARE EFFECTIVELY SUBORDINATED TO ANY OF OUR SECURED DEBT. The debentures are not secured by any of our assets or those of our subsidiaries. In addition, the debentures are not guaranteed by our subsidiaries. As a result, the debentures are effectively subordinated to any secured debt that we may incur. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of our secured debt may assert rights against the secured assets in order to receive full payment of their debt before the assets may be used to pay the holders of the debentures. WE MAY NOT BE ABLE TO PURCHASE THE DEBENTURES UPON A CHANGE OF CONTROL. Upon the occurrence of certain specific kinds of change of control events, we are required to offer to repurchase all outstanding debentures at a price equal to 100% of their principal amount plus accrued and unpaid interest, if any, to but not including the date of repurchase. See "Description of the Debentures -- Repurchase at Option of Holders Upon a Change of Control." It is possible that we will not have sufficient funds at the time of a change of control to make any required repurchase of debentures. If we are required to make a change of control offer, there can be no assurance that we will be able to obtain all required consents from the holders of our senior debt to allow repurchase of the debentures. If we fail to repurchase the debentures when required following certain change of control events, we will be in default under the indenture. In addition, we have, and may in the future incur other indebtedness (including our existing credit facility) with similar change of control provisions permitting our other creditors to accelerate or to require us to purchase our indebtedness upon the occurrence of similar events or on some specific dates. WE MAY ISSUE ADDITIONAL EQUITY SECURITIES AND THEREBY MATERIALLY AND ADVERSELY AFFECT THE PRICE OF OUR COMMON STOCK. We are not restricted from issuing additional equity securities during the life of the debentures. We are authorized to issue, without stockholder approval, 500,000 shares of preferred stock, of which 30,000 were outstanding as of September 30, 2003, in one or more series, which may give other stockholders dividend, conversion, voting, and liquidation rights, among other rights, which may be superior to the rights of holders of our common stock. Any such series of preferred stock could contain dividend rights, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences or other rights superior to the rights of holders of our common stock. In addition, we are authorized to issue, without stockholder approval, up to 50,000,000 shares of common stock, of which approximately 1,096,221 shares were outstanding as of 15 September 30, 2003, and 10,000,000 shares of Class B common stock, of which approximately 207,057 shares were outstanding as of September 30, 2003. If we issue additional equity securities, the price of our common stock and, in turn, the price of the debentures may be materially and adversely affected. SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS In connection with the provisions of the Private Securities Litigation Reform Act of 1995, or the Reform Act, we may include forward looking statements (as defined in the Reform Act) in oral or written public statements issued by us or on our behalf. These forward looking statements may include, among other things, plans, objectives, projections, anticipated future economic performance or assumptions and the like that are subject to risks and uncertainties. Actual results or outcomes may differ materially from those discussed in the forward looking statements. Important factors that may cause actual results to differ include, but are not limited to, the following: the unanticipated loss of a material client or key personnel, delays or reductions in client budgets, shifts in industry rates of compensation, government compliance costs or litigation, unanticipated natural disasters, terrorist attacks, war, technological developments, creditworthiness of clients and suppliers, changes in the general economic conditions that affect exchange rates, changes in interest rates and/or consumer spending either in the United States or non-United States markets in which we operate, unanticipated expenses, client preferences that can be affected by competition, and/or changes in the competitive frame, and the ability to project risk factors that may vary. The forward looking statements speak only as of the date when made. We do not undertake to update such statements. You should carefully read the factors described in the "Risk Factors" section of this prospectus for a description of certain risks that could, among other things, cause our actual results to differ from these forward looking statements. USE OF PROCEEDS The selling securityholders will receive all of the net proceeds from the sale of the offered securities. We will not receive any of the proceeds from the sale of any of these securities. RATIO OF EARNINGS TO FIXED CHARGES The following table presents the ratio of earnings to fixed charges for Grey Global Group Inc. and its consolidated subsidiaries for each of the periods indicated.
NINE MONTHS YEARS ENDED DECEMBER 31, ENDED -------------------------------- SEPTEMBER 30, 1998 1999 2000 2001 2002 2003 ---- ---- ---- ---- ---- ------------- Ratio of Earnings to Fixed Charges(1)... 3.48 2.37 2.71 * 2.05 2.35
- --------------- * For the year ended December 31, 2001, there was a deficiency of earnings to fixed charges of $1,305. (1) For the purposes of calculating the ratio of earnings to fixed charges, "earnings" consist of income before taxes, equity losses in unconsolidated subsidiaries and minority interests, plus fixed charges and distributed income of equity investees less preference security dividends. "Fixed charges" consist of interest expensed and capitalized, amortization of debt expense, an estimate of interest within rent expense and preference security dividends. 16 DIVIDEND POLICY Since at least 1965, we have paid dividends on our common stock and Class B common stock each quarter and, starting with our fourth fiscal quarter in 1996, we have paid dividends at a rate of $1.00 per share of our common stock and limited duration Class B common stock per quarter. We currently anticipate that we will continue to pay quarterly dividends at a rate of $1.00 per share of our common stock and limited duration Class B common stock, subject to the factors described below. The payment of dividends, however, in the future will be a business decision to be made by our board of directors from time to time based on such considerations as our board of directors deems relevant, will be payable only out of funds legally available under Delaware law and will be subject to any restrictions that may be contained in our debt instruments. Under our credit facility and loan agreements, we are not allowed to declare or pay dividends or repurchase shares of our capital stock in an amount in excess of 50% of our pre-tax cash income for our immediately preceding fiscal year. Under the terms of the debentures, if we exercise our right to defer payments of interest on the debentures, during any such deferral period, our ability to declare or pay any dividends on our capital stock will be restricted, subject to certain exceptions. 17 DESCRIPTION OF THE DEBENTURES We issued our 5.0% Contingent Convertible Subordinated Debentures due 2033, which we refer to as the debentures, under an indenture between us and American Stock Transfer & Trust Company, as trustee. The following description is only a summary of the material provisions of the debentures, the related indenture and the registration rights agreement. We urge you to read the indenture, the debentures and the registration rights agreement in their entirety because they, and not this description, define your rights as holders of the debentures. You may request copies of these documents at our address shown under the caption "Where You Can Find More Information." The terms of the debentures include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as amended. For purposes of this section, references to the "company," "we," "us," "our" and "Grey" include only Grey Global Group Inc. and not its subsidiaries. GENERAL The debentures have an aggregate principal amount of $150.0 million. The debentures will mature on October 15, 2033 unless earlier converted, redeemed or repurchased. The debentures: - were issued in U.S. dollars in denominations of $1,000 and integral multiples of $1,000; - represent our unsecured obligations subordinated in right of payment to the extent set forth in the indenture to our senior debt (as defined below); - are convertible into shares of our common stock, par value $0.01 per share, during any permitted conversion period (as defined below), unless previously repurchased or redeemed, at an initial conversion rate of 1.0404 shares per each $1,000 principal amount of debentures, subject to adjustment upon the occurrence of the events described below under "-- Conversion Rights"; - are required to be repurchased by us at the option of the holders, as described below under "-- Repurchase at Option of Holders Upon a Change of Control"; and - do not have a sinking fund. The debentures were issued only in fully registered book-entry form, without coupons, and are represented by one or more global debentures registered in the name of a nominee of The Depository Trust Company, New York, New York, which we refer to as DTC. We will maintain an office in the Borough of Manhattan, The City of New York, for the payment of interest, which currently is an office of the trustee. We may pay the principal of, and interest on, the debentures either: - by check mailed to your address as it appears in the debenture register, - or, if you are a holder of record with an aggregate principal amount in excess of $2.0 million, if you so elect in writing, by wire transfer in immediately available funds to an account in the United States. However, payments to DTC will be made by wire transfer of immediately available funds to the account of DTC or its nominee. Interest will be computed on the basis of a 360-day year composed of twelve 30-day months. The indenture does not contain any restrictions on the incurrence of indebtedness or liens or on the payment of senior debt, and does not contain any financial covenants. In addition, except during an extension period (as defined below), the indenture does not contain any restrictions on the payment of dividends or the repurchase of our securities or on the payment of junior or pari passu indebtedness. Other than as described under "-- Repurchase at Option of Holders Upon a Change of Control," the indenture contains no covenants or other provisions that afford protection to holders of debentures in the event of a highly leveraged transaction. 18 INTEREST The debentures began bearing interest from October 28, 2003 at the rate of 5.0% per year. We will also pay contingent interest (as defined below) on the debentures in the circumstances described under "-- Contingent Interest." Subject to the provisions set forth under "-- Option to Extend Interest Payment Period," we will pay interest semiannually on April 15 and October 15 of each year to the holders of record at the close of business on the preceding April 1 and October 1, respectively, beginning April 15, 2004; provided that: - we will not pay interest accrued and unpaid on any debentures that are converted into our common stock. See "-- Conversion Rights." If a holder of debentures converts after a record date for an interest payment but prior to the corresponding interest payment date, it will receive the interest payable on the interest payment date, notwithstanding the conversion of such debentures prior to such interest payment date, because that holder will have been the holder of record on the corresponding record date. However, at the time the holder surrenders those debentures for conversion, except as provided below, it must pay us an amount equal to the interest that will be paid on the interest payment date. The preceding sentence does not apply, however, to a holder that converts debentures that are called by us for redemption. Accordingly, if we elect to redeem debentures on a date after a record date for an interest payment but prior to the corresponding interest payment date, and prior to the redemption date and the holder of those debentures chooses to convert the debentures, the holder will not be required to pay us, at the time it surrenders the debentures for conversion, the amount of interest on the debentures it will receive on the interest payment date, - we will pay interest to a person other than the holder of record on the record date if we redeem the debentures on a date that is after the record date and prior to the corresponding interest payment date. In this instance, we will pay interest accrued and unpaid on the debentures being redeemed, to but not including the redemption date to the same person to whom we will pay the principal of such debentures, and - our delivery to a holder of shares of our common stock into which a debenture is convertible, together with any cash payment for such holder's fractional shares, will be deemed to satisfy our obligation to pay accrued tax original issue discount attributable to the period from the issue date through the conversion date. As a result, accrued tax original issue discount to the conversion date is deemed to be paid in full rather than cancelled, extinguished or forfeited. All references herein to interest shall include compounded interest (as defined herein) unless otherwise stated. CONTINGENT INTEREST Subject to the accrual, record date and payment provisions described above, beginning with the six-month interest period commencing on October 15, 2013, "contingent interest" will accrue during any semi-annual interest period where the average trading price of the debentures (as determined below) for the five trading days ending on the third trading day immediately preceding the first day of such six-month period equals $1,200 or more per $1,000 principal amount of debentures. During any period in which contingent interest accrues, it will be payable at a rate per annum equal to 0.50% of such average trading price. Upon determination that contingent interest on the debentures will accrue during a relevant six-month period, at or prior to the start of such six-month period, we will issue a press release and notify the trustee. The "trading price" of the debentures on any date of determination means the average of the secondary market bid quotations per $1,000 principal amount of debentures obtained by the trustee for $5.0 million principal amount of debentures at approximately 3:30 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers we select; provided that if at least three such bids cannot reasonably be obtained by the trustee, but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the trustee, that one bid shall be used. We shall provide prompt written notice to the trustee identifying the three independent nationally 19 recognized securities dealers selected by us. If the trustee cannot reasonably obtain at least one bid for $5.0 million principal amount of debentures from an independent nationally recognized securities dealer selected by us and identified in writing to the trustee or, in our reasonable judgment, the bid quotations are not indicative of the secondary market value of the debentures, then the trading price per $1,000 principal amount of debentures will be deemed to be equal to (a) the then-applicable conversion rate of the debentures multiplied by (b) the closing price of shares of our common stock on such determination date on The NASDAQ National Market, or, if our common stock is not then quoted on such market, on the principal U.S. national or regional securities exchange on which our common stock is then listed or, if our common stock is not then listed on a national or regional securities exchange, on the principal other market on which our common stock is then traded; provided that the trustee shall not determine the trading price of the debentures unless requested by us to do so; and provided, further, that we shall have no obligation to make such request unless a holder of debentures provides us with reasonable evidence that the trading price of the debentures is equal to not less than 120% of the principal amount thereof; and at which time, we shall instruct the trustee to determine the trading price of the debentures beginning on the next trading day (as defined below) and on each successive trading day until the trading price of the debentures is greater or equal to 120% of the principal amount thereof. The trustee shall be entitled to all of the rights of the trustee set forth in the indenture in connection with any such determination. Any such determination shall be conclusive absent manifest error. OPTION TO EXTEND INTEREST PAYMENT PERIOD So long as we are not in default in the payment of interest on the debentures, we shall have the right to extend the interest payment period (such extended period, an "extension period"), including the payment of contingent interest, from time to time for a period not exceeding 10 consecutive semi-annual interest periods, provided that such extension period shall terminate upon the occurrence of a default or event of default, and provided further that no extension period shall extend beyond the maturity date of the debentures. We have no current intention of exercising our right to extend an interest payment period. No interest shall be due and payable during an extension period, except at the end thereof, provided that interest (including compounded interest) shall accrue. During any extension period, we shall not (i) declare or pay any dividends on, or redeem, purchase, acquire or make a distribution or liquidation payment with respect to, any of our common stock or preferred stock or make any guarantee payments with respect thereto (provided that the foregoing will not apply (a) to repurchases, redemptions or other acquisitions of shares of our capital stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants, which contract, plan or arrangement is approved by our board of directors, (b) as a result of an exchange or conversion of any class or series of our capital stock for any other class or series of our capital stock, (c) to the purchase of fractional interests in shares of our capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged or (d) to stock dividends or other stock distributions (including rights, warrants or options to purchase capital stock) paid by us) or (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any of our debt securities that rank in right of payment pari passu with, or junior to, the debentures. Prior to the termination of any such extension period, we may further extend the interest payment period; provided that such extension period together with all such previous and further extensions thereof may not exceed 10 consecutive semi-annual interest payment periods or extend beyond the maturity of the debentures. On the first interest payment date occurring on or after the end of each extension period, we shall pay to the holders of debentures of record on the record date for such interest payment date (regardless of who the holders of record may have been on other dates during the extension period) all accrued and unpaid interest (including contingent interest, if any) on the debentures, together with interest thereon (including interest on unpaid and deferred interest) at the rate specified for the debentures, compounded semi-annually. Upon the termination of any extension period and the payment of all amounts then due, we may commence a new extension period, subject to the above requirements. We may also prepay at any time, in accordance with the notice provisions contained in the indenture, all or any portion of the interest accrued during an extension period. Consequently, there could be multiple extension periods of varying lengths throughout the term of the debentures, not to exceed 10 consecutive semi-annual interest payment periods; provided, that no such period may extend beyond the stated maturity of the debentures. The failure by us to make interest payments during 20 an extension period would not constitute a default or an event of default under the indenture or our currently outstanding indebtedness. We shall give notice to the trustee of our election of such extension period ten business days prior to the earlier of (i) the next succeeding interest payment date or (ii) the date we are required to give notice to The NASDAQ National Market (if the debentures are then listed thereon) or other applicable self-regulatory organization or to holders of the debentures of the record or payment date of such related interest payment. A "business day" is any day other than Saturday, Sunday or any other day on which banking institutions in The City of New York in the State of New York are authorized or required by any applicable law to close. SUBORDINATION The payment of principal of, and interest on, the debentures is, to the extent and in the manner set forth in the indenture, subordinated in right of payment to the prior payment in full, in cash or cash equivalents, of all our senior debt (as defined below). As of September 30, 2003, we had approximately $262 million of senior debt outstanding (including a total of approximately $86 million of obligations of our subsidiaries secured by liens on our assets or guaranteed by us). In addition, the debentures are structurally subordinated to all other indebtedness and liabilities of our subsidiaries. As of September 30, 2003, our subsidiaries had total liabilities of approximately $1,615 million. Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding up, receivership, reorganization, assignment for the benefit of creditors, marshaling of assets and liabilities or any bankruptcy, insolvency or similar proceedings of us, the holders of all senior debt will first be entitled to receive payment in full in cash or cash equivalents of all amounts due or to become due thereon before the holders of the debentures will be entitled to receive any payment in respect of the principal of, or interest on, the debentures. No payments on account of principal, or interest in respect of the debentures may be made by us if there shall have occurred and be continuing a default in any payment with respect to senior debt (other than obligations in respect of clauses (ii), (iii) and (iv) of the definition of qualifying deferred compensation and reasonable expense reimbursements due to our and our subsidiaries' employees and directors), whether at maturity, upon redemption, by declaration of acceleration or otherwise. In addition, during the continuance of any other event of default (other than a payment default) with respect to designated senior debt (as defined below) pursuant to which the maturity thereof may be accelerated, from and after the date of receipt by the trustee of written notice from holders of such designated senior debt or from an agent of such holders, no payments on account of principal, or interest in respect of the debentures may be made during a period, referred to herein as a "payment blockage period," commencing on the date of receipt of such notice and ending on the date such event of default has been cured or waived or has ceased to exist, but in no event shall any payment blockage period extend beyond October 15, 2033. By reason of such subordination, in the event of insolvency, funds that would otherwise be payable to holders of debentures will be paid to the holders of senior debt to the extent necessary to pay such indebtedness in full, and we may be unable to fully meet our obligations with respect to the debentures. "Designated senior debt" is defined to mean (i) indebtedness outstanding under the Credit Agreement dated as of December 21, 2001, referred to herein as the "credit agreement," among us, HSBC Bank USA, Fleet National Bank and JP Morgan Chase Bank, as such credit agreement has been and may be amended, restated, extended, supplemented, replaced, refinanced or otherwise modified from time to time, (ii) indebtedness under the Note Agreement, dated as of November 13, 2000, referred to as the "2000 loan agreement," and the Note Agreement, dated as of March 14, 2003, referred to herein as the "2003 loan agreement" and, together with the 2000 loan agreement, the "loan agreements," each between us and The Prudential Insurance Company of America, as such loan agreements have and may be amended, restated, supplemented, extended, replaced, refinanced or otherwise modified from time to time and (iii) senior debt (other than obligations in respect of clauses (ii), (iii) and (iv) of the definition of qualifying deferred 21 compensation and reasonable expense reimbursements due to our and our subsidiaries' employees and directors) which, at the time of its determination, (A) has an aggregate principal amount of at least $25.0 million and (B) is specifically designated in the instrument evidencing such senior debt as "designated senior debt" by us. "Senior debt" is defined to mean the principal of (and premium, if any) and interest on (i) all of our indebtedness for borrowed money, (ii) all of our obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) all of our obligations in respect of letters of credit or bankers' acceptances or other similar instruments (or reimbursement obligations with respect thereto), (iv) all of our obligations to pay the deferred purchase price of property or services (including all obligations in respect of qualifying deferred compensation (as defined below)) and reasonable expense reimbursements due to our and our subsidiaries' employees and directors, (v) all of our monetary obligations as lessee under capitalized leases, (vi) all indebtedness of others secured by a lien on any of our assets, whether or not such indebtedness is assumed by us (provided that, for purposes of determining the principal amount of any indebtedness of the type described in this clause, if recourse with respect to such indebtedness is limited to such asset, the amount of such indebtedness shall be limited to the lesser of the fair market value of such asset or the amount of such indebtedness), (vii) all indebtedness of others guaranteed by us to the extent such indebtedness is guaranteed by us and (viii) to the extent not otherwise included in this definition, all of our obligations under currency agreements and interest rate agreements, in each case, whether created, incurred or assumed before, on or after the date of the indenture; provided that senior debt shall not include (a) indebtedness or other obligations of ours to any of our subsidiaries, or to any of our or our subsidiaries' officers or directors, or to a significant stockholder (as defined below) (other than qualifying deferred compensation and expense reimbursements referred to in clause (iv) above), (b) our indebtedness or other obligations that, when incurred and without respect to any election under Section 1111(b) of Title 11, U.S. Code, was secured by one or more of our assets or properties, but was otherwise without recourse to us, (c) any of our other indebtedness or other obligations which by the terms of the instrument creating or evidencing the same is specifically designated as not being senior in right of payment to the debentures or expressly provides that such indebtedness or other obligation is pari passu with, or junior to, the debentures, (d) payment obligations in respect of any of our redeemable stock, and (e) trade payables or other obligations to trade creditors. "Qualifying deferred compensation" means (i) deferred compensation owed to employees that are not our or our subsidiaries' directors or officers, (ii) deferred ordinary course of business compensation owed to our or our subsidiaries' directors and officers to the extent that such deferred compensation has been fully vested and fully funded to a trust (or similar arrangement) established for the benefit of such director or officer pursuant to plans and arrangements in existence on the date the debentures are first issued, provided that the funds representing such deferred compensation need not be so vested and funded as of the date the debentures are first issued, (iii) all other deferred compensation owed to any of our directors, to the extent reflected as a liability in our balance sheet as of September 30, 2003 and (iv) deferred compensation accrued after September 30, 2003 consistent with past practice for services rendered by any of our directors after September 30, 2003. "Significant stockholder" is defined to mean a person or entity (other than any of our or our subsidiaries' officers or directors) that is the beneficial owner of more than 5% of the total voting power of all shares of our outstanding capital stock that are entitled to vote generally in the election of directors. CONVERSION RIGHTS GENERAL Prior to the close of business on the business day immediately preceding October 15, 2033, referred to herein as the "conversion expiration date," you may at your option convert your debenture, in the manner described below, into shares of our common stock at an initial conversion rate of 1.0404 shares of our common stock for each $1,000 principal amount of debentures (equivalent to a conversion price of $961.20 per share of our common stock (the "initial conversion price")), subject to adjustment as described under "-- Conversion 22 Price Adjustments -- General" below (the initial conversion price as so adjusted from time to time, the "conversion price") during each of the following periods (each such period, a "permitted conversion period"): - during the fiscal quarter immediately following each fiscal quarter (such previous fiscal quarter, the "prior fiscal quarter") in which the market price condition (as defined below) has been satisfied, - during the period beginning on the date the debentures are called for redemption and ending at the close of business on the business day immediately prior to the redemption date, - during the five (5) consecutive business days after the trading price condition (as defined below) has been satisfied, - during a dividend payment period (as defined below), and - during the period commencing on the date of our notice to holders of record of the debentures of the occurrence of a change of control (as defined below) in accordance with the terms of the indenture and ending thirty (30) days after our giving of such notice. The conversion provisions set forth in the fourth bullet point of the previous sentence shall not apply with respect to a holder of a debenture that is otherwise permitted to, elects to and in fact does participate in the dividend or distribution (on an as-if-converted basis) giving rise to such right of conversion. In respect of any debenture presented for conversion, we may, at our option, in lieu of delivering shares of common stock, elect to pay the holder surrendering such debenture an amount of cash equal to the average of the last reported sale price (as defined below) for our common stock for the five consecutive trading days immediately following (a) the date of delivery our notice of our election to deliver cash as described below if we have not given notice of redemption, or (b) the conversion date, in the case of a conversion following our notice of redemption with respect to such debenture, specifying that we intend to deliver cash upon conversion, in either case, multiplied by the number of shares of common stock issuable upon conversion of such debenture on that date. We will inform holders of our election to deliver shares of common stock or to pay cash in lieu of the delivery of such shares by delivering an irrevocable written notice to the trustee and the paying agent prior to the close of business on the second business day after the conversion date, unless we have already informed holders of our election by delivering an irrevocable notice in connection with our optional redemption of the debentures as described under "-- Optional Redemption." If we deliver only shares of common stock upon conversion, such shares will be delivered through the trustee no later than the fifth business day following the conversion date. If we elect to satisfy all or a portion of our obligation to deliver shares upon conversion in cash, the payment, including any delivery of common stock will be made to holders surrendering debentures no later than the tenth business day following the applicable conversion date. If an event of default, as described under "-- Events of Default," has occurred and is continuing, we may not pay cash upon conversion of any debentures (other than cash in lieu of fractional shares). In addition, if we are party to a consolidation, merger or binding share exchange pursuant to which our common stock would be converted into cash or property other than securities, a holder may surrender debentures for conversion at any time from and after the date that is 15 days prior to the anticipated effective date of the transaction until 15 days after the actual effective date of such transaction. If we engage in certain reclassifications of our common stock or are a party to a consolidation, merger, binding share exchange or transfer of all or substantially all of our assets pursuant to which our common stock is converted into cash, securities or other property, then at the effective time of the transaction, the right to convert a debenture into our common stock will be changed into a right to convert a debenture into the kind and amount of cash, securities or other property that the holder would have received if the holder had converted its debentures immediately prior to the applicable record date for such transaction ("acquiror securities"). If the transaction also constitutes a change of control, as defined below, a holder can require us to purchase all or a portion of its debentures as described below under "-- Repurchase at Option of Holders Upon a Change of Control." The "market price condition" shall be satisfied if at any time the last reported sale price of our common stock for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading 23 day of the prior fiscal quarter is greater than 120% of the applicable conversion price as in effect on the last trading day of the prior fiscal quarter. The "last reported sale price" of our common stock on any date means the closing sale price per share (or if no closing sale price is reported, the average of the bid and asked prices or, if more than one in either case, the average of the average bid and the average asked prices) on such date as reported by The NASDAQ National Market or, if our common stock is not reported by The NASDAQ National Market, as reported in composite transactions for the principal U.S. securities exchange on which our common stock is traded. If our common stock is not reported by The NASDAQ National Market and not listed for trading on a U.S. national or regional securities exchange on the relevant date, the "last reported sale price" will be the last quoted bid price for our common stock in the over-the-counter market on the relevant date as reported by the National Quotation Bureau Incorporated or similar organization. If our common stock is not so quoted, the "last reported sale price" will be the average of the mid-point of the last bid and asked prices for our common stock on the relevant date quoted by each of at least three independent nationally recognized investment banking firms selected by us for this purpose. A "trading day" is a day during which trading in securities generally occurs on The NASDAQ National Market or, if our common stock is not then listed on The NASDAQ National Market, on the principal other U.S. national or regional securities exchange on which our common stock is then listed or, if our common stock is not then listed on a national or regional securities exchange, on the principal other market on which our common stock is then traded. The "trading price condition" shall be satisfied if the trading price per $1,000 principal amount of debentures for any five (5) consecutive trading day period (the "measurement period") as determined following a request by a holder of debentures in accordance with the procedures described below, for each day of that measurement period was less than 95% of the product of the last reported sale price of our common stock and the conversion rate for such date (i.e. the number of shares of our common stock $1,000 principal amount of debentures are then convertible into) (the "parity value"); provided, that if, on the date of any conversion pursuant to the trading price condition, the last reported sale price of our common shares is between 100% and 120% of the then current conversion price of the debentures, you will receive, in lieu of our common shares based on the conversion rate, common stock with a value equal to the principal amount of your debentures plus accrued and unpaid interest and accrued and unpaid additional interest and contingent interest, if any, as of the conversion date (a "principal value conversion"). Our common stock delivered upon a principal value conversion will be valued at the greater of the conversion price on the conversion date and the last reported sale price on the third trading day after the conversion date. In connection with any conversion upon satisfaction of the trading price condition, the trustee (or other conversion agent appointed by us) shall have no obligation to determine the trading price of the debentures unless we have requested such determination; and we shall have no obligation to make such request unless a holder of debentures provides us with reasonable evidence that the trading price for $1,000 principal amount of debentures would be less than the parity value. At such time, we shall instruct the trustee or conversion agent, as the case may be, to determine the trading price of the debentures beginning on the next trading day and on each successive trading day until, and only until, the trading price for $1,000 principal amount of debentures is greater than or equal to the parity value. A "dividend payment period" shall commence on each date on which we have announced that we will (i) issue a below market issuance, (ii) distribute a cash dividend or an asset distribution (each as defined under "-- Conversion Price Adjustments -- General"), which distribution has a per share value as determined in good faith by our board of directors exceeding 10% of the last reported sale price of our common stock on the trading day immediately preceding the declaration date for such distribution or (iii) have commenced a tender offer (as defined below), and end on the earlier of (a) the close of business on the business day immediately prior to the ex-dividend date with respect to such distribution or dividend (or in the case of a tender offer, at the close of business on the business day immediately prior to the expiration of the tender offer) and (b) the close of business on the first business day after the day on which we make a public 24 announcement that such distribution or dividend will not be issued or that such tender offer has been terminated. We will give notice to the holders of record of the debentures of the pending occurrence of each below market issuance, cash dividend and asset distribution not less than twenty (20) business days prior to the ex-dividend date for such distribution and we will give notice to the holders of record of the debentures of the occurrence of each change of control within twenty (20) business days after our obtaining knowledge of such occurrence of a change of control. The terms of the debentures provide that a holder of debentures wishing to exercise its conversion right shall surrender such debentures, together with an irrevocable conversion notice, to the conversion agent (initially the trustee) (the "conversion agent"), which shall, on behalf of such holder, immediately convert such debentures into our common stock. Holders may obtain copies of the required form of the conversion notice from the conversion agent. So long as a book-entry system for the debentures is in effect, however, procedures for converting the debentures into shares of our common stock may differ, as described under "-- Book-Entry; Delivery and Form" and "-- The Global Debentures." No fractional shares of our common stock will be issued as a result of conversion, but in lieu thereof such fractional interest will be paid by us in cash based on the market price of our common stock on the date such debentures are surrendered for conversion. CONVERSION PRICE ADJUSTMENTS -- GENERAL The conversion price is subject to adjustment (under formulae set forth in the indenture) from time to time in certain events, including: (i) the issuance of shares of our common stock as a dividend or distribution to all or substantially all holders of shares of our common stock; (ii) certain subdivisions and combinations of our common stock; (iii) the issuance to all or substantially all holders of our common stock of certain rights or warrants to purchase our common stock at less than the then current market price (a "below market issuance"); (iv) the distribution to all or substantially all holders of our common stock of (A) our equity securities (other than our common stock), (B) evidences of our indebtedness and/or (C) other assets (including securities, but excluding (1) any rights or warrants referred to in clause (iii) above, (2) any rights or warrants to acquire any capital stock of any entity other than us, (3) any dividends or distributions in connection with our liquidation, dissolution or winding-up, (4) any dividends payable solely in cash that may from time to time be declared by our board of directors and (5) any dividends or distributions referred to in clause (i) above) (each of (A), (B) and (C), an "asset distribution"), in which case, the conversion price shall be adjusted so that the adjusted conversion price shall equal the number determined by multiplying the conversion price in effect on the record date with respect to the asset distribution by the fraction of "A/B," where "A" is equal to the last reported sale price (as defined above) of our common stock on such record date minus the fair market value on such record date (as determined in good faith by our board of directors, whose determination shall be conclusive evidence of such fair market value) of the portion of the asset distribution applicable to one share of our common stock, and "B" is equal to such last reported sale price; (v) distributions or dividends to all or substantially all holders of our common stock, consisting of cash (a "cash dividend") that when combined with all other cash dividends paid within the calendar year during which such cash dividend is paid exceeds $4.00 per share of common stock (appropriately adjusted from time to time for any stock dividends on or subdivisions or combinations of or other similar events with respect to our common stock) (the amount of such excess, the "excess dividend"), in which case, the conversion price shall be reduced so that the adjusted conversion price shall equal the number determined by multiplying the conversion price in effect on the record date with respect to the cash dividend by the fraction of "B/A," where "A" is equal to the last reported sale price of our common stock 25 on such record date, and "B" is equal to such last reported sale price minus the amount of excess dividend applicable to one share of our then outstanding common stock; and (vi) payment in respect of a tender or exchange offer by us or any of our subsidiaries for our common stock to the extent that the cash and fair market value of any other consideration included in such payment per share of our common stock exceed the first reported sale price per share of our common stock on the trading day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer (such a tender or exchange offer, a "tender offer"). If an adjustment is required to be made as set forth in clause (vi) above, such adjustment would be calculated based upon the amount by which the aggregate consideration paid for our common stock acquired in the tender offer exceeds the value of such shares based on the first reported sale price of our common stock on the trading day next succeeding the expiration time. With respect to clauses (iv) and (v) above, no adjustment to the conversion price will be made if we provide that holders of debentures will participate in the asset distribution or the cash dividend, as applicable, on an as-converted basis without conversion. Furthermore, if the numerator of the fraction described in the second sentence of clauses (iv) and (v) above is less than $1.00 (including a negative amount) then in lieu of any adjustment of the conversion price, we will make adequate provision so that each holder of debentures shall have the right to receive upon conversion, in addition to the shares of common stock issuable upon such conversion, the distribution or dividend such holder would have received had such holder converted such debentures immediately prior to the record date for such distribution or dividend. In the case where the indenture provides that a conversion price adjustment is effective upon the record date for a distribution or dividend, if the distribution or dividend is not so paid or made, the conversion price will again be adjusted to be the conversion price that would then be in effect if such distribution or dividend had not been declared. No adjustment in the conversion price will be required unless the adjustment would require a change of at least 1% in the conversion price then in effect; provided, however, that any adjustment that would otherwise be required to be made shall be carried forward and taken into account in any subsequent adjustment. We may, from time to time, to the extent permitted by law and The NASDAQ Stock Market Marketplace Rules, reduce the conversion price by any amount for any period of at least 20 business days, in which case we will give at least fifteen (15) days' notice of such reduction. In particular, we may, at our option, make such reduction in the conversion price, in addition to those set forth above, as we deem advisable to avoid or diminish any income tax to holders of our common stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for tax purposes or for any other reasons. See "Certain United States Federal Income Tax Consequences." Conversion price adjustments may, in certain circumstances, result in constructive distributions that could be taxable as dividends under the Internal Revenue Code of 1986, as amended (the "Code"), to holders of debentures or to holders of our common stock issued upon conversion thereof. See "Certain United States Federal Income Tax Consequences." Conversions of the debentures may be effected by delivering them to our office or agency maintained for such purpose in the Borough of Manhattan, The City of New York. OPTIONAL REDEMPTION Except as provided below, the debentures may not be redeemed prior to October 15, 2013. We have the right to redeem the debentures, in whole or in part, from time to time, on or after October 15, 2013, upon not less than 30 nor more than 60 days' notice, at 100% of the principal amount thereof together with accrued and unpaid interest, including interest on any unpaid interest at the rate specified for the debenture, compounded semi-annually (together with any unpaid contingent interest, "compounded interest") to, but excluding, the redemption date. If the debentures are redeemed on any interest payment date, accrued and unpaid interest shall be payable to holders of record on the relevant record date. 26 We may not redeem any debentures unless all accrued and unpaid interest thereon, including compounded interest, has been or is simultaneously paid for all semi-annual periods terminating on or prior to the date of notice of redemption. If we give a notice of redemption in respect of debentures (which notice will be irrevocable), then, by 12:00 noon, New York City time, on the redemption date, we will deposit irrevocably with the trustee funds sufficient to pay the applicable redemption price and will give irrevocable instructions and authority to pay such redemption price to the holders of the debentures. If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit, interest will cease to accrue on the debentures called for redemption, such debentures will no longer be deemed to be outstanding and all rights of holders of such debentures so called for redemption will cease, except the right of the holders of such debentures to receive the applicable redemption price, but without interest on such redemption price. If any date fixed for redemption of debentures is not a business day, then payment of the redemption price payable on such date will be made on the next succeeding day that is a business day (and without any interest or other payment in respect of any such delay) except that, if such business day falls in the next calendar year, such payment will be made on the immediately preceding business day, in each case with the same force and effect as if made on such date fixed for redemption. If we fail to repay the debentures on maturity or the date fixed for this redemption, or if payment of the redemption price in respect of debentures is improperly withheld or refused and not paid by us, interest on such debentures will continue to accrue, from the original redemption date to the date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the applicable redemption price. If we decide to redeem fewer than all the outstanding debentures, the trustee will select the debentures to be redeemed (in principal amounts of $1,000 or integral multiples thereof) by lot, or on a pro rata basis or by another method the trustee considers fair and appropriate. If the trustee selects a portion of your debenture for partial redemption and you convert a portion of the same debenture, the converted portion will be deemed to be from the portion selected for redemption. In the event of any redemption in part, we shall not be required to (i) issue, register the transfer of or exchange any debentures during a period beginning at the opening of business 15 days before any selection for redemption of debentures and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all holders of debentures to be redeemed and (ii) register the transfer of or exchange any debentures so selected for redemption, in whole or in part, except the unredeemed portion of any debentures being redeemed in part. REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE OF CONTROL If a change of control (as defined below in this section) occurs at any time prior to the maturity date, you will have the right, at your option, to require us to repurchase your debentures, or any portion of the principal amount thereof that is equal to $1,000 or an integral multiple of $1,000. The change of control repurchase price we are required to pay is equal to 100% of the principal amount of the debentures to be purchased plus accrued and unpaid interest (including additional amounts, if any) to but excluding the change of control repurchase date. Instead of paying the change of control repurchase price in cash, we may elect (which election shall be irrevocable) to pay the change of control repurchase price in shares of our common stock, acquiror securities that are publicly traded securities (as defined below), or a combination of cash, shares of our common stock and such publicly traded acquiror securities by so stating in the change of control notice to be delivered within 20 business days after our obtaining knowledge of the occurrence of a change of control, as described below. In such event, the number of shares of our common stock or acquiror securities a holder will receive will equal the portion of the repurchase price payable in such shares divided by 95% of the average of the last reported sale price of our common stock or acquiror securities that are publicly traded securities, as the case may be, for the five (5) days immediately preceding and including the third trading day prior to the repurchase date. However, we may not pay the repurchase price in our common stock or acquiror securities if an event of 27 default (as described under "-- Events of Default") has occurred or is continuing and unless we satisfy certain other conditions prior to the repurchase date as set forth in the indenture. A "change of control" will be deemed to have occurred if any of the following occurs at the time after the debentures are originally issued: - a "person" or "group" within the meaning of Section 13(d) of the Exchange Act (other than us, our subsidiaries, our or their employee benefit plans or a permitted holder (as defined below)) becomes the direct or indirect "beneficial owner," within the meaning of Rule 13d-3 under the Exchange Act, of more than 50% of the total voting power of all shares of our capital stock that are entitled to vote generally in the election of directors; - consummation of any share exchange, consolidation or merger of us or any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of us and our subsidiaries, taken as a whole, to any person other than us, one or more of our subsidiaries or a permitted holder, pursuant to which our common stock will be converted into cash, securities or other property; provided, however, that a transaction where the holders of our voting capital stock immediately prior to such transaction have, directly or indirectly, more than 50% of the aggregate voting power of all shares of capital stock of the continuing or surviving corporation or transferee entitled to vote generally in the election of directors immediately after such event shall not be a change of control; or - the approval by the holders of our capital stock of any plan or proposal for our liquidation or dissolution; provided that for purposes of the provisions described under this section entitled "-- Repurchase at Option of Holders Upon a Change of Control," a change of control will not be deemed to have occurred if either: - the last reported sale price of our common stock for any five trading days within the 10 consecutive trading days ending immediately before the later of the change of control or the public announcement thereof, equals or exceeds 105% of the applicable conversion price of the debentures immediately before the change of control or the public announcement thereof; or - not less than 90% of the consideration, excluding cash payments for fractional shares, in the transaction or transactions constituting the change of control consists of shares of capital stock traded on a U.S. national securities exchange or quoted on The NASDAQ National Market or which will be so traded or quoted when issued or exchanged in connection with a change of control (such securities being referred to as "publicly traded securities") and as a result of this transaction or transactions the debentures become convertible into such publicly traded securities, excluding cash payments for fractional shares. For purposes of the above paragraph the term "capital stock" of any person means any and all shares, interests, participations or other equivalents however designated of corporate stock or other equity participations, including partnership interests, whether general or limited, of such person and any rights (other than debt securities convertible or exchangeable into an equity interest), warrants or options to acquire an equity interest in such person. "Permitted holder" means (i) Edward H. Meyer (or, in the event of his incompetence or death, his estate, heirs, testamentary trusts (as well as the trustees and beneficiaries in respect of any such trust), executor, administrator, committee or other personal representative (collectively, "heirs")) or any person controlled, directly or indirectly, by Edward H. Meyer or any heirs, (ii) any of Edward H. Meyer's immediate family members, including his spouse, or any of his lineal descendants, (iii) any trust in which one or more of the persons described in clause (i) or (ii) holds substantially all of the beneficial interests therein, (iv) until October 15, 2004, Ariel Capital Management, Inc., (v) the Voting Trust formed by the Voting Trust Agreement, (vi) any trustee or beneficiary under the Voting Trust Agreement, (vii) any of Grey's employee stock ownership plans or trusts or similar plans or trusts or any persons or entities having voting or dispositive power with respect to the assets of any such plan or trust or (viii) any affiliate of the foregoing. 28 "Voting Trust Agreement" means the Voting Trust Agreement, dated as of February 24, 1986, among Edward H. Meyer (the voting trustee), Grey and the beneficiaries of the Voting Trust Agreement, as such Voting Trust Agreement has been and may be amended, restated, supplemented, extended, replaced or otherwise modified from time to time. Within 20 business days after our obtaining knowledge of the occurrence of a change of control, we will provide to all holders of the debentures and the trustee and paying agent a notice of the occurrence of the change of control and of the resulting repurchase right. Such notice shall state, among other things: - the events causing a change of control; - the date of the change of control; - the change of control repurchase price - the last date on which a holder may exercise the change of control repurchase right; - the change of control repurchase date; - whether we will pay the purchase price in cash, shares of our common stock, acquiror securities or a combination thereof, specifying the percentage of each; - the name and address of the paying agent and the conversion agent; - the applicable conversion rate and any adjustments to the applicable conversion rate; - that the debentures with respect to which a change of control repurchase election has been given by the holder may be converted only if the holder withdraws the change of control repurchase election in accordance with the terms of the indenture; and - the procedure that holders must follow to require us to repurchase their debentures. To exercise the repurchase right, you must deliver prior to the close of business on the 20th business day following the date of our notice of the occurrence of a change of control, subject to extension to comply with applicable law, the debentures to be repurchased, duly endorsed for transfer, together with a written change of control repurchase election and the form entitled "Form of Change of Control Repurchase Notice" on the reverse side of the debentures duly completed, to the paying agent. Your change of control repurchase election must state: - the certificate numbers of the debentures to be delivered for repurchase; - the portion of the principal amount of debentures to be repurchased, which must be $1,000 or an integral multiple thereof; and - that the debentures are to be repurchased by us pursuant to the applicable provisions of the debentures and the indenture. For a discussion of the tax treatment of a holder exercising the right to require us to purchase debentures, see "Certain United States Federal Income Tax Consequences." If your debentures are held through DTC, your notice must comply with appropriate DTC procedures. No debentures may be repurchased at the option of holders upon a change of control if there has occurred and is continuing an event of default other than an event of default that is cured by the payment of the change of control repurchase price of the debentures. You may withdraw any change of control repurchase election (in whole or in part) by delivering a written notice of withdrawal to the paying agent prior to the close of business on the 20th business day following the date of our notice of the occurrence of a change of control. The notice of withdrawal must state: - the principal amount of the withdrawn debentures; 29 - if certificated debentures have been issued, the certificate numbers of the withdrawn debentures; and - the principal amount, if any, which remains subject to the change of control repurchase notice. If your debentures are held through DTC, your notice must comply with appropriate DTC procedures. To receive payment of the change of control repurchase price, you must either effect book-entry transfer of your debentures or deliver your debentures, together with necessary endorsements, to the office of the paying agent after delivery of your change of control repurchase notice. Payment of the change of control repurchase price for debentures will be made promptly following the later of the change of control repurchase date and the time of book-entry transfer or delivery of the debentures. We will be required to repurchase the debentures no later than the 30th business day after the date of our notice of the occurrence of the relevant change of control. If the paying agent holds money or securities sufficient to pay the change of control repurchase price of the debentures on the business day following the change of control repurchase date, then, on and after such date: - the debentures will cease to be outstanding and interest will cease to accrue (whether or not book-entry transfer of the debentures has been made or the debentures have been delivered to the paying agent); and - all other rights of the holders will terminate (other than the right to receive the change of control repurchase price upon transfer or delivery of the debentures). The rights of the holders to require us to repurchase their debentures upon a change of control could discourage a potential acquirer of us. The change of control repurchase feature, however, is not the result of management's knowledge of any specific effort to accumulate shares of our common stock, to obtain control of us by any means or part of a plan by management to adopt a series of anti-takeover provisions. Instead, the change of control repurchase feature is a standard term contained in other offerings of debt securities similar to the debentures that have been marketed by the initial purchasers. The terms of the change of control repurchase feature resulted from negotiations between the initial purchasers and us. The term "change of control" is limited to specific transactions and may not include other events that might adversely affect our financial condition. In addition, the requirement that we offer to repurchase the debentures upon a change of control may not protect holders in the event of a highly leveraged transaction, reorganization, merger or similar transaction involving us. The definition of change of control includes a phrase relating to the conveyance, transfer, sale, lease or disposition of "all or substantially all" of our consolidated assets. There is no precise, established definition of the phrase "substantially all" under applicable law. Accordingly, the ability of a holder of the debentures to require us to repurchase its debentures as a result of the conveyance, transfer, sale, lease or other disposition of less than all of our assets may be uncertain. If a change of control were to occur, we may not have enough funds to pay the change of control repurchase price. If we are obligated to make a change of control offer, there can be no assurance that we will be able to obtain all required consents from the holders of our senior debt to allow repurchase of the debentures. If we fail to repurchase the debentures when required following a change of control, we will be in default under the indenture. In addition, we have, and may in the future incur, other indebtedness (including our existing credit facility) with similar change of control provisions permitting our creditors to accelerate or to require us to purchase our indebtedness upon the occurrence of similar events or on some specific dates. Notwithstanding the foregoing, we will not be required to make a change of control offer upon a change of control if a third party makes the change of control offer in the manner, at the times and otherwise in compliance with the requirements set forth in the indenture applicable to a change of control offer made by us. In addition, we will not be required to make a change of control offer, as provided above, if, in connection with or in contemplation of any change of control, we have made an offer to purchase (an "alternate offer") any and all debentures validly tendered at a cash price equal to or higher than the change of control purchase price and have purchased all debentures properly tendered in accordance with the terms of such alternate 30 offer; provided, however, that the terms and conditions of such contemplated change of control are described in reasonable detail to the holders in the notice delivered in connection with such alternate offer. MERGERS AND SALES OF ASSETS BY US We will not consolidate with or merge into any other person or convey, transfer, sell or lease our properties and assets substantially as an entirety to any person, unless: - the person formed by such consolidation or into or with which we are merged or the person to which our properties and assets are conveyed, transferred, sold or leased, is a corporation organized and existing under the laws of the United States, any State thereof or the District of Columbia and, if other than us, has expressly assumed all of our obligations, including the payment of the principal of, and interest on, the debentures and the performance of the other covenants under the indenture; and - immediately after giving effect to such transaction, no event of default, and no event which, after notice or lapse of time or both, would become an event of default, has occurred and is continuing under the indenture. In the case of any consolidation, merger or any conveyance, transfer or lease of our properties and assets as described in and in accordance with the provisions of the preceding paragraph, the successor company will be our successor and shall succeed to, and be substituted for, and may exercise every right and power of, Grey under the indenture. If the predecessor is still in existence after the transaction, it will be released from its obligations and covenants under the indenture and the debentures, except in the case of a lease of all or substantially all of our properties and assets. EVENTS OF DEFAULT The following are events of default in respect of the debentures: (a) failure for 30 days to pay interest on the debentures when due, whether or not such payment is prohibited by the subordination provisions of the indenture; provided that a valid extension of the interest payment period by us during an extension period pursuant to the indenture shall not constitute a default in the payment of interest for this purpose; (b) failure to pay principal on the debentures when due whether at maturity, upon redemption, by declaration or otherwise, whether or not such payment is prohibited by the subordination provisions of the indenture; (c) failure to observe or perform any other covenant contained in the indenture for 90 days after written notice to us of such failure from the trustee or the holders of at least 25% in principal amount of the outstanding debentures; (d) our failure to comply with the provisions described under "-- Repurchase at Option of Holders Upon a Change of Control" or "-- Merger and Sales of Assets by Us"; (e) a default in our indebtedness with an aggregate amount outstanding in excess of $25.0 million (a) resulting from the failure to pay principal at maturity or (b) as a result of which the maturity of such indebtedness has been accelerated prior to its stated maturity; (f) our failure to pay final judgments aggregating in excess of $25.0 million, which judgments are not paid, discharged or stayed for a period of not less than 60 days; or (g) certain events in bankruptcy, insolvency or reorganization of us. In each and every such case, unless the principal of all the debentures shall have already become due and payable, either the trustee or the holders of not less than 25% in aggregate principal amount of the debentures then outstanding, by notice in writing to us (and to the trustee if given by such holders), may declare the principal of all the debentures to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable. 31 The holders of a majority in aggregate outstanding principal amount of the debentures have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee. The holders of a majority in aggregate outstanding principal amount of the debentures may, on behalf of the holders of all the debentures, waive any past default, except a default in the payment of principal or interest (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal otherwise than by acceleration has been deposited with the trustee) or a call for redemption of debentures. We are required to file annually with the trustee a certificate as to whether or not we are in compliance with all the conditions and covenants under the indenture. MODIFICATION AND WAIVER From time to time, we and the trustee may, without the consent of holders, amend the indenture or the debentures, or supplement the indenture, for certain specified purposes, including: - to provide that the surviving entity following a change of control of us permitted under the indenture shall assume all of our obligations under the indenture and debentures; - to provide for uncertificated debentures in addition to certificated debentures; - to comply with any requirements under the Trust Indenture Act of 1939; - to cure any ambiguity, defect or inconsistency, or make any other change that does not adversely affect the rights of any holder; and - to appoint a successor trustee under the indenture. From time to time we and the trustee may, with the consent of holders of at least a majority in principal amount of the outstanding debentures, amend or supplement the indenture or the debentures, or waive compliance in a particular instance by us with any provision of the indenture or the debentures; but without the consent of each holder affected by such action, we may not modify or supplement the indenture or the debentures or waive compliance with any provision of the indenture or the debentures in order to: - reduce the amount of debentures whose holders must consent to an amendment, supplement or waiver to the indenture or the debentures; - reduce the rate of or change the time for payment of interest or the applicable redemption dates; - reduce the principal of or change the stated maturity of any debenture; - make any debenture payable in currency other than that stated in the debenture; - change the amount or time of any payment required after the obligation to make such payment arises or change the time before which no repurchase may be made; - waive the right of such holder to receive payment of the principal of or interest on any debenture, or any repurchase payment when due; - impair the right of any holder to convert any debenture; - impair the right to bring a suit to enforce the right to receive payment on any debenture; - modify the provisions of the indenture relating to our requirement to repurchase the debentures upon a change of control after the occurrence thereof; - modify the subordination provisions of the indenture in a manner that adversely affects the rights of such holder; or - take any other action otherwise prohibited by the indenture to be taken without the consent of each holder affected by such action. 32 NOTICES As long as we issue the debentures in global form, notices to be given to holders will be given to DTC, in accordance with its applicable policies as in effect from time to time. If we issue the debentures in non-global form, notices to holders will be given by mail to the addresses of the holders as they appear in the security register. Notices will be deemed to have been given three business days after the mailing of the notice. SATISFACTION AND DISCHARGE OF THE INDENTURE The indenture will generally cease to be of any further effect with respect to the debentures, if: - we have delivered to the trustee for cancellation all outstanding debentures (with certain limited exceptions), or - all debentures not previously delivered to the trustee for cancellation have become due and payable, whether at stated maturity or any redemption date or any purchase date, or upon conversion or otherwise, and we have deposited with the trustee as trust funds the entire amount in cash and/or our common shares (as applicable under the terms of the indenture) sufficient to pay all the outstanding debentures, and if, in either case, we also pay or cause to be paid all other sums payable under the indenture by us. DEFEASANCE The debentures are not subject to defeasance. GOVERNING LAW The indenture and the debentures are governed by and construed in accordance with the laws of the State of New York. THE TRUSTEE In case an event of default has occurred, and has not been cured, the trustee will be required to use the degree of care of a prudent person in the conduct of his own affairs in the exercise of its powers. However, the trustee will have no obligation to exercise any of its rights or powers under the indenture at the request of the holders, unless they have offered to the trustee reasonable security or indemnity. The indenture and the Trust Indenture Act contain limitations on the rights of the trustee, should the trustee become our creditor, to obtain payments of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. Subject to the Trust Indenture Act, the trustee is permitted to engage in other transactions with us or any of our affiliates. If, however, the trustee acquires any conflicting interest as described in the Trust Indenture Act, it must eliminate the conflict or resign. American Stock Transfer & Trust Company acts as the trustee for the debentures. TRANSFER AGENT AND REGISTRAR American Stock Transfer & Trust Company acts as the transfer agent and registrar for our common stock. See "Description of Capital Stock." BOOK-ENTRY SYSTEM; DELIVERY AND FORM The certificates representing the debentures were issued in fully registered form. The debentures were resold by the initial purchasers in reliance on Rule 144A of the Securities Act of 1933, as amended ("Rule 144A") and are represented by one or more single, permanent global debenture in definitive, fully registered form (the "global debentures") and were deposited with the trustee as custodian for DTC and registered in the name of a nominee of DTC. Except in the limited circumstances described under "-- The 33 Global Debentures," owners of beneficial interests in the global debentures will not be entitled to receive physical delivery of certificated debentures. The debentures are not issuable in bearer form. THE GLOBAL DEBENTURES Upon the issuance of the global debentures, DTC or its custodian credited, on its internal system, the respective principal amount of the individual beneficial interests represented by such global debentures to the accounts of persons who had accounts with such depositary. Ownership of beneficial interests in the global debentures are limited to persons who have accounts with DTC ("participants") or persons who hold interests through participants. Ownership of beneficial interests in the global debentures are shown on, and the transfer of that ownership are effected only through, records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interest of persons other than participants). Qualified institutional buyers may hold their interest in the global debentures directly through DTC if they are participants in such system, or indirectly through organizations that are participants in such system. So long as DTC, or its nominee, is the registered owner or holder of the global debentures, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the debentures represented by such global debentures for all purposes. No beneficial owner of an interest in the global debentures will be able to transfer that interest except in accordance with DTC's applicable procedures and, if applicable, those of Euroclear and Cedel. Payments of the principal of, and interest on, the global debentures are made to DTC or its nominee, as the case may be, as the registered owner thereof. Neither us nor any paying agent has any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the global debentures or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. We expect that DTC or its nominee, upon receipt of any payment of principal or interest in respect of the global debentures, will credit participants' accounts with payments in accounts proportionate to their respective beneficial interests in the principal amount of the global debentures as shown on the records of DTC or its nominee. We also expect that payments by participants to owners of beneficial interests in the global debentures held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the name of nominees for such customers. Such payments will be the responsibility of such participants. Transfers between participants in DTC are effected in the ordinary way in accordance with DTC rules and are settled in same-day funds. If a holder requires physical delivery of a certificated debenture for any reason, including to sell debentures to persons in states that require such delivery of such debentures or to pledge such debentures, such holder must transfer its interest in the global debentures in accordance with the normal procedures of DTC. Transfers between participants in Euroclear and Cedel are effected in the ordinary way in accordance with their respective rules and operating procedures. DTC has advised us that it will take any action permitted to be taken by a holder of debentures (including the presentation of debentures for exchange as described below) only at the direction of one or more participants to whose accounts the DTC interests in the global debentures is credited and only in respect of such portion of the aggregate principal amount of debentures as to which such participant or participants has or have given such direction. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of securities in definitive form. Such laws may impair the ability to transfer beneficial interests in the global debentures as represented by a global certificate. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as 34 amended (the "Exchange Act"). DTC holds securities that its participants ("participants") deposit with DTC. DTC also facilitates the settlement among participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in participants' accounts, thereby eliminating the need for physical movement of securities certification. direct participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations ("direct participants"). DTC is owned by a number of its direct participants and by The NASDAQ National Market, the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC System is also available to others, such as securities brokers and dealers, banks and trust companies that clear transactions through or maintain a direct or indirect custodial relationship with a direct participant either directly or indirectly ("indirect participants"). The rules applicable to DTC and its participants are on file with the Commission. Conversion and redemption notices, as well as notices required pursuant to the registration rights agreement, shall be sent to DTC or its nominee. If less than all of the debentures of a direct participant are being converted or redeemed, DTC or such nominee will reduce the amount of the interest of each direct participant in such debentures in accordance with its normal procedures. Although voting with respect to the debentures is limited, in those cases where a vote is required, neither DTC nor its nominee will itself consent or vote with respect to debentures. Under its usual procedures, DTC would mail an Omnibus Proxy to the trustee as soon as possible after the record date. The Omnibus Proxy assigns consenting or voting rights to those direct participants to whose accounts the debentures are credited on the record date (identified in a listing attached to the Omnibus Proxy). We believe that the arrangements among DTC, direct and indirect participants, and beneficial owners will enable the beneficial owners to exercise rights equivalent in substance to the rights that can be directly exercised by a holder of a beneficial interest in the debentures. Although DTC, Euroclear and Cedel have agreed to the foregoing procedures in order to facilitate transfers of interest in the global debentures among participants of DTC, Euroclear and Cedel, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither we nor the trustee has any responsibility for the performance by DTC, Euroclear or Cedel or their respective obligations under the rules and procedures governing their operations. If DTC discontinues being the depositary and a successor depositary is not obtained, certificates for the debentures are required to be printed and delivered. Additionally, we may decide to discontinue use of the system of book-entry transfers through DTC (or any successor depositary) with respect to the debentures. In that event, certificates for the debentures will be printed and delivered. The information in this section concerning DTC, Euroclear and Cedel and DTC's book-entry system has been obtained from sources we believe to be reliable, but we take no responsibility for the accuracy thereof. Neither we, the trustee nor any of their respective agents will have any responsibility for the performance by DTC or its participants of their obligations under the rules and procedures governing DTC's operations, including maintaining, supervising or reviewing any of DTC's or such participants' records relating to, or payments made on account of, beneficial ownership interests in global debentures. NO PERSONAL LIABILITY OF STOCKHOLDERS, EMPLOYEES, OFFICERS, DIRECTORS None of our, or of any successor entity's direct or indirect stockholders, employees, officers or directors, as such, past, present or future, have any personal liability in respect of our obligations under the indenture or the debentures solely by reason of his or its status as such stockholder, employee, officer or director. REGISTRATION RIGHTS On October 28, 2003, we entered into a registration rights agreement with the initial purchasers, for the benefit of the holders of the debentures, pursuant to which we agreed to, at our cost, file on or before the 90th day following the date of original issuance of the debentures a shelf registration statement, of which this prospectus is a part, with respect to resales of the debentures and the shares of our common stock issuable 35 upon conversion of the debentures (the "registrable securities"), and use our reasonable best efforts to cause such shelf registration statement to become effective within 180 days following the date of the original issuance of the debentures, and to keep such registration statement effective until the earlier of (i) the sale pursuant to such registration statement or Rule 144 under the Securities Act of all the registrable securities and (ii) two years after the date of the original issuance of the debentures. Holders will be required to provide certain information to us to be included in the registration statement in order to use the prospectus for resales. We shall provide to each holder copies of the prospectus, notify each holder when such registration statement has become effective and take certain other actions as are required to permit resales. This prospectus is part of the shelf registration statement we agreed to file. In the event that (i) the shelf registration statement is not declared effective on or prior to the 180th day following the date of original issuance of the debentures or (ii) if use of the shelf registration statement for resales is suspended for any time (other than during a blackout period (as defined below)) during the two-year period after the date of original issuance of the debentures, then additional interest (in addition to amounts otherwise due on the debentures) will accrue at an annual rate of 0.25% if clause (i) applies from the 181st day following the date of original issuance of the debentures until such registration statement is declared effective and if clause (ii) applies, then during the period use is so suspended. The right to receive additional interest is the sole and exclusive remedy to the debenture holders for breach by us of our registration obligations. A "blackout period" means a period of time not to exceed 45 days in any 90-day period, and not to exceed an aggregate of 120 days in any 365-day period, during which we suspend the effectiveness of any registration statement and the use of the prospectus included in any registration statement referred to above (1) under certain circumstances relating to pending corporate developments, including but not limited to acquisitions, divestitures, dispositions and financings, public filings with the Commission and similar events or (2) the occurrence of any other event that would require disclosure of material non-public information by us as to which we have a bona fide business purpose for preserving confidentiality; provided, that, so long as registrable securities are outstanding, we shall provide the trustee with prompt written notice of the commencement of and prompt written notice of the termination of each such blackout period; provided further, however, that we need not specify the nature of the event giving rise to a blackout period in any such notice to the trustee. Only holders of registrable securities who have been named in this prospectus and have satisfied certain other conditions will be entitled to receive any additional interest that may be payable because the shelf registration statement is not effective or usable in accordance with and during the periods specified in the registration rights agreement, other than the periods during which we are permitted to suspend registration. Upon any sale or other transfer of any debentures or shares of common stock issued upon conversion of debentures pursuant to the registration statement of which this prospectus is a part, such debentures or shares of common stock, as the case may be, will cease to be registrable securities, and our obligation to pay additional interest, if any, in respect of those debentures or shares of common stock will terminate. 36 DESCRIPTION OF CAPITAL STOCK Our authorized capital stock consists of 50,000,000 shares of common stock, par value $0.01 per share, 10,000,000 shares of Limited Duration Class B Common Stock, par value $0.01 per share, or Class B common stock, and 500,000 shares of preferred stock, par value $0.01 per share, of which there are three series, the Series I Preferred Stock, Series II Preferred Stock and Series III Preferred Stock. The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company. At September 30, 2003, 1,096,221 shares of common stock, 207,057 shares of Class B common stock, 20,000 shares of Series I Preferred Stock, 5,000 shares of Series II Preferred Stock and 5,000 shares of Series III Preferred Stock were outstanding. In addition to the summary of our capital stock that follows, we encourage you to review our certificate of incorporation and bylaws, which we have filed with the Commission. COMMON STOCK AND CLASS B COMMON STOCK Holders of shares of our common stock are entitled to one vote, and holders of shares of Class B common stock are entitled to ten votes, for each share held of record on all matters on which shareholders are generally entitled to vote. Holders of shares of our common stock and Class B common stock vote as a single class with the holders of any series of preferred stock entitled to vote on such matters, but vote separately as classes with respect to amendments to our certificate of incorporation that alter or change the powers, preferences or special rights of our common stock or Class B common stock to affect them adversely, and with respect to such other matters as may require class votes under the general corporation law of Delaware. The vote of the holders of a majority of the stock represented at a meeting at which a quorum is present is generally required to take shareholder action, unless a greater vote is required by law. Directors are elected by a plurality of the votes cast at any election. Our certificate of incorporation allows for cumulative voting of shares. The holder of each outstanding share of Class B common stock has the right at any time to convert such share into one fully paid and nonassessable share of our common stock. All outstanding shares of Class B common stock will automatically convert into shares of our common stock on April 3, 2006, unless extended. No holder of shares of Class B common stock may transfer such shares, whether by gift, bequest, appointment or otherwise, except to a permitted transferee. A permitted transferee means generally an affiliate of the Class B holder. Any purported transfer of shares of Class B common stock not permitted under our certificate of incorporation shall result in the automatic conversion of the shares of Class B common stock into shares of our common stock, effective on the date of the purported transfer. Holders of shares of our common stock and Class B common stock have no preemptive rights. Subject to the applicable laws and the rights of the holders of preferred stock, holders of shares of our common stock and Class B common stock are entitled to share equally in dividends as may be declared by our board of directors, except that, if dividends are declared that are payable in shares of common stock or Class B common stock, dividends shall be declared that are payable at the same rate on both classes of stock and the dividends payable in shares of our common stock shall be payable to holders of that class of stock and the dividends payable in shares of Class B common stock shall be payable to holders of that class of stock. Upon our dissolution, liquidation or winding up, the holders of shares of our common stock and Class B common stock are entitled to share ratably in our net assets remaining after the payment of all creditors and liquidation preferences of preferred stock. The terms of our common stock and Class B common stock do not provide for any sinking fund or redemption rights. The outstanding shares of our common stock and Class B common stock are duly authorized, validly issued, fully paid and nonassessable. The terms of our common stock do not provide for any conversion rights. PREFERRED STOCK We are authorized to issue 500,000 shares of preferred stock. Of the authorized preferred stock, 20,000 shares have been designated as the Series I Preferred Stock, 5,000 shares have been designated as the Series II Preferred Stock and 5,000 shares have been designated as the Series III Preferred Stock. All designated shares of the Series I Preferred Stock, the Series II Preferred Stock and the Series III Preferred Stock are outstanding. 37 Subject to the provisions of our certificate of incorporation, our board of directors, without further stockholder authorization, is authorized to establish, from time to time, one or more series of preferred stock and to fix the designations, powers, preferences and rights of the shares of each of these series and any qualifications, limitations or restrictions thereof, including dividend rights and preferences over dividends on our common stock, conversion rights, voting rights, redemption rights, the terms of any sinking fund therefor and rights upon liquidation. The ability of our board of directors to issue preferred stock, while providing flexibility in connection with financing, acquisitions and other corporate purposes, could have the effect of discouraging, deferring or preventing a change in control or an unsolicited acquisition proposal, since the issuance of preferred stock could be used to dilute the share ownership of a person or entity seeking to obtain control of us. In addition, because our board of directors has the power to establish the preferences, powers and rights of the shares of any of these series of preferred stock, it may afford the holders of any preferred stock preferences, powers and rights (including voting rights) senior to the rights of the holders of common stock, which could adversely affect the rights of holders of common stock. In most circumstances, upon the termination of the employment of the holder of preferred stock for reasons other than for cause, such holder has the option, for a twelve-month period after the date of termination, to have us redeem such holder's shares of preferred stock. If such holder is terminated for cause, then such holder must submit such holder's shares of the preferred stock for redemption. In addition, beginning in April 2004 or soon thereafter, a holder of preferred stock must submit at least one-third of such holder's shares for redemption, and must submit such holder's remaining shares of preferred stock in equal amounts upon the first and second anniversary date of such holder's submission for redemption of the original one-third of such holder's shares of preferred stock. In addition, in order for holders of Series II Preferred Stock and Series III Preferred Stock to have their shares redeemed, a certain number of shares (depending on the number of shares of Series II Preferred Stock and Series III Preferred Stock being submitted for redemption) of Series I Preferred Stock must be redeemed concurrently with the shares of Series II Preferred Stock and Series III Preferred Stock. SERIES I PREFERRED STOCK The holders of record of the Series I Preferred Stock are entitled to share equally in preferential and participating dividends as may be declared by our board of directors. Preferential dividends on each share of the Series I Preferred Stock are payable in equal amounts quarterly and are calculated at the annual rate of $.25 per share of Series I Preferred Stock. Our certificate of incorporation prevents it from declaring dividends upon our common stock and Class B common stock unless the full cumulative preferential dividends have been paid on the Series I Preferred Stock, as well as arrearages. In addition, in certain circumstances, when a declaration of a dividend upon our common stock and Class B common stock is made, there shall also be a participating dividend declared upon the Series I Preferred Stock. Upon our liquidation, dissolution or winding up, the holders of the Series I Preferred Stock are entitled to be paid out of our assets available for distribution to our stockholders an amount in cash equal to $1.00 per share, plus all accrued and unpaid preferential dividends, before any distribution or payment is made on our common stock or Class B common stock. The holders of the Series I Preferred Stock are entitled to eleven votes for each share held of record, and vote together as a class with holders of our common stock, Class B common stock and any other series of preferred stock who shall have the right and power to vote generally with the holders of our common stock, Class B common stock and Series I Preferred Stock. However, upon automatic conversion of the Class B common stock into shares of our common stock on April 3, 2006, the holders of the Series I Preferred Stock will be entitled to two votes per share thereafter. The holders of the Series I Preferred Stock are also entitled to special voting rights for the election and removal of directors and in voting situations relating to business combinations. See "-- Anti-takeover considerations -- Election of directors" and "-- Business combinations and limitations in the certificate of incorporation." However, upon the termination of the full-time employment of a holder of the Series I Preferred Stock by reason of cause, death, permanent disability or voluntary retirement, all such voting rights shall terminate. 38 A holder of the Series I Preferred Stock is entitled to assign, pledge, transfer or otherwise dispose of his shares of the Series I Preferred Stock only to a transferee holder, which is a corporation, the voting stock of which is wholly owned by such holder of the Series I Preferred Stock, or in the event of the death of such holder, the estate of such holder, any executor, administrator, legal representative or trustee thereof and any heir, distributee, devisee or legatee thereunder. Our certificate of incorporation prevents us, without the affirmative vote of a majority of the shares of the Series I Preferred Stock outstanding, from (i) creating, authorizing or issuing any shares of any class or series of stock ranking senior as to dividends or assets or otherwise to the Series I Preferred Stock or any shares of any class or series of stock ranking on parity as to dividends or assets or otherwise to the Series I Preferred Stock, (ii) reclassifying any authorized stock into any shares of senior stock or parity stock, (iii) creating, authorizing or issuing any obligation or security convertible into or evidencing the right to purchase any shares of senior stock or parity stock or (iv) amending, altering, supplementing or repealing any of the provisions of our certificate of incorporation so as to adversely affect the preferences, rights, powers or privileges given to the Series I Preferred Stock. SERIES II PREFERRED STOCK AND SERIES III PREFERRED STOCK The holders of the Series II Preferred Stock and the Series III Preferred Stock are generally entitled to the same rights as the holders of the Series I Preferred Stock, except that the holders of the Series II Preferred Stock and the Series III Preferred Stock are not entitled to the special voting rights for the election and removal of directors and in voting situations relating to business combinations described in "-- Anti-takeover considerations -- Election of directors" and "-- Business combinations and limitations in our certificate of incorporation." Currently, Edward H. Meyer, our chairman, president and chief executive officer, beneficially owns 100% of the Series I Preferred Stock, Series II Preferred Stock and Series III Preferred Stock. ANTI-TAKEOVER CONSIDERATIONS Our certificate of incorporation, by-laws, our employment agreement with Edward H. Meyer, our voting trust agreement and the laws of the State of Delaware contain a number of provisions that may have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring us. ELECTION OF DIRECTORS The holders of shares of our common stock, Class B common stock and the Series I Preferred Stock, together with the holders of shares of any other series of preferred stock who have the right to vote with the holders of our common stock, Class B common stock and the Series I Preferred Stock as a single class on the election and removal of directors, have the right, all voting as a single class, to elect a number of directors equal to three-fourths of the number of directors that shall constitute our entire board of directors (rounding up or down as necessary). Such holders also have the right to remove such directors, with or without cause, by the affirmative vote of the holders of not less than the number of shares entitled to vote thereon that, if voted cumulatively, would be sufficient to elect the entire class of directors of which such director is a part. The holders of shares of the Series I Preferred Stock entitled to vote such shares, together with the holders of shares of any other series of preferred stock who have the right to vote with the holders of the Series I Preferred Stock as a single class on the election and removal of directors, have the right, all voting as a single class, to elect a number of directors equal to one-fourth of the number of directors that shall constitute the entire board of directors (rounding up or down as necessary). Such holders also have the right to remove such directors, with or without cause, by the affirmative vote of the holders of not less than a majority of the shares entitled to vote thereon. 39 CLASSIFIED BOARD OF DIRECTORS Our by-laws divide our board of directors into three classes, as nearly equal in size as possible, with staggered three year terms, and provide that any vacancy on our board of directors may only be filled by vote of a majority of the directors then in office. TIE-BREAKING VOTE BY CHAIRMAN OF THE BOARD Our by-laws provide that in the event that a vote of our board of directors is tied, the chairman of the board is entitled to cast an additional vote. BUSINESS COMBINATIONS AND LIMITATIONS IN THE CERTIFICATE OF INCORPORATION Our certificate of incorporation provides that whenever the vote of stockholders is required to be taken by any provision of the General Corporation Law of Delaware in connection with a merger or consolidation of it or the sale, lease, exchange, or other disposition of all or substantially all of its assets, such action requires the concurrence of the holders of not less than two-thirds of our outstanding stock entitled to vote thereon. In addition, the holders of shares of the Series I Preferred Stock entitled to vote such shares, together with the holders of shares of any other series of preferred stock who have the right to vote with the holders of the Series I Preferred Stock as a single class in connection with any such action, have the right to vote as a single class, and the affirmative vote of the holders of not less than a majority of the outstanding shares entitled to vote thereon is required to approve any such action. AMENDMENTS; SUPERMAJORITY VOTE REQUIREMENTS Our certificate of incorporation requires the affirmative vote of four-fifths of the outstanding stock entitled to vote to amend the provision in the by-laws relating to changing the number of directors. SHAREHOLDER ACTION, SPECIAL MEETING OF SHAREHOLDERS Our charter requires that any shareholders' action by written consent in lieu of shareholders' meetings has to be approved not less than the number of votes required by statute or, if greater, our certificate of incorporation, for the proposed corporate action. Our certificate of incorporation and by-laws allow for shareholders' to call for special meetings upon the written request of not less than a majority of the outstanding shares entitled to vote at such meeting. EDWARD H. MEYER'S EMPLOYMENT AGREEMENT Our employment agreement with Edward H. Meyer provides that upon our change of control, Mr. Meyer may terminate his employment, in which case we will have to pay Mr. Meyer the product of his total compensation and the greater of (i) the number of years remaining in the term of his employment or (ii) the number three. Mr. Meyer will also have the right to force us to buy all of our securities held by Mr. Meyer at the market price of those securities. OUR VOTING TRUST AGREEMENT Pursuant to a voting trust agreement among us, Edward H. Meyer as trustee, and the beneficiaries named in the voting trust agreement, upon the threat of a change of control, no holder of trust shares may sell, transfer or dispose of any such shares, and no such person may withdraw any trust shares from the trust. In all meetings of the shareholders, Mr. Meyer, as trustee, can cast votes with respect to the trust shares in the exercise of his discretion. DELAWARE ANTI-TAKEOVER LAW Section 203 of the Delaware General Corporation Law prohibits certain "business combination" transactions between a Delaware corporation and any "interested stockholder" owning 15% or more of the 40 corporation's outstanding voting stock for a period of three years after the date on which the stockholder became an interested stockholder, unless: - our board of directors approves, prior to the date, either the proposed business combination or the proposed acquisition of stock which resulted in the stockholder becoming an interested stockholder; - upon consummation of the transaction in which the stockholder becomes an interested stockholder, the interested stockholder owned at least 85% of those shares of the voting stock of the corporation that are not held by the directors, officers or certain employee stock plans; or - on or subsequent to the date on which the stockholder became an interested stockholder, the business combination with the interested stockholder is approved by our board of directors and also approved at a stockholder's meeting by the affirmative vote of the holders of at least two-thirds of the outstanding shares of the corporation's voting stock other than shares held by the interested stockholder. Under Delaware law, a "business combination" includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder. Although a corporation may elect not to be governed by Section 203, we have made no such election. 41 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES The following is a summary of certain United States federal income tax consequences of the purchase, ownership, conversion, and other disposition of the debentures by an initial purchaser of the debentures that purchases the debentures for their issue price (as defined below) and of the common stock received upon a conversion of the debentures. This summary is based upon existing United States federal income tax law, which is subject to change or differing interpretations, possibly with retroactive effect. This summary does not discuss all aspects of United States federal income taxation which may be important to particular investors in light of their individual circumstances, such as debentures held by investors subject to special tax rules (e.g., financial institutions, insurance companies, partnerships or other pass-through entities, broker-dealers, and tax-exempt organizations) or to persons that will hold the debentures as part of a straddle, hedge, conversion, constructive sale, or other integrated transaction for United States federal income tax purposes or U.S. Holders (as defined below) that have a functional currency other than the United States dollar, all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this summary does not discuss any foreign, state, or local tax considerations. This summary assumes that investors will hold their debentures as "capital assets" under the Internal Revenue Code of 1986, as amended (the "Code"). Each prospective investor is urged to consult its tax advisor regarding the United States federal, state, local, and foreign income and other tax consequences of the purchase, ownership, conversion, and other disposition of the debentures and common stock received upon a conversion of the debentures. For purposes of this summary, a "U.S. Holder" is a beneficial owner of a debenture that is, for United States federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation or other entity created in, or organized under the law of, the United States or any state or political subdivision thereof, (iii) an estate the income of which is includible in gross income for United States federal income tax purposes regardless of its source, or (iv) a trust (A) the administration of which is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust, or (B) that was in existence on August 20, 1996, was treated as a United States person on the previous day, and elected to continue to be so treated. A beneficial owner of a debenture that is not a U.S. Holder is referred to herein as a "Non-U.S Holder." If a partnership (including any entity or arrangement treated as a partnership for United States federal income tax purposes) is a beneficial owner of debentures or shares of common stock, the treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A holder of debentures or shares of common stock that is a partnership and partners in such partnership should consult their tax advisors about the United States federal income tax consequences of holding and disposing of debentures or shares of common stock, as the case may be. CLASSIFICATION OF THE DEBENTURES Pursuant to the terms of the indenture, each holder of debentures will agree to treat the debentures, for United States federal income tax purposes, as debt instruments that are subject to the Treasury regulations that govern contingent payment debt instruments (the "CPDI Regulations") and to be bound by our application of the CPDI Regulations to the debentures, including our determination of the rate at which interest will be deemed to accrue on the debentures and the related "projected payment schedule." The remainder of this discussion assumes that the debentures will be treated in accordance with that agreement and our determinations. No authority directly addresses the treatment of all aspects of the debentures for United States federal income tax purposes. The Internal Revenue Service (the "Service") has issued Revenue Ruling 2002-31 and Notice 2002-36, in which the Service addressed the United States federal income tax classification and treatment of a debt instrument similar, although not identical, to the debentures, and the Service concluded that the debt instrument addressed in that published guidance was subject to the CPDI Regulations. In addition, the Service clarified various aspects of the applicability of certain other provisions of the Code to the debt instrument addressed in that published guidance. The applicability of Revenue Ruling 2002-31 and Notice 2002-36 to any particular debt instrument, however, such as the debentures, is uncertain. In addition, no rulings are expected to be sought from the Service with respect to any of the United States federal income 42 tax consequences discussed below, and no assurance can be given that the Service will not take contrary positions. As a result, no assurance can be given that the Service will agree with the tax characterizations and the tax consequences described below. A different treatment of the debentures for United States federal income tax purposes could significantly alter the amount, timing, character, and treatment of income, gain or loss recognized in respect of the debentures from that which is described below and could require a U.S. Holder to accrue interest income at rate different from the "comparable yield" rate described below. U.S. HOLDERS INTEREST INCOME Under the CPDI Regulations, a U.S. Holder will generally be required to accrue interest income on the debentures on a constant yield to maturity basis based on the adjusted issue price (as defined below) of the debentures and the comparable yield (as defined below), regardless of whether the U.S. Holder uses the cash or accrual method of tax accounting. Accordingly, a U.S. Holder will be required to include interest in taxable income in each year significantly in excess of the amount of interest payments, including contingent interest payments, actually received by it in that year. The "issue price" of a debenture is the first price at which a substantial amount of the debentures is sold to investors, excluding bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers. The "adjusted issue price" of a debenture is its issue price increased by any interest income previously accrued, determined without regard to any adjustments to interest accruals described below and decreased by the amount of any projected payments scheduled to be made with respect to the debentures. Under the CPDI Regulations, we are required to establish the "comparable yield" for the debentures. The comparable yield for the debentures is the annual yield we would incur, as of the initial issue date, on a fixed rate nonconvertible debt instrument with no contingent payments, but with terms and conditions otherwise comparable to those of the debentures. Accordingly, we have determined the comparable yield to be 9.40% compounded semi-annually. We are required to provide to U.S. Holders, solely for United States federal income tax purposes, a schedule of the projected amounts of payments on the debentures. This schedule must produce the comparable yield. Our determination of the projected payment schedule for the debentures includes estimates for payments of contingent interest and an estimate for a payment at maturity that takes into account the conversion feature. U.S. Holders may obtain the projected payment schedule by submitting a written request for it to us at the address set forth under "Where you can find more information." The comparable yield and the projected payment schedule are not determined for any purpose other than for the determination of a U.S. Holder's interest accruals and adjustments thereof in respect of the debentures for United States federal income tax purposes and do not constitute a projection or representation regarding the actual amounts payable to U.S. holders of the debentures. ADJUSTMENTS TO INTEREST ACCRUALS ON THE DEBENTURES If a U.S. Holder receives actual payments with respect to the debentures in a tax year that in the aggregate exceed the total amount of projected payments for that tax year, the U.S. Holder will have a "net positive adjustment" equal to the amount of such excess. The U.S. Holder will be required to treat the "net positive adjustment" as additional interest income for the tax year. For this purpose, the payments in a tax year include the fair market value of any property received in that year. If a U.S. Holder receives actual payments with respect to the debentures in a tax year that in the aggregate are less than the amount of the projected payments for that tax year, the U.S. Holder will have a "net negative adjustment" equal to the amount of such deficit. This adjustment will (a) reduce the U.S. Holder's interest income on the debentures for that tax year, and (b) to the extent of any excess after the application of (a), give rise to an ordinary loss to the extent of the U.S. Holder's interest income on the debentures during prior tax years, reduced to the extent such interest income was offset by prior net negative 43 adjustments. Any negative adjustment in excess of the amounts described in (a) and (b) will be carried forward to offset future interest income in respect of the debentures or to reduce the amount realized upon a sale, exchange, repurchase or redemption of the debentures. If subsequent purchasers of the debentures have a basis in the debentures which differs from the adjusted issue price of the debentures, such a holder must reasonably allocate such difference to the interest accruing over the remaining term of the debentures and/or the remaining projected payments. If the holder's basis is less than the adjusted issue price (e.g., discount), the amounts so allocated are treated as a positive adjustment. If the holder's basis exceeds the adjusted issue price (e.g., premium), the amounts so allocates are treated as a negative adjustment. A holder's adjusted tax basis in the debenture will be increased to reflect any such positive adjustment or decreased to reflect any such negative adjustment. Holders should consult their tax advisors regarding such potential adjustments. SALE, EXCHANGE, CONVERSION, REPURCHASE OR REDEMPTION Generally, the sale, exchange, repurchase, or redemption of a debenture will result in gain or loss to a U.S. Holder, which will be subject to tax. As described above, our calculation of the comparable yield and the schedule of projected payments for the debentures includes the receipt of shares of our common stock upon conversion as a contingent payment with respect to the debentures. Accordingly, we intend to treat the payment of shares of our common stock to a U.S. Holder upon the conversion of a debenture as a contingent payment under the CPDI Regulations. As described above, U.S. Holders are generally bound by our determination of the comparable yield and the schedule of projected payments. Under this treatment, a conversion will also result in taxable gain or loss to a U.S. Holder. The amount of gain or loss on a taxable sale, exchange, conversion, repurchase or redemption will be equal to the difference between (a) the amount of cash plus the fair market value of any other property received by the U.S. Holder, including the fair market value of any shares of our common stock received, reduced by any negative adjustment carryforward as described above, and (b) the U.S. Holder's adjusted tax basis in the debenture. A U.S. Holder's adjusted tax basis in a debenture on any date will generally be equal to the U.S. Holder's original purchase price for the debenture, increased by any interest income previously accrued by the U.S. Holder under the CPDI Regulations as described above (determined without regard to any adjustments to interest accruals described above), and decreased by the amount of any projected payments, as described above, scheduled to be made on the debentures to the U.S. Holder through such date (without regard to the actual amount paid). Gain recognized upon a sale, exchange, conversion, repurchase or redemption of a debenture will generally be treated as ordinary interest income. Any loss recognized upon a sale, exchange, conversion, repurchase or redemption of a debenture will be treated as an ordinary loss to the extent of the excess of previous interest inclusions over the total negative adjustment previously taken into account as ordinary loss, and thereafter, as capital loss (which will be long-term if the debenture is held for more than one year). The deductibility of capital losses is subject to limitations. Under recently finalized Treasury regulations intended to address so-called tax shelters and other tax-motivated transactions, a U.S. Holder that recognizes a loss that meets certain thresholds upon the sale, exchange, conversion, repurchase or redemption of a debenture may have to comply with certain disclosure requirements and should consult its tax advisor. A U.S. Holder's tax basis in shares of our common stock received upon a conversion of a debenture will equal the fair market value of such common stock at the time of conversion. The U.S. Holder's holding period for the shares of our common stock received will commence on the day immediately following the date of conversion. CONSTRUCTIVE DIVIDENDS If at any time we make a distribution of property to our stockholders that would be taxable to the stockholders as a dividend for United States federal income tax purposes and, in accordance with the anti-dilution provisions of the debentures, the conversion rate of the debentures is increased, such increase may be deemed to be the payment of a taxable dividend to U.S. Holders of the debentures. For example, an increase in the conversion rate in the event of our distribution of our debt instruments or our assets will generally result 44 in deemed dividend treatment to U.S. Holders of the debentures, but an increase in the event of stock dividends or the distribution of rights to subscribe for our common stock will generally not. DIVIDENDS ON COMMON STOCK If we make cash distributions on our common stock, the distributions will generally be treated as dividends to a U.S. Holder of our common stock to the extent of our current or accumulated earnings and profits as determined under United States federal income tax principles at the end of the tax year of the distribution, then as a tax-free return of capital to the extent of the U.S. Holder's adjusted tax basis in the common stock, and thereafter as gain from the sale or exchange of that stock. Under recently enacted tax legislation, eligible dividends received in tax years beginning on or before December 31, 2008, will be subject to tax to a non-corporate U.S. Holder at the special reduced rate generally applicable to long-term capital gains. A U.S. Holder will be eligible for this reduced rate only if the U.S. Holder has held our common stock for more than 60 days during the 120-day period beginning 60 days before the ex-dividend date. DISPOSITION OF COMMON STOCK Upon the sale or other disposition of our common stock received on conversion of a debenture, a U.S. Holder will generally recognize capital gain or loss equal to the difference between (i) the amount of cash and the fair market value of any property received upon the sale or exchange and (ii) the U.S. Holder's adjusted tax basis in our common stock. That capital gain or loss will be long-term if the U.S. Holder's holding period in respect of such debenture is more than one year. The deductibility of capital losses is subject to limitations. Under recently finalized Treasury regulations intended to address so-called tax shelters and other tax-motivated transact ions, a U.S. Holder that recognizes a loss that meets certain thresholds upon the sale or exchange of our common stock may have to comply with certain disclosure requirements and should consult its tax advisor. NON-U.S. HOLDERS DEBENTURES All payments on the debentures made to a Non-U.S. Holder, including a payment in our common stock pursuant to a conversion, and any gain realized on a sale or exchange of the debentures, will be exempt from United States income and withholding tax, provided that: (i) such Non-U.S. Holder does not own, actually or constructively, 10% or more of the total combined voting power of all classes of our stock entitled to vote, (ii) such Non-U.S. Holder is not a controlled foreign corporation related, directly or indirectly, to us through stock ownership, (iii) such Non-U.S. Holder is not a bank receiving certain types of interest, (iv) the beneficial owner of the debentures certifies, under penalties of perjury, to us or our paying agent on IRS Form W-8BEN that it is a United States person and provides its name, address and certain other required information or certain other certification requirements are satisfied, (v) such payments and gain are not effectively connected with the conduct by such Non-U.S. Holder of a trade or business in the United States, and (vi) with respect only to gain realized on a sale, exchange or conversion of the debentures, our common stock continues to be actively traded within the meaning of section 871 (h) (4) (C) (v) (I) of the Code and we have not been a U.S. Real Property Holding Corporation, as defined in the Code, at any time within the five-year period preceding the disposition or the Non-U.S. Holder's holding period, whichever is shorter. We believe that we have not been during the past five years, are not, and do not anticipate becoming, a U.S. Real Property Holding Corporation. If a Non-U.S. Holder of a debenture were deemed to have received a constructive dividend (see "U.S. Holders -- Constructive dividends" above), however the Non-U.S. Holder would generally be subject to United States withholding tax at a 30% rate on the amount of such dividend, thereby potentially reducing the amount of interest payable to it, subject to reduction (i) by an applicable treaty if the Non-U.S. Holder provides an IRS Form W-8BEN certifying that it is entitled to such treaty benefits or (ii) upon the receipt of an IRS Form W-8ECI from a Non-U.S. Holder claiming that the constructive dividend on the debentures is effectively connected with the conduct of a United States trade or business. 45 COMMON STOCK Dividends paid to a Non-U.S. Holder of common stock will generally be subject to withholding tax at a 30% rate subject to reduction (a) by an applicable treaty if the Non-U.S. Holder provides an IRS Form W-8BEN certifying that it is entitled to such treaty benefits or (b) upon the receipt of an IRS Form W-8ECI from a Non-U.S. Holder claiming that the payments are effectively connected with the conduct of a United States trade or business. A Non-U.S. Holder will generally not be subject to United States federal income tax on gain realized on the sale or exchange of the common stock received upon a conversion of debentures unless (a) the gain is effectively connected with the conduct of a United States trade or business of the Non-U.S. Holder, (b) in the case of a Non-U.S. Holder who is a nonresident alien individual, the individual is present in the United States for 183 or more days in the taxable year of the disposition and certain other conditions are met, or (c) we will have been a U.S. real property holding corporation at any time within the shorter of the five-year period preceding such sale or exchange and the Non-U.S. Holder's holding period in the common stock. We believe that we have not been during the past five years, are not, and do not anticipate becoming, a U.S. real property holding corporation. INCOME EFFECTIVELY CONNECTED WITH A UNITED STATES TRADE OR BUSINESS If a Non-U.S. Holder of debentures or our common stock is engaged in a trade or business in the United States, and if interest on the debentures, dividends on our common stock, or gain realized on the sale, exchange, conversion or other disposition of the debentures and gain realized on the sale or exchange of our common stock is effectively connected with the conduct of such trade or business, the Non-U.S. Holder, although exempt from the withholding tax discussed in the preceding paragraphs, will generally be subject to regular United States federal income tax on such interest, dividends or gain in the same manner as if it were a U.S. Holder. In addition, if such a Non-U.S. Holder is a foreign corporation, such holder may be subject to a branch profits tax equal to 30% (or such lower rate provided by an applicable treaty) of its effectively connected earnings and profits for the taxable year, subject to certain adjustments. INFORMATION REPORTING AND BACKUP WITHHOLDING Payments of interest or dividends made by us on, or the proceeds of the sale or other disposition of, the debentures or shares of common stock may be subject to information reporting and United States federal backup withholding tax at the rate then in effect if the recipient of such payment fails to supply an accurate taxpayer identification number or otherwise fails to comply with applicable United States information reporting or certification requirements. Any amount withheld under the backup withholding rules is allowable as a credit against the holder's United States federal income tax, provided that the required information is furnished to the IRS. 46 SELLING SECURITYHOLDERS The following table sets forth information regarding the beneficial ownership of our securities by the selling securityholders prior to this offering and the respective amounts of offered securities offered by the selling securityholders pursuant to this prospectus. This information has been obtained from the selling securityholders and we have not independently verified this information. Unless otherwise indicated for Mr. Meyer, none of the selling securityholders has, or within the past three years has had, any position, office or other material relationship with us or, insofar as we are aware, any of our predecessors or affiliates. Because the selling securityholders may offer all or some portion of the offered securities pursuant to this prospectus, no estimate can be given as to the amount of the debentures or common stock that will be held by the selling securityholders upon termination of this offering. In addition, the selling securityholders identified below may have sold, transferred or otherwise disposed of all or a portion of their debentures or common stock since the date on which they provided the information to us for inclusion in the following table.
PRINCIPAL AMOUNT NUMBER OF SHARES OF DEBENTURES OF COMMON STOCK NUMBER OF SHARES BENEFICIALLY OWNED PRINCIPAL AMOUNT OF BENEFICIALLY OF COMMON STOCK PRIOR TO THIS DEBENTURES OFFERED OWNED PRIOR TO OFFERED BY THIS NAME OF SELLING SECURITYHOLDER(1) OFFERING BY THIS PROSPECTUS THIS OFFERING(2) PROSPECTUS(2) - --------------------------------- ------------------ ------------------- ------------------- ---------------- Argent Classic Convertible Arbitrage Fund, L.P......... $ 1,000,000 $ 1,000,000 1,040 1,040 BNP Paribas Equity Strategies, SNC......................... 2,786,000 2,786,000 2,898 2,898 Calamos Convertible Fund -- Calamos Investment Trust.... 3,000,000 3,000,000 3,121 3,121 CooperNeff Convertible Strategies (Cayman) Master Fund, L.P.... 2,933,000 2,933,000 3,051 3,051 CQS Convertible & Quantitative Strategies Master Fund Limited..................... 20,400,000 20,400,000 21,223 21,223 Deutsche Bank Securities...... 100,000 100,000 104 104 The Drake Offshore Master Fund, Ltd......................... 11,500,000 11,500,000 11,964 11,964 Fore Convertible Master Fund, Ltd......................... 3,542,000 3,542,000 3,684 3,684 FrontPoint Convertible Arbitrage Fund, L.P................... 1,850,000 1,850,000 1,924 1,924 Grace Convertible Arbitrage Fund, LTD. ....................... 4,050,000 4,050,000 4,123 4,123 Guggenheim Portfolio Company VII, LLC......................... 777,000 777,000 808 808 JMG Capital Partners, LP...... 1,000,000 1,000,000 1,040 1,040 JMG Triton Offshore Fund, Ltd... 1,000,000 1,000,000 1,040 1,040 KBC Financial Products USA Inc. ....................... 3,890,000 3,890,000 4,047 4,047 KD Convertible Arbitrage Fund.. 2,200,000 2,200,000 2,288 2,288 Lyxor/Convertible Arbitrage Fund Limited..................... 189,000 189,000 196 196 Lyxor/Silverado Fund Ltd...... 2,250,000 2,250,000 2,340 2,340
47
PRINCIPAL AMOUNT NUMBER OF SHARES OF DEBENTURES OF COMMON STOCK NUMBER OF SHARES BENEFICIALLY OWNED PRINCIPAL AMOUNT OF BENEFICIALLY OF COMMON STOCK PRIOR TO THIS DEBENTURES OFFERED OWNED PRIOR TO OFFERED BY THIS NAME OF SELLING SECURITYHOLDER(1) OFFERING BY THIS PROSPECTUS THIS OFFERING(2) PROSPECTUS(2) - --------------------------------- ------------------ ------------------- ------------------- ---------------- Man Mac 1 Limited............. 681,000 681,000 708 708 McMahan Securities Co., L.P... 500,000 500,000 520 520 Polaris Vega Fund L.P......... 500,000 500,000 520 520 Silverado Arbitrage Trading Ltd......................... 750,000 750,000 780 780 Singlehedge U.S. Convertible Arbitrage Fund.............. 693,000 693,000 720 720 Sunrise Partners Limited Partnership................. 6,000,000 6,000,000 6,242 6,242 Swiss Re Financial Products Corporation................. 1,500,000 1,500,000 1,560 1.560 Wachovia Securities International Ltd......................... 5,000,000 5,000,000 5,201 5,201 Edward H. Meyer(3)............ -- -- 174,722(4) 51,128(4) All other holders of debentures or shares of common stock issued on conversion of debentures and future transferees, pledgees, donees and successors thereof(5)... 71,909,000 71,909,000 74,903(6) 74,903 Total....................... $150,000,000 $150,000,000 330,767(4) 207,173(4)
- --------------- (1) Information concerning the selling securityholders may change from time to time. Any such changed information will be set forth in amendments or supplements to this prospectus, if and when required. (2) Unless otherwise indicated, includes all shares of common stock issuable upon conversion of the debentures and assumes a conversion price of $961.20 per share and a cash payment in lieu of any fractional share. However, this conversion price will be subject to adjustment as described under "Description of the Debentures -- Conversion Rights -- Conversion Price Adjustments -- General." As a result, the number of shares of common stock beneficially owned prior to this offering and the number of shares of common stock offered hereby may increase or decrease in the future. Also assumes that the debentures are convertible immediately. As described above under "Description of the Debentures -- Conversion Rights," the debentures are convertible only in specified circumstances. (3) Edward H. Meyer is our chairman, chief executive officer and president. Assuming all of the securities offered hereby by Mr. Meyer are sold, based on the number of shares of common stock outstanding as of the date of this prospectus, Mr. Meyer will beneficially own 14.3% of the outstanding shares of our common stock after this offering, including shares of common stock issuable upon exercise of currently exercisable stock options owned by Mr. Meyer. (4) Includes 25,564 shares of common stock that were issued upon conversion of the Meyer debentures and an additional 25,564 shares of common stock issuable upon conversion of the 25,564 shares of Class B common stock that were issued upon conversion of the Meyer debentures. (5) Information concerning other selling securityholders will be set forth in amendments or supplements to this prospectus, if required. (6) Assumes that any other holders of debentures or shares of common stock issuable on conversion of debentures and their respective transferees, pledgees, donees and successors do not beneficially own any common stock other than the common stock issued or issuable upon conversion of the debentures. 48 The debentures offered hereby were originally issued by us in a private offering in October 2003. Pursuant to a purchase agreement that we and the initial purchasers entered into in connection with that offering, the initial purchasers agreed to offer and sell the debentures only to persons they reasonably believed to be "qualified institutional buyers" within the meaning of Rule 144A under the Securities Act. The selling securityholders, which term includes their transferees, pledgees, donees and successors, may from time to time offer and sell pursuant to this prospectus any or all of the offered securities. On June 5, 1986, we entered into a registration rights agreement with Edward H. Meyer pursuant to which we agreed to register shares of stock issuable upon conversion of our 8 1/2% convertible subordinated debentures due 2003 held by Mr. Meyer. On December 31, 2003, Mr. Meyer converted the debentures into 25,564 shares of our common stock and 25,564 shares of our Class B stock. The shares of our Class B stock are convertible into an equal number of shares of our common stock. Pursuant to this registration rights agreement, Mr. Meyer has requested that the shelf registration statement, of which this prospectus is a part, include such 25,564 shares of our common stock and the 25,564 shares of common stock issuable upon conversion of such Class B common stock. 49 PLAN OF DISTRIBUTION The selling securityholders (including their transferees, pledgees, donees and successors) may sell the offered securities from time to time directly to purchasers or through broker-dealers or agents who may receive compensation in the form of discounts, concessions or commissions from the selling securityholders or the purchasers. If the offered securities are sold through broker-dealers or agents, the selling securityholders will be responsible for any discounts, concessions or commissions payable to those broker-dealers or agents. The offered securities may be sold in one or more transactions at: - fixed prices; - prevailing market prices at the time of sale; - varying prices determined at the time of sale; or - negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions: - on any national securities exchange or quotation service on which the debentures or the common stock may be listed or quoted at the time of sale; - in the over-the-counter market; - otherwise than on such exchanges or services or in the over-the-counter market; or - through the writing of options. Crosses are transactions in which the same broker acts as an agent on both sides of the trade. In connection with the sale of the offered securities or otherwise, the selling securityholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the debentures or common stock in the course of hedging their positions. The selling securityholders also may deliver the offered securities to close out short positions, or loan or pledge the offered securities to broker-dealers or other financial institutions that in turn may sell those securities. The selling securityholders also may transfer, donate and pledge offered securities, in which case the transferees, donees, pledgees or other successors in interest will be deemed selling securityholders for purposes of this prospectus. The aggregate proceeds to the selling securityholders from the sale of the offered securities offered by them will be the purchase price of such debentures or common stock less discounts and commissions, if any, payable by them. Each of the selling securityholders reserves the right to accept and, together with their broker-dealers or agents from time to time, to reject, in whole or in part, any proposed purchase of the offered securities to be made directly or through broker-dealers or agents. We will not receive any of the proceeds from the offering of the offered securities. There is no public market for the debentures and we do not intend to apply for listing of the debentures on any securities exchange or for quotation of the debentures through any automated quotation system. The debentures are currently designated for trading on the PORTAL Market. However, once debentures are sold by means of this prospectus, those debentures will no longer trade on the PORTAL Market. Our common stock is listed on The NASDAQ National Market under the symbol "GREY." In order to comply with the securities laws of some states, if applicable, the offered securities may be sold in those jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the offered securities may not be sold unless they have been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with. The selling securityholders may not sell any, or may sell less than all, of the offered securities offered by them pursuant to this prospectus. In addition, any selling securityholder may, to the extent permitted by applicable law, sell, transfer, devise or gift the offered securities by means not described in this prospectus. In 50 that regard, any offered securities that qualify for sale pursuant to Rule 144A or Rule 144 under the Securities Act may be sold under that rule, if applicable, rather than pursuant to this prospectus. The selling securityholders and any broker-dealers or agents that participate in the distribution of the offered securities may be "underwriters" within the meaning of Section 2(11) of the Securities Act. As a result, any profits on the sale of the offered securities received by selling securityholders and any discounts, commissions or concessions received by any such broker-dealers or agents might be deemed to be underwriting discounts and commissions under the Securities Act. If the selling securityholders were deemed to be underwriters, the selling securityholders could be subject to certain statutory liabilities under the federal securities laws, including under Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Securities Exchange Act of 1934. The selling securityholders and any other persons participating in the distribution of the offered securities will be subject to the Securities Exchange Act. The Securities Exchange Act rules include, without limitation, Regulation M, which may limit the timing of or prohibit the purchase and sale of debentures and shares of common stock by the selling securityholders and any such other person. In addition, under Regulation M, any selling securityholder or other person engaged in the "distribution," within the meaning of Regulation M, of the offered securities may not engage in market-making activities with respect to the debentures or the common stock for certain periods prior to the commencement of that distribution, unless, in the case of persons other than selling securityholders, an applicable exemption is available under Regulation M. The foregoing may affect the marketability of the offered securities and the ability of any person or entity to engage in market-making activities with respect to those securities. In that regard, the selling securityholders are required to acknowledge that they understand their obligations to comply with the provisions of the Securities Exchange Act and the rules thereunder relating to stock manipulation, particularly Regulation M thereunder (or any successor rules or regulations), in connection with the offering made by this prospectus. Each selling securityholder is required to agree that neither it nor any person acting on its behalf will engage in any transaction in violation of such provisions. To the extent required, the specific debentures or common stock to be sold, the names of the selling securityholders, the respective purchase prices and public offering prices, the names of any agent or broker-dealer, and any applicable commissions or discounts with respect to a particular sale or other disposition of offered securities pursuant to this prospectus will be set forth in a supplement to this prospectus or, if appropriate, a post-effective amendment to the shelf registration statement of which this prospectus is a part. Pursuant to the registration rights agreements described above under "Description of the Debentures -- Registration Rights" and "Selling Securityholders," we and the selling securityholders have agreed, subject to exceptions, to indemnify each other against specified liabilities, including liabilities under the Securities Act, and may be entitled to contribution from each other in respect of those liabilities. We will pay substantially all of the expenses incident to the offering and sale of the offered securities pursuant to this prospectus, other than commissions, fees and discounts payable to brokers-dealers or agents, fees and disbursements of any counsel or other advisors or experts retained by the selling securityholders and any documentary, stamp or similar issue or transfer tax. Under the registration rights agreement, we may be required from time to time to require holders of offered securities to discontinue the sale or other disposition of those debentures and shares of common stock under specified circumstances. See "Description of the Debentures -- Registration Rights" above. LEGAL MATTERS John A. Grudzina, senior vice president and general counsel to the company, and Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York have acted as counsel to Grey Global Group Inc. in connection with this registration statement. Mark N. Kaplan, a director and shareholder of Grey, is of counsel to Skadden, Arps, Slate, Meagher & Flom LLP. 51 EXPERTS The consolidated financial statements of Grey Global Group Inc. appearing in Grey Global Group Inc.'s Annual Report (Form 10-K) for the year ended December 31, 2002 have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein, and incorporated herein by reference. Such consolidated financial statements have been incorporated herein by reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing. WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, proxy statements and other information with the Commission. You may read and copy materials that we have filed with the Commission at the Commission's public reference room located at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further information on the public reference room. Our Commission filings are also available to the public on the Commission's Internet website at www.sec.gov. We incorporate by reference into this prospectus the documents listed below and any future filings we make with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, including any filings after the date of this prospectus, until all of the offered securities to which this prospectus relates have been sold or the offering is otherwise terminated. The information incorporated by reference is an important part of this prospectus. Any statement in a document incorporated by reference into this prospectus will be deemed to be modified or superseded to the extent a statement contained in (1) this prospectus or (2) any other subsequently filed document that is incorporated by reference into this prospectus modifies or supersedes such statement. The documents incorporated by reference herein include: - Our Annual Report on Form 10-K for the fiscal year ended December 31, 2002; - Our amendment on Form 10-K/A to our Annual Report on Form 10-K for the fiscal year ended December 31, 2002; - Our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2003, June 30, 2003 and September 30, 2003; - Our definitive proxy statement filed with the Commission for our Annual Meeting of Stockholders held on August 21, 2003; and - Our Current Reports on Form 8-K filed on October 22, 2003, October 23, 2003, October 28, 2003 and January 8, 2004. We will provide without charge, upon written or oral request, a copy of any or all of the documents that are incorporated by reference in this prospectus, other than exhibits to such documents, unless the exhibits are incorporated by reference into such documents. Requests should be directed to our Secretary, Grey Global Group Inc., 777 Third Avenue, New York, New York 10017. 52 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the fees and expenses, other than discounts, commissions and concessions payable to broker-dealers and agents, in connection with the offering and distribution of the securities being offered hereunder. All amounts other than the filing fee for the registration statement are estimates. All of these fees and expenses will be borne by the Registrant. Securities and Exchange Commission Filing Fee............... $ 14,956.93 Printing Fees and Expenses.................................. 20,000 Trustees' Fees and Expenses................................. 1,000 Legal Fees.................................................. 100,000 Accounting and Auditor Fees................................. 15,000 Miscellaneous............................................... 5,000 ----------- Total..................................................... $155,956.93 ===========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Under provisions of the Restated Certificate of Incorporation of Grey, each person who is or was a director or officer of Grey may be indemnified by Grey to the full extent permitted or authorized by the General Corporation Law of Delaware. Under such law, to the extent that such person is successful on the merits of defense of a suit or proceeding brought against him by reason of the fact that he is a director or officer of Grey, such person shall be indemnified against expenses (including attorneys' fees) reasonably incurred in connection with such action. If unsuccessful in defense of a third-party civil suit or if a criminal suit is settled, such a person may be indemnified under such law against both (1) expenses (including attorneys' fees) and (2) judgments, fines and amounts paid in settlement if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of Grey, and with respect to any criminal action, had no reasonable cause to believe his conduct was unlawful. If unsuccessful in defense of a suit brought by or in the right of Grey, or if such suit is settled, such a person may be indemnified under such law only against expenses (including attorneys' fees) incurred in the defense or settlement of such suit if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of Grey except that if such a person is adjudged to be liable in such suit for negligence or misconduct in the performance of his duty to Grey, he cannot be made whole even for expenses unless the court determines that he is fairly and reasonably entitled to indemnity for such expenses. Determinations made as to whether such person has met the applicable standard of conduct in order to be indemnified shall be made (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (3) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (4) by the stockholders. The indemnification and advancement of expenses shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. The officers and directors of Grey are covered by officers and directors liability insurance. The policy coverage is $20,000,000, which includes reimbursement for costs and fees. There is an excess policy coverage of $5,000,000. There is a maximum deductible under the policy of $1,000,000 for each securities claim. Grey II-1 has entered into indemnification agreements with all of its officers and directors. The agreements provide for reimbursement for all direct and indirect costs of any type or nature whatsoever (including attorneys' fees and related disbursements) actually and reasonably incurred in connection with either the investigation, defense or appeal of a proceeding (as defined in such agreements) including amounts paid in settlement by or on behalf of an indemnitee. ITEM 16. EXHIBITS 3.1 Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K, dated July 13, 2000) 3.2 By-laws (incorporated by reference to Exhibit 3.2 of our Annual Report on Form 10-K for the year ended December 31, 2002) 4.1 Indenture, dated October 28, 2003, between Grey Global Group Inc. and American Stock Transfer & Trust Company, as Trustee, including the form of 5.0% Contingent Convertible Subordinated Debenture due 2033 4.2 Registration Rights Agreement, dated October 28, 2003, by and between Grey Global Group Inc. and J.P. Morgan Securities Inc., as representative of the initial purchasers 4.3 Form of Certificate Evidencing the Common Stock 5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York 8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, as to certain tax matters 12.1 Statement re: Computation of Ratios 23.1 Consent of Ernst & Young LLP 23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1 hereof) 24.1 Powers of Attorney (included in the signature page hereof) 25.1 Statement of Eligibility of the Trustee on Form T-1
ITEM 17. UNDERTAKINGS The undersigned hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered II-2 therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, as amended (the "Act"), each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (5) Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (6) The undersigned Registrant hereby undertakes: (i) For purposes of determining any liability under the Act, the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of the registration statement as of the time it was declared effective. (ii) For the purpose of determining any liability under the Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (7) The undersigned registrant hereby undertakes to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Act. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in New York, New York on the 26th day of January, 2004. GREY GLOBAL GROUP INC. By: /s/ STEVEN G. FELSHER ------------------------------------ Name: Steven G. Felsher Title: Vice Chairman, Chief Financial Officer -- Worldwide Secretary and Treasurer POWER OF ATTORNEY Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed on January 26, 2004 by the following persons in the capacities indicated. Each person whose signature appears below constitutes and appoints Steven G. Felsher and Lester M. Feintuck, and each of them acting individually, with full power of substitution, our true and lawful attorneys-in-fact and agents to do any and all acts and things in our name and on our behalf in our capacities indicated below which they or either of them may deem necessary or advisable to enable Grey Global Group Inc. to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement including specifically, but not limited to, power and authority to sign for us or any of us in our names in the capacities stated below, any and all amendments (including post-effective amendments) thereto, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in such connection, as fully to all intents and purposes as we might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof.
SIGNATURE TITLE --------- ----- /s/ EDWARD H. MEYER Chairman of the Board, President - --------------------------------------------- and Chief Executive Officer Edward H. Meyer (Principal Executive Officer) /s/ STEVEN G. FELSHER Vice Chairman, Chief Financial Officer -- - --------------------------------------------- Worldwide, Secretary and Treasurer Steven G. Felsher (Principal Financial Officer) /s/ LESTER M. FEINTUCK Senior Vice President, Chief Financial - --------------------------------------------- Officer -- US and Controller Lester M. Feintuck (Principal Accounting Officer) /s/ VICTOR J. BARNETT Director - --------------------------------------------- Victor J. Barnett
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SIGNATURE TITLE --------- ----- /s/ MARK N. KAPLAN Director - --------------------------------------------- Mark N. Kaplan /s/ DANIEL S. SHAPIRO Director - --------------------------------------------- Daniel S. Shapiro
II-5 EX-4.1 3 y93424exv4w1.txt INDENTURE Exhibit 4.1 Execution Copy ================================================================================ GREY GLOBAL GROUP INC. 5.0% CONTINGENT CONVERTIBLE SUBORDINATED DEBENTURES DUE 2033 ----------------------------- INDENTURE Dated as of October 28, 2003 ----------------------------- AMERICAN STOCK TRANSFER & TRUST COMPANY Trustee ----------------------------- ================================================================================ CROSS-REFERENCE TABLE
TIA Indenture Section Section - ------- ------- 310(a)(1)........................................................ 7.10 (a)(2)........................................................ 7.10 (a)(3)........................................................ N.A. (a)(4)........................................................ N.A. (a)(5)........................................................ 7.10 (b)........................................................... 7.10 (c)........................................................... N.A. 311(a)........................................................... 7.11 (b)........................................................... 7.11 (c)........................................................... N.A. 312(a)........................................................... 2.05 (b)........................................................... 12.03 (c)........................................................... 12.03 313(a)........................................................... 7.06 (b)(2)........................................................ 7.06; 7.07 (c)........................................................... 7.06; 12.02 (d)........................................................... 7.06 314(a)........................................................... 4.03 (a)(4)........................................................ 4.04; 12.05 (c)(1)........................................................ N.A. (c)(2)........................................................ N.A. (c)(3)........................................................ N.A. (e)........................................................... 12.05 (f)........................................................... N.A. 315(a)........................................................... N.A. (b)........................................................... N.A. (c)........................................................... N.A. (d)........................................................... N.A. (e)........................................................... N.A. 316(a) .......................................................... N.A. (a)(1)(A)..................................................... N.A. (a)(1)(B)..................................................... N.A. (a)(2)........................................................ N.A. (b)........................................................... N.A. (c)........................................................... N.A. 317(a)(1)........................................................ N.A. (a)(2)........................................................ N.A. (b)........................................................... N.A. 318(a)........................................................... N.A. (b)........................................................... N.A. (c)........................................................... 12.01
- ---------- N.A. means Not Applicable Note: This Cross-Reference Table is not part of this Indenture. TABLE OF CONTENTS
Page ---- ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE 1.01 Definitions........................................................ 1 1.02 Other Definitions.................................................. 11 1.03 Incorporation by Reference of Trust Indenture Act.................. 12 1.04 Rules of Construction.............................................. 12 ARTICLE 2 THE DEBENTURES 2.01 Form and Dating.................................................... 13 2.02 Execution and Authentication....................................... 14 2.03 Registrar, Paying Agent and Conversion Agent....................... 15 2.04 Paying Agent to Hold Money in Trust................................ 15 2.05 Holder Lists....................................................... 15 2.06 Transfer and Exchange.............................................. 16 2.07 Replacement Debentures............................................. 29 2.08 Outstanding Debentures............................................. 29 2.09 Treasury Debentures................................................ 30 2.10 Temporary Debentures............................................... 30 2.11 Cancellation....................................................... 31 2.12 Defaulted Interest................................................. 31 2.13 CUSIP Numbers...................................................... 31 ARTICLE 3 REDEMPTION AND PREPAYMENT 3.01 Optional Redemption................................................ 32 3.02 Debentures Purchased in Part....................................... 32 3.03 Reserved........................................................... 33 3.04 Notices to Trustee................................................. 33 3.05 Selection of Debentures to Be Redeemed............................. 33 3.06 Notice of Redemption............................................... 33 3.07 Effect of Notice of Redemption..................................... 34 3.08 Deposit of Redemption Price........................................ 35
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Page ---- 3.09 Debentures Redeemed in Part........................................ 35 3.10 Mandatory Redemption............................................... 36 3.11 Purchase of Debentures at Option of the Holder upon Change of Control..................................................... 36 3.12 Effect of Holder Change of Control Acceptance Notice............... 39 3.13 Deposit of Change of Control Repurchase Price...................... 40 3.14 Repayment to the Company........................................... 41 3.15 Covenant to Comply with Securities Laws upon Purchase of Debentures....................................................... 41 ARTICLE 4 COVENANTS 4.01 Payment of Debentures.............................................. 41 4.02 Maintenance of Office or Agency.................................... 42 4.03 Reports............................................................ 43 4.04 Compliance Certificate............................................. 43 4.05 Taxes.............................................................. 44 4.06 Stay, Extension and Usury Laws..................................... 44 4.07 Corporate Existence................................................ 44 4.08 Tax Treatment of Debentures........................................ 44 ARTICLE 5 SUCCESSORS 5.01 Mergers and Sales of Assets by the Company......................... 45 5.02 Successor Corporation Substituted.................................. 46 ARTICLE 6 DEFAULTS AND REMEDIES 6.01 Events of Default.................................................. 46 6.02 Acceleration....................................................... 47 6.03 Other Remedies..................................................... 48 6.04 Waiver of Past Defaults............................................ 48 6.05 Control by Majority................................................ 48 6.06 Limitation on Suits................................................ 48 6.07 Rights of Holders of Debentures to Receive Payment................. 49 6.08 Collection Suit by Trustee......................................... 49 6.09 Trustee May File Proofs of Claim................................... 49 6.10 Priorities......................................................... 50 6.11 Undertaking for Costs.............................................. 50
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Page ---- ARTICLE 7 TRUSTEE 7.01 Duties of Trustee.................................................. 51 7.02 Rights of Trustee.................................................. 52 7.03 Individual Rights of Trustee....................................... 53 7.04 Trustee's Disclaimer............................................... 53 7.05 Notice of Defaults................................................. 54 7.06 Reports by Trustee to Holders of the Debentures.................... 54 7.07 Compensation and Indemnity......................................... 54 7.08 Replacement of Trustee............................................. 55 7.09 Successor Trustee by Merger, etc................................... 56 7.10 Eligibility; Disqualification...................................... 56 7.11 Preferential Collection of Claims Against Company.................. 57 ARTICLE 8 SATISFACTION AND DISCHARGE 8.01 Satisfaction and Discharge......................................... 57 8.02 Application of Trust Money......................................... 58 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER 9.01 Without Consent of Holders of Debentures........................... 58 9.02 With Consent of Holders of Debentures.............................. 59 9.03 Compliance with Trust Indenture Act................................ 61 9.04 Revocation and Effect of Consents.................................. 61 9.05 Notation on or Exchange of Debentures.............................. 61 9.06 Trustee to Sign Amendments, etc.................................... 61 ARTICLE 10 SUBORDINATION 10.01 Agreement to Subordinate........................................... 62 10.02 Liquidation; Dissolution; Bankruptcy............................... 62 10.03 Default on Senior Debt or Designated Senior Debt................... 63 10.04 Acceleration of Debentures......................................... 63 10.05 When Distribution Must Be Paid Over................................ 63 10.06 Notice by Company.................................................. 64
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Page ---- 10.07 Subrogation........................................................ 64 10.08 Relative Rights.................................................... 64 10.09 Subordination May Not Be Impaired by Company....................... 64 10.10 Distribution or Notice to Representative........................... 65 10.11 Rights of Trustee and Paying Agent................................. 65 10.12 Authorization to Effect Subordination.............................. 66 ARTICLE 11 CONVERSION OF THE SECURITIES 11.01 Conversion Privilege............................................... 66 11.02 Conversion Procedure............................................... 69 11.03 Adjustments Below Par Value........................................ 71 11.04 Taxes on Conversion................................................ 71 11.05 Company to Provide Stock........................................... 72 11.06 Adjustment of Conversion Price..................................... 73 11.07 No Adjustment...................................................... 76 11.08 Equivalent Adjustments............................................. 76 11.09 Notice of Adjustment............................................... 77 11.10 Notice of Certain Transactions..................................... 77 11.11 Effect of Reclassification, Consolidation, Merger, Share Exchange or Sale on Conversion Privilege......................... 77 11.12 Trustee's Disclaimer............................................... 78 11.13 Voluntary Reduction................................................ 79 11.14 Simultaneous Adjustments........................................... 79 ARTICLE 12 MISCELLANEOUS 12.01 Trust Indenture Act Controls....................................... 79 12.02 Notices............................................................ 80 12.03 Communication by Holders of Debentures with Other Holders of Debentures................................................... 81 12.04 Certificate and Opinion as to Conditions Precedent................. 81 12.05 Statements Required in Certificate or Opinion...................... 81 12.06 Rules by Trustee and Agents........................................ 82 12.07 No Personal Liability of Stockholders, Employees, Officers, Directors..................................................... 82 12.08 Governing Law; Submission to Jurisdiction.......................... 82 12.09 No Adverse Interpretation of Other Agreements...................... 83 12.10 Successors......................................................... 83 12.11 Severability....................................................... 83 12.12 Counterpart Originals.............................................. 83
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Page ---- 12.13 Table of Contents, Headings, etc................................... 83
EXHIBITS Exhibit A FORM OF DEBENTURE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR -v- INDENTURE dated as of October 28, 2003 between Grey Global Group Inc., a Delaware corporation (the "COMPANY") and American Stock Transfer & Trust Company, a trust company organized under the laws of the State of New York, as trustee (the "TRUSTEE"). The Company and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the Debentures: ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE 1.01 Definitions. "144A GLOBAL DEBENTURE" means a global debenture substantially in the form of Exhibit A hereto bearing the Global Debenture Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Debentures sold in reliance on Rule 144A. "ADDITIONAL AMOUNTS" means all additional interest then owing pursuant to Section 3 of the Registration Rights Agreement. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" shall have correlative meanings. "AGENT" means any Registrar, Paying Agent, Conversion Agent or co-registrar. "APPLICABLE PROCEDURES" means, with respect to any transfer or exchange of or for beneficial interests in any Global Debenture, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange. "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. -2- "BENEFICIAL OWNER" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The term "beneficial ownership" shall have a corresponding meaning. "BOARD OF DIRECTORS" means the Board of Directors of the Company, or any authorized committee of the Board of Directors. "BUSINESS DAY" means any day other than Saturday, Sunday or any other day on which banking institutions in The City of New York in the State of New York are authorized or required by any applicable law to close. "CAPITAL STOCK" of any Person, as used in the definition of "Change of Control," means any and all shares, interests, participations or other equivalents however designated of corporate stock or other equity participations, including partnership interests, whether general or limited, of such Person and any rights (other than debt securities convertible or exchangeable into an equity interest), warrants or options to acquire an equity interest in such Person. "CHANGE OF CONTROL" means the occurrence or any of the following after the date of this Indenture: (a) a "person" or "group" within the meaning of Section 13(d) of the Exchange Act (other than the Company, its subsidiaries, the Company's or its subsidiaries' employee benefit plans or a Permitted Holder) becomes the direct or indirect "beneficial owner," within the meaning of Rule 13d-3 under the Exchange Act, of more than 50% of the total voting power of all shares of the Company's capital stock that are entitled to vote generally in the election of directors; (b) consummation of any share exchange, consolidation or merger of the Company or any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of the Company and its subsidiaries, taken as a whole, to any person other than the Company, one or more of the Company's subsidiaries or a Permitted Holder, pursuant to which the Common Stock will be converted into cash, securities or other property; provided, however, that a transaction where the holders of the Company's voting capital stock immediately prior to such transaction have, directly or indirectly, more than 50% of the aggregate voting power of all shares of capital stock of the continuing or surviving corporation or transferee entitled to vote generally in the election of directors immediately after such event shall not be a Change of Control; or (c) the approval by the holders of the Company's capital stock of any plan or proposal for the Company's liquidation or dissolution; provided that for purposes of Section 3.11, a Change of Control shall not be deemed to have occurred if either (a) the last reported sale price of the Common Stock for any five trading days within the 10 consecutive trading days ending immediately before the later of the Change of Control or the public announcement thereof, equals or exceeds 105% of the applicable conversion price of the Debentures immedi- -3- ately before the Change of Control or the public announcement thereof; or not less than 90% of the consideration, excluding cash payments for fractional shares, in the transaction or transactions constituting the Change of Control consists of shares of capital stock traded on a U.S. national securities exchange or quoted on The NASDAQ National Market or which shall be so traded or quoted when issued or exchanged in connection with a Change of Control (such securities being referred to as "PUBLICLY TRADED SECURITIES") and as a result of this transaction or transactions the Debentures become convertible into such publicly traded securities, excluding cash payments for fractional shares. "CLEARSTREAM" means Clearstream Bank, S.A., or its successors. "COMMON STOCK" means the common stock, par value $0.01 per share, of the Company. "COMPANY" means Grey Global Group Inc., and any and all successors thereto. "CONTINGENT INTEREST" shall mean an amount of interest payable as set forth in paragraph 1 of the Debenture, the form of which is attached hereto as Exhibit A. "CORPORATE TRUST OFFICE" means the principal office of the Trustee at which at any time its corporate trust business shall be administered, which office at the date hereof is located at 59 Maiden Lane, New York, New York 10038, Attention: Corporate Trust Department, or such other address as the Trustee may designate from time to time by notice under Section 12.02, or the principal corporate trust office of any successor Trustee (or such other address as a successor Trustee may designate from time to time by notice under Section 12.02). "CUSTODIAN" means the Trustee, as custodian for the Depositary with respect to the Debentures in global form, or any successor entity thereto. "DEBENTURES" means the $125.0 million 5.0% Contingent Convertible Subordinated Debentures due 2033 ($150.0 million if the Initial Purchasers exercise their option to purchase additional debentures in full) of the Company issued hereunder. "DEFAULT" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "DEFINITIVE DEBENTURE" means a certificated Debenture registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A hereto except that such Debenture shall not bear the Global Debenture Legend and shall not have the "Schedule of Exchanges of Interests in the Global Debenture" attached thereto. "DEPOSITARY" means, with respect to the Debentures issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the -4- Debentures, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "DESIGNATED SENIOR DEBT" means (i) indebtedness outstanding under the Credit Agreement dated as of December 21, 2001 (the "CREDIT AGREEMENT") among the Company, HSBC Bank USA, Fleet National Bank and JP Morgan Chase Bank, as such Credit Agreement has been and may be amended, restated, extended, supplemented, replaced, refinanced or otherwise modified from time to time, (ii) indebtedness under the Note Agreement, dated as of November 13, 2000 (the "2000 LOAN AGREEMENT") and the Note Agreement, dated as of March 14, 2003 (the "2003 LOAN AGREEMENT" and, together with the 2000 Loan Agreement, the "LOAN AGREEMENTS"), each between the Company and The Prudential Insurance Company of America, as such Loan Agreements have and may be amended, restated, supplemented, extended, replaced, refinanced or otherwise modified from time to time and (iii) Senior Debt (other than obligations in respect of clauses (ii), (iii) and (iv) of the definition of "QUALIFYING DEFERRED COMPENSATION" and reasonable expense reimbursements due to the Company's and its subsidiaries' employees and directors) which, at the time of its determination, (A) has an aggregate principal amount of at least $25.0 million and (B) is specifically designated in the instrument evidencing such Senior Debt as "Designated Senior Debt" by the Company. "DISTRIBUTION COMPLIANCE PERIOD" means the 40-day restricted period as defined in Regulation S. "EUROCLEAR" means Euroclear Bank S.A./N.V., or its successor. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as in effect from time to time. "EXTENSION PERIOD" shall have the meaning set forth in the form of Debenture attached as Exhibit A hereto. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession of the United States, which are in effect on the date hereof. "GLOBAL DEBENTURE LEGEND" means the legend set forth in Section 2.06(f)(ii), which is required to be placed on all Global Debentures issued under this Indenture. "GLOBAL DEBENTURES" means, individually and collectively, each of the Restricted Global Debentures and the Unrestricted Global Debentures, substantially in the form of Exhibit A hereto issued in accordance with Section 2.01 and 2.02 hereof and containing the Global Debenture -5- Legend that is deposited with or on behalf of and registered in the name of the Depositary or its nominee. "HOLDER" means a Person in whose name a Debenture is registered. "INDENTURE" means this Indenture, as amended or supplemented from time to time. "INDIRECT PARTICIPANT" means a Person who holds a beneficial interest in a Global Debenture through a Participant. "INITIAL PURCHASERS" means the Initial Purchasers set forth on Schedule I to the Purchase Agreement. "INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who is not also a QIB. "INTEREST PAYMENT DATE" shall have the meaning set forth in the form of Debentures attached as Exhibit A hereto. "ISSUE DATE" means October 28, 2003. "MARKET PRICE" means the average of the last reported sale price per share of Common Stock for 20 consecutive trading days before the record date with respect to any distribution, issuance or other event requiring such computation, appropriately adjusted (as determined in good faith by the Board of Directors of the Company, whose determination shall be conclusive) to take into account the occurrence, during the period commencing on the first of such 20 consecutive trading days and ending on such record date, of any event requiring adjustment of the Conversion Price under this Indenture. "OFFICER" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President (whether or not such is preceded by any modifier such as "Executive," "Senior" or the like) of such Person or any other officer designated by the board of directors of such Person serving in a similar capacity. "OFFICERS' CERTIFICATE" means a certificate signed in the name of the Company by any two Officers. "OID LEGEND" means a legend to the following effect: THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THE ISSUE PRICE OF EACH SECURITY IS $1,000 PER $1,000 PRIN- -6- CIPAL AMOUNT, THE ISSUE DATE IS OCTOBER 28, 2003 AND THE COMPARABLE YIELD IS 9.40% PER ANNUM. HOLDERS OF THIS SECURITY MAY OBTAIN INFORMATION REGARDING THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, YIELD TO MATURITY AND THE PROJECTED PAYMENT SCHEDULE FOR THIS SECURITY BY SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO: GREY GLOBAL GROUP INC., 777 THIRD AVENUE, NEW YORK, NEW YORK 10017, ATTN: CORPORATE SECRETARY, SUCH INFORMATION TO BE MADE AVAILABLE BEGINNING NO LATER THAN 10 DAYS AFTER THE ISSUE DATE, PROMPTLY UPON REQUEST. "OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 12.05 hereof. The counsel may be an employee of or counsel to the Company, any subsidiary of the Company or the Trustee. "PARTICIPANT" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream). "PERMITTED HOLDER" means (i) Edward H. Meyer (or, in the event of his incompetence or death, his estate, heirs, testamentary trusts (as well as the trustees and beneficiaries in respect of any such trust), executor, administrator, committee or other personal representative (collectively, "HEIRS")) or any Person controlled, directly or indirectly, by Edward H. Meyer or any heirs, (ii) any of Edward H. Meyer's immediate family members, including his spouse, or any of his lineal descendants, (iii) any trust in which one or more of the Persons described in clause (i) or (ii) holds substantially all of the beneficial interests therein, (iv) until October 15, 2004, Ariel Capital Management, Inc., (v) the Voting Trust formed by the Voting Trust Agreement, (vi) any trustee or beneficiary under the Voting Trust Agreement, (vii) any of the Company's employee stock ownership plans or trusts or similar plans or trusts or any Persons or entities having voting or dispositive power with respect to the assets of any such plan or trust or (viii) any Affiliate of the foregoing. "PERSON" means, unless the context specifies otherwise, an individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, limited liability partnership, trust, unincorporated organization, or government or any agency or political subdivision thereof. "PRIVATE PLACEMENT LEGEND" means the legend set forth in Section 2.06(f)(i) to be placed on all Debentures issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "PURCHASE AGREEMENT" means the Purchase Agreement, dated October 22, 2003, between the Company and J.P. Morgan Securities Inc., as representative of the several Initial Purchasers listed on Schedule I thereto, with respect to the Debentures. -7- "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "QUALIFYING DEFERRED COMPENSATION" means (i) deferred compensation owed to employees that are not the Company's or its subsidiaries' directors or officers, (ii) deferred ordinary course of business compensation owed to the Company's or its subsidiaries' directors and officers to the extent that such deferred compensation has been fully vested and fully funded to a trust (or similar arrangement) established for the benefit of such director or officer pursuant to plans and arrangements in existence on the date the Debentures are first issued, provided that the funds representing such deferred compensation need not be so vested and funded as of the date the Debentures are first issued, (iii) all other deferred compensation owed to any of the Company's directors, to the extent reflected as a liability in the Company's balance sheet as of September 30, 2003 and (iv) deferred compensation accrued after September 30, 2003 consistent with past practice for services rendered by any of the Company's directors after September 30, 2003. "REDEMPTION DATE" or "REDEMPTION DATES" shall mean the date specified for redemption of the Debentures in accordance with the terms of the Debentures and this Indenture. "REG S PERMANENT GLOBAL DEBENTURE" means one or more permanent Global Debentures bearing the Private Placement Legend, that will be issued in an aggregate amount of denominations equal in total to the outstanding principal amount of the Reg S Temporary Global Debenture upon expiration of the Distribution Compliance Period. "REG S TEMPORARY GLOBAL DEBENTURE" means one or more temporary Global Debentures bearing the Private Placement Legend and the Reg S Temporary Global Debenture Legend, issued in an aggregate amount of denominations equal in total to the outstanding principal amount of Debentures sold in reliance on Rule 903 of Regulation S. "REG S TEMPORARY GLOBAL DEBENTURE LEGEND" means the legend set forth in Section 2.06(f)(iii), which is required to be placed on all Reg S Temporary Global Debentures issued under this Indenture. "REGULATION S" means Regulation S promulgated under the Securities Act, as it may be amended from time to time, and any successor provision thereto. "REGULATION S GLOBAL DEBENTURE" means a Reg S Temporary Global Debenture or a Reg S Permanent Global Debenture, as the case may be. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated as of October 28, 2003, by and among the Company and the Initial Purchasers, as such agreement may be amended, modified or supplemented from time to time. -8- "REPRESENTATIVE" means the indenture trustee or other trustee, agent or representative for any Senior Debt or Designated Senior Debt; provided, however, that if, and for so long as, any Senior Debt or Designated Senior Debt lacks such a representative, the holders of a majority in outstanding principal amount of such Senior Debt or Designated Senior Debt in respect of such debt, as applicable, shall constitute the Representative of such Senior Debt or Designated Senior Debt, as applicable. "RESPONSIBLE OFFICER" means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such Person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture. "RESTRICTED DEFINITIVE DEBENTURE" means a Definitive Debenture bearing the Private Placement Legend. "RESTRICTED GLOBAL DEBENTURE" means a Global Debenture bearing the Private Placement Legend. "RULE 144" means Rule 144 promulgated under the Securities Act, and any successor provision thereto. "RULE 144A" means Rule 144A promulgated under the Securities Act, and any successor provision thereto. "SEC" means the Securities and Exchange Commission. "SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, as in effect from time to time. "SENIOR DEBT" means the principal of (and premium, if any) and interest on (i) all of the Company's indebtedness for borrowed money, including, without limitation, the Loan Agreements (as defined in the definition of Designated Senior Debt), (ii) all of the Company's obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) all of the Company's obligations in respect of letters of credit or bankers' acceptances or other similar instruments (or reimbursement obligations with respect thereto), (iv) all of the Company's obligations to pay the deferred purchase price of property or services (including all obligations in respect of Qualifying Deferred Compensation) and reasonable expense reimbursements due to the Company's and its subsidiaries' employees and directors, (v) all of the Company's monetary obligations as lessee under capitalized leases, (vi) all indebtedness of others secured by a lien on any of the Company's assets, whether or not such indebtedness is assumed by the Company (provided -9- that, for purposes of determining the principal amount of any indebtedness of the type described in this clause, if recourse with respect to such indebtedness is limited to such asset, the amount of such indebtedness shall be limited to the lesser of the fair market value of such asset or the amount of such indebtedness), (vii) all indebtedness of others guaranteed by the Company to the extent such indebtedness is guaranteed by the Company and (viii) to the extent not otherwise included in this definition, all of the Company's obligations under currency agreements and interest rate agreements, in each case, whether created, incurred or assumed before, on or after the date of this Indenture; provided that Senior Debt shall not include (a) indebtedness or other obligations of the Company to any of its subsidiaries, or to any of the Company's or its subsidiaries' officers or directors, or to a Significant Stockholder (other than Qualifying Deferred Compensation and expense reimbursements referred to in clause (iv) above), (b) the Company's indebtedness or other obligations that, when incurred and without respect to any election under Section 1111(b) of Title 11, U.S. Code, was secured by one or more of the Company's assets or properties, but was otherwise without recourse to the Company, (c) any of the Company's other indebtedness or other obligations which by the terms of the instrument creating or evidencing the same is specifically designated as not being senior in right of payment to the Debentures or expressly provides that such indebtedness or other obligation is pari passu with, or junior to, the Debentures, (d) payment obligations in respect of any of the Company's redeemable stock, and (e) trade payables or other obligations to trade creditors. "SHELF REGISTRATION STATEMENT" shall have the meaning set forth in Registration Rights Agreement. "SIGNIFICANT STOCKHOLDER" means a Person or entity (other than any of the Company's or its subsidiaries' officers or directors) that is the beneficial owner of more than 5% of the total voting power of all shares of the Company's outstanding capital stock that are entitled to vote generally in the election of directors. "STATED MATURITY" means, when used with respect to any indebtedness, the date specified in such indebtedness as the fixed date on which an amount equal to the principal amount of such indebtedness is due and payable. "TAX ORIGINAL ISSUE DISCOUNT" means the amount of ordinary interest income on a Debenture that must be accrued as original issue discount for United States Federal income tax purposes pursuant to U.S. Treasury Regulation section 1.1275-4. "TIA" means the Trust Indenture Act of 1939, as in effect on the date of this Indenture; provided, however, that in the event the TIA is amended after such date, the TIA means, to the extent required by any such amendment, the TIA as so amended. "TRADING PRICE" of the Debentures on any date of determination means the average of the secondary market bid quotations per $1,000 principal amount of Debentures obtained by the Trustee for $5.0 million principal amount of Debentures at approximately 3:30 p.m., New York -10- City time, on such determination date from three independent nationally recognized securities dealers the Company selects; provided that if at least three such bids cannot reasonably be obtained by the Trustee, but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the Trustee, that one bid shall be used. The Company shall provide prompt written notice to the Trustee identifying the three independent nationally recognized securities dealers selected by the Company. If the Trustee cannot reasonably obtain at least one bid for $5.0 million principal amount of Debentures from an independent nationally recognized securities dealer selected by the Company and identified in writing to the Trustee or, in the Company's reasonable judgment, the bid quotations are not indicative of the secondary market value of the Debentures, then the Trading Price per $1,000 principal amount of Debentures will be deemed to be equal to (a) the then-applicable conversion rate of the Debentures multiplied by (b) the closing price of shares of the Common Stock on such determination date on The NASDAQ National Market or, if the Common Stock is not then quoted on such market, on the principal U.S. national or regional securities exchange on which the Common Stock is then listed or, if the Common Stock is not then listed on a national or regional securities exchange, on the principal other market on which the Common Stock is then traded; provided that the Trustee shall not determine the Trading Price of the Debentures unless requested by the Company to do so; and provided, further, that the Company shall have no obligation to make such request unless a Holder provides the Company with reasonable evidence that the Trading Price of the Debentures is equal to not less than 120% of the principal amount thereof; and at which time, the Company shall instruct the Trustee to determine the Trading Price of the Debentures beginning on the next trading day and on each successive trading day until the Trading Price of the Debentures is greater or equal to 120% of the principal amount thereof. The Trustee shall be entitled to all of the rights of the Trustee set forth in this Indenture in connection with any such determination. Any such determination shall be conclusive absent manifest error. "TRUSTEE" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "U.S. PERSON" means a U.S. person as defined in Rule 902 under the Securities Act. "UNRESTRICTED DEFINITIVE DEBENTURE" means one or more Definitive Debentures that do not bear and are not required to bear the Private Placement Legend. "UNRESTRICTED GLOBAL DEBENTURE" means a permanent global Debenture substantially in the form of Exhibit A attached hereto that bears the Global Debenture Legend and that has the "Schedule of Exchanges of Interests in the Global Debenture" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, and that does not bear the Private Placement Legend. -11- "VOTING STOCK" means, with respect to any Person, capital stock of such Person entitling the holders thereof, under ordinary circumstances, to vote in the election of the board of directors of such Person. "VOTING TRUST AGREEMENT" means the Voting Trust Agreement, dated as of February 24, 1986, among Edward H. Meyer (the voting trustee), the Company and the beneficiaries of the Voting Trust Agreement, as such Voting Trust Agreement has been and may be amended, restated, supplemented, extended, replaced or otherwise modified from time to time. 1.02 Other Definitions.
Defined in Term Section ---- ------- "ACCELERATION NOTICE" ....................................... 6.02 "ACQUIROR SECURITIES"........................................ 11.11 "ALTERNATE OFFER"............................................ 3.11 "ASSET DISTRIBUTION"......................................... 11.06(d) "AUTHENTICATION ORDER"....................................... 2.02(b) "BELOW MARKET ISSUANCE"...................................... 11.06(c) "CASH DIVIDEND".............................................. 11.06(e) "CHANGE OF CONTROL REPURCHASE DATE".......................... 3.11(a) "CHANGE OF CONTROL REPURCHASE PRICE"......................... 3.11(a) "COMPANY CHANGE OF CONTROL OFFER NOTICE"..................... 3.11(c) "COMPOUNDED INTEREST"........................................ 3.01 "CONVERSION AGENT"........................................... 2.03 "CONVERSION DATE"............................................ 11.02 "CONVERSION EXPIRATION DATE"................................. 11.01 "CONVERSION PRICE"........................................... 11.01 "DIVIDEND PAYMENT PERIOD".................................... 11.01 "DTC"........................................................ 2.03 "EVENT OF DEFAULT"........................................... 6.01 "EXCESS DIVIDEND"............................................ 11.06(e) "EXPIRATION TIME"............................................ 11.06(f) "HOLDER CHANGE OF CONTROL ACCEPTANCE NOTICE"................. 3.11(d) "INITIAL CONVERSION PRICE"................................... 11.01 "LAST REPORTED SALE PRICE"................................... 11.01 "MARKET PRICE CONDITION"..................................... 11.01 "MEASUREMENT PERIOD"......................................... 11.01 "NOTICE OF REDEMPTION"....................................... 3.06 "PARITY VALUE"............................................... 11.01
-12- "PAYING AGENT"............................................... 2.03 "PAYMENT BLOCKAGE NOTICE".................................... 10.03(b) "PAYMENT BLOCKAGE PERIOD".................................... 10.03(b) "PAYMENT DEFAULT"............................................ 10.03(a) "PERMITTED CONVERSION PERIOD"................................ 11.01 "PRINCIPAL VALUE CONVERSION"................................. 11.01 "PRIOR FISCAL QUARTER"....................................... 11.01 "PURCHASED SHARES"........................................... 11.06(f) "REDEMPTION PRICE"........................................... 3.01 "REGISTRAR".................................................. 2.03 "TENDER OFFER"............................................... 11.06(f) "TRADING DAY"................................................ 11.01 "TRADING PRICE CONDITION".................................... 11.01
1.03 Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "INDENTURE SECURITIES" means the Debentures; "INDENTURE SECURITY HOLDER" means a Holder of a Debenture; "INDENTURE TO BE QUALIFIED" means this Indenture; "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; and "OBLIGOR" on the Debentures means the Company and any successor obligor upon the Debentures. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. 1.04 Rules of Construction. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; -13- (c) "or" is not exclusive; (d) words in the singular include the plural, and in the plural include the singular; (e) "including" means including, without limitation; (f) provisions apply to successive events and transactions; and (g) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement by successor sections or rules adopted by the SEC from time to time. ARTICLE 2 THE DEBENTURES 2.01 Form and Dating. (a) General. The Debentures and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Debentures may have notations, legends or endorsements required by law, stock market or exchange rule or usage; provided that any such notation, legend or endorsement required by usage is in a form acceptable to the Company. Each Debenture shall be dated the date of its authentication. The Debentures shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Debentures shall constitute, and are hereby expressly made, a part of this Indenture and the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Debenture conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Debentures. Debentures issued in global form shall be substantially in the form of Exhibit A attached hereto (which Debenture shall include the Global Debenture Legend and the "Schedule of Exchanges of Interests in the Global Debenture" attached to Exhibit A hereto). Debentures issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Debenture Legend thereon and without the "Schedule of Exchanges of Interests in the Global Debenture" attached thereto). Each Global Debenture shall represent such of the outstanding Debentures as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Debentures from time to time endorsed thereon and that the aggregate principal amount of outstanding Debentures repre- -14- sented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Debenture to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Debentures represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. (c) Euroclear and Clearstream Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream" and "Customer Handbook" of Clearstream (or any successor document setting forth the procedures, terms and/or conditions of Euroclear or Clearstream, as applicable) in effect at the relevant time shall be applicable to transfers of beneficial interests in the Regulation S Global Debentures that are held by Participants through Euroclear or Clearstream, as applicable. 2.02 Execution and Authentication. An Officer shall sign the Debentures for the Company by manual or facsimile signature. If the Officer whose signature is on a Debenture no longer holds that office at the time a Debenture is authenticated, the Debenture shall nevertheless be valid. A Debenture shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Debenture has been authenticated under this Indenture. The Trustee shall authenticate Debentures for original issue in the aggregate principal amount not to exceed $125,000,000 ($150,000,000 if the Initial Purchasers exercise in full their option to purchase additional Debentures pursuant to the Purchase Agreement) upon a written order of the Company signed by an Officer (an "AUTHENTICATION ORDER"). Each such written order shall specify the amount of Debentures to be authenticated and the date on which the Debentures are to be authenticated, whether the Debentures are to be issued as certificated Debentures or Global Debentures or such other information as the Trustee may reasonably request. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Debentures. An authenticating agent may authenticate Debentures whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or the Company. The Trustee shall have the right to decline to authenticate and deliver any Debentures under this Indenture if the Trustee, being advised by counsel, determines that such action may not lawfully be taken or if the Trustee in good faith shall determine that such action would expose the Trustee to personal liability. -15- 2.03 Registrar, Paying Agent and Conversion Agent. The Company shall maintain an office or agency in the Borough of Manhattan, The City of New York where (a) Debentures may be presented for registration of transfer or for exchange ("REGISTRAR"), (b) Debentures may be presented for payment ("PAYING AGENT") and (c) Debentures may be presented for conversion (the "CONVERSION AGENT"). The Registrar shall keep a register of the Debentures and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar, the term "Paying Agent" includes any additional paying agent and the term "Conversion Agent" includes any additional Conversion Agent. The Company may change any Paying Agent, Conversion Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar, Paying Agent or Conversion Agent, the Trustee shall act as such. The Company or any of its subsidiaries may act as Paying Agent, Registrar or Conversion Agent. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Debentures. The Company initially appoints the Trustee to act as the Registrar, Paying Agent and Conversion Agent and to act as Custodian with respect to the Global Debentures. 2.04 Paying Agent to Hold Money in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Additional Amounts, if any, or interest on the Debentures, and will promptly notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a subsidiary) shall have no further liability for the money. If the Company or a subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Debentures. 2.05 Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven business days before each Interest Payment Date and at such other times as the Trus- -16- tee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Debentures and the Company shall otherwise comply with TIA Section 312(a). 2.06 Transfer and Exchange. (a) Transfer and Exchange of Global Debentures. A Global Debenture may not be transferred except as a whole (but not in part) by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. Global Debentures will be exchanged by the Company for Definitive Debentures if (i) the Company delivers to the Trustee notice from the Depositary that (A) the Depositary is unwilling or unable to continue to act as Depositary for the Global Debentures or (B) the Depositary is no longer a clearing agency registered under the Exchange Act and, in either case, the Company fails to appoint a successor Depositary within 90 days after the date of such notice from the Depositary, (ii) the Company in its sole discretion determines that the Global Debentures (in whole but not in part) should be exchanged for Definitive Debentures and delivers a written notice to such effect to the Trustee or (iii) upon request of the Trustee or Holders of a majority of the aggregate principal amount of outstanding Debentures if there shall have occurred and be continuing a Default or Event of Default with respect to the Debentures; provided that in no event shall the Reg S Temporary Global Debenture be exchanged by the Company for Definitive Debentures prior to (A) the expiration of the Distribution Compliance Period and (B) the receipt by the Registrar of any certificate identified by the Company and its counsel to be required pursuant to Rule 903 or Rule 904 under the Securities Act. Upon the occurrence of any of the preceding events in (i), (ii) or (iii) above, Definitive Debentures shall be issued in such names as the Depositary shall instruct the Trustee. Global Debentures also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Debenture authenticated and delivered in exchange for, or in lieu of, a Global Debenture or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Debenture. A Global Debenture may not be exchanged for another Debenture other than as provided in this Section 2.06(a); however, beneficial interests in a Global Debenture may be transferred and exchanged as provided in Section 2.06(b), (c) or (h) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Debentures. The transfer and exchange of beneficial interests in the Global Debentures shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Debentures shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Debentures also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: -17- (i) Transfer of Beneficial Interests in the Same Global Debenture. Beneficial interests in any Restricted Global Debenture may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Debenture in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to expiration of the Distribution Compliance Period, transfer of beneficial interests in the Reg S Temporary Global Debenture may not be made to a U.S. Person or for the account or benefit of a U.S. Person. Beneficial interests in any Unrestricted Global Debenture may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Debenture. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Debentures. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Debenture in an amount equal to the beneficial interests to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) an order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Debenture in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Debenture shall be registered to effect the transfer or exchange referred to in (B) (1) above; provided that in no event shall Definitive Debentures be issued upon the transfer or exchange of beneficial interests in the Reg S Temporary Global Debenture prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Registrar of any certificates identified by the Company or its counsel to be required pursuant to Rule 903 and Rule 904 under the Securities Act. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Debentures contained in this Indenture and the Debentures or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Debenture(s) pursuant to Section 2.06(h) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Debenture. A beneficial interest in any Restricted Global Debenture may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Debenture if the transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar receives the following: -18- (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Debenture, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and (B) if the transferee will take delivery in the form of a beneficial interest in the Reg S Temporary Global Debenture or the Reg S Permanent Global Debenture, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Debenture for Beneficial Interests in the Unrestricted Global Debenture. A beneficial interest in any Restricted Global Debenture may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Debenture or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Debenture if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) above and: (A) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; or (B) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Debenture proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Debenture, a certificate from such holder in the form of Exhibit C hereto, including the certifications in Item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Debenture proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Debenture, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item 1(a) thereof; and, in each such case set forth in this subparagraph (iv), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form, and from legal counsel, reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) above at a time when an Unrestricted Global Debenture has not yet been issued, the Company shall issue and, -19- upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Debentures in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) above. Beneficial interests in an Unrestricted Global Debenture cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Debenture. (c) Transfer or Exchange of Beneficial Interests for Definitive Debentures. (i) Beneficial Interests in Restricted Global Debentures to Restricted Definitive Debentures. If any holder of a beneficial interest in a Restricted Global Debenture proposes to exchange such beneficial interest for a Restricted Definitive Debenture or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Debenture, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Debenture proposes to exchange such beneficial interest for a Restricted Definitive Debenture, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Person other than a U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(d) thereof, if applicable; -20- (F) if such beneficial interest is being transferred to the Company or any of its subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Debenture to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Debenture in the appropriate principal amount. Any Restricted Definitive Debenture issued in exchange for a beneficial interest in a Restricted Global Debenture pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Restricted Definitive Debentures to the Persons in whose names such Debentures are so registered. Any Restricted Definitive Debenture issued in exchange for a beneficial interest in a Restricted Global Debenture pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Beneficial Interests in Restricted Global Debentures to Unrestricted Definitive Debentures. A holder of a beneficial interest in a Restricted Global Debenture may exchange such beneficial interest for an Unrestricted Definitive Debenture or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Debenture only if: (A) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; or (B) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Debenture proposes to exchange such beneficial interest for a Definitive Debenture that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Debenture proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Debenture that does not bear the Private Placement Legend, a certificate from such holder -21- in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (B), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form, and from legal counsel, reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Beneficial Interests in Unrestricted Global Debentures to Unrestricted Definitive Debentures. If any holder of a beneficial interest in an Unrestricted Global Debenture proposes to exchange such beneficial interest for an Unrestricted Definitive Debenture or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Unrestricted Definitive Debenture, then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Unrestricted Global Debenture to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and, upon receipt of an Authentication Order pursuant to Section 2.02, the Trustee shall authenticate and deliver to the Person designated in the instructions an Unrestricted Definitive Debenture in the appropriate principal amount. Any Unrestricted Definitive Debenture issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Unrestricted Definitive Debentures to the Persons in whose names such Debentures are so registered. Any Unrestricted Definitive Debenture issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear the Private Placement Legend. (iv) Transfer or Exchange of Reg S Temporary Global Debentures. Notwithstanding the other provisions of this Section 2.06, a beneficial interest in the Reg S Temporary Global Debenture may not be (A) exchanged for a Definitive Debenture prior to (1) the expiration of the Distribution Compliance Period (unless such exchange is effected by the Company, does not require an investment decision on the part of the holder thereof and does not violate the provisions of Regulation S) and (2) the receipt by the Registrar of any certificates identified by the Company or its counsel to be required pursuant to Rule 903(b)(3)(B) under the Securities Act or (B) transferred to a Person who takes delivery thereof in the form of a Definitive Debenture prior to the events set forth in clause (A) above or unless the transfer is pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. -22- (d) Transfer and Exchange of Definitive Debentures for Beneficial Interests. (i) Restricted Definitive Debentures to Beneficial Interests in Restricted Global Debentures. If any Holder of a Restricted Definitive Debenture proposes to exchange such Debenture for a beneficial interest in a Restricted Global Debenture or to transfer such Restricted Definitive Debentures to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Debenture, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Debenture proposes to exchange such Debenture for a beneficial interest in a Restricted Global Debenture, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Debenture is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Debenture is being transferred to a Person other than a U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Debenture is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Debenture is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(d) thereof, if applicable; (F) if such Restricted Definitive Debenture is being transferred to the Company or any of its subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such Restricted Definitive Debenture is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, -23- the Trustee shall cancel the Restricted Definitive Debenture, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Debenture, in the case of clause (B) above, the 144A Global Debenture and, in the case of clause (C) above, the Regulation S Global Debenture. (ii) Restricted Definitive Debentures to Beneficial Interests in Unrestricted Global Debentures. A Holder of a Restricted Definitive Debenture may exchange such Debenture for a beneficial interest in an Unrestricted Global Debenture or transfer such Restricted Definitive Debenture to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Debenture only if: (A) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; or (B) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Debentures proposes to exchange such Debentures for a beneficial interest in the Unrestricted Global Debenture, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Debentures proposes to transfer such Debentures to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Debenture, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (B), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel, and from legal counsel, in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Restricted Definitive Debentures so transferred or exchanged and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Debenture. (iii) Unrestricted Definitive Debentures to Beneficial Interests in Unrestricted Global Debentures. A Holder of an Unrestricted Definitive Debenture may exchange such Debenture for a beneficial interest in an Unrestricted Global Debenture or transfer such Definitive Debentures to a Person who takes delivery thereof in the form of a bene- -24- ficial interest in an Unrestricted Global Debenture at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Debenture and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Debentures. If any such exchange or transfer from a Definitive Debenture to a beneficial interest is effected pursuant to subparagraphs (ii)(A), (ii)(B) or (iii) of this Section 2.06(d) at a time when an Unrestricted Global Debenture has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Debentures in an aggregate principal amount equal to the principal amount of Definitive Debentures so transferred. (e) Transfer and Exchange of Definitive Debentures for Definitive Debentures. Upon request by a Holder of Definitive Debentures and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Debentures. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Debentures duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). (i) Restricted Definitive Debentures to Restricted Definitive Debentures. Any Restricted Definitive Debenture may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Debenture if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Restricted Definitive Debentures to Unrestricted Definitive Debentures. Any Restricted Definitive Debenture may be exchanged by the Holder thereof for an Un- -25- restricted Definitive Debenture or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Debenture if: (A) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; or (B) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Debentures proposes to exchange such Debentures for an Unrestricted Definitive Debenture, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Debentures proposes to transfer such Debentures to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Debenture, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (B), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form, and from legal counsel, reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Debentures to Unrestricted Definitive Debentures. A Holder of Unrestricted Definitive Debentures may transfer such Debentures to a Person who takes delivery thereof in the form of an Unrestricted Definitive Debenture. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Debentures pursuant to the instructions from the Holder thereof. (f) Legends. The following legends shall appear on the face of all Global Debentures and Definitive Debentures issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Debenture and each Definitive Debenture (and all Debentures issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: -26- "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) or (7) UNDER THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR")) OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITIES IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO GREY GLOBAL GROUP INC. OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, BEFORE SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO, AMONG OTHER THINGS, THE RESTRICTIONS ON TRANSFER OF THIS SECURITY AND INVESTMENT INTENT (THE FORM OF WHICH LETTER IS AN EXHIBIT TO THE INDENTURE AND CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE TRUSTEE THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED, A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY PRIOR TO THE EXPIRATION DATE OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE TRANSFEROR MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE FORM OF CERTIFICATE ATTACHED TO THE INDENTURE RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THAT CERTIFICATE AND THIS CERTIFICATE TO THE ISSUER. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE TRANSFEROR MUST, BEFORE SUCH TRANSFER, FURNISH TO THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT." -27- (B) Notwithstanding the foregoing, any Global Debenture or Definitive Debenture issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii) or (e)(iii) to this Section 2.06 (and all Debentures issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Debenture Legend. Each Global Debenture shall bear a legend in substantially the following form: "THIS GLOBAL DEBENTURE IS HELD BY THE DEPOSITARY (AS DEFINED IN THIS INDENTURE GOVERNING THIS DEBENTURE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL DEBENTURE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL DEBENTURE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL DEBENTURE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." (iii) Reg S Temporary Global Debenture Legend. "THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL DEBENTURE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE DEBENTURES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL DEBENTURE SHALL BE ENTITLED TO RECEIVE CASH PAYMENTS OF INTEREST DURING THE PERIOD WHICH SUCH HOLDER HOLDS THIS DEBENTURE. NOTHING IN THIS LEGEND SHALL BE DEEMED TO PREVENT INTEREST FROM ACCRUING ON THIS DEBENTURE." (g) Cancellation and/or Adjustment of Global Debentures. At such time as all beneficial interests in a particular Global Debenture have been exchanged for Definitive Debentures or a particular Global Debenture has been redeemed, repurchased or canceled in whole and not in part, each such Global Debenture shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Debenture is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Debenture or for Definitive Debentures, the principal amount of Debentures represented by such Global Debenture shall be reduced accordingly and an endorsement shall be made on such Global Debenture by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Debenture, such other Global Debenture shall be increased -28- accordingly and an endorsement shall be made on such Global Debenture by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (h) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Debentures and Definitive Debentures upon the Company's order or at the Registrar's request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Debenture or to a Holder of a Definitive Debenture for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Debenture selected for redemption in whole or in part, except the unredeemed portion of any Debenture being redeemed in part. (iv) All Global Debentures and Definitive Debentures issued upon any registration of transfer or exchange of Global Debentures or Definitive Debentures shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Debentures or Definitive Debentures surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Debentures during a period beginning at the opening of business 15 days before the day of any selection of Debentures for redemption under Section 3.05 hereof and ending at the close of business on the earliest date on which the relevant Notice of Redemption is deemed to have been given to all Holders of Debentures to be redeemed, (B) to register the transfer of or to exchange any Debenture so selected for redemption in whole or in part, except the unredeemed portion of any Debenture being redeemed in part or (C) to register the transfer of or to exchange a Debenture between a record date and the next succeeding Interest Payment Date. (vi) Prior to due presentment for the registration of a transfer of any Debenture, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Debenture is registered as the absolute owner of such Debenture for the purpose of receiving payment of principal of and interest on such Debentures and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. -29- (vii) The Trustee shall authenticate Global Debentures and Definitive Debentures in accordance with the provisions of Section 2.02 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. (ix) Each Holder agrees to indemnify the Company and the Trustee against any liability that may result from the transfer, exchange or assignment by such Holder of such Holder's Debenture in violation of any provision of this Indenture and/or applicable United States federal or state securities law. (x) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Debenture (including any transfers between or among Depositary Participants or beneficial owners of interests in any Global Debenture) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. 2.07 Replacement Debentures. If any mutilated Debenture is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Debenture, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Debenture if the Trustee's requirements are met. An indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Debenture is replaced. The Company may charge for its expenses in replacing a Debenture. Every replacement Debenture is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Debentures duly issued hereunder. 2.08 Outstanding Debentures. The Debentures outstanding at any time are all the Debentures authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Debenture effected by the Trustee in accordance with the provisions hereof, and those described in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 -30- hereof, a Debenture does not cease to be outstanding because the Company or an Affiliate of the Company holds the Debenture. If a Debenture is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Debenture is held by a bona fide purchaser. If a Debenture is converted pursuant to Article 11 hereof, such Debenture shall cease to be outstanding and interest thereon (including Contingent Interest and Additional Amounts, if any) shall cease to accrue. If the principal amount of any Debenture is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Debentures payable on that date, then on and after that date such Debentures shall be deemed to be no longer outstanding and shall cease to accrue interest. 2.09 Treasury Debentures. In determining whether the Holders of the required principal amount of Debentures have concurred in any direction, waiver or consent, Debentures owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Debentures as to which a Responsible Officer of the Trustee has actual knowledge are so owned shall be so disregarded. 2.10 Temporary Debentures. Until certificates representing Debentures are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Debentures. Temporary Debentures shall be substantially in the form of certificated Debentures but may have variations that the Company considers appropriate for temporary Debentures and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Debentures in exchange for temporary Debentures. Holders of temporary Debentures shall be entitled to all of the benefits of this Indenture. -31- 2.11 Cancellation. The Company at any time may deliver Debentures to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Debentures surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Debentures surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall dispose of canceled Debentures in accordance with its procedures for the disposition of canceled securities in effect as of the date of such disposition (subject to the record retention requirement of the Exchange Act). Certification of the disposition of all canceled Debentures shall be delivered to the Company. The Company may not issue new Debentures to replace Debentures that it has paid or that have been delivered to the Trustee for cancellation. 2.12 Defaulted Interest. If the Company defaults in a payment of interest on the Debentures, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Debentures. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Debenture and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. 2.13 CUSIP Numbers. The Company in issuing the Debentures may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Debentures or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Debentures, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the "CUSIP" numbers. -32- ARTICLE 3 REDEMPTION AND PREPAYMENT 3.01 Optional Redemption. On or after October 15, 2013, the Company may redeem the Debentures for cash in whole or in part, from time to time, in any integral multiple of $1,000, at any time at the option of the Company upon not less than 30 nor more than 60 days notice at a redemption price (the "REDEMPTION PRICE") equal to 100% of the principal amount thereof, together with accrued and unpaid interest, including interest on any unpaid interest, compounded semi-annually (together with any unpaid Contingent Interest, "COMPOUNDED INTEREST") thereon, up to but not including the Redemption Date. If the Debentures are redeemed on any Interest Payment Date, accrued and unpaid interest shall be payable to Holders of record on the relevant record date. If a Debenture is redeemed on or after an interest record date but on or prior to the related Interest Payment Date, then any accrued and unpaid interest shall be paid to the Person to whom principal of such Debenture will be paid. If any Debenture called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Debentures. The Company may not redeem any Debentures unless all accrued and unpaid interest thereon, including Compounded Interest, if any, has been or is simultaneously paid for all semi-annual periods terminating on or prior to the date of the Notice of Redemption. 3.02 Debentures Purchased in Part. Any Debenture that is to be purchased only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Debenture, without service charge, a new Debenture or Debentures, of any authorized denomination as requested by such Holder in aggregate principal amount equal to, and in exchange for, the portion of the principal amount of the Debenture so surrendered which is not redeemed. -33- 3.03 Reserved. 3.04 Notices to Trustee. If the Company elects to redeem Debentures pursuant to the optional redemption provisions set forth in Section 3.01 hereof, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Debentures to be redeemed and (iv) the Redemption Price. 3.05 Selection of Debentures to Be Redeemed. If less than all of the Debentures are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Debentures to be redeemed or purchased among the Holders of the Debentures by lot, or on a pro rata basis, or another method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Debentures to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Debentures not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Debentures selected for redemption and, in the case of any Debenture selected for partial redemption, the principal amount thereof to be redeemed. Debentures and portions of Debentures selected shall be in principal amounts of $1,000 or integral multiples of $1,000; except that if all of the Debentures of a Holder are to be redeemed, the entire outstanding amount of Debentures held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Debentures called for redemption also apply to portions of Debentures called for redemption. If any Debenture selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Debenture so selected, the converted portion of such Debenture shall be deemed (so far as possible) to be the portion selected for redemption. Debentures that have been converted during a selection of Debentures to be redeemed may be treated by the Trustee as outstanding for the purpose of such selection. 3.06 Notice of Redemption. At least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption (the "NOTICE OF REDEMPTION") to each Holder whose Debentures are to be redeemed at its registered address. The notice shall identify the Debentures (including the CUSIP number, if any) to be redeemed and shall state: -34- (a) the Redemption Date; (b) the Redemption Price; (c) the current Conversion Price; (d) that the Debentures called for redemption may be converted at any time before the close of business on the second business day immediately preceding the Redemption Date; (e) if any Debenture is being redeemed in part, the portion of the principal amount of such Debenture to be redeemed and that, after the redemption date upon surrender of such Debenture, a new Debenture or Debentures in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Debenture; (f) the name and address of the Paying Agent and Conversion Agent; (g) that Holders who want to convert Debentures must satisfy the requirements set forth in paragraph 8 of the Debentures; (h) that Debentures called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (i) that, unless the Company defaults in making such redemption payment, interest on Debentures called for redemption ceases to accrue on and after the redemption date and the Debentures will cease to be convertible; (j) the paragraph of the Debentures and/or Section of this Indenture pursuant to which the Debentures called for redemption are being redeemed; and (k) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Debentures. At the Company's request, the Trustee shall give the Notice of Redemption in the Company's name and at its expense; provided that the Company shall have delivered to the Trustee, at least 15 days prior to the date of the mailing of such notice, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. 3.07 Effect of Notice of Redemption. Once Notice of Redemption is mailed in accordance with Section 3.06 hereof, Debentures called for redemption become irrevocably due and payable on the redemption date at the Redemption Price. A Notice of Redemption may not be conditional. -35- 3.08 Deposit of Redemption Price. The Company shall, by 12:00 noon, New York City time, on the Redemption Date, deposit irrevocably with the Trustee or with the Paying Agent funds sufficient to pay the Redemption Price and will give irrevocable instructions and authority to pay such Redemption Price to the Holders of the Debentures. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the Redemption Price of, and accrued interest on, all Debentures to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the Redemption Date, interest shall cease to accrue on the Debentures or the portions of Debentures called for redemption, such Debentures will no longer be deemed to be outstanding and all rights of Holders of such Debentures so called for redemption will cease, except the right of the Holders of such Debentures to receive the applicable Redemption Price, but without interest on such Redemption Price. If any date fixed for redemption of Debentures is not a business day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a business day (and without any interest or other payment in respect of any such delay) except that, if such business day falls in the next calendar year, such payment will be made on the immediately preceding business day, in each case with the same force and effect as if made on such date fixed for redemption. If the Company fails to repay the Debentures on maturity or the date fixed for redemption, or if payment of the Redemption Price in respect of Debentures is improperly withheld or refused and not paid by the Company, interest on such Debentures will continue to accrue, from the original Redemption Date to the date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the applicable Redemption Price. 3.09 Debentures Redeemed in Part. Upon surrender of a Debenture that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Debenture equal in principal amount to the unredeemed portion of the Debenture surrendered. In the event of any redemption in part, the Company shall not be required to (i) issue, register the transfer of or exchange any Debentures during a period beginning at the opening of business 15 days before any selection for redemption of Debentures and ending at the close of business on the earliest date on which the relevant Notice of Redemption is deemed to have been given to all Holders of Debentures to be redeemed and (ii) register the transfer of or exchange any Debentures so selected for redemption, in whole or in part, except the unredeemed portion of any Debentures being redeemed in part. -36- 3.10 Mandatory Redemption. The Company shall not be required to make sinking fund payments with respect to the Debentures. 3.11 Purchase of Debentures at Option of the Holder upon Change of Control. (a) Subject to Section 3.11(b) below, if at any time that Debentures remain outstanding there shall have occurred a Change of Control, Debentures shall be repurchased by the Company, at the option of the Holder thereof, at a purchase price in cash (the "CHANGE OF CONTROL REPURCHASE PRICE") equal to 100% of the principal amount of the Debentures to be purchased plus accrued and unpaid interest (including Additional Amounts, if any), thereon, up to but not including the date (the "CHANGE OF CONTROL REPURCHASE DATE") fixed by the Company that is no later than the 30th business day after the date the Company Change of Control Offer Notice is given, subject to satisfaction by or on behalf of the Holder of the requirements set forth in Section 3.11(d); provided that if the Change of Control Repurchase Date is on or after an interest record date but on or prior to the related Interest Payment Date, interest and Additional Amounts, if any, will be payable to the Holders in whose names the Debentures are registered at the close of business on the relevant record date. (b) Notwithstanding anything set forth in Section 3.11(a), the Company may elect (which election shall be irrevocable) to pay the Change of Control Repurchase Price in Common Stock, shares of Acquiror Securities that are publicly traded securities, or a combination of cash, shares of Common Stock and such publicly traded Acquiror Securities by so stating in the Company Change of Control Offer Notice; provided, however, the Company shall not pay the Change of Control Repurchase Price in Common Stock or Acquiror Securities if an Event of Default has occurred or is continuing (other than an Event of Default that is cured by the payment of the Change of Control Repurchase Price) and unless the Company satisfies the other conditions prior to the Change of Control Repurchase Date as set forth in Sections 3.11 and 3.13. In such event, the number of shares of Common Stock or Acquiror Securities a Holder will receive will equal the portion of the Change of Control Repurchase Price payable in such shares divided by 95% of the average of the last reported sale price of Common Stock or Acquiror Securities that are publicly traded securities, as the case may be, for the five (5) days immediately preceding and including the third trading day prior to the Change of Control Repurchase Date. All shares issued pursuant to this Section 3.11(b) shall, upon issue, be duly and validly issued and fully paid and non-assessable. (c) The Company shall mail to all Holders of record of the Debentures a notice (a "COMPANY CHANGE OF CONTROL OFFER NOTICE") of the occurrence of a Change of Control and of the repurchase right arising as a result thereof within 20 business days after the Company obtains knowledge of the occurrence of such Change of Control. The Company shall promptly furnish to the Trustee a copy of such notice. Each Company Change of Control Offer Notice shall in- -37- clude a form of Holder Change of Control Acceptance Notice to be completed by a Holder and shall state, as applicable: (i) the events causing a Change of Control; (ii) the date of the Change of Control; (iii) the Change of Control Repurchase Price, the applicable conversion rate and any adjustments to the applicable conversion rate; (iv) the name and address of the Paying Agent and Conversion Agent; (v) that Debentures as to which a Holder Change of Control Acceptance Notice has been given may be converted only if the Holder Change of Control Acceptance Notice has been withdrawn in accordance with the terms of this Indenture; (vi) that Debentures must be surrendered to the Paying Agent to collect payment of the Change of Control Repurchase Price and accrued but unpaid interest and Contingent Interest and Additional Amounts, if any; (vii) that the Change of Control Repurchase Price for any Debentures as to which a Holder Change of Control Acceptance Notice has been given and not withdrawn, together with any accrued and unpaid interest (including Contingent Interest and Additional Amounts, if any, with respect thereto, shall be paid promptly following the later of the Change of Control Repurchase Date and the time of surrender of such Debentures as described in (vi); (viii) the last date on which a Holder may exercise the Change of Control repurchase right; (ix) the Change of Control Repurchase Date; (x) whether the Company will pay the Change of Control Repurchase Price in cash, shares of Common Stock, Acquiror Securities or a combination thereof, specifying the percentage of each; (xi) the procedures the Holder must follow under this Section 3.11 to require the Company to repurchase their Debentures; (xii) that, unless the Company defaults in making payment of such Change of Control Repurchase Price, interest (including Contingent Interest and Additional Amounts, if any), on Debentures covered by any Holder Change of Control Acceptance Notice will cease to accrue on and after the Change of Control Repurchase Date; -38- (xiii) the CUSIP number of the Debentures; and (xiv) the procedures for withdrawing a Holder Change of Acceptance Notice (as specified in Section 3.12). At the Company's request and at the Company's expense, the Trustee shall give the Company Change of Control Offer Notice in the Company's name; provided, however, that, in all cases, the text of the Company Change of Control Offer Notice shall be prepared by or at the direction of the Company. (d) For a Debenture to be so repurchased at the option of the Holder, the Paying Agent must receive such Debenture duly endorsed for transfer, together with the form entitled "Form of Holder Change of Control Acceptance Notice" (a "HOLDER CHANGE OF CONTROL ACCEPTANCE NOTICE") on the reverse thereof duly completed, together with such Debenture duly endorsed for transfer, prior to the close of business on the 20th business day following the date of the Company Change of Control Offer Notice, subject to extension to comply with applicable law. The Holder Change of Control Acceptance Notice must state: (i) the certificate numbers of the Debentures to be delivered for repurchase; (ii) the portion of the principal amount of Debentures to be repurchased, which must be $1,000 or an integral multiple thereof; and (iii) that the Debentures are to be repurchased by the Company pursuant to Section 3.11 hereof. All questions as to the validity, eligibility (including time of receipt) and acceptance of any Debenture for redemption shall be determined by the Company, whose determination shall be final and binding. The Company shall purchase from the Holder thereof, pursuant to this Section 3.11, a portion of a Debenture if the principal amount 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 Debenture also apply to the purchase of such portion of such Debenture. Any purchase by the Company contemplated pursuant to the provisions of this Section 3.11 shall be consummated by the delivery of the consideration to be received by the Holder promptly following the later of the Change of Control Repurchase Date and the time of delivery of the Debentures to the Paying Agent in accordance with this Section 3.11. Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Holder Change of Control Acceptance Notice contemplated by this Section 3.11(d) shall have the right to withdraw such Holder Change of Control Acceptance Notice at any time prior to the close of business on the 20th business day following the date of the Company Change of Control Offer Notice by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.12. The Paying Agent shall promptly notify the Company of the receipt by it of any Holder Change of Control Acceptance Notice or written withdrawal thereof. -39- Notwithstanding anything herein to the contrary, the Company's obligations pursuant to this Section 3.11 shall be satisfied if a third party makes an offer to repurchase outstanding Debentures after a Change of Control in the manner, and at the times and otherwise in compliance in all material respects with the requirements of this Section 3.11 and purchases all Debentures properly tendered and not withdrawn pursuant to the requirements of this Section 3.11. In addition, the Company shall not be required to make a Change of Control offer pursuant to this Section 3.11, if, in connection with or in contemplation of any Change of Control, the Company has made an offer to purchase (an "ALTERNATE OFFER") any and all Debentures validly tendered at a cash price equal to or higher than the Change of Control Repurchase Price and has purchased all Debentures properly tendered in accordance with the terms of such Alternate Offer; provided, however, that the terms and conditions of such contemplated Change of Control are described in reasonable detail to the Holders in the notice delivered in connection with such Alternate Offer. 3.12 Effect of Holder Change of Control Acceptance Notice. Upon receipt by the Paying Agent of the Holder Change of Control Acceptance Notice specified in Section 3.11(d), the Holder of the Debenture in respect of which such Holder Change of Control Acceptance Notice was given shall (unless such Holder Change of Control Acceptance Notice is withdrawn as specified in the following two paragraphs) thereafter be entitled to receive solely the Change of Control Repurchase Price, together with accrued but unpaid interest (including Contingent Interest and Additional Amounts, if any), thereon, to but not including the Change of Control Repurchase Date with respect to such Debenture. Such Change of Control Repurchase Price, together with accrued but unpaid interest (including Contingent Interest and Additional Amounts, if any), thereon, to but not including the Change of Control Repurchase Date shall be paid to such Holder, subject to receipt of funds by the Paying Agent, promptly following the later of (x) the Change of Control Repurchase Date with respect to such Debenture (provided that the conditions in Section 3.11 have been satisfied) and (y) the book-entry transfer or time of delivery of such Debenture to the Paying Agent by the Holder thereof in the manner required by Section 3.11(d). Debentures in respect of which a Holder Change of Control Acceptance Notice has been given by the Holder thereof may not be converted pursuant to Article 11 hereof on or after the date of the delivery of such Holder Change of Control Acceptance Notice unless such Holder Change of Control Acceptance Notice has first been validly withdrawn as specified in the following two paragraphs. A Holder Change of Control Acceptance Notice may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent in accordance with the Holder Change of Control Acceptance Notice prior to the close of business on the 20th business day following the date of the Company Change of Control Offer Notice. The notice of withdrawal must state: -40- (i) the principal amount of the Debentures with respect to which such notice of withdrawal is being submitted; (ii) if certificated Debentures have been issued, the certificate numbers of the withdrawn Debentures; and (iii) the principal amount, if any, of such Debenture which remains subject to the original Holder Change of Control Acceptance Notice and which has been or will be delivered for purchase by the Company. The Company shall not purchase any of the Debentures pursuant to Section 3.11 if there has occurred prior to, on or after, as the case may be, the giving, by the Holders of such Debentures, of the required Holder Change of Control Acceptance Notice, and is continuing an Event of Default (other than a default in the payment of the Change of Control Repurchase Price). The Paying Agent will promptly return to the respective Holders thereof any Debentures (x) with respect to which a Holder Change of Control Acceptance Notice 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 Change of Control Repurchase Price) in which case, upon such return, the Holder Change of Control Acceptance Notice with respect thereto shall be deemed to have been withdrawn. 3.13 Deposit of Change of Control Repurchase Price. Prior to the close of business (New York City time) on the business day prior to the Change of Control Repurchase Date, the Company shall deposit with the Trustee or with the Paying Agent (or, if the Company or a subsidiary or an Affiliate of either of them is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 2.04) an amount of money (in immediately available funds if deposited on such business day) or shares of Common Stock or Acquiror Securities, as applicable, sufficient to pay the aggregate Change of Control Repurchase Price together with accrued but unpaid interest (including Contingent Interest and Additional Amount, if any) thereon, to but not including the Change of Control Repurchase Date of all the Debentures or portions thereof which are to be purchased as of the Change of Control Repurchase Date. If the Paying Agent holds money or securities sufficient to pay the Change of Control Repurchase Price of the Debentures on the business day following the Change of Control Repurchase Date, then, on and after such date: (a) the Debentures will cease to be outstanding and interest will cease to accrue (whether or not book-entry transfer of the Debentures has been made or the Debentures have been delivered to the Paying Agent); and (b) all other rights of the Holders will terminate (other than the right to receive the Change of Control Repurchase Price upon transfer or delivery of the Debentures). -41- 3.14 Repayment to the Company. The Trustee and the Paying Agent shall return to the Company any cash (or shares of Common Stock or Acquiror Securities, as the case may be) that remains unclaimed as provided in paragraph 6 of the Debentures, together with interest or dividends, if any, thereon, held by them for the payment of the Change of Control Repurchase Price and accrued but unpaid interest (including Contingent Interest and Additional Amounts, if any); provided, however, that to the extent that the aggregate amount of cash (or shares of Common Stock or Acquiror Securities, as the case may be) deposited by the Company pursuant to Section 3.13 exceeds the aggregate Change of Control Repurchase Price of the Debentures or portions thereof which the Company is obligated to purchase as of the Change of Control Repurchase Date and accrued but unpaid interest thereon (including Contingent Interest and Additional Amounts, if any), then, unless otherwise agreed in writing with the Company, promptly after the Change of Control Repurchase Date, the Trustee shall return any such excess to the Company together with interest or dividends, if any, thereon. 3.15 Covenant to Comply with Securities Laws upon Purchase of Debentures. When complying with the provisions of Section 3.11 hereof (provided that such offer or purchase constitutes an "issuer tender offer" for purposes of Rule 13e-4 (which term, as used herein, includes any successor provision thereto) under the Exchange Act at the time of such offer or purchase), the Company shall to the extent required (i) comply in all material respects with Rule 13e-4 and Rule 14e-1 under the Exchange Act, (ii) file the related Schedule TO (or any successor schedule, form or report) under the Exchange Act, and (iii) otherwise comply in all material respects with all Federal and state securities laws so as to permit the rights and obligations under Section 3.11 to be exercised in the time and in the manner specified in Section 3.11. ARTICLE 4 COVENANTS 4.01 Payment of Debentures. The Company shall pay or cause to be paid the principal of, premium, if any, and interest (including Contingent Interest) on the Debentures on the dates and in the manner provided in the Debentures, provided that (a) the Company will not pay interest accrued and unpaid on any Debentures that are converted into Common Stock. If a Holder converts after a record date for an interest payment but prior to the corresponding Interest Payment Date, it will receive the interest payable on the Interest Payment Date, notwithstanding the conversion of such -42- Debentures prior to such Interest Payment Date, because that Holder will have been the Holder of record on the corresponding record date. However, at the time the Holder surrenders those Debentures for conversion, except as provided below, it must pay the Company an amount equal to the interest that will be paid on the Interest Payment Date. The preceding sentence does not apply, however, to a Holder that converts Debentures that are called by the Company for redemption. Accordingly, if the Company elects to redeem Debentures on a date after a record date for an interest payment but prior to the corresponding Interest Payment Date and prior to the Redemption Date, and the Holder of those Debentures chooses to convert the Debentures, the Holder will not be required to pay the Company, at the time it surrenders the Debentures for conversion, the amount of interest on the Debentures it will receive on the Interest Payment Date, (b) the Company will pay interest to a Person other than the Holder of record on the record date if the Company redeems the Debentures on a date that is after the record date and prior to the corresponding Interest Payment Date. In this instance, the Company will pay interest accrued and unpaid on the Debentures being redeemed, to, but not including the Redemption Date to the same Person to whom the Company will pay the principal of such Debentures, and (c) the Company's delivery to a Holder of shares of Common Stock into which a Debenture is convertible, together with any cash payment for such Holder's fractional shares, will be deemed to satisfy the Company's obligation to pay accrued tax original issue discount attributable to the period from the Issue Date through the conversion date. As a result, accrued tax original issue discount to the conversion date is deemed to be paid in full rather than cancelled, extinguished or forfeited. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a subsidiary thereof, holds as of 12:00 noon, New York City Time on the due date, money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay all Additional Amounts, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. All references in this Indenture to "interest" shall include Compounded Interest unless otherwise stated. 4.02 Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency (which may be an office of the Trustee or an Affiliate of the Trustee, Registrar, co-registrar or Conversion Agent) where Debentures may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Debentures and this Indenture may be served. The Company shall give prompt written notice -43- to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Debentures may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03. 4.03 Reports. (a) The Company shall file with the Trustee, within 15 days after it files such annual and quarterly reports, information, documents and other reports with the SEC, copies of its annual report and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. In the event the Company is at any time no longer subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, it shall continue to provide the Trustee with reports containing substantially the same information as would have been required to be filed with the SEC had the Company continued to have been subject to such reporting requirements. In addition, the Company shall comply with the other provisions of TIA Section 314(a). (b) At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, for so long as any Debentures remain outstanding, the Company shall furnish to the Holders and to prospective investors designated by such Holders, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. 4.04 Compliance Certificate. (a) The Company shall deliver to the Trustee, on or prior to the 100th day after the end of each fiscal year of the Company (which on the date hereof is December 31), an Officers' Certificate complying with Section 314(a)(4) of the TIA, stating that a review of the activities of the Company during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, per- -44- formed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Debentures is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. The Company shall promptly provide the Trustee with an Officers' Certificate notifying the Trustee of any change in the fiscal year of the Company. (b) The Company shall, so long as any of the Debentures are outstanding, deliver to the Trustee, as soon as possible, and in any event within five days after any Officer becomes aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. 4.05 Taxes. The Company shall pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Debentures. 4.06 Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. 4.07 Corporate Existence. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence. 4.08 Tax Treatment of Debentures. The Company and the Holders and any beneficial owner of a Debenture, by purchasing the Debentures, agree that (i) the Debentures are "contingent payment debt instruments" as de- -45- fined in Treasury Regulations Section 1.1275-4(b), (ii) each Holder and any beneficial owner of a Debenture shall be bound by the Company's application of the Treasury Regulations to the Debentures, including the Company's determination that the rate at which interest will be deemed to accrue on the Debentures for United States federal income tax purposes will be 9.40% compounded semi-annually, which is the rate comparable to the rate at which the Company would borrow on a noncontingent, nonconvertible basis with terms and conditions otherwise comparable to the Debentures, (iii) each Holder and any beneficial owner of a Debenture shall use the projected payment schedule with respect to the Debentures determined by the Company, as required by Treasury Regulations Section 1.1275-4(b)(4)(iv), to determine its interest accruals and adjustments as provided in Treasury Regulations Section 1.1275-4(b), and (iv) the Company and each Holder and any beneficial owner of a Debenture will not take any position on a tax return inconsistent with (i), (ii), or (iii), unless required by applicable law. A Holder of Debentures may obtain the issue price, amount of original issue discount, issue date, yield to maturity, comparable yield and projected payment schedule for the Debentures by submitting a written request for such information to the Company at Grey Global Group Inc., 777 Third Avenue, New York, New York 10017, Attention: Corporate Secretary. ARTICLE 5 SUCCESSORS 5.01 Mergers and Sales of Assets by the Company. The Company shall not consolidate with or merge into any other Person or convey, transfer, sell or lease its properties and assets substantially as an entirety to any Person, unless: (i) the Person formed by such consolidation or into or with which the Company is merged or the Person to which the Company's properties and assets are conveyed, transferred, sold or leased, is a corporation organized and existing under the laws of the United States, any State thereof or the District of Columbia and, if other than the Company, has expressly assumed all of the Company's obligations, including the payment of the principal of, and interest on, the Debentures and the performance of the other covenants under Article 4 of this Indenture; and (ii) immediately after giving effect to such transaction, no Default or Event of Default has occurred and is continuing under this Indenture. -46- 5.02 Successor Corporation Substituted. Upon any consolidation, merger, or any conveyance, transfer, sale or lease of the Company's properties and assets in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation, merger, conveyance, transfer, sale or lease shall be substituted for (so that from and after the date of such consolidation, merger, conveyance, transfer, sale or lease, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Debentures except in the case of a consolidation, merger, conveyance, transfer, sale or lease of the Company's assets that meets the requirements of Section 5.01 hereof. ARTICLE 6 DEFAULTS AND REMEDIES 6.01 Events of Default. Each of the following is an "EVENT OF DEFAULT" in respect of the Debentures: (a) failure for 30 days to pay interest on the Debentures when due, whether or not such payment is prohibited by Article 10 of this Indenture; provided that a valid extension of the interest payment period by the Company during an Extension Period pursuant to this Indenture shall not constitute a default in the payment of interest for this purpose; (b) failure to pay principal on the Debentures when due whether at maturity, upon redemption, by declaration or otherwise, whether or not such payment is prohibited by Article 10 of this Indenture; (c) failure to observe or perform any covenant contained in Article 4 of this Indenture for 90 days after written notice to the Company of such failure from the Trustee or the Holders of at least 25% in principal amount of the outstanding Debentures; (d) the Company's failure to comply with Sections 3.11 or 5.01; (e) a default in the Company's indebtedness with an aggregate amount outstanding in excess of $25.0 million (a) resulting from the failure to pay principal at maturity or (b) as a result of which the maturity of such indebtedness has been accelerated prior to its Stated Maturity; -47- (f) the Company's failure to pay final judgments aggregating in excess of $25.0 million, which judgments are not paid, discharged or stayed for a period of not less than 60 days; (g) a court having competent jurisdiction enters a decree or order for (A) relief in respect of the Company in an involuntary case under any applicable Bankruptcy Law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company for all or substantially all of the property and assets of the Company or (C) the winding up or liquidation of the affairs of the Company and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (h) the Company (A) commences a voluntary case under any applicable Bankruptcy Law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or for all or substantially all of the property and assets of the Company or (C) effects any general assignment for the benefit of creditors. 6.02 Acceleration. If any Event of Default (other than an Event of Default specified in clause (g) or (h) of Section 6.01 hereof) with respect to the Company occurs and is continuing, unless the principal of all Debentures shall have already become due and payable, either the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Debentures may declare the principal of all the Debentures to be due and payable immediately in cash by written notice to the Company (and to the Trustee if given by such Holders) and, if it is given at the request of the Holders, the Trustee must specify the respective Event of Default and that it is a "notice of acceleration" (the "ACCELERATION NOTICE"). Upon delivery of an Acceleration Notice, the principal of and accrued interest (including Contingent Interest and Additional Amounts, if any) on all the Debentures shall become immediately due and payable. Notwithstanding the foregoing, if an Event of Default specified in clause (g) or (h) of Section 6.01 hereof occurs with respect to the Company all outstanding Debentures shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of a majority in aggregate principal amount of the then outstanding Debentures by written notice to the Trustee may, on behalf of all of the Holders, rescind and cancel an acceleration and its consequences if the rescission would not conflict with any judgment or decree if all existing Events of Default have been cured or waived except the nonpayment of principal or interest that has become due solely because of such acceleration, if interest on overdue installments of interest (to the extent the payment of such interest is lawful) and on overdue principal, which has become due other- -48- wise than by such declaration of acceleration, has been paid, and in the event of the cure or waiver of an Event of Default of the type described in Section 6.01(c), the Trustee has received an Officers' Certificate and an Opinion of Counsel that such Event of Default has been cured or waived. No such rescission shall affect any subsequent Default or impair any rights arising from a subsequent Default. 6.03 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium and Additional Amounts, if any, and interest on the Debentures or to enforce the performance of any provision of the Debentures or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Debentures or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Debenture in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. 6.04 Waiver of Past Defaults. Holders of not less than a majority in aggregate principal amount of the then outstanding Debentures by written notice to the Trustee may on behalf of the Holders of all of the Debentures waive any past Default, except a Default in the payment of the principal of, or interest on, the Debentures (unless such Default has been cured and a sum sufficient to pay all matured installments of interest and principal otherwise than by acceleration has been deposited with the Trustee) or call for a redemption of the Debentures. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. 6.05 Control by Majority. Holders of a majority in aggregate outstanding principal amount of the Debentures have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of other Holders of Debentures or that may involve the Trustee in personal liability. 6.06 Limitation on Suits. A Holder of a Debenture may pursue a remedy with respect to this Indenture or the Debentures only if: -49- (a) the Holder of a Debenture gives to the Trustee written notice of a continuing Event of Default; (b) such Holder of a Debenture or Holders of Debentures offer and, if requested, provide to the Trustee indemnity or security satisfactory to the Trustee against any loss, liability or expense; and (c) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity or security. A Holder of a Debenture may not use this Indenture to prejudice the rights of another Holder of a Debenture or to obtain a preference or priority over another Holder of a Debenture. 6.07 Rights of Holders of Debentures to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Debenture to receive payment of principal, premium and Additional Amounts, if any, and interest on the Debenture, on or after the respective due dates expressed in the Debenture or the right to receive shares of Common Stock upon conversion of a Debenture, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. 6.08 Collection Suit by Trustee. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Additional Amounts, if any, and interest (including Contingent Interest, if any) remaining unpaid on the Debentures and interest (including Contingent Interest, if any) on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. 6.09 Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Debentures allowed in any judicial proceedings relative to the Company (or any other obligor upon the Debentures), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee -50- shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Debentures or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. 6.10 Priorities. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Debentures for amounts due and unpaid on the Debentures and for any accrued but unpaid interest amounts (including Additional Amounts and Contingent Interest, if any, due in respect of the Debentures), ratably, without preference or priority of any kind, according to the amounts due and payable on the Debentures; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Debentures pursuant to this Section 6.10. 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee or a suit by a Holder of a Debenture pursuant to Section 6.07 hereof. -51- ARTICLE 7 TRUSTEE 7.01 Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii)in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture, but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section 7.01; (ii)the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights -52- and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (e) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. 7.02 Rights of Trustee. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it sees fit, and, if the Trustee shall determine to make such further inquiry -53- or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney, and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. (h) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event that is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Debentures and this Indenture. (i) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder. (j) The Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any Person authorized to sign an Officers' Certificate, including any Person specified as so authorized in any such certificate previously delivered and not superseded. 7.03 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Debentures and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as Trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. 7.04 Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Debentures, it shall not be accountable for the Company's use of the proceeds from the Debentures or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Debentures or any other document in connection with the sale of the Debentures or pursuant to this Indenture other than its certificate of authentication. -54- 7.05 Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is actually known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders of Debentures a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Debenture, the Trustee may withhold the notice if and so long as a trust committee of the Board of Directors or Responsible Officers of the Trustee in good faith determines that withholding the notice is in the interests of the Holders of the Debentures. 7.06 Reports by Trustee to Holders of the Debentures. Within 60 days after each August 15 beginning with the August 15 following the date of this Indenture, and for so long as Debentures remain outstanding, the Trustee shall mail to the Holders of the Debentures a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). A copy of each report at the time of its mailing to the Holders of Debentures shall be mailed to the Company and filed with the SEC and each stock exchange, if any, on which the Debentures are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Debentures are listed on any stock exchange or of any delisting thereof. 7.07 Compensation and Indemnity. The Company shall pay to the Trustee from time to time such compensation for its acceptance of this Indenture and services hereunder as the Company and the Trustee shall agree to in writing from time to time. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee and any predecessor Trustee and their agents against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or willful misconduct. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve -55- the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which shall not be unreasonably withheld. To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Debentures on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Debentures. Such lien shall survive the satisfaction and discharge of this Indenture and the resignation or removal of the Trustee. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture and the resignation or removal of the Trustee. 7.08 Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Debentures may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding -56- Debentures may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 90 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in principal amount of the then outstanding Debentures may, at the expense of the Company, petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. 7.09 Successor Trustee by Merger, etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act or document shall be the successor Trustee. 7.10 Eligibility; Disqualification. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $10 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). -57- 7.11 Preferential Collection of Claims Against Company. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8 SATISFACTION AND DISCHARGE 8.01 Satisfaction and Discharge. This Indenture will be discharged and will cease to be of further effect as to all Debentures issued hereunder, if: (1) either: (a) all Debentures that have been authenticated (except lost, stolen or destroyed Debentures that have been replaced or paid and Debentures for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or (b) all Debentures that have not previously been delivered to the Trustee for cancellation have become due and payable whether at Stated Maturity or any Redemption Date or any Repurchase Date, or upon conversion or otherwise, and the Company has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars and/or shares of Common Stock (as applicable under the terms of this Indenture) in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Debentures not delivered to the Trustee for cancellation for principal, premium and Additional Amounts, if any, and accrued interest (including Contingent Interest, if any) to the date of maturity or redemption; (2) the Company has paid or caused to be paid all sums payable by it under this Indenture; and (3) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Debentures at maturity or the redemption date, as the case may be. -58- In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. Notwithstanding the satisfaction and discharge of this Indenture, if money shall have been deposited with the Trustee pursuant to subclause (b) of clause (1) of this Section 8.01, the provisions of Section 8.02 shall survive. 8.02 Application of Trust Money. All money deposited with the Trustee pursuant to Section 8.01 shall be held in trust and applied by it, in accordance with the provisions of the Debentures and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest (including Contingent Interest, if any) for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law. If the Trustee or Paying Agent is unable to apply any money in accordance with Section 8.01 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Debentures shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.01; provided that if the Company has made any payment of principal of, premium and Additional Amounts, if any, or interest (including Contingent Interest, if any) on any Debentures because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Debentures to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER 9.01 Without Consent of Holders of Debentures. Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee may amend or supplement this Indenture or the Debentures without the consent of any Holder of a Debenture: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Debentures in addition to certificated Debentures; -59- (c) to provide for the assumption of the Company's obligations to the Holders of the Debentures by a successor to the Company pursuant to Article 5 hereof; (d) to make any change that would provide any additional rights or benefits to the Holders of the Debentures or that does not adversely affect the rights of any Holder of the Debentures; (e) to comply with any requirements under the TIA; or (f) to appoint a successor trustee under this Indenture. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. 9.02 With Consent of Holders of Debentures. Except as provided below in this Section 9.02, the Company and the Trustee may amend or supplement this Indenture and the Debentures with the consent of the Holders of at least a majority in principal amount of the Debentures then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Debentures), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium and Additional Amounts, if any, or interest (including Contingent Interest, if any) on the Debentures, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Debentures may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Debentures voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Debentures). Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Debentures as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. -60- It shall not be necessary for the consent of the Holders of Debentures under this 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders of Debentures affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Debentures then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Debentures. However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Debentures held by a non-consenting Holder): (a) reduce the principal amount of Debentures whose Holders must consent to an amendment, supplement, modification or waiver of this Indenture or the Debentures; (b) reduce the principal of or change the Stated Maturity of any Debenture; (c) reduce the rate of or change the time for payment of interest, including Contingent Interest and Additional Amounts, or the applicable Redemption Dates on any Debenture; (d) impair the right to institute suit for the enforcement of the right to receive any payment on or with respect to any Debenture when due; (e) make any Debenture payable in currency other than that stated in the Debenture; (f) change the amount or time of any payment required after the obligation to make such payment arises or change the time before which no repurchase may be made; (g) waive the right of such Holder to receive payment of the principal of or interest on any debenture, or any repurchase payment when due; (h) impair the right of any Holder to convert any debenture; (i) modify the provisions of this Indenture relating to the Company's requirement to make an offer to repurchase the Debentures upon a Change of Control after the occurrence thereof; -61- (j) modify the subordination provisions of Article 10 hereof in a manner that adversely affects the rights of such Holder; or (k) take any other action otherwise prohibited by this Indenture to be taken without the consent of each Holder affected by such action. 9.03 Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Debentures shall be set forth in an amended or supplemental indenture that complies with the TIA as then in effect. 9.04 Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Debenture is a continuing consent by the Holder of a Debenture and every subsequent Holder of a Debenture or portion of a Debenture that evidences the same debt as the consenting Holder's Debenture, even if notation of the consent is not made on any Debenture. However, any such Holder of a Debenture or subsequent Holder of a Debenture may revoke the consent as to its Debenture if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. 9.05 Notation on or Exchange of Debentures. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Debenture thereafter authenticated. The Company in exchange for all Debentures may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Debentures that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Debenture shall not affect the validity and effect of such amendment, supplement or waiver. 9.06 Trustee to Sign Amendments, etc. The Trustee shall sign any amended or supplemental indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental indenture until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon an Officers' Certificate and an Opinion of Counsel each stating that the amendment or supplement is authorized or permitted by this Indenture and each complying with the requirements of Section 12.04 hereof. The Trustee may, but shall not be obligated to, enter -62- into any such amended or supplemental indenture which affects the Trustee's own rights, duties, liabilities or immunities under this Indenture or otherwise. ARTICLE 10 SUBORDINATION 10.01 Agreement to Subordinate. The Company agrees, and each Holder by accepting a Debenture agrees, that the indebtedness evidenced by the Debentures is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment in full, in cash or cash equivalents, of all Senior Debt (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Debt, including Senior Debt incurred after the date of this Indenture. This Article 10 shall constitute a continuing offer to all Persons who, in reliance upon such provisions, become holders of, or continue to hold, Senior Debt, and such provisions are made for the benefit of the holders of Senior Debt and such holders are made obligees hereunder and any one or more of them may enforce such provisions. For purposes of this Article 10, a distribution may consist of cash, securities or other property, by set-off or otherwise. 10.02 Liquidation; Dissolution; Bankruptcy. Upon any payment or distribution of assets of the Company to creditors of the Company upon any liquidation, dissolution, winding up, receivership, reorganization, assignment for the benefit of creditors, marshaling of assets and liabilities or any bankruptcy, insolvency or similar proceeding relating to the Company or its property, in an assignment for the benefit of creditors or any marshaling of the Company's assets and liabilities: (i) the holders of all Senior Debt shall first be entitled to receive payment in full in cash or cash equivalents of all amounts due or to become due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt) before Holders of the Debentures shall be entitled to receive any payment with respect of the principal of, or interest on, the Debentures; and -63- (ii)until all amounts due with respect to Senior Debt (as provided in clause (i) above) are paid in full, any distribution to which Holders would be entitled but for this Article 10 shall be made to holders of Senior Debt. 10.03 Default on Senior Debt or Designated Senior Debt. (a) The Company may not make any payment or distribution to the Trustee or any Holder on account of principal, premium, if any, or interest in respect of the Debentures if there shall have occurred and be continuing a default in any payment with respect to Senior Debt (other than obligations in respect of clauses (ii), (iii) and (iv) of the definition of "Qualifying Deferred Compensation" and reasonable expense reimbursements due to the Company's and its subsidiaries' employees and directors), whether at maturity, upon redemption, by declaration of acceleration or otherwise (a "PAYMENT DEFAULT"). (b) During the continuance of any other event of default (other than a Payment Default) with respect to Designated Senior Debt pursuant to which the maturity thereof may be accelerated, from and after the date of receipt by the Trustee of written notice (a "PAYMENT BLOCKAGE NOTICE") from holders of such Designated Senior Debt or from any Representative thereof, no payments on account of principal, premium, if any, or interest in respect of the Debentures may be made during a period (the "PAYMENT BLOCKAGE PERIOD") commencing on the date of receipt of such Payment Blockage Notice and ending on the date such event of default has been cured or waived or has ceased to exist, but in no event shall any Payment Blockage Period extend beyond October 15, 2033. 10.04 Acceleration of Debentures. If payment of the Debentures is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Debt of the acceleration. 10.05 When Distribution Must Be Paid Over. In the event that the Trustee or any Holder receives any payment of any obligations with respect to the Debentures when the payment is prohibited by Section 10.03 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt as their interests may appear or their Representative under an agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. -64- 10.06 Notice by Company. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any obligations with respect to the Debentures to violate this Article 10, but failure to give such notice shall not affect the subordination of the Debentures to the Senior Debt as provided in this Article 10. 10.07 Subrogation. After all Senior Debt is paid in full and until the Debentures are paid in full, Holders of Debentures shall be subrogated to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Holders of Debentures have been applied to the payment of Senior Debt. A distribution made under this Article 10 to holders of Senior Debt that otherwise would have been made to Holders of Debentures is not, as between the Company and Holders, a payment by the Company on the Debentures. 10.08 Relative Rights. This Article 10 defines the relative rights of Holders of Debentures and holders of Senior Debt. Nothing in this Indenture shall: (i) impair, as between the Company and Holders of Debentures, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Debentures in accordance with their terms; (ii)affect the relative rights of Holders of Debentures and creditors of the Company other than their rights in relation to holders of Senior Debt; or (iii) prevent the Trustee or any Holder of Debentures from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders of Debentures. If the Company fails because of this Article 10 to pay principal of or interest on a Debenture on the due date, the failure is still a Default or Event of Default. 10.09 Subordination May Not Be Impaired by Company. No right of any present or future holder of Senior Debt to enforce the subordination of the indebtedness evidenced by the Debentures shall in any way be prejudiced or impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with the terms of this Indenture, regardless of any knowledge thereof any such holder of Senior Debt may have or otherwise be charged with. -65- Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee, without incurring responsibility to the Trustee or the Holders of the Debentures and without impairing or releasing the subordination provided in this Article 10 or the obligations hereunder of the Holders of the Debentures to the holders of the Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt, or otherwise amend or supplement in any manner Senior Debt, or any instrument evidencing the same or any agreement under which Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person liable in any manner for the payment or collection of Senior Debt; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. 10.10 Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their respective Representatives. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee and the Holders of Debentures shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of any Representatives or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders of Debentures for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. 10.11 Rights of Trustee and Paying Agent. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt and shall not be liable to any such holders (other than for its willful misconduct or negligence) if the Trustee shall in good faith mistakenly pay over or distribute to Holders of Debentures or to the Company or to any other Person cash, property or securities to which any holders of Senior Debt shall be entitled by virtue of this Article 10 or otherwise. With respect to the holders of Senior Debt, the Trustee undertakes to perform or to observe only such of its covenants or obligations as are specifically set forth in this Indenture and no implied covenants or obligations with respect to holders of Senior Debt shall be read into this Indenture against the Trustee. Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Debentures, unless the Trustee shall have received at its Corporate Trust Office at least five business days prior to the date of such payment written notice -66- of facts that would cause the payment of any obligations with respect to the Debentures to violate this Article 10. Only the Company or a Representative may give the notice. Nothing in this Article 10 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. 10.12 Authorization to Effect Subordination. Each Holder of Debentures, by the Holder's acceptance thereof, authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the Representatives are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Debentures. ARTICLE 11 CONVERSION OF THE SECURITIES 11.01 Conversion Privilege. Prior to the close of business on the business day immediately preceding October 15, 2033 (the "CONVERSION EXPIRATION DATE") and subject to the provisions of this Article 11, a Holder may convert Debentures into shares of Common Stock at an initial conversion rate of 1.0404 shares of Common Stock for each $1,000 principal amount of Debentures (equivalent to a conversion price of $961.20 per share of Common Stock (the "INITIAL CONVERSION PRICE")), subject to adjustment pursuant to Section 11.06 (the Initial Conversion Price as so adjusted from time to time, the "CONVERSION PRICE") during each of the following periods (each such period, a "PERMITTED CONVERSION PERIOD"): (a) during the fiscal quarter immediately following each fiscal quarter (such previous fiscal quarter, the "PRIOR FISCAL QUARTER") in which the Market Price Condition has been satisfied, (b) during the period beginning on the date the Debentures are called for redemption and ending at the close of business on the business day immediately prior to the Redemption Date, -67- (c) during the five (5) consecutive business days after the Trading Price Condition has been satisfied, (d) during a Dividend Payment Period; provided that this clause (d) shall not apply with respect to a Holder that is otherwise permitted to, elects to and in fact does participate in the dividend or distribution (on an as-if-converted basis) giving rise to such right of conversion, and (e) during the period commencing on the date a Company Change of Control Offer Notice is mailed to Holders pursuant to Section 3.11(c) and ending thirty (30) days after the Company gives such notice. In addition, if the Company is a party to a consolidation, merger or binding share exchange, in each case, pursuant to which Common Stock would be converted into cash or property other than securities, a Holder may surrender Debentures for conversion at any time from and after the date that is 15 days prior to the anticipated effective date of such transaction until 15 days after the actual effective date of such transaction. The Board of Directors shall determine the anticipated effective date of the transaction, and such determination shall be conclusive and binding on the holders and shall be publicly announced by the Company by publication on its website or through such other public medium as it may use at that time not later than two (2) business days prior to such fifteenth day. A Debenture in respect of which a Holder elects to exercise its option to require repurchase pursuant to Section 3.11 may be converted only if such Holder withdraws its election in accordance with Section 3.11(d) and Section 3.12. A Holder of Debentures is not entitled to any rights of a holder of Common Stock until such Holder has converted its Debentures to Common Stock, and only to the extent such Debentures are deemed to have been converted to Common Stock under this Article 11. The "MARKET PRICE CONDITION" shall be satisfied if, at any time after the date of this Indenture, the last reported sale price of the Common Stock for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the Prior Fiscal Quarter is greater than 120% of the applicable Conversion Price as in effect on the last trading day of the Prior Fiscal Quarter. The "LAST REPORTED SALE PRICE" of the Common Stock on any date means the closing sale price per share (or if no closing sale price is reported, the average of the bid and asked prices or, if more than one in either case, the average of the average bid and the average asked prices) on such date as reported by The NASDAQ National Market or, if the Common Stock is not reported by The NASDAQ National Market, as reported in composite transactions for the principal U.S. securities exchange on which the Common Stock is traded. If the Common Stock is not reported by The NASDAQ National Market and not listed for trading on a U.S. national or regional securities exchange on the relevant date, the "last reported sale price" will be the last quoted bid price -68- for the Common Stock in the over-the-counter market on the relevant date as reported by the National Quotation Bureau Incorporated or similar organization. If the Common Stock is not so quoted, the "last reported sale price" will be the average of the mid-point of the last bid and asked prices for the Common Stock on the relevant date quoted by each of at least three independent nationally recognized investment banking firms selected by the Company for this purpose. A "TRADING DAY" is a day during which trading in securities generally occurs on The NASDAQ National Market or, if the Common Stock is not then listed on The NASDAQ National Market, on the principal other U.S. national or regional securities exchange on which the Common Stock is then listed or, if the Common Stock is not then listed on a national or regional securities exchange, on the principal other market on which the Common Stock is then traded. The "TRADING PRICE CONDITION" shall be satisfied if, at any time after the date the Debentures are originally issued, the Trading Price per $1,000 principal amount of Debentures for any five (5) consecutive trading day period (the "MEASUREMENT PERIOD"), as determined following a request by a Holder in accordance with the next succeeding paragraph, for each day of that measurement period was less than 95% of the product of the last reported sale price of Common Stock and the conversion rate for such date (i.e. the number of shares of Common Stock $1,000 principal amount of Debentures are then convertible into) (the "PARITY VALUE"); provided that if, on the date of any conversion pursuant to the Trading Price Condition, the last reported sale price of Common Stock is between 100% and 120% of the then current conversion price of the Debentures, Holders shall receive, in lieu of Common Stock based on the conversion rate, Common Stock with a value equal to the principal amount of such Holder's Debentures plus accrued and unpaid interest and accrued and unpaid Additional Amounts and Contingent Interest, if any, as of the conversion date (a "PRINCIPAL VALUE CONVERSION"). The Common Stock delivered upon a principal value conversion will be valued at the greater of the conversion price on the conversion date and the last reported sale price on the third trading day after the conversion date. In connection with any conversion upon satisfaction of the Trading Price Condition, the Trustee (or other Conversion Agent appointed by the Company) shall have no obligation to determine the Trading Price of the Debentures unless the Company has requested such determination; and the Company shall have no obligation to make such request unless a Holder provides the Company with reasonable evidence that the Trading Price for $1,000 principal amount of Debentures would be less than the Parity Value. At such time, the Company shall instruct the Trustee or Conversion Agent, as the case may be, to determine the Trading Price of the Debentures beginning on the next trading day and on each successive trading day until, and only until, the Trading Price for $1,000 principal amount of Debentures is greater than or equal to the Parity Value. A "DIVIDEND PAYMENT PERIOD" shall commence on each date on which the Company has announced that it will (i) issue a Below Market Issuance, (ii) distribute a Cash Dividend or an -69- Asset Distribution, which distribution has a per share value as determined in good faith by the Board of Directors exceeding 10% of the last reported sale price of Common Stock on the trading day immediately preceding the declaration date for such distribution or (iii) has commenced a Tender Offer, and end on the earlier of (a) the close of business on the business day immediately prior to the ex-dividend date with respect to such distribution or dividend (or in the case of a Tender Offer, at the close of business on the business day immediately prior to the expiration of the Tender Offer) and (b) the close of business on the first business day after the day on which the Company makes a public announcement that such distribution or dividend will not be issued or that such Tender Offer has been terminated. A Holder may convert a portion of a Debenture equal to $1,000 or any integral multiple thereof. Provisions of this Indenture that apply to conversion of all of a Debenture also apply to conversion of a portion of a Debenture. If a Debenture is called for redemption pursuant to Article 3, the right to convert such Debenture shall terminate at the close of business on the second business day before the Redemption Date for such Debenture (unless the Company shall default in making the redemption payment then due, in which case the conversion right shall terminate on the date such Default is cured and such Debenture is redeemed. 11.02 Conversion Procedure. To convert a Debenture, a Holder must satisfy the requirements in paragraph 8 of the Debentures and (i) complete and manually sign the irrevocable conversion notice on the back of the Debenture and deliver such notice to the Conversion Agent, (ii) surrender the Debenture to the Conversion Agent, (iii) furnish appropriate endorsements and transfer documents if required by the Registrar or the Conversion Agent, (iv) pay any transfer or other tax, if required by Section 11.04 and (v) if the Debenture is held in book-entry form, complete and deliver to the Depositary appropriate instructions pursuant to the Depositary's book-entry conversion programs. The date on which the Holder satisfies all of the foregoing requirements is the "CONVERSION DATE". As soon as practicable after the Conversion Date and in any event within five business days, the Company shall deliver to the Holder through the Conversion Agent either (i) a certificate for or (ii) a book-entry notation of the number of whole shares of Common Stock issuable upon the conversion pursuant to Section 11.05 and cash in lieu of any fractional shares. The Person in whose name the Debenture is registered shall be deemed to be a stockholder of record on the Conversion Date; provided, however, that no surrender of a Debenture 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 (subject to the provisions of -70- the next paragraph of this Section 11.02); provided, further, that such conversion shall be at the Conversion Price in effect on the date that such Debenture shall have been surrendered for conversion, as if the stock transfer books of the Company had not been closed. Upon conversion of a Debenture, such Person shall no longer be a Holder of such Debenture. In respect of any Debenture presented for conversion, the Company may, at its option, in lieu of delivering shares of Common Stock, elect to pay the Holder surrendering such Debenture an amount of cash equal to the average of the last reported sale price for the Common Stock for the five consecutive trading days immediately following (a) the date of delivery of the Company's notice of its election to deliver cash (as described in the next succeeding sentence) if the Company has not given Notice of Redemption, or (b) the Conversion Date, in the case of a conversion following a Notice of Redemption with respect to such Debenture, specifying that the Company intends to deliver cash upon conversion, in either case multiplied by the number of shares of Common Stock issuable upon conversion of such Debenture on that date. The Company shall inform Holders of its election to deliver shares of Common Stock or to pay cash in lieu of the delivery of such shares by delivering an irrevocable written notice to the Trustee and the Paying Agent prior to the close of business on the second business day after the Conversion Date, unless it has already informed Holders of its election by delivering an irrevocable notice in connection with its optional redemption of the Debentures as set forth in Section 3.01 hereof. If the Company delivers only shares of Common Stock upon conversion, such shares shall be delivered through the Trustee no later than the fifth business day following the Conversion Date. If the Company elects to satisfy all or a portion of its obligation to deliver shares upon conversion in cash, the payment, including any delivery of Common Stock, will be made to Holders surrendering Debentures no later than the tenth business day following the applicable Conversion Date; provided that if an Event of Default has occurred and is continuing, the Company shall not pay cash upon conversion of any Debentures (other than cash in lieu of fractional shares as set forth below). Accrued interest (including Contingent Interest, accrued Tax Original Issue Discount and Additional Amounts, if any) on a Debenture shall not be cancelled, extinguished or forfeited but rather shall, except as otherwise set forth herein, be deemed paid by an applicable portion of the Common Stock issued upon conversion of such Debenture. Except as set forth in the preceding sentence, no payment or adjustment will be made for accrued interest (including Contingent Interest or Additional Amounts, if any), on a converted Debenture or for dividends or distributions on shares of Common Stock issued upon conversion of a Debenture (provided that the shares of Common Stock received upon conversion of Debentures shall continue to accrue Additional Amounts, as applicable, in accordance with the Registration Rights Agreement and shall be entitled to receive, at the next Interest Payment Date, any accrued but unpaid Additional Amounts with respect to the converted Debentures), but if any Holder surrenders a Debenture for conversion between the record date for the payment of an installment of interest and the next Interest Payment Date, then, notwithstanding such conversion, the interest (including Contingent Interest or Additional Amounts, if any), payable on such Interest Payment Date shall be paid to the -71- Holder of such Debenture on such Interest Payment Date. In such event, such Debenture, when surrendered for conversion, must be accompanied by delivery of a check payable to the Conversion Agent in an amount equal to the interest (including Contingent Interest or Additional Amounts, if any), payable on such Interest Payment Date on the portion so converted. If such payment does not accompany such Debenture, the Debenture shall not be converted; provided, however, that no such check shall be required if such Debenture has been called for redemption on a redemption date within the period between and including such record date and such Interest Payment Date, or if such Debenture is surrendered for conversion on the Interest Payment Date. If the Company defaults in the payment of interest (including Contingent Interest or Additional Amounts, if any), payable on the Interest Payment Date, the Conversion Agent shall repay such funds to the Holder. No fractional shares of Common Stock shall be issued upon conversion of Debentures. If more than one Debenture shall be surrendered for conversion at one time by the same holder, the number of full shares that shall be issuable upon conversion shall be computed on the basis of the aggregate principal amount of the Debentures (or specified portions thereof to the extent permitted hereby) so surrendered. If any fractional share of Common Stock would be issuable upon the conversion of any Debenture or Debentures, the Company shall make a payment in lieu thereof in cash based on the current Market Price of a share of Common Stock on the Conversion Date. Upon surrender of a Debenture that is converted in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Debenture equal in principal amount to the unconverted portion of the Debenture surrendered. 11.03 Adjustments Below Par Value. Before taking any action which would cause an adjustment decreasing the Conversion Price so that the shares of Common Stock issuable upon conversion of the Debentures would be issued for less than the par value of such Common Stock, the Company will take all corporate action which may be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of such Common Stock at such adjusted Conversion Price. 11.04 Taxes on Conversion. If a Holder converts a Debenture, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon such conversion. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder's name. The Conversion Agent may refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder's name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder's name. Nothing herein shall preclude any tax withholding required by law or regulations. -72- 11.05 Company to Provide Stock. The Company shall, prior to issuance of any Debentures hereunder, and from time to time as may be necessary, reserve, out of its authorized but unissued Common Stock a sufficient number of shares of Common Stock to permit the conversion of all outstanding Debentures into shares of Common Stock. The shares of Common Stock or other securities issued upon conversion of Debentures bearing a legend as provided in Section 2.06(f) shall bear a legend substantially in the following form: "THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (III) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (III) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM THE HOLDER OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE." The Company covenants that all shares of Common Stock delivered upon conversion of the Debentures shall be newly issued shares or treasury shares, shall be duly authorized, validly issued, fully paid and non-assessable and shall be free from preemptive rights and free of any lien or adverse claim. -73- 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 Debentures, 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. 11.06 Adjustment of Conversion Price. The Conversion Price shall be adjusted from time to time, without duplication, as follows: (a) In case the Company shall pay or make a dividend or other distribution on Common Stock in shares of Common Stock to all or substantially all holders of shares of Common Stock, then the Conversion Price in effect at the opening of business on the day following the date fixed for the determination of shareholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator of which shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this subparagraph (a), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company (except to the extent such dividend or distribution is being made with respect to such shares) but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. (b) In case the outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, then the Conversion Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and, conversely, in case the outstanding shares of Common Stock shall be combined into a smaller amount of shares of Common Stock, then the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (c) In case the Company shall issue to all or substantially all holders of its Common Stock, rights, warrants or options entitling such holders (for a period commencing no earlier than the record date described below and expiring not more than 60 days after such record date) to subscribe for or purchase shares of Common Stock (or securities convertible into Common Stock) at a price per share less than the Market Price at the -74- record date for the determination of stockholders entitled to receive such rights, warrants or options (a "BELOW MARKET ISSUANCE"), the Conversion Price in effect immediately prior thereto shall be adjusted so that the Conversion Price shall equal the price determined by multiplying the Conversion Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record date, plus the number of shares that the aggregate subscription or purchase price for the total number of shares of Common Stock offered by the rights, warrants or options so issued (or the aggregate conversion price of the convertible securities offered by such rights, warrants or options) would purchase at such Market Price, and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock offered by such rights, warrants or options (or into which the convertible securities so offered by such rights, warrants or options are convertible). Such adjustment shall be made successively whenever any such rights, warrants or options are issued, and shall become effective immediately after such record date. If at the end of the period during which such rights, warrants or options are exercisable not all rights, warrants or options shall have been exercised, the adjusted Conversion Price shall be immediately readjusted to what it would have been upon application of the foregoing adjustment substituting the number of additional shares of Common Stock actually issued (or the number of shares of Common Stock issuable upon conversion of convertible securities actually issued) for the total number of shares of Common Stock offered (or the convertible securities offered). (d) In case the Company shall distribute to all or substantially all holders of Common Stock (i) the Company's equity securities (other than Common Stock), (ii) evidences of the Company's indebtedness and/or (iii) other assets (including securities, but excluding (1) any rights, warrants or options referred to in clause (c) above, (2) any rights or warrants to acquire any capital stock of any entity other than the Company, (3) any dividends or distributions in connection with the Company's liquidation, dissolution or winding-up, (4) any dividends payable solely in cash that may from time to time be declared by the Company's Board of Directors and (5) any dividends or distributions referred to in clause (a) above) (each of (i), (ii) and (iii), an "ASSET DISTRIBUTION"), in which case, the Conversion Price shall be adjusted so that the adjusted Conversion Price shall equal the number determined by multiplying the Conversion Price in effect on the record date with respect to the Asset Distribution by the fraction of "A/B," where "A" is equal to the last reported sale price (as defined above) of Common Stock on such record date minus the fair market value on such record date (as determined in good faith by the Company's Board of Directors, whose determination shall be conclusive evidence of such fair market value) of the portion of the Asset Distribution applicable to one share of Common Stock, and "B" is equal to such last reported sale price. (e) In case the Company shall distribute or dividend to all or substantially all holders of Common Stock, cash (a "CASH Dividend") that when combined with all other -75- Cash Dividends paid within the calendar year during which such Cash Dividend is paid exceeds $4.00 per share of Common Stock (appropriately adjusted from time to time for any stock dividends on or subdivisions or combinations of or other similar events with respect to Common Stock) (the amount of such excess, the "EXCESS DIVIDEND"), in which case, the Conversion Price shall be reduced so that the adjusted Conversion Price shall equal the number determined by multiplying the Conversion Price in effect on the record date with respect to the Cash Dividend by the fraction of "B/A," where "A" is equal to the last reported sale price of Common Stock on such record date, and "B" is equal to such last reported sale price minus the amount of Excess Dividend applicable to one share of then outstanding Common Stock. (f) In case a tender or exchange offer (a "TENDER OFFER") made by the Company or any subsidiary of the Company for all or any portion of the Common Stock shall expire and such Tender Offer (as amended as of the expiration thereof) shall require the payment to common stockholders of consideration per share of Common Stock having a cash and fair market value and any other consideration included in such payment per share of Common Stock (as determined by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors) that as of the last time (the "EXPIRATION TIME") tenders or exchanges may be made pursuant to such Tender Offer (as it may be amended) exceeds the first reported sale price per share of Common Stock on the trading day next succeeding the Expiration Time, the Conversion Price shall be decreased so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the Expiration Time by a fraction, (i) the numerator of which shall be the number of shares of Common Stock outstanding (including any tendered or exchanged shares) at the Expiration Time multiplied by the Closing Price of a share of Common Stock on the trading day next succeeding the Expiration Time, and (ii)the denominator of which shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares deemed so accepted up to any such maximum, being referred to as the "PURCHASED SHARES") and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) at the Expiration Time and the last reported sale price of a share of Common Stock on the trading day next succeeding the Expiration Time, such adjustment to become effective immediately prior to the opening of business on the day following the Expiration Time. If the Company is obligated to purchase shares pursuant to any such Tender Offer, but the Company is permanently prevented by applicable -76- law from effecting any such purchases or all such purchases are rescinded, the Conversion Price shall again be adjusted to be the Conversion Price that would then be in effect if such Tender Offer had not been made. If an adjustment is required to be made as set forth in Section 11.06(f) above, such adjustment shall be calculated based upon the amount by which the aggregate consideration paid for Common Stock acquired in the Tender Offer exceeds the value of such shares based on the first reported sale price of Common Stock on the trading day next succeeding the Expiration Time. 11.07 No Adjustment. No adjustment in the Conversion Price shall be required unless the adjustment would require an increase or decrease of at least 1% in the Conversion Price then in effect; provided, however, that any adjustment which by reason of this Section 11.07 is not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article 11 by the Company shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. With respect to Sections 11.06(d) and (e) hereof, no adjustment to the Conversion Price shall be made if the Company provides that Holders of Debentures will participate in the Asset Distribution or the Cash Dividend, as applicable, on an as-converted basis without conversion. Furthermore, if the numerator of the fraction described in Sections 11.06(d) and (e) hereof is less than $1.00 (including a negative amount) then in lieu of any adjustment of the Conversion Price, the Company shall make adequate provision so that each Holder of Debentures shall have the right to receive upon conversion, in addition to the shares of Common Stock issuable upon such conversion, the distribution or dividend such Holder would have received had such Holder converted such Debentures immediately prior to the record date for such distribution or dividend. In the case where this Indenture provides that a Conversion Price adjustment is effective upon the record date for a distribution or dividend, if the distribution or dividend is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price that would then be in effect if such distribution or dividend had not been declared. 11.08 Equivalent Adjustments. If, as a result of an adjustment made pursuant to Section 11.06 above, the holder of any Debenture thereafter surrendered for conversion shall become entitled to receive any shares of capital stock of the Company other than shares of its Common Stock, thereafter the Conversion Price of such other shares so receivable upon conversion of any Debentures shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to Common Stock contained in this Article 11. -77- 11.09 Notice of Adjustment. Whenever the Conversion Price is adjusted, or Holders become entitled to other securities or due bills, the Company shall promptly mail to Holders a notice of the adjustment and file with the Trustee an Officers' Certificate briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence of the correctness of such adjustment and the Trustee may conclusively assume that, unless and until such certificate is received by it, no such adjustment is required. 11.10 Notice of Certain Transactions. The Company shall give notice to the Holders of record of the Debentures of the pending occurrence of each Below Market Issuance, Cash Dividend and Asset Distribution not less than twenty business days prior to the ex-dividend date for such distribution and notice to the Holders of record of the Debentures of the occurrence of each Change of Control within twenty business days after the Company obtains knowledge of such occurrence of a Change of Control. The Company shall cause any such notice to be filed with the Trustee and the Conversion Agent and to be mailed to each Holder of Debentures at its address appearing on the list provided for in Section 2.05, as promptly as possible but in any event at least ten days prior to the applicable date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such transaction, or, if a record is not to be taken, the date as of which the holders of Common Stock are to be determined, or (y) the date on which such transaction is expected to become effective or occur, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such transaction. Notwithstanding anything in this paragraph to the contrary, the Company shall not be obligated under this Indenture to provide notice to Holders of a Change of Control, other than as set forth in the preceding paragraph. 11.11 Effect of Reclassification, Consolidation, Merger, Share Exchange or Sale on Conversion Privilege. If any of the following shall occur, namely (i) any reclassification or change of outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination); (ii) any consolidation, combination, merger or share exchange to which the Company is a party other than a merger in which the Company is the continuing corporation and that does not result in any reclassification of, or change (other than a change in name, or par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of Common Stock; or (iii) any sale or conveyance of all or substantially all of the assets of the Company, then the Company, or such successor or purchasing corporation, as the case may be, shall, as a condition precedent to such reclassification, change, consolidation, combination, merger, share exchange, sale or conveyance, execute and deliver to the Trustee a -78- supplemental indenture providing that the Holder of each Debenture then outstanding shall have the right to convert such Debenture into the kind and amount of shares of capital stock and other securities and property (including cash) ("ACQUIROR SECURITIES") receivable upon such reclassification, change, consolidation, combination, merger, share exchange, sale or conveyance by a holder of the number of shares of Common Stock deliverable upon conversion of such Debenture immediately prior to the record date of such reclassification, change, consolidation, combination, merger, share exchange, sale or conveyance. Such supplemental indenture shall provide for adjustments of the Conversion Price that shall be as nearly equivalent as may be practicable to the adjustments of the Conversion Price provided for in this Article 11. If, in the case of any such consolidation, combination, merger, share exchange, sale or conveyance, the stock or other securities and property (including cash) receivable thereupon by a holder of Common Stock includes shares of capital stock or other securities and property of a corporation other than the successor or purchasing corporation, as the case may be, in such consolidation, combination, merger, share exchange, sale or conveyance, then such supplemental indenture shall also be executed by such other corporation and shall contain such additional provisions to protect the interests of the Holders of the Debentures as the Board of Directors of the Company shall reasonably consider necessary by reason of the foregoing. The provision of this Section 11.11 shall similarly apply to successive consolidations, combination mergers, share exchanges, sales or conveyances. Notwithstanding the foregoing, a distribution by the Company to all or substantially all holders of its Common Stock for which an adjustment to the Conversion Price or provision for conversion of the Debentures may be made pursuant to Section 11.06 shall not be deemed to be a sale or conveyance of all or substantially all of the assets of the Company for purposes of this Section 11.11. In the event the Company shall execute a supplemental indenture pursuant to this Section 11.11, the Company shall promptly file with the Trustee an Opinion of Counsel stating that such supplemental indenture is authorized or permitted by this Indenture and an Officers' Certificate briefly stating the reasons therefor, the kind or amount of shares of stock or securities or property (including cash) receivable by Holders of the Debentures upon the conversion of their Debentures after any such reclassification, change, consolidation, combination, merger, share exchange, sale or conveyance, any adjustment to be made with respect thereto and that all conditions precedent have been complied with. 11.12 Trustee's Disclaimer. The Trustee has no duty to determine when an adjustment under this Article 11 should be made, how it should be made or what such adjustment should be made, but may accept as conclusive evidence of the correctness of any such adjustment, and shall be protected in relying upon, the Officers' Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 11.09. The Trustee shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon conversion of Debentures, and the Trustee shall not be responsible for the Company's failure to comply with -79- any provisions of this Article 11. Each Conversion Agent (other than the Company or an Affiliate of the Company) shall have the same protection under this Section 11.12 as the Trustee. The Trustee shall not be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture executed pursuant to Section 11.11, but may accept as conclusive evidence of the correctness thereof, and shall be protected in relying upon, the Officers' Certificate with respect thereto, which the Company is obligated to file with the Trustee pursuant to Section 11.11. 11.13 Voluntary Reduction. The Company may, from time to time, to the extent permitted by law and The NASDAQ Stock Market Marketplace Rules, reduce the Conversion Price by any amount for any period of at least 20 business days, in which case the Company shall give at least fifteen (15) days' notice of such reduction. In particular, the Company may, at its option, make such reduction in the Conversion Price, in addition to those set forth in Section 11.06, as it deems advisable to avoid or diminish any income tax to holders of Common Stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for tax purposes or for any other reasons. 11.14 Simultaneous Adjustments. In the event that this Article 11 requires adjustments to the Conversion Price under more than one of the subsections of Section 11.06, and the record dates for the distributions giving rise to such adjustments shall occur on the same date, or if more than one event requiring adjustment pursuant to Section 11.06 shall occur before completing the determination for the Conversion Price for the first event requiring such adjustment, then in each case, such adjustments shall be made in such order as determined by the Board of Directors (whose determination shall, if made in good faith, be conclusive) as shall preserve for Holders the Conversion Price protection provided in Section 11.06. ARTICLE 12 MISCELLANEOUS 12.01 Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties shall control. -80- 12.02 Notices. Any notice or communication by the Company or the Trustee to the others or by others to the Trustee is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next day delivery, to the others' or the Trustee's address, as applicable: If to the Company: Grey Global Group Inc. 777 Third Avenue New York, New York 10017 Telecopier No.: (212) 546-1495 Attention: Corporate Secretary With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Telecopier No.: (212) 735-2000 Attention: Greg Fernicola, Esq. If to the Trustee: American Stock Transfer & Trust Company 59 Maiden Lane New York, New York 10038 Attn: Corporate Trust Department Telecopier No. (718) 331-1852 The Company or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next business day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar; provided that, initially, the Depositary will be the only Holder for purposes of any no- -81- tice or communication to a Holder. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. 12.03 Communication by Holders of Debentures with Other Holders of Debentures. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Debentures. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). 12.04 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. 12.05 Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA Section 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; -82- (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. 12.06 Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. 12.07 No Personal Liability of Stockholders, Employees, Officers, Directors. None of the Company's, or of any successor entity's direct or indirect stockholders, employees, officers or directors, as such, past, present or future, shall have any personal liability in respect of the Company's obligations under this Indenture or the Debentures solely by reason of his or its status as such stockholder, employee, officer or director. Each Holder by accepting a Debenture waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Debentures. 12.08 Governing Law; Submission to Jurisdiction. THIS INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. The parties to this Indenture each hereby irrevocably submits to the non-exclusive jurisdiction of any New York State or federal court sitting in the Borough of Manhattan in The City of New York in any action or proceeding arising out of or relating to the Debentures or this Indenture, and all such parties hereby irrevocably agree that all claims in respect of such action or proceeding may be heard and determined in such New York State or federal court and hereby irrevocably waive, to the fullest extent that they may legally do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE DEBENTURES OR THE TRANSACTIONS CONTEMPLATED HEREBY. -83- 12.09 No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. 12.10 Successors. All agreements of the Company in this Indenture and the Debentures shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. 12.11 Severability. In case any provision in this Indenture or in the Debentures 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. 12.12 Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 12.13 Table of Contents, Headings, etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [Signatures on following page] IN WITNESS WHEREOF, the Company and the Trustee have caused this Indenture to be executed. GREY GLOBAL GROUP INC. By: ------------------------------------- Name: Title: AMERICAN STOCK TRANSFER & TRUST COMPANY By: ------------------------------------- Name: Title: S-1 EXHIBIT A [Insert the Global Debenture Legend, if applicable pursuant to the provisions of the Indenture] [Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture] [Insert OID Legend, if applicable pursuant to the provisions of the Indenture] [FACE OF DEBENTURE] CUSIP No. ISIN No. 5.0% Contingent Convertible Subordinated Debenture due 2033 No. _____ $_____________ GREY GLOBAL GROUP INC. promises to pay to _____________________________________________________________ or registered assigns, the principal sum of ___________________________________________________________ Dollars on October 15, 2033. Interest Payment Dates: April 15 and October 15, commencing April 15, 2004 Record Dates: April 1 and October 1 Reference is hereby made to the further provisions of this Debenture set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as set forth at this place. In witness hereof, Grey Global Group Inc. has caused this Debenture to be signed by a duly authorized officer. Grey Global Group Inc., By:_________________________________________ Name: Title: A-1 This is one of the Debentures referred to in the within-mentioned Indenture: Dated: American Stock Transfer & Trust Company, as Trustee By: __________________________________ Authorized Signatory A-2 [BACK OF DEBENTURE] 5.0% CONTINGENT CONVERTIBLE SUBORDINATED DEBENTURE DUE 2033 Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Interest. Grey Global Group Inc., a Delaware corporation (the "COMPANY"), promises to pay interest on the principal amount of this Debenture at 5.0% per annum from October 28, 2003 until maturity and shall pay the Additional Amounts, if any, payable pursuant to Section 3 of the Registration Rights Agreement referred to below. The Company will pay interest and, if applicable, Contingent Interest and Additional Amounts, if any, semi-annually in arrears on April 15 and October 15 of each year, or if any such day is not a business day, on the next succeeding business day (each an "INTEREST PAYMENT DATE"). Interest on the Debentures will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that the first Interest Payment Date shall be April 15, 2004. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Subject to the accrual, record date and payment provisions above, contingent interest ("CONTINGENT INTEREST") will accrue during any six-month interest period (a "CONTINGENT INTEREST PERIOD") beginning with the six-month interest period commencing on October 15, 2013, if the average Trading Price of the Debentures for the five trading days (as defined in the Indenture) ending on the third trading day immediately preceding the first day of the applicable Contingent Interest Period equals $1,200 or more per $1,000 principal amount of Debentures. During any period in which Contingent Interest accrues, it will be payable per $1,000 principal amount of Debentures at a rate per annum equal to 0.50% of such average Trading Price. The Company will pay Contingent Interest, if any, in the same manner as it will pay interest as described above. Upon determination that Contingent Interest on the Debentures will accrue during any relevant six-month period, on or prior to the start of such six-month period, the Company shall issue a press release announcing the payment of such Contingent Interest and shall notify the Trustee in writing. So long as the Company is not in default in the payment of interest on the Debentures, the Company shall have the right to extend the interest payment period (such extended period, an "EXTENSION PERIOD"), including the payment of Contingent Interest, from time to time for a period not exceeding 10 consecutive semi-annual interest periods, provided that such Extension Period shall terminate upon the occurrence of a Default or Event of Default, and provided further that no Extension Period shall extend beyond October 15, 2033. No interest shall be due and payable during an Extension Period, except at the end thereof, provided that interest (including Compounded Interest) shall accrue. During any Extension Period, the Company shall not (i) declare or pay any dividends on, or redeem, purchase, acquire or make a distribution or liquidation payment with respect to, any of the Company's common stock or preferred stock or make any guarantee payments with respect thereto (provided that the foregoing will not apply (a) to repur- A-3 chases, redemptions or other acquisitions of shares of the Company's capital stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants, which contract, plan or arrangement is approved by the Company's Board of Directors, (b) as a result of an exchange or conversion of any class or series of the Company's capital stock for any other class or series of the Company's capital stock, (c) to the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged or (d) to stock dividends or other stock distributions (including rights, warrants or options to purchase capital stock) paid by the Company) or (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any of the Company's debt securities that rank in right of payment pari passu with, or junior to, the Debentures. Prior to the termination of any such Extension Period, the Company may further extend the interest payment period; provided that such Extension Period together with all such previous and further extensions thereof may not exceed 10 consecutive semi-annual interest payment periods or extend beyond October 15, 2033. On the first Interest Payment Date occurring on or after the end of each Extension Period, the Company shall pay to the Holders of Debentures of record on the record date for such Interest Payment Date (regardless of who the Holders of record may have been on other dates during the Extension Period) all accrued and unpaid interest (including Contingent Interest, if any) on the Debentures, together with Compounded Interest. Upon the termination of any Extension Period and the payment of all amounts then due, the Company may commence a new Extension Period, subject to the above requirements. The Company may also prepay at any time all or any portion of the interest accrued during an Extension Period. Consequently, there could be multiple Extension Periods of varying lengths throughout the term of the Debentures, not to exceed 10 consecutive semi-annual interest payment periods; provided, that no such period may extend beyond October 15, 2033. If at any time other than an Interest Payment Date the Company elects to prepay all or a portion of the interest accrued during an Extension Period, the Company will (a) if the debentures are listed on a national securities exchange or quoted on The NASDAQ National Market, make payment of such deferred interest in accordance with the regulations of the principal exchange or market on which the Debentures are listed or quoted, if any, or (b) deliver an irrevocable notice to the Holders of the Debentures notifying such holders of the prepayment date, which date shall be not less than 30 days nor more than 60 days after the delivery of such notice. The notice shall state, among other things, the amount of deferred interest to be paid on such prepayment date and shall establish a special record date for the prepayment of such deferred interest (the "SPECIAL RECORD DATE"). The Special Record Date shall be no less than 10 days nor more than 15 days prior to the prepayment date. The Company will pay such deferred interest to the Holders of Debentures of record on the Special Record Date (regardless of who the Holders of record may have been on other dates during the Extension Period). The Company shall give notice to the Trustee of its election of an Extension Period ten business days prior to the earlier of (i) the next succeeding Interest Payment Date or (ii) the date the Company is required to give notice to The NASDAQ National Market (if the Debentures are A-4 then listed thereon) or other applicable self-regulatory organization or to Holders of the Debentures of the record or payment date of such related interest payment. 2. METHOD OF PAYMENT. The Company will pay interest on the Debentures (including Contingent Interest, if any) (except defaulted interest) and Additional Amounts, if any, to the Persons who are registered Holders of Debentures at the close of business on the April 1 or October 1 next preceding the Interest Payment Date, even if such Debentures are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Debentures will be payable as to principal and Additional Amounts, if any, and interest (including Contingent Interest, if any) at the office or agency of the Company maintained for such purpose, or, at the option of the Company, payment of interest (including Contingent Interest, if any) and Additional Amounts, if any, may be made (i) by check mailed to the Holders at their addresses set forth in the register of Holders, or (ii) to a Holder of record with an aggregate principal amount of Debentures in excess of $2.0 million, if such Holder so elects in writing, by wire transfer in immediately available funds to an account in the United States; provided such Holder shall have provided wire transfer instructions to the Company or the Paying Agent at least fifteen (15) business days prior to the applicable payment date. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. AGENT AND REGISTRAR. Initially, American Stock Transfer & Trust Company, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its subsidiaries may act in any such capacity. 4. INDENTURE. The Company issued the Debentures under an Indenture dated as of October 28, 2003 ("INDENTURE"), between the Company and the Trustee. The terms of the Debentures include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended. The Debentures are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Debenture conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. 5. OPTIONAL REDEMPTION. No sinking fund is provided for in the Debentures. Beginning on October 15, 2013 and during the periods thereafter to maturity, the Company may redeem the Debentures, in whole or in part, from time to time, at a price equal to 100% of the principal amount of the Debentures plus accrued but unpaid interest (including Compounded Interest, Contingent Interest and Additional Amounts, if any) up to but not including the Redemption Date. The Company will pay interest to a Person other than the Holder of record on the record date if it redeems such Holder's Debentures on a date that is after the record date and prior to the corresponding Interest Payment Date. In this instance, the Company will pay interest accrued A-5 and unpaid on the Debentures being redeemed, to but not including the Redemption Date to the same Person to whom the Company will pay the principal of such Debentures. 6. PURCHASE AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL. At the option of the Holder and subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase the Debentures held by such Holder after the occurrence of a Change of Control of the Company for a Change of Control Repurchase Price equal to 100% of the principal amount thereof plus accrued but unpaid interest (including Contingent Interest and Additional Amounts, if any), thereon, up to but not including the Change of Control Repurchase Date (provided that, if the Change of Control Repurchase Date is on or after an interest record date but on or prior to the related Interest Payment Date, accrued but unpaid interest will be payable to the Holders in whose names the Debentures are registered at the close of business on the relevant record date). Holders have the right to withdraw any Holder Change of Control Acceptance Notice by delivering to the Paying Agent a written notice of withdrawal in accordance with the provisions of the Indenture. Notwithstanding anything set forth above, the Company may elect (which election shall be irrevocable) to pay the Change of Control Repurchase Price in Common Stock, Acquiror Securities that are publicly traded securities, or a combination of cash, shares of Common Stock and such publicly traded Acquiror Securities. In such event, the number of shares of Common Stock or Acquiror Securities that are publicly traded a Holder will receive will equal the portion of the Change of Control Repurchase Price payable in such shares divided by 95% of the average of the last reported sale price of the Common Stock or Acquiror Securities for the five trading days immediately preceding and including the third trading day prior to the Change of Control Repurchase Date. All shares of Common Stock issued pursuant to the previous sentence must be issued out of the Company's authorized but unissued Common Stock or treasury stock and will, upon issue, be duly and validly issued and fully paid and non-assessable. If cash or shares of Common Stock or Acquiror Securities sufficient to pay the Change of Control Repurchase Price on all Debentures or portions thereof to be purchased as of the Change of Control Repurchase Date are held by the Paying Agent on the business day prior to the Change of Control Repurchase Date, interest (including Contingent Interest and Additional Amounts, if any), shall cease to accrue on such Debentures (or portions thereof) as of such Change of Control Repurchase Date, (whether or not book-entry transfer of the Debentures has been made or the Debentures have been delivered to the Paying Agent) and the Holder thereof shall have no other rights as such other than the right to receive Change of Control Repurchase Price upon surrender of such Debenture. 7. NOTICE OF REDEMPTION. Notice of redemption of Debentures at the option of the Company will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Debentures to be redeemed at the Holder's registered address. If money sufficient to pay the Redemption Price of all Debentures (or portions thereof) to be redeemed on the Redemption Date is deposited with the Paying Agent prior to or on the Redemption Date, immediately after such Redemption Date, interest (including Contingent Interest and Additional A-6 Amounts, if any) shall cease to accrue on such Debentures or portions thereof. Debentures in denominations larger than $1,000 of principal amount may be redeemed in part but only in integral multiples of $1,000 of principal amount. 8. Conversion. Subject to the provisions of Article 11 of the Indenture, a Holder of a Debenture may convert such Debenture into shares of Common Stock of the Company if any of the conditions specified in paragraphs (a) through (e) of Section 11.01 of the Indenture is satisfied; provided, however, that if such Debenture is called for redemption, the conversion right will terminate at the close of business on the second business day immediately preceding the Redemption Date of such Debenture (unless the Company shall default in making the redemption payment when due, in which case the conversion right shall terminate at the close of business on the date such Default is cured and such Debenture is redeemed). The initial conversion price is $961.20 per share, subject to adjustment under certain circumstances as described in the Indenture (the "CONVERSION PRICE"). The number of shares issuable upon conversion of a Debenture is determined by dividing the principal amount of Debentures converted by the Conversion Price in effect on the conversion date. In the event of a conversion of a Debenture, the Company has the option, in lieu of delivering shares of Common Stock, to pay the Holder surrendering such Debenture an amount of cash determined in accordance with Section 11.02 of the Indenture. Upon conversion, no adjustment for interest (including Contingent Interest and Additional Amounts, if any), or dividends will be made. No fractional shares will be issued upon conversion; in lieu thereof, an amount will be paid in cash based upon the current Market Price (as defined in the Indenture) of the Common Stock on the last trading day prior to the date of conversion. To convert a Debenture, a Holder must (a) complete and sign the irrevocable conversion notice set forth below (copies of which may also be obtained from the Conversion Agent) and deliver such notice to the Conversion Agent, (b) surrender the Debentures by delivering them to the Conversion Agent, at the office or agency maintained for such purpose in the Borough of Manhattan, The City of New York, (c) furnish appropriate endorsements and transfer documents if required by the Registrar or the Conversion Agent, (d) pay any transfer or similar tax, if required and (e) if the Debenture is held in book-entry form, complete and deliver to the Depositary appropriate instructions pursuant to the Depositary's book-entry conversion programs. Upon satisfaction of such requirements, the Conversion Agent shall, on behalf of such Holder, immediately convert such Debentures into Common Stock (unless the Company has elected to pay cash in lieu of delivering shares of Common Stock). If a Holder surrenders a Debenture for conversion between the record date for the payment of an installment of interest and the related Interest Payment Date, the Debenture must be accompanied by payment of an amount equal to the interest (including Contingent Interest and Additional Amounts, if any), payable on such Interest Payment Date on the principal amount of the Debenture or portion thereof then converted; provided, however, that no such payment shall be required if such Debenture has been called for redemption on a Redemption Date within the period between and including such record date and such Interest Payment Date, or if such Debenture is surrendered for conversion on the Interest Payment Date. A Holder may convert a portion of a Debenture equal to $1,000 or any integral multiple thereof. A-7 A Debenture in respect of which a Holder has delivered a Holder Change of Control Acceptance Notice exercising the option of such Holder to require the Company to repurchase such Debenture as provided in Section 3.11 of the Indenture may be converted only if such notice of exercise is withdrawn in accordance with the terms of the Indenture. 9. Denominations, Transfer, Exchange. The Debentures are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Debentures may be registered and Debentures may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Debenture or portion of a Debenture selected for redemption, except for the unredeemed portion of any Debenture being redeemed in part. Also, the Company need not exchange or register the transfer of any Debentures for a period of 15 days before a selection of Debentures to be redeemed or during the period between a record date and the succeeding Interest Payment Date. 10. Persons Deemed Owners. The registered Holder of a Debenture may be treated as its owner for all purposes. 11. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture or the Debentures may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Debentures voting as a single class, and any existing default or compliance with any provision of the Indenture or the Debentures may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Debentures voting as a single class, except a default in the payment of principal or interest (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal otherwise than by acceleration has been deposited with the Trustee). Without the consent of any Holder of a Debenture, the Indenture or the Debentures may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Debentures in addition to or in place of certificated Debentures, to provide for the assumption of the Company's obligations to Holders of the Debentures in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the Debentures or that does not adversely affect the rights under the Indenture of any such Holder and to comply with the requirements of the Trust Indenture Act. 12. Defaults and Remedies. The following are "EVENTS OF DEFAULT" in respect of the Debentures: (i) failure for 30 days to pay interest on the Debentures when due, whether or not such payment is prohibited by the subordination provisions of the Indenture; provided that a valid extension of the interest payment period by the Company during an Extension Period pursuant to the Indenture shall not constitute a default in the payment of interest for this purpose; (ii) failure to pay principal on the debentures when due whether at maturity, upon redemption, by declaration or otherwise, whether or not such payment is prohibited by the subordination provisions of the Indenture; (iii) failure to observe or perform any covenant contained in Article 4 of A-8 the Indenture for 90 days after written notice to the Company of such failure from the Trustee or the Holders of at least 25% in principal amount of the outstanding Debentures; (iv) the Company's failure to comply with the provisions of Section 3.11 (Purchase of Debentures at Option of the Holder upon a Change of Control) or Section 5.01 (Mergers and Sales of Assets by the Company); (v) a default in the Company's indebtedness with an aggregate amount outstanding in excess of $25.0 million (a) resulting from the failure to pay principal at maturity or (b) as a result of which the maturity of such indebtedness has been accelerated prior to its Stated Maturity; (vi) the Company's failure to pay final judgments aggregating in excess of $25.0 million, which judgments are not paid, discharged or stayed for a period of not less than 60 days; or (vii) certain events in bankruptcy, insolvency or reorganization of the Company. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Debentures may declare all the Debentures to be due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Debentures will become due and payable without further action or notice. Holders may not enforce the Indenture or the Debentures except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Debentures may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Debentures notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Debentures then outstanding by notice to the Trustee may on behalf of the Holders of all of the Debentures waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on and Additional Amounts, if any, or the principal of, the Debentures (unless such Default has been cured and a sum sufficient to pay all matured installments of interest and principal otherwise than by acceleration has been deposited with the Trustee). The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 13. Tax Treatment of Debentures. The Company and the Holders and any beneficial holder of a Debenture, by purchasing the Debentures, agree that (i) the Debentures are contingent payment debt instruments as defined in Treasury Regulations Section 1.1275-4(b), (ii) each Holder and any beneficial holder of a Debenture shall be bound by the Company's application of the Treasury Regulations to the Debentures, including the Company's determination that the rate at which interest will be deemed to accrue on the Debentures for United States federal income tax purposes will be 9.40% compounded semi-annually, which is the rate comparable to the rate at which the Company would borrow on a noncontingent, nonconvertible basis with terms and conditions otherwise comparable to the Debentures, (iii) each Holder and any beneficial holder of a Debenture shall use the projected payment schedule with respect to the Debentures determined by the Company, as required by Treasury Regulations Section 1.1275-4(b)(4)(iv), to determine its interest accruals and adjustments as provided in Treasury Regulations Section 1.1275-4(b), and (iv) the Company and each Holder and any beneficial holder of a Debenture will not take any position on a tax return inconsistent with (i), (ii), or (iii), unless re- A-9 quired by applicable law. A Holder of Debentures may obtain the issue price, amount of original issue discount, issue date, yield to maturity, comparable yield and projected payment schedule for the Debentures by submitting a written request for such information to the Company at the following address: Grey Global Group Inc., 777 Third Avenue, New York, New York 10017; Attention: Corporate Secretary. 14. Subordination. The indebtedness evidenced by this Debenture is, to the extent and in the manner provided in the Indenture (including, without limitation, Article 10 thereof), subordinated and subject in right of payment to the prior payment in full in cash or cash equivalents of all amounts then due on all Senior Debt (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed) of the Company, and this Debenture is issued subject to such provisions of the Indenture with respect thereto. Subject to certain exceptions, the Company may not make any payments of principal, premium, if any, or interest on this Debenture if an event of default has occurred and is continuing in any payment with respect to Senior Debt. During the continuance of any other event of default with respect to Designated Senior Debt, pursuant to which maturity thereof may be accelerated, the holders of such Designated Senior Debt may, under certain circumstances, prohibit the Company from making payments on the Debentures, until such event of default is cured or waived. Each Holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee such Holder's attorney-in-fact for any and all such purposes. 15. Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 16. No Recourse Against Others. None of the Company's, or of any successor entity's direct or indirect stockholders, employees, officers or directors, as such, past, present or future, shall have any personal liability in respect of the Company's obligations under the Indenture or this Debenture solely by reason of his or its status as such stockholder, employee, officer or director. Each Holder by accepting this Debenture waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Debentures. 17. Authentication. This Debenture shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 18. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). A-10 [19. Additional Rights of Holders of Restricted Global Debentures and Restricted Definitive Debentures. In addition to the rights provided to Holders of Debentures under the Indenture, Holders of Restricted Global Debentures and Restricted Definitive Debentures shall have all the rights set forth in the Registration Rights Agreement dated as of October 28, 2003, between the Company and the parties named on the signature pages thereof (the "REGISTRATION RIGHTS AGREEMENT").] 20. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Debentures and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Debentures or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Grey Global Group Inc. 777 Third Avenue New York, New York 10017 Attention: Corporate Secretary A-11 ASSIGNMENT FORM To assign this Debenture, fill in the form below and have your signature guaranteed: (I) or (we) assign and transfer this Debenture to:______________________________ (Insert assignee's legal name) ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint_________________________________________________________ to transfer this Debenture on the books of the Company. The agent may substitute another to act for him. Date: ______________________ Your Name :_________________________________ (Print your name exactly as your name appears on the face of this Debenture) Your Signature:_____________________________ (Sign exactly as your name appears on the face of this Debenture) Signature Guarantee*: ________________________ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A-12 CONVERSION NOTICE TO: GREY GLOBAL GROUP INC. 777 Third Avenue New York, New York 10017 Attn: Corporate Secretary Telecopier No. (212) 546-1495 COPY TO: AMERICAN STOCK TRANSFER & TRUST COMPANY 59 Maiden Lane New York, New York 10038 Attn: Corporate Trust Department Telecopier No. (718) 331-1852 The undersigned registered owner of this Debenture hereby irrevocably exercises the option to convert this Debenture, or the portion hereof (the principal amount of which is an integral multiple of $1,000) below designated, into shares of Common Stock in accordance with the terms of the Indenture referred to in this Debenture, and directs that the shares issuable and deliverable upon such conversion, together with any check in payment for fractional shares and any Debentures representing any unconverted principal amount hereof, be issued and delivered to the registered holder hereof unless a different name has been indicated below. If shares or any portion of this Debenture not converted are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Any amount required to be paid to the undersigned on account of interest (including Contingent Interest, if any) and Additional Amounts, if any, accompanies this Debenture. Dated: ________________ Your Name:_________________________________________ (Print your name exactly as it appears on the face of this Debenture) Your Signature:_________________ (Sign exactly as your name appears on the face of this Debenture) Signature Guarantee*:______________ Social Security or other Taxpayer Identification Number:_____________________________ DTC Participant Number:____________________________ Principal amount to be converted (if less than all): $ A-13 - ----------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A-14 Fill in for registration of shares (if to be issued) and Debentures (if to be delivered) other than to and in the name of the registered holder: _____________________________________________________________________ (Name) _____________________________________________________________________ (Street Address) _____________________________________________________________________ (City, State and Zip Code) A-15 FORM OF HOLDER CHANGE OF CONTROL ACCEPTANCE NOTICE TO: GREY GLOBAL GROUP INC. 777 Third Avenue New York, New York 10017 Attn: Corporate Secretary Telecopier No. (212) 546-1495 The undersigned registered owner of this Debenture hereby irrevocably acknowledges receipt of a notice from Grey Global Group Inc. (the "COMPANY") as to the occurrence of a Change of Control with respect to the Company and requests and instructs the Company to repay the entire principal amount of this Debenture, or the portion thereof (the principal amount of which is an integral multiple of $1,000) below designated, in accordance with the terms of this Debenture and Indenture referred to in this Debenture, together with accrued but unpaid interest (including Contingent Interest and Additional Amounts, if any) to, but excluding, such date, to the registered holder hereof. Dated: __________________ Your Name:_________________________________________ (Print your name exactly as it appears on the face of this Debenture) Your Signature:_________________ (Sign exactly as your name appears on the face of this Debenture) Signature Guarantee*:______________ Social Security or other Taxpayer Identification Number:_____________________________ DTC Participant Number:____________________________ Certificate Number:________________________________ - ----------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). Principal amount to be repaid (if less than all): $ A-16 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL DEBENTURE* The following exchanges of a part of this Global Debenture for an interest in another Global Debenture or for a Definitive Debenture, or exchanges of a part of another Global Debenture or Definitive Debenture for an interest in this Global Debenture, have been made:
Principal Amount of Amount of increase this Global Signature Amount of in Debenture of decrease in Principal following authorized Principal Amount of such officer of Amount of this decrease Trustee or this Global Global (or Debenture Date Debenture Debenture increase) Custodian ---- --------- --------- --------- ---------
* This schedule should be included only if the Debenture is issued in global form. EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Grey Global Group Inc. 777 Third Avenue New York, New York 10017 Attention: Corporate Secretary Telecopier No. (212) 546-1495 American Stock Transfer & Trust Company 59 Maiden Lane New York, New York 10038 Attn: Corporate Trust Department Telecopier No. (718) 331-1852 RE: 5.0% CONTINGENT CONVERTIBLE SUBORDINATED DEBENTURES DUE 2033 Dear Sirs: Reference is hereby made to the Indenture, dated as of October 28, 2003 (the "INDENTURE"), between Grey Global Group Inc., as issuer (the "COMPANY"), and American Stock Transfer & Trust Company, a trust company organized under the laws of the State of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ______________ (the "TRANSFEROR") owns and proposes to transfer the Debenture[s] or interest in such Debenture[s] specified in Annex A hereto, in the principal amount of $___________ in such Debenture[s] or interests (the "TRANSFER"), to __________ (the "TRANSFEREE"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] [ ] 1. Check if Transferee will take delivery of a beneficial interest in the 144A Global Debenture or a Definitive Debenture Pursuant to Rule 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "SECURITIES ACT"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Debenture is being transferred to a person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Debenture for its own account, or for one or more accounts with respect to which such person exercises sole investment discretion, and such person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any State of the United States. B-1 Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Debenture will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Debenture and/or the Definitive Debenture and in the Indenture and the Securities Act. [ ] 2. Check if Transferee will take delivery of a beneficial interest in the Regulation S Global Debenture or a Definitive Debenture pursuant to Regulation S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Distribution Compliance Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Debenture will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Debenture and/or the Definitive Debenture and in the Indenture and the Securities Act. [ ] 3. Check and complete if Transferee will take delivery of a beneficial interest in a Definitive Debenture pursuant to any provision of the Securities Act other than Rule 144A or Regulation S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Debentures and Restricted Definitive Debentures and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any State of the United States, and accordingly the Transferor hereby further certifies that (check one): [ ] (a) Such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or [ ] (b) Such Transfer is being effected to the Company or a subsidiary thereof; or [ ] (c) Such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or B-2 [ ] (d) Such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Debenture or Restricted Definitive Debentures and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in a form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Debentures at the time of transfer of less than $250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification and provided to the Company, which has confirmed its acceptability), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the Definitive Debenture will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Definitive Debentures and in the Indenture and the Securities Act. [ ] 4. Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Debenture or of an Unrestricted Definitive Debenture. [ ] (a) Check if Transfer is Pursuant to Rule 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Debenture will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Debentures, on Restricted Definitive Debentures and in the Indenture and the Securities Act. [ ] (b) Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain B-3 compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Debenture will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Debentures, on Restricted Definitive Debentures and in the Indenture and the Securities Act. [ ] (c) Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Debenture will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Debentures or Restricted Definitive Debentures and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. Dated: [Insert Name of Transferor] By:_________________________________________ Name: Title: B-4 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] [ ] (a) a beneficial interest in the: (i) 144A Global Debenture (CUSIP __________), or (ii) Regulation S Global Debenture (CUSIP __________), or [ ] (b) a Restricted Definitive Debenture. 2. After the Transfer the Transferee will hold: [CHECK ONE] [ ] (a) a beneficial interest in the: (i) 144A Global Debenture (CUSIP __________), or (ii) Regulation S Global Debenture (CUSIP __________), or (iii) Unrestricted Global Debenture (CUSIP __________); or [ ] (b) a Restricted Definitive Debenture; or [ ] (c) an Unrestricted Definitive Debenture, in accordance with the terms of the Indenture. B-5 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Grey Global Group Inc. 777 Third Avenue New York, New York 10017 Attention: Corporate Secretary Telecopier No. (212) 546-1495 American Stock Transfer & Trust Company 59 Maiden Lane New York, New York 10038 Attn: Corporate Trust Department Telecopier No. (718) 331-1852 Re: 5.0% Contingent Convertible Subordinated Debentures due 2033 Dear Sirs: Reference is hereby made to the Indenture, dated as of October 28, 2003 (the "INDENTURE"), between Grey Global Group Inc., as issuer (the "COMPANY"), and American Stock Transfer & Trust Company, a trust company organized under the laws of the State of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ________________________________ (the "OWNER") owns and proposes to exchange the Debenture[s] or interest in such Debenture[s] specified herein, in the principal amount of $____________________________________ in such Debenture[s] or interests (the "EXCHANGE"). In connection with the Exchange, the Owner hereby certifies that: 1. Exchange of Restricted Definitive Debentures or Beneficial Interests in a Restricted Global Debenture for Unrestricted Definitive Debentures or Beneficial Interests in an Unrestricted Global Debenture. [ ] (a) Check if Exchange is from beneficial interest in a Restricted Global Debenture to beneficial interest in an Unrestricted Global Debenture. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Debenture for a beneficial interest in an Unrestricted Global Debenture in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Debentures and pursuant to and in accordance with the United States Securities Act of 1933, as C-1 amended (the "SECURITIES ACT"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Debenture is being acquired in compliance with any applicable blue sky securities laws of any State of the United States. [ ] (b) Check if Exchange is from beneficial interest in a Restricted Global Debenture to Unrestricted Definitive Debenture. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Debenture for an Unrestricted Definitive Debenture, the Owner hereby certifies (i) the Definitive Debenture is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Debentures and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Debenture is being acquired in compliance with any applicable blue sky securities laws of any State of the United States. [ ] (c) Check if Exchange is from Restricted Definitive Debenture to beneficial interest in an Unrestricted Global Debenture. In connection with the Owner's Exchange of a Restricted Definitive Debenture for a beneficial interest in an Unrestricted Global Debenture, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Debentures and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any State of the United States. [ ] (d) Check if Exchange is from Restricted Definitive Debenture to Unrestricted Definitive Debenture. In connection with the Owner's Exchange of a Restricted Definitive Debenture for an Unrestricted Definitive Debenture, the Owner hereby certifies (i) the Unrestricted Definitive Debenture is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Debentures and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Debenture is being acquired in compliance with any applicable blue sky securities laws of any State of the United States. C-2 2. Exchange of Restricted Definitive Debentures or Beneficial Interests in Restricted Global Debentures for Restricted Definitive Debentures or Beneficial Interests in Restricted Global Debentures. [ ] (a) Check if Exchange is from beneficial interest in a Restricted Global Debenture to Restricted Definitive Debenture. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Debenture for a Restricted Definitive Debenture with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Debenture is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Debenture issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Debenture and in the Indenture and the Securities Act. [ ] (b) Check if Exchange is from Restricted Definitive Debenture to beneficial interest in a Restricted Global Debenture. In connection with the Exchange of the Owner's Restricted Definitive Debenture for a beneficial interest in the: [CHECK ONE] [ ] 144A Global Debenture or [ ] Regulation S Global Debenture with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Debentures and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any State of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Debenture and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. Dated: C-3 [Insert Name of Owner] By: ------------------------------------ Name: Title: C-4 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Grey Global Group Inc. 777 Third Avenue New York, New York 10017 Attention: Corporate Secretary Telecopier No. (212) 546-1495 American Stock Transfer & Trust Company 59 Maiden Lane New York, New York 10038 Attn: Corporate Trust Department Telecopier No. (718) 331-1852 RE: 5.0% CONTINGENT CONVERTIBLE SUBORDINATED DEBENTURES DUE 2033 Dear Sirs: Reference is hereby made to the Indenture, dated as of October 28, 2003 (the "INDENTURE"), between Grey Global Group Inc., as issuer (the "COMPANY"), and American Stock Transfer & Trust Company, a trust company organized under the laws of the State of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) a beneficial interest in a Global Debenture, or (b) a Definitive Debenture, we confirm that: 1. We understand that any subsequent transfer of the Debentures or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Debentures or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "SECURITIES Act"). 2. We understand that the offer and sale of the Debentures have not been registered under the Securities Act, and that the Debentures and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Debentures or any interest therein, we will do so only (A) to the Company or any of their respective subsidiaries, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional D-1 buyer" (as defined therein), (C) inside the United States to an institutional "accredited investor" (as defined below) purchasing for its own account or for the account of another institutional accredited investor that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if the proposed transfer is in respect of an aggregate principal amount of Debentures of less than $250,000, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144 under the Securities Act (if available), (F) in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel acceptable to the Company) or (G) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Debenture from us in a transaction meeting the requirements of clauses (A) through (F) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Debentures or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Debentures purchased by us will bear a legend to the foregoing effect. We further understand that any subsequent transfer by us of the Debentures or beneficial interest therein acquired by us must be effected through one of the Initial Purchasers. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Debentures, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Debentures or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Dated: D-2 [Insert Name of Accredited Investor] By: ------------------------------------ Name: Title: D-3 EX-4.2 4 y93424exv4w2.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.2 EXECUTION COPY REGISTRATION RIGHTS AGREEMENT Dated as of October 28, 2003 between GREY GLOBAL GROUP INC. and J.P. MORGAN SECURITIES INC., as Representative of the Initial Purchasers 5.0% Contingent Convertible Subordinated Debentures due 2033 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "AGREEMENT") is dated as of October 28, 2003, by and between GREY GLOBAL GROUP INC., a Delaware corporation (the "COMPANY") and J.P. MORGAN SECURITIES INC., as Representative and on behalf of, the Initial Purchasers (the "INITIAL PURCHASERS") set forth in Schedule I to the Purchase Agreement (as defined below). This Agreement is entered into in connection with the Purchase Agreement, dated as of October 22, 2003, among the Company and the Initial Purchasers (the "PURCHASE AGREEMENT") relating to the sale by the Company to the Initial Purchasers of $125,000,000 aggregate principal amount 5.0% Contingent Convertible Subordinated Debentures due 2033 (the "FIRM DEBENTURES"), plus up to an additional $25,000,000 aggregate principal amount of the same that the Initial Purchasers may elect to purchase pursuant to the terms of the Purchase Agreement (the "ADDITIONAL DEBENTURES" and, together with the Firm Debentures, the "DEBENTURES"), which are convertible, under certain circumstances, into shares of common stock, par value $0.01 per share, of the Company (such shares, the "UNDERLYING SHARES"). The Debentures are being issued pursuant to an indenture dated as of the date hereof (the "INDENTURE") between the Company and American Stock Transfer & Trust Company, as Trustee (the "TRUSTEE"). In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Purchasers and any subsequent holder of holders of the Debentures or the Underlying Shares as provided herein. The execution and delivery of this Agreement is a condition to the Initial Purchasers' obligation to purchase the Firm Debentures under the Purchase Agreement. The parties hereby agree as follows: 1. Definitions As used in this Agreement, the following terms shall have the following meanings: Additional Debentures: See the introductory paragraphs to this Agreement. Additional Interest: See Section 3(a). Advice: See Section 4. Amount of Registrable Securities: (a) With respect to Debentures constituting Registrable Securities, the aggregate principal amount of all such Debentures outstanding, (b) -2- with respect to Underlying Shares constituting Registrable Securities, the aggregate number of such Underlying Shares outstanding multiplied by the Conversion Price (as defined in the Indenture relating to the Debentures upon the conversion of which such Underlying Shares were issued) in effect at the time of computing the Amount of Registrable Securities or, if no such Debentures are then outstanding, the last Conversion Price that was in effect under such Indenture when any such Debentures were last outstanding, and (c) with respect to combinations thereof, the sum of (a) and (b) for the relevant Registrable Securities. Blackout Period: See Section 3(a). Business Day: Any day that is not a Saturday, Sunday or a day on which banking institutions in New York are authorized or required by law to be closed. Closing Date: The Closing Date as defined in the Purchase Agreement. Company: See the introductory paragraphs to this Agreement. Damages Payment Date: See Section 3(b). Debentures: See the introductory paragraphs to this Agreement. DTC: See Section 4(a). Effectiveness Date: The 180th day after the Issue Date. Effectiveness Period: See Section 2(a). Event Date: See Section 3(b). Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. Filing Date: The 90th day after the Issue Date. Holder: Any record holder of Registrable Securities. Indemnified Person: See Section 6. Indemnifying Person: See Section 6. Indenture: See the introductory paragraphs to this Agreement. Initial Purchasers: See the introductory paragraphs to this Agreement. -3- Initial Shelf Registration: See Section 2(a). Inspectors: See Section 4(n). Issue Date: The date hereof. Notice and Questionnaire: A written notice delivered to the Company containing substantially the information called for by the Form of Selling Securityholder Notice and Questionnaire attached as Appendix A to the Offering Memorandum of the Company relating to the Debentures. Person: An individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. Prospectus: The prospectus included in any Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. Purchase Agreement: See the introductory paragraphs to this Agreement. Records: See Section 4(n). Registrable Securities: All Debentures and Underlying Shares upon original issuance thereof and at all times subsequent thereto until the earliest to occur of (i) a Registration Statement covering such Debentures and Underlying Shares having been declared effective by the SEC and such Debentures and Underlying Shares have been disposed of in accordance with such effective Registration Statement, (ii) such Debentures and Underlying shares having been sold in compliance with Rule 144 and (iii) such Debentures and any Underlying Shares cease to be outstanding. Registration Default: See Section 3(a). Registration Statement: Any registration statement of the Company filed with the SEC that covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, -4- including post-effective amendments, all exhibits, and all documents incorporated by reference or deemed to be incorporated by reference in such registration statement. Rule 144: Rule 144 promulgated under the Securities Act, as such rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. Rule 144A: Rule 144A promulgated under the Securities Act, as such rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC. Rule 415: Rule 415 promulgated under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. SEC: The Securities and Exchange Commission. Securities: The Debentures and the Underlying Shares, until the Debentures have all been converted into Underlying Shares, in which case Securities shall mean the Underlying Shares. Securities Act: The Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. Selling Holder: On any date, any Holder that has delivered a Notice and Questionnaire to the Company on or prior to such date. Shelf Registration: See Section 2(b). Shelf Registration Statement: See Section 2(b). Subsequent Shelf Registration: See Section 2(b). TIA: The Trust Indenture Act of 1939, as amended, and the rules and regulations of the SEC promulgated thereunder. Trustee: See the introductory paragraphs to this Agreement. Underlying Shares: See the introductory paragraphs to this Agreement. -5- Underwritten Registration or Underwritten Offering: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. 2. Shelf Registration (a) The Company shall prepare and file with the SEC a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Securities (the "INITIAL SHELF REGISTRATION"); provided, that, with respect to any particular Registrable Security, the Holder thereof shall have provided all information regarding such Holder and the distribution of such Registrable Security as may be required to be in a registration statement filed under the Securities Act. The Company shall file with the SEC the Initial Shelf Registration on or prior to the Filing Date. The Initial Shelf Registration shall be on Form S-3 or another appropriate form permitting registration of such Registrable Securities for resale by such Holders in the manner or manners reasonably designated by them (excluding Underwritten Offerings). The Company shall not permit any securities other than the Registrable Securities to be included in the Initial Shelf Registration or any Subsequent Shelf Registration (as defined below), other than as may be required to comply with the registration rights granted to Edward H. Meyer in the Registration Rights Agreement, dated as of June 5, 1986, between Grey Advertising Inc. and Edward H. Meyer. The Company shall use its reasonable best efforts to cause the Initial Shelf Registration to be declared effective under the Securities Act on or prior to the Effectiveness Date and to keep the Initial Shelf Registration continuously effective under the Securities Act until the date which is two years from the Issue Date (other than during a Blackout Period) (as defined below) (the "EFFECTIVENESS PERIOD"), or such shorter period ending when (i) all the Registrable Securities covered by the Initial Shelf Registration have been sold in the manner set forth and as contemplated in the Initial Shelf Registration, (ii) the date on which all the Registrable Securities (x) have been resold pursuant to Rule 144 or (y) cease to be outstanding or (iii) a Subsequent Shelf Registration covering all of the Registrable Securities has been declared effective under the Securities Act. Holders who elect to sell Securities pursuant to a Shelf Registration Statement will be required to be named as a selling security holder; will be required to deliver a prospectus to purchasers; will be subject to the civil liability provisions under the Securities Act in connection with any sales; and will be bound by the applicable provisions of this Agreement, including the indemnification obligations herein. (b) Subsequent Shelf Registrations. If the Initial Shelf Registration or any Subsequent Shelf Registration (as defined below) ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the Registrable Securities registered thereunder), the Company shall use its reasonable best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within 45 days of such cessation of effectiveness amend the Shelf Registration in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness -6- thereof, or file an additional "shelf" Registration Statement pursuant to Rule 415 covering all of the Registrable Securities covered by the Initial Shelf Registration Statement and not theretofore sold (a "SUBSEQUENT SHELF REGISTRATION"). If a Subsequent Shelf Registration is filed, the Company shall use its reasonable best efforts to cause the Subsequent Shelf Registration to be declared effective as soon as practicable after such filing and to keep such Registration Statement continuously effective for a period equal to the number of days in the Effectiveness Period less the aggregate number of days during which the Initial Shelf Registration or any Subsequent Shelf Registration was previously continuously effective. As used herein the term "SHELF REGISTRATION" means the Initial Shelf Registration and any Subsequent Shelf Registration and the term "SHELF REGISTRATION STATEMENT" means any Registration Statement filed in connection with a Shelf Registration. (c) Supplements and Amendments. The Company shall promptly supplement and amend the Shelf Registration if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, if required by the Securities Act, or if reasonably requested by the Holders of a majority in Amount of Registrable Securities covered by such Registration Statement. 3. Additional Interest (a) The Company and the Initial Purchasers agree that the Holders of Registrable Securities will suffer damages if the Company fails to fulfill certain of its obligations under Section 2 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, the Company agrees to pay additional interest on the Registrable Securities ("ADDITIONAL INTEREST") under the circumstances and to the extent set forth below. Additional Interest shall accrue: (i) if the Initial Shelf Registration Statement is not declared effective by the SEC on or prior to the Effectiveness Date or (ii) if the effectiveness of the Initial Shelf Registration Statement for resales thereunder is suspended at any time during the Effectiveness Period (other than during a Blackout Period) (each a "REGISTRATION DEFAULT"). In each case, Additional Interest will be payable on the Registrable Securities included (or that would have been included but for the Company's failure to comply with Section 4(a) hereof and provided the Holder thereof did not fail to comply with the provisions of Section 4(o) hereof) in such Registration Statement over and above the stated interest rate of the Debentures at a rate of 0.25% per annum on the Amount of Registrable Securities, commencing on (x) the 181st day after the Issue Date in the case of clause (i) above and (y) the day such Initial Shelf Registration is suspended in excess of the Blackout Period in the case of clause (ii) above; provided, however, that (1) upon the effectiveness of the Shelf Registration Statement as required hereunder (in the case of clause (a)(i) of this Section 3) or (2) upon the effectiveness of the Shelf Registration Statement which has been suspended (in the case of (a)(ii) of this Section 3), Additional Interest on the Registrable Securities as a result of such clause, shall cease to accrue; provided further, however, that Additional Interest on the Regis- -7- trable Securities may accrue under only one of the foregoing clauses (a)(i) and (a)(ii) of this Section 3 at any one time. It is understood and agreed that, notwithstanding any provision to the contrary, (1) no Additional Interest shall accrue on any Registrable Securities that are then covered by an effective Shelf Registration Statement and (2) the right to receive Additional Interest shall be the sole and exclusive remedy to the Holders of the Registrable Securities for breach by the Company of its registration obligations. As used herein, the term "BLACKOUT PERIOD" means a period of time not to exceed 45 days in any 90-day period, and not to exceed an aggregate of 120 days in any 365-day period, during which the Company suspends the effectiveness of the Initial Shelf Registration Statement and the use of the Prospectus included in the Initial Shelf Registration Statement referred to above (1) under certain circumstances relating to pending corporate developments, including but not limited to acquisitions, divestitures, dispositions and financings, public filings with the SEC and similar events or (2) the occurrence of any other event which would require disclosure of material non-public information by the Company as to which the Company has a bona fide business purpose for preserving confidentiality; provided, that, so long as Registrable Securities are outstanding the Company shall provide the Trustee with prompt written notice of the commencement of and prompt written notice of the termination of each such Blackout Period; provided further, however, that the Company need not specify the nature of the event giving rise to a Blackout Period in any such notice to the Trustee. (b) The Company shall notify the Trustee within five Business Days after each and every date on which an event occurs in respect of which Additional Interest is required to be paid (an "EVENT DATE"). The Additional Interest due shall be payable in cash semi-annually on each April 15 and October 15 (each a "DAMAGES PAYMENT DATE"), commencing with the first such date occurring after any such Additional Interest begins to accrue, to the record Holder of Registrable Securities entitled to receive the regular interest on such Damages Payment Date, with respect to Debentures that are Registrable Securities, and to Persons that are registered Holders on April 1 and October 1 immediately prior to a Damages Payment Date with respect to Underlying Shares that are Registrable Securities. The amount of Additional Interest for Registrable Securities will be determined by multiplying the rate of Additional Interest by the Amount of Registrable Securities outstanding on the Damages Payment Date following a Registration Default in the case of the first such payment of Additional Interest with respect to a Registration Default and thereafter at the next succeeding Damages Payment Date until the cure of such Registration Default. 4. Registration Procedures In connection with the registration of any Registrable Securities pursuant to Section 2 hereof, the Company shall effect such registrations to permit the sale of such Reg- -8- istrable Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Company shall: (a) (i) Promptly upon request from any Holder of Registrable Securities, the Company will provide a form of Notice and Questionnaire, which must be completed and delivered by such Holder to the Company at least five Business Days before any intended distribution of Registrable Securities under the Shelf Registration Statement. To be named as a selling security holder in the Shelf Registration Statement when it first becomes effective, Holders must complete and deliver the Notice and Questionnaire in substantially the form of Appendix A to the Offering Memorandum dated October 22, 2003 with respect to the initial offering of the Securities before the effectiveness of the Shelf Registration Statement. If the Company receives from a Holder of Registrable Securities a completed Notice and Questionnaire, together with such other information as the Company may reasonably request, after the effectiveness of the Shelf Registration Statement, the Company will file an amendment to the Shelf Registration Statement, or a supplement to the related Prospectus, to permit the Holder to deliver a Prospectus to purchasers of Registrable Securities. Any Holder that does not complete and deliver a Notice and Questionnaire or provide such other information will not be named as a selling security holder in the Prospectus and will not be permitted to sell any Registrable Securities under the applicable Shelf Registration Statement. (ii) Prepare and file with the SEC on or prior to the Filing Date, a Registration Statement as prescribed by Section 2 hereof, and to use its reasonable best efforts to cause such Registration Statement to become effective and remain effective as provided herein, provided that, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Company shall upon written request from any registered Holder of Registrable Securities (which in the case of Registrable Securities in the form of global certificates shall be The Depository Trust Company ("DTC")) to be covered by such Registration Statement, furnish to and afford such Holder a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed. Before filing any Registration Statement or Prospectus or any amendments or supplements thereto the Company will consider any reasonable objections of the Holders of a majority in Registrable Securities covered by such Registration Statement or their counsel, if any. (b) Prepare and file with the SEC such amendments and post-effective amendments to each Shelf Registration Statement, as the case may be, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period (other than during a Blackout Period); cause the related Prospectus to be supplemented by any Prospectus supplement required by applicable law, and as so supplemented to be filed pursuant to -9- Rule 424 (or any similar provisions then in force) under the Securities Act; and comply with the provisions of the Securities Act, the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to it with respect to the disposition of all Registrable Securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented. (c) Notify the Selling Holders of Registrable Securities named in the Shelf Registration Statement promptly (but in any event within five Business Days), and confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective under the Securities Act (including in such notice a written statement that any Holder may, upon request, obtain, without charge, one conformed copy of such Registration Statement or post-effective amendment), (ii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any Prospectus or the initiation of any proceedings for that purpose, (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Securities for offer or sale in any jurisdiction, or the initiation or threatening in writing of any proceeding for such purpose, (iv) of the happening of any event or any information becoming known that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (v) of the Company's determination that a post-effective amendment to a Registration Statement would be appropriate. (d) Use its reasonable best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, and, if any such order is issued, to use its reasonable best efforts to obtain the withdrawal of any such order at the earliest possible moment. (e) Deliver to each Selling Holder of Registrable Securities, without charge, as many copies of the Prospectus or Prospectuses (including each form of preliminary prospectus) and each amendment or supplement thereto and any documents incorporated by -10- reference therein as such Persons may reasonably request; and, subject to the last paragraph of this Section 4, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the Selling Holders of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto. (f) Cause the Company's counsel to perform Blue Sky investigations and file registrations and qualifications required to be filed in connection with the registration or qualification (or exemption therefrom) of such Registrable Securities; keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other reasonable acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the applicable Registration Statement, provided that the Company shall not be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified, (B) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or (C) subject itself to taxation in excess of a nominal dollar amount in any such jurisdiction. (g) Cooperate with the Selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with DTC; and enable such Registrable Securities to be registered in such names as Selling Holders may request. (h) Use its reasonable best efforts to cause the Registrable Securities covered by the Registration Statement to be registered with or approved by such other United States governmental agencies or authorities of the United States as may be necessary to enable the Selling Holders to consummate the disposition of such Registrable Securities, except as may be required solely as a consequence of the nature of such Selling Holder's business, in which case the Company will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals. (i) Upon the occurrence of any event contemplated by paragraph 4(c)(iv) or 4(c)(v) above, as promptly as practicable prepare and (subject to Section 4(a) above) file with the SEC, solely at the expense of the Company, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. -11- (j) Prior to the effective date of the first Registration Statement relating to the Registrable Securities, (i) provide the Trustee with printed certificates for the Registrable Securities in a form eligible for deposit with DTC and (ii) provide a CUSIP number for the Registrable Securities. (k) Cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement relating to the Registrable Securities; and in connection therewith, cooperate with the Trustee and the Selling Holders of the Registrable Securities to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA; and execute, and use its reasonable best efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner. (l) During the Effectiveness Period, comply in all material respects with all applicable rules and regulations of the SEC and make generally available to its securityholders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 90 days after the end of any 12-month period commencing on the first day of the first fiscal quarter of the Company after the effective date of a Shelf Registration Statement. (m) Use its reasonable best efforts to take all other steps necessary to effect the registration of the Registrable Securities covered by a Registration Statement contemplated hereby. (n) During the Effectiveness Period, make available at reasonable times for inspection by representatives of the Selling Holders of such Registrable Securities designated in writing by Holders of a majority in Amount of Registrable Securities to be included in such Registration Statement and any attorney, accountant or other agent retained by such Selling Holders (collectively, the "INSPECTORS"), at the offices where normally kept, during reasonable business hours at such time or times as shall be mutually convenient for the Company and the Inspectors as a group, all financial and other records, pertinent corporate documents and instruments of the Company and its subsidiaries (collectively, the "RECORDS") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information reasonably requested by any such Inspector in connection with such Registration Statement; provided, however, that the Company shall have no obligation to provide any such information prior to the execution by the party receiving such information of a confidentiality agreement in a form reasonably acceptable to the Company. The Inspectors shall treat all records as confidential and such records shall not be disclosed by any Inspector unless (i) the disclosure of such Records is necessary to avoid or correct a material misstatement or -12- material omission in such Registration Statement, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (iii) disclosure of such information is, in the opinion of counsel for any Inspector, necessary or advisable in connection with any action, claim, suit or proceeding directly involving or potentially involving such Inspector and arising out of, based upon, relating to, or involving this Agreement or any transactions contemplated hereby or arising hereunder, (iv) the information in such Records has been made generally available to the public other than through the acts of such Inspector; provided, however, that prior notice shall be provided as soon as practicable to the Company of the potential disclosure of any information by such Inspector pursuant to clause (ii) or (iii) of this sentence to permit the Company to obtain a protective order (or waive the provisions of this paragraph (n)) and that such Inspector shall take such actions as are reasonably necessary to protect the confidentiality of such information (if practicable) to the extent such action is otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of any Holder or Inspector or (v) the information in such Records has been made generally available to the public other than as a result of a breach of this Agreement. (o) Each Holder agrees, by acquisition of the Registrable Securities, that no Holder shall be entitled to sell any of such Registrable Securities pursuant to a Registration Statement or to receive a Prospectus relating thereto, unless such Holder has furnished the Company with a Notice and Questionnaire as required pursuant to Section 4(a) hereof (including the information required to be included in such Notice and Questionnaire) and the information set forth in the next sentence. Each Selling Holder agrees promptly to furnish to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Selling Holder not misleading and any other information regarding such Selling Holder and the distribution of such Registrable Securities as the Company may from time to time reasonably request. Any sale of any Registrable Securities by any Holder shall constitute a representation and warranty by such Holder that the information relating to such Holder and its plan of distribution is as set forth in the Prospectus delivered by such Holder in connection with such disposition, that such Prospectus does not as of the time of such sale contain any untrue statement of a material fact relating to or provided by such Holder or its plan of distribution and that such Prospectus does not as of the time of such sale omit to state any material fact relating to or provided by such Holder or its plan of distribution necessary to make the statement in such Prospectus, in the light of the circumstances under which they were made, not misleading. The Company may require each Selling Holder of Registrable Securities to furnish to the Company such information regarding such Selling Holder and the distribution of such Registrable Securities as the Company may, from time to time, reasonably request. The Company may exclude from such registration the Registrable Securities of any Selling Holder who fails to furnish such information within 20 Business Days after receiving such request. Each Selling Holder as to which any Shelf Registration is being effected is deemed -13- to agree to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such seller not materially misleading. Each Holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon receipt of any notice of a Blackout Period in accordance with Section 3(a) hereof or upon the happening of any event of the kind described in Section 4(c)(ii), 4(c)(iii), 4(c)(iv), or 4(c)(v), such Holder will forthwith discontinue disposition of such Registrable Securities covered by such Registration Statement or Prospectus until such holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 4(e), or until it is advised in writing (the "ADVICE") by the Company that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto. Each Holder agrees to keep any such notice confidential. In the event the Company shall give any such notice, the Effectiveness Period shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of Registrable Securities covered by such Registration Statement shall be given (x) the copies of the supplemented or amended Prospectus contemplated by Section 4(e) or (y) the Advice. 5. Registration Expenses All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not a Shelf Registration is filed or becomes effective, including, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of one counsel in connection with Blue Sky qualifications of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions in the United States as provided in Section 4(f)), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities in a form eligible for deposit with DTC and of printing prospectuses if the printing of prospectuses is requested by the Holders of a majority in Amount of Registrable Securities included in any Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company desires such insurance, (vi) fees and expenses of all other Persons retained by the Company, (vii) internal expenses of the Company (including, without limitation, all salaries and expenses of officers and employees of the Company performing legal or accounting duties), (viii) the expense of any annual audit, (ix) the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange, if applicable, (x) the expenses relating to printing, word processing and distributing all Registration Statements and any other documents necessary in order to comply with this Agreement and (xi) fees and expenses of the -14- Trustee. Notwithstanding anything in this Agreement to the contrary, each Holder shall pay all brokerage commissions with respect to any Registrable Securities sold by it and, except as set forth in clause (i) of this Section 5, the Company shall not be responsible for the fees and expenses of any counsel, accountant or advisor for the Holders. 6. Indemnification (a) The Company agrees to indemnify and hold harmless each Initial Purchaser and each Holder, their respective affiliates, directors and officers and each Person, if any, who controls such Initial Purchaser or any Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are incurred), joint or several, that arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or any Prospectus or any omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to such Initial Purchaser or any such Holder furnished to the Company in writing through J.P. Morgan Securities Inc. or any such Selling Holder expressly for use therein. Notwithstanding anything herein to the contrary, in connection with the sale of Registrable Securities pursuant to a Shelf Registration Statement, the Company will not be liable to any Holder with respect to any such untrue statement or alleged untrue statement or omission or alleged omission made in any preliminary prospectus of a Registration Statement that is corrected in a Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) relating to such securities if the Person asserting any such claim, loss, damage or liability purchased such securities and was not sent or given a copy of the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) if delivery of such Prospectus by such Holder was required under the Securities Act, provided the Company delivered in sufficient quantity such Prospectus (as amended or supplemented if any Issuer shall have furnished any amendments or supplements thereto) to such Holder sufficiently in advance of the written confirmation of the sale of the securities to such Person asserting such claim, loss, damage or liability and any such claims, losses, damages, or liabilities result from (or are alleged to result from) the fact that a copy of the Prospectus (as amended or supplemented if any Issuer shall have furnished any amendments or supplements thereto) was not delivered to such Person at or prior to the written confirmation of the sale of the securities to such Person. -15- (b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, each Initial Purchaser and each other Selling Holder, their respective affiliates, the directors of the Company, each officer of the Company who signed the Registration Statement and each Person, if any, who controls the Company, such Initial Purchaser and such other Selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity set forth in paragraph (a) above, but only with respect to any losses, claims, damages or liabilities that arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to such Holder furnished to the Company in writing through any such Holder expressly for use in any Registration Statement and any Prospectus. (c) If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnification may be sought pursuant to either paragraph (a) or (b) above, such Person (the "INDEMNIFIED PERSON") shall promptly notify the Person against whom such indemnification may be sought (the "INDEMNIFYING PERSON") in writing; provided that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have under this Section 6 except to the extent that the Indemnifying Person has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have to an Indemnified Person otherwise than under this Section 6. If any such proceeding shall be brought or asserted against an Indemnified Person and it shall have notified the Indemnifying Person thereof, the Indemnifying Person, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others entitled to indemnification pursuant to this Section 6 that the Indemnifying Person may designate in such proceeding and shall pay the reasonable fees and expenses of such counsel related to such proceeding. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary; (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person; (iii) the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the Indemnifying Person; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood and agreed that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons. Any such separate firm (x) for the Initial Purchaser, its affiliates, direc- -16- tors and officers and any control Persons of the Initial Purchaser shall be designated in writing by the Initial Purchaser, (y) for any Holders, their affiliates, directors and officers and any control Persons of any such Holders shall be designated in writing by the majority in Amount of Registrable Securities and (z) in all other cases shall be designated in writing by the Company. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify each Indemnified Person from and against any loss or liability by reason of such settlement or judgment. No Indemnifying Person shall, without the written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnification could have been sought hereunder by such Indemnified Person, unless such settlement (A) includes an unconditional release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person. (d) If the indemnification provided for in paragraphs (a) and (b) above is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Person, on the one hand, and by the Indemnified Person, on the other hand, pursuant to the Purchase Agreement or from the offering of the Registrable Securities pursuant to any Shelf Registration or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative fault of the Indemnifying Person on the one hand and the Indemnified Person on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Holders and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (e) The Company, the Initial Purchasers and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 6 were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an Indemnified Person as a result -17- of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Person in connection with any such action or claim. Notwithstanding the provisions of this Section 6, in no event shall a Holder be required to contribute any amount in excess of the amount by which the net proceeds received by such Holder from the offering or sale of the Registrable Securities pursuant to the Shelf Registration Statement exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (f) The remedies provided for in this Section 6 are not exclusive and shall not limit any rights or remedies that may otherwise be available to any Indemnified Person at law or in equity. (g) The indemnity and contribution provisions contained in this Section 6 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Initial Purchaser or any Holder, their respective affiliates or any Person controlling any Initial Purchaser or any Holder, or by or on behalf of the Company, its affiliates or the officers or directors of or any Person controlling the Company, (iii) acceptance of any of the Registrable Securities and (iv) any sale of Registrable Securities pursuant to a Shelf Registration Statement. 7. Rule 144 and Rule 144A The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder of Registrable Securities, make publicly available other information so long as necessary to permit sales pursuant to Rule 144 and Rule 144A under the Securities Act. The Company further covenants it will take such further action as any Holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 and Rule 144A under the Securities Act, as such rules may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. 8. Underwritten Registrations No Holder of Registrable Securities may participate in any Underwritten Registration hereunder. -18- 9. Miscellaneous (a) No Inconsistent Agreements. The Company has not, as of the date hereof, entered and shall not, after the date of this Agreement, enter into any agreement with respect to any of its securities that restricts the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. After the date of this Agreement, the Company will not enter into any agreement with respect to any of its securities which will grant to any Person piggy-back rights with respect to a Registration Statement (as defined herein). (b) Adjustments Affecting Registrable Securities. The Company shall not, directly or indirectly, take any action with respect to the Registrable Securities as a class that would adversely affect the ability of the Holders of Registrable Securities to include such Registrable Securities in a registration undertaken pursuant to this Agreement. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, otherwise than with the prior written consent of the Company and the Holders of not less than the majority in Amount of Registrable Securities; provided, however, that Section 6 and this Section 9(c) may not be amended, modified or supplemented without the prior written consent of the Company and each Holder (including, in the case of an amendment, modification or supplement to Section 6, any Person who was a Holder of Registrable Securities disposed of pursuant to any Registration Statement). Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Securities may be given by Holders of at least a majority in Amount of Registrable Securities being sold by such Holders pursuant to such Registration Statement. (d) Notices. All notices and other communications (including without limitation any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, next-day air courier or facsimile, if provided: (i) if to a Holder of Registrable Securities, at the most current address of such Holder set forth on the records of the registrar under the Indenture, in the case of Holders of Debentures, and the stock ledger of the Company, in the case of Holders of Underlying Shares, unless, in either such case, any Holder shall have provided notice information in a Notice and Questionnaire or any amendment thereto, in which case such information shall control; and -19- (ii) if to the Company, at 777 Third Avenue, New York, New York 10017, (facsimile no.: (212) 546-1495), Attention: Corporate Secretary, with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, New York 10036, (facsimile no.: [ ]), Attention: Greg Fernicola, and (iii) if to the Initial Purchasers, J.P. Morgan Securities Inc., 277 Park Avenue, New York, New York 10172; Attention: Syndicate Department. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; one Business Day after being timely delivered to a next-day air courier; and when the Person giving such notice or communication receives facsimile confirmation, if sent by facsimile during normal business hours, and otherwise on the next Business Day during normal business hours. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the trustee under the Indenture at the address specified in the Indenture. (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, including the Holders; provided, that, with respect to the indemnity and contribution agreements in Section 6, each Holder of Registrable Securities subsequent to the Initial Purchaser shall be bound by the terms thereof if such Holder elects to include Registrable Securities in a Shelf Registration; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign holds Registrable Securities. (f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) Governing Law. THIS AGREEMENT 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 REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURIS- -20- DICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. (i) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (j) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. (k) Securities Held by the Company or Its Affiliates. Whenever the consent or approval of Holders of a specified percentage in Amount of Registrable Securities is required hereunder, Registrable Securities held by the Company or any of its affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (l) Third Party Beneficiaries. Holders of Registrable Securities are intended third party beneficiaries of this Agreement and this Agreement may be enforced by such Persons. S-1 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. GREY GLOBAL GROUP INC. By: ----------------------------------- Name: Title: J.P. MORGAN SECURITIES INC., as representative of the Initial Purchasers By: ----------------------------------- Name: Title: EX-4.3 5 y93424exv4w3.txt FORM OF CERTIFICATE . . . Exhibit 4.3 [LEGEND] NUMBER G GREY [LEGEND] SHARES COMMON STOCK GREY GLOBAL GROUP INC. COMMON STOCK PAR VALUE INCORPORATED UNDER THE LAWS OF THE STATE OF CUSIP 39787M 10 8 $.01 PER SHARE DELAWARE
This Certifies that is the owner of FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE OF GREY GLOBAL GROUP INC. CERTIFICATE OF STOCK transferable on the books of the Corporation by the holder hereof in person or by its duly authorized Attorney upon surrender of this certificate properly endorsed. This Certificate is not valid until countersigned by a Transfer Agent and registered by a Registrar. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated [LEGEND] [LEGEND] Grey Global Group Inc. SEAL VICE CHAIRMAN, SECRETARY STATE OF DELAWARE PRESIDENT AND TREASURER COUNTERSIGNED AND REGISTERED: AMERICAN STOCK TRANSFER & TRUST COMPANY TRANSFER AGENT AND REGISTRAR BY: AUTHORIZED SIGNATURE
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS THE DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF OF THE CORPORATION, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. SUCH REQUEST MAY BE MADE TO THE CORPORATION OR THE TRANSFER AGENT. GREY GLOBAL GROUP INC. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common UNIF GIFT/TRANS MIN ACT-_______________ Custodian _______________ TEN ENT -- its tenants by the entireties (Cust) (Minor) JT TEN -- as joint tenants with right of under Uniform Gifts/Transfers to Minors survivorship and not as tenants Act _____________ in common (State)
Additional abbreviations may also be used though not in the above list. FOR VALUE RECEIVED ______________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Please print or typewrite name and address, including zip code, of assignee) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- _____________________________ Shares of the Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint _______________________ Attorney to transfer the said shares on the books of the within named Corporation with full power of substitution in the premises. Dated ___________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement or any change whatever. EX-5.1 6 y93424exv5w1.txt OPINION OF SKADDEN ARPS SLATE MEAGHER & FLOM LLP Exhibit 5.1 January 26, 2004 Grey Global Group Inc. 777 Third Avenue New York, New York 10017 Re: Grey Global Group Inc. 5.0% Contingent Convertible Subordinated Debentures due 2033 --------------------------------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to Grey Global Group Inc., a Delaware corporation (the "Company"), in connection with the public offering of (i) $150,000,000 aggregate principal amount of 5.0% Contingent Convertible Subordinated Debentures due 2033 (the "Debentures") issued by the Company, (ii) such indeterminate number of shares of the Company's common stock, par value $.01 per share ("Common Stock"), as are issuable upon conversion of the Debentures (the "Debenture Shares") and (iii) certain shares of the Company's Common Stock owned by Edward H. Meyer ("Meyer") (the "Meyer Shares" and, together with the Debenture Shares, the "Shares") issued upon conversion of (x) the Company's 8-1/2% Convertible Subordinated Debentures due 2003 (the "Meyer Debentures") and (y) shares of the Company's Limited Duration Class B Common Stock, par value $.01 per share (the "Class B Stock"), owned by Meyer. This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended (the "Act"). In connection with this opinion, we have examined originals or copies, certified or otherwise identified to our satisfaction, of: (i) the Registration Statement on Form S-3 to be filed by the Company with the Securities and Exchange Commission (the "Commission") on the date hereof under the Act (the "Registration Statement"); Grey Global Group Inc. January 26, 2004 Page 2 (ii) an executed copy of the Registration Rights Agreement, dated as of October 28, 2003, between the Company and J.P. Morgan Securities Inc., as representative of the initial purchasers (the "Registration Rights Agreement"); (iii) an executed copy of the Indenture, dated as of October 28, 2003 (the "Indenture"), between the Company and American Stock Transfer and Trust Company, as trustee (the "Trustee"); (iv) the Restated Certificate of Incorporation of the Company, certified by the Assistant Secretary of the Company as currently in effect; (v) the Restated By-Laws of the Company, certified by the Assistant Secretary of the Company as currently in effect; (vi) certain resolutions adopted by the Board of Directors of the Company relating to the issuance and sale of the Debentures and the Debenture Shares, the execution of the Registration Rights Agreement and the filing of the Registration Statement; (vii) certain resolutions adopted by the Board of Directors of the Company relating to the issuance and sale of the Meyer Debentures and the shares of Common Stock and Class B Stock issuable upon conversion of the Meyer Debentures; (viii) the Form T-1 of the Trustee filed as an exhibit to the Registration Statement; (ix) an executed global note representing the Debentures authenticated by the Trustee; (x) a certificate evidencing the Meyer Shares; and (xi) a specimen certificate evidencing the Common Stock; We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such records of the Company and such agreements, certificates of public officials, certificates of officers or other representatives of the Company and others, and such other documents, certificates and records as we have deemed necessary or appropriate as a basis for the opinions set forth herein. In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as facsimile, electronic, certified, or photostatic copies and the authenticity of the Grey Global Group Inc. January 26, 2004 Page 2 originals of such copies. In making our examination of documents executed or to be executed, we have assumed that the parties thereto, other than the Company, had or will have the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action, corporate or other, and the execution and delivery by such parties of such documents and the validity and binding effect thereof on such parties. As to any facts material to the opinions expressed herein which we did not independently establish or verify, we have relied upon statements and representations of officers and other representatives of the Company and others and of public officials. Our opinions set forth herein are limited to Delaware corporate law and the laws of the State of New York that are normally applicable to transactions of the type contemplated by the Registration Statement and Registration Rights Agreement and, to the extent that judicial or regulatory orders or decrees or consents, approvals, licenses, authorizations, validations, filings, recordings or registrations with governmental authorities are relevant, to those required under such laws (all of the foregoing being referred to as "Opined on Law"). We do not express any opinion with respect to the law of any jurisdiction other than Opined on Law or as to the effect of any such non-opined on law on the opinions herein stated. The opinions set forth below are subject to the following qualifications, further assumptions and limitations: (a) the validity or enforcement of any agreements or instruments may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law); and (b) in rendering the opinion set forth in paragraph 2 below, we have assumed that the certificates evidencing the Debenture Shares will be manually signed by one of the authorized officers of the transfer agent and registrar for the Common Stock and registered by such transfer agent and registrar and will conform to the specimen certificate examined by us evidencing the Common Stock. Based upon and subject to the foregoing and the limitations, qualifications, exceptions and assumptions set forth herein, we are of the opinion that: 1. The Debentures have been duly authorized and are valid and binding obligations of the Company, enforceable against the Company in accordance with their terms; Grey Global Group Inc. January 26, 2004 Page 2 2. The Debenture Shares initially issuable upon conversion of the Debentures pursuant to the Indenture have been duly authorized for issuance and, when issued upon conversion of the Debentures in accordance with the terms of the Indenture, will be validly issued, fully paid and non-assessable; and 3. The Meyer Shares have been validly issued, and are fully paid and non-assessable. In rendering the opinion set forth above in paragraph 1, we have assumed that the execution and delivery by the Company of the Indenture and the Debentures and the performance by the Company of its obligations thereunder do not violate, conflict with or constitute a default under any agreement or instrument to which the Company or its properties is subject, except for those agreements and instruments that have been identified to us by the Company as being material to it and that are listed in Part II of the Registration Statement or Part IV of the Company's Annual Report on Form 10-K. In rendering the opinion set forth in paragraph 3, we have assumed that the consideration recited in the resolutions of the Board of Directors authorizing the issuance of the Meyer Debentures has been received in full by the Company. We advise you that Mark N. Kaplan, a director and shareholder of the Company, is of counsel to this Firm. We hereby consent to the filing of this opinion with the Commission as Exhibit 5 to the Registration Statement. We also consent to the reference to us under the heading "Legal Matters" in the Registration Statement. In giving this consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission. Very truly yours, /s/ Skadden, Arps, Slate, Meagher & Flom, LLP --------------------------------------------- EX-8.1 7 y93424exv8w1.txt OPINION OF SKADDEN ARPS SLATE MEAGHER & FLOM LLP Exhibit 8.1 January 26, 2003 Grey Global Group Inc. 777 Third Avenue New York, New York 10017 Re: Grey Global Group Inc. 5.0% Contingent Convertible Subordinated Debentures due 2033 Ladies and Gentlemen: We have acted as special counsel to Grey Global Group Inc., a Delaware corporation (the "Company"), in connection with the preparation of a Registration Statement on Form S-3 (the "Registration Statement") and its filing by the Company with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"), relating to the registration of the 5.0% Contingent Convertible Subordinated Debentures due 2033 issued by the Company (the "Debentures"), (ii) the associated shares of the Company's common stock, par value $0.01 per share (the "Common Stock"), into which the Debentures are convertible and (iii) certain shares of the Company's Common Stock owned by Edward H. Meyer. In connection with this opinion, we have examined and relied upon originals or copies, certified or otherwise identified to our satisfaction, of (i) the Registration Statement (ii) the Offering Memorandum, dated October 22, 2003, (iii) the Purchase Agreement, dated as of October 22, 2003, between the Company and J.P. Morgan Securities Inc., as representative of the initial purchasers named in Schedule I thereto, and (iv) such other documents, certificates, and records as we have deemed necessary or appropriate as a basis for the opinion set forth herein. We have also relied upon statements and representations made to us by representatives of the Company and others. For purposes of this opinion, we have assumed the validity and the initial and continuing accuracy of the facts, information, and analyses set forth in such documents, certificates, records, statements, and representations referred to above. In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed, or photostatic copies, and the authenticity of the originals of such latter documents. In making our examination of documents executed, or to be executed, by the parties indicated therein, we have assumed that each party has, or will have, the power, corporate or other, to enter into and perform all obligations thereunder, and we have also assumed the due authorization by all requisite action, corporate or other, and execution and delivery by each party indicated in the documents and that such documents constitute, or will constitute, valid and binding obligations of each party. In rendering our opinion, we have considered the current provisions of the Internal Revenue Code of 1986, as amended, Treasury Department regulations promulgated thereunder, judicial authorities, interpretive rulings of the Internal Revenue Service, and such other authorities as we have considered relevant, all of which are subject to change or differing interpretations, possibly on a retroactive basis. There can be no assurance that any of the opinions expressed herein will be accepted by the Internal Revenue Service or, if challenged, by a court. Moreover, a change in the authorities or the accuracy or completeness of any of the information, documents, certificates, records, statements, representations, covenants, or assumptions on which our opinion is based could affect our conclusions. Based upon the foregoing and in reliance thereon, we hereby confirm that, although the discussion set forth in the Registration Statement under the heading "CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES" does not purport to discuss all possible United States federal income tax consequences of the purchase, ownership, and disposition of the Debentures, subject to the agreements, qualifications, assumptions, and Company's determinations referred to therein, such discussion constitutes, in all material respects, a fair and accurate summary of the United States federal income tax consequences of the purchase, ownership, and disposition of the Debentures under current United States federal income tax law. This opinion is expressed as of the date hereof, and we are under no obligation to supplement or revise our opinion to reflect any changes (including changes that have retroactive effect) in applicable law or any information, document, certificate, record, statement, representation, covenant, or assumption relied upon herein that becomes incorrect or untrue. Except as set forth above, we express no opinion to any party as to the tax consequences, whether federal, state, local, or foreign, of the issuance of the Debentures or of any transaction related to or contemplated by such issuance. This opinion is furnished to you solely for use in connection with the Registration Statement and is not to be relied upon by any other person without our express written permission. In accordance with the requirements of Item 601(b)(23) of Regulation S-K under the Securities Act, we hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm in the Registration Statement. In giving such consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act or the rules or regulations of the Commission thereunder. Very truly yours, /s/ Skadden, Arps, Slate, Meagher & Flom, LLP --------------------------------------------- 3 EX-12.1 8 y93424exv12w1.txt STATEMENT RE: COMPUTATION OF RATIOS . . . EXHIBIT 12.1 RATIO OF EARNINGS TO FIXED CHARGES
Years ended December 31, Nine months ended --------------------------------------------------------- ----------------- 1998 1999 2000 2001 2002 Sept. 30, 2003 ---- ---- ---- ---- ---- -------------- Pretax income from continuing operations before adjustment for minority interests in consolidated subsidiaries or income or loss from equity investees 59,152 38,270 54,224 (4,116) 42,972 35,800 Add: Fixed Charges: Interest on rent expense 13,309 15,583 16,596 18,675 18,947 15,000 Interest expense 11,506 12,479 15,100 15,519 15,735 11,317 Preference security dividend (461) 201 188 (1,575) 3,431 239 ------ ------ ------ ------ ------ ------ Total Fixed Charges 24,354 28,263 31,884 32,619 38,113 26,556 Distributed income of equity investees 856 645 599 1,236 589 164 Less: Preference security dividend (461) 201 188 (1,575) 3,431 239 ------ ------ ------ ------ ------ ------ Total Adjustments 25,671 28,707 32,295 35,430 35,271 26,481 ------ ------ ------ ------ ------ ------ TOTAL EARNINGS 84,823 66,977 86,519 31,314 78,243 62,281 FIXED CHARGES 24,354 28,263 31,884 32,619 38,113 26,556 RATIO OF EARNINGS TO FIXED CHARGES 3.48 2.37 2.71 * 2.05 2.35 * For the year ended December 31, 2001, there was a deficiency of earnings to fix charges of 1,305
EX-23.1 9 y93424exv23w1.txt CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.1 Consent of Ernst & Young LLP We consent to the reference to our firm under the caption "Experts" in the Registration Statement Form S-3 and related Prospectus of Grey Global Group Inc. for the registration of $150 million 5.0% Contingent Convertible Subordinated Debentures due 2033 and 207,183 shares of Common Stock and to the incorporation by reference therein of our report dated February 26, 2003, with respect to the consolidated financial statements of Grey Global Group Inc. included in its Annual Report (Form 10-K) for the year ended December 31, 2002, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP New York, New York January 22, 2004 EX-25.1 10 y93424exv25w1.txt STATEMENT OF ELIGIBILITY OF TRUSTEE ON FORM T-1 EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE AMERICAN STOCK TRANSFER & TRUST COMPANY (Exact name of trustee as specified in its charter) New York 13-3439945 (State of incorporation (I.R.S. employer if not a national bank) identification No.) 59 Maiden Lane 10038 New York, New York (Zip Code) (Address of trustee's principal executive offices)
GREY GLOBAL GROUP INC. (Exact name of obligor as specified in its charter) DELAWARE 13-0802840 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 777 Third Avenue New York, New York 10017 (Address of principal executive (Zip Code) offices)
-------------------------------------------------- 5.0% CONTINGENT CONVERTIBLE SUBORDINATED DEBENTURES DUE 2033 (Title of the Indenture Securities) -2- GENERAL 1. General Information. Furnish the following information as to the trustee: a. Name and address of each examining or supervising authority to which it is subject. New York State Banking Department, Albany, New York b. Whether it is authorized to exercise corporate trust powers. The Trustee is authorized to exercise corporate trust powers. 2. Affiliations with Obligor and Underwriters. If the obligor or any underwriter for the obligor is an affiliate of the trustee, describe each such affiliation. None. 3. Voting Securities of the Trustee. Furnish the following information as to each class of voting securities of the trustee: As of November 30, 2003 ------------------------------------------ COL. A COL. B ------------------------------------------ Title of Class Amount Outstanding ------------------------------------------ Common Shares - par value $600 per share. 1,000 shares 4. Trusteeships under Other Indentures. None. -3- 5. Interlocking Directorates and Similar Relationships with the Obligor or Underwriters. None. 6. Voting Securities of the Trustee Owned by the Obligor or its Officials. None. 7. Voting Securities of the Trustee Owned by Underwriters or their Officials. None. 8. Securities of the Obligor Owned or Held by the Trustee. None. 9. Securities of Underwriters Owned or Held by the Trustee. None. 10. Ownership or Holdings by the Trustee of Voting Securities of Certain Affiliates or Security Holders of the Obligor. None. 11. Ownership or Holdings by the Trustee of any Securities of a Person Owning 50 Percent or More of the Voting Securities of the Obligor. None. 12. Indebtedness of the Obligor to the Trustee. None. 13. Defaults by the Obligor. None. 14. Affiliations with the Underwriters. None. 15. Foreign Trustee. Not applicable. -4- 16. List of Exhibits. T-1.1 - A copy of the Organization Certificate of American Stock Transfer & Trust Company, as amended to date including authority to commence business and exercise trust powers was filed in connection with the Registration Statement of Live Entertainment, Inc., File No. 33-54654, and is incorporated herein by reference. T-1.4 - A copy of the By-Laws of American Stock Transfer & Trust Company, as amended to date was filed in connection with the Registration Statement of Live Entertainment, Inc., File No. 33-54654, and is incorporated herein by reference. T-1.6 - The consent of the Trustee required by Section 312(b) of the Trust Indenture Act of 1939. Exhibit A. T-1.7 - A copy of the latest report of condition of the Trustee published pursuant to law or the requirements of its supervising or examining authority. - Exhibit B. --------------- SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, American Stock Transfer & Trust Company, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York, and State of New York, on the 1st day of December 2003. AMERICAN STOCK TRANSFER & TRUST COMPANY Trustee By: /s/ Herb Lemmer ---------------------------- Vice President EXHIBIT A Securities and Exchange Commission Washington, DC 20549 Gentlemen: Pursuant to the provisions of Section 321 (b) of the Trust Indenture Act of 1939, and subject to the limitations therein contained, American Stock Transfer & Trust Company hereby consents that reports of examinations of said corporation by Federal, State, Territorial or District authorities may be furnished by such authorities to you upon request therefor. Very truly yours, AMERICAN STOCK TRANSFER & TRUST COMPANY By /s/ Herb Lemmer ------------------------------------ Vice President EXHIBIT B AMERICAN STOCK TRANSFER & TRUST COMPANY 59 MAIDEN LANE NEW YORK, NY 10038 CONSOLIDATED REPORT OF CONDITION AND INCOME FOR A BANK WITH DOMESTIC OFFICES ONLY AND TOTAL ASSETS OF LESS THAN $100 MILLION REPORT AT CLOSE OF BUSINESS ON JUNE 30, 2003. All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding as of the last business day of the quarter. SCHEDULE RC - BALANCE SHEET
DOLLAR AMOUNTS IN THOUSANDS --------------------------- ASSETS 1. Cash and balances due from depository institutions: a. Non-interest-bearing balances and currency and coin 2,068 b. Interest-bearing balances 2,005 2. Securities: a. Held-to-maturity securities (from Schedule RC-B, column A) 9,992 b. Available-for-sale securities (from Schedule RC-B, column D) 11,513 3. Federal funds sold and securities purchased under agreements to resell 4. Loans and lease financing receivables 5. Trading assets 6. Premises and fixed assets (including capitalized leases) 5,990 7. Other real estate owned (from Schedule RC-M) 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) 9. Customers' liability to this bank on acceptances outstanding 10. Intangible assets (from Schedule RC-M) 11. Other assets (from Schedule RC-F) 7,361 12. Total assets (sum of items 1 through 11) 38,929
SCHEDULE RC - CONTINUED
DOLLAR AMOUNTS IN THOUSANDS --------------------------- LIABILITIES 13. Deposits. 14. Federal funds purchased and securities sold under agreements to repurchase 15. Trading liabilities 16. Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases): 17. Not applicable 18. Bank's liability on acceptances executed and outstanding 19. Subordinated notes and debentures 20. Other liabilities (from Schedule RC-G) 21. Total liabilities (sum of items 13 through 20) 12,446 12,446 22. Not applicable EQUITY CAPITAL 23. Perpetual preferred stock and related surplus 24. Common stock 600 25. Surplus (exclude all surplus related to preferred stock) 11,449 26. a. Retained Earnings 12,961 b. Accumulated other comprehensive income 1,473 27. Other equity capital components 28. Total equity capital (sum of items 23 through 27) 26,483 29. Total liabilities and equity capital (sum of items 21 and 28) 38,929
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