-----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, MUM7vd7nQ2FgnTQDn/tUsDMKBLRWeHQ4J+68+v8vRmShHgoNO2uzPO4H7ka0SItv V4XgZTk+XG/aT+kBne8TRQ== 0000950123-04-003312.txt : 20040315 0000950123-04-003312.hdr.sgml : 20040315 20040315143829 ACCESSION NUMBER: 0000950123-04-003312 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040315 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: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-07898 FILM NUMBER: 04669027 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 10-K 1 y95040e10vk.txt GREY GLOBAL GROUP, INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-7898 GREY GLOBAL GROUP INC. (Exact name of registrant as specified in its charter) DELAWARE 13-0802840 (State or other jurisdiction of incorporation (I.R.S. Employer Identification Number) or organization) 777 THIRD AVENUE, NEW YORK, NEW YORK 10017 (Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 212-546-2000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, PAR VALUE $0.01 PER SHARE (TITLE OF CLASS) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to the filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is an accelerated filer (as defined in rule 12b-2 of the Act). Yes [X] No [ ] The aggregate market value of the voting stock held by non-affiliates of the registrant was $720,508,722 at June 30, 2003. The registrant had 1,143,139 shares of its Common Stock, par value $0.01 per share, and 232,108 shares of its Limited Duration Class B Common Stock, par value $0.01 per share, outstanding at March 1, 2004. DOCUMENTS INCORPORATED BY REFERENCE Portions of the annual proxy statement to be furnished in connection with the registrant's 2004 annual meeting of stockholders are incorporated by reference into Part III. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I. ITEM 1. BUSINESS. Grey Global Group Inc. ("Grey" or the "Company") commenced operations in 1917, was incorporated in New York in 1925 as Grey Advertising Inc. and reincorporated in Delaware in 1974. The Company changed its name to Grey Global Group Inc. in 2000. Grey is one of the world's largest advertising, communications and marketing service companies. It operates in 83 countries around the world providing its 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. Grey services a diverse client base in all product categories including fast moving consumers goods, pharmaceutical products, automobiles, entertainment and communications, technology and telecommunications, and retail. Grey has maintained client relationships over long periods of time. It has been providing service to its ten largest clients, on average, for more than 23 years. One client, The Procter & Gamble Company, which has been a client of the Company for more than forty years, represented approximately 10.6% of the Company's consolidated revenue in 2003. The loss of this client would likely have an adverse effect on the results of the Company. No other client represented more than 5% of revenue in 2003. The Company and its subsidiaries (consolidated and nonconsolidated) employed approximately 10,500 people at the end of 2003, including eight executive officers. The Company faces risks normally associated with a global marketing communications firm including general economic and market conditions; the credit-worthiness of its clients; competition for client assignments and talented staff; and the risks associated with extensive international operations. While the Company has no reason to believe that its international operations as a whole are jeopardized in any material respect, they bear certain risks, including those of currency fluctuations, political instability and exchange controls, which do not affect its domestic operations. While the Company operates on a global basis, for purposes of presenting certain financial information in accordance with accounting principles generally accepted in the United States, its operations are deemed to be conducted in three geographic areas and relevant information for these areas for the last three years is summarized in the Notes to the Company's Consolidated Financial Statements. The Company's website address is www.greyglobalgroup.com. The Company makes available free of charge on its website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission. FORWARD LOOKING STATEMENTS In connection with the provisions of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"), the Company may include Forward Looking Statements (as defined in the Reform Act) in oral or written public statements issued by or on behalf of the Company. 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 which 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, deterioration of creditworthiness of clients or suppliers, changes in the general economic conditions, changes in exchange rates, changes in interest rates and/or consumer spending either in the North American 2 or non-North American markets in which the Company operates, unanticipated expenses, client preferences which can be affected by competition, and/or changes in the competitive frame, and the ability to project risk factors which may vary. EXECUTIVE OFFICERS OF GREY AS OF MARCH 1, 2004
YEAR FIRST BECAME EXECUTIVE OFFICERS (A) POSITION AGE EXECUTIVE OFFICER - ---------------------- ---------------------------------- --- ----------------- Robert L. Berenson................ Vice Chairman - General Manager 64 1978 Lester M. Feintuck................ Senior Vice President, Chief 50 1998 Financial Officer - US, Controller Steven G. Felsher................. Vice Chairman, Chief Financial 54 1989 Officer - Worldwide, Secretary & Treasurer John A. Grudzina.................. Senior Vice President, General 50 2003 Counsel W. Jonathan T. Hirst.............. Senior Vice President, Director of 54 2003 International Finance Neil I. Kreisberg................. Group Executive Vice President 59 2002 Executive Managing Director Edward H. Meyer................... Chairman of the Board, President & 77 1959 Chief Executive Officer Stephen A. Novick................. Vice Chairman, Chief Creative 63 1984 Officer
- --------------- (a) All executive officers are elected annually by the Board of Directors of Grey ("Board"). Each executive officer has been with Grey for a period greater than five years. There exists no family relationship between any of Grey's directors or executive officers and any other director or executive officer or person nominated or chosen to become a director or executive officer. ITEM 2. PROPERTIES. Substantially all offices of the Company are located in leased premises. The Company's principal office is at 777 Third Avenue, New York, New York, where it occupies approximately 439,000 square feet of space. The Company's lease covering this space expires at the end of 2009. The Company also has leases covering other offices, including in Amsterdam, Atlanta, Auckland, Beijing, Brussels, Buenos Aires, Copenhagen, Dusseldorf, Hong Kong, Istanbul, Jakarta, Johannesburg, Kuala Lumpur, London, Los Angeles, Madrid, Melbourne, Mexico City, Milan, New York, Oslo, Paris, San Francisco, San Juan, Sao Paolo, Stockholm, Tokyo, Toronto and Washington D.C. The Company considers all space leased by it to be adequate for the operation of its business and does not foresee any significant difficulty in meeting its space requirements. ITEM 3. LEGAL PROCEEDINGS. In the Company's judgment, it is not involved in any material pending legal proceedings other than ordinary routine litigation incidental to the business of the Company. 3 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Common Stock is traded on the NASDAQ Stock Market's National Market and listed on the NASDAQ Stock Market under the symbol GREY. As of March 1, 2004, there were 360 holders of record of the Common Stock and 165 holders of record of the Limited Duration Class B Common Stock. The following table sets forth certain information about dividends paid and the bid prices on the NASDAQ Stock Market during the periods indicated with respect to the Common Stock:
BID PRICES* DOLLARS PER SHARE ----------------- DIVIDENDS HIGH LOW PER SHARE ------ ------ --------- 2003 First Quarter............................................ $642 $591 $1.00 Second Quarter........................................... 787 599 1.00 Third Quarter............................................ 800 660 1.00 Fourth Quarter........................................... 825 625 1.00 2002 First Quarter............................................ $686 $593 $1.00 Second Quarter........................................... 834 650 1.00 Third Quarter............................................ 745 516 1.00 Fourth Quarter........................................... 623 551 1.00
- --------------- * Such over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. 4 ITEM 6. SELECTED FINANCIAL DATA.
2003 2002 2001 2000 1999 ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Revenue.......................... $1,307,266 $1,199,708 $1,217,013 $1,247,448 $1,067,212 Expenses......................... 1,232,606 1,146,958 1,196,763 1,182,512 1,034,339 Income (loss) of consolidated companies before taxes on income......................... 66,125 42,972 (4,116) 54,224 38,270 Provision for taxes on income.... 34,990 21,529 14,087 29,752 27,400 Net income (loss)................ 29,076 18,255 (24,428) 19,404 6,401 Earnings (loss) per common share Basic (a)...................... 21.76 13.28 (18.46) 15.70 5.13 Diluted (b).................... 20.03 12.08 (18.46) 14.41 4.86 Weighted average number of common shares outstanding Basic....... 1,277,539 1,245,856 1,237,880 1,230,696 1,237,007 Diluted........................ 1,395,199 1,380,698 1,237,880 1,349,979 1,333,379 Working capital (deficiency)..... 44,085 (94,823) (91,518) (51,421) (56,887) Total assets..................... 2,525,462 2,073,839 1,899,806 1,989,320 1,809,254 Long-term debt................... 275,000 128,025 128,025 128,025 78,025 Redeemable preferred stock at redemption value............... 12,042 9,652 8,180 9,995 10,150 Common stockholders' equity...... 241,959 177,505 141,760 171,935 171,365 Cash dividends per share of Common Stock and Limited Duration Class B Common Stock.......................... $ 4.00 $ 4.00 $ 4.00 $ 4.00 $ 4.00
- --------------- (a) After giving effect to amounts attributable to redeemable preferred stock and for diluted earnings per common share to the assumed (i) exercise of dilutive stock options, (ii) issuance of shares pursuant to the Company's Senior Management Incentive Plan and (iii) conversion of the 8 1/2% Convertible Subordinated Debentures. On December 31, 2003, the 8 1/2% Convertible Subordinated Debentures were converted into 25,564 shares of Common Stock and 25,564 shares of Limited Duration Class B Common Stock. For 2003, net income was adjusted by interest savings, net of tax, on the assumed conversion of the 8 1/2% Convertible Subordinated Debentures. (b) Due to the anti-dilutive result of the diluted earnings per share calculation for 2001, basic and diluted earnings per share are the same. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW Grey ranks among the largest global communications companies in the world. Grey operates branded business units in many communications disciplines including general advertising, public relations/public affairs, direct marketing, internet communications, healthcare marketing, brand strategy and design, and on-line and off-line media services. The challenging market environment which we have had in North America the last few years seemed to abate as 2003 progressed. In 2003, the Company experienced its third year of difficult trading conditions in Europe. In 2003, the Company saw revenue grow by 9.0%, its net income rise by 59.2% and its diluted earnings per share go up by 65.8%. The increase in revenue was attributable mostly to the strengthening of foreign currencies against the United States dollar; exchange rate movements, however, did not have a material impact on net income. Improved performance was achieved despite the Company incurring losses in Scandinavia in 2003 significantly greater than those incurred in 2002. 5 YEAR ENDED 2003 COMPARED TO YEAR ENDED 2002 REVENUE The following chart shows the breakdown of the Company's 2003 and 2002 revenue by area:
2003 PERCENTAGE OF 2002 PERCENTAGE OF AMOUNT TOTAL AMOUNT TOTAL ---------- ------------------- ---------- ------------------- (IN THOUSANDS, EXCEPT PERCENTAGE DATA) Revenue from: North American operations........ $ 585,669 44.8% $ 555,235 46.3% ---------- ----- ---------- ----- Non-North American operations ("international"): Europe...................... 581,384 44.5% 517,643 43.1% Asia/Latin America.......... 140,213 10.7% 126,830 10.6% ---------- ----- ---------- ----- Total International operations.................. 721,597 55.2% 644,473 53.7% ---------- ----- ---------- ----- Total Revenue...................... $1,307,266 100.0% $1,199,708 100.0% ========== ===== ========== =====
In 2003, the weakening of the United States dollar against selected foreign currencies was responsible for the majority of the growth in revenue; the impact of such currency movements is summarized in the following:
2003 VS. 2002 NON-EXCHANGE RATE TOTAL GROWTH IMPACTED GROWTH EXCHANGE RATE IMPACT ------------ ----------------- -------------------- Revenue from: North American operations................ 5.5% 4.7% 0.8% International operations: Europe................................ 12.3% (2.5)% 14.8% Asia/Latin America.................... 10.6% 8.8% 1.8% Total International operations........... 12.0% (0.3)% 12.3% Total Revenue.............................. 9.0% 2.0% 7.0%
Revenue at the Company's Scandinavian operations was down $15.6 million in 2003 compared to 2002; of this reduction, only $300,000 was attributable to currency fluctuations. This drop was due to weak market conditions, poor performance of our operating units in the region and the result of closing certain operations. Absent the effect of exchange rate movements, revenue decreases in Eastern Europe and The Netherlands were more than offset by increases in The United Kingdom, Brazil, Mexico, Argentina and Hong Kong. EXPENSES As shown in the chart set forth below, compensation expenses were up at a rate slightly greater than the rate of increase in revenue. This is mostly because of the increased variable, incentive compensation earned and/or granted in 2003 reflecting the overall increased profit performance of the Company. Other operating costs grew at a pace less than the increase in revenue because of the Company's continued focus on cost containment.
PERCENTAGE 2003 2002 CHANGE ---------- ----------- ---------- (IN THOUSAND, EXCEPT PERCENTAGE DATA) Salaries and employee related expenses.................. $ 858,000 $ 780,882 9.8% Office and general expenses............................. 374,606 366,076 2.3% Total expenses............................................ $1,232,606 $ 1,146,958 7.5%
Inflation did not have a material impact on revenue or expenses in 2003 or 2002. 6 OTHER INCOME/EXPENSE Other Income/Expense for 2003 compared to 2002 is set forth below:
PERCENTAGE 2003 2002 CHANGE --------- --------- ---------- (IN THOUSAND, EXCEPT PERCENTAGE DATA) Interest expense............................................ $ (16,814) $ (15,735) 6.9% Interest income............................................. 5,635 5,642 -- Other income/expense -- net................................. 2,644 315 739.4%
Interest expense increased because of the impact of the issuance in the fourth quarter of the Company's 5% contingent convertible subordinated debentures. Interest income remained essentially the same as 2002. The amount of cash that was invested was generally higher during 2003, especially in the fourth quarter with the inclusion of the proceeds from the issuance in the fourth quarter of the Company's 5% contingent convertible subordinated debentures. The interest income benefit of the additional cash was offset by the lower rate environment in 2003. Other income increased primarily because of the sale of a majority-owned subsidiary in Germany, resulting in a gain of approximately $2.5 million. INCOME OF CONSOLIDATED COMPANIES BEFORE TAXES ON INCOME ("PRE-TAX PROFIT") The Company's pre-tax profit rose by $23.1 million (up 53.8%) during 2003. A majority of the increase was attributable to improved performance in North America where both cost containment and revenue growth helped increase pre-tax profit by 57.9%. The pre-tax profit in Europe increased modestly in 2003 but was significantly affected by very poor results from the Company's operations in Scandinavia. The pre-tax profit in Asia/Latin America more than doubled to $9.4 million because of revenue growth and improved margins. The 2003 results were negatively affected by a pre-tax loss of $20.6 million in the Company's Scandinavian operations, which was $17.3 million greater than the $3.3 million pre-tax loss incurred in the previous year. Absent exchange rate movement the pre-tax loss would have been $17.6 million. Through a series of start-ups, tactical acquisitions and the adoption of other growth strategies, the Company's operations in Scandinavia became the largest marketing communications group in the region. Beginning in 2001, the Company's Scandinavian operations struggled in a region where market conditions were very weak and weakened further, where structural change (such as effecting personnel reductions) is expensive and there is a long lead time before the benefits of cost reductions are fully realized. In 2003, even business units which had historically performed well suffered greatly; as noted above, revenue in the region, absent exchange rate movements, dropped by $15.6 million from 2002. The Company has reviewed all of its Scandinavian operations and has merged or closed a number of them, and sold one, recognizing a $2.1 million loss on the sale. The Company has replaced its executive and senior financial management in Scandinavia, and is continuing to reorganize selected business units which remain challenged. TAXES The effective tax rate for 2003 increased to 52.9% from 50.1% in 2002. The increase in the tax rate was directly attributable to losses incurred in Scandinavia for which no tax benefit was recorded. Given the magnitude of the losses, an addition was made to the valuation allowance for prior period losses in Scandinavia for which tax benefit had been recognized previously. This result was partially offset by reductions to the valuation allowance for prior period operating losses in other international operations where business has improved. MINORITY INTEREST/EQUITY ACCOUNTING Minority interest decreased by $1.3 million in 2003 principally because of changes in the net income at a number of consolidated companies, the acquisition of additional equity in the Company's media subsidiary in the United Kingdom and the sale of a majority-owned German subsidiary. Equity in earnings of non- consolidated companies did not move significantly between 2002 and 2003. 7 NET INCOME The Company reported net income of $29.1 million for 2003 compared to $18.3 million in 2002. This growth was achieved after a net loss of $22.4 million incurred in respect of the Company's Scandinavian operations for 2003. YEAR ENDED 2002 COMPARED TO YEAR ENDED 2001 REVENUE The following chart shows the breakdown of the Company's 2002 and 2001 revenue by area:
2002 2001 -------------------------- -------------------------- PERCENTAGE OF PERCENTAGE OF AMOUNT TOTAL AMOUNT TOTAL ---------- ------------- ---------- ------------- (IN THOUSAND, EXCEPT PERCENTAGE DATA) Revenue from: North American operations................. $ 555,235 46.3% $ 539,169 44.3% ---------- ----- ---------- ----- International operations: Europe............................... 517,643 43.1% 534,697 43.9% Asia/Latin America................... 126,830 10.6% 143,147 11.8% ---------- ----- ---------- ----- Total International operations......... 644,473 53.7% 677,844 55.7% ---------- ----- ---------- ----- Total Revenue............................... $1,199,708 100.0% $1,217,013 100.0% ========== ===== ========== =====
The slight decrease in revenue in 2002 reflects generally weak economic conditions in selected Northern European and Latin American countries offset by a growth performance of the International operations and the positive impact of a weakening dollar.
2002 VS. 2001 ---------------------------------------------- NON-EXCHANGE RATE EXCHANGE TOTAL GROWTH IMPACTED GROWTH RATE IMPACT ------------ ----------------- ----------- Revenue from: North American operations......................... 3.0% 3.1% (0.1)% International operations: Europe......................................... (3.2)% (6.3)% 3.1% Asia/Latin America............................. (11.4)% (5.2)% (6.2)% Total International operations.................... (4.9)% (6.0)% 1.1% Total Revenue....................................... (1.4)% (2.0)% 0.6%
EXPENSES Salaries and employee related expenses decreased in 2002 reflecting the continued commitment of the Company to align its costs with its revenue and the elimination of certain costs, principally the result of the write-off of leasehold improvements and fixed assets related to disposal of more than 160,000 square feet of leased space in the fourth quarter of 2001, and the absence of goodwill amortization expense in 2002 compared with amortization of $14.4 million in 2001.
PERCENTAGE 2002 2001 CHANGE ---------- --------- ---------- (IN THOUSANDS, EXCEPT PERCENTAGE DATA) Expenses: Salaries and employee related expenses................... $ 780,882 801,512 (2.6)% Office and general expenses.............................. 366,076 395,251 (7.4)% ---------- --------- Total expenses............................................. $1,146,958 1,196,763 (4.2)% ---------- ---------
8 Inflation did not have a material effect on revenue or expenses in 2002 or 2001. OTHER INCOME/EXPENSE
PERCENTAGE 2002 2001 CHANGE ------- ------- ---------- (IN THOUSANDS, EXCEPT PERCENTAGE DATA) Interest expense............................................ (15,735) (15,519) 1.4% Interest income............................................. 5,642 12,282 (54.1)% Other income/expense - net.................................. 315 (21,129) 1,014.9%
Other Income/Expense -- net decreased in 2002 reflecting the absence of a non-cash charge taken in 2001 for the write-down of investments in Internet-related early stage businesses and certain marketable securities. Interest income was lower because of reduced cash balances as well as lower interest rates. TAXES The effective tax rate returned to historical levels with an effective tax rate of 50.1% in 2002, consistent with the tax rate in 2001, exclusive of the non-cash charge incurred in 2001. MINORITY INTEREST/EQUITY ACCOUNTING Minority interest decreased by $1.0 million in 2002. Equity in earnings of nonconsolidated affiliated companies increased $2.0 million in 2002. The changes in 2002 and in 2001 were primarily due to changes in the level of profits of consolidated and nonconsolidated companies. NET INCOME The Company reported net income of $18.3 million in 2002 as compared to a net loss of $24.4 million in 2001. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents were $510.4 million and $351.0 million at December 31, 2003 and 2002, respectively, and the Company's investments in marketable securities were $2.6 million and $7.2 million at December 31, 2003 and 2002, respectively. Working capital increased by $138.9 million to $44.1 million at December 31, 2003 versus a deficit of $94.8 million at December 31, 2002. The increases in cash and working capital result, primarily, from the net proceeds of approximately $145.0 million related to the sale of the 5% contingent convertible subordinated debentures. The continued high level of cash and cash equivalents reflects the Company's ongoing focus on cash management. Domestically, the Company had available $110.0 million credit under an annual revolving credit facility from a syndicate of JPMorgan Chase Bank, HSBC Bank USA, Fleet National Bank, Barclays Bank PLC, North Fork Bank and City National Bank at December 31, 2003 and 2002, respectively. This facility was utilized during both 2003 and 2002 to secure lines of credit for certain of the Company's international subsidiaries. There was no outstanding borrowing under this facility at December 31, 2003. There was $10.0 million outstanding at December 31, 2002. The borrowings under this facility bore interest rates of 4.9% and 5.3% for the years ended December 31, 2003 and 2002, respectively. The commitment and related fees paid for the facility were $200,000 and $100,000 in 2003 and 2002, respectively. Other credit facilities are available to the Company in foreign countries in connection with short-term borrowings and bank overdrafts used in the normal course of business. Amounts outstanding under such facilities at December 31, 2003 and 2002 were $70.5 million and $57.0 million, respectively. The changes in the level of short-term borrowing and bank overdrafts are primarily due to timing differences on collection from clients, and related payments to media and other vendors. Historically, cash flows from operations, bank and other borrowings have been sufficient to meet the Company's dividend, capital expenditure, acquisition and working capital needs. The Company expects that 9 such sources will be sufficient to meet its near-term cash requirements and will enable the Company to meet its longer-term obligations. The Company's business historically has been seasonal with greater business activity 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 the Company's year-end balance sheet than at the end of any of the preceding three quarters. SUMMARY OF SIGNIFICANT CONTRACTUAL OBLIGATIONS The following summarizes the Company's estimated contractual obligations at December 31, 2003, and the effect such obligations are expected to have on its liquidity and cash flow in future periods. ESTIMATED CONTRACTUAL OBLIGATIONS
PAYMENTS DUE BY PERIOD ----------------------------------------------------------- NOT INCLUDED ON THE BALANCE SHEET ----------------------------------------------------------- 2009 AND 2004 2005 2006 2007 2008 BEYOND TOTAL -------- ----- ----- ----- ----- ----- -------- (IN THOUSANDS) Media and production commitments... $1,090.8 $ -- $ -- $ -- $ -- $ -- $1,090.8 Acquisition agreements............. 4.0 4.7 10.8 1.4 2.7 30.7 54.2 Operating leases................... 76.1 68.2 58.2 53.7 49.2 59.9 363.3 -------- ----- ----- ----- ----- ----- -------- Total......................... $1,170.9 $72.9 $69.0 $55.1 $51.9 88.6 $1,508.4 ======== ===== ===== ===== ===== ===== ========
PAYMENTS DUE BY PERIOD ----------------------------------------------------------------------------------- LONG TERM LIABILITIES ----------------------------------------------------------------------------------- 2009 AND 2005 2006 2007 2008 BEYOND TOTAL --------- --------- --------- --------- ----------- ----------- (IN THOUSANDS) Long term debt...................... $ -- $ 25.0 $ 50.0 $ 25.0 $ 175.0 $ 275.0 Deferred compensation............... 15.7 3.1 41.7 5.5 17.5 83.5 Capital leases...................... 3.0 0.4 0.1 0.1 0.1 3.7 Other............................... 1.8 0.2 0.1 0.1 0.0 2.2 --------- --------- --------- --------- ----------- ----------- Total.......................... $ 20.5 $ 28.7 $ 91.9 $ 30.7 $ 192.6 $ 364.4 ========= ========= ========= ========= =========== ===========
The Company has $44.3 million of cash, marketable securities and other investments set aside to fund certain of the deferred compensation obligations shown above. Those assets are on the balance sheet included in other assets. In addition to the contractual obligations set forth in the table, the Company makes commitments when it purchases media time and space from various media suppliers on behalf of its clients. The liability for the media is generally recorded on the Company's balance sheet when the client is billed, usually in the month that the underlying advertising appears. As part of the general practice in the industry, the Company frequently is required to reserve, or commit to purchase, media time and space with the media suppliers well before a commercial is aired or a publication reaches the market. The duration of these commitments vary depending on the type of media purchased and the terms of the particular purchase. The duration of any commitment may be as short as a few days or as long as a year. These commitments are only entered following the specific authorization of clients who, in turn, commit to reimburse the Company. In practice, clients fulfill their commitments to the Company enabling it, in turn, to fulfill its commitments. There are, however, instances where a client may seek to alter its commitments to purchase media. It is generally industry practice that media suppliers seek to accommodate the client's wishes, in part, because the media suppliers wish to work to maintain good, on-going relations with important clients, such as the Company represents, and large buyers of media like the Company. 10 At December 31, 2003, the amount of Company's media commitments not recorded on its balance sheet was $1,048.7 million, of which $357.0 million was, as of that date, cancelable by the terms of those commitments. The Company-guards against loss in respect of its media commitments in various ways. The Company considers the creditworthiness of its clients and sets relevant terms of business appropriately, and may purchase credit insurance in certain instances. In certain markets, the Company is also protected on its commitments if a client does not fulfill its underlying obligations by the rule of sequential liability, which generally provides that a buyer of media is not required to pay a media supplier unless such buyer has been paid by its client. The Company estimates that it will be required to make future payments to acquire additional shares of subsidiary companies or to complete earn-out agreements (collectively, "Agreements") pursuant to certain acquisition arrangements not reflected as liabilities on its consolidated balance sheet of approximately $54.2 million. Of such amount, 38.4% is estimated to be paid over the period from 2004 through 2007 and the remainder to be paid from 2008 and beyond. The foregoing information is estimated and the actual payments made will be dependent on future events primarily related to the attainment of earnings goals, specified operating margin and revenue targets or a combination thereof in respect of a number of subject companies. Other factors which must be considered in making the estimate include the fulfillment and amendment of certain contractual obligations by third parties, the movement of exchange rates, the timing of when the Company or other parties choose to exercise certain contractual rights and other variables. Many of the Agreements do not provide for maximum or minimum amounts payable. Therefore, there is no definitive range of the amounts payable in the future. The estimated amounts payable were computed using assumptions as to earnings bases, dividend rates, earnings growth rates and other factors deemed to be reasonable for the underlying situations. If the Company were to increase the earnings assumptions used in estimating the amounts payable uniformly by 10%, the estimated amounts payable would increase to $64.7 million; if the earnings assumptions were decreased uniformly by 10%, the estimated amounts payable would decrease to $43.7 million. The Company has two loans outstanding from the Prudential Insurance Company of America. The first loan of $75.0 million from December 1997 bore interest at the rate of 6.94% and was originally repayable in three equal annual installments, commencing in December 2003. This loan was renegotiated in March 2003, with a fixed interest rate of 7.41%, and principal repayments of $25.0 million in March, 2007, 2008 and 2009, respectively. The second loan of $50.0 million was drawn in November 2000, bears interest at the rate of 8.17% and is repayable in two equal annual installments, commencing in November 2006. The loans and the availability of the Company's committed lines of credit contain certain covenants related to the Company's capital, debt load and cash flow. As of December 31, 2003 and December 31, 2002, the Company was in compliance with these covenants. On October 28, 2003, the Company sold $125 million principal amount of its 5% contingent convertible subordinated debentures, due 2033 ("Debentures"), to JP Morgan Securities Inc. ("Initial Purchaser") in a transaction exempt from the registration requirements of the Securities Act of 1933. On November 7, 2003, the Company sold an additional $25 million principal amount of Debentures pursuant to an overallotment option held by the Initial Purchaser. The total net proceeds of the offering were $145 million. The Debentures are convertible into shares of Common Stock at an initial conversion price of $961.20 per share provided that any one of several contingencies are met, including that the Common Stock trades above $1,153.44 for specified periods of time. The Debentures are subordinate to the other debt of the Company. The fair value of the Debentures at year end was $156 million. The Company is using the proceeds of the issuance for working capital and other general corporate purposes. CRITICAL ACCOUNTING POLICIES The Company's discussion and analysis of financial condition and results from operations are based on the consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the 11 financial statements. Estimates also affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company's critical accounting policies include: REVENUE RECOGNITION Revenue derived from advertising placed with media is recognized based upon the publication or broadcast dates. Revenue resulting from expenditures billable to clients is recognized when the service is performed and billed. Media revenue and revenue resulting from expenditures billable to clients is clearly defined and determinable. Labor based revenue is recognized in the month of service as service is provided throughout the life of each contract. At the end of the reporting period, labor based contracts are examined to determine what was earned and what is collectible on such earned amounts for the purposes of recognizing revenue amounts appropriate for the period. Revenue from performance-based incentive fees is recorded at the end of a contract period when the amount to be received can be reasonably estimated. ACQUISITIONS AND IMPAIRMENT OF GOODWILL The Company, from time to time, makes acquisitions that complement its core capabilities and strategies, enhance its existing client service infrastructure and/or provide additional support for current clients. The price of the acquisitions may be in excess of the fair value of the net tangible assets acquired. The Company accounts for these acquisitions in accordance with Statement of Financial Accounting Standards No. 141, Business Combinations. Normally, acquired client and employment relationships are short term in nature or cancelable at will, and an acquired entity will have a minimum of tangible assets over which to allocate purchase price. Therefore, a substantial portion of the purchase price is allocated to goodwill. The Company assesses the fair value and recoverability of intangible assets, almost exclusively goodwill, in accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, which was adopted January 1, 2002. When assessing potential impairment of goodwill, the fair value of all business units at the regional levels of North America and Europe is compared to the carrying value of those business units. For the purposes of the analysis, Asian and Latin American business units are combined with the respective North American and European regions reflecting the fact that investments in the Asian and Latin American regions are principally needed to support multi-national clients serviced in North America and Europe. If impairment is indicated, the excess of the carrying value of the goodwill over fair value of the business units is written-off. The Company completed its annual impairment test of goodwill and intangible assets with indefinite lives as of March 31, 2003, and no impairment was identified nor were there any impairment indicators subsequent to March 31, 2003. The 2001 results on a historical basis do not reflect the provisions of FAS 142. Had the Company adopted FAS 142 on January 1, 2001, the historical net income and basic and diluted net income per common share would have been changed to the adjusted amounts indicated below:
TWELVE MONTHS ENDED DECEMBER 31, 2001 ------------------------------------------------------ BASIC EARNINGS PER DILUTED EARNINGS PER NET INCOME COMMON SHARE COMMON SHARE ---------- ------------------ -------------------- (IN THOUSANDS, EXCEPT PER SHARE DATA Reported net income.............................. $(24,428) $(18.46) $(18.46) Goodwill amortization............................ 14,390 11.07 11.07 -------- ------- ------- Adjusted net income.............................. $(10,038) $ (7.39) $ (7.39) ======== ======= =======
FIXED ASSETS Fixed assets fall into three main categories; furniture and fixtures, computer equipment and leasehold improvements. Depreciation of furniture and fixtures, and computer equipment is computed principally by the straight-line method over the useful life of the asset, normally five to ten years for furniture and fixtures, and three to five years for computer equipment. Amortization of leasehold improvements is provided for on a 12 straight-line basis principally over the terms of the related leases but not in excess of the useful lives of the underlying assets. SALARIES AND EMPLOYEE RELATED EXPENSES The Company records salaries and employee related expenses as a period cost when incurred. Salary expense is generally recorded in the period that the salary is paid. Discretionary bonuses are estimated and accrued as short-term liabilities each period. Bonuses are paid shortly after year end. Stock and other incentive plans and contractual bonuses are clearly identifiable and determinable, and are generally accrued when earned by the employee. DEFERRED TAXES The Company recognizes deferred tax assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. The net deferred tax assets are regularly reviewed for recoverability and a valuation allowance is established, based upon historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. As of December 31, 2003, the Company had $53.7 million of deferred tax assets net of a valuation reserve of $25.4 million, which it believes to be appropriate. For further detail on accounting policies, please refer to the Notes to the Company's Consolidated Financial Statements. FASB STATEMENTS In January 2003, the FASB issued FASB Interpretation No. 46 "Consolidation of Variable Interest Entities" an Interpretation of ARB No. 51 ("FIN 46"), which requires variable interest entities (often referred to as special purpose entities or SPEs) to be consolidated if certain criteria are met. FIN 46 was effective as of January 31, 2003 for variable interest entities created after that date and other variable interest entities in the first quarter of 2004. The adoption of FIN 46 is not expected to have a material impact the Company's consolidated financial statements. In December 2002, the Financial Accounting Standard Board, issued Statement of Financial Accounting Standards No. 148 ('FAS 148'), Accounting for Stock-Based Compensation - Transition and Disclosure which amends Statement of Financial Accounting Standards No. 123 ("FAS 123"), Accounting for Stock-Based Compensation . FAS 148 provides alternative methods of transition to FAS 123's fair value method of accounting for stock-based employee compensation and amends the disclosure provisions of FAS 123. While the statement does not require companies to account for employee stock options using the fair value method, the Company adopted FAS 123 effective January 1, 2003, using the prospective method as provided for in FAS 123 and adopted the disclosure requirements of FAS 148, for 2003. On May 15, 2003, the FASB issued Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity ("FAS 150"). This Statement establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer, and have characteristics of both liabilities and equity. FAS 150 represents a significant change in practice in the accounting for a number of financial instruments, including mandatorily redeemable equity instruments. Effective July 1, 2003, the Company's redeemable preferred stock was classified as a liability. Additionally, the change in the redemption value of the Company's redeemable preferred stock and dividend payments to its holder, which were previously recorded as changes in retained earnings, have been recorded from July 1, 2003 as increases or decreases to interest expense. The adoption of FAS 150 affected working capital and net income in 2003. The adoption of FAS 150 will not affect earnings per share computations. The earnings per share calculations, through June 30, 2003 included an adjustment to net income for the change in the redemption value of preferred stock; FAS 150 requires the change in redemption value to be recorded as increases or decreases to interest expense, thereby, eliminating the need for the adjustment. 13 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's results may be affected by currency exchange rate fluctuations given the Company's extensive international operations. Generally, the foreign currency exchange risk is limited to net income of each operation because the Company's revenues and expenses, by country, are almost exclusively denominated in the local currency of each respective country with both revenue and expense items matched. Occasionally, the Company enters into foreign currency contracts for known cash flows related to repatriation of earnings from its international subsidiaries or identified liabilities in foreign currencies. The term of each such foreign currency contract entered into in 2003 was for less than three months and the amount open at December 31, 2003 was not material. At December 31, 2002, there were no foreign currency contracts open. The Company had no derivative contracts outstanding at December 31, 2003 or 2002, respectively. The Company has investments in private equity securities, corporate bonds and equity securities that may be subject to changes in general economic conditions and fluctuations in interest rates. Excess funds are generally invested in short term liquid securities and money market funds. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by this Item is presented in this report beginning on Page F-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. ITEM 9A. CONTROLS AND PROCEDURES (a) Disclosure Controls and Procedures. The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective. (b) Internal Controls Over Financial Reporting. There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information with respect to the directors of Grey is incorporated herein by reference to the Company's proxy statement ("Proxy Statement") to be sent to its stockholders in connection with its 2003 Annual Meeting and will be included under the caption "Election of Director". Information with respect to Grey's executive officers is set forth in Part I of this report. The Company has adopted the Grey Global Group Inc. Code of Ethics - Senior Officers, a copy of which is annexed as an Exhibit to this Form 10-K, which applies to the Company's principal executive officer, principal financial officer and principal accounting officer. Any waiver or amendment of the Code of Ethics will be disclosed on the Company's website or as otherwise permitted under applicable law. ITEM 11. EXECUTIVE COMPENSATION. The information required by this Item is incorporated herein by reference to the Proxy Statement and will be included under the caption "Management Remuneration and Other Transactions". 14 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this Item is incorporated herein by reference to the Proxy Statement and will be included under the captions "Election of Director" and "Voting Securities". ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this Item is incorporated herein by reference to the Proxy Statement and will be included under the captions "Election of Director" and "Voting Securities". ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this Item is incorporated herein by reference to the Proxy Statement and will be included under the caption "Relationship with Independent Auditors". PART IV. ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) (1) (2) The information required by this subsection of this Item is presented in the index to Financial Statements on Page F-1. (3) The information required by this subsection of this Item is provided in the Index of Exhibits at Page E-1 of this report. Such index provides a listing of exhibits filed with this report and those incorporated herein by reference. (b) The Company filed reports on Form 8-K, dated October 21, 2003, October 23, 2003 and October 28, 2003 reporting items 5 and 7, "Other Events" and "Financial Statements, Pro Forma Financial Information and Exhibits," respectively. The Company filed a report on Form 8-K, dated October 22, 2003, reporting Items 7 and 9, "Financial Statements, Pro Forma Financial Information and Exhibits" and "Regulation FD Disclosure", respectively. The Company filed reports on Form 8-K, dated November 11, 2003 and February 27, 2004, reporting Items 5, 9, and 12. "Other Events", Regulation FD Disclosure" and "Disclosure of Results of Operations and Financial Conditions," respectively. The Company filed a report on Form 8-K, dated January 8, 2004, reporting Item 5, "Other Events". The Company filed a report on Form 8-K, dated March 2, 2004, reporting Items 9 and 12, "Regulation FD Disclosure" and "Disclosure of Results of Operations and Financial Conditions", respectively. (c) The information required by this subsection of this Item is presented following the Financial Statements. All schedules except for Financial Statement Schedule II - Valuation and Qualifying Accounts are not required under the related instructions or are inapplicable and, therefore have been omitted. 15 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GREY GLOBAL GROUP INC. By: /s/ EDWARD H. MEYER ------------------------------------ Edward H. Meyer, Chairman, Chief Executive Officer & President Dated: March 15, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Registrant and in the capacities and on the date indicated.
/s/ MARK N. KAPLAN Dated: March 15, 2004 - --------------------------------------------- Mark N. Kaplan, Director /s/ VICTOR J. BARNETT Dated: March 15, 2004 - --------------------------------------------- Victor J. Barnett, Director /s/ DANIEL S. SHAPIRO Dated: March 15, 2004 - --------------------------------------------- Daniel S. Shapiro, Director /s/ EDWARD H. MEYER Dated: March 15, 2004 - --------------------------------------------- Edward H. Meyer, Director, Principal Executive Officer /s/ STEVEN G. FELSHER Dated: March 15, 2004 - --------------------------------------------- Steven G. Felsher, Principal Financial Officer /s/ LESTER M. FEINTUCK Dated: March 15, 2004 - --------------------------------------------- Lester M. Feintuck, Principal Accounting Officer
16 ANNUAL REPORT ON FORM 10-K ITEM 8, ITEM 15(A)(1) AND (2) FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA LIST OF FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2003 GREY GLOBAL GROUP INC. NEW YORK, NEW YORK FORM 10-K -- ITEM 8, ITEM 15(A)(1) AND (2) GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES INDEX TO FINANCIAL STATEMENTS The following consolidated financial statements of Grey Global Group Inc. and consolidated subsidiary companies are included in Item 8: Report of Independent Auditors.............................. F-2 Consolidated Balance Sheets--December 31, 2003 and 2002..... F-3 Consolidated Statements of Operations--Years Ended December 31, 2003, 2002 and 2001................................... F-5 Consolidated Statements of Common Stockholders' Equity-- Years Ended December 31, 2003, 2002 and 2001.............. F-6 Consolidated Statements of Cash Flows-- Years Ended December 31, 2003, 2002 and 2001................................... F-9 Notes to Consolidated Financial Statements-- December 31, 2003...................................................... F-11 Schedule II - Valuation and Qualifying Accounts--Years Ended December 31, 2003, 2002 and 2001.......................... F-34
F-1 REPORT OF INDEPENDENT AUDITORS The Stockholders and Board of Directors Grey Global Group Inc. We have audited the accompanying consolidated balance sheets of Grey Global Group Inc. and consolidated subsidiary companies as of December 31, 2003 and 2002, and the related consolidated statements of operations, common stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2003. Our audits also included the financial statement schedule listed in the Index at Item 15 (c). These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Grey Global Group Inc. and consolidated subsidiary companies at December 31, 2003 and 2002, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Note A, the Company changed its method for accounting for stock compensation and its accounting for goodwill and other intangibles effective January 1, 2003 and January 1, 2002, respectively. In addition, as also discussed in Note A, the Company changed the accounting for its redeemable Preferred Stock effective July 1, 2003. ERNST & YOUNG LLP New York, New York February 26, 2004 F-2 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, --------------------------- 2003 2002 ------------ ------------ (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) ASSETS Current assets: Cash and cash equivalents................................. $ 510,446 $ 351,006 Marketable securities..................................... 979 1,733 Accounts receivable (net of allowance for doubtful accounts of $21,467 in 2003 and $16,352 in 2002)....... 1,250,241 1,030,665 Expenditures billable to clients.......................... 77,503 78,364 Other current assets...................................... 106,710 100,189 ---------- ---------- Total current assets........................................ 1,945,879 1,561,957 Investments in and advances to nonconsolidated affiliated companies................................................. 16,899 14,750 Fixed assets-net............................................ 140,687 139,941 Marketable securities....................................... 1,580 5,522 Goodwill.................................................... 286,880 243,499 Other assets-including loans to executive officers of $5,047 in 2003 and 2002.......................................... 133,537 108,170 ---------- ---------- Total assets................................................ $2,525,462 $2,073,839 ========== ==========
See notes to consolidated financial statements. F-3 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (CONTINUED)
DECEMBER 31, ------------------------------- 2003 2002 LIABILITIES AND COMMON STOCKHOLDERS' EQUITY -------------- -------------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Current liabilities: Accounts payable.......................................... $ 1,472,944 $ 1,292,808 Notes payable to banks.................................... 70,455 67,046 Accrued expenses and other................................ 313,213 270,860 Income taxes payable...................................... 33,140 26,066 Redeemable preferred stock-at redemption value; par value $0.01 per share; authorized 500,000 shares; issued and outstanding 30,000 shares in 2003...................... 12,042 - ----------- ----------- Total current liabilities................................... 1,901,794 1,656,780 Other liabilities-including deferred compensation of $61,318 in 2003 and $57,766 in 2002............................... 92,271 78,900 Term loans.................................................. 125,000 128,025 Contingent convertible subordinated debentures.............. 150,000 - Minority interest........................................... 14,438 22,977 Redeemable preferred stock-at redemption value; par value $0.01 per share; authorized 500,000 shares; issued and outstanding 30,000 shares in 2003 and 2002, respectively.............................................. - 9,652 Common stockholders' equity: Common Stock- par value $0.01 per share; authorized 50,000,000 shares; issued 1,284,493 shares in 2003 and 1,265,905 shares in 2002............................... 13 13 Limited Duration Class B Common Stock- par value $0.01 per share; authorized 10,000,000 shares; issued 233,559 shares in 2003 and 234,705 shares in 2002.............. 2 2 Paid-in additional capital................................ 57,481 54,488 Retained earnings......................................... 211,573 188,956 Accumulated other comprehensive income (loss): Cumulative translation adjustment...................... 7,042 (22,743) Unrealized loss on marketable securities............... - (1,081) ----------- ----------- Total accumulated other comprehensive income (loss)....... 7,042 (23,824) ----------- ----------- Loans to officer used to purchase Common Stock and Limited Duration Class B Common Stock.......................... (4,726) (4,726) ----------- ----------- 271,385 214,909 Less-cost of 161,389 and 195,444 shares of Common Stock and 1,373 and 26,937 shares of Limited Duration Class B Common Stock held in treasury at December 31, 2003 and 2002, respectively..................................... 29,426 37,404 ----------- ----------- Total common stockholders' equity........................... 241,959 177,505 Commitments and contingencies............................... -- -- ----------- ----------- Total liabilities and common stockholders' equity........... $ 2,525,462 $ 2,073,839 =========== ===========
See notes to consolidated financial statements. F-4 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31 ------------------------------------ 2003 2002 2001 ---------- ---------- ---------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Revenue.................................................. $1,307,266 $1,199,708 $1,217,013 Expenses: Salaries and employee related expenses.............. 858,000 780,882 801,512 Office and general expenses......................... 374,606 366,076 395,251 ---------- ---------- ---------- 1,232,606 1,146,958 1,196,763 ---------- ---------- ---------- Operating Income......................................... 74,660 52,750 20,250 Interest expense.................................... (16,814) (15,735) (15,519) Interest income..................................... 5,635 5,642 12,282 Other income -- net................................. 2,644 315 (21,129) ---------- ---------- ---------- Income (loss) of consolidated companies before taxes on income................................................. 66,125 42,972 (4,116) Provision for taxes on income............................ 34,990 21,529 14,087 ---------- ---------- ---------- Income (loss) of consolidated companies.................. 31,135 21,443 (18,203) Minority interest applicable to consolidated companies... (2,718) (4,005) (5,034) Equity in earnings (loss) of non-consolidated affiliated companies.............................................. 659 817 (1,191) ---------- ---------- ---------- Net income (loss)........................................ $ 29,076 $ 18,255 $ (24,428) ========== ========== ========== Net income applicable to common shareholders: Net Income............................................... $ 29,076 $ 18,255 $ (24,428) Effect of dividend requirement and the change in redemption value of redeemable preferred stock......... (1,278) (1,713) 1,575 ---------- ---------- ---------- Net income applicable to common shareholders............. $ 27,798 $ 16,542 $ (22,853) ========== ========== ========== Weighted average number of common shares outstanding Basic............................................. 1,277,539 1,245,856 1,237,880 Diluted........................................... 1,395,199 1,380,698 1,237,880 Earnings (loss) per Common Share: Basic............................................. $ 21.76 $ 13.28 ($ 18.46) Diluted........................................... $ 20.03 $ 12.08 ($ 18.46) Dividends per common share............................... $ 4.00 $ 4.00 $ 4.00 ========== ========== ==========
See notes to consolidated financial statements. F-5 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
PAID-IN COMMON ADDITIONAL COMPREHENSIVE RETAINED STOCK CAPITAL INCOME EARNINGS ------ ---------- ------------- -------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Balance at December 31, 2000................ $ 15 $46,004 $205,378 Comprehensive income: Net (loss) income....................... $(24,428) (24,428) Other comprehensive loss: Translation adjustment................ (12,828) Unrealized loss on marketable securities, net of reclassification adjustment for losses included in net loss of $208................... 6,224 -------- Other comprehensive loss................ (6,604) -------- Total comprehensive loss.................. $(31,032) ======== Cash dividends-Common Shares-$4.00 per share................................... (5,022) Cash dividends-Redeemable Preferred Stock-$8.00 per Share................... (240) Decrease in redemption value of Redeemable Preferred Stock......................... 1,815 Restricted stock activity................. 1,701 Common Shares issued upon exercise of stock options........................... 937 Common Shares issued in accordance with Employee Stock Ownership Plan........... Senior Management Incentive Plan activity................................ 142 Rounding.................................. (1) ------ ------- -------- Balance at December 31, 2001................ $ 14 $48,784 $177,503 ====== ======= ======== COMMON STOCK HELD IN TREASURY -------------------- LOANS TO ACCUMULATED OTHER SHARES AMOUNT OFFICERS COMPREHENSIVE LOSS TOTAL -------- --------- -------- ------------------ -------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Balance at December 31, 2000................ 237,686 $(40,012) $(4,726) $(34,724) $171,935 Comprehensive income: Net (loss) income....................... (24,428) Other comprehensive loss: Translation adjustment................ Unrealized loss on marketable securities, net of reclassification adjustment for losses included in net loss of $208................... Other comprehensive loss................ (6,604) (6,604) Total comprehensive loss.................. Cash dividends-Common Shares-$4.00 per share................................... (5,022) Cash dividends-Redeemable Preferred Stock-$8.00 per Share................... (240) Decrease in redemption value of Redeemable Preferred Stock......................... 1,815 Restricted stock activity................. (2,313) 212 1,913 Common Shares issued upon exercise of stock options........................... (4,984) 719 1,656 Common Shares issued in accordance with Employee Stock Ownership Plan........... (983) 594 594 Senior Management Incentive Plan activity................................ 142 Rounding.................................. (1) ------- -------- ------- -------- -------- Balance at December 31, 2001................ 229,406 $(38,487) $(4,726) $(41,328) $141,760 ======= ======== ======= ======== ========
See notes to consolidated financial statements. F-6 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY (CONTINUED) YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
PAID-IN COMMON ADDITIONAL COMPREHENSIVE RETAINED STOCK CAPITAL INCOME EARNINGS ------ ---------- ------------- -------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Balance at December 31, 2001................ $ 14 $48,784 $177,503 Comprehensive income: Net income.............................. $ 18,255 18,255 Other comprehensive income: Translation adjustment................ 17,473 Unrealized loss on marketable securities, net of reclassification adjustment for losses included in net loss of $348................... 31 -------- Other comprehensive income.............. 17,504 -------- Total comprehensive income................ $ 35,758 ======== Cash dividends-Common Shares-$4.00 per share................................... (5,090) Cash dividends-Redeemable Preferred Stock-$8.00 per share................... (240) Increase in redemption value of Redeemable Preferred Stock......................... (1,472) Restricted stock activity................. 1,804 Common Shares issued upon exercise of stock options........................... 1 1,187 Senior Management Incentive Plan activity................................ 2,711 Rounding.................................. 2 ------ ------- -------- Balance at December 31, 2002................ $ 15 $54,488 $188,956 ====== ======= ======== COMMON STOCK HELD IN TREASURY -------------------- LOANS TO ACCUMULATED OTHER SHARES AMOUNT OFFICERS COMPREHENSIVE LOSS TOTAL -------- --------- -------- ------------------ -------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Balance at December 31, 2001................ 229,406 $(38,487) $(4,726) $(41,328) $141,760 Comprehensive income: Net income.............................. 18,255 Other comprehensive income: Translation adjustment................ Unrealized loss on marketable securities, net of reclassification adjustment for losses included in net loss of $348................... Other comprehensive income.............. 17,504 17,504 Total comprehensive income................ Cash dividends-Common Shares-$4.00 per share................................... (5,090) Cash dividends-Redeemable Preferred Stock-$8.00 per share................... (240) Increase in redemption value of Redeemable Preferred Stock......................... (1,472) Restricted stock activity................. (5,093) 807 2,611 Common Shares issued upon exercise of stock options........................... (1,932) 276 1,464 Senior Management Incentive Plan activity................................ 2,711 Rounding.................................. 2 ------- -------- ------- -------- -------- Balance at December 31, 2002................ 222,381 $(37,404) $(4,726) $(23,824) $177,505 ======= ======== ======= ======== ========
See notes to consolidated financial statements. F-7 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY (CONTINUED) YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
PAID-IN COMMON ADDITIONAL COMPREHENSIVE RETAINED ------ ---------- ------------- -------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) STOCK CAPITAL INCOME EARNINGS Balance at December 31, 2002.................... $15 $54,488 $188,956 Comprehensive income: Net income.................................. $29,076 29,076 Other comprehensive income: Translation adjustment.................... 29,785 Unrealized loss on marketable securities, net of $178 reclassification adjustment for losses included in net loss........ 1,081 ------- Other comprehensive income.................. 30,866 ------- Total comprehensive income.................... $59,942 ======= Cash dividends-Common Shares-$4.00 per share....................................... (5,180) Cash dividends-Redeemable Preferred Stock-$8.00 per share....................... (120) Increase in redemption value of Redeemable Preferred Stock............................. (1,158) Restricted stock activity..................... 2,338 Stock option activity......................... 2,398 Tax Benefit from exercise of stock options.... 2,646 Expense for stock option issuance............. 22 Common Shares issued in accordance with Employee Stock Ownership Plan............... Senior Management Incentive Plan activity..... (1,802) Conversion of 8 1/2% Convertible Subordinated Debentures.................................. (2,610) Rounding...................................... 1 (1) --- ------- -------- Balance at December 31, 2003.................... $15 $57,481 $211,573 === ======= ======== ACCUMULATED COMMON STOCK HELD IN OTHER TREASURY LOANS TO COMPREHENSIVE -------------------- -------- ------------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) SHARES AMOUNT OFFICERS LOSS TOTAL Balance at December 31, 2002.................... 222,381 $(37,404) $(4,726) $(23,824) $177,505 Comprehensive income: Net income.................................. 29,076 Other comprehensive income: Translation adjustment.................... 29,785 29,785 Unrealized loss on marketable securities, net of $178 reclassification adjustment for losses included in net loss........ 1,081 1,081 Other comprehensive income.................. Total comprehensive income.................... Cash dividends-Common Shares-$4.00 per share....................................... (5,180) Cash dividends-Redeemable Preferred Stock-$8.00 per share....................... (120) Increase in redemption value of Redeemable Preferred Stock............................. (1,158) Restricted stock activity..................... (3,542) 537 2,875 Stock option activity......................... (3,226) 462 2,860 Tax Benefit from exercise of stock options.... 2,646 Expense for stock option issuance............. 22 Common Shares issued in accordance with Employee Stock Ownership Plan............... (1,723) 1,344 1,344 Senior Management Incentive Plan activity..... (1,802) Conversion of 8 1/2% Convertible Subordinated Debentures.................................. (51,128) 5,635 3,025 Rounding...................................... ------- -------- ------- -------- -------- Balance at December 31, 2003.................... 162,762 $(29,426) $(4,726) $ 7,042 $241,959 ======= ======== ======= ======== ========
See notes to consolidated financial statements. F-8 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31 ------------------------------------------- 2003 2002 2001 ------------- ------------ ------------ (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) OPERATING ACTIVITIES Net income (loss)........................................... $ 29,076 $ 18,255 $(24,428) Adjustments to reconcile net income (loss) to net cash provided by operating activities, net of acquisitions: Depreciation and amortization of fixed assets............... 43,571 41,430 50,492 Amortization of intangibles, primarily goodwill............. -- -- 14,390 Write-down of goodwill...................................... 867 -- 7,005 Deferred compensation....................................... 9,654 7,920 2,225 Amortization of restricted stock............................ 2,509 2,605 1,838 Stock option expense........................................ 22 -- -- Equity in earnings (loss) of non-consolidated affiliated companies, net of dividends received of $543 in 2003, $589 in 2002, and $1,236 in 2001............................... (116) (228) 2,427 Loss from the sale of marketable securities................. 178 348 208 Loss on the write-down of investments and marketable securities................................................ 196 866 21,554 Net gains from the sale/closure of subsidiaries............. (140) (517) -- Minority interest applicable to consolidated companies...... 2,718 4,005 5,034 Deferred income taxes....................................... (3,397) (4,052) (2,283) Changes in operating assets and liabilities: (Increase) decrease in accounts receivable................ (129,955) (72,243) 37,779 Decrease in expenditures billable to clients.............. 7,234 2,371 13,346 Decrease in other current assets.......................... 4,581 1,769 8,039 Decrease (increase) in other assets....................... 17,658 15,598 (2,255) Increase (decrease) in accounts payable................... 91,174 115,028 (62,880) Increase (decrease) in accrued expenses and other......... 23,935 20,044 (24,374) Increase (decrease) in income taxes payable............... 3,374 621 (2,458) Decrease in other liabilities............................. (36,647) (9,600) (1,043) --------- -------- -------- Net cash provided by operating activities................... 66,492 144,220 44,616 --------- -------- -------- INVESTING ACTIVITIES Purchases of fixed assets................................... (34,240) (26,422) (57,978) Trust fund deposits......................................... (4,041) (3,681) (4,095) Decrease (increase) in investments in and advances to non- consolidated affiliated companies......................... (2,033) 674 (241) Proceeds from the sales of marketable securities............ 5,724 3,224 4,928 Purchases of investment securities.......................... (606) (128) (1,561) Increase in goodwill........................................ (18,558) (21,106) (44,785) --------- -------- -------- Net cash used in investing activities....................... (53,754) (47,439) (103,732) --------- -------- --------
F-9 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEAR ENDED DECEMBER 31 --------------------------------- 2003 2002 2001 --------- --------- --------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) FINANCING ACTIVITIES (Repayments of) net proceeds from short-term borrowings..... 3,450 (31,001) 33,182 Proceeds from revolving credit facility..................... 42,815 96,808 35,512 Repayment of revolving credit facility...................... (53,357) (86,506) (35,512) Net proceeds from issuance of debentures.................... 145,000 -- -- Common Shares acquired for treasury......................... -- -- (122) Cash dividends paid on Common Shares........................ (5,180) (5,090) (5,022) Cash dividends paid on Redeemable Preferred Stock........... (120) (240) (240) Net proceeds from (repurchase) issuance of Restricted Stock..................................................... 4 6 791 Proceeds from exercise of stock options..................... 2,860 1,464 1,656 Borrowings under life insurance policies.................... -- 843 811 -------- -------- -------- Net cash (used in) provided by financing activities......... 135,472 (23,716) 31,056 -------- -------- -------- Effect of exchange rate changes on cash..................... 11,230 1,339 (5,088) -------- -------- -------- Increase (decrease) in cash and cash equivalents............ 159,440 74,404 (33,148) Cash and cash equivalents at beginning of year.............. 351,006 276,602 309,750 -------- -------- -------- Cash and cash equivalents at end of year.................... $510,446 $351,006 $276,602 ======== ======== ========
See notes to consolidated financial statements F-10 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. Certain of the Company's international operations are consolidated on an up to three month lag as permitted by accounting principles generally accepted in the United States. Material intercompany balances and transactions have been eliminated in consolidation. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also impact the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. REVENUE AND ACCOUNTS RECEIVABLE Revenue derived from advertising placed with media is recognized based upon the publication or broadcast dates. Revenue resulting from expenditures billable to clients is recognized when the services are performed and billed. Labor based revenue is recognized in the month of service. Revenue from performance-based incentive fees is recorded at the end of a contract period when the amount to be received can be reasonably estimated. Payroll costs are expensed as incurred. Accounts receivable include both the revenue recognized as well as actual media and production costs which are paid for by the Company and rebilled to clients. CASH EQUIVALENTS The Company considers all highly liquid investments with a maturity of three months or less from the purchase date to be cash equivalents. The carrying amount of cash equivalents approximates fair value because of the short maturities of these instruments. SALARIES AND EMPLOYEE RELATED EXPENSES The Company records salaries and employee related expenses as a period cost when incurred. Salary expense is generally recorded in the period the salary is paid. Discretionary bonuses are estimated and accrued as short-term liabilities each period. Bonuses are paid shortly after year end. Stock and other incentive plans and contractual bonuses are identifiable and determinable, and are generally accrued when earned by the employee. INVESTMENTS IN AND ADVANCES TO NONCONSOLIDATED AFFILIATED COMPANIES The Company carries its investments in nonconsolidated affiliated companies on the equity method. The following data relates to the Company's investments in nonconsolidated subsidiaries that met the criteria for a significant subsidiary as set forth in Rule 1.02(w) of Regulation S-X either individually or in the F-11 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) aggregate. Summarized financial information based on audited and unaudited financial statements as of and for the twelve months ended December 31, 2003, 2002 and 2001 is as follows:
AS OF AND FOR THE PERIOD ENDED DECEMBER 31, 2003 ------------------------------ AGGREGATE OF OTHER NONCONSOLIDATED AS-GREY OY SUBSIDIARIES ----------- ---------------- (IN THOUSANDS) Revenue..................................................... $44,276 $27,596 Net income (loss)........................................... 1,476 (1,001)
AS OF AND FOR THE PERIOD ENDED DECEMBER 31, 2002 ------------------------------ AGGREGATE OF OTHER NONCONSOLIDATED AS-GREY OY SUBSIDIARIES ----------- ---------------- (IN THOUSANDS) Current assets.............................................. $21,344 $40,675 Non-current assets.......................................... 5,564 6,969 Current liabilities......................................... 5,108 34,079 Non-current liabilities..................................... -- 14,402 Revenue..................................................... 38,201 31,976 Net income.................................................. 1,844 1,416
AS OF AND FOR THE PERIOD ENDED DECEMBER 31, 2001 --------------------------------------------------------------- AGGREGATE OF OTHER NONCONSOLIDATED KPE INC. AS-GREY OY GCI RINGPRESS GMBH SUBSIDIARIES -------- ---------- ------------------ ------------------ (IN THOUSANDS) Current assets....................... $1,344 $25,646 $1,908 $38,856 Non-current assets................... 4,265 3,399 13 7,937 Current liabilities.................. 740 5,494 2,646 32,685 Non-current liabilities.............. -- -- 65 3,524 Revenue.............................. 9,640 36,317 799 32,687 Net income (loss).................... (9,478) 3,893 (277) 1,878
KPE Inc., AS-Grey OY, GCI Ringpress and the aggregate of other of the Company's non-consolidated subsidiaries have been accounted for under the equity method. KPE Inc., an internet services provider, was acquired in 2001 by a professional administrator to liquidate it on behalf of its creditors. The foregoing data for KPE Inc. is unaudited and comes from its internal statements which did not value assets or liabilities in such a manner as to reflect its liquidity or commercial difficulties. In 2001, the Company wrote off its entire investment in KPE Inc. and has no continuing liabilities or obligations. The Company has a minority interest in AS-Grey OY which has been, and continues to be, the Company's affiliate in Finland. GCI Ringpress GmbH is a public relations subsidiary in Germany. Its financial statements were consolidated into the Company's financial statements beginning in 2002. FIXED ASSETS Fixed assets fall into three main categories: furniture and fixtures, computer equipment and leasehold improvements. Depreciation of furniture and fixtures, and computer equipment is computed principally by the F-12 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) straight-line method over the useful life of the asset, normally five to ten years for furniture and fixtures, and three to five years for computer equipment. Amortization of leasehold improvements is provided for on a straight-line basis principally over the terms of the related leases but not in excess of the useful lives of the underlying assets. FOREIGN CURRENCY TRANSLATION All balance sheet accounts of the Company's international operations are translated at the exchange rate in effect at each year end and statement of operation accounts are translated at the weighted average exchange rates prevailing during the year. Resulting translation adjustments are recorded as a component of other comprehensive income (loss). Foreign currency transaction gains and losses are reported as part of net income. During 2003, 2002 and 2001, foreign currency transaction gains and losses were not material. GOODWILL Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142 ("FAS 142"), Goodwill and Other Intangible Assets. FAS 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets. Under FAS 142 the excess of purchase price over the underlying fair value of the net assets of consolidated subsidiaries and nonconsolidated investments are recorded as goodwill by the Company. Other intangible assets are recognized separately from goodwill if at acquisition they can be separated from the entity and are available for sale or exchange, or control over future economic benefits through legal or contractual rights can be demonstrated. Goodwill is deemed to have an indefinite life and is reviewed annually or upon indications of impairment. Intangible assets with determinable lives are amortized over their useful life. The amount of goodwill associated with consolidated subsidiaries and nonconsolidated investments was:
2003 2002 -------- -------- (IN THOUSANDS) Balance at beginning of year............................ $243,499 $211,812 Additions............................................... 18,558 21,106 Amortization............................................ -- -- Write-down.............................................. (867) -- Currency effect......................................... 25,690 10,581 -------- -------- Balance at end of year.................................. $286,880 $243,499 ======== ========
As part of the annual evaluation, the fair value of the business units, on the regional levels of North America and Europe, is compared to the carrying value of those business units. For the purposes of the calculation, Asian and Latin American business units are combined with the respective North American and European regions reflecting the fact that investments in the Asian and Latin American regions are principally needed to support multi-national clients in North America and Europe. If impairment is indicated, the excess of the carrying value of the goodwill over fair value of the business units is written-off. The Company completed its annual impairment test of goodwill and intangible assets with indefinite lives as of March 31, 2003, and no impairment was identified nor were there impairment indicators subsequent to March 31, 2003. F-13 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The 2001 results on a historical basis do not reflect the provisions of FAS 142. Had the Company adopted FAS 142 on January 1, 2001, the historical net income and basic and diluted net income per common share would have been the adjusted amounts indicated below:
TWELVE MONTHS ENDED DECEMBER 31, 2001 ---------------------------------------- BASIC DILUTED EARNINGS PER EARNINGS PER COMMON COMMON NET INCOME SHARE SHARE ---------- ------------ ------------ (IN THOUSAND, EXCEPT PER SHARE DATAS) Reported net income........................ $(24,428) $(18.46) $(18.46) Goodwill amortization...................... 14,390 11.07 11.07 -------- ------- ------- Adjusted net income........................ $(10,038) $ (7.39) $ (7.39) ======== ======= =======
INCOME TAXES The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides for appropriate foreign withholding taxes on unremitted earnings of consolidated and nonconsolidated foreign companies. MARKETABLE SECURITIES The Company has designated all its marketable securities as available-for-sale. Available-for-sale securities are carried at fair value, based on publicly quoted market prices, with unrealized gains and losses reported as other comprehensive income (loss). Securities are written-off or written-down to their realizable value when other than temporary impairments are indicated. INVESTMENT SECURITIES Investment securities are primarily investments in private companies and are included in Other Assets. Because quoted market prices are not available, such investments are recorded at cost net of impairment write-downs, if necessary. Reductions in the estimated fair market value of these investments for periods of longer that six months are considered other than temporary and are then expensed. STOCK-BASED COMPENSATION In December 2002, the Financial Accounting Standard Board, issued Statement of Financial Accounting Standards No. 148 ("FAS 148"), Accounting for Stock-Based Compensation - Transition and Disclosure which amends Statement of Financial Accounting Standards No. 123 ("FAS 123"), Accounting for Stock-Based Compensation. FAS 148 provides alternative methods of transition to FAS 123's fair value method of accounting for stock-based employee compensation and amends the disclosure provisions of FAS 123. While the statement does not require companies to account for employee stock options using the fair value method, the Company adopted FAS 123, effective January 1, 2003, using the prospective method as provided for in FAS 123 and to adopt the disclosure requirements of FAS 148 in 2003. Compensation expense is recorded for options granted based of their fair market value at the date of grant. The excess of the fair market value of restricted stock over the cash consideration received is amortized as compensation over the period of restriction. The future obligation to issue stock, pursuant to the Company's Senior Management Incentive Plan, is included in Paid-in Additional Capital and results in periodic charges to compensation. F-14 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Pro forma information regarding net income and earnings per common share has been determined as if the Company had accounted for its employee stock options under the fair value method. The approximate fair value for these options was estimated at the date of grant using a Black-Scholes option valuation model with the following weighted average assumptions for the years 2002 and 2001, respectively; risk-free interest rates of 4.96% and 4.73%; dividend yields of 0.61% and 0.65%; volatility factors of the expected market price of the Company's Common Stock of .30 and .32; and a weighted-average expected life for the options of 7.0 years for 2002, and 10 years for 2001. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restriction and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows:
2003 2002 2001 ---------- ---------- ----------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net Income (as reported).................................... $29,076 $18,255 $(24,428) Add: Stock-based employee compensation expense included in reported net income, net of related tax effects........... 1,257 1,394 1,030 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects................................ (1,867) (2,371) (2,226) ------- ------- -------- Pro forma net income (loss)................................. $28,466 $17,278 $(25,624) ======= ======= ======== Pro forma earnings per common share: Basic - as reported....................................... $ 21.76 $ 13.28 $ (18.46) Basic - pro forma......................................... $ 21.30 $ 12.53 $ (19.38) Diluted - as reported..................................... $ 20.03 $ 12.08 $ (18.46) Diluted - pro forma....................................... $ 19.60 $ 11.41 $ (19.38)
EARNINGS PER COMMON SHARE On May 15, 2003, the FASB issued Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity ("FAS 150"). This Statement establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer, and have characteristics of both liabilities and equity. FAS 150 represents a significant change in practice in the accounting for a number of financial instruments, including mandatorily redeemable equity instruments. As required by FAS 150 since July 1, 2003 the Company's redeemable Preferred Stock has been classified as a liability. Additionally, the change in the redemption value of the Company's redeemable Preferred Stock and dividend payments to the preferred shareholder which were previously recorded as changes in Retained Earnings, from July 31, 2003 are recorded as increases or decreases to interest expense. The adoption of FAS 150 impacts, therefore, working capital and net income. The adoption of FAS 150, however, does not affect the calculation of earnings per share. The earnings per share calculation before the application of FAS 150 included an adjustment to net income for the change in the redemption value of preferred stock, which is now be designated as interest expense eliminating the need for the adjustment. F-15 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The computation of basic earnings per common share is based on the weighted average number of common shares outstanding and for diluted earnings per common share includes adjustments for the effect of the assumed exercise of dilutive stock options, the shares issuable pursuant to the Company's Senior Management Incentive Plan (see Notes to Consolidated Financial Statements) and through the date of conversion on December 31, 2003, the assumed conversion of the 8 1/2% Convertible Subordinated Debentures. Shares issuable upon conversion of the 5% Contingent Convertible Subordinated Debentures are excluded from the computation of diluted earnings per common share since the Company has determined that the contingent conditions for conversion have not been met. For the purpose of computing basic earnings per common share through June 30, 2003, the Company's net income is reduced by dividends on the redeemable Preferred Stock and increased or decreased by the change in redemption value of the redeemable Preferred Stock. Upon adoption of FAS 150 for periods after July 1, 2003 and beyond the change in redemption value is recorded as increase or decreases to interest expense, thereby eliminating the need for the adjustment. For the purpose of computing diluted earnings per common share, net income is also adjusted by the interest savings, net of tax, on the assumed conversion of the Company's 8 1/2% Convertible Subordinated Debentures which were converted on December 31, 2003. RECENT ACCOUNTING PRONOUNCEMENTS In January 2003, the FASB issued FASB Interpretation No. 46 "Consolidation of Variable Interest Entities" an Interpretation of ARB No. 51 ("FIN 46"), which requires variable interest entities (often referred to as special purpose entities or SPEs) to be consolidated if certain criteria are met. FIN 46 is effective as of January 31, 2003 for variable interest entities created after that date and other variable interest entities in the first quarter of 2004. The Company currently does not believe the impact of adopting FIN 46 for such investment interests will have a material impact on its consolidated financial statements. B. INTERNATIONAL OPERATIONS The following financial data is applicable to the Company's consolidated international subsidiaries:
2003 2002 2001 ---------- -------- -------- (IN THOUSANDS) Current assets...................................... $1,036,974 $855,126 $742,415 Current liabilities................................. 982,263 770,743 730,910 Other assets -- net of other liabilities............ 226,196 153,704 170,702 Net income (loss)................................... 8,096 7,551 (4,201)
Consolidated retained earnings at December 31, 2003 and 2002 include equity in unremitted earnings of nonconsolidated international companies of approximately $14.0 million and $13.3 million respectively. F-16 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) C. OTHER EXPENSE -- NET Details of other (expense) income -- net are:
2003 2002 2001 ------- ------ -------- (IN THOUSANDS) Write-down of investments and marketable securities..... (196) (866) (21,554) Loss from the sale of marketable securities............. (178) (348) (208) Net gain on the sales of subsidiaries................... 2,040 517 -- Dividends from affiliates............................... 47 11 16 Other expense -- net.................................... 931 1,001 617 ------- ------ -------- $ 2,644 $ 315 $(21,129) ======= ====== ========
D. FIXED ASSETS Components of fixed assets-at cost are:
2003 2002 --------- --------- (IN THOUSANDS) Furniture, fixtures and equipment........................... $ 253,968 $ 230,883 Leaseholds and leasehold improvements....................... 133,174 123,318 --------- --------- 387,142 354,201 Accumulated depreciation and amortization................... (246,455) (214,260) --------- --------- $ 140,687 $ 139,941 ========= =========
During the year ended December 31, 2001, the Company recorded a non-cash charge of $5.4 million for the write-off of leasehold improvements and fixed assets related to the disposal of more than 160,000 square feet of leased space. E. ACQUISITIONS AND RELATED COSTS For the years ended December 31, 2003, 2002 and 2001, the Company completed a number of acquisitions which enhanced its core advertising agency capabilities in selected markets and expanded its presence in specialized communications areas. Furthermore, the Company increased its stakes in majority-owned subsidiaries in certain markets. All acquisitions and increased investments were accounted for under the purchase method. The purchase price and corresponding goodwill in connection with a number of the acquisitions may be increased by contingent payouts to certain of the sellers depending on the future performance of the acquired entities. Aggregate purchase price of:
2003 2002 2001 ------- ------- ------- (IN THOUSANDS) Acquisitions................................................ $21,294 $21,106 $29,785 ======= ======= =======
None of the acquisitions in 2003, 2002 or 2001 were significant on an individual basis and the results of the operations from these acquired entities for the period were not material. Pro-forma results of operations for 2003, 2002 and 2001 would not be materially different from the reported results. The Company estimates that it will be required to make future payments to acquire additional shares of subsidiary companies or to complete earn-out agreements (collectively, "Agreements") pursuant to certain F-17 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) acquisition arrangements not reflected as liabilities on its consolidated balance sheet of approximately $54.2 million. Of such amount, 38.4% is estimated to be paid over the period from 2004 through 2007 and the remainder to be paid from 2008 and beyond. The foregoing information is estimated and the actual payments made will be dependent on future events primarily related to the attainment of earnings goals, specified operating margins and revenue targets or a combination thereof in respect of a number of subject companies. Other factors which must be considered in making the estimate include the fulfillment and amendment of certain contractual obligations by third parties, the movement of exchange rates, the timing of when the Company or other parties choose to exercise certain contractual rights and other variables. Many of the Agreements do not provide for maximum or minimum amounts payable. Therefore, there is no definitive range of the amounts payable in the future. The estimated amounts payable were computed using assumptions as to earnings bases, dividend rates, earnings growth rates and other factors deemed to be reasonable for the underlying situations. If the Company were to increase the earnings assumptions used in estimating the amounts payable uniformly by 10%, the estimated amounts payable would increase to $64.7 million; if the earnings assumptions were decreased uniformly by 10%, the estimated amounts payable would decrease to $43.7 million. F. MARKETABLE SECURITIES AND OTHER INVESTMENT SECURITIES The marketable securities and other investment securities, by type of investment, held by the Company at December 31, 2003 and 2002 are as follows:
GROSS GROSS ESTIMATED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ---- ---------- ---------- --------- (IN THOUSANDS) MARKETABLE SECURITIES AT DECEMBER 31, 2003: Maturities of one year or less: Money market funds............................. $ 495 $-- $-- $ 495 Equity securities.............................. 484 -- -- 484 ------ -- -- ------ 979 -- -- 979 Maturities greater than one year: Corporate bonds................................ 1,580 -- -- 1,580 ------ -- -- ------ Total marketable securities......................... $2,559 $-- $-- $2,559 ====== == == ======
GROSS GROSS ESTIMATED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ---- ---------- ---------- --------- (IN THOUSANDS) Marketable securities at December 31, 2002 Maturities of one year or less: Money market funds............................. $ 547 $-- $ -- $ 547 Equity securities.............................. 1,242 39 (95) 1,186 ------ --- ------- ------ 1,789 39 (95) 1,733 Maturities greater than one year: Corporate bonds................................ 6,547 60 (1,085) 5,522 ------ --- ------- ------ Total marketable securities......................... $8,336 $99 $(1,180) $7,255 ====== === ======= ======
F-18 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company uses the specific identification method when determining the cost of the securities sold or the amount reclassified out of accumulated comprehensive income into earnings. The reduction in 2003 and 2002 in unrealized losses is attributable to the sale and write-down of certain marketable securities. At December 31, 2003 and 2002, the Company's investments in marketable securities classified as long-term had an average maturity of approximately 2.02 and 7.30 years, respectively. During the year ended December 31, 2001, the Company took a non-cash charge in the amount of $21.6 million for the write-down of investments in Internet-related early stage businesses and certain marketable securities. G. CREDIT ARRANGEMENTS AND LONG-TERM DEBT On October 28, 2003, the Company sold $125 million principal amount of its 5% contingent convertible subordinated debentures, due 2033 ("Debentures"), to JP Morgan Securities Inc. ("Initial Purchaser") in a transaction exempt from the registration requirements of the Securities Act of 1933. On November 7, 2003, the Company sold an additional $25 million principal amount of Debentures pursuant to an overallotment option held by the Initial Purchaser. The total net proceeds of the offering were approximately $145 million. The Debentures are convertible into shares of Common Stock at an initial conversion price of $961.20 per share provided that any one of several contingencies are met, including that the Common Stock trades above $1,153.44 for specified periods of time. The Debentures are subordinate to the other debt of the Company. The fair value of the Debentures at year end 2003 was approximately $156 million. The proceeds from the sale of the Debentures will be used for working capital and other general corporate purposes. At December 31, 2003 and 2002, the Company had a revolving line of credit ("revolver") totaling $110.0 million. The Company had no amounts drawn on the revolver as of December 31, 2003. The amount drawn down on the revolver at December 31, 2002 was $10.0 million. The Company had other lines of credit available to it in foreign countries in connection with short-term borrowing and bank overdrafts utilized in the ordinary course of business. The Company had $70.5 million and $57.0 million outstanding under other uncommitted lines of credit at December 31, 2003 and 2002, respectively. The weighted average interest rate for the borrowings under the uncommitted lines of credit was 4.9% and 5.3% at December 31, 2003 and 2002, respectively. The carrying amount of the debt outstanding under both the committed and uncommitted lines of credit approximates fair value because of the short maturities of the underlying notes. Consistent with industry practices in a number of countries, the Company, from time to time, directly or through a local media buying operation, is required to guarantee payment to the media suppliers in the form of performance bonds, letters of credit or other similar financial instruments which relate to liabilities shown in the accounts payable section of the Consolidated Balance Sheet. Occasionally, the Company enters into foreign currency contracts for known cash flows related to the repatriation of earnings from its international subsidiaries. The terms of each foreign currency contract entered into in 2003 were for less than three months and the amount open at December 31, 2003 was not material. At December 31, 2002, there were no foreign currency contracts open. The Company had no derivative contracts outstanding at December 31, 2003 and 2002, respectively. The Company has two outstanding loans from the Prudential Insurance Company of America ("Prudential"). The first loan of $75.0 million from December 1997 had a fixed interest rate of 6.94% with the principal originally repayable in equal installments of $25.0 million in December 2003, 2004 and 2005. This loan was renegotiated in March 2003, with a fixed interest rate of 7.41%, with principal repayments of $25.0 million in December 2007, 2008 and 2009, respectively. The second loan of $50.0 million drawn in November 2000 has a fixed interest rate of 8.17% and is repayable in two equal installments of $25.0 million in November 2006 and 2007. The fair value of the renegotiated first loan and second loan is estimated to be $130.0 million and F-19 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) $128.2 million at December 31, 2003 and 2002, respectively. This estimate was determined using a discounted cash flow analysis using current interest rates for debt having similar terms and remaining maturities. The term loans and the revolver contain certain covenants related to the Company's capital, debt load and cash flow. As of December 31, 2003 and December 31, 2002, the Company was in compliance with these covenants. On December 31, 2003 ("Conversion Date"), Mr. Edward H. Meyer, the Chairman and Chief Executive Officer of the Company, converted $3.025 million in principal amount of the Company's 8 1/2% Convertible Subordinated Debentures ("8 1/2% Debentures"), due December 31, 2003, which constituted the entire principal amount of the 8 1/2% Debentures originally purchased by Mr. Meyer on December 10, 1983. In accordance with the terms of the 8 1/2% Debentures, the Company issued to Mr. Meyer, 51,128 shares, comprised of 25,564 shares of Common Stock and 25,564 shares of Limited Duration Class B Common Stock. The 8 1/2% Debentures were issued in exchange for cash and Mr. Meyer's $3.0 million, 9% promissory note, payable on December 31, 2004 (included in Other Assets at December 31, 2003 and 2002). During each of the years 2003, 2002 and 2001, the Company paid to Mr. Meyer interest of $257,000 pursuant to the terms of the 8 1/2% Debentures and he paid to the Company interest of $270,000 pursuant to the terms of the 9% promissory note. Long-term debt at December 31, 2003 and 2002 is as follows:
2003 2002 -------- -------- (IN THOUSANDS) Term loans.................................................. $125,000 $125,000 Debentures.................................................. 150,000 -- 8 1/2% Debentures........................................... -- 3,025 -------- -------- Long-term debt.............................................. $275,000 $128,025 ======== ========
The scheduled maturity of long-term debt is as follows:
YEARS ENDING DECEMBER 31 AMOUNT ------------ -------------- (IN THOUSANDS) 2006........................................................ 25,000 2007........................................................ 50,000 2008........................................................ 25,000 2009........................................................ 25,000 2033........................................................ 150,000 -------- $275,000 ========
During 2003 and 2002, the Company borrowed against the cash surrender value of the life insurance policies that it owns on the life of its Chairman and Chief Executive Officer. The amounts borrowed at December 31, 2003 and 2002 are, respectively, $27.2 million with an interest rate of 7.40% and $25.9 million with an interest rate of 7.40%. The amounts borrowed are carried as a reduction of the related cash surrender value included in Other Assets. Of the amounts borrowed in 2003 and 2002, $1.2 million was used in each year to pay premiums on the underlying life insurance policies and in 2002 the Company also received $800,000 in cash. For the years 2003, 2002 and 2001, the Company made interest payments on all third party debt of $16.8 million, $15.7 million and $15.5 million, respectively. F-20 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) H. REDEEMABLE PREFERRED STOCK As of December 31, 2003 and 2002, the Company had outstanding 20,000 shares of Series I Preferred Stock, and 5,000 shares each of Series II and Series III Preferred Stock (collectively, "Preferred Stock"). The holder of the Preferred Stock is the Chairman and Chief Executive Officer of the Company. The terms of each class of Preferred Stock, including the basic economic terms relating thereto, are essentially the same. The redemption date ("Redemption Date") for the Preferred Stock is fixed at April 7, 2004. On the Redemption Date, the holder of the Preferred Stock must tender for redemption at least one-third of the Preferred Stock owned and may tender such additional shares of Preferred Stock as he elects. If all of the Preferred Stock is not tendered, the remaining shares will be redeemed in equal amounts on the first and second anniversaries of the Redemption Date. Each share of Preferred Stock is to be redeemed by the Company at a price equal to the book value per share attributable to one share of Common Stock and one share of Class B Common Stock (subject to certain adjustments) upon redemption, less a fixed discount established upon the issuance of the Preferred Stock. The holder of the Preferred Stock is entitled to receive cumulative preferential dividends at the annual rate of $.25 per share, and to participate in dividends on one share of the Common Stock and one share of Class B Common Stock to the extent such dividends exceed the per share preferential dividend. In connection with his ownership of the Preferred Stock, the holder issued to the Company full recourse promissory notes totaling $763,000 (included in Other Assets at December 31, 2003 and 2002) with a maturity date of April 2004. The interest paid by the holder to the Company in 2003, 2002 and 2001 pursuant to the terms of these notes was approximately $69,000 in each year. In accordance with the terms of the respective Certificates of Designation and Terms of each Series of Preferred Stock, the Board of Directors determined the change in redemption value would not reflect a 1994 write-off of goodwill but rather reflect amortization as if the Company had continued to write-off goodwill in accordance with historical amortization schedules. Following the distribution of the Limited Duration Class B Common Stock ("Class B Common Stock"), the holder of the Preferred Stock became entitled to eleven votes per share on all matters submitted to the vote of stockholders. The holder of the Series I Preferred Stock is entitled, as well, to vote as a single class to elect or remove one-quarter of the Board of Directors, to approve the merger or consolidation of the Company or the sale by it of all or substantially all of its assets, and to approve the authorization or issuance of any other class of Preferred Stock having equivalent voting rights. The rights described in this paragraph expire on the Redemption Date. In the event of the liquidation of the Company, the holder of the Preferred Stock is entitled to a preferential liquidation distribution of $1.00 per share in addition to all accrued and unpaid preferential dividends. The total carrying value, and therefore aggregate redemption value, of the Preferred Stock (applicable to those shares outstanding at each respective year end) increased by $2.4 million in 2003 and by $1.5 million in 2002, respectively. Since July 1, 2003 the increases in redemption value of the redeemable Preferred Stock has been recorded as interest expense in accordance with FAS 150 which is discussed in Note B in the Notes to Consolidated Financial Statements. I. COMMON STOCK The Company has authorized and outstanding two classes of common equity, Common Stock and Class B Common Stock. Each class of common equity has a par value of $0.01. The Class B Common Stock has the same dividend and liquidation rights as the Common Stock, and a holder of Class B Common Stock is entitled to ten votes per share on all matters submitted to stockholders. The shares of Class B Common Stock are restricted as to transferability and upon transfer, except to specified limited classes of transferees, will F-21 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) convert into shares of Common Stock which have one vote per share. The Class B Common Stock will automatically convert to Common Stock on April 3, 2006. J. STOCK INCENTIVE PLAN The Company's 1994 Stock Incentive Plan ("Stock Incentive Plan") is the Company's active restricted stock and stock option plan. Under the Stock Incentive Plan, awards in the form of incentive or nonqualified stock options or restricted stock are available to be granted through June 2004 to officers and other key employees. A maximum of 500,000 shares of Common Stock is available for grant under the Stock Incentive Plan. Stock options cannot have an exercise price less than 100% of the fair market value of the shares on the date of grant. A committee of the Board of Directors ("Committee") determines the terms and conditions under which the awards may be granted, vest or are exercisable. Stock options must be exercised within ten years of the date of grant or such shorter period as may be fixed by the Company. Shares of restricted stock may be sold to participants at a purchase price determined by the Committee (which may be less than fair market value per share). Transactions involving nonqualified options under the Stock Incentive were:
NUMBER WEIGHTED AVERAGE OF SHARES EXERCISE PRICE --------- ---------------- Outstanding, December 31, 2000.............................. 190,124 $255 Granted..................................................... 800 621 Exercised................................................... (7,586) 214 Forfeited................................................... (3,350) 335 ------- Outstanding, December 31, 2001.............................. 179,988 257 Granted..................................................... 8,406 660 Exercised................................................... (9,914) 168 Forfeited................................................... (2,750) 389 ------- Outstanding, December 31, 2002.............................. 175,730 280 GRANTED..................................................... 2,212 610 EXERCISED................................................... (11,336) 254 FORFEITED................................................... (3,782) 484 ------- OUTSTANDING, DECEMBER 31, 2003.............................. 162,824 281 =======
There were 124,291, 121,736, and 115,121 stock options exercisable and 251,914, 260,119, and 265,775 stock options available for grant at December 31, 2003, 2002 and 2001, respectively. The weighted average fair value of the stock options granted during 2003, 2002 and 2001 was $236, $258 and $296, respectively. F-22 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The remaining weighted average contractual life and weighted average exercise price of stock options outstanding at December 31, 2003 and the weighted average exercise price for stock options exercisable at December 31, 2003 are as follows:
STOCK OPTIONS OUTSTANDING ------------------------------------------------------ STOCK OPTIONS EXERCISABLE WEIGHTED AVERAGE ----------------------------------- RANGE OF EXERCISE NUMBER OF SHARES REMAINING WEIGHTED AVERAGE NUMBER OF SHARES WEIGHTED AVERAGE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE - ----------------- ---------------- ---------------- ---------------- ---------------- ---------------- $149-168............. 56,833 0.2years $149 56,833 $149 196........... 400 2.0years 196 400 196 235........... 27,100 2.2years 235 27,100 235 272-282............ 150 3.3years 276 -- -- 312-340............ 49,888 2.6years 329 34,071 333 403-640............ 22,074 6.6years 454 5,887 436 644-756............ 6,379 7.9years 670 -- -- ------- ------- Total........... 162,824 124,291 ======= =======
3,659, 5,593 and 2,063 shares of restricted stock were issued at a price of $1.00 per share in 2003, 2002, and 2001, respectively. All restricted stock is issued with restrictions as to transferability with various expiration dates between two and five years and is subject to forfeiture. In 2003, restrictions on 7,581 shares of restricted stock lapsed and 117 shares were forfeited by holders and held in Treasury. In 2002, restrictions on 3,857 shares of restricted stock lapsed, and no shares were forfeited and held in Treasury. Compensation to employees under the Stock Incentive Plan of $5.1 million in 2003, $4.9 million in 2002 and $3.7 million in 2001, representing the excess of the market value of restricted stock, at the date of issuance, over any cash consideration received, is carried as a reduction of Paid-In Additional Capital and is charged to income ($2.4 million in 2003, $2.6 million in 2002 and $1.9 million in 2001) over the related period of service for the respective employees. F-23 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) K. COMPUTATION OF EARNINGS PER COMMON SHARE The following table shows the amounts used in computing earnings per common share and the effect on income and the weighted average number of shares of dilutive potential common stock.
2003 2002 2001 ----------- --------- ---------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) BASIC EARNINGS PER COMMON SHARE Weighted-average shares................... 1,277,539 1,245,856 1,237,880 ----------- --------- ---------- Net income (loss)......................... $ 29,076 $ 18,255 $ (24,428) Effect of dividend requirements and the change in redemption value of redeemable preferred stock......................... (1,278) (1,713) 1,575 ----------- --------- ---------- NET EARNINGS (LOSS) USED IN COMPUTATION... $ 27,798 $ 16,542 $ (22,853) ----------- --------- ---------- PER SHARE AMOUNT.......................... $ 21.76 $ 13.28 $ (18.46) =========== ========= ========== DILUTED EARNINGS PER COMMON SHARE Weighted-average shares used in Basic Earnings per Common Share............... 1,277,539 1,245,856 1,237,880 Net effect of dilutive stock options and stock incentive plans (1)............... 66,532 83,714 --(2) Assumed conversion of 8.5% Convertible Subordinated Debentures................. 51,128(3) 51,128 --(2) ----------- --------- ---------- ADJUSTED WEIGHTED-AVERAGE SHARES.......... 1,395,199 1,380,698 1,237,880 ----------- --------- ---------- Net earnings (loss) used in Basic Earnings per Common Share........................ $ 27,798 $ 16,542 $ (22,853) 8.5% Convertible Subordinated Debentures interest net of income tax effect....... 143 143 -- ----------- --------- ---------- NET EARNINGS (LOSS) USED IN COMPUTATION... $ 27,941 $ 16,685 $ (22,853) ----------- --------- ---------- PER SHARE AMOUNT.......................... $ 20.03 $ 12.08 $ (18.46) =========== ========= ==========
- --------------- (1) For the years ended December 31, 2003 and 2002 the weighted average number of shares issuable pursuant to the Senior Management Incentive Plan included in the diluted earnings per share calculations were 12,486 and 20,211, respectively. Due to the anti-dilutive result of the diluted earnings per share calculation for 2001, shares issuable pursuant to the terms of the Senior Management Incentive Plan were excluded from the calculation. (2) For the year ended December 31, 2001, the assumed exercise of stock options, issuances under stock incentive plans and the assumed conversion of the 8 1/2% Convertible Subordinated Debentures each had an anti-dilutive effect. As such, these items have been excluded from the diluted earnings per share calculation. (3) On December 31, 2003, the 8 1/2% Convertible Subordinated Debentures were converted into 25,564 shares of Common Stock and 25,564 shares of Limited Duration Class B Common Stock. For 2003, net income was adjusted by interest savings, net of tax, on the assumed conversion of the 8 1/2% Convertible Subordinated Debentures. (4) Diluted earnings per common share have not been adjusted for the assumed conversion of the 5% Contingent Convertible Subordinated Debentures because the Company has determined that the contingent conditions for conversion have not been met. F-24 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) L. INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. At December 31, 2003 and 2002, the Company had deferred tax assets and deferred tax liabilities as follows:
DEFERRED TAX ASSETS (LIABILITIES) ------------------- 2003 2002 ------- ------- (IN THOUSANDS) Deferred compensation....................................... $32,281 $31,581 Accrued expenses............................................ 6,178 10,036 Depreciation................................................ 3,574 1,944 Foreign net operating losses................................ 37,880 33,084 Tax on unremitted foreign earnings and other................ (859) 1,282 ------- ------- 79,054 77,927 Valuation allowance......................................... (25,391) (26,891) ------- ------- Net deferred tax assets..................................... $53,663 $51,036 ======= ======= Included in: Other current assets...................................... $13,176 $13,611 Other assets.............................................. 40,487 37,425 ------- ------- $53,663 $51,036 ======= =======
The components of income (loss) of consolidated companies before taxes on income are as follows:
2003 2002 2001 ------- ------- -------- (IN THOUSANDS) Domestic.................................................... $38,661 $22,477 $(15,999) Foreign..................................................... 27,464 20,495 11,883 ------- ------- -------- $66,125 $42,972 $ (4,116) ======= ======= ========
Provisions (benefits) for Federal, foreign, state and local income taxes consisted of the following:
2003 2002 2001 ------------------ ------------------ ------------------ CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED ------- -------- ------- -------- ------- -------- (IN THOUSANDS) Federal............................. $15,150 $ (454) $10,189 $(1,952) $ 3,932 $(4,938) Foreign............................. 14,388 (2,800) 9,611 (1,601) 10,951 140 State and local..................... 8,849 (143) 5,781 (499) 4,287 (285) ------- ------- ------- ------- ------- ------- $38,387 $(3,397) $25,581 $(4,052) $19,170 $(5,083) ======= ======= ======= ======= ======= =======
The Company has not recognized a tax benefit on capital losses relating to the write-down of investments as the realization thereof is not certain. F-25 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The effective tax rate varied from the statutory Federal income tax rate as follows:
2003 2002 2001 ---- ---- ------ Statutory Federal tax rate.................................. 35.0% 35.0% 35.0% State and local income taxes, net of Federal income tax benefits.................................................. 8.6 8.0 (63.2) Difference in foreign tax rates inclusive of net operating losses without tax benefit................................ 7.3 5.4 (187.5) Withholding tax on unremitted foreign earnings.............. 1.4 0.9 (0.1) Other--net.................................................. 0.6 0.8 3.5 Capital loss and write-down of investments.................. -- -- (129.9) ---- ---- ------ 52.9% 50.1% (342.2)% ==== ==== ======
During the years 2003, 2002 and 2001, the Company made income tax payments of $20.7 million, $17.4 million and $28.2 million, respectively. The tax benefit resulting from the difference between compensation expense deducted for tax purposes and compensation expense charged to income for restricted stock and nonqualified stock options is recorded as an increase to Paid-in Additional Capital. At December 31, 2003, the Company had cumulative net operating losses attributable to foreign subsidiaries of approximately $116.0 million. Of this amount, $88.2 million can be carried forward indefinitely. No material amount of the remainder will expire before 2005. Since a portion of the benefits may fail to be realized, a valuation allowance has been reflected. M. RETIREMENT PLANS, DEFERRED COMPENSATION, EXECUTIVE OFFICER LOANS, LEASES AND CONTINGENCIES 1. The Company's Profit Sharing Plan is available to eligible employees of Grey and qualifying subsidiaries meeting certain eligibility requirements. This plan provides for contributions by the Company at the discretion of the Board of Directors, subject to maximum limitations, as well as employee pre-tax contributions. The Company also maintains a noncontributory Employee Stock Ownership Plan covering eligible employees of the Company and qualifying subsidiaries, under which the Company may make contributions in stock or cash to an Employee Stock Ownership Trust ("ESOT") in amounts each year as determined at the discretion of the Board of Directors. The Company contributed stock to the ESOT for 2003 and 2002. The Company did not contribute to the ESOT for 2001. The Company and the ESOT have certain rights to purchase shares from participants whose employment has terminated. In addition to the two plans noted above, a number of subsidiaries maintain separate profit sharing and retirement arrangements. Furthermore, the Company also provides additional retirement and deferred compensation benefits to certain executive officers and employees. The Company maintains a Senior Management Incentive Plan ("Plan") in which deferred compensation is granted to senior executive or management employees deemed important to the continued success of the Company. The Plan has operated as an ongoing series of individual plans each with terms of five years. The latest plan in the series commenced in 2003 and provides for awards to be made through 2007. Awards generally vest to participants after the conclusion of the fifth year of continued employment following admission to the plan, including the year the participant was admitted. The amount recorded as an expense related to the Plan amounted to $6.1 million, $5.4 million and $0 in 2003, 2002 and 2001, respectively. Approximately $2.4 million, $2.3 million and $0 of plan expense incurred in 2003, 2002 and 2001, respectively, will be payable in Common Stock in accordance with the terms of the Plan. The awards payable in Common Stock were converted into an equivalent number of shares of Common Stock, based on the average of the market values on the last 15 business days of the calendar year. The net increase to Paid-in Additional Capital for the 2003 Plan is $2.4 million and relates to F-26 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) the future obligation to issue Common Stock. At December 31, 2003, approximately 4,941 shares are payable in Common Stock pursuant to the Plan of which 864 were vested. 2. The Company has entered into an employment agreement with its Chairman and Chief Executive Officer providing for a fixed term through December 31, 2004. This agreement further provides for the deferral of certain compensation otherwise payable to the Chairman and Chief Executive pursuant to his employment agreement and the payment of such deferred compensation into a trust, commonly referred to as a grantor trust, for which HSBC Bank USA serves as trustee. The purpose of the trust arrangement is to ensure the Company's ability to deduct compensation paid to the Chairman and Chief Executive Officer without the application of Section 162(m) of the Internal Revenue Code ("Section"). The Section, under certain circumstances, denies a tax deduction to a publicly held corporate employer for certain compensation expenses in excess of $1.0 million per year to certain of its executives. Amounts deferred and paid into the grantor trust, as adjusted for the earnings and gains or losses on the trust assets, will be paid to the Chairman and Chief Executive Officer or to his estate, as the case may be, following the expiration of his employment agreement, or the termination of his employment by reason of death or disability. In 1998, the Company began making payments to the grantor trust which are to be used to fund a pension obligation payable to the Chairman and Chief Executive Officer over the eleven year period following the normal expiration of his current employment agreement ("pension period"). The initial pension deposit was for $1.04 million with annual pension deposits of $360,000 ratably paid through 2002; commencing in 2003 the annual rate of the pension deposits increased to $610,000. The amount of the pension to be paid to the Chairman and Chief Executive Officer will depend on, and be limited to, the funds in the grantor trust during the pension period. In addition, upon termination of his employment prior to the commencement of the pension period or upon his death, any undistributed funds in the grantor trust would be paid to him or his estate, as the case may be, in satisfaction of any future obligations with respect to this pension. At December 31, 2003 and 2002, the value of the assets in the grantor trust was $37.6 million and $32.2 million, respectively, and is included in Other Assets and the Company's related deferred compensation obligation for the same amount is included in Other Liabilities. Amounts charged to expense related to the foregoing plans and benefits aggregated $33.4 million in 2003, $36.0 million in 2002 and $28.9 million in 2001. 3. An executive officer has an outstanding loan with the Company amounting to $500,000 as of December 31, 2003 and December 31, 2002, respectively, which is reflected in Other Assets. The $500,000 loan will be forgiven on December 31, 2004, assuming continued employment of the executive officer through that date. In connection with a 1992 exercise of stock options, the Company received a cash payment of $67,000 and a note from the Chairman and Chief Executive Officer of the Company in the amount of $3.17 million, due in December 2001, bearing interest at the rate of 6.06%, the then current, comparable U.S. Treasury Note rate. In addition, and in accordance with the terms of the option agreement, the holder of the options issued to the Company a promissory note in the principal amount of $2.34 million bearing interest at the same U.S. Treasury Note rate of 6.06%, payable in December 2001, to settle his obligation to provide the Company with funds necessary to pay the required withholding taxes due upon the exercise of the options. A portion of the second note ($1.56 million) equal to the tax benefit received by the Company upon exercise and the full amount of the note for $3.17 million is reflected in a separate component of common stockholders' equity. Both notes were modified in 2001 to extend their due dates to November 2006 and change the interest rate to the comparable U.S. Treasury Note rate at the time of extension of 3.93%. The interest paid to the Company by the holder pursuant to the terms of the two notes issued in connection with the option exercise was $217,000 in 2002 and $334,000 in 2001 and 2000. F-27 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. Rental expense amounted to approximately $80.1 million in 2003, $76.0 million in 2002, and $73.0 million in 2001. Approximate minimum rental commitments, excluding escalations qualifying as contingent rentals, under non-cancelable operating leases are as follows:
FOR THE YEAR ENDED AMOUNT - ------------------ -------------- (IN THOUSANDS) 2004........................................................ 76,066 2005........................................................ 68,206 2006........................................................ 58,241 2007........................................................ 53,707 2008........................................................ 49,217 Beyond 2008................................................. 57,890 -------- $363,327 ========
N. QUARTERLY FINANCIAL DATA (UNAUDITED) A summary of the quarterly unaudited results of operations for the years ended December 31, 2003 and 2002 follows:
FOR THE THREE MONTHS ENDED ------------------------------------------------------------------------------------- MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 ------------------- ------------------- ------------------- ------------------- 2003 2002 2003 2002 2003 2002 2003 2002 -------- -------- -------- -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Revenue.............. $297,643 $285,581 $319,946 $290,082 $324,486 $290,441 $365,191 $333,604 Income from operations(1)...... 14,380 12,948 9,786 6,919 15,466 8,409 35,028 24,474 Net income........... 5,071 4,314 4,744 1,670 4,584 2,755 14,677 9,516 Earnings per Common Share(2): Basic.............. $ 3.41 $ 3.21 $ 3.33 $ 1.26 $ 3.57 $ 1.92 $ 11.38 $ 6.90 Diluted............ $ 3.12 $ 2.92 $ 3.07 $ 1.16 $ 3.28 $ 1.76 $ 10.51 $ 6.27
- --------------- (1) Income of consolidated companies before taxes on income and other expense - net. (2) Rounding differences may arise upon accumulation of quarterly per share data. F-28 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) O. INDUSTRY SEGMENT AND RELATED INFORMATION The Company is not engaged in more than one industry segment. The Company is domiciled in the United States and evaluates performance by geographic region based on profit or loss before income taxes. Revenue is attributed to the geographic region that generates billings. Revenue, operating profit, interest income/expense, and related identifiable assets at December 31, 2003, 2002 and 2001, are summarized below according to geographic region:
NORTH AMERICA EUROPE OTHER -------------------------------- -------------------------------- ------------------- 2003 2002 2001 2003 2002 2001 2003 2002 ---------- -------- -------- ---------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Revenue................. $ 585,669 $555,234 $539,169 $ 581,384 $517,643 $534,697 $140,213 $126,831 Operating profit (loss).............. 54,732 35,409 8,566 10,162 14,414 12,965 9,766 2,927 Interest (expense) income - net........ (10,440) (7,166) (3,220) (284) (4,014) 806 (454) 1,089 Other (expense) income.............. 587 181 (18,009) 1,929 133 (2,690) 127 0 ---------- -------- -------- ---------- -------- -------- -------- -------- (Loss) income of consolidated companies before taxes on income..... $ 44,879 $ 28,423 $(12,663) $ 11,807 $ 10,533 $ 11,081 $ 9,439 $ 4,016 ========== ======== ======== ========== ======== ======== ======== ======== Equity in earnings of nonconsolidated affiliated companies........... Identifiable assets... $1,036,831 $866,713 $883,454 $1,246,617 $991,769 $833,285 $225,115 $200,607 Investments in and advances to nonconsolidated affiliated companies........... Total assets.......... OTHER CONSOLIDATED -------- ------------------------------------ 2001 2003 2002 2001 -------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Revenue................. $143,147 $1,307,266 $1,199,708 $1,217,013 Operating profit (loss).............. (1,281) 74,660 52,750 20,250 Interest (expense) income - net........ (823) (11,179) (10,091) (3,237) Other (expense) income.............. (430) 2,643 314 (21,129) -------- ---------- ---------- ---------- (Loss) income of consolidated companies before taxes on income..... $ (2,534) $ 66,125 $ 42,974 $ (4,116) ======== ========== ========== ========== Equity in earnings of nonconsolidated affiliated companies........... $ 659 $ 817 $ (1,191) ========== ========== ========== Identifiable assets... $168,388 $2,508,563 $2,059,089 $1,885,127 Investments in and advances to nonconsolidated affiliated companies........... 16,899 14,750 14,679 ---------- ---------- ---------- Total assets.......... $2,525,462 $2,073,839 $1,899,806 ========== ========== ==========
Revenue from one client amounted to 10.6%, 10.2% and 9.2% of the consolidated total in 2003, 2002 and 2001, respectively. Revenue from the United States amounted to 93.4%, 94.0% and 93.7% of the North American total in 2003, 2002 and 2001, respectively. F-29 P. SUBSEQUENT EVENT On January 5, 2004, Edward H. Meyer, the Company's Chairman and Chief Executive Officer, exercised non-qualified stock options to purchase 40,000 shares of Common Stock at an aggregate exercise price of $5.94 million. The options, which had been issued in 1995 pursuant to the Company's 1994 Stock Incentive Plan, were set to expire on January 5, 2004. In accordance with the terms of the Stock Incentive Plan, Mr. Meyer elected to pay the exercise price through the delivery of shares of Common Stock owned by him and has delivered to the Company, in satisfaction thereof, and in satisfaction of the tax withholding obligations from the option exercise, an aggregate of 21,090 shares of Common Stock (plus cash in lieu of delivery of a fractional share). F-30 SCHEDULE II GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES VALUATION AND QUALIFYING ACCOUNTS ALLOWANCE FOR DOUBTFUL ACCOUNTS - deducted from Receivables in the Consolidated Balance Sheet:
COLUMN B BALANCE COLUMN C COLUMN D COLUMN E COLUMN A AT BEGINNING OF CHARGED TO COSTS DEDUCTIONS -- BALANCE AT END OF DESCRIPTION PERIOD AND EXPENSES DESCRIBE PERIOD ----------- ---------------- ---------------- ------------- ----------------- (IN THOUSANDS) 2003.............................. 16,352 12,425 7,310 21,467 2002.............................. 17,005 6,344 6,997 16,352 2001.............................. 12,676 12,232 7,903 17,005
F-31 INDEX TO EXHIBITS
NUMBER ASSIGNED TO EXHIBIT (I.E. 601 OF REGULATION S-K) DESCRIPTION OF EXHIBITS - -------------------- ------------------------------------------------------------ 3.01 Restated Certificate of Incorporation of Grey Global Group Inc. ("Grey"). (Incorporated herein by reference to Exhibit 3.1 to Grey's Current Report on Form 8-K (Commission file number 000-07898), dated July 13, 2000, filed with the SEC pursuant to Section 13 of the 1934 Act.) 3.02 By-Laws of Grey as amended. (Incorporated herein by reference to Exhibit 3.02 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 2002.) 4.01 Stockholder Exchange Agreement, dated as of April 7, 1994, by and between Grey and Edward H. Meyer. (Incorporated herein by reference to Exhibit 10(a) of Grey's Current Report on Form 8-K (Commission file number 000-07898), dated April 7, 1994, filed with the SEC pursuant to Section 13 of the 1934 Act.) 4.02 Indenture, dated as of October 28, 2003 between Grey and the American Stock Transfer & Trust Company relating to 5.0% Contingent Convertible Subordinated Debentures due 2033. 4.03 Registration Rights Agreement, dated as of October 28, 2003 between Grey and J.P. Morgan Securities Inc. relating to 5.0% Contingent Convertible Subordinated Debentures due 2033. 9.01 Voting Trust Agreement, dated as of December 1, 1989, among the several Beneficiaries, Grey and Edward H. Meyer as Voting Trustee. (Incorporated herein by reference to Exhibit 9.03 to Grey's Annual report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1989.) 9.02 Voting Trust Agreement, dated as of February 24, 1986, as amended and restated as of August 31, 1987 and March 21, 1994, and as amended April 10, 1996, among the several Beneficiaries there-under, Grey and Edward H. Meyer as Voting Trustee. (Incorporated herein by reference to Exhibit 9.02 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1985, Exhibit 9.03 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1987, Exhibit 9.04 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1993, and Schedule 13D (Commission file number 005-06825), dated April 10, 1996.) 10.01* Employment Agreement, dated as of February 9, 1984, between Grey and Edward H. Meyer ("Meyer Employment Agreement"). (Incorporated herein by reference to Exhibit 10.01 to Grey's Annual Report on Form 10-K (Commission file number 000- 07898) for the fiscal year ended December 31, 1983.)
NUMBER ASSIGNED TO EXHIBIT (I.E. 601 OF REGULATION S-K) DESCRIPTION OF EXHIBITS - -------------------- ------------------------------------------------------------ 10.02* Amendments Two through Eleven to Meyer Employment Agreement. (Incorporated herein by reference to Exhibit 10.02 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1985, Exhibit 10.03 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1987, Exhibit 1 to Grey's Current Report on Form 8-K (Commission file number 000-07898), dated May 9, 1988, filed with the SEC pursuant to Section 13 of the 1934 Act, Exhibit 2 to Grey's Current Report on Form 8-K (Commission file number 000-07898), dated May 9, 1988, filed with the SEC pursuant to Section 13 of the 1934 Act, Exhibit I to Grey's Current Report on Form 8-K (Commission file number 000-07898), dated June 9, 1989, filed with the SEC pursuant to Section 13 of the 1934 Act, Exhibit 10.07 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1990, Exhibit 10.03 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1994, Exhibit 10.03 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1997, Exhibit 10.01 to Grey's Quarterly Report on Form 10-Q (Commission file number 000-07898) for the quarter ended March 31, 1998, and Exhibit 10.03 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 2001, respectively.) 10.03* Amendment Twelve to Meyer Employment Agreement. 10.04* Deferred Compensation Trust Agreement dated March 22, 1995 ("Trust Agreement"), by and between Grey and United States Trust Company of New York. (Incorporated herein by reference to Exhibit 10.04 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1994.) 10.05* First and Second Amendments to Trust Agreement (Incorporated herein by reference to Exhibit 10.05 to Grey's Annual Report on Form 10-K Commission file number 000-07898) for the fiscal year ended December 31, 1995, and Exhibit 10.02 to Grey's Quarterly Report on Form 10-Q (Commission file number 000-07898) for the quarter ended March 31, 1998, respectively.) 10.06* Agreement Settling First and Final Account of Trustee, dated as of July 21, 2003, between United States Trust Company of New York, as Trustee, HSBC Bank USA, as Successor Trustee, Grey, and Edward H. Meyer. 10.07* Employment Agreement dated as of July 21, 2000, by and between Grey and Steven G. Felsher. (Incorporated herein by reference to Exhibit 10.05 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 2000.) 10.08* Grey Advertising Inc. Book Value Preferred Stock Plan, as amended. (Incorporated herein by reference to Exhibit 4.1 to Grey's Current Report on Form 8-K (Commission file number 000-07898), dated June 14, 1983, filed with the SEC pursuant to Section 13 of the 1934 Act.) 10.09* Grey Advertising Inc. Amended and Restated Senior Executive Officer Pension Plan. (Incorporated herein by reference to Exhibit 10.08 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1984.) 10.10* Grey Advertising Inc. 1998 Senior Management Incentive Plan. (Incorporated herein by reference to Exhibit A to Grey's Annual Meeting Proxy Statement (Commission file number 000- 07898) dated August 17, 1998.) 10.11* Grey Global Group Inc. 2003 Senior Management Incentive Plan. (Incorporated herein by reference to Exhibit A to Grey's Annual Meeting Proxy Statement (Commission file number 000-07898) dated August 21, 2003.)
NUMBER ASSIGNED TO EXHIBIT (I.E. 601 OF REGULATION S-K) DESCRIPTION OF EXHIBITS - -------------------- ------------------------------------------------------------ 10.12* Stock Option Agreement, dated as of October 13, 1984, by and between Grey and Edward H. Meyer ("1984 Option Agreement"). (Incorporated herein by reference to Exhibit 10.15 to Grey's Annual Report on Form 10-K (Commission file number 000- 07898) for the fiscal year ended December 31, 1985.) 10.13* Promissory Notes I and II dated as of November 26, 2001 from Edward H. Meyer to Grey delivered pursuant to the 1984 Option Agreement. (Incorporated herein by reference to Exhibit 10.11 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 2001.) 10.14* Stock Option Agreement, effective as of January 5, 1995, by and between Grey and Edward H. Meyer. (Incorporated herein by reference to Exhibit 13 to Amendment No. 8 to the Statement on Schedule 13D (Commission file number 005-06825), dated as of March 10, 1995, filed by Edward H. Meyer.) 10.15* Stock Option Agreement effective as of November 26, 1996, by and between Grey and Edward H. Meyer. (Incorporated herein by reference to Exhibit 15 to Amendment No. 10 to the Statement on Schedule 13D (Commission file number 005-06825), dated as of February 11, 1997, filed by Edward H. Meyer.) 10.16* Stock Option Agreement, effective as of January 23, 1998, by and between Grey and Edward H. Meyer. (Incorporated herein by reference to Exhibit 16 to Amendment No. 11 to the Statement on Schedule 13D (Commission file number 005-06825), dated as of March 13, 1998, filed by Edward H. Meyer.) 10.17 Registration Rights Agreement, dated as of June 5, 1986, between Grey and Edward H. Meyer. (Incorporated herein by reference to Exhibit 12 to Amendment No. 8 to the Statement on Schedule 13D (Commission file number 005-06825), dated as of March 10, 1995, filed by Edward H. Meyer.) 10.18 Grey Advertising Inc. amended and restated 1994 Stock Incentive Plan. (Incorporated herein by reference to Exhibit 10.02 to Grey's Quarterly Report on Form 10-Q (Commission file number 000-07898) for the quarter ended September 30, 1996.) 10.19 Note Agreement, dated as of December 23, 1997, by and between Grey and the Prudential Insurance Company of America. (Incorporated herein by reference to Exhibit 10.20 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1997.) 10.20 Note Agreement dated as of November 13, 2000, by and between Grey and the Prudential Insurance Company of America ("2000 Note Agreement"). (Incorporated herein by reference to Exhibit 99.1 to Grey's Current Report on Form 8-K (Commission File number 000-07898) dated November 13, 2000, filed with the SEC pursuant to Section 13 of the 1934 Act.) 10.21 First through third Amendments dated as of December 31, 2000, December 31, 2001 and March 14, 2003 respectively, to the 2000 Note Agreement. (Incorporated herein by reference to Exhibit 10.18 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 2002.) 10.22 Note Agreement dated as of March 14, 2003, by and between Grey and Prudential Insurance Company of America. (Incorporated herein by reference to Exhibit 10.19 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 2002.) 10.23 Amended and Restated Omnibus Amendment to Note Agreements, dated as of October 27, 2003, between Grey and the Prudential Insurance Company of America. 10.24 Credit Agreement dated as of December 21, 2001, among Grey, HSBC Bank USA, Fleet National Bank and JP Morgan Chase Bank. (Incorporated herein by reference to Exhibit 10.19 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 2001.)
NUMBER ASSIGNED TO EXHIBIT (I.E. 601 OF REGULATION S-K) DESCRIPTION OF EXHIBITS - -------------------- ------------------------------------------------------------ 10.25 First and Second Amendments to the December 21, 2001 Credit Agreement, dated December 31, 2001 and October 2, 2003, between Grey and JP Morgan Chase Bank. 10.26 Extension Agreement dated as of December 20, 2002, among Grey, HSBC Bank USA, Fleet National Bank and JP Morgan Chase Bank. (Incorporated herein by reference to Exhibit 10.21 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 2002.) 10.27* Bonuses -- Grey has paid bonuses to certain of its executive officers (including those who are directors) and employees in prior years including 2003, and may do so in future years. Bonuses have been and may be in the form of cash, shares of stock or both although Grey presently does not have any plans to pay stock bonuses. Bonuses are not granted pursuant to any formal plan. 10.28* Director's Fees -- It is the policy of Grey to pay each of its non-employee directors a fee of $4,500 per fiscal quarter and a fee of $4,000 for each meeting of the Board of Directors attended. This policy is not embodied in any written document. Members of the Audit Committee and Compensation Committee receive $1,000 for attendance at each meeting of each such committee which does not fall on the same day as a meeting of the Board of Directors. 10.29* Deferred Compensation Agreement, dated December 23, 1981, between Grey and Mark N. Kaplan, regarding deferral of payment of director's fees to which Mr. Kaplan may become entitled. (Incorporated herein by reference to Exhibit 10.18 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1982.) 10.30* On March 23, 1978, Grey's Board of Directors, at a meeting thereof held on such date, approved an arrangement whereby Grey is required to accrue for Edward H. Meyer, the difference between the amount contributed by Grey on behalf of Mr. Meyer under the Profit Sharing Plan and Grey's Employee Stock Ownership Plan, and the amount which would have been contributed to such plans on his behalf had such plans not contained maximum annual limitations on contributions and credits, as required by the Employee Retirement Income Security Act of 1974. Such accrual is to be paid to Mr. Meyer as if it had been contributed to his account under the Profit Sharing Plan. Such arrangement is not embodied in any written document. 10.31 Lease, dated as of July 1, 1978, by and between Grey and William Kaufman and J. D. Weiler, regarding space at 777 Third Avenue, New York, New York ("Main Lease"). (Incorporated herein by reference to Exhibit 10.21 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1982.) 10.32 First through Eighteenth Amendments to Main Lease. (Incorporated herein by reference to Exhibits 10.22, 10.23, 10.24, 10.25, 10.26, 10.27, 10.28 and 10.29 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1982, Exhibit 10.30 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1983, Exhibits 10.33 and 10.34 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1984, Exhibits 10.35 and 10.36 to Grey's Annual Report on Form 10-K (Commission file number 000- 07898) for the fiscal year ended December 31, 1985, Exhibit 10.36 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1986, Exhibit 10.27 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1997, and Exhibit 10.26 to Grey's Annual Report on Form 10-K (Commission file number 000-07898) for the fiscal year ended December 31, 1998, respectively.)
NUMBER ASSIGNED TO EXHIBIT (I.E. 601 OF REGULATION S-K) DESCRIPTION OF EXHIBITS - -------------------- ------------------------------------------------------------ 14.01 Code of Ethics -- Senior Officers applicable to principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. 21.01 Subsidiaries of Grey. 23.01 Consent of Independent Auditors. 31.01 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.02 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.01 Certification of CEO and CFO pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
EX-4.02 3 y95040exv4w02.txt INDENTURE EXHIBIT 4.02 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............................................................................. 10 1.03 Incorporation by Reference of Trust Indenture Act............................................. 11 1.04 Rules of Construction......................................................................... 12 ARTICLE 2 THE DEBENTURES 2.01 Form and Dating............................................................................... 12 2.02 Execution and Authentication.................................................................. 13 2.03 Registrar, Paying Agent and Conversion Agent.................................................. 14 2.04 Paying Agent to Hold Money in Trust........................................................... 14 2.05 Holder Lists.................................................................................. 15 2.06 Transfer and Exchange......................................................................... 15 2.07 Replacement Debentures........................................................................ 28 2.08 Outstanding Debentures........................................................................ 28 2.09 Treasury Debentures........................................................................... 29 2.10 Temporary Debentures.......................................................................... 29 2.11 Cancellation.................................................................................. 30 2.12 Defaulted Interest............................................................................ 30 2.13 CUSIP Numbers................................................................................. 30 ARTICLE 3 REDEMPTION AND PREPAYMENT 3.01 Optional Redemption........................................................................... 30 3.02 Debentures Purchased in Part.................................................................. 31 3.03 Reserved...................................................................................... 31 3.04 Notices to Trustee............................................................................ 31 3.05 Selection of Debentures to Be Redeemed........................................................ 31 3.06 Notice of Redemption.......................................................................... 32 3.07 Effect of Notice of Redemption................................................................ 33 3.08 Deposit of Redemption Price................................................................... 33 3.09 Debentures Redeemed in Part................................................................... 34 3.10 Mandatory Redemption.......................................................................... 34 3.11 Purchase of Debentures at Option of the Holder upon Change of Control......................... 34 3.12 Effect of Holder Change of Control Acceptance Notice.......................................... 37 3.13 Deposit of Change of Control Repurchase Price................................................. 38 3.14 Repayment to the Company...................................................................... 39 3.15 Covenant to Comply with Securities Laws upon Purchase of Debentures........................... 39 ARTICLE 4 COVENANTS 4.01 Payment of Debentures......................................................................... 40
i 4.02 Maintenance of Office or Agency............................................................... 41 4.03 Reports....................................................................................... 41 4.04 Compliance Certificate........................................................................ 42 4.05 Taxes......................................................................................... 42 4.06 Stay, Extension and Usury Laws................................................................ 42 4.07 Corporate Existence........................................................................... 43 4.08 Tax Treatment of Debentures................................................................... 43 ARTICLE 5 SUCCESSORS 5.01 Mergers and Sales of Assets by the Company.................................................... 43 5.02 Successor Corporation Substituted............................................................. 44 ARTICLE 6 DEFAULTS AND REMEDIES 6.01 Events of Default............................................................................. 44 6.02 Acceleration.................................................................................. 45 6.03 Other Remedies................................................................................ 46 6.04 Waiver of Past Defaults....................................................................... 46 6.05 Control by Majority........................................................................... 46 6.06 Limitation on Suits........................................................................... 46 6.07 Rights of Holders of Debentures to Receive Payment............................................ 47 6.08 Collection Suit by Trustee.................................................................... 47 6.09 Trustee May File Proofs of Claim.............................................................. 47 6.10 Priorities.................................................................................... 48 6.11 Undertaking for Costs......................................................................... 48 ARTICLE 7 TRUSTEE 7.01 Duties of Trustee............................................................................. 49 7.02 Rights of Trustee............................................................................. 50 7.03 Individual Rights of Trustee.................................................................. 51 7.04 Trustee's Disclaimer.......................................................................... 51 7.05 Notice of Defaults............................................................................ 51 7.06 Reports by Trustee to Holders of the Debentures............................................... 52 7.07 Compensation and Indemnity.................................................................... 52 7.08 Replacement of Trustee........................................................................ 53 7.09 Successor Trustee by Merger, etc.............................................................. 54 7.10 Eligibility; Disqualification................................................................. 54 7.11 Preferential Collection of Claims Against Company............................................. 54 ARTICLE 8 SATISFACTION AND DISCHARGE 8.01 Satisfaction and Discharge.................................................................... 54 8.02 Application of Trust Money.................................................................... 55 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER 9.01 Without Consent of Holders of Debentures...................................................... 56 9.02 With Consent of Holders of Debentures......................................................... 56
ii 9.03 Compliance with Trust Indenture Act........................................................... 58 9.04 Revocation and Effect of Consents............................................................. 58 9.05 Notation on or Exchange of Debentures......................................................... 58 9.06 Trustee to Sign Amendments, etc............................................................... 59 ARTICLE 10 SUBORDINATION 10.01 Agreement to Subordinate...................................................................... 59 10.02 Liquidation; Dissolution; Bankruptcy.......................................................... 59 10.03 Default on Senior Debt or Designated Senior Debt.............................................. 60 10.04 Acceleration of Debentures.................................................................... 60 10.05 When Distribution Must Be Paid Over........................................................... 60 10.06 Notice by Company............................................................................. 61 10.07 Subrogation................................................................................... 61 10.08 Relative Rights............................................................................... 61 10.09 Subordination May Not Be Impaired by Company.................................................. 61 10.10 Distribution or Notice to Representative...................................................... 62 10.11 Rights of Trustee and Paying Agent............................................................ 62 10.12 Authorization to Effect Subordination......................................................... 63 ARTICLE 11 CONVERSION OF THE SECURITIES 11.01 Conversion Privilege.......................................................................... 63 11.02 Conversion Procedure.......................................................................... 66 11.03 Adjustments Below Par Value................................................................... 68 11.04 Taxes on Conversion........................................................................... 68 11.05 Company to Provide Stock...................................................................... 68 11.06 Adjustment of Conversion Price................................................................ 69 11.07 No Adjustment................................................................................. 72 11.08 Equivalent Adjustments........................................................................ 73 11.09 Notice of Adjustment.......................................................................... 73 11.10 Notice of Certain Transactions................................................................ 73 11.11 Effect of Reclassification, Consolidation, Merger, Share Exchange or Sale on Conversion Privilege ......................................................................... 74 11.12 Trustee's Disclaimer.......................................................................... 75 11.13 Voluntary Reduction........................................................................... 75 11.14 Simultaneous Adjustments...................................................................... 75 ARTICLE 12 MISCELLANEOUS 12.01 Trust Indenture Act Controls.................................................................. 76 12.02 Notices....................................................................................... 76 12.03 Communication by Holders of Debentures with Other Holders of Debentures....................... 77 12.04 Certificate and Opinion as to Conditions Precedent............................................ 77 12.05 Statements Required in Certificate or Opinion................................................. 77 12.06 Rules by Trustee and Agents................................................................... 78 12.07 No Personal Liability of Stockholders, Employees, Officers, Directors......................... 78 12.08 Governing Law; Submission to Jurisdiction..................................................... 78 12.09 No Adverse Interpretation of Other Agreements................................................. 79
iii 12.10 Successors.................................................................................... 79 12.11 Severability.................................................................................. 79 12.12 Counterpart Originals......................................................................... 79 12.13 Table of Contents, Headings, etc.............................................................. 79
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 iv 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. "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 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 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 2 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 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 3 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 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. 4 "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 PRINCIPAL 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 5 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. "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 6 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. "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. 7 "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, 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. 8 "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 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 9 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. "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)
10 "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 "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 11 "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; (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 12 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 represented 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 13 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. 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 14 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 ss. 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 Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Debentures and the Company shall otherwise comply with TIA ss. 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. 15 (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: (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 16 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: (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; 17 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, 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 18 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; (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: 19 (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 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 an 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 20 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. (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; 21 (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, 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. 22 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 beneficial 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 23 (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 Unrestricted 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. 24 (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: "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 25 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." (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 26 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 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. 27 (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. (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 28 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 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. 29 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. 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 30 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. 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 31 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 section 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: (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; 32 (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. 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 33 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. 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 me 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 34 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 include 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); 35 (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; (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. 36 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. 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 37 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: (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 38 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). 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. 39 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 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. 40 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 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 l5(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 41 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, performed 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, 42 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 defined 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 43 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. 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 arid 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 44 maturity or (b) as a result of which the maturity of such indebtedness has been accelerated prior to its Stated Maturity; (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 otherwise 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 45 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: (a) the Holder of a Debenture gives to the Trustee written notice of a continuing Event of Default; 46 (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 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 47 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. 48 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 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. 49 (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 counselor 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 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. 50 (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. 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. 51 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 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. 52 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 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 53 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). 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: 54 (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. 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 8.0l 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; 55 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; (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, 56 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. 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 nonconsenting 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; 57 (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; (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. 58 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 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: 59 (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 (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 60 in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. 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. 61 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 of facts that would cause the payment of 62 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, (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 63 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 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. 64 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 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 65 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 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 66 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 latex 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 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 67 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 it 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. 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 68 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. 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: 69 (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 ox 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 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 70 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 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 71 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 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 72 I1.06(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. 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 73 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 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. 74 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 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 bylaw 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, 75 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. 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. 76 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 notice 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; 77 (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; (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. 78 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] 79 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of October 28, 2003. GREY GLOBAL GROUP INC., as Issuer By /s/ Steven G. Felsher ---------------------------------- Name: Steven G. Felsher Title: Vice Chairman, Chief Financial Officer, Secretary and Treasurer AMERICAN STOCK TRANSFER & TRUST COMPANY, as Trustee By /s/ Herbert J. Lemmer ---------------------------------- Name: HERBERT J. LEMMER Title: VICE PRESIDENT 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 repurchases, redemptions or other acquisitions of shares of the Company's capital stock in A-3 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 then listed thereon) or other applicable self-regulatory A-4 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 and unpaid on the Debentures being redeemed, to but not including A-5 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, A-6 interest (including Contingent Interest and Additional 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 A-7 Holder may convert a portion of a Debenture equal to $1,000 or any integral multiple thereof. 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 A-8 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 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 A-9 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 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 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. A-10 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/MIA (= Uniform Gifts to Minors Act). [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): $ - -------------------------------------------------------------------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A-13 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-14 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-15 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 decrease in Amount of increase in this Global Debenture Signature of authorized Principal Amount of Principal Amount of following such decrease officer of Trustee or Date this Global Debenture this Global Debenture (or increase) Debenture Custodian - ------ --------------------- --------------------- ----------------------- ------------------------
* This schedule should be included only if the Debenture is issued in global form. A-16 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-2 [ ] (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 [ ] (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 B-3 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 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. B-4 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-5 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-6 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 amended (the "SECURITIES ACT"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement B-7 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 C-2 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. 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. C-3 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. Dated: C-4 [Insert Name of Owner] By: ------------------------------- Name: Title: c-5 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 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 B-10 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: 2 [Insert Name of Accredited Investor] By: -------------------------------- Name: Title: 3 EX-4.03 4 y95040exv4w03.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.03 ----------------------------- 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) 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. Initial Shelf Registration: See Section 2(a). Inspectors: See Section 4(n). Issue Date: The date hereof. 2 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, 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. 3 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. 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). 4 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 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. 5 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 Registrable 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. 6 (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 Registrable 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 7 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 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 8 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 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. 9 (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. (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 security-holders 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, 10 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 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 11 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 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 12 and (xi) fees and expenses of the 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. (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, 13 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, directors 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 14 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 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. 15 (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. 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. 16 (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 (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. 17 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 JURISDICTION 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. 18 (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 in-tended third party beneficiaries of this Agreement and this Agreement may be enforced by such Persons. 19 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. GREY GLOBAL GROUP INC. By: /s/ Steven G. Felsher ---------------------------------------- Name: Steven G. Felsher Title: Vice Chairman, Chief Financial, Officer, Secretary and Treasurer J.P. MORGAN SECURITIES INC., on behalf of the Initial Purchasers By: /s/ Paul A. Ohern ---------------------------------------- Name: Paul Ohern Title: VP EX-10.03 5 y95040exv10w03.txt AMENDMENT TWELVE TO MERYER EMPLOYMENT AGREEMENT TWELFTH AMENDMENT AGREEMENT made as of April 4,2003 between GREY GLOBAL GROUP INC., a Delaware corporation with principal offices at 777 Third Avenue, New York, New York 10017 ("Grey"), and Edward H. Meyer, residing at 580 Park Avenue, New York, New York 10021 ("Meyer"). WHEREAS, Meyer is employed by Grey as its President, Chairman of the Board and Chief Executive Officer pursuant to an employment agreement originally executed effective February 9,1984 and amended from time to time thereafter (such employment agreement, as so amended, being hereinafter referred to as the "Current Agreement"). WHEREAS, in recognition of Meyer's strong leadership and long service to Grey, Grey desires to increase the supplemental pension that will be payable to Meyer upon termination of his employment with Grey. WHEREAS, in order to accomplish the foregoing, Grey desires to increase the monthly supplemental pension credit provided for in paragraph (a) of Section 4 of the Current Agreement from $30,000 per month to $50,833 per month. WHEREAS, the parties desire to amend the Current Agreement to reflect the foregoing. NOW, THEREFORE, in consideration of the foregoing, the parties hereby agree as follows: 1. Capitalized Terms. Capitalized terms used herein, unless otherwise defined herein, have the meaning ascribed to such terms in the Current Agreement. 2. Monthly Pension Account Credit. Paragraph (a) of Section 4 of the Current Agreement is hereby amended so that the phrase "an amount equal to $30,000" is deleted and replaced with the phrase "an amount equal to $50,833". 3. Monthly Pension Payment. Paragraph (c) of Section 4 of the Current Agreement is hereby amended so that the phrase "a supplemental pension equal to $40,000 per month" is deleted and replaced with the phrase "a supplemental pension equal to $67,777 per month ". 4. Status of Current Agreement. This Amendment shall be effective as of January 1, 2003, and, except as set forth herein, the Current Agreement shall remain in full force and effect and shall be otherwise unaffected hereby. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals as of the day and year first above written. GREY GLOBAL GROUP INC. By: Steven G. Felsher Vice Chairman & Chief Financial Officer /s/ STEVEN G. FELSHER ---------------------------------------- /s/ EDWARD H. MEYER ---------------------------------------- Edward H. Meyer EX-10.06 6 y95040exv10w06.txt AGREEMENT SETTLING FIRST & FINAL ACCT. OF TRUSTEE EXHIBIT 10.06 STATE OF NEW YORK SURROGATE'S COURT: NEW YORK COUNTY ______________________________ x In the Matter of the Settlement of the : First and Final Account of Proceedings : AGREEMENT SETTLING of UNITED STATES TRUST COMPANY : FIRST AND FINAL OF NEW YORK, as Trustee of the : ACCOUNT OF TRUSTEE Deferred Compensation Trust created : under Agreement dated March 22, 1995, as : File No. amended. : ______________________________ x THIS AGREEMENT, made as of the day of June, 2003, by and among (1) UNITED STATES TRUST COMPANY OF NEW YORK, as resigning Trustee of a trust known as the Grey Advertising Inc. Deferred Compensation Trust created under a certain Trust Agreement dated March 22, 1995, as amended from time to time (the "Trustee"); (2) GREY GLOBAL GROUP INC. (formerly Grey Advertising Inc.) (the "Company"); (3) EDWARD H. MEYER (the "Executive") and (4) HSBC BANK USA (the "Successor Trustee"). WI T N E S S E T H: WHEREAS: (1) By Trust Agreement dated March 22, 1995, between the Company and the Trustee (the "Trust Agreement"), the Company established a trust known as the Grey Advertising Inc. Deferred Compensation Trust for the benefit of the Executive (the "Trust"), a copy of which is attached hereto as Exhibit A; and 1 (2) Section 12 of the Trust Agreement provides that the Trust Agreement may be amended from time to time by a written instrument executed by the Company and the Trustee with the consent of the Executive; and (3) A First Amendment to the Trust Agreement was made by the Company and the Trustee with the consent of the Executive as of February 26, 1996 (the "First Amendment"), a copy of which is attached hereto as Exhibit B; and (4) A Second Amendment to the Trust Agreement was made by the Company and the Trustee with the consent of the Executive as of April 30, 1998 (the "Second Amendment"), a copy of which is attached hereto as Exhibit C; and (5) Pursuant to the authority of the Trustee and the terms of the Trust Agreement, the First Amendment and the Second Amendment, the Trustee has held and managed the assets comprising the trust fund, as constituted from time to time, in certain separate trust accounts and sub-accounts known as (i) Account No. 23080000 titled "UD GREY ADV DEF TRUST UST"; (ii) Account No. 23104300 titled "UD GREY ADV DEF TR MISC"; (iii) Account No. 23104400 titled "UD GREY ADV DCT CUST ACT G SACHS"; (iv) Account No. 23104500 titled "UD GREY ADV PEN SUB GOLDMAN" and (v) Account No. 23104600 titled "UD GREY ADV DCT PENSION SUB AC" (the "Five Trust Accounts"); and (6) Pursuant to Sections 10 (b) and 11(a) of the Trust Agreement, as amended, the Company with the consent of the Executive shall have the right to (i) remove the Trustee on 30 days' notice or upon such shorter notice accepted by the Trustee and (ii) appoint a successor corporate Trustee to replace such removed 2 Trustee, which appointment shall be effective when accepted in writing by such successor Trustee; and (7) By letter dated May 21, 2003, a copy of which is attached hereto as Exhibit D, the Company, with the consent of the Executive, removed the Trustee and appointed HSBC BANK USA as successor Trustee of the Trust (previously referred to above as the "Successor Trustee"), effective as of the close of business on June 30, 2003 or such other earlier date as shall be mutually agreed by the Trustee and the Successor Trustee; and (8) By letter dated May 23, 2003, a copy of which is attached hereto as Exhibit E, HSBC BANK USA accepted its appointment to act as successor Trustee of the Trust effective as of the close of business on June 30, 2003 or such other earlier date as shall be mutually agreed upon; and (9) In accordance with Section 7 of the Trust Agreement, as amended, the Company and the Executive have requested the Trustee to render its account on an informal basis and based thereon the Trustee has annexed Statements of Income and Principal Transactions for the Five Trust Accounts for the period from March 22, 1995 through June 30, 2003 (the "Statements") as follows: (i) United States Trust Company of New York ledger and cash statements reflecting principal and income transactions for Account No. 23080000 titled "UD GREY ADV DEF TRUST UST" for the period from March 22, 1995 through June 30, 2003 together with a statement of principal on hand in such account as of June 30, 2003, attached hereto as Exhibit F ; (ii) United States Trust Company of New York ledger and cash statements reflecting principal and income transactions for Account No. 23104300 titled "UD GREY ADV DEF TR MISC" for the period from March 22, 1995 through June 30, 2003 together with a statement of principal on hand in such account as of June 30, 2003, attached hereto as Exhibit G; 3 (iii) United States Trust Company of New York ledger and cash statements reflecting principal and income transactions for Account No. 23104400 titled "UD GREY ADV DCT CUST ACT G SACHS" for the period from March 22, 1995 through June 30, 2003 together with a statement of principal on hand in such account as of June 30, 2003, attached hereto as Exhibit H; (iv) United States Trust Company of New York ledger and cash statements reflecting principal and income transactions for Account No. 23104500 titled "UD GREY ADV PEN SUB GOLDMAN" for the period from March 22, 1995 through June 30, 2003 together with a statement of principal on hand in such account as of June 30, 2003, attached hereto as Exhibit I; and (v) United States Trust Company of New York ledger and cash statements reflecting principal and income transactions for Account No. 23104600 titled "UD GREY ADV DCT PENSION SUB AC" for the period from March 22, 1995 through June 30, 2003 together with a statement of principal on hand in such account as of June 30, 2003, attached hereto as Exhibit J. (10) Pursuant to Section 9 of the Trust Agreement, as amended, the Company shall be responsible for the payment of all administrative and Trustee's fees and expenses; and (11) The Trustee is owed the sum of $45,711, on account of its unpaid annual commissions calculated for the period from January 1, 2003 through June 20, 2003 in connection with its services as Trustee of the Trust. The Trustee is also owed additional estimated annual commissions in the amount of $2,200 calculated for the period from June 21, 2003 through June 30, 2003, representing the balance of the Trustee's unpaid annual commissions in connection with such services, which amount shall be finally determined by the Trustee as soon as practicable after the date of this Agreement and thereupon promptly paid by the Company; and 4 (12) The firm of Skadden, Arps, Slate, Meagher and Flom LLP is owed the sum of $5,000 as and for its fee for legal services rendered in connection with the preparation of this Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained and for other good and valuable consideration, the parties hereto agree as follows: FIRST: The Company and the Executive have examined the Statements and they are each satisfied that the Statements contain in all respects full, true and complete statements of the acts and proceedings of UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee of the Trust for the period from March 22, 1995 through June 30, 2003 in connection with the administration of the Trust, and that there is no error or omission in the Statements, to the prejudice of their rights. SECOND: The Company and the Executive acknowledge and agree that the Trustee has made full and complete disclosure to each of them of all of its acts and proceedings as Trustee of the Trust for the period from March 22, 1995 through June 30, 2003 and that it has put at their disposal all information in any way related to or connected with its acts and proceedings as Trustee of the Trust during such period. THIRD: The Company and the Executive (i) accept the Statements in lieu of a formal accounting listing all income and principal transactions by schedule (ii) acknowledge and agree that the Statements shall have the same force and effect as a formal accounting; (iii) ratify, approve and confirm the Statements 5 and each and every act, doing, proceeding, collection and disbursement of the Trustee set forth therein and (iv) waive any right to enforce the judicial settlement of any account of the Trustee for the period from March 22, 1995 through June 30, 2003, it being the purpose and intent of the parties hereto that the release, discharge and hereinafter given and granted in Article SEVENTH of this Agreement shall be accepted by the Trustee, and shall be binding upon the Company and the Executive and each of them in all respects as though an account had been rendered in the course of a judicial proceeding and had thereupon been settled and allowed, as presented and filed, by a judgment, decree or order of a court of competent jurisdiction. FOURTH: Notwithstanding any contrary provision of this Agreement, the Trustee may at any time, and without notice of any kind to the Company or the Executive, record or file this Agreement and the annexed Statements, or any of them, in accordance with the provisions of any existing law, statute or rule of the courts of the State of New York or of any other state, as an instrument settling the first and final account of the Trustee, if, in the discretion of the Trustee, it shall be deemed advisable to do so, and the Trustee may institute and conduct any legal proceedings or obtain a judicial settlement of such account, without further notice to the Company or the Executive. FIFTH: The Company and the Executive agree that upon execution of this Agreement, the Company shall pay (i) the Trustee (a) the sum of $45,711 on account of the Trustee's unpaid annual commissions calculated for the period from January 1, 2003 through June 20, 2003 in connection with its services as 6 Trustee of the Trust and (b) the balance of the Trustee's unpaid annual commissions calculated for the period from June 21, 2003 through June 30, 2003 in connection with such services, which amount has been estimated by the Trustee to be $2,200, and which amount shall be finally determined by the Trustee as soon as practicable after the date of this Agreement and thereupon promptly paid by the Company and (ii) the firm of Skadden, Arps, Slate, Meagher and Flom LLP the sum of $5,000, as and for its fee for legal services rendered in connection with the preparation of this Agreement. SIXTH: The Successor Trustee hereby acknowledges receipt from the Trustee of the assets described in the Statements attached hereto as Exhibits F through J, being the aggregate of income and principal assets of the Trust and hereby agrees to refund, upon demand, any amount found to be in excess of the amount properly payable to the Successor Trustee and any amounts necessary to pay any debts, taxes or other charges or expenses of any kind which, if charged to the Trustee prior to distribution would be a proper charge against the Trust, not to exceed, however, an amount equal to the value of the property distributed to the Successor Trustee from the Trust as hereinabove set forth. SEVENTH: The Company and the Executive each release and discharge the Trustee, and its legal representatives, successors and assigns, as Trustee, of and from any and all manner of action or actions, cause or causes of action, suits, debts, sums of money, damages, claims and demands whatsoever which the Company and the Executive may now have or hereafter may have against the Trustee for or by reason of any act or omission, collection or disbursement, cause, 7 matter or thing whatsoever, recited, contained, appearing or set forth in the Statements or this Agreement or reasonably to be inferred from anything therein contained, or for or by reason of anything done or omitted to be done by the Trustee in the administration of the Trust during the period from March 22, 1995 through June 30, 2003. The Company further agrees, to indemnify and hold harmless the Trustee from all liabilities, claims, losses, damages or demands, which the Trustee may sustain or incur at any time by reason of any act or thing connected with the Trust or the administration and distribution thereof, up to but not exceeding an amount equal to the aggregate value on the date or dates of distributions of the property distributed to the Successor Trustee as hereinabove set forth. EIGHTH: The parties agree that the Successor Trustee shall be relieved of any and all responsibility and accountability whatsoever to the Company or to the Executive for or by reason of any act or omission, collection or disbursement, cause, matter or thing whatsoever, recited, contained, appearing, or set forth in the Statements or this Agreement or reasonably to be inferred from anything therein contained, or for or by reason of anything done or omitted to be done by the Trustee in the administration of the Trust during the period from March 22, 1995 through June 30, 2003 and that the accountability and liability of the Successor Trustee shall be limited solely to those assets or properties delivered into his possession as successor Trustee of the Trust. NINTH: The Company and Executive and each of them represent, certify and warrant that he or it has not transferred, assigned or encumbered, in any 8 way, either voluntarily or involuntarily, his or its interest in the Trust, or any part of such Trust. TENTH: This Agreement shall inure to the benefit of the Trustee, and its legal representatives, successors and assigns, and shall be binding on the Company and the Executive, and their respective heirs, executors, administrators, legal representatives, successors and assigns. ELEVENTH: This Agreement may be executed in counterparts and as so executed shall have the same force and effect as if one document had been executed by all of the parties. IN WITNESS WHEREOF, the parties have hereunto set their respective hands as of the day and year first above written. UNITED STATES TRUST COMPANY OF NEW YORK, Trustee By: /s/ Laurence Edelman ----------------------------------------- Attest: Name: Laurence Edelman Title: Senior Vice President GREY GLOBAL GROUP INC., Company By: /s/ Steven G. Felsher ----------------------------------------- Attest: Name: Title: 9 /s/ Edward H. Meyer --------------------------------------- EDWARD H. MEYER, Executive HSBC BANK USA, Successor Trustee By: /s/ James Esposito -------------------------------------- Attest: Name: James Esposito Title: Vice President 10 STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On this 24 day of June, 2003, before me personally came , to me known who duly swore to the foregoing instrument and who did say that (s)he resides at 4 Locust Road, Ossining, NY ; that (s)he is a Senior Vice President of UNITED STATES TRUST COMPANY OF NEW YORK, the corporation described in and which executed the foregoing instrument; that (s)he knows the seal of said corporation; that the seal affixed to such instrument is such corporate seal, that it was so affixed by order of the Board of Directors of UNITED STATES TRUST COMPANY OF NEW YORK and that (s)he signed his/her name thereto by like authority. /s/ Linda M. Rojas -------------------------------------- Notary Public STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On this 21st day of July, 2003, before me personally came Steven G. Felsher, to me known who duly swore to the foregoing instrument and who did say that (s)he resides at 777 Third Ave, NY, NY 10017 ; that (s)he is a Vice Chairman of GREY GLOBAL GROUP INC., the corporation described in and which executed the foregoing instrument; that (s)he knows the seal of said corporation; that the seal affixed to such instrument is such corporate seal, that it was so affixed by order of the Board of Directors of GREY GLOBAL GROUP INC. and that (s)he signed his/her name thereto by like authority. /s/ Moshe R. Oppenheim -------------------------------------- Notary Public 11 STATE OF New York ) : ss.: COUNTY OF New York ) On this 21st day of July , 2003, before me, a Notary Public in and for the State of New York , personally appeared EDWARD H. MEYER, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. /s/ Moshe R. Oppenheim --------------------------------------- Notary Public STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On this 25th day of June , 2003, before me personally came , to me known who duly swore to the foregoing instrument and who did say that (s)he resides at 6 Lyon Place, Staten Island, NY ; that (s)he is a Vice President of HSBC BANK USA, the corporation described in and which executed the foregoing instrument; that (s)he knows the seal of said corporation; that the seal affixed to such instrument is such corporate seal, that it was so affixed by order of the Board of Directors of HSBC BANK USA and that (s)he signed his/her name thereto by like authority. /s/ Marianne Caskran --------------------------------------- Notary Public 12 EX-10.23 7 y95040exv10w23.txt AMENDED & RESTATED OMNIBUS AMENDMENT TO NOTE AGRMT EXHIBIT 10.23 EXECUTION COPY AMENDED AND RESTATED OMNIBUS AMENDMENT TO NOTE AGREEMENTS THIS AMENDED AND RESTATED OMNIBUS AMENDMENT TO NOTE AGREEMENTS (this "Amendment") is entered into as of October 27, 2003 between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential") and GREY GLOBAL GROUP INC., a Delaware corporation (the "Company"). WHEREAS, the Company and Prudential are parties to (1) that certain Note Agreement, dated as of November 13, 2000 (as amended, supplemented and in effect as of the date of effectiveness hereof, the "2000 Note Agreement") relating to the issue and sale of the Company's 8.17% Senior Notes Due November 13, 2007, and (2) that certain Note Agreement, dated as of March 14, 2003 (as amended, supplemented and in effect as of the date of effectiveness hereof, the "2003 Note Agreement"; and collectively with the 2000 Note Agreement, the "Note Agreements") relating to the issue and sale of the Company's 7.41% Senior Notes Due March 14, 2009; WHEREAS, the Company and Prudential agreed to certain amendments to the Note Agreement, subject to certain limitations and conditions, as provided for in the Omnibus Amendment To Note Agreements (the "Existing Amendment"), dated as of October 21, 2003, between Prudential and the Company; and WHEREAS, at the Company's request, the Company and Prudential have agreed to amend and restate the Existing Amendment, in its entirety, to incorporate certain additional amendments to the Note Agreement and modifications to such Existing Amendment, subject to certain limitations and conditions, all as provided for herein. NOW, THEREFORE, in consideration of the foregoing premises and mutual covenants and agreements contained herein, the parties hereto agree as follows: 1. Amendments to Note Agreement. Prudential and the Company hereby agree as follows: (a) Paragraph 6 of each Note Agreement is hereby amended by: (i) amending Paragraph 6F thereof, in each case, by inserting the following, new paragraph immediately following the first paragraph thereof and immediately before Paragraph 6G: "For purposes of this Paragraph 6F only, the amount of Fixed Charges determined for any period shall be decreased by an amount equal to the lesser of (i) the amount of Interest Charges for such period attributable to the Incremental Debentures (as defined below) outstanding at such time, and (ii) $1,250,000. "INCREMENTAL DEBENTURES" shall mean, so long as the aggregate, outstanding principal amount of the Debentures exceeds $125,000,000, a portion of the Debentures equal to the lesser of (A) the amount by which the aggregate, outstanding principal amount of the Debentures exceeds $125,000,000, and (B) $25,000,000."; and (ii) deleting Paragraph 6H thereof (in each case) in its entirety, and replacing it (in each case) with the following new Paragraph 6H in it's entirety: "6H. OPTIONAL PAYMENTS AND MODIFICATIONS OF CERTAIN DEBT INSTRUMENTS. (a) Make or offer to make any optional or voluntary payment, prepayment, repurchase or redemption of or otherwise optionally or voluntarily defease or segregate funds with respect to (i) the Debentures or (ii) if, at the time thereof or after giving effect thereto, a Default of Event of Default shall have occurred and be continuing or the Company shall not be in pro forma compliance with the financial covenants incorporated pursuant to paragraph 6G above, any other Indebtedness in respect of any private placement or public offering of notes or debt securities; or (b) amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of or applicable to the Debentures including, without limitation, the Indenture (other than any such amendment, modification, waiver or other change that (x) (i) would only operate to extend the maturity or reduce the amount of any payment of principal thereof or reduce the rate or extend any date for payment of interest thereon and (ii) does not involve the payment of a consent fee, or (y) would only operate to cure any ambiguity, defect or inconsistency, so long as such amendment, modification, waiver or other change is acceptable to the Required Holders).". (b) Paragraph 7A of the Note Agreement is hereby amended by inserting the following, new clause (xv) in its entirety immediately following clause (xiv) thereof, and immediately before the last paragraph of Paragraph 7A: "(xv) a Change of Control;". (c) Each of the Note Agreements is hereby amended by deleting (in their entirety) the respective definitions of "CONSOLIDATED CASH FLOW", "CONSOLIDATED NET WORTH", and "TOTAL BORROWED FUNDS" set forth in Paragraph 10B thereof, respectively, and replacing them, respectively, in each case, with the following new definitions (in the appropriate alphabetical order): ""CONSOLIDATED CASH FLOW" for any period shall mean the sum of Consolidated Net Income, depreciation expenses, amortization costs (including amortization of restricted stock and employee stock options granted as compensation to employees), deferred compensation expenses (net of deferred compensation due and payable within one year), intangibles-related asset impairment charges for such period attributable to the purchase price of acquisitions, Interest Charges for such period attributable to the Debentures, dividends paid during such period on, and other downward adjustments (in accordance with Financial Accounting Standard (FAS) No. 150, issued by the Financial Accounting Standards Board in 2003) to Consolidated Net Income for such period attributable to changes in the redemption value of, the Company's Preferred Stock issued and outstanding on June 30, 2003, minority interests and changes in deferred taxes, less any upward adjustments (in accordance with FAS No. 150) to Consolidated 2 Net Income for such period attributable to changes in the redemption value of, the Company's Preferred Stock issued and outstanding on June 30, 2003, and any equity in the earnings of unconsolidated affiliated entities (net of dividends received), all as computed and consolidated for the Company and its Subsidiaries for such period in accordance with generally accepted accounting principles.". ""CONSOLIDATED NET WORTH" shall mean, at any date, the excess, if any, of the total assets of the Company and its Subsidiaries over the total liabilities of the Company and its Subsidiaries, all as would be shown on a consolidated balance sheet of the Company and its Subsidiaries prepared as of such date in accordance with generally accepted accounting principles (but Preferred Stock of the Company shall not in any event be treated as a liability).". ""TOTAL BORROWED FUNDS" shall mean, at any date, the sum of (x) Consolidated Funded Debt (excluding Consolidated Funded Debt attributable to (A) the outstanding principal amount of the Debentures, in an amount not to exceed $125,000,000 and (B) obligations in respect of the Company's Preferred Stock issued and outstanding on June 30, 2003) as of such date plus (y) the excess, if any, of Consolidated Current Debt as of such date over the aggregate of Cash Equivalents of the Company and its Subsidiaries on hand as of such date (valued at the amount as would be shown for such items on a consolidated balance sheet of the Company and its Subsidiaries prepared as of such date in accordance with generally accepted accounting principles) and not subject to any Lien (other than a Lien in favor of any such Consolidated Current Debt).". (d) Each of the Note Agreements is hereby amended by adding, in each case, the following defined terms and definitions in their entirety to Paragraph l0B thereof, respectively, each in its appropriate, respective position determined by alphabetical order: ""CHANGE OF CONTROL" shall mean any event giving rise to the obligation of the Company to repurchase the Debentures as defined in the Indenture until such obligation ceases to exist." ""DEBENTURES" shall mean those certain subordinated, convertible debentures issued by the Company under the Indenture, in an aggregate principal amount not greater than $150,000,000." " "INCREMENTAL DEBENTURES" shall have the meaning ascribed thereto in Paragraph 6F hereof." ""INDENTURE" shall mean the indenture, dated on or about October 28, 2003, pursuant to which the Debentures are issued by the Company." (e) Each Note Agreement and any and all other documents heretofore, now or hereafter executed and delivered pursuant to the terms of such Note Agreement, are hereby amended so that any reference to such Note Agreement shall mean a reference to such Note Agreement as amended hereby. Except as expressly modified and amended in this Amendment all of the terms, provisions and conditions of each Note Agreement and the agreements and instruments relating thereto shall remain unchanged and in full force and effect. 3 2. Representations, Warranties and Acknowledgment of the Company The Company hereby: (a) represents and warrants as of the date hereof that (i) no Default or Event of Default has occurred and is continuing, and (ii) no material adverse change has occurred in the financial condition, assets, or prospects of the Company and its Subsidiaries, taken as a whole, since December 31, 2002; and (b) confirms and acknowledges that it has no defenses, offsets or counterclaims against any of its obligations under or in respect of either Note Agreement and that all amounts outstanding under and in respect of the respective Notes and each of the Note Agreements are owing to holders of the Notes without defense, offset or counterclaim. 3. Effectiveness of Amendment This Amendment shall become effective upon receipt by the Required Holders of (a) counterparts of this Amendment, executed and delivered by each of the parties hereto, and (b) a true and correct copy of the executed and effective Second Amendment to the 2001 Bank Agreement, dated as of October 2, 2003 (as amended and supplemented by the October 25, 2003 letter agreement relating thereto), receipt of which is hereby acknowledged. 4. Miscellaneous (a) Capitalized terms used and not otherwise defined herein shall have the respective meanings ascribed thereto in the Note Agreements (as the case may be). (b) The Note Agreements, as amended by this Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. (c) This Amendment may be executed in any number of counterparts and by any combination of the parties hereto in separate counterparts, each of which counterparts shall be an original and all of which taken together shall constitute one and the same agreement. (d) Upon the effectiveness of this Amendment, the Existing Amendment will be superseded and replaced in its entirety. IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and delivered by their respective officers thereunto duly authorized as of the date first above written. GREY GLOBAL GROUP INC. By: /s/ Lester Feintuck ------------------------------------ Title: SVP 4 THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: /s/ Christopher Carey ----------------------------------- Title: Vice President 5 EX-10.25 8 y95040exv10w25.txt FIRST & SECOND AMENDMENTS TO CREDIT AGREEMENT EXHIBIT 10.25 EXECUTION COPY FIRST AMENDMENT, dated as of December 31, 2001 (this "Amendment"), to the Credit Agreement, dated as of December 21, 2001 (as amended by this amendment and as the same may be further amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among GREY GLOBAL GROUP INC., a Delaware corporation (the "Company"), the Foreign Subsidiary Borrowers from time to time parties thereto, the several banks and other financial institutions or entities from time to time parties thereto (the "Lenders"), HSBC BANK USA, as documentation agent (in such capacity, the "Documentation Agent"), FLEET NATIONAL BANK, as syndication agent (in such capacity, the "Syndication Agent"), and JPMORGAN CHASE BANK as administrative agent (in such capacity, the "Administrative Agent"). W I T N E S S E T H: WHEREAS, the Company, the Lenders, the Documentation Agent, the Syndication Agent and the Administrative Agent are parties to the Credit Agreement; WHEREAS, the Company has requested that the Lenders amend certain terms in the Credit Agreement in the manner provided for herein; and WHEREAS, the Administrative Agent and the Lenders are willing to agree to the requested amendment subject to certain limitations and conditions, as provided for herein; NOW, THEREFORE, in consideration of the premises contained herein, the parties hereto agree as follows: 1. Defined Terms. Unless otherwise defined herein, terms which are defined in the Credit Agreement and used herein as defined terms are so used as so defined. 2. Amendment to Section 6.14. Section 6.14 of the Credit Agreement is hereby amended by amending and restating such section in its entirety to read as follows: 6.14. Note Agreements. Fail to comply with Section 6B, 6C or 6F of the 1997 Note Agreement or Section 6B, 6C or 6F of the 2000 Note Agreement (which Sections (as in effect on the date hereof) are hereby incorporated herein by reference as if set forth herein in full (together with any related definitions) and without giving effect to any modifications or amendments thereto after the date hereof, other than the Second Amendment to the Note Agreements, dated as of December 31, 2001). 3. Representations and Warranties. On and as of the date hereof, the Company hereby confirms, reaffirms and restates the representations and warranties set forth in Section 3 of the Credit Agreement mutatis mutandis, except to the extent that such representations and warranties expressly relate to a specific earlier date in which case the Company hereby confirms, reaffirms and restates such representations and warranties as of such earlier date. 4. Effectiveness of Amendment. This Amendment shall become effective as of the date first written above so long as the Administrative Agent has received (a) counterparts of this Amendment duly executed by the Company and each of the Required Lenders and (b) all fees required to be paid, and all expenses for which invoices have been presented (including the reasonable fees and expenses of legal counsel). 5. Continuing Effect; No Other Amendments or Consents. Except as expressly provided herein, all of the terms and provisions of the Credit Agreement are and shall remain in full force and effect. The amendment provided for herein is limited to the specific section of the Credit Agreement specified herein and shall not constitute a consent, waiver or amendment of, or an indication of the Administrative Agent's or the Lenders' willingness to consent to any action requiring consent under any other provisions of the Credit Agreement or the same section for any other date or time period. 6. Expenses. The Company agrees to pay and reimburse the Administrative Agent for all its reasonable costs and out-of-pocket expenses incurred in connection with the preparation and delivery of this Amendment, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent. 7. Counterparts. This Amendment may be executed in any number of counterparts by the parties hereto (including by facsimile transmission), each of which counterparts when so executed shall be an original, but all the counterparts shall together constitute one and the same instrument. 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 2 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. GREY GLOBAL GROUP INC. By: /s/ Steven G. Felsher ---------------------------------- Name: Steven Felsher Title: Vice Chairman By: /s/ Lester M. Feintuck ---------------------------------- Name: Lester M. Feintuck Title: SVP JPMORGAN CHASE BANK, as Administrative Agent and as a Lender By: /s/ Rebecca Vogel ---------------------------------- Name: Rebecca Vogel Title: Vice President FLEET NATIONAL BANK, as Syndication Agent and as a Lender By: /s/ Thomas J. Levy ---------------------------------- Name: Thomas J. Levy Title: Vice President HSBC BANK USA, as Documentation Agent and as a Lender By: /s/ Johan Sorensson ---------------------------------- Name: Johan Sorensson Title: First Vice President NORTH FORK BANK, as a Lender By: /s/ Thomas McGann ---------------------------------- Name: Thomas McGann Title: Senior Vice President THE BANK OF NEW YORK, as a Lender By: /s/ Brian A. Stern ---------------------------------- Name: Brian A. Stern Title: Vice President 3 EXHIBIT 10.25 Execution Copy SECOND AMENDMENT, dated as of October 2, 2003 (this "Amendment"), to the Credit Agreement, dated as of December 21, 2001 (as amended pursuant to the First Amendment hereto, dated as of December 31, 2001 and this Amendment, and as the same may further be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among GREY GLOBAL GROUP INC., a Delaware corporation (the "Company"), the Foreign Subsidiary Borrowers from time to time parties thereto, the several banks and other financial institutions or entities from time to time parties thereto (the "Lenders"), HSBC BANK USA, as documentation agent (in such capacity, the "Documentation Agent"), FLEET NATIONAL BANK, as syndication agent (in such capacity, the "Syndication Agent"), and JPMORGAN CHASE BANK as administrative agent (in such capacity, the "Administrative Agent"). W I T N E S S E T H: WHEREAS, the Company, the Lenders, the Documentation Agent, the Syndication Agent and the Administrative Agent are parties to the Credit Agreement; WHEREAS, the Company has requested that the Lenders amend certain terms in the Credit Agreement in the manner provided for herein; and WHEREAS, the Administrative Agent and the Lenders are willing to agree to the requested amendment subject to certain limitations and conditions, as provided for herein; NOW, THEREFORE, in consideration of the premises contained herein, the parties hereto agree as follows: 1. Defined Terms. Unless otherwise defined herein, terms which are defined in the Credit Agreement and used herein as defined terms are so used as so defined. 2. Amendment to Section 1 (Definitions). Section 1.1 of the Credit Agreement is hereby amended as follows: (a) by deleting therefrom the definition of "Termination Date" in its entirety and substituting in lieu thereof the following definition: "Termination Date": September 30, 2004, subject to extension as provided in Section 2.15. (b) by adding at the end of the first sentence of the definition of "Indebtedness" the following proviso: "; and provided, further, that, for purposes of determining Consolidated Total Debt, Indebtedness of the Company shall not include the Debentures." (c) by replacing the words "1997 Note Agreement" in the definition of "Note Agreements" with the words "2003 Note Agreement". (d) by adding thereto the following definitions in their appropriate alphabetical order: "Change of Control": any event giving rise to the obligation of the Company to repurchase the Debentures as defined in the Indenture until such obligation ceases to exist. "Debentures": as defined in the Second Amendment. "Indenture": the indenture pursuant to which the Debentures are issued by the Company. "Second Amendment": the Second Amendment to this Agreement, dated as of October 2, 2003. (e) by deleting therefrom the definition of "1997 Note Agreement" in its entirety and substituting in lieu thereof the following definition: "2003 Note Agreement": the Note Agreement, dated as of March 14, 2003 entered into between the Company and the Prudential Insurance Company of America. 3. Amendment to Section 6 (Negative Covenants). Section 6 of the Credit Agreement is hereby amended as follows: (a) by replacing the words "Administrative Agent" in proviso (i) of Section 6.4(c) with the words "Required Lenders". (b) replacing the word "and" at the end of exception (a) of Section 6.6 with a comma, and by replacing the period at the end of Section 6.6 with the following language: "and (c) the Company may use the cash proceeds received from the issuance of the Debentures to repurchase Capital Stock of the Company on the date of such issuance, so long as the aggregate amount paid in connection with such repurchases is not greater than $30,000,000." (c) by replacing the words "Section 6B or 6C of the 1997 Note Agreement" in Section 6.14 with the words "Section 6B, 6C or 6F of the 2003 Note Agreement". (d) by inserting a new Section 6.16 immediately after Section 6.15 as follows: "6.16 Optional Payments and Modifications of the Debentures; Certain Other Matters Relating to the Debentures. (a) Make or offer to make any optional or voluntary payment, prepayment, repurchase or redemption of or otherwise optionally or voluntarily defease or segregate funds with respect to the Debentures; or (b) amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of 2 the Debentures including, without limitation, the Indenture (other than any such amendment, modification, waiver or other change that would (x) (i) extend the maturity or reduce the amount of any payment of principal thereof or reduce the rate or extend any date for payment of interest thereon and (ii) does not involve the payment of a consent fee or (y) cure any ambiguity, defect or inconsistency, so long as such amendment, modification, waiver or other change is acceptable to the Administrative Agent). 4. Amendment to Section 8 (Events of Default). Section 8 of the Credit Agreement is hereby amended by replacing paragraph (j) with the following language: "(j) a Change of Control;" 5. Representations and Warranties. On and as of the date hereof, the Company hereby confirms, reaffirms and restates the representations and warranties set forth in Section 3 of the Credit Agreement mutatis mutandis, except to the extent that such representations and warranties expressly relate to a specific earlier date in which case the Company hereby confirms, reaffirms and restates such representations and warranties as of such earlier date. 6. Conditions to Effectiveness. (a) Sections 2(a), 2(c), 2(e), 3(a), 3(c) and 4 of this Amendment shall become effective as of the date first written above upon satisfaction of the following conditions: (i) the Administrative Agent shall have received counterparts of this Amendment duly executed by the Company and each of the Required Lenders (or in the case of Section 2(a),the Lenders); (ii) all fees required to be paid, and all expenses for which invoices have been presented (including the reasonable fees and expenses of legal counsel), in connection with this Amendment shall have been paid or reimbursed, as the case may be; and (iii) The Bank of New York, Fleet National Bank and HSBC Bank USA shall have executed an Assignment and Acceptance pursuant to which The Bank of New York shall assign all of its Commitment and its related rights and obligations under the Credit Agreement and the other Loan Documents to Fleet National Bank and HSBC Bank USA as set forth therein. (b) Sections 2(b), 2(d),3(b) and 3(d) of this Amendment shall become effective upon satisfaction of the following conditions: (i) the Administrative Agent has received counterparts of this Amendment duly executed by the Company and each of the Required Lenders; (ii) all fees required to be paid, and all expenses for which invoices have been presented (including the reasonable fees and expenses of legal counsel), in connection with this Amendment shall have been paid or reimbursed, as the case may be; (iii) the Company shall have issued subordinated debentures (the "Debentures") in an aggregate principal amount not greater than $125,000,000 on substantially the terms and conditions disclosed to the Administrative Agent prior to the date hereof or otherwise on terms and conditions reasonably satisfactory to the Administrative Agent; and (iv) all amendments required to be made to the Note Agreements in connection with the issuance of the Debentures (the "Note Agreements Amendments") shall have been executed and delivered to the Administrative Agent in form and substance satisfactory to the Administrative Agent and shall have become effective in accordance with the terms of the Note Agreements Amendments. 3 7. Consent. Subject to condition set forth in Section 6(b)(iv) of this Amendment being satisfied, the Agents and the Lenders parties hereto hereby consent to the Note Agreements Amendments and agree that the references to the Note Agreements in Section 6.14 of the Credit Agreement will include such Note Agreements Amendments. 8. Continuing Effect; No Other Amendments or Consents. Except as expressly provided herein, all of the terms and provisions of the Credit Agreement are and shall remain in full force and effect. The amendment provided for herein is limited to the specific sections of the Credit Agreement specified herein and shall not constitute a consent, waiver or amendment of, or an indication of the Administrative Agent's or the Lenders' willingness to consent to any action requiring consent under any other provisions of the Credit Agreement or the same section for any other date or time period. 9. Expenses. The Company agrees to pay and reimburse the Administrative Agent for all its reasonable costs and out-of-pocket expenses incurred in connection with the preparation and delivery of this Amendment, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent. 10. Counterparts. This Amendment may be executed in any number of counterparts by the parties hereto (including by facsimile transmission), each of which counterparts when so executed shall be an original, but all the counterparts shall together constitute one and the same instrument. 11. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their respective duly authorized officers as of the date first above written. GREY GLOBAL GROUP INC. By: /s/ Steven G. Felsher --------------------------------------- Name: Steven G. Felsher Title: Vice Chairman By: /s/ Lester M. Feintuck ---------------------------------------- Name: Lester Feintuck Title: Senior VP, CFO JPMORGAN CHASE BANK, as Administrative Agent and as a Lender By: /s/ Rebecca Vogel ---------------------------------------- Name: Rebecca Vogel Title: Vice President FLEET NATIONAL BANK, as Syndication Agent and as a Lender By: /s/ Thomas J. Levy ---------------------------------------- Name: Thomas J. Levy Title: Senior Vice President HSBC BANK USA, as Documentation Agent and as a Lender By: /s/ Johan Sorensson ---------------------------------------- Name: Johan Sorensson Title: First Vice President NORTH FORK BANK, as a Lender By: /s/ Thomas McGann ---------------------------------------- Name: Thomas McGann Title: Senior Vice President BARCLAYS BANK PLC, as a Lender By: /s/ Vincent Muldoon ---------------------------------------- Name: Vincent Muldoon Title: Relationship Director CITY NATIONAL BANK, A NATIONAL BANKING ASSOCIATION, as a Lender By: /s/ Craig D. Kelley ---------------------------------------- Name: Craig D. Kelley Title: Vice President/Senior Relationship Manager EX-14.01 9 y95040exv14w01.txt CODE OF ETHICS Exhibit 14.01 Grey Global Group Inc. and Consolidated Subsidiary Companies Code of Ethics - Senior Officers CODE OF ETHICS FOR CHIEF EXECUTIVE AND DESIGNATED SENIOR FINANCIAL OFFICERS Grey Global Group Inc. ("Grey" or the "Company") is committed to conducting its business in accordance with applicable laws, rules and regulations, and the highest standards of business ethics. This commitment includes providing complete and accurate financial disclosure in compliance with applicable laws, rules and regulations. This Code of Ethics, applicable to the Company's Chief Executive Officer, Chief Financial Officer and Controller (who also serves as the Chief Accounting Officer) (together, "Senior Officers"), sets forth specific policies to guide the Senior Officers in the performance of their duties. Each Senior Officer must comply with applicable laws, rules and regulations. Each Senior Officer also has a responsibility to conduct himself/herself in an honest and ethical manner. He/She has leadership responsibilities that include creating a culture of ethical business conduct and commitment to compliance, maintaining a work environment that encourages employees to raise concerns, and promptly addressing employee compliance concerns. Grey's Code of Business Conduct, which this Code of Ethics is intended to supplement, sets forth the fundamental principles and key policies and procedures that govern the conduct of Grey's officers and employees. Each Senior Officer must comply with the requirements and standards set forth in the Code of Business Conduct, as well as those set forth in this Code of Ethics, and other applicable policies and procedures. COMPLIANCE WITH LAWS, RULES AND REGULATIONS Each Senior Officer is required to comply with all applicable laws, rules and regulations governing the conduct of Grey's business and to report any suspected violations of applicable laws, rules and regulations to the General Counsel of the Company or to the Chairman or other designated member of the Audit Committee of the Board of Directors ("Audit Committee"). CONFLICTS OF INTEREST A conflict of interest occurs when private interests interfere with the interests of the Company. The appearance of a conflict of interest occurs when private interests may be reasonably perceived to interfere with the interests of the Company. Each Senior Officer's obligation to conduct the Company's business in an honest and ethical manner includes the ethical handling of actual, apparent or potential conflicts of interest between personal and business relationships. Before a Senior Officer makes any investment, accepts any position or benefits, participates in any transaction or business arrangement or otherwise acts in a manner that may create or appear to create a conflict of interest, he/she must make full disclosure of all facts and circumstances to and obtain the prior written approval of the Chairman of the Audit Committee. DISCLOSURES As a public company, Grey is required to file various periodic and other reports with the Securities and Exchange Commission ("SEC"). It is Company policy to make full, fair, accurate, timely and understandable disclosure in compliance with all applicable laws and regulations in all reports and documents that the Company files with, or submits to, the SEC and in all other public communications made by the Company. Each Senior Officer is required to promote compliance with this policy, and to abide by all Company standards, policies and procedures designed to promote compliance with this policy. 1 Exhibit 14.01 Grey Global Group Inc. and Consolidated Subsidiary Companies Code of Ethics - Senior Officers COMPLIANCE WITH THE CODE If there are questions about this Code of Ethics, guidance should be sought from the General Counsel or the Chairman or other designated member of the Audit Committee. Known of or suspected violations of this Code of Ethics, must be immediately reported to a member of the Audit Committee. No one will be subject to retaliation because of a good faith report of a suspected violation. Violations of this Code of Ethics may result in disciplinary action, up to and including termination of employment. The Audit Committee shall determine, or shall designate appropriate persons to determine, appropriate action in response to violations of this Code. WAIVERS OF THE CODE If a Senior Officer would like to seek a waiver of the Code of Ethics he/she must make full disclosure of the particular circumstances to the Chairman or other designated member of the Audit Committee. Waivers of the Code will only be granted by the Board of Directors or the Audit Committee. Any waiver or amendment of this Code of Ethics will be publicly disclosed as required under applicable law and regulations. NO RIGHTS CREATED This Code is a statement of certain fundamental principles, policies and procedures which govern the Company's Senior Officers in the conduct of Grey's business. It is not intended to and does not create any rights in any employee, or any other person or entity. ACKNOWLEDGMENT FORM I have received and read the Code of Ethics for Senior Officers, and I understand its contents. I agree to comply fully with the standards contained in the Code of Ethics and the Company's related policies and procedures. I understand that I have an obligation to report any suspected violations of the Code of Ethics to the Chairman or other designated member of the Audit Committee or the General Counsel. ------------------------ Printed Name ------------------------ Signature ------------------------ Date 2 EX-21.01 10 y95040exv21w01.txt SUBSIDIARIES OF GREY . . . Exhibit 21.01 Grey Global Group Inc. and Consolidated Subsidiary Companies
Number of Non- Jurisdiction of Number of U.S. U.S. Name Organization Subsidiaries Subsidiaries ---- ------------ ------------ ------------ APCO Worldwide Inc. Delaware 2 10 Beyond Interactive Inc. Delaware 1 1 Compas Inc. New Jersey Dorland & Grey S.A. France 11 Dorland and Grey S.A. Belgium 6 G2 Worldwide Inc. New York GCG Mediacommunications Holding AB Sweden 13 GCG Peru SAC Peru GMBG Holdings Spain, S.L. Spain 17 Grey Advertising Hong Kong Ltd. Hong Kong 16 Grey Advertising Inc. (Maryland) Maryland Grey Advertising Ltd Canada 3 Grey Argentina S.A. Argentina 3 Grey Athens Advertising S.A. Greece 2 Grey Australia New Zealand Pty. Ltd. Australia 17 Grey Brazil Ltda. Brazil 3 Grey Comex S.A. De C.V. Mexico 1 Grey Communications Group B.V. Netherlands 12 Grey Communications Group Holdings Ltd. United Kingdom 62 Grey Direct Inc. Delaware 2 Grey Global Group Inc. Delaware 35* * Grey Global Group Middle Europe GmbH & Co. Germany 31 Grey Global Group Sweden AB Sweden 16 Grey Global Group Nordic ApS Denmark 47 Grey Global South Africa (Propietary) Ltd. South Africa 16 Grey GMBH Germany Grey Healthcare Group Inc. Delaware 8 Grey Holding B.V. Belgium Grey Holding Central Europe GMBH Germany 24 Grey Hungary Csopert-finanszirozo KFT. Hungary Grey Mexico S.A. De C.V. Mexico 2 Grey Thailand, Co. Ltd. Thailand 3 Grey Worldwide Inc. Delaware
* Certain subsidiaries are separately identified. 1 Exhibit 21.01 Grey Global Group Inc. and Consolidated Subsidiary Companies
Number of Non- Jurisdiction of Number of U.S. U.S. Name Organization Subsidiaries Subsidiaries ---- ------------ ------------ ------------ Grey Worldwide Inc. Japan 2 Grey Worldwide (India) Private Limited India Grey Worldwide Istanbul Turkey Reklamcilik Ltd. Sti. Grey Worldwide Italia SPA Italy 6 Grey Worldwide Korea Inc. Korea Grey Worldwide Middle East Network Limited Cyprus 4 Grey Worldwide New Zealand Ltd. New Zealand 3 Grey Worldwide Sdn. Bhd. Malaysia 5 Grey Worldwide SEA Sdn Bhd Malaysia 1 Grey Ventures Inc. Delaware G WHIZ Entertainment Inc. New York International Facilities Holding GmbH Austria Local Marketing Corporation Ohio 1 Marketdata Solutions Inc. Delaware 1 Mediacom Worldwide Inc. Delaware 1 PT. Rama Perwira Indonesia REP/Grey Worldwide S.A. Columbia The GCI Group Inc. New York 5 2 West Indies & Grey Puerto Rico
2 EX-23.01 11 y95040exv23w01.txt CONSENT OF INDEPENDENT AUDITORS Exhibit 23.01 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-36599, 33-61233, 33-61231, 33-21352, 2-98101, 333-102132 and 333-112208) pertaining to the stock and other incentive plans of Grey Global Group Inc. of our report dated February 26, 2004 on the consolidated financial statements and the financial statement schedule of Grey Global Group Inc. and consolidated subsidiary companies included in this Annual Report (Form 10-K) for the year ended December 31, 2003. ERNST & YOUNG LLP New York, New York March 12, 2004 EX-31.01 12 y95040exv31w01.txt SECTION 302 CERTIFICATION OF THE CEO Exhibit 31.01 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Edward H. Meyer, certify that: 1. I have reviewed this annual report of Form 10-K of Grey Global Group Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 15, 2004 /s/ Edward H. Meyer ----------------------- Edward H. Meyer Chief Executive Officer EX-31.02 13 y95040exv31w02.txt SECTION 302 CERTIFICATION OF THE CFO Exhibit 31.02 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Steven G. Felsher, certify that: 1. I have reviewed this annual report of Form 10-K of Grey Global Group Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 15, 2004 /s/ Steven G. Felsher ----------------------- Steven G. Felsher Chief Financial Officer EX-32.01 14 y95040exv32w01.txt SECTION 906 CERTIFICATION OF THE CEO & CFO Exhibit 32.01 CERTIFICATION OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of Grey Global Group Inc. (the "Company") for the fiscal year ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Edward H. Meyer, as Chief Executive Officer of the Company, and Steven G. Felsher, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Edward H. Meyer - ----------------------- Edward H. Meyer Chief Executive Officer March 15, 2004 /s/ Steven G. Felsher - ----------------------- Steven G. Felsher Chief Financial Officer March 15, 2004 This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----