As filed with the Securities and Exchange Commission on May 15, 2002
Registration No. 333-82368
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
AMENDMENT NO. 3 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
The Interpublic Group of Companies, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 13-1024020
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
--------------------
1271 Avenue of the Americas
New York, New York 10020
(212) 399-8000
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
--------------------
Nicholas J. Camera, Esq.
Senior Vice President, General Counsel & Secretary
The Interpublic Group of Companies, Inc.
1271 Avenue of the Americas
New York, New York 10020
(212) 399-8000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------
Copies to:
Barry M. Fox, Esq.
Raymond B. Check, Esq.
Ethan A. Klingsberg, Esq.
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
(212) 255-2000
---------------------
Approximate date of commencement of proposed
sale to the public: From time to time after the
effective date of this Registration Statement.
---------------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
====================================== =============== =========================== ============================ ====================
Title of Securities to be Registered Amount to be Proposed Maximum Offering Proposed Maximum Aggregate Amount of
Registered (1) Price Per Security (2) Offering Price (2) Registration Fee
- -------------------------------------- --------------- --------------------------- ---------------------------- --------------------
Zero-Coupon Convertible Senior Notes $701,960,000 83.75% $587,891,500 $54,086.02 (3)
Due 2021
- -------------------------------------- --------------- --------------------------- ---------------------------- --------------------
Common Stock, $.10 par value per (4) (5) (5) (5)
share
====================================== =============== =========================== ============================ ====================
(1) The Notes were issued at an original price of $819.14 per $1,000 principal
amount at maturity, which represents an aggregate initial issue price of
approximately $575,003,514.40 and an aggregate principal amount at
maturity of $701,960,000.
(2) This estimate is made pursuant to Rule 457(c) of the Securities Act solely
for the purpose of determining the registration fee. The above calculation
is based on the average of the bid and ask prices for the Registrant's
Notes on PORTAL at closing on February 6, 2002.
(3) This fee was previously paid, on February 8, 2002 and April 5, 2002.
(4) Includes shares of common stock issuable upon conversion of the Notes at
the rate of 22.8147 shares of Common Stock for each $1,000 principal
amount at maturity of the Notes. This registration statement is
registering the resale of the Notes and the underlying shares of common
stock into which the Notes are convertible. Pursuant to Rule 416 under the
Securities Act, the number of shares of common stock registered hereby
shall include an indeterminate number of additional shares of common stock
that may be issuable as a result of antidilution adjustments. Any shares
of common stock issued upon conversion of the Notes will be issued for no
additional consideration.
(5) Pursuant to Rule 457(i), there is no additional filing fee with respect to
the shares of common stock issuable upon conversion of the Notes because
no additional consideration will be received in connection with the
exercise of the conversion privilege.
------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment that specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the U.S. Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the prospectus is delivered in final form. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
Subject to completion, dated May 15, 2002
PROSPECTUS
$701,960,000
THE INTERPUBLIC GROUP OF COMPANIES, INC.
Zero-Coupon Convertible Senior Notes Due 2021
and
Common Stock Issuable upon Conversion of the Notes
We issued the notes in a private placement in December 2001 at an issue
price of $819.14 per note. Selling securityholders may use this prospectus to
resell their notes and the shares of our common stock issuable upon conversion
of the notes.
We will not pay periodic cash interest on the notes unless we are
required to pay contingent interest or the U.S. tax laws change in ways
described in this prospectus. We will pay contingent interest to the holders of
notes during the six-month period beginning on December 14, 2006, and any
following six-month period, if the average price of a note for a five trading
day measurement period equals 120% or more of the issue price plus accrued
original issue discount. During any period in which we must pay contingent
interest, the contingent interest will be the greater of:
(1) the per share cash dividend paid on our common stock during that period
multiplied by the number of shares of common stock issuable upon
conversion of a note and
(2) .125% of the average price of a note for the related five trading day
measurement period.
For a discussion of the special regulations governing contingent payment debt
instruments, see "United States Federal Income Tax
Considerations--Classification of the Notes."
Holders may convert each of their notes into 22.8147 shares of our common
stock, subject to adjustment, when the sale price of the amount of common stock
into which a note is convertible is above a set threshold. This threshold will
decrease over time. In addition, the notes will be convertible if their credit
rating is reduced below Ba1 or BB+, they are called for redemption or specified
corporate transactions occur.
We may redeem the notes at any time on or after December 14, 2006.
Holders may require us to purchase the notes on scheduled dates or, before
December 14, 2006, at any time that we experience a change of control. The price
we will pay for any notes we redeem or are required to purchase will be equal to
the accreted value of the notes, plus accrued and unpaid interest, if any.
Holders may require us to purchase their notes on specified dates. We must pay
cash for any notes we are required to purchase on the first such date, December
14, 2003. We may choose to pay the purchase price for any notes that holders
require us to purchase on subsequent dates in cash, in shares of our common
stock, or any combination of cash and stock.
The notes are not listed on any national securities exchange or automated
quotation system. Our common stock is listed on the New York Stock Exchange
under the symbol "IPG."
Investing in the notes or shares of our common stock involves risks.
See "Risk Factors" beginning on page 6 of this prospectus and "Special Note
Regarding Forward-Looking Statements and Other Factors" beginning on page 9 of
this prospectus.
We will not receive any of the proceeds from the sale of the notes or
shares of common stock by any of the selling securityholders. The notes and the
shares of common stock may be offered and sold from time to time directly by the
selling securityholders or alternatively through underwriters or broker-dealers
or agents. The notes and the shares of common stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale, or at negotiated prices. See
"Plan of Distribution."
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is , 2002.
TABLE OF CONTENTS
Page
Summary......................................................................1
Risk Factors.................................................................6
Where You Can Find More Information..........................................8
Special Note Regarding Forward-Looking Statements And Other Factors..........9
Ratio of Earnings to Fixed Charges..........................................11
Capitalization..............................................................12
Price Range of Common Stock and Dividend Policy.............................13
Use of Proceeds.............................................................14
Interpublic.................................................................15
Description of the Notes....................................................19
Description of Common Stock.................................................38
United States Federal Income Tax Considerations.............................39
Selling Securityholders.....................................................45
Plan Of Distribution.......................................................50
Validity of Securities.....................................................52
Experts....................................................................52
Glossary...................................................................52
We have not authorized anyone to give any information or make any
representation about the offering that is different from, or in addition to,
that contained in this prospectus, the related registration statement or in any
of the materials that we have incorporated by reference into this prospectus.
Therefore, if anyone does give you information of this type, you should not rely
on it. If you are in a jurisdiction where offers to sell, or solicitations of
offers to purchase, the securities offered by this document are unlawful, or if
you are a person to whom it is unlawful to direct these types of activities,
then the offer presented in this document does not extend to you. The
information contained in this document speaks only as of the date of this
document unless the information specifically indicates that another date
applies.
Definitions for the defined terms used in this prospectus are repeated
together under the heading "Glossary" at the end of this prospectus for
convenient reference.
SUMMARY
The Interpublic Group of Companies, Inc.
Interpublic is a group of advertising and specialized marketing and
communication services companies that together represent one of the largest
resources of marketing and advertising expertise in the world. With offices in
more than 130 countries, we realized worldwide revenue in 2001 of approximately
$6.7 billion, 57% of which represented domestic revenue and 43% of which
represented international revenue, after giving effect to our recent acquisition
of True North Communications Inc. Our net loss in 2001 was approximately $505
million.
In the last five years, we have grown to become one of the world's
largest groups of global marketing services companies, providing our clients
with communications expertise in four broad areas:
o Advertising, which includes advertising and media management;
o Marketing Communications, which includes client relationship management,
public relations, sales promotion, event marketing, on-line marketing, and
specialized sectors such as healthcare, diversity and corporate identity;
o Marketing Intelligence, which includes custom marketing research, brand
consultancy, and database management; and
o Marketing Services, which includes sports and entertainment marketing,
corporate meetings and events, retail marketing, and other marketing and
business services.
We seek to be the best in quality, broadest in scope and leader in size
in all of these areas.
We are organized into four global operating groups. Three of these
groups, the WorldGroup, The FCB Group and The Partnership, are global marketing
communications companies that provide a full complement of global marketing
services and marketing communication services. Our fourth global operating
group, The Advanced Marketing Services Group, is focused on growing our current
marketing services and marketing intelligence services.
We believe this organizational structure allows us to provide
comprehensive marketing communications solutions for clients, enables stronger
organic growth among all our operating companies and allows us to bring improved
operating efficiencies to our organization.
--------------------------------
Our principal executive offices are located at 1271 Avenue of the
Americas, New York, New York 10020. Our telephone number at that address is
(212) 399-8000.
The Offering
Notes Offered............................... $701,960,000 principal amount at
maturity of Zero-Coupon Convertible
Senior Notes Due 2021. We will not
pay cash interest on the notes
prior to maturity, other than as
described below under "Description
of the Notes--Optional Conversion
to Semi-Annual Cash Pay Notes upon
Tax Event" and "Description of the
Notes--Contingent Interest." Each
note was issued at a price of
$819.14 and a principal amount at
maturity of $1,000.
Maturity.................................... December 14, 2021.
Yield to Maturity of Notes...................1.00% per year, computed on a
semi-annual bond equivalent basis,
calculated from December 14, 2001.
This is the rate at which a note's
original issue discount will accrue
and be added to its accreted value,
other than for tax purposes.
Conversion Rights............................Holders may convert their notes at
any time prior to the close of
business on December 14, 2021 if
the average per share sale price of
our common stock for the 20 trading
days immediately prior to the
conversion date is at or above a
set threshold. This threshold will
initially be 120% of the accreted
value of a note, divided by the
conversion rate, and will decline
1/2% each year until it reaches
110% at maturity in 2021. A note's
accreted value is the sum of its
issue price plus its accrued
original issue discount.
On May 14, 2002, the threshold sale
price for our common stock that
would have allowed holders to
convert their notes was $43.19 and
the closing sale price of our
common stock was $33.02.
Holders may also convert notes
regardless of the sale price of our
common stock at any time after:
o the credit rating assigned to
the notes by any two of Moody's
Investors Service, Inc.,
Standard & Poor's Ratings Group
and Fitch IBCA Duff & Phelps are
Ba1, BB+ and BB+, respectively,
or lower, or the notes are no
longer rated by at least two of
these ratings services;
o we call the notes for
redemption;
o we make specified distributions
to our shareholders as described
in "Conversion Rights"; or
o we become a party to a
consolidation, merger or binding
share exchange pursuant to which
our common stock would be
converted into cash or property
other than securities.
For each note converted, we will
deliver 22.8147 shares of our
common stock. This conversion rate
may be adjusted under some
circumstances, but will not be
adjusted for increases in accreted
value or accrued and unpaid
interest.
Your right to convert your
notes will expire at the close
of business on December 14, 2021.
Ranking......................................The notes are our general
obligations and are not secured by
any collateral. Your right to
payment under these notes is:
o junior to the rights of our
secured creditors to the extent
of their security in our assets;
o equal with the rights of
creditors under our other
unsecured unsubordinated debt,
including our credit facilities;
o senior to the rights of
creditors under debt expressly
subordinated to these notes; and
o effectively subordinated to the
rights of our subsidiaries'
creditors.
We had no secured debt outstanding
as of March 31, 2002.
We had $552.5 million of
subordinated indebtedness
outstanding as of March 31, 2002.
Our subsidiaries had $460 million
of indebtedness outstanding as of
March 31, 2002, as well as other
liabilities.
Contingent Interest..........................We will pay contingent interest to
the holders of notes during the
six-month period beginning on
December 14, 2006, and during any
following six-month period, if the
average price of a note for a five
trading day measurement period
preceding the relevant six-month
period equals 120% or more of its
accreted value, which is the sum of
its issue price and accrued
original issue discount.
During any period in which we must
pay contingent interest, the amount
of contingent interest we will pay
will be the greater of:
o the per share amount of cash
dividends we pay on our common
stock during that period
multiplied by the number of
shares of common stock issuable
upon conversion of a note; and
o 125% of the average price of a
note for the related five
trading day measurement period.
Contingent interest, if any, will
accrue and be payable to holders of
notes as of the record date for the
related common stock dividend or,
if no cash dividend is paid by us
during a quarter within the
relevant six-month period, to
holders of notes as of the
fifteenth day preceding the last
day of the relevant six-month
period.
United States Federal Income
Tax Considerations...........................We and each holder agree in the
indenture to treat the notes as
contingent payment debt instruments
for United States federal income
tax purposes. As a holder of notes,
you will agree to accrue original
issue discount on a constant yield
to maturity basis at a rate
comparable to the rate at which we
would borrow in a noncontingent,
nonconvertible borrowing, 7.45%,
even though the notes will have a
significantly lower stated yield to
maturity. You will recognize
taxable income significantly in
excess of cash received, if any,
while the notes are outstanding.
Additionally, you will generally be
required to recognize ordinary
income on the gain, if any,
realized, including the fair market
value of stock received, on a sale,
exchange, conversion or redemption
of the notes. No ruling will be
obtained from the Internal Revenue
Service concerning the application
of the contingent payment debt
rules to the notes. You should
consult your own tax advisor
concerning the tax consequences of
owning the notes.
Sinking Fund.................................None.
Optional Redemption..........................We may not redeem the notes before
December 14, 2006. We may redeem
all or part of the notes for cash
on or after December 14, 2006 at
their accreted value plus any
accrued and unpaid interest.
Indicative redemption prices are
set forth in this prospectus on
page 25.
Purchase of the Notes by
Us at the Option of the Holder...............Holders may require us to purchase
their notes on any one of the
following dates at the following
purchase prices plus any accrued
and unpaid interest:
o on December 14, 2003 at a price
of $835.64 per note;
o on December 14, 2004 at a price
of $844.02 per note;
o on December 14, 2005 at a price
of $852.48 per note;
o on December 14, 2006 at a price
of $861.03 per note;
o on December 14, 2011 at a price
of $905.06 per note; and
o on December 14, 2016 at a price
of $951.35 per note.
We will pay cash for all notes so
purchased on December 14, 2003. For
any purchases on or after December
14, 2004, we may choose to pay the
purchase price for any notes
holders require us to purchase in
cash, in shares of our common stock
or any combination of cash and
common stock. If we choose to pay
for notes with common stock, it
will be valued at the average
closing sale price per share for
the 20 day period ending on the
third business day prior to the
date that the valuation is
determined. If the tax law changes
as described in the next paragraph
and we elect to pay cash interest
in lieu of accruing original issue
discount on the notes, the purchase
price will be adjusted as described
in this prospectus.
Optional Conversion to Semi-Annual
Cash Pay Notes upon a Tax Event.............If we receive an opinion from
independent tax counsel that
because of an amendment, or change
in the tax laws, rules or
regulations, or because of an
administrative pronouncement,
action or judicial decision that
there is a risk, which is greater
than insubstantial, that interest
from the notes would not be
deductible, then at our option, the
notes will cease to accrue original
issue discount. Instead, cash
interest will accrue on each note
from the date on which we choose to
exercise the option at the rate of
1.00% per year on the accreted
value of the notes on the later of
the date of the event giving rise
to the option and the date we
exercise the option and shall be
payable semi-annually on the
interest payment dates of June 14
and December 14 of each year to
holders of record at the close of
business on each regular record
date immediately preceding the
interest payment date. Interest
will be computed on the basis of a
360-day year comprised of twelve
30-day months. In such an event,
the redemption prices, purchase
prices for purchases of notes at
the option of holders and purchase
prices payable upon a fundamental
change will be adjusted as
described in this prospectus. If we
exercise this option to pay cash
interest, it will not change
holders' rights to convert notes
for common stock.
Fundamental Change...........................Upon the occurrence of a
fundamental change prior to
December 14, 2006, each holder may
require us to purchase all or a
portion of the holder's notes. A
fundamental change shall be limited
to the following three events:
o a "person" or "group", as those
terms are defined by Section
13(d) of the Exchange Act, gains
greater than 50% of the voting
power of our common equity;
o we consummate any share
exchange, consolidation or
merger pursuant to which our
common stock will be converted
into cash, securities or other
property or any sale, lease or
other transfer of substantially
all of our consolidated assets;
or
o the directors who either were
members of our board on December
14, 2001 or became board members
subsequent to that date, but
were elected by members as of
December 14, 2001 no longer
constitute a majority of the
total board.
The purchase price will be equal to
the accreted value of the notes on
the date we purchase them, plus
accrued and unpaid interest, if
any. We may choose to pay the
purchase price for any notes that
the holders require us to purchase
upon the occurrence of any of the
three events described above in
cash, in shares of our common stock
or any combination of cash and
common stock. If we choose to pay
for notes with common stock, it
will be valued at the average
closing sale price per share for
the 20 day period ending on the
third business day prior to the
date that the valuation is
determined.
Use of Proceeds..............................We will not receive any of the
proceeds from the sale by any
selling securityholder of the notes
or the shares of common stock
issuable upon conversion of the
notes.
Global Securities............................The notes have been issued only in
book-entry form, which means that
they are represented by one or more
permanent global securities
registered in the name of The
Depository Trust Company, or DTC.
The global securities have been
deposited with the trustee as
custodian for DTC.
Trading......................................The notes issued in the initial
placement are eligible for trading
on the Private Offerings, Resales
and Trading through Automatic
Linkages Market, commonly referred
to as the PORTAL Market. Notes sold
using this prospectus, however,
will no longer be eligible for
trading in the PORTAL system. We
have not listed, and do not intend
to list, the notes on any national
securities exchange or automated
quotation system. Our common stock
is listed on the New York Stock
Exchange under the symbol "IPG."
RISK FACTORS
You should consider carefully the following risks in addition to all
the other information included or incorporated by reference in this prospectus,
including the Special Note Regarding Forward-Looking Statements and Other
Factors, before deciding to invest in the notes.
We may be required to purchase notes for cash on December 14, 2003. At
that time we may not have sufficient funds to pay the purchase price for all
notes that we may be required to repurchase, and these purchases could adversely
affect our financial liquidity.
Any purchase of notes at the option of the holder on December 14, 2003
must be paid for in cash. If we were required to purchase outstanding notes at
the option of the holders on that date, we might not at that time have
sufficient funds to pay the purchase price for all notes that we may be required
to purchase and such purchases could adversely affect our financial liquidity.
Any failure by us to redeem the notes when required would result in an event of
default with respect to the notes.
An active trading market for the notes and resale may not develop.
Prior to the initial placement of the notes, there was no trading
market for the notes. Although the broker dealers that acted as initial
purchasers when the notes were originally issued have advised us that they
currently intend to make a market in the notes, they are not obligated to do so
and may discontinue market making activities at any time without notice. In
addition, their market making activity will be subject to the limits imposed by
the Securities Act and the Exchange Act. Accordingly, we cannot assure you that
any market for the notes will develop or be sustained. The price of the notes
could be materially adversely affected as a result. The notes issued in the
initial placement are eligible for trading on the PORTAL Market. Notes sold
using this prospectus, however, will no longer be eligible for trading in the
PORTAL system. We have not listed, and do not intend to list, the notes on any
national securities exchange or automated quotation system.
Investment in the notes will result in the yearly inclusion in your
taxable income of amounts significantly in excess of any cash received while the
notes are outstanding.
We and each holder agree in the indenture to treat the notes as
contingent payment debt instruments subject to the contingent payment debt
regulations. As a result, you will be required to include amounts in income, as
original issue discount, in advance of the cash you receive on the notes. The
rate at which you will accrue the original issue discount will be comparable to
the rate at which we would borrow in a noncontingent, nonconvertible borrowing,
even though the notes have a significantly lower stated yield to maturity. You
will recognize taxable income significantly in excess of any cash received while
the notes are outstanding. In addition, under the indenture, you will recognize
taxable income upon the conversion of the notes equal to the difference between
the fair market value of the common stock received and your basis in the notes.
Gain or loss upon a sale, exchange or conversion will be ordinary income.
Your claim against us will be limited if a bankruptcy proceeding is
commenced against us.
If a bankruptcy proceeding is commenced in respect of us, the claim of
the holder of notes is, under Title 11 of the United States Code, limited to the
issue price of the notes plus that portion of the original issue discount that
has accrued from the date of issue to the commencement of the proceeding.
Our consolidated financials incorporated in this prospectus by
reference, insofar as they relate to NFO Worldwide, Inc. and True North
Communications Inc., were audited by Arthur Andersen LLP, which is the subject
of litigation and has been indicted.
Arthur Andersen LLP is the subject of litigation and was indicted with
respect to its activities in connection with Enron Corp. Arthur Andersen LLP may
dissolve or liquidate, may merge with or have its assets sold to a third party,
or may lose critical personnel. In the event that Arthur Andersen LLP dissolves,
liquidates or does not otherwise continue in business, Arthur Andersen LLP may
have insufficient assets to satisfy any claims that may be made by investors or
by us with respect to this offering or the financial statements incorporated by
reference in this prospectus and our periodic reports under the Securities
Exchange Act in reliance on Arthur Andersen LLP's reports.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document that we file
at the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from the SEC's web site at http://www.sec.gov. Our SEC filings are also
available at the offices of the New York Stock Exchange. For further information
on obtaining copies of our public filings at the New York Stock Exchange, you
should call (212) 656-5060.
This prospectus "incorporates by reference" information that we have
filed with the SEC under the Securities Exchange Act of 1934. This means that we
are disclosing important information to you by referring you to those documents.
Any statement contained in this prospectus or in any document incorporated or
deemed to be incorporated by reference in this prospectus will be deemed to be
modified or superseded for purposes of this prospectus to the extent that a
statement contained in this prospectus or any subsequently filed document which
also is, or is deemed to be, incorporated by reference in this prospectus
modifies or supersedes that statement. Any such statement so modified or
superseded will not be deemed, except as so modified or superseded, to
constitute a part of this prospectus. We incorporate by reference
o our Annual Report on Form 10-K for the year ended December 31, 2001 (File
Number 001-06686; Film Number 02596498);
o our Quarterly Report on Form 10-Q dated May 15, 2002 (File Number 001-6686;
Film Number 02651876);
o our Current Reports on Form 8-K dated February 13, 2002 (File Number
001-6686; Film Number 02539780), March 4, 2002 (File Number 001-6686; Film
Number 02566444) and May 3, 2002 (File Number 001-6686; Film Number
02633202);
o any future filings made with the SEC under Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act.
You may request a copy of these filings no cost, by writing or
telephoning us at the following address:
The Interpublic Group of Companies, Inc.
1271 Avenue of the Americas
New York, New York 10020
Attn: Susan V. Watson
(212) 399-8000
Unless otherwise indicated, currency amounts in this prospectus and in
any applicable supplement are stated in U.S. dollars.
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS AND OTHER FACTORS
This prospectus contains and incorporates by reference forward-looking
statements. Our representatives may also make forward-looking statements orally
from time to time. Statements in this prospectus and statements incorporated by
reference from our SEC reports that are not historical facts, including
statements about our beliefs and expectations, particularly regarding recent
business and economic trends, the integration of acquisitions and restructuring
costs, constitute forward-looking statements. These statements are based on
current plans, estimates and projections, and you should therefore not place
undue reliance on them. Forward-looking statements speak only as of the date
they are made, and we undertake no obligation to update publicly any of them in
light of new information or future events.
Forward-looking statements involve inherent risks and uncertainties. A
number of important factors could cause actual results to differ materially from
those contained in any forward-looking statement. Such factors include, but are
not limited to, those associated with the effect of national and regional
economic conditions, our ability to attract new clients and retain existing
clients, the financial success of our clients, developments from changes in the
regulatory and legal environment for advertising companies around the world, and
the successful completion and integration of acquisitions which complement and
expand our business capabilities.
This prospectus also contains and incorporates by reference certain
financial information calculated on a "pro forma" basis, including information
that is restated to exclude the impact of historical events. Because "pro forma"
financial information by its very nature departs from traditional accounting
conventions, the information should not be viewed as a substitute for the
information prepared in accordance with Generally Accepted Accounting Principles
contained in our financial statements that are incorporated into this prospectus
by reference and should be read in conjunction therewith.
One of our business strategies is to acquire businesses that complement
and expand our current business capabilities. Accordingly, we are usually
engaged in evaluating potential acquisition candidates. We are frequently
engaged in a number of preliminary discussions that may result in one or more
substantial acquisitions. These acquisition opportunities require
confidentiality and from time to time give rise to bidding scenarios that
require quick responses by us. Although there is uncertainty that any of these
discussions will result in definitive agreements or the completion of any
transactions, the announcement of any such transaction may lead to increased
volatility in the trading price of our securities.
Moreover, the success of recent or contemplated future acquisitions
will depend on the effective integration of newly-acquired businesses into our
current operations. Important factors for integration include realization of
anticipated synergies and cost savings and the ability to retain and attract new
personnel and clients.
The advertising agency and other marketing communications and marketing
services businesses are highly competitive. Our agencies and media services must
compete with other agencies and with other providers of creative or media
services which are not themselves advertising agencies, in order to maintain
existing client relationships and to obtain new clients. Competition in the
advertising agency business depends to a large extent on the client's perception
of the quality of an agency's "creative product." An agency's ability to serve
clients, particularly large international clients, on a broad geographic basis
is also an important competitive consideration. On the other hand, because an
agency's principal asset is its people, freedom of entry into the business is
almost unlimited and quite small agencies are, on occasion, able to take all or
some portion of a client's account from a much larger competitor.
Moreover, increasing size may limit an agency's potential for securing
new business, because many clients prefer not to be represented by an agency
that represents a competitor. Also, clients frequently wish to have different
products represented by different agencies. Our ability to retain existing
clients and to attract new clients may, in some cases, be limited by clients'
policies on or perceptions of conflicts of interest. These policies can in some
cases prevent one agency and, in limited circumstances, different agencies
within the same holding company, from performing similar services for competing
products or companies. In addition, these perceived conflicts, following an
acquisition by us of an agency or company, can result in clients terminating
their relationship with us or reducing the number or scope of projects for which
they retain those agencies. Moreover, after the True North Communications Inc.
acquisition and the resulting larger number of clients, there could be a greater
likelihood of conflicts with potential new clients in the future. If the
combined company fails to maintain existing clients or attract new clients, its
business may be materially and adversely impacted.
Employees, including creative, research, media, account and practice
group specialists, and their skills and relationships with clients, are among
our most important assets. An important aspect of the our competitiveness is our
ability to retain employee and management personnel. Our inability to hire and
retain these employees in the future may have a material adverse effect on us.
Advertising and marketing communications businesses are subject to
government regulation, both domestic and foreign. There has been an increasing
tendency in the United States on the part of advertisers to resort to the
courts, industry and self-regulatory bodies to challenge comparative advertising
on the grounds that the advertising is false and deceptive. Through the years,
there has been a continuing expansion of specific rules, prohibitions, media
restrictions, labeling disclosures and warning requirements with respect to the
advertising for certain products. Representatives within government bodies, both
domestic and foreign, continue to initiate proposals to ban the advertising of
specific products and to impose taxes on or deny deductions for advertising
which, if successful, may have an adverse effect on advertising expenditures and
consequently our revenues.
Our international operations still remain exposed to risks which affect
foreign operations of all kinds, such as local legislation, monetary
devaluation, exchange control restrictions and unstable political conditions. In
addition, international advertising agencies are still subject to ownership
restrictions in some countries because they are considered an integral factor in
the communications process.
Investors in the notes should evaluate any forward-looking statements and an
investment in the notes in light of these important factors.
RATIO OF EARNINGS TO FIXED CHARGES
The following table shows the ratios of earnings to fixed charges for
us and our consolidated subsidiaries for the periods indicated.
Three Months Years Ended December 31,
Ended ------------------------
March 31, 2002 2001 2000 1999 1998 1997
-------------- ---- ---- ---- ---- ----
Ratio of earnings to fixed charges....... 2.56x -- (1) 4.07x 3.95x 4.44x 3.21x
- -------
(1) For the year ended December 31, 2001, we had a deficiency of earnings to
fixed charges. Additional earnings of $524,188,000 would have been
necessary for the year ended December 31, 2001 to provide a one-to-one
coverage ratio. The decline in the ratio of earnings to fixed charges for
the year ended December 31, 2001 primarily relates to lower income from
operations, including restructuring and merger related charges, as
compared to prior periods.
In calculating the ratio of earnings to fixed charges, earnings are the
sum of earnings before income taxes plus fixed charges. Fixed charges are the
sum of interest on indebtedness, amortization of debt discount and that portion
of net rental expense deemed representative of the interest component.
CAPITALIZATION
The following table sets forth our short-term debt, long-term debt and
stockholders' equity as of March 31, 2002. The data is derived from our
unaudited financial statements. You should read this table in conjunction with
our consolidated financial statements and related notes and the description of
our liquidity and capital resources as of March 31, 2002 incorporated by
reference in this prospectus.
December 31,
2001
--------------
(unaudited)
--------------
(in millions)
Short-term debt:
Short-term bank borrowings..................................... $ 425.4
Floating Rate Notes............................................ 100.0
Long-term debt:
Payable to financial institutions.............................. 239.3
Notes--7.25% due 2011.......................................... 500.0
Notes--7.875%, due 2005........................................ 500.0
Convertible Subordinated Notes--1.80%, due 2004................ 230.4
Convertible Subordinated Notes--1.87%, due 2006................ 322.1
Zero-Coupon Convertible Senior Notes due 2021.................. 576.7
Stockholders' equity:
Total stockholders' equity..................................... 2,040.6
----------
Total capitalization....................................... $ 4,934.5
==========
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our common stock is listed and traded on the New York Stock Exchange
("NYSE") under the symbol "IPG." The following table provides, for the calendar
quarters indicated, the high and low closing sales prices per share on the NYSE
for the periods shown below as reported on the NYSE and dividends per share paid
during those periods.
NYSE Sale Price Dividends on
-------------------- Common
High Low Stock
----------- ----------- ----------
Period
1999:
First Quarter......................................... $40.00 $34.88 $.075
Second Quarter........................................ 43.31 34.59 .085
Third Quarter......................................... 44.06 36.50 .085
Fourth Quarter........................................ 58.06 35.75 .085
2000:
First Quarter......................................... 55.56 37.00 .085
Second Quarter........................................ 47.44 38.00 .095
Third Quarter......................................... 44.62 33.50 .095
Fourth Quarter........................................ 43.75 33.06 .095
2001:
First Quarter......................................... 47.19 32.50 .095
Second Quarter........................................ 38.85 27.79 .095
Third Quarter......................................... 30.46 19.30 .095
Fourth Quarter........................................ 31.00 19.50 .095
2002:
First Quarter......................................... 34.56 27.10 .095
Second Quarter (through May 14, 2002).................. 34.89 30.12 .095
- -------------------------------------------------------------------------------
The amount of future common stock dividends will depend on earnings, financial
condition and other factors, and will be determined by the directors on a
quarterly basis. On March 28, 2002, our Board of Directors declared a cash
dividend of 9-1/2 cents per share payable on June 17, 2002, to shareholders of
record at the close of business on March 30, 2002.
As of April 29, 2002, there were approximately 17,791 direct holders of
our common stock.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale by any selling
securityholder of the notes or the shares of common stock issuable upon
conversion of the notes.
INTERPUBLIC
Interpublic is a group of advertising and specialized marketing and
communication services companies that together represent one of the largest
resources of marketing and advertising expertise in the world. With offices in
more than 130 countries, we realized worldwide revenue in 2001 of approximately
$6.7 billion, 57% of which represented domestic revenue and 43% of which
represented international revenue, after giving effect to our recent acquisition
of True North Communications Inc. Our net loss in 2001 was approximately $505
million.
Advertising and Specialized Marketing and Communications Services Businesses
In the last five years, we have grown to become one of the world's
largest groups of global marketing services companies, providing our clients
with communications expertise in four broad areas:
o Advertising, which includes advertising and media management;
o Marketing Communications, which includes client relationship management,
public relations, sales promotion, event marketing, on-line marketing and
specialized sectors such as healthcare, diversity and corporate identity;
o Marketing Intelligence, which includes custom marketing research, brand
consultancy and database management; and
o Marketing Services, which includes sports and entertainment marketing,
corporate meetings and events, retail marketing and other marketing and
business services.
We seek to be the best in quality, broadest in scope and leader in size in all
of these areas.
We are organized into four global operating groups. Three of these
groups, the WorldGroup, the FCB Group and The Partnership, are global marketing
communications companies. Each offers a distinctive range of marketing solutions
for our clients. Our fourth global operating group is The Advanced Marketing
Services Group. This group is focused on growing our current marketing services
and marketing intelligence services.
We believe this organizational structure allows us to provide
comprehensive marketing communications solutions for clients, enables stronger
organic growth among all our operating companies and allows us to bring improved
operating efficiencies to our organization.
A brief description of our four global operating groups follows:
The WorldGroup was founded on the global strength and quality of
McCann-Erickson, one of the world's leading advertising agencies. It includes
marketing communications companies spanning media, relationship marketing,
events, sales promotion, public relations, brand equity, on-line marketing
communications and healthcare communications. Launched in late 1997, the
WorldGroup has expanded rapidly to become one of the world's leading networked
marketing communications groups, now working with more than 25 key worldwide
clients in three or more disciplines and with more than 40 U.S. clients in two
or more disciplines. The WorldGroup includes the following agencies and public
relations firms:
o McCann-Erickson Worldwide (advertising),
o MRM Partners Worldwide (direct marketing),
o Momentum Worldwide (entertainment, event and promotional marketing),
o FutureBrand (brand consultancy),
o Torre Lazur McCann Healthcare Worldwide (healthcare advertising and
marketing),
o Universal McCann Worldwide (media planning and buying),
o Nationwide Advertising Services (recruitment advertising), and
o Aligned Agency Group, which includes the following independently branded
general advertising agencies: Amster Yard (New York), Gotham (New York),
Austin Kelly (Atlanta), Temerlin McClain (Dallas), Hill, Holliday (Boston,
New York and San Francisco), Campbell Mithun (Minneapolis), and Avrett Free
& Ginsberg (New York).
Weber Shandwick Worldwide is aligned with the WorldGroup to provide its clients
with a global public relations capability and to enhance and broaden the
WorldGroup's offering to prospective clients.
The FCB Group is a single global integrated marketing communications
network centered on Foote, Cone & Belding Worldwide and its advertising, direct
marketing and sales promotion capabilities. This group also includes the
following specialized services:
o ANALYTICi (database marketing),
o Marketing Drive Worldwide (integrated marketing),
o R/GA (web design and development),
o The Hacker Group (customer acquisition direct marketing),
o FCB Media Services (media planning), and
o FCB HealthCare (healthcare marketing).
Weber Shandwick Worldwide also is aligned with the FCB Group to provide
its clients with a global public relations capability and to enhance and broaden
the FCB Group's offering to prospective clients.
In addition, Campbell-Ewald, an independent marketing communications
company, is affiliated with this group through a global strategic alliance to
provide its clients with an international network for implementation of
marketing communications programs.
The Partnership, a global, client-driven creative leader, is anchored
on the quality advertising reputation of Lowe & Partners Worldwide. The
Partnership provides collaboration across a global group of independent networks
with creative capabilities across all areas of marketing communications. The
partners seek to preserve their independence while creating the ability to
interconnect seamlessly to better service clients. Senior Partners include:
o Lowe & Partners Worldwide (advertising),
o Draft Worldwide (direct and promotional marketing),
o Golin/Harris International (public relations), and
o Initiative Media (media planning and buying).
The Partnership also includes a group of Member Partners, which are
independent advertising agencies that will now have more direct access to both
global capabilities and increased marketing services. This group includes The
Martin Agency, Mullen and Suissa Miller, as well as the following new Member
Partners:
o Bozell,
o Carmichael Lynch,
o Deutsch,
o Howard Merrell & Partners,
o Tierney Communications,
o Delaney Lund (minority international partner), and
o Springer & Jacoby (minority international partner).
The Advanced Marketing Services Group (AMS) is the management center
for our specialized and advanced marketing services including:
o NFO WorldGroup (marketing intelligence services),
o Jack Morton Worldwide (specialized marketing services including corporate
events, meetings and training/learning),
o New America Strategies Group (multi-cultural marketing and
communications), and
o ISO Healthcare Group (strategic healthcare consulting).
Each of the companies in AMS is linked to one or more of the other
three operating groups through affiliate relationships, ensuring access to the
best, most innovative ideas and solutions for client communications needs.
Additionally, our public relations networks, Weber Shandwick Worldwide,
Golin/Harris International and DeVries Public Relations, are based within
Advanced Marketing Services' Constituency Management Group, in order to maintain
their professional affiliation with our other operating groups. AMS is also
charged with expanding our business into new marketing intelligence, services,
and communications areas.
We provide services for clients whose businesses are international in
scope as well as for clients whose businesses are restricted to a single country
or a small number of countries. Revenue for 2001 and 2000 is presented below by
major geographic area:
Year Ended December 31,
-----------------------
2001 2000
-------------- --------------
(in millions)
United States.......................... $3,805.8 $4,244.2
International
United Kingdom...................... 679.7 604.9
All other Europe.................... 1,161.0 1,233.6
Asia Pacific........................ 478.9 508.9
Latin America....................... 327.1 333.7
Other............................... 274.3 257.4
-------------- --------------
Total International............... 2,921.0 2,938.5
-------------- --------------
Total Consolidated.............. $6,726.8 $7,182.7
======== ========
Sources of Revenue
We generate revenue from planning, creating and placing advertising in
various media and from planning and executing other communications or marketing
programs. Historically, the commission customary in the industry was 15% of the
gross charge ("billings") for advertising space or time; more recently, lower
commissions have been negotiated, but often with additional incentives paid for
better performance. For example, an incentive component is frequently included
in arrangements with clients based on improvements in an advertised brand's
awareness or image, or increases in a client's sales or market share of the
products or services being advertised. Under commission arrangements, media bill
us at their gross rates. We bill these amounts to our clients, remit the net
charges to the media and retain the balance as our commission. Some clients,
however, prefer to compensate us on a fee basis, under which we bill our client
for the net charges billed by the media plus an agreed-upon fee. These fees
usually are calculated to reflect our hourly rates and out-of-pocket expenses
incurred on behalf of clients, plus proportional overhead and a profit mark-up.
Like other agencies, we are primarily responsible for paying the media
with respect to firm contracts for advertising time or space placed on behalf of
our clients. This is a problem only if the client is unable to pay us because of
insolvency or bankruptcy. We make serious efforts to reduce the risk from a
client's insolvency including carrying out credit clearances, requiring in some
cases payment of media in advance, or agreeing with the media that we will be
solely liable to pay the media only after the client has paid us for the media
charges.
We also receive commissions from clients for planning and supervising
work done by outside contractors in the physical preparation of finished print
advertisements and the production of television and radio commercials and other
forms of advertising. This commission is customarily 17.65% of the outside
contractor's net charge, which is the same as 15.0% of the outside contractor's
total charges including commission. With the expansion of negotiated fees, the
terms on which outstanding contractors' charges are billed are subject to wide
variations and even include in some instances the elimination of commissions
entirely, provided that there are adequate negotiated fees.
We also derive revenue in many other ways, including the planning and
placement in media of advertising produced by unrelated advertising agencies;
the maintenance of specialized media placement facilities; the creation and
publication of brochures, billboards, point of sale materials and direct
marketing pieces for clients; the planning and carrying out of specialized
marketing research; public relations campaigns; creating and managing special
events at which clients' products are featured; and designing and carrying out
interactive programs for special uses.
Clients
The five clients that made the largest revenue contribution in 2001
accounted individually for approximately 1.5% to 6.79% of our revenue and in the
aggregate accounted for approximately 14% of our revenue. Twenty of our clients
accounted for approximately 25% of our revenue. Based on revenue, our largest
clients currently include Coca-Cola, General Motors Corporation, Johnson &
Johnson, Nestle and Unilever. General Motors Corporation first became a client
of one of our agencies in 1916 in the United States. Predecessors of several of
the Lintas agencies have supplied advertising services to Unilever since 1893.
Our client relationship with Nestle began in 1940 in Argentina. While the loss
of the entire business of one of our largest clients could significantly harm
our business, we believe that it is very unlikely that the entire business of
any of these clients would be lost at the same time, because we represent
several different brands or divisions of each of these clients in a number of
geographical markets in each case through more than one of our agency systems.
Representation of a client rarely means that we handle advertising for
all brands or product lines of the client in all geographical locations. Any
client may transfer its business from an agency within our Company to a
competing agency, and a client may reduce its marketing budget at any time.
Our agencies in many instances have written contracts with their
clients. As is customary in the industry, these contracts provide for
termination by either party on relatively short notice, usually 90 days but
sometimes shorter or longer.
Acquisition Strategy
We pursue acquisitions to complement and enhance our service offerings.
In addition, we also seek to acquire businesses similar to our own that expand
our geographic scope to better serve new and existing clients. Our acquisitions
have historically been funded using stock, cash or a combination of both.
DESCRIPTION OF THE NOTES
The Zero-Coupon Convertible Senior Notes Due 2021 (the "notes") were
issued under an indenture dated as of October 20, 2000, between us and The Bank
of New York, as trustee (the "trustee"), as supplemented by a supplemental
indenture thereto, dated as of December 14, 2001 (as so supplemented, the
"indenture"). The indenture has been filed as an exhibit to the registration
statement of which this prospectus forms a part.
The following summary of certain provisions of the indenture does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the indenture. Because the following is only
a summary, it does not contain all information that you may find useful. For
further information you should read the indenture and the notes. The form of
indenture and notes is available as set forth under "Where You Can Find More
Information."
Definitions of certain terms are set forth under the heading "Glossary"
at the end of this prospectus. As used in this "Description of the Notes,"
unless otherwise indicated, the words "we," "us" and "our" refer to The
Interpublic Group of Companies, Inc. and its successors and not any of our
subsidiaries.
General
The notes:
o are our unsecured senior obligations and rank equally with all of our
other unsecured senior indebtedness;
o are limited to $701,960,000 aggregate principal amount at maturity; and
o will mature on December 14, 2021.
As used in this prospectus, "note" means a note having, upon issuance,
a principal amount at maturity of $1,000. Except under circumstances described
under "--Optional Conversion to Semi-Annual Cash Pay Notes Upon Tax Event" and
"Contingent Interest," we will not pay cash interest on the notes; rather the
notes will accrete to a principal amount of $1,000 per note upon maturity,
representing a yield to maturity of 1.00% per annum.
The notes are redeemable prior to maturity on or after December 14,
2006, as described below, and do not have the benefit of a sinking fund.
Principal of the notes will be payable, and the transfer of notes will be
registrable, at the office of the trustee.
The notes were originally offered at a substantial discount from their
principal amount at maturity. Except as described below, we will not make
periodic cash payments of interest on the notes. Each note of $1,000 principal
amount at maturity was issued at an issue price of $819.14. For United States
federal income tax purposes, we will report the accrual of original issue
discount at the Comparable Yield of 7.45% under the contingent payment debt
regulations while the notes remain outstanding. "Comparable Yield" is defined
below under "United States Federal Income Tax Considerations - U.S. Holders -
Accrual of Interest on the Notes." The issue date for the notes and the
commencement date for the accrual of original issue discount was December 14,
2001.
The notes were issued only in registered form without coupons in
denominations of $1,000 and integral multiples of $1,000 above that amount. No
service charge will be made for any registration of transfer or exchange of
notes, but we may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with transfers or exchanges. The notes
are represented by one or more global securities registered in the name of a
nominee of DTC.
Ranking
The notes are our general unsecured obligations and rank senior in
right of payment to all our existing and future indebtedness that is, by its
terms, expressly subordinated in right of payment to the notes. The notes rank
pari passu in right of payment with all our existing and future unsecured
indebtedness that is not so subordinated. As of December 31, 2001, we had $548.5
million of subordinated indebtedness outstanding. Because we are a holding
company, our rights and the rights of our creditors, including the holders of
the notes offered in this prospectus, to participate in the assets of any
subsidiary during its liquidation or reorganization, will be subject to the
prior claims of the subsidiary's creditors, unless we are ourselves a creditor
with recognized claims against the subsidiary.
Conversion Rights
Holders may convert notes, in multiples of $1,000 principal amount at
maturity, into our common stock at any time prior to the close of business on
December 14, 2021, if the average Sale Price of our common stock for the 20
trading days immediately prior to the conversion date is equal to or greater
than a specified percentage, beginning at 120% in the year of issuance and
declining 1/2% each year until it reaches 110% at maturity, of the Accreted
Value as of the date of conversion, divided by the conversion rate. "Sale Price"
and "Accreted Value" are defined below under the heading "Glossary."
On May 14, 2002, the threshold average Sale Price for our common stock
that would have allowed conversion of the notes was $43.19 and the closing Sale
Price of our common stock was $33.02.
The table below shows the threshold average Sale Price for our common
stock that would allow conversion of the notes on December 14, 2001 and at later
specified dates. The threshold average Sale Price applicable between those dates
would reflect the increase in Accreted Value since the next preceding date in
the table.
Accreted Conversion Specified Threshold
Date Value (1) Rate (2) Percentage (3) Price((1)x(3))/(2)
- ---- --------- -------- -------------- ------------------
December 14, 2001.......................................819.14 22.8147 120% 43.085
December 14, 2002.......................................827.35 22.8147 119.5% 43.335
December 14, 2003.......................................835.65 22.8147 119% 43.587
December 14, 2004.......................................844.02 22.8147 118.5% 43.839
December 14, 2005.......................................852.48 22.8147 118% 44.091
December 14, 2006.......................................861.03 22.8147 117.5% 44.345
December 14, 2007.......................................869.66 22.8147 117% 44.599
December 14, 2008.......................................878.38 22.8147 116.5% 44.853
December 14, 2009.......................................887.19 22.8147 116% 45.108
December 14, 2010.......................................896.08 22.8147 115.5% 45.364
December 14, 2011.......................................905.06 22.8147 115% 45.621
December 14, 2012.......................................914.14 22.8147 114.5% 45.878
December 14, 2013.......................................923.30 22.8147 114% 46.135
December 14, 2014.......................................932.56 22.8147 113.5% 46.393
December 14, 2015.......................................941.91 22.8147 113% 46.652
December 14, 2016.......................................951.35 22.8147 112.5% 46.911
December 14, 2017.......................................960.89 22.8147 112% 47.171
December 14, 2018.......................................970.52 22.8147 111.5% 47.431
December 14, 2019.......................................980.25 22.8147 111% 47.692
December 14, 2020.......................................990.08 22.8147 110.5% 47.953
December 14, 2021.....................................1,000.00 22.8147 110% 48.215
- --------------------------------------------------------------------------------
Holders may also convert notes into our common stock, regardless of the
Sale Price of our common stock, if any of the following three conditions
applies, in multiples of $1,000 principal amount at maturity.
Change in Credit Ratings. Holders may convert notes into our common
stock at any time after the credit ratings assigned to the notes by any two of
Moody's Investors Service, Inc., Standard & Poor's Ratings Group and Fitch IBCA
Duff & Phelps are Ba1, BB+ and BB+, respectively, or lower, or the notes are no
longer rated by at least two of these ratings services.
Redemption of Notes. If we redeem the notes, holders may convert notes
into our common stock at any time prior to the close of business on the business
day prior to the redemption date.
Occurrence of Specified Corporate Transactions. Holders may convert
notes into our common stock at any time if we elect to:
(1) become a party to a consolidation, merger or binding share
exchange pursuant to which our common stock would be converted into
cash or property other than securities, in which case a holder may
surrender notes for conversion at any time from and after the date
which is 15 days prior to the anticipated effective date for the
transaction until 15 days after the actual effective date of the
transaction;
(2) distribute to all holders of our common stock assets,
debt, securities or rights to purchase our securities, which
distribution has a per share value as determined by our board of
directors exceeding 15% of the Sale Price of our common stock on the
day preceding the declaration date for the distribution; or
(3) distribute to all holders of our common stock rights
entitling them to purchase, for a period expiring within 60 days after
the date of the distribution, our common stock at less than the Sale
Price at the time of the distribution.
In the case of clause (2) or (3), we must notify the holders of notes
at least 20 days prior to the ex-dividend date for the distribution. Once we
have given such notice, holders may surrender their notes for conversion at any
time until the earlier of the close of business on the business day prior to the
ex-dividend date or our announcement that the distribution will not take place.
The ex-dividend date is the first date upon which a sale of the common stock
does not automatically transfer the right to receive the relevant dividend from
the seller of the common stock to its buyer.
Notes for which a holder has delivered a purchase notice or a
Fundamental Change purchase notice requiring us to purchase the notes may be
converted only if the notice is withdrawn in accordance with the indenture.
The initial conversion rate is 22.8147 shares of our common stock per
note and is subject to adjustment if any of the events described below occurs.
The conversion rate will not be adjusted for accrued original issue discount or
accrued and unpaid interest, if any.
In lieu of issuing fractional shares, we will pay an amount of cash
based on the Sale Price of our common stock on the trading day immediately
preceding the conversion date. On conversion of notes, a holder will not receive
any cash payment representing accrued original issue discount or accrued and
unpaid interest, if any. Our delivery to the holder of the fixed number of
shares of our common stock into which the notes are convertible, together with
any cash payment for fractional shares, will be deemed:
o to satisfy our obligation to pay the principal amount at maturity of the
notes;
o to satisfy any obligation to pay the increase in Accreted Value from
December 14, 2001 through the conversion date; and
o to satisfy any obligation to pay accrued and unpaid interest, if any.
As a result, Accreted Value is deemed to be paid in full rather than
canceled, extinguished or forfeited.
A certificate for the number of full shares of our common stock into
which any notes are converted, together with any cash payment for fractional
shares, will be delivered through the conversion agent as soon as practicable
following the conversion date.
The conversion rate will be adjusted for:
o dividends or distributions on our common stock payable in our common stock
or our other capital stock;
o subdivisions, combinations or certain reclassifications of our common
stock;
o distributions to all holders of our common stock of certain rights to
purchase our common stock for a period expiring within 60 days at less
than the Sale Price at the time; and
o distributions to all holders of our common stock of our assets, debt
securities or certain rights to purchase our securities, if these
distributions, aggregated on an annual basis, have a per share value
exceeding 15% of the Market Price on the day preceding the declaration of
the distribution.
No adjustment in the conversion rate will be required unless the
adjustment would require a change of at least 1% of the conversion rate then in
effect; provided that any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
Except as stated above, the conversion rate will not be adjusted for the
issuance of common stock or any securities convertible into or exchangeable for
common stock or carrying the right to purchase any of the foregoing.
No adjustment need be made if holders may participate in the
transaction that would otherwise give rise to such an adjustment. In cases where
the fair market value of assets, debt securities or certain rights, warrants or
options to purchase our securities distributed to shareholders (a) equals or
exceeds the Sale Price of our common stock, or (b) the Sale Price exceeds the
fair market value of the assets, debt securities or rights, warrants or options
so distributed by less than $1.00, rather than being entitled to an adjustment
in the conversion rate, the holder will be entitled to receive upon conversion,
in addition to the shares of our common stock, the kind and amount of assets,
debt securities or rights, warrants or options comprising the distribution that
the holder would have received if the holder had converted the holder's notes
immediately prior to the record date for determining the shareholders entitled
to receive the distribution. The indenture will permit us to increase the
conversion rate from time to time.
If at any time we were to make a distribution of property to our
stockholders that would be taxable to the stockholders as a dividend for United
States federal income tax purposes and, in accordance with the anti-dilution
provisions of the notes, the conversion rate of the notes is increased, such
increase might be deemed to be the payment of a taxable dividend to holders of
the notes.
If we are party to a consolidation, merger or binding share exchange or
a transfer of all or substantially all of our assets, the right to convert notes
into our common stock may be changed into a right to convert notes into the kind
and amount of securities, cash or other assets of ours or of another person's
which the holder would have received if the holder had converted the holder's
notes immediately prior to the transaction.
If we exercise our option to have cash interest accrue on the notes
following a Tax Event (as defined below in "--Optional Conversion to Semi-Annual
Cash Pay Notes Upon Tax Event"), the holder will be entitled on conversion to
receive the same number of shares of our common stock or other property that the
holder would have received if we had not exercised this option. In this
prospectus, when we refer to the notes as they would be following exercise of
our option to have cash interest accrue on the notes following a Tax Event, we
call them "Cash Pay Notes."
If we exercise our option to have cash interest accrue on the notes
following a Tax Event or are required to pay contingent interest, notes
surrendered for conversion by a holder during the period from the close of
business on any regular record date to the opening of business of the next
interest payment date, except for notes to be redeemed on a date within this
period or on the next interest payment date, must be accompanied by payment of
an amount equal to the contingent interest or interest that the holder is to
receive on the notes.
Contingent Interest
Subject to the accrual and record date provisions described below, we
will pay contingent interest to the holders of notes during any six-month period
from December 14 to June 13 and from June 14 to December 13, beginning with the
six-month period beginning December 14, 2006, if the average (the "Average Note
Price") of the Note Prices for the Applicable Five Trading Day Period equals
120% or more of the Accreted Value of such notes on the day immediately
preceding the relevant six-month period.
The table below shows the threshold Average Note Price that would cause
contingent interest to be payable in respect of the six-month period beginning
December 14, 2006 and each following six-month period.
Six-Month Period Accreted Value Threshold Average
Beginning on Reference Day Note Price ((1) x
(1) 120%)
---------------- ------------------
December 14, 2006................................................ 861.03 1,033.24
June 14, 2007.................................................... 865.34 1,038.40
December 14, 2007................................................ 869.66 1,043.60
June 14, 2008.................................................... 874.01 1,048.81
December 14, 2008................................................ 878.38 1,054.06
June 14, 2009.................................................... 882.77 1,059.33
December 14, 2009................................................ 887.19 1,064.62
June 14, 2010.................................................... 891.62 1,069.95
December 14, 2010................................................ 869.08 1,075.30
June 14, 2011.................................................... 900.56 1,080.67
December 14, 2011................................................ 905.06 1,086.08
June 14, 2012.................................................... 909.59 1,091.51
December 14, 2012................................................ 914.14 1,096.96
June 14, 2013.................................................... 918.71 1,102.45
December 14, 2013................................................ 923.30 1,107.96
June 14, 2014.................................................... 927.92 1,113.50
December 14, 2014................................................ 932.56 1,119.07
June 14, 2015.................................................... 937.22 1,124.66
December 14, 2015................................................ 941.91 1,130.29
June 14, 2016.................................................... 946.62 1,135.94
December 14, 2016................................................ 951.35 1,141.62
June 14, 2017.................................................... 956.11 1,147.33
December 14, 2017................................................ 960.89 1,153.06
June 14, 2018.................................................... 965.69 1,158.83
December 14, 2018................................................ 970.52 1,164.62
June 14, 2019.................................................... 975.37 1,170.45
December 14, 2019................................................ 980.25 1,176.30
June 14, 2020.................................................... 985.15 1,182.18
December 14, 2020................................................ 990.08 1,188.09
June 14, 2021.................................................... 995.03 1,194.03
We will pay contingent interest only in cash. "Applicable Five Trading
Day Period" means the five trading days ending on the second trading day
immediately preceding the relevant six-month period, unless we declare a
dividend for which the record date falls prior to the first day of a six-month
period but the payment date falls within such six-month period, in which case
the "Applicable Five Trading Day Period" means the five trading days ending on
the second trading day immediately preceding the record date for that dividend.
The amount of contingent interest payable per note in respect of any
six-month period will equal the greater of:
(1) cash dividends paid by us per share on our common stock during that
six-month period multiplied by the number of shares of our common stock
issuable upon conversion of notes at the then applicable conversion rate
and
(2) .125% of the Average Note Price for the Applicable Five Trading Day
Period.
During any six month period in which we must pay contingent interest:
o on any payment date for a cash dividend that falls within the relevant
six-month period, we will pay contingent interest equal to:
(x) the amount of the cash dividend paid in respect of a share of
common stock, multiplied by
(y) the number of shares of common stock into which a note is
convertible;
o on any additional payment date for a cash dividend that falls within the
relevant six-month period, we will pay additional contingent interest equal
to:
(x) the amount of the cash dividend paid in respect of a share of
common stock, multiplied by
(y) the number of shares of common stock into which a note is
convertible;
or, if it is more:
(x) .125% of the average Note Price for the Applicable Five Trading
Day Period that was used to calculate whether contingent interest
would be payable during the relevant six-month period, minus
(y) the amount of contingent interest previously paid in respect of
each note during the relevant six-month period;
o on the last day of the six-month period, we will pay contingent interest
equal to:
(x) .125% of the average Note Price for the Applicable Five Trading
Day Period that was used to calculate whether contingent interest
would be payable during the relevant six-month period, minus
(y) the amount of any contingent interest previously paid in respect
of each note during the relevant six-month period.
Contingent interest that is payable on the payment date for a cash
dividend in respect of our common stock will be payable to holders of notes as
of the record date for the related common stock dividend. Contingent interest
that is payable on the last day of a six-month period (other than because that
happens to be the payment date for a cash dividend in respect of our common
stock) will be payable to holders of notes as of the fifteenth day preceding the
last day of the relevant six-month period.
Original Issue Discount will continue to accrue at 1.00% per annum
whether or not contingent interest is paid, other than for tax purposes. For
United States federal income tax purposes, original issue discount will continue
to accrue at the Comparable Yield, which we will report as 7.45% under the
contingent debt payment regulations, subject to adjustment for actual payments
of contingent interest.
The contingent interest feature of the notes is designed to encourage
holders to continue holding notes rather than converting them into our common
stock, thereby postponing or avoiding equity dilution.
For financial accounting purposes, our obligation to pay contingent
interest on the notes will constitute an embedded derivative, the initial value
of which is not material to our consolidated financial position. Any material
changes in its value will be reflected in our future income statements, in
accordance with Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities." We do not believe that such
future changes in value will have a significant effect on our future reported
results of operations.
"cash dividends" means all cash dividends on our common stock as
declared by our board of directors.
The "Note Price" on any date of determination means the average of the
secondary market bid quotations per note obtained by the bid solicitation agent
under the indenture for $10 million principal amount at maturity of notes at
approximately 4:00 p.m., New York City time, on the determination date from
three unaffiliated securities dealers we select, provided that if:
o at least three such bids are not obtained by the bid solicitation agent,
or
o in our reasonable judgment, the bid quotations are not indicative of the
secondary market value of the notes,
then the Note Price will equal (a) the then applicable conversion rate of the
notes multiplied by (b) the average Sale Price of our common stock on the five
trading days ending on the determination date.
The bid solicitation agent will initially be the trustee. We may change
the bid solicitation agent, but the bid solicitation agent will not be our
affiliate. The bid solicitation agent will solicit bids from securities dealers
that are believed by us to be willing to bid for the notes.
If we determine that holders will be entitled to receive contingent
interest for a given six-month period, then on or prior to the start of that
six-month period, we will issue a press release and publish the information on
our corporate web site or such other reasonable media as we reasonably
determine.
Optional Redemption
No sinking fund is provided for the notes. Beginning on December 14,
2006, at our option we may redeem the notes for cash at any time as a whole, or
from time to time in part, at a price (the "redemption price") equal to the
Accreted Value, plus accrued and unpaid interest, if any. If the notes are
converted to Cash Pay Notes following the occurrence of a Tax Event, they will
be redeemable at the Restated Principal Amount plus accrued and unpaid interest
from the date of the conversion through the redemption date. However, in no
event may the notes be redeemed prior to December 14, 2006. We will give holders
not less than 30-days' nor more than 60-days' notice of redemption.
The table below shows what the Accreted Value of a note would be on
December 14, 2006, at later specified dates prior to maturity and at maturity on
December 14, 2021. The Accreted Value, in dollars, of a note redeemed between
those dates would include an additional amount reflecting the increase in
Accreted Value since the next preceding date in the table.
Increase in Accreted Redemption
Redemption Date Issue Price(1) Value at 1.00% (2) Price (1+2)
- --------------- -------------- ------------------ -----------
December 14, 2006................................................ $819.14 $ 41.89 $ 861.03
December 14, 2007................................................ $819.14 $ 50.52 $ 869.66
December 14, 2008................................................ $819.14 $ 59.24 $ 878.38
December 14, 2009................................................ $819.14 $ 68.05 $ 887.19
December 14, 2010................................................ $819.14 $ 76.94 $ 896.08
December 14, 2011................................................ $819.14 $ 85.92 $ 905.06
December 14, 2012................................................ $819.14 $ 95.00 $ 914.14
December 14, 2013................................................ $819.14 $104.16 $ 923.30
December 14, 2014................................................ $819.14 $113.42 $ 932.56
December 14, 2015................................................ $819.14 $122.77 $ 941.91
December 14, 2016................................................ $819.14 $132.21 $ 951.35
December 14, 2017................................................ $819.14 $141.75 $ 960.89
December 14, 2018................................................ $819.14 $151.38 $ 970.52
December 14, 2019................................................ $819.14 $161.11 $ 980.25
December 14, 2020................................................ $819.14 $170.94 $ 990.08
December 14, 2021................................................ $819.14 $180.86 $1,000.00
If less than all of the outstanding notes are to be redeemed, the
trustee will select the notes to be redeemed in principal amounts at maturity of
$1,000 or integral multiples thereof. In this case the trustee may select the
notes by lot, pro rata or by any other method the trustee considers fair and
appropriate. If a portion of a holder's notes is selected for partial redemption
and the holder converts a portion of the notes, the converted portion will be
deemed to be the portion selected for redemption.
Purchase of Notes at the Option of the Holder
On the purchase dates indicated below, we will, at the option of the
holder, be required to purchase any outstanding notes for which a written
purchase notice has been properly delivered by the holder to the trustee and not
withdrawn, subject to specified additional conditions. Holders may submit their
notes for purchase to the paying agent at any time from the opening of business
on the date that is 30 business days prior to the purchase date until the close
of business on the purchase date.
The purchase price of a note, in each case, plus accrued and unpaid
interest, if any, will be:
o $835.64 per note on December 14, 2003;
o $844.02 per note on December 14, 2004;
o $852.48 per note on December 14, 2005;
o $861.03 per note on December 14, 2006;
o $905.06 per note on December 14, 2011; and
o $951.35 per note on December 14, 2016.
The foregoing dollar amounts equal the Accreted Value on the respective
purchase dates.
If prior to a purchase date the notes have been converted to Cash Pay
Notes, the purchase price will be equal to the Restated Principal Amount plus
accrued and unpaid interest from the date of conversion to the purchase date.
We will pay cash for all notes purchased pursuant to the option
described above on December 14, 2003. For purchases on or after December 14,
2004, we may, at our option, instead of paying the purchase price in cash, pay
all or a portion of the purchase price in shares of our common stock, as long as
our common stock is then listed on a national securities exchange or traded on
the NASDAQ National Market System. For purchases on or after December 14, 2004,
if we elect to pay the purchase price, in whole or in part, in shares of common
stock, the number of shares of common stock to be delivered by us will be equal
to the portion of the purchase price to be paid in common stock divided by the
Market Price of a share of our common stock.
We will be required to give notice to all holders and beneficial owners
as required by applicable law on a date not less than 30 business days prior to
each purchase date, stating among other things:
o for purchases on or after December 14, 2004, whether we will pay the
purchase price of notes in cash, common stock or a combination of cash and
common stock, specifying the percentages of each;
o for purchases on or after December 14, 2004, if we elect to pay in common
stock, the method of calculating the Market Price of the common stock; and
o the procedures that holders must follow to require us to purchase their
notes.
The purchase notice given by each holder electing to require us to
purchase notes shall state:
o if certificated, the certificate numbers of the holder's notes to be
delivered for purchase;
o the portion of the principal amount at maturity of notes to be purchased,
which must be $1,000 or an integral multiple of $5,000;
o for purchases on or after December 14, 2004, if we elect, pursuant to the
notice that we are required to give, to pay all or part of the purchase
price in common stock, but the purchase price is ultimately to be paid to
the holder entirely in cash because any condition to payment of the
repurchase price or portion of the purchase price in common stock is not
satisfied prior to the close of business on the purchase date, as
described below, whether the holder elects:
(1) to withdraw the purchase notice as to some or all of the notes
to which it relates, or
(2) to receive cash in respect of the entire purchase price for all
notes or portions of notes subject to such purchase notice; and
o that the notes are to be purchased by us pursuant to the applicable
provisions of the notes and the indenture.
For purchases on or after December 14, 2004, if the holder fails to
indicate the holder's choice with respect to the election described in the sixth
bullet point above, the holder will be deemed to have elected to receive cash in
respect of the entire purchase price for all notes subject to the purchase
notice in these circumstances.
Any purchase notice may be withdrawn by the holder by a written notice
of withdrawal delivered to the paying agent prior to the close of business on
the business day prior to the purchase date.
The notice of withdrawal shall state:
o the principal amount at maturity being withdrawn;
o if certificated, the certificate numbers of the notes being withdrawn; and
o the principal amount at maturity of the notes that remain subject to the
purchase notice, if any.
In connection with any purchase offer pursuant to these provisions, to
the extent applicable we will:
o comply with the provisions of Rule 13e-4, Rule 14e-l and any other tender
offer rules under the Exchange Act which may then be applicable; and
o file Schedule TO or any other required schedule under the Exchange Act.
Payment of the purchase price for notes for which a purchase notice has
been delivered and not validly withdrawn is conditioned upon delivery of the
notes, together with necessary endorsements, to the paying agent at any time
after delivery of the purchase notice. Payment of the purchase price for the
notes will be made promptly following the later of the purchase date or the time
of delivery of the notes.
Because the Market Price (as defined below in "Glossary") of the common
stock is determined prior to the applicable purchase date, holders of notes bear
the market risk with respect to the value of the common stock to be received
from the date the Market Price is determined to the purchase date. We may pay
the purchase price or any portion of the purchase price in common stock only if
the information necessary to calculate the Market Price is published in a daily
newspaper of national circulation.
Our right to purchase notes, in whole or in part, with common stock for
purchases on or after December 14, 2004, is subject to our satisfying various
conditions, including:
o the registration of the common stock under the Securities Act and the
Exchange Act, if required; and
o any necessary qualification or registration under applicable state
securities law or the availability of an exemption from such qualification
and registration.
If the conditions are not satisfied with respect to a holder prior to
the close of business on the purchase date, we will pay the purchase price of
the notes of the holder entirely in cash. We may not change the form or
components or percentages of components of consideration to be paid for the
notes once we have given the notice that we are required to give to holders of
notes, except as described in the first sentence of this paragraph.
If the paying agent holds money or securities sufficient to pay the
purchase price of a note on the business day following the purchase date in
accordance with the terms of the indenture, then, immediately after the purchase
date, the note will cease to be outstanding and will cease to accrete original
issue discount, whether or not the note is delivered to the paying agent.
Thereafter, all other rights of the holder shall terminate, other than the right
to receive the purchase price upon delivery of the note.
Our ability to purchase notes may be limited by the terms of our then
existing indebtedness or financing agreements.
No notes may be purchased at the option of holders if there has
occurred and is continuing an event of default (as defined below in "--Events of
Default"), other than an event of default that is cured by the payment of the
purchase price of all the notes.
Fundamental Change Permits Holders to Require Us to Purchase Notes
If a Fundamental Change (as defined below in this section) occurs at
any time prior to December 14, 2006, each holder will have the right, at the
holder's option, to require us to purchase any or all of the holder's notes. The
notes may be purchased in integral multiples of $1,000 principal amount at
maturity. We will purchase the notes at a price equal to the Accreted Value of
the notes on the purchase date plus accrued and unpaid interest, if any. See the
table under "--Optional Redemption." If, prior to the purchase date, we elect to
convert the notes to Cash Pay Notes, the purchase price will be equal to the
Restated Principal Amount plus accrued and unpaid interest from the date of
conversion to the purchase date. See "--Optional Conversion to Semi-Annual Cash
Pay Notes Upon Tax Event." If a Fundamental Change occurs on or after December
14, 2006, no holder will have a right to require us to purchase any notes,
except as described above under "--Purchase of Notes at the Option of the
Holders."
We may, at our option, instead of paying the purchase price in cash,
pay all or a portion of the purchase price in shares of our common stock, as
long as our common stock is then listed on a national securities exchange or
traded on the NASDAQ National Market System. If we elect to pay the purchase
price, in whole or in part, in shares of common stock, the number of shares of
common stock to be delivered by us will be equal to the portion of the purchase
price to be paid in common stock divided by the Market Price of a share of our
common stock.
A "Fundamental Change" will be deemed to have occurred at the time
after the original issuance of the notes as any of the following occurs:
(1) a "person" or "group" within the meaning of Section 13(d) of the
Exchange Act other than us, our subsidiaries or our or their
employee benefit plans files a Schedule TO or any schedule, form or
report under the Exchange Act disclosing that such person or group
has become the direct or indirect ultimate "beneficial owner", as
defined in Rule 13d-3 under the Exchange Act, of our common equity
representing more than 50% of the voting power of our common equity;
(2) consummation of any share exchange, consolidation or merger of
us pursuant to which our common stock will be converted into cash,
securities or other property or any sale, lease or other transfer in
one transaction or a series of transactions of all or substantially
all of our consolidated assets, considered together with our
subsidiaries, to any person other than one of our subsidiaries;
provided, however, that a transaction where the holders of more than
50% of all classes of our common equity immediately prior to such
transaction own, directly or indirectly, more than 50% of all
classes of common equity of the continuing or surviving corporation
or transferee immediately after such event shall not be a
Fundamental Change; or
(3) Continuing Directors cease to constitute at least a majority of
our board of directors.
A Fundamental Change will not be deemed to have occurred, however,
if either:
(I) the Sale Price of our common stock for any five trading days
within the 10 consecutive trading days ending immediately before the
later of the Fundamental Change or the announcement thereof, shall
equal or exceed 105% of the Accreted Value as of that date, divided
by the conversion rate, or
(II) at least 90% of the consideration in the transaction or
transactions constituting the Fundamental Change consists of shares
of common stock traded on a national securities exchange or quoted
on the Nasdaq Stock Market or which will be so traded or quoted when
issued or exchanged in connection with a Fundamental Change (these
securities being referred to as "publicly traded securities") and as
a result of this transaction or transactions the notes become
convertible into such publicly traded securities, excluding cash
payments for fractional shares.
On or before the 20th day after the occurrence of a Fundamental Change,
we will provide to all holders of the notes and the trustee a notice of the
occurrence of the Fundamental Change and of the resulting purchase right. Such
notice shall state, among other things:
o whether we will pay the purchase price of notes in cash, common stock or a
combination thereof, specifying the percentages of each;
o if we elect to pay in common stock, the method of calculating the Market
Price of the common stock; and
o the procedures that holders must follow to require us to purchase their
notes.
To exercise the purchase right, holders of notes must deliver, on or
before the 35th day after the date of our notice of a Fundamental Change,
subject to extension to comply with applicable law, the notes to be purchased,
duly endorsed for transfer, together with a written purchase notice and the form
entitled "Option to Elect Purchase Upon a Fundamental Change" on the reverse
side of the notes duly completed, to the paying agent. The purchase notice given
by each holder electing to require us to purchase notes shall state:
o if certificated, the certificate numbers of the holder's notes to be
delivered for purchase;
o the portion of the principal amount at maturity of notes to be purchased,
which must be $1,000 or an integral multiple thereof;
o in the event we elect, pursuant to the notice that we are required to
give, to pay the purchase price in common stock, in whole or in part, but
the purchase price is ultimately to be paid to the holder entirely in cash
because any condition to payment of the repurchase price or portion of the
purchase price in common stock is not satisfied prior to the close of
business on the purchase date, as described below, whether the holder
elects:
(1) to withdraw the purchase notice as to some or all of the notes
to which it relates, or
(2) to receive cash in respect of the entire purchase price for all
notes or portions of notes subject to the purchase notice; and
o that the notes are to be purchased by us pursuant to the applicable
provisions of the notes and the indenture.
If the holder fails to indicate the holder's choice with respect to the
election described in the sixth bullet point above, the holder will be deemed to
have elected to receive cash in respect of the entire repurchase price for all
notes subject to the repurchase notice in these circumstances.
Any purchase notice may be withdrawn by the holder by a written notice
of withdrawal delivered to the paying agent prior to the close of business on
the business day prior to the purchase date. The notice of withdrawal shall
state:
o the principal amount at maturity being withdrawn;
o if certificated, the certificate numbers of the notes being withdrawn; and
o the principal amount at maturity of the notes that remain subject to the
purchase notice, if any.
We will be required to purchase the notes no later than 35 business
days after the occurrence of the relevant Fundamental Change subject to
extension to comply with applicable law.
In connection with any purchase offer pursuant to these provisions, to
the extent applicable we will:
o comply with the provisions of Rule 13e-4, Rule 14e-l and any other tender
offer rules under the Exchange Act; and
o file Schedule TO or any other required schedule under the Exchange Act.
The purchase rights of the holders could discourage a potential
acquirer of us. The Fundamental Change purchase feature, however, is not the
result of management's knowledge of any specific effort to obtain control of us
by any means or part of a plan by management to adopt a series of anti-takeover
provisions.
The term Fundamental Change is limited to specified transactions and
may not include other events that might adversely affect our financial
condition. In addition, the requirement that we offer to purchase the notes upon
a Fundamental Change may not protect holders in the event of a highly leveraged
transaction, reorganization, merger or similar transaction involving us.
No notes may be purchased at the option of holders upon a Fundamental
Change if there has occurred and is continuing an event of default other than an
event of default that is cured by the payment of the purchase price of all the
notes.
Because the Market Price of the common stock is determined prior to the
applicable purchase date, holders of notes bear the market risk with respect to
the value of the common stock to be received from the date the Market Price is
determined to the purchase date. We may pay the purchase price or any portion of
the purchase price in common stock only if the information necessary to
calculate the Market Price is published in a daily newspaper of national
circulation.
Our right to purchase notes, in whole or in part, with common stock is
subject to our satisfying various conditions, including:
o the registration of the common stock under the Securities Act and the
Exchange Act, if required; and
o any necessary qualification or registration under applicable state
securities law or the availability of an exemption from such qualification
and registration.
If those conditions are not satisfied with respect to a holder prior to
the close of business on the purchase date, we will pay the purchase price of
the notes of the holder entirely in cash. We may not change the form or
components or percentages of components of consideration to be paid for the
notes once we have given the notice that we are required to give to holders of
notes, except as described in the first sentence of this paragraph.
Optional Conversion to Semi-Annual Cash Pay Notes Upon Tax Event
From and after the date of the occurrence of a Tax Event, we will have
the option to elect to have cash interest in lieu of future original issue
discount accrue on all, and not less than all of, the notes at the rate of 1.00%
per year. If we exercise this option to pay cash interest, the principal amount
of each note will be restated (the "Restated Principal Amount") and will equal
its Accreted Value on the date of the Tax Event or the date on which we exercise
the option described in this prospectus, whichever is later (the "Option
Exercise Date").
Such interest will accrue from the Option Exercise Date and will be
payable in cash semi-annually on the interest payment dates of December 14 and
June 14 of each year to holders of record at the close of business on November
30 or May 31 immediately preceding the interest payment date. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Interest will initially accrue from the Option Exercise Date and after such
date, from the last date to which interest has been paid. If we exercise this
option to pay cash interest, the redemption price, purchase price and
Fundamental Change purchase price on the notes will be adjusted. However, there
will be no change in the holder's conversion rights.
A "Tax Event" means that we shall have received an opinion from
independent tax counsel experienced in such matters to the effect that, on or
after the date of the initial placement of the notes, as a result of:
(1) any amendment to, or change in, including any announced proposed
change in, the laws, rules or regulations of the United States or
any political subdivision or taxing authority thereof or therein, or
(2) any official administrative pronouncement, action or judicial
decision interpreting or applying those laws or regulations,
in each case which amendment or change is enacted, promulgated, issued
or announced or which proposed change, pronouncement, action or decision is
issued or announced, on or after the date of this prospectus, there is more than
an insubstantial risk that interest, including interest calculated at the
"Comparable Yield," original issue discount or contingent interest, if any, in
respect of the notes either:
o would not be deductible on a current accrual basis, or
o would not be deductible under any other method,
in either case in whole or in part, by us by reason of deferral, disallowance,
or otherwise for United States federal income tax purposes.
The modification of the terms of the notes by us upon a Tax Event, as
described above, may alter the timing of income recognition by holders of the
notes with respect to the semi-annual payments of interest due on the notes
after the Option Exercise Date.
Events of Default
Each of the following constitutes an event of default under the
indenture:
o default in payment of the principal amount at maturity (or if the notes
have been converted to Cash Pay Notes following a Tax Event, the Restated
Principal Amount), redemption price, purchase price or Fundamental Change
purchase price with respect to any notes when that amount becomes due and
payable;
o if additional amounts are owing due to a breach of the Registration Rights
Agreement, contingent interest is payable or the notes have been converted
to Cash Pay Notes following a Tax Event, the failure to pay the additional
amounts or interest due within 30 days of the due date;
o a failure to comply with any of our other agreements contained in the
indenture for a period of 60 days after notice to us by the trustee or to
us and the trustee by the holders of at least 25% in principal amount at
maturity of the notes;
o the occurrence of an event of default within the meaning of another
mortgage, indenture or debt, instrument under which there may be issued any
of our indebtedness, other than the notes, in an amount in excess of
$20,000,000 and which results in the indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise
become due and payable, and we have not cured the default in payment or the
acceleration is not rescinded or annulled in each case within 10 days after
written notice to us from trustee or to us and to the trustee from the
holders of at least 25% in principal amount at maturity of the notes;
provided, however, that if, prior to a declaration of acceleration of the
maturity of the notes or the entry of judgment in favor of the trustee in a
suit pursuant to the indenture, the default has been remedied or cured by
us or waived by the holders of the indebtedness, then the event of default
will be deemed likewise to have been remedied, cured or waived; and
o the occurrence of an event of bankruptcy, insolvency or reorganization with
respect to us or any of our subsidiaries that meet thresholds set out in
the indenture. A subsidiary meets these thresholds if:
o our investment in and advances to the subsidiary, including indirectly
through other subsidiaries, exceed ten percent of our total
consolidated assets as of the end of the most recent completed fiscal
year;
o our proportionate share of the total assets, including indirectly
through other subsidiaries, and after intercompany elimination, of the
subsidiary exceeds ten percent of our total consolidated assets as of
the end of the most recent completed fiscal year; or
o our equity in the income from continuing operations of the subsidiary,
including indirectly through other subsidiaries, calculated before
income taxes, extraordinary items and cumulative effect of changes in
accounting principles, exceeds ten percent of our total consolidated
income calculated on the same basis as of the end of the most recent
completed fiscal year.
No event of default with respect to a series of our debt securities
other than the notes, except as to the occurrence of an event involving
bankruptcy, insolvency or reorganization with respect to us, necessarily
constitutes an event of default with respect to the notes.
In general, the indenture obligates the trustee to give notice of a
default with respect to the notes to the holders of those notes. The trustee may
withhold notice of any default, except a default in payment on any notes, if the
trustee determines it is in the best interest of the holders of the notes to do
so.
If there is a continuing event of default, the trustee or the holders
of at least 25% in principal amount at maturity of the notes may require us to
repay immediately the issue price of the notes plus the original issue discount
on the notes accrued through the date of such declaration (or, if the notes have
been converted to Cash Pay Notes, the Restated Principal Amount plus accrued and
unpaid interest) on all notes. In the case of an event of default resulting from
events of bankruptcy, insolvency or reorganization with respect to us (but not
our subsidiaries), the issue price of the notes plus the original issue discount
on the notes accrued through the date of such declaration on all notes will
become immediately payable without any act on the part of the trustee or any
holder of notes. The holders of a majority in principal amount at maturity of
the notes may rescind our obligation to accelerate repayment and may waive past
defaults if
o all existing events of default, other than the nonpayment of the
accelerated amounts, have been cured or are being waived,
o any interest that has become due on overdue amounts, other than by virtue
of acceleration, has been paid,
o the rescission would not conflict with any judgement or decree of a
competent court, and
o all payments due the trustee have been made,
except that they may not waive:
o a default in payment of the principal amount at maturity (or if the notes
have been converted to Cash Pay Notes following a Tax Event, the Restated
Principal Amount), redemption price, purchase price or Fundamental Change
purchase price with respect to any notes when that amount becomes due and
payable,
o a default in the payment of additional amounts or interest due within 30
days of the due date (if additional amounts are owing due to a breach of
the Registration Rights Agreement, contingent interest is payable or the
notes have been converted to Cash Pay Notes following a Tax Event),
o a default with respect to a provision of the indenture which cannot be
amended without the consent of each holder affected by the amendment or
o a default which constitutes a failure to convert any notes in accordance
with its terms and the terms of the indenture.
Under the terms of the indenture, the trustee may refuse to enforce the
indenture or the notes unless it first receives satisfactory security or
indemnity from the holders of notes. Subject to limitations specified in the
indenture, the holders of a majority in principal amount at maturity of the
notes have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or exercising any trust or
power conferred on the trustee.
No holder of notes has any right to institute any proceeding, judicial
or otherwise, with respect to the indenture or for the appointment of a receiver
or trustee, or for any other remedy under the indenture unless:
o the holder has previously given to the trustee written notice of a
continuing event of default with respect to the notes, and
o the holders of at least 25% in principal amount at maturity of the notes
have made written request, and offered indemnity reasonably satisfactory to
the trustee to institute such proceeding as trustee, and the trustee has
not received from the holders of a majority in principal amount of the
notes a direction inconsistent with the request and has failed to institute
the proceeding within 60 days.
Notwithstanding the foregoing, the holder of any notes has an absolute
and unconditional right to receive payment of the principal of and interest and
premium, if any, on the notes on or after the due dates expressed in the notes
and to institute suit for the enforcement of any such payment.
We are required to furnish to the trustee annually a statement by some
of our officers as to whether or not we, to their knowledge, are in default in
the performance or observance of any of the terms, provisions and conditions of
the indenture and, if so, specifying all the known defaults.
Modification and Waiver
The indenture permits us and the trustee to amend the indenture without
the consent of the holders of notes:
o to evidence the succession of another corporation and the assumption of our
covenants under the indenture and the notes;
o to add to our covenants or to the events of default or to make other
changes which would not adversely affect in any material respect the holder
of any outstanding notes;
o to cure any ambiguity, defect or inconsistency;
o to add or change any of the provisions of the indenture to the extent
necessary to permit or facilitate the issuance of securities in bearer
form;
o to secure the securities or add guarantees with respect to any or all of
the securities;
o to establish the form or terms of securities of any series;
o to evidence and provide for the acceptance of an appointment by a successor
trustee with respect to one or more series of the securities and to change
any provision of the indenture to accommodate the appointment;
o to make any change that does not materially adversely affect the interests
of the securities holders; and
o to provide for uncertificated securities in addition to or in place of
certificated securities.
The indenture also permits us and the trustee, with the consent of the
holders of a majority in principal amount at maturity of the notes voting as a
class, to add any provisions to or change or eliminate any of the provisions of
the indenture or to modify the rights of the holders of notes, provided,
however, that, without the consent of the holder of each of the notes so
affected, no such amendment may:
o reduce the principal amount at maturity, Restated Principal Amount or issue
price, or extend the stated maturity, of any notes;
o reduce the redemption price, purchase price or Fundamental Change purchase
price of any notes;
o make any change that adversely affects the right to convert any notes;
o except as otherwise provided in this prospectus and in the indenture, alter
the manner or rate of accrual of original issue discount or interest on any
notes, reduce the rate of interest upon the occurrence of a Tax Event, or
extend the time for payment of original issue discount or interest, if any,
on any notes;
o reduce the amount of principal payable upon acceleration of maturity;
o change the place of payment where, or the currency or currency unit in
which, the notes are payable;
o reduce the percentage in principal amount at maturity of affected notes the
consent of whose holders is required for amendment of the indenture or for
waiver of compliance with some provisions of the indenture or for waiver of
some defaults;
o change our obligation with respect to the redemption provisions of the
indenture in a manner adverse to the holder; or
o modify the provisions relating to waiver of some defaults or any of the
provisions relating to amendment of the indenture except to increase the
percentage required for consent or to provide that some other provisions of
the indenture may not be modified or waived.
The holders of a majority in principal amount at maturity of the
outstanding notes may waive compliance by us with certain restrictive provisions
of the indenture. The holders of a majority in principal amount at maturity of
the outstanding notes may also waive certain past defaults under the indenture.
See "--Events of Default."
Consolidation, Merger and Sale of Assets
We may not consolidate or merge with or into any other person,
including any other entity, or convey, transfer or lease all or substantially
all of our properties and assets to any person or group of affiliated persons
unless:
o we are the continuing corporation or the person, if other than us, formed
by such consolidation or with which or into which we are merged or the
person to which all or substantially all our properties and assets are
conveyed, transferred or leased is a corporation organized and existing
under the laws of the United States, any of its states or the District of
Columbia and expressly assumes our obligations under the notes and the
indenture; and
o immediately after giving effect to the transaction, there is no default and
no event of default under the indenture.
If we consolidate with or merge into any other corporation or convey,
transfer or lease all or substantially all of our property and assets as
described in the preceding paragraph, the successor corporation shall succeed to
and be substituted for us, and may exercise our rights and powers under the
indenture, and after any such contemplated transaction, except in the case of a
lease, we will be relieved of all obligations and covenants under the indenture
and the notes.
Although these types of transactions are permitted under the indenture,
certain of the foregoing transactions occurring on or prior to December 14, 2006
could constitute a Fundamental Change (as defined below) permitting each holder
to require us to purchase the notes of such holder as described above.
Discharge of the Indenture
We may satisfy and discharge our obligations under the indenture by
delivering to the trustee for cancellation all outstanding notes or by
depositing with the trustee, the paying agent or the conversion agent, if
applicable, after the notes have become due and payable, whether at stated
maturity, or any redemption date, or any purchase date, or a Fundamental Change
purchase date, or upon conversion or otherwise, cash or shares of common stock
sufficient to pay all of the outstanding notes and paying all other sums payable
under the indenture by us. Such discharge is subject to terms contained in the
indenture.
Limitation of Claims in Bankruptcy
If a bankruptcy proceeding is commenced in respect of us, the claim of
the holder of a note is, under Title 11 of the United States Code, limited to
the issue price of the note plus that portion of the original issue discount
that has accreted from the date of issue to the commencement of the proceeding.
Regarding the Trustee
The indenture provides that, except during the continuance of an event
of default, the trustee will perform only those duties as are specifically set
forth in the indenture. During the existence of an event of default, the trustee
will exercise those rights and powers vested in it under the indenture and use
the same degree of care and skill in its exercise as a prudent person would
exercise under the circumstances in the conduct of that person's own affairs.
The indenture and provisions of the Trust Indenture Act that will be
incorporated by reference therein upon the effectiveness of the shelf
registration statement of which this prospectus is a part contain limitations on
the rights of the trustee, should it become one of our creditors, to obtain
payment of claims in some cases or to realize on certain property received by it
in respect of any such claim as security or otherwise. The trustee is permitted
to engage in other transactions with us or any of our affiliates; provided,
however, that if it acquires any conflicting interest (as defined in the
indenture or in the Trust Indenture Act), it must eliminate the conflict or
resign.
The trustee is a lender under our credit facility and in that respect
will receive repayment of amounts outstanding under the facility from the net
proceeds of the offering. The trustee under the indenture is also the trustee
under other indentures relating to certain of our outstanding indebtedness. The
trustee and its affiliates have performed banking, investment banking, custodial
and advisory services for us from time to time for which it and they have
received customary fees and expenses.
Calculations in Respect of Notes
We or our agents will be responsible for making all calculations called
for under the notes. These calculations include, but are not limited to,
determination of the market prices of the notes and of the common stock and
amounts of interest and contingent interest, if any, on the notes. We or our
agents will make all these calculations in good faith and, absent manifest
error, our and their calculations will be final and binding on holders of notes.
We or our agents will provide a schedule of these calculations to the trustee,
and the trustee is entitled to conclusively rely upon the accuracy of these
calculations without independent verification.
Governing Law
The indenture and the notes are governed by, and construed in
accordance with, the law of the State of New York.
Book Entry, Delivery and Form
The notes are evidenced by fully registered global notes (the "global
notes"). The global notes were deposited on December 14, 2001 on behalf of The
Depository Trust Company, or DTC, and registered in the name of Cede & Co., as
nominee of DTC. Upon resale of the notes in accordance with the registration
statement of which this prospectus forms a part, beneficial interests in the
global notes will be transferred from one or more restricted global securities
to one or more unrestricted global securities. Owners of beneficial interests in
the notes represented by the global notes will hold their interests pursuant to
the procedures and practices of DTC. As a result, beneficial interests in any
such securities will be shown on, and transfers will be effected only through,
records maintained by DTC and its direct and indirect participants and any such
interest may not be exchanged for certificated securities, except in limited
circumstances. Owners of beneficial interests must exercise any rights in
respect of their interests, including any right to convert or require purchase
of their interests in the notes, in accordance with the procedures and practices
of DTC.
So long as Cede & Co, as nominee of DTC, is the registered owner of any
notes, Cede & Co. will be considered the sole owner or holder of the notes
outstanding under the indenture. Except as provided below, owners of notes will
not be entitled to have notes registered in their names, will not receive or be
entitled to receive physical delivery of notes in definitive form, and will not
be considered the holders thereof under the indenture for any purpose, including
with respect to the giving of any directions, instructions or approvals to the
trustee under the indenture. As a result, the ability of a person having a
beneficial interest in notes represented by the global notes to pledge the
interest to persons or entities that do not participate in DTC's system or to
otherwise take actions in respect of the interest may be affected by the lack of
a physical certificate evidencing the interest. You should be aware that the
laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer the notes may be limited.
DTC is a limited-purpose trust company which was created to hold
securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants. Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants") that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through Participants or Indirect Participants.
Neither we nor the trustee, the paying agent or the registrar for the
notes will have any responsibility or liability for any aspect of the records
relating to or payments made on account of notes by DTC, or for maintaining,
supervising or reviewing any records of DTC relating to those notes.
Payments in respect of the principal, premium, if any, and interest on
any notes registered in the name of Cede & Co. on the applicable record date
will be payable by the trustee to or at the direction of Cede & Co. in its
capacity as the registered holder under the indenture. Under the terms of the
indenture, we and the trustee may treat the persons in whose names the notes,
including the global notes, are registered as the owners thereof for the purpose
of receiving the payments and for any and all other purposes whatsoever.
Consequently, neither we nor the trustee has or will have any responsibility or
liability for the payment of the amounts to beneficial owners of notes
(including principal, premium, if any, and interest).
We believe, however, that it is currently the policy of DTC to
immediately credit the accounts of the relevant Participants with the payment,
in amounts proportionate to their respective holdings in principal amount at
maturity of beneficial interests in the relevant security as shown on the
records of DTC. Payments by DTC's Participants and Indirect Participants to the
beneficial owners of notes will be governed by standing instructions and
customary practice and will be the responsibility of DTC's Participants or
Indirect Participants.
As long as the notes are represented by one or more global notes, DTC's
nominee will be the holder of the notes and therefore will be the only entity
that can exercise a right to repayment or repurchase of the notes. See "Purchase
of Notes at the Option of the Holder," and "Fundamental Change Permits Holders
to Require Us to Purchase Notes." Notice by Participants or Indirect
Participants or by owners of beneficial interests in a global note held through
the Participants or Indirect Participants of the exercise of the option to
require purchase or conversion of beneficial interests in notes represented by a
global note must be transmitted to DTC in accordance with its procedures on a
form required by DTC and provided to Participants. In order to ensure that DTC's
nominee will timely exercise a right to purchase or conversion with respect to
particular notes, the beneficial owner of the notes must instruct the broker or
the Participant or Indirect Participant through which it holds an interest in
the notes to notify DTC of its desire to exercise a right to purchase or
conversion. Different firms have cut-off times for accepting instructions from
their customers and, accordingly, each beneficial owner should consult the
broker or other Participant or Indirect Participant through which it holds an
interest in notes in order to ascertain the cut-off time by which such an
instruction must be given in order for timely notice to be delivered to DTC. We
will not be liable for any delay in delivery of notices of the exercise of the
option to elect purchase or conversion.
If DTC is at any time unwilling to continue as depositary and a
successor depositary is not appointed by us within 90 days, we will issue
definitive notes in exchange for the global notes.
Same-Day Settlement and Payment
The indenture requires that payments in respect of the notes (including
principal, premium, if any, and interest) be made by wire transfer of
immediately available funds to the accounts specified by Cede & Co.
Transfer and Exchange
A holder may transfer or exchange the notes in accordance with the
procedures set forth in the indenture. The registrar may require a holder, among
other things, to furnish appropriate endorsements and transfer documents, and to
pay any taxes and fees required by law or permitted by the indenture. The
registrar for the notes is not required to transfer or exchange any notes
selected for redemption. Also, the registrar is not required to transfer or
exchange any notes for a period of 15 days before a selection of the notes to be
redeemed.
The registered holder of a note will be treated as the owner of it for
all purposes.
DESCRIPTION OF COMMON STOCK
General
The Interpublic Group of Companies, Inc. is incorporated in the State
of Delaware. The terms of our common stock are therefore subject to Delaware
law, including the Delaware General Corporation Law and the common and
constitutional law of Delaware. Our certificate of incorporation and by-laws are
filed as exhibits to the registration statement of which this prospectus forms a
part and we encourage you to read them.
We are authorized to issue up to 550 million shares of common stock
with a par value of $0.10 per share. As of March 31, 2002, there were
380,640,853 shares of common stock outstanding. Our common stock is traded on
the New York Stock Exchange under the symbol "IPG."
Voting Rights
Each share of common stock is entitled to one vote, and a majority of
the votes cast with respect to a matter will be sufficient to authorize action
upon that matter. Directors are elected by a majority of the votes cast.
Stockholders do not have the right to cumulate their votes in the election of
directors. For that reason, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election.
No Preemptive or Conversion Rights
Our common stock will not entitle its holders to any preemption,
redemption, conversion or other subscription rights.
Assets Upon Dissolution
In the event of liquidation, holders of common stock would be entitled
to receive proportionately any assets legally available for distribution to our
shareholders with respect to shares held by them, subject to any prior or equal
rights of any of our preferred stock then outstanding.
Distributions
Holders of common stock will be entitled to receive ratably the
dividends or distributions that our board of directors may declare out of funds
legally available for these payments. The payment of distributions by us is
subject to the restrictions of Delaware law applicable to the declaration of
distributions by a corporation. Under Delaware law, a corporation may not pay a
dividend out of net profits if the capital stock of the corporation is less than
the stated amount of capital represented by the issued and outstanding stock of
all classes having a preference upon the distribution of the corporation's
assets. In addition, the payment of distributions to shareholders is subject to
any prior or equal rights of outstanding preferred stock.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
General
This is a summary of the United States federal income tax consequences
relevant to holders of notes, and where noted, the common stock issuable upon a
conversion of the notes. This summary does not purport to be a comprehensive
description of all the tax considerations that may be relevant to a particular
investor, including tax considerations that arise from rules of general
application to all taxpayers or to certain classes of investors or that are
generally assumed to be known by investors. All references to "holders"
(including U.S. Holders and Non-U.S. Holders) are to beneficial owners of notes.
The discussion below deals only with notes held as capital assets and does not
purport to deal with persons in special tax situations, including, for example,
financial institutions, insurance companies, regulated investment companies,
dealers in securities or currencies, tax exempt entities, persons holding notes
in a tax-deferred or tax-advantaged account, or persons holding notes as a hedge
against currency risks, as a position in a "straddle" or as part of a "hedging"
or "conversion" transaction for tax purposes.
Except where specifically indicated below, we do not address all of the
tax consequences that may be relevant to a holder. In particular, we do not
address:
o the United States federal income tax consequences to shareholders in, or
partners or beneficiaries of, an entity that is a holder of notes;
o the United States federal estate, gift or alternative minimum tax
consequences of the purchase, ownership or disposition of notes;
o persons who hold the notes whose functional currency is not the United
States dollar;
o any state, local or foreign tax consequences of the purchase, ownership or
disposition of notes; or
o any federal, state, local or foreign tax consequences of owning or
disposing of the common stock.
Persons considering the purchase of notes should consult their own tax
advisors concerning the application of the United States federal income tax laws
to their particular situations as well as any consequences of the purchase,
ownership and disposition of the notes arising under the laws of any other
taxing jurisdiction.
This summary is based upon laws, regulations, rulings and decisions now
in effect all of which are subject to change (including retroactive changes in
effective dates) or possible differing interpretations. No statutory,
administrative or judicial authority directly addresses the treatment of the
notes or instruments similar to the notes for United States federal income tax
purposes. No rulings have been sought or are expected to be sought from the
Internal Revenue Service (which we refer to as the IRS) with respect to any of
the United States federal income tax consequences discussed below, and no
assurance can be given that the IRS will not take contrary positions, As a
result, no assurance can be given that the IRS will agree with the tax
characterizations and the tax consequences described below.
We urge prospective investors to consult their own tax advisors with
respect to the tax consequences to them of the purchase, ownership and
disposition of the notes and the common stock in light of their own particular
circumstances, including the tax consequences under state, local, foreign and
other tax laws and the possible effects of changes in United States federal or
other tax laws.
Classification of the Notes
Our counsel, Cleary, Gottlieb, Steen & Hamilton, has provided us with
an opinion that the notes will be treated as indebtedness for United States
federal income tax purposes and that the notes will be subject to the special
regulations governing contingent payment debt instruments (which we refer to as
the CPDI regulations). Moreover, pursuant to the terms of the indenture, we and
each holder of notes agree, for United States federal income tax purposes, to
treat the notes as debt instruments that are subject to the CPDI regulations
with a "Comparable Yield" calculated in the manner described below.
U.S. Holders
The following discussion is a summary of United States federal income
tax consequences that will apply to you if you are a citizen or resident of the
United States or a domestic corporation or a person who is otherwise subject to
United States federal income tax on a net income basis in respect of the notes
(a "U.S. Holder").
Accrual of Interest on the Notes
Pursuant to the CPDI regulations, U.S. Holders of notes are required to
accrue interest income on notes, in the amounts described below, regardless of
whether the U.S. Holder uses the cash or accrual method of tax accounting.
Accordingly, U.S. Holders may be required to include interest in taxable income
in each year in excess of the accruals on the notes for non-tax purposes and in
excess of any contingent interest payments actually received in that year.
The CPDI regulations provide that a U.S. Holder must accrue an amount
of ordinary interest income, as original issue discount for United States
federal income tax purposes, for each accrual period prior to and including the
maturity date of the notes that equals:
(1) the product of (i) the adjusted issue price (as defined below) of the
notes as of the beginning of the accrual period; and (ii) the Comparable
Yield to maturity (as defined below) of the notes, adjusted for the length
of the accrual period;
(2) divided by the number of days in the accrual period; and
(3) multiplied by the number of days during the accrual period that the
U.S. Holder held the notes.
The issue price of the notes is the first price at which a substantial
amount of the notes was sold to the public, excluding sales to bond houses,
brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers. The adjusted issue price of a
note is its issue price increased by any interest income previously accrued,
determined without regard to any adjustments to interest accruals described
below, and decreased by the projected amount of any payments previously made
with respect to the notes.
The term "Comparable Yield" means the annual yield we would pay, as of
the initial issue date (December 14, 2001), on a fixed-rate nonconvertible debt
security with no contingent payments, but with terms and conditions otherwise
comparable to those of the notes. We have determined that the Comparable Yield
for the notes is an annual rate of 7.45%, compounded semiannually.
The CPDI regulations require that we provide to U.S. Holders, solely
for United States federal income tax purposes, a schedule of the projected
amounts of payments, which we refer to as projected payments, on the notes.
These payments set forth on the schedule must produce total return on the notes
equal to the Comparable Yield. The projected payment schedule includes estimates
for certain contingent interest payments and an estimate for a payment at
maturity taking into account the fair market value of the common stock that
might be paid upon a conversion of the notes.
Pursuant to the terms of the indenture, each holder of notes has agreed
to use the Comparable Yield and the schedule of projected payments as described
above in determining its interest accruals, and the adjustments thereto
described below, in respect of the notes. This Comparable Yield and the schedule
of projected payments will be set forth in the indenture. You may also obtain
the projected payment schedule by submitting a written request for the
information to the address set forth under "Where You Can Find More
Information."
The Comparable Yield and the schedule of projected payments are not
determined for any purpose other than for the determination of a holder's
interest accruals and adjustments thereof in respect of the notes for United
States federal income tax purposes and do not constitute a projection or
representation regarding the actual amounts payable on the notes.
Amounts treated as interest under the CPDI regulations are treated as
original issue discount for all purposes of the Code.
Adjustments to Interest Accruals on the Notes
If, during any taxable year, a U.S. Holder receives actual payments
with respect to the notes that in the aggregate exceed the total amount of
projected payments for that taxable year, the U.S. Holder will incur a "net
positive adjustment" under the CPDI regulations equal to the amount of the
excess. The U.S. Holder will treat a "net positive adjustment" as additional
interest income. For this purpose, the payments in a taxable year include the
fair market value of our common stock received in that year.
If a U.S. Holder receives in a taxable year actual payments with
respect to the notes that in the aggregate were less than the amount of
projected payments for that taxable year, the U.S. Holder will incur a "net
negative adjustment" under the CPDI regulations equal to the amount of the
deficit. This adjustment will (a) reduce the U.S. Holder's interest income on
the notes for that taxable year, and (b) to the extent of any excess after the
application of (a), give rise to an ordinary loss to the extent of the U.S.
Holder's interest income on the notes during prior taxable years, reduced to the
extent that the interest was offset by prior net negative adjustments. Any
negative adjustment in excess of the amount described in (a) and (b) will be
carried forward, as a negative adjustment to offset future interest income in
respect of the notes or to reduce the amount realized on a sale, exchange or
retirement of the notes.
Sale, Exchange, Conversion or Redemption
Upon the sale or exchange of a note, or the redemption of a note for
cash, a U.S. Holder generally will recognize gain or loss. As described above,
our calculation of the Comparable Yield and the schedule of projected payments
for the notes includes the receipt of stock upon conversion as a contingent
payment with respect to the notes. Accordingly, we intend to treat the receipt
of our common stock by a U.S. Holder upon the conversion of a note, or upon the
redemption of a note where we elect to pay in common stock, as a payment under
the CPDI regulations. As described above, holders have agreed to be bound by our
determination of the Comparable Yield and the schedule of projected payments.
The amount of gain or loss on a taxable sale, exchange, conversion or
redemption will be equal to the difference between (a) the amount of cash plus
the fair market value of any other property received by the U.S. Holder,
including the fair market value of any of our common stock received, and (b) the
U.S. Holder's adjusted tax basis in the note. A U.S. Holder's adjusted tax basis
in a note will generally be equal to the U.S. Holder's original purchase price
for the note, increased by any interest income previously accrued by the U.S.
Holder (determined without regard to any adjustments to interest accruals
described above), and decreased by the amount of any projected payments that
have been previously scheduled to be made in respect of the note (without regard
to the actual amount paid). Gain recognized upon a sale, exchange, conversion or
redemption of a note will generally be treated as ordinary interest income; any
loss will be ordinary loss to the extent of interest previously included in
income, and as to any remainder, capital loss (which will be long-term if the
note is held for more than one year). The deductibility of net capital losses is
subject to limitations.
A U.S. Holder's tax basis in our common stock received upon a
conversion of a note or upon a U.S. Holder's exercise of a put right that we
elect to pay in common stock will equal the then current fair market value of
that common stock. The U.S. Holder's holding period for the common stock
received will commence on the day immediately following the date of conversion
or redemption.
Purchasers of Notes at a price other than the adjusted issue price
If you purchase a note in the secondary market for an amount that
differs from the adjusted issue price of the notes at the time of purchase, you
will be required to accrue interest income on the note in accordance with the
Comparable Yield even if market conditions have changed since the date of
issuance. The rules for accruing bond premium, acquisition premium and market
discount will not apply. Instead, you must reasonably determine whether the
difference between the purchase price for a note and the adjusted issue price of
a note is attributable to a change in expectations as to the contingent amounts
potentially payable in respect of the notes, a change in interest rates since
the notes were issued, or both, and reasonably allocate the difference
accordingly.
If the purchase price of a note is less than its adjusted issue price,
a positive adjustment will result, increasing the amount of interest that you
would otherwise accrue and include in income each year, and the amount of
ordinary income (or decreasing the amount of ordinary loss) recognized upon
redemption or maturity by the amounts allocated to each of interest and
projected payment schedule. If the purchase price is more than the adjusted
issue price of a note, a negative adjustment will result, decreasing the amount
of interest that you must include in income each year, and the amount of
ordinary income (or increasing the amount of ordinary loss) recognized upon
redemption or maturity by the amounts allocated to each of interest and
projected payment schedule. To the extent that an adjustment is attributable to
a change in interest rates, it must be reasonably allocated to the daily
portions of interest over the remaining term of the notes. Any positive or
negative adjustment that you are required to make if you purchase your notes at
a price other than the adjusted issue price will increase or decrease,
respectively, your tax basis in the notes.
Certain United States holders will receive Forms 1099-OID reporting
interest accruals on their notes. Those forms will not, however, reflect the
effect of any positive or negative adjustments resulting from your purchase of a
note in the secondary market at a price that differs from its adjusted issue
price on the date of purchase. You are urged to consult your tax advisor as to
whether, and how, the adjustments should be made to the amounts reported on any
Form 1099-OID.
Constructive Dividends
If at any time we were to make a distribution of property to our
stockholders that would be taxable to the stockholders as a dividend for United
States federal income tax purposes and, in accordance with the anti-dilution
provisions of the notes, the conversion rate of the notes is increased, such
increase might be deemed to be the payment of a taxable dividend to holders of
the notes.
For example, an increase in the conversion rate in the event of
distributions of our evidences of indebtedness or our assets or an increase in
the event of an extraordinary cash dividend would generally result in deemed
dividend treatment to holders of the notes, but generally an increase in the
event of stock dividends or the distribution of rights to subscribe for common
stock will not.
Tax Event
The modification of the terms of the notes by us upon a Tax Event as
described in "Description of Notes--Optional Conversion to Semiannual Cash Pay
Upon Tax Event," could possibly alter the timing and amount of income
recognition by the holders with respect to the semiannual payments of interest
due after the option exercise date.
Backup Withholding Tax and Information Reporting
Payments of principal, premium, if any, and interest (including
original issue discount) on, and the proceeds of dispositions of, the notes may
be subject to information reporting and United States federal backup withholding
tax if the U.S. Holder thereof fails to supply an accurate taxpayer
identification number or otherwise fails to comply with applicable United States
information reporting or certification requirements. Any amounts so withheld
will be allowed as a credit against the U.S. Holder's United States federal
income tax liability.
Non-U.S. Holders
The following is a summary of United States federal tax consequences
that will apply to you if you are a Non-U.S. Holder of the notes or shares of
common stock. The term "Non-U.S. Holder" means a beneficial owner of a note that
is not a U.S. Holder.
Non-U.S. Holders should consult their own tax advisors to determine the
United States federal, state, local and foreign tax consequences that may be
relevant to them.
Payments with respect to the Notes
Payments of contingent interest made to Non-U.S. Holders that are based
on the cash dividends paid by us will not be exempt from United States federal
income or withholding tax and, therefore, Non-U.S. Holders will be subject to
withholding on the payments of contingent interest at a rate of 30%, subject to
reduction by an applicable treaty or upon the receipt of a Form W-8ECI (or
successor form) from a Non-U.S. Holder claiming that the payments are
effectively connected with the conduct of a United States trade or business (or,
where a tax treaty applies, are attributable to a United States permanent
establishment).
All other payments on the notes made to a Non-U.S. Holder, including a
payment in common stock pursuant to a conversion, and any gain realized on a
sale or exchange of the notes (other than gain attributable to accrued
contingent interest payments), will be exempt from United States income or
withholding tax, provided that:
(i) Non-U.S. Holder does not own, actually or constructively, 10
percent or more of the total combined voting power of all
classes of our stock entitled to vote, and is not a
controlled foreign corporation related, directly or
indirectly, to us through stock ownership;
(ii) the beneficial owner of a note certifies on IRS Form W-8BEN
(or successor form), under penalties of perjury, that it is
not a United States person and provides its name and address
or otherwise satisfies applicable documentation
requirements;
(iii) the payments and gain are not effectively connected with
the conduct by the Non-U.S. Holder of a trade or business in
the United States, and
(iv)the notes and common stock are actively traded within the
meaning of section 871(h)(4)(C)(v)(1) of the Code (which,
for these purposes and subject to certain exceptions,
includes trading on the NYSE).
If a Non-U.S. Holder of the notes is engaged in a trade or business in
the United States, and if interest on the notes is effectively connected with
the conduct of that trade or business, the Non-U.S. Holder, although exempt from
the withholding tax discussed in the preceding paragraphs, will generally be
subject to regular United States federal income tax on interest and on any gain
realized on the sale, exchange, conversion or redemption of the notes in the
same manner as if it were a U.S. Holder. In lieu of the certificate described in
the preceding paragraph, such a Non-U.S. Holder will be required to provide to
the withholding agent a properly executed IRS Form W-8ECI (or successor form) in
order to claim an exemption from withholding tax. In addition, if such a
Non-U.S. Holder is a foreign corporation, the Holder may be subject to a branch
profits tax equal to 30% (or a lower rate provided by an applicable treaty) of
its effectively connected earnings and profits for the taxable year, subject to
certain adjustments.
Payments on Common Stock and constructive dividends
Any dividends paid to you with respect to the shares of common stock
(and any deemed dividends resulting from certain adjustments, or failure to make
adjustments, to the number of shares of common stock to be issued upon
conversion, see "Constructive Dividends" above) will be subject to withholding
tax at a 30% rate or a lower rate as may be specified by an applicable income
tax treaty. However, dividends that are effectively connected with the conduct
of a trade or business within the United States and, where a tax treaty applies,
are attributable to a United States permanent establishment, are not subject to
the withholding tax, but instead are subject to United States federal income tax
on a net income basis applicable graduated individual or corporate rates.
Certain certification and disclosure requirements must be complied with in order
for effectively connected income to be exempt from withholding tax. Any such
effectively connected dividends received by a foreign corporation may, under
certain circumstances, be subject to an additional "branch profits tax" at a 30%
rate or a lower rate as may be specified by an applicable income tax treaty.
Sale, Exchange or Redemption of Shares of Common Stock
Any gain realized upon the sale, exchange, or redemption of a share of
common stock generally will not be subject to United States federal income tax
unless:
o That gain is effectively connected with the conduct of a trade or business
in the United States by you, or
o You are an individual who is present in the United States for 183 days or
more in the taxable year of that disposition and certain other conditions
are met.
United States Federal Estate Tax
Notes held by a Non-U.S. Holder individual at the time of death will
not be includible in the decedent's taxable estate for United States federal
estate tax purposes (except to the extent a portion of the value of the notes is
appropriately attributable to payments on the notes that are based on our
dividends), provided that the holder or beneficial owner did not at the time of
death actually or constructively own 10% or more of the combined voting power of
all of our classes of stock entitled to vote, and provided that, at the time of
death, payments with respect to the notes (including original issue discount)
would not have been effectively connected with the conduct by the holder of a
trade or business within the United States. If you are an individual, your
common stock will be subject to United States estate tax when you die unless you
are entitled to the benefits of an estate tax treaty.
Backup Withholding Tax and Information Reporting
In general, if you are a Non-U.S. Holder you will not be subject to backup
withholding and information reporting with respect to payments made by us with
respect to the notes if you have provided us with an IRS Form W-8BEN described
above and we do not have actual knowledge or reason to know that you are a U.S.
person. In addition, no backup withholding will be required regarding the
proceeds of the sale of notes made within the United States or conducted through
certain United States financial intermediaries if the payor receives the
statement described above and does not have actual knowledge or reason to know
that you are a United States person or you otherwise establish an exemption.
SELLING SECURITYHOLDERS
The notes were originally issued by us and sold to Salomon Smith Barney
Inc., J.P. Morgan Securities Inc., HSBC Securities (USA) Inc., Morgan Stanley &
Co. Incorporated, Barclays Capital, Inc., Robertson Stephens, Inc. and SunTrust
Capital Markets, Inc. (the "Initial Purchasers") and resold by the Initial
Purchasers in transactions exempt from the registration requirements of the
Securities Act to persons reasonably believed by the Initial Purchasers to be
"qualified institutional buyers" as defined by Rule 144A under the Securities
Act and outside the United States to non-United States persons in accordance
with Regulation S under the Securities Act. The selling securityholders,
including their transferees, pledgees, donees, assignees or successors, may from
time to time offer and sell pursuant to this prospectus any or all of the notes
listed below and the shares of common stock issued upon conversion of the notes.
Selling securityholders may be deemed to be "underwriters" as defined
in the Securities Act of 1933, as amended. Any profits realized by the selling
securityholders may be deemed to be underwriting commissions.
The table below sets forth the name of each selling securityholder, the
principal amount at maturity of notes that each selling securityholder may offer
pursuant to this prospectus and the number of shares of common stock into which
those notes are convertible. Unless set forth below, to the best of our
knowledge, none of the selling securityholders has, or within the past three
years has had, any material relationship with us or any of our predecessors or
affiliates or beneficially owns in excess of 1% of our outstanding common stock.
We have prepared the table below based on information given to us by
the selling securityholders on or prior to May 11, 2002. However, any or all of
the notes or shares of common stock listed below may be offered for sale
pursuant to this prospectus by the selling securityholders from time to time.
Accordingly, no estimate can be given as to the amounts of notes or shares of
common stock that will be held by the selling securityholders upon consummation
of any sales. In addition, the selling securityholders listed in the table below
may have acquired, sold or transferred, in transactions exempt from the
registration requirements of the Securities Act, some or all of their notes
since the date as of which the information in the table is presented.
Information about the selling securityholders may change over time. Any
changed information will be set forth in prospectus supplements to this
prospectus. From time to time, additional information concerning ownership of
the notes and shares of common stock may rest with certain holders of the notes
not named in the table below and of whom we are unaware.
Number of
Shares of
Aggregate Principal Percentage Common Stock Percentage of
Amount at Maturity of of Notes That May be Common Stock
Name Notes That May be Sold Outstanding Sold(1) Outstanding(2)
- ---- ---------------------- ----------- ------- --------------
Absolute Return Fund Ltd. 95,000 * 2,167 *
Aftra Health Fund 375,000 * 8,556 *
Aid Association for 3,000,000 * 68,444 *
Lutherans, as successor
to Lutheran
Brotherhood(6)
Aloha Airlines Non-Pilots 115,000 * 2,635 *
Pension Trust
Aloha Pilots Retirement Trust 65,000 * 1,483 *
Argent Classic Convertible 2,500,000 * 72,036 *
Arbitrage Fund (Bermuda)
Ltd
Argent Classic Convertible 1,500,000 * 43,222 *
Arbitrage Fund L.P.(5)
Argent LowLev Convertible 1,000,000 * 22,815 *
Arbitrage Fund, LLC
Argent LowLev Convertible 10,000,000 1.42% 228,147 *
Arbitrage Fund Ltd.
Aristeia International Limited 13,340,000 1.90% 304,348 *
Aristeia Trading, LLC(5) 3,600,000 * 82,132 *
Bank Austria Cayman Islands, 1,000,000 * 22,815 *
Ltd
BNP Paribas London Branch USD 42,000,000 5.98% 958,217 *
Converts
C & H Sugar Company, Inc. 155,000 * 3,536 *
CC Investments, LDC(6) 4,250,000 * 96,962 *
Chrysler Corporation Master 4,980,000 * 113,617 *
Retirement Trust
Citicorp Life Insurance 39,000 * 889 *
Company - Corporate(6)
CSFB Convertible & 1,500,000 * 43,222 *
Quantitative Strategies
LTD
Delta Air Lines Master Trust 1,280,000 * 29,203 *
(c/o Oaktree Capital
Management, LLC)
Delta Pilots D&S Trust (c/o 625,000 * 14,259 *
Oaktree Capital
Management LLC)
Deutsche Banc Alex Brown 163,000,000 23.22% 3,718,796 *
Inc.(5)
Drury University 45,000 * 1,027 *
Gaia Offshore Master Fund Ltd. 6,500,000 * 148,295 *
GDO Equity Arbitrage Master 9,000,000 1.28% 205,332 *
Fund
Global Bermuda Limited 2,000,000 * 45,629 *
Partnership
Goldman Sachs and Company(5) 7,000,000 * 159,702 *
Goldman, Sachs & Co. Profit 109,000 * 2,487 *
Sharing Master Trust(6)
Hamilton Multi-Strategy 5,000,000 * 114,073 *
Master Fund
Hawaiian Airlines Employees 50,000 * 1,141 *
Pension Plan-IAM
Hawaiian Airlines Pension 10,000 * 228 *
Plan for Salaried
Employees
Hawaiian Airlines Pilots 100,000 * 2,281 *
Retirement Plan
HBK Master Fund L.P. 15,000,000 2.14% 342,220 *
HFR TQA Master Trust 500,000 * 11,407 *
Highbridge International 16,750,000 2.39% 382,146 *
LLC(6)
Innovest Finanzdienstleistungs 600,000 * 13,688 *
AG
JMG Convertible Investments, 1,500,000 * 34,222 *
LP(5)
JMG Triton Offshore Fund, Ltd. 1,500,000 * 34,222 *
JP Morgan Securities, Inc.(5) 17,095,000 2.44% 390,017 *
Lakeshore International, Ltd. 8,000,000 1.14% 182,518 *
LDG Limited 700,000 * 15,970 *
Lexington (IMA) Limited 893,000 * 20,374 *
Lyxor Master Fund 1,000,000
Lyxor Master Fund Ref: 1,000,000 * 22,815 *
Argent/LowLev CB
MAG Mutual Insurance Company 175,000 * 3,992 *
Mainstay Convertible Fund(6) 4,920,000 * 112,248 *
Mainstay VP Convertible 1,500,000 * 34,222 *
Portfolio(6)
Managed Assets Trust(6) 400,000 * 9,125 *
Medical Liability Mutual 17,125,000 2.44% 390,701 *
Insurance Company
Microsoft Corporation 1,635,000 * 37,302 *
Motion Picture Industry 390,000 * 8,898 *
Health Plan-Active
Member Fund
Motion Picture Industry 185,000 * 4,221 *
Health Plan-Retiree
Member Fund
National Benefit Life 23,000 * 524 *
Insurance Company(6)
NCMIC Insurance Company 225,000 * 5,133 *
New York Life Insurance 5,295,000 * 120,803 *
Company(5)(6)
New York Life Insurance 2,250,000 * 1,333 *
Company(5)(6)
New York Life Separate 660,000 * 15,058 *
Account #7(6)
Nicholas Applegate Investment 10,000 * 228 *
Grade Convertible Fund
NMS Services (Cayman) Inc.(6) 20,000,000 2.85% 576,294 *
OCM Convertible Trust 2,750,000 * 62,740 *
Ohio Insurance Company 950,000 * 21,673
OZ Convertible Master Fund, 1,186,000 * 27,058 *
Ltd
OZ Mac 13 Ltd. 99,000 * 2,239 *
OZ Master Fund, Ltd. 23,118,000 3.29% 527,430 *
Partner Reinsurance Company 675,000 * 15,400 *
Ltd
Primerica Life Insurance 904,000 * 20,624 *
Company(6)
Primex 150,000 * 3,422 *
Princeton Insurance Company 3,250,000 * 74,147 *
Professional Liability 100,000 * 2,281 *
Insurance Company of
America
Qwest Occupational Health 120,000 * 2,738 *
Trust
RCG Halifax Master Fund, Ltd. 500,000 * 11,407 *
RCG Latitude Master Fund Ltd. 2,500,000 * 57,037 *
RCG Multi Strategy, LP 1,000,000 * 22,814 *
S.A.C. Capital Associates, LLC 22,250,000 3.20% 507,627
Southern Farm Bureau Life 2,500,000 * 57,036 *
Insurance
Starvest Managed Portfolio 70,000 * 1,597 *
State Employee's Retirement 1,860,000 * 42,435 *
Fund of the State of
Delaware
State of Florida Division of 3,250,000 * 74,147 *
Treasury
State of Oregon/SAIF 3,700,000 * 84,414 *
Corporation
TCW Group, Inc. 2,500,000 * 57,036 *
Teachers Insurance and 13,000,000 1.85% 296,591 *
Annuity Association
The Reciprocal of America 350,000 * 7,985 *
The Travelers Indemnity 2,186,000 * 49,872 *
Company(6)
The Travelers Insurance 1,652,000 * 36,586 *
Company - Life(6)
The Travelers Insurance 85,000 * 1,939 *
Company - Separate
Account TLAC(6)
The Travelers Life and 111,000 * 2,532 *
Annuity Company(6)
TQA Master Fund, Ltd. 3,850,000 * 87,836 *
TQA Master Plus Fund, Ltd. 1,000,000 * 22,814
Travelers Series Trust 600,000 * 13,688 *
Convertible Bond
Portfolio(6)
Tribeca Investments L.L.C 12,500,000 1.78% 285,184 *
UFJ Investments Asia Ltd. 9,000,000 * 205,332 *
UBS AG London Branch(5) 15,000,000 2.14% 342,220 *
UBS Warburg LLC(5) 16,250,000 2.31% 370,738 *
Wilmington Trust Company as 64,810,000 9.23% 1,478,621 *
Owner Trustee for the
Forrestal Funding Master
Trust
Wolverine Trading LP(5) 6,500,000 * 148,295 *
Zazove Hedged Convertible 1,500,000 * 34,222 *
Fund L.P.
Zurich Institutional 2,250,000 * 51,333 *
Benchmarks Master Fund
Ltd
All other holders of notes or
future transferees,
pledgees, donees,
assignees or successors
of any holders(3)(4) 76,320,000 10.87 1,616,179 0.42
---------- ----- --------- ----
Total 701,960,000 100 16,015,006 4.20
=========== === ========== ====
- -------
* Less than one percent (1%).
(1) Assumes conversion of all of the holder's notes at a conversion rate of
22.8147 shares of common stock per $1,000 principal amount at maturity of
the notes. This conversion rate is subject to adjustment, however, as
described under "Description of the Notes--Conversion rights." As a result,
the number of shares of common stock issuable upon conversion of the notes
may increase or decrease in the future.
(2) Calculated based on Rule 13d-3(d)(1)(i) of the Exchange Act, using
380,640,853 shares of common stock outstanding as of March 31, 2002. In
calculating this amount for each holder, we treated as outstanding the
number of shares of common stock issuable upon conversion of all of that
holder's notes, but we did not assume conversion of any other holder's
notes.
(3) Information about other selling securityholders will be set forth in
prospectus supplements, if required.
(4) Assumes that any other holders of notes, or any future pledgees, donees,
assignees, transferees or successors of or from any other holders of notes,
do not beneficially own any shares of common stock other than the common
stock issuable upon conversion of the notes at the initial conversion rate.
(5) This selling securityholder is a broker-dealer.
(6) This selling securityholder is an affiliate of a broker-dealer.
PLAN OF DISTRIBUTION
We are registering the notes and shares of common stock covered by this
prospectus to permit holders to conduct public secondary trading of these
securities from time to time after the date of this prospectus. We have agreed,
among other things, to bear all expenses, other than underwriting discounts and
selling commissions, in connection with the registration and sale of the notes
and the shares of common stock covered by this prospectus.
We will not receive any of the proceeds from the offering of notes or
the shares of common stock by the selling securityholders. We have been advised
by the selling securityholders that the selling securityholders may sell all or
a portion of the notes and shares of common stock beneficially owned by them and
offered hereby from time to time:
o directly; or
o through underwriters, broker-dealers or agents, who may receive
compensation in the form of underwriting discounts or commissions or
agent's commissions from the selling securityholders or from the purchasers
of the notes and common stock for whom they may act as agent.
The notes and the common stock may be sold from time to time in one or
more transactions at:
o fixed prices;
o prevailing market prices at the time of sale;
o varying prices determined at the time of sale; or
o negotiated prices.
These prices will be determined by the holders of the securities or by
agreement between these holders and underwriters or dealers who may receive fees
or commissions in connection with the sale. The aggregate proceeds to the
selling securityholders from the sale of the notes or shares of common stock
offered by them hereby will be the purchase price of the notes or shares of
common stock less discounts and commissions, if any.
The sales described in the preceding paragraph may be effected in
transactions:
o on any national securities exchange or quotation service on which the notes
and common stock may be listed or quoted at the time of sale, including the
NYSE in the case of the common stock;
o in the over-the-counter market; or
o through the writing of options.
These transactions may include block transactions or crosses. Crosses
are transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with the sales of the notes and the shares of common
stock or otherwise, the selling securityholders may enter into hedging
transactions with broker-dealers, which may in turn engage in short sales of the
notes and the shares of common stock, short and deliver notes and the shares of
common stock to close out the short positions, or loan or pledge notes and the
shares of common stock to broker-dealers that in turn may sell the notes and the
shares of common stock.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholders and any underwriter,
broker-dealer or agent regarding the sale of the notes and the shares of common
stock by the selling securityholders. Selling securityholders may not sell any,
or may not sell all, of the notes and the shares of common stock offered by them
pursuant to this prospectus. In addition, we cannot assure you that a selling
securityholder will not transfer, devise or gift the notes and the shares of
common stock by other means not described in this prospectus. In addition, any
securities covered by this prospectus which qualify for sale pursuant to Rule
144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A
rather than pursuant to this prospectus.
The outstanding shares of common stock are listed for trading on the
NYSE under the symbol "IPG."
The selling securityholders and any broker and any broker-dealers,
agents or underwriters that participate with the selling securityholders in the
distribution of the notes or the shares of common stock may be deemed to be
"underwriters" within the meaning of the Securities Act. In this case, any
commissions received by these broker-dealers, agents or underwriters and any
profit on the resale of the notes or the shares of common stock purchased by
them may be deemed to be underwriting commissions or discounts under the
Securities Act. In addition, any profits realized by the selling securityholders
may be deemed to be underwriting commissions.
Each of the selling securityholders that is an affiliate of a
registered broker-dealer has represented to us, and by its use of this
prospectus repeats such representation to you, that it purchased its notes in
the ordinary course of business and at the time of such purchase had no direct
or indirect agreements or understandings with any person to distribute such
notes or common shares issuable upon conversion of such notes.
The notes were issued and sold in December 2001 in transactions exempt
from the registration requirements of the Securities Act to persons reasonably
believed by the Initial Purchasers to be "qualified institutional buyers," as
defined by Rule 144A under the Securities Act, and outside the United States to
non-United States persons in accordance with Regulation S under the Securities
Act. We have agreed to indemnify each selling securityholder (including the
Initial Purchasers), and each selling securityholder's directors, officers,
employees, representatives, agents, and each person, if any, who controls that
selling securityholder within the meaning of either the Securities Act or the
Exchange Act, and each selling securityholder (including the Initial Purchasers)
has agreed to indemnify us, our directors, officers, employees, representatives,
agents, and each person, if any, who controls us within the meaning of either
the Securities Act or the Exchange Act, against specified liabilities arising
under the Securities Act, the Exchange Act or other applicable law.
The selling securityholders and any other person participating in a
distribution will be subject to the Exchange Act. The Exchange Act rules
include, without limitation, Regulation M, which may limit the timing of
purchases and sales of any of the notes and the underlying shares of common
stock by the selling securityholders and any such other person. In addition,
Regulation M of the Exchange Act may restrict the ability of any person engaged
in the distribution of the notes and the underlying shares of common stock to
engage in market-making activities with respect to the particular notes and the
underlying shares of common stock being distributed for a period of up to five
business days prior to the commencement of the distribution. This may affect the
marketability of the notes and the underlying shares of common stock and the
ability of any person or entity to engage in market-making activities with
respect to the notes and the underlying shares of common stock.
We will use our reasonable efforts to keep the registration statement
of which this prospectus is a part effective until the earliest of:
o the time when the notes and the underlying shares of common stock can be
sold pursuant to Rule 144 under the Securities Act or any successor
provision;
o the expiration of the holding period applicable to the notes and the
underlying shares of common stock held by persons that are not our
affiliates under Rule 144(k) under the Securities Act or any successor
provision; and
o the date on which all notes and the underlying shares of common stock are
disposed of in accordance with the registration statement to which this
prospectus relates.
We will be permitted to suspend the effectiveness of the shelf
registration statement and the use of this prospectus during specified periods
(not to exceed 120 days in the aggregate in any 12 month period) in specified
circumstances, including circumstances relating to pending corporate
developments. We need not specify the nature of the event giving rise to a
suspension in any notice to holders of the notes of the existence of such a
suspension. In these cases, we may prohibit offers and sales of notes and shares
of common stock pursuant to the registration statement to which this prospectus
relates.
VALIDITY OF SECURITIES
The validity of the notes offered hereby and the shares of common stock
issuable upon conversion of the notes has been passed upon for Interpublic by
Nicholas J. Camera, Esq., Senior Vice President, General Counsel and Secretary
of Interpublic.
EXPERTS
The consolidated financial statements incorporated in this prospectus
by reference to Interpublic's Annual Report on Form 10-K (Exhibit 13), except as
they relate to NFO Worldwide, Inc. for the year ended December 31, 1999,
Deutsch, Inc. and subsidiary and affiliates as of and for the two year period
ended December 31, 2000, and True North Communications Inc. as of and for the
two year period ended December 31, 2000, have been audited by
PricewaterhouseCoopers LLP, independent accountants, and, insofar as they relate
NFO Worldwide, Inc., Deutsch, Inc. and subsidiary and affiliates, and True North
Communications Inc., by Arthur Andersen LLP, J.H. Cohn LLP, and Arthur Andersen
LLP, respectively, independent accountants, whose reports thereon have been
incorporated in this prospectus. The financial statements have been incorporated
in reliance on the reports of these independent accountants given on the
authority of these firms as experts in accounting and auditing.
GLOSSARY OF DEFINED TERMS
For your convenient reference in reading this prospectus, the definitions of
certain terms used in this prospectus are set forth in the glossary below.
Defined Term Definition
Accreted Value..............At any date of determination:
(1) if the notes have not been converted to Cash
Pay Notes, the sum of:
(x) the initial offering price
of each note, plus
(y) the portion of the excess of
the principal amount of each
note over the initial offering
price which shall have been
amortized by us in accordance
with GAAP through such date, on
a daily basis and compounded
semi-annually on each December
14 and June 14 at the rate of
1.00% per annum from December
14, 2001 through the date of
determination computed on the
basis of a 360-day year of
twelve 30-day months, and
(2) if the notes have been converted to Cash Pay
Notes, the Restated Principal Amount.
Applicable Five Trading Day
Period......................For purposes of determining whether contingent
interest will be paid in respect of the notes during
any six-month period, the five trading days ending
on the second trading day immediately preceding the
relevant six-month period, unless we declare a
dividend for which the record date falls prior to
the first day of a six-month period but the payment
date falls within such six-month period, in which
case the "Applicable Five Trading Day Period" means
the five trading days ending on the second trading
day immediately preceding the record date for that
dividend.
Average Note Price..........The average of the Note Prices for the Applicable
Five Trading Day period.
Comparable Yield...........The annual yield we would pay, as of the initial
issue date (December 14, 2001), on a fixed-rate
nonconvertible debt security with no contingent
payments, but with terms and conditions otherwise
comparable to those of the notes.
Continuing Director.........A director who either was a member of our board of
directors on December 14, 2001 or who becomes a
director of Interpublic subsequent to that date and
whose election, or nomination for election by our
stockholders, is duly approved by a majority of the
Continuing Directors on the board of directors of
Interpublic at the time of the approval, either by a
specific vote or by approval of the proxy statement
issued by Interpublic on behalf of the entire board
of directors of Interpublic in which the individual
is named as nominee for director.
Fundamental Change..........Whenever any of the following has occurred at any
time after the original issuance of the notes:
o A "person" or "group" within the meaning of
Section 13(d) of the Exchange Act (other than
us, our subsidiaries or our or their employee
benefit plans) files a Schedule TO (or any
schedule, form or report under the Exchange Act)
disclosing that such person or group has become
the direct or indirect ultimate "beneficial
owner" (as defined in Rule 13d-3 under the
Exchange Act) of our Common Equity representing
more than 50% of the voting power of our Common
Equity;
o Consummation of any share exchange,
consolidation or merger of us pursuant to which
our common stock will be converted into cash,
securities or other property or any sale, lease
or other transfer (in one transaction or a
series of transactions) of all or substantially
all of our consolidated assets (considered
together with our subsidiaries) to any person
(other than one of our subsidiaries); provided,
however, that a transaction where the holders of
more than 50% of all classes of our Common
Equity immediately prior to such transaction
own, directly or indirectly, more than 50% of
all classes of Common Equity of the continuing
or surviving corporation or transferee
immediately after such event shall not be a
Fundamental Change; or
o Continuing Directors cease to constitute at
least a majority of our board of directors.
A Fundamental Change will not be deemed to have
occurred, however, if either:
o the Sale Price of our common stock for any five
trading days within the 10 consecutive trading
days ending immediately before the later of the
Fundamental Change or the announcement thereof,
shall equal or exceed 105% of the Accreted Value
as of that date, divided by the conversion rate,
or
o at least 90% of the consideration in the
transaction or transactions constituting the
Fundamental Change consists of shares of common
stock traded on a national securities exchange
or quoted on the Nasdaq Stock Market (or which
will be so traded or quoted when issued or
exchanged in connection with a Fundamental
Change) (these securities being referred to as
"publicly traded securities") and as a result of
this transaction or transactions the notes
become convertible into such publicly traded
securities (excluding cash payments for
fractional shares).
Initial Purchasers..........Salomon Smith Barney Inc., J.P. Morgan Securities
Inc., HSBC Securities (USA) Inc., Morgan Stanley &
Co. Incorporated, Barclays Capital, In., Robertson
Stephens, Inc. and SunTrust Capital markets, Inc.,
the broker dealers that acted as initial purchasers
when the notes were originally issued.
Market Price................As of any date, the average of the Sale Prices of
our common stock for the 20 trading-day period
ending on the third business day prior to that date,
appropriately adjusted to take into account the
occurrence, during the period beginning on the first
of such trading days during the 20 trading day
period and ending on that date, of certain events
with respect to our common stock that would result
in an adjustment of the conversion rate.
Non-U.S. Holder.............A beneficial owner of a note that is not a U.S.
Holder.
Note Price..................The average of the secondary market bid quotations
per note obtained by the bid solicitation agent
under the indenture for $10 million principal amount
at maturity of notes at approximately 4:00 p.m., new
York City time, on the determination date from three
unaffiliated securities dealers we select, provided
that if:
o at least three such bids are not obtained by the
bid solicitation agent, or
o in our reasonable judgment, the bid quotations
are not indicative of the secondary market value
of the notes,
then the Note Price will equal (a) the then
applicable conversion rate of the notes multiplied
by (b) the average Sale Price of our common stock on
the five trading days ending on the determination
date.
Option Exercise Date........The later of:
(1) the date upon which a Tax Event occurs or
(2) the date upon which we exercise the option
to elect to have cash interest in lieu of future
original issue discount on the notes following a
Tax Event.
Restated Principal Amount...The principal amount of each note if we exercise the
option to elect to have cash interest in lieu of
future original issue discount accrue on the notes
following a Tax Event.
Sale Price..................The closing sale price per share (or if no closing
sale price is reported, the average of the bid and
ask prices or, if more than one in either case, the
average of the average bid and the average ask
prices) on a given date as reported in composite
transactions for the principal United States
securities exchange on which our common stock is
traded or, if our common stock is not listed on a
United States national or regional securities
exchange, as reported on the Nasdaq Stock Market.
Tax Event...................Whenever we shall have received an opinion from
independent tax counsel experienced in such matters
to the effect that, on or after the date of the
initial placement of the notes, as a result of:
o any amendment to, or change in, including any
announced proposed change in, the laws, rules or
regulations of the United States or any
political subdivision or taxing authority
thereof or therein, or
o any official administrative pronouncement,
action or judicial decision interpreting or
applying those laws or regulations,
in each case which amendment or change is enacted,
promulgated, issued or announced or which proposed
change, pronouncement, action or decision is issued
or announced, on or after the date of this
prospectus, there is more than an insubstantial risk
that interest, including interest calculated at the
"comparable yield," original issue discount or
contingent interest, if any, in respect of the notes
either:
o would not be deductible on a current accrual
basis, or
o would not be deductible under any other method,
in either case in whole or in part, by us, by reason
of deferral, disallowance, or otherwise, for United
States federal income tax purposes.
U.S. Holder.................A citizen or resident of the United States or a
domestic corporation or a person who is otherwise
subject to United States federal income basis in
respect of the notes.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Interpublic is paying all of the selling securityholders' expenses
related to this offering, except the selling securityholders will pay any
applicable underwriting and broker's commissions and expenses. The following
table sets forth the approximate amount of fees and expenses payable by
Interpublic in connection with this registration statement and the distribution
of the notes and shares of common stock registered hereby. All of the amounts
shown are estimates except the SEC registration fee.
SEC registration fee...........................................$54,086
Accountant's Fees and Expenses................................$100,000
Attorneys' Fees and Expenses..................................$175,000
Printing and engraving expenses.................................$5,000
------
Total................................................$334,086
========
Item 15. Indemnification of Directors and Officers.
Section 145 of Title 8 of the General Corporation Law of the State of
Delaware ("GCL") gives a corporation power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding, provided
that the director, officer, employee or agent acted in good faith and in a
manner reasonably believed to be in or not opposed by the best interests of the
corporation, and, with respect to any criminal action or proceeding, provided
that the director, officer, employee or agent had no reasonable cause to believe
his or her conduct was unlawful. The same Section also gives a corporation power
to indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
the person is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of such action or suit if he acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which the person shall have been adjudged to be liable to the
corporation, unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnity for the
expenses which the Court of Chancery or such other court shall deem proper.
Section 145 of the GCL further provides that, to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any such action, suit or proceeding, or in defense of
any claim, issue or matter therein, he or she shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection therewith.
The Registrant's by-laws contain specific authority for indemnification
by the Registrant of current and former directors, officers, employees or agents
of the Registrant on terms that have been derived from Section 145 of Title 8 of
the GCL.
Item 16. Exhibits.
The following is a list of all exhibits filed as a part of this
registration statement on Form S-3, including those incorporated in this
registration statement by reference.
Exhibit Description of Exhibits
Number -----------------------
-----
4.1*** Restated Certificate of Incorporation of the Registrant, as
amended (incorporated by reference to Exhibit 3.1(i) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 2000 (File Number 001-06686; Film Number 1585503))
4.2*** Bylaws of the Registrant (incorporated by reference to Exhibit
3.1(ii) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 2000 (File Number 001-06686; Film Number
1585503))
4.3*** Senior Debt Indenture dated as of October 20, 2000 between the
Registrant and The Bank of New York, as Trustee (incorporated by
reference to Exhibit 99.1 to the Registrant's Current Report on
Form 8-K dated October 24, 2000 (File Number 001-06686; Film
Number 744846))
4.4*** Second Supplemental Indenture dated as of December 14, 2001
between the Registrant and The Bank of New York, as Trustee
4.5*** Form of Zero-Coupon Convertible Senior Notes Due 2021
(included in Exhibit 4.4)
4.6*** Registration Rights Agreement dated as of December 14, 2001
between the Registrant and Salomon Smith Barney Inc., as
representative of the initial purchasers named therein.
5.1* Opinion of Nicholas J. Camera, Esq., Senior Vice President,
General Counsel and Secretary of the Registrant
8.1*** Opinion of Cleary, Gottlieb, Steen & Hamilton as to certain U.S.
federal income tax matters
12.1* Statement of Computation of Ratio of Earnings to Fixed Charges
23.5* Consent of Nicholas J. Camera, Esq., Senior Vice President,
General Counsel and Secretary of the Registrant (included in
Exhibit 5.1)
23.6*** Consent of Cleary, Gottlieb, Steen & Hamilton (included in
Exhibit 8.1)
23.7*** Consent of PricewaterhouseCoopers LLP
23.8*** Consent of Arthur Andersen LLP (with respect to NFO
Worldwide, Inc.)
23.9*** Consent of Arthur Andersen LLP (with respect to True North
Communications Inc.)
23.10*** Consent of J.H. Cohn LLP
24.1*** Power of Attorney
25.1*** Statement of Eligibility on Form T-1 under the Trust Indenture
Act of 1939, as amended, of The Bank of New York under the
Indenture
* Filed herewith. The version of this exhibit filed with this amendment replaces
the version originally filed.
** Filed herewith.
*** Previously filed.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of this registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
Fundamental Change in the information set forth in this registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to the information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the SEC
by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in the registration statement;
(2) That, for the purpose of determining any liability under the Securities Act,
each post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered in this prospectus, and the offering of the
securities at that time shall be deemed to be the initial bona fide offering
thereof; and
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering; and
(4) That, for purposes of determining any liability under the Securities Act,
each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered in this prospectus, and the offering of the
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to its articles, bylaws or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by the
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether the indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement amendment (number three) to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on May 15, 2002.
THE INTERPUBLIC GROUP OF
COMPANIES, INC.
By: /s/ Nicholas J. Camera
-----------------------------------------------------------------
Name: Nicholas J. Camera
Title: Senior Vice President, General Counsel
and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement amendment (number three) has been signed by the following
persons in the capacities on May 15, 2002.
Title
-----
* Executive Vice President, Chief
- ---------------------------
Sean F. Orr Financial Officer (Principal
Financial Officer) and Director
* Chairman of the Board, President
- ---------------------------
John J. Dooner, Jr. and Chief Executive Officer
(Principal Executive Officer)
* Vice President and Controller
- ---------------------------
Richard P. Sneeder, Jr. (Principal Accounting Officer)
* Director
- ---------------------------
Frank J. Borelli
* Director
- ---------------------------
Reginald K. Brack
* Director
- ---------------------------
Jill M. Considine
* Director
- ---------------------------
H. John Greeniaus
* Director
- ---------------------------
Richard A. Goldstein
* Director
- ---------------------------
J. Phillip Samper
* By: /s/ Nicholas J. Camera
----------------------
Nicholas J. Camera
Attorney-in Fact
EXHIBIT INDEX
Exhibit Description of Exhibits
Number -----------------------
-----
4.1*** Restated Certificate of Incorporation of the Registrant, as
amended (incorporated by reference to Exhibit 3.1(i) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 2000 (File Number 001-06686; Film Number 1585503))
4.2*** Bylaws of the Registrant (incorporated by reference to Exhibit
3.1(ii) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 2000 (File Number 001-06686; Film Number
1585503))
4.3*** Senior Debt Indenture dated as of October 20, 2000 between the
Registrant and The Bank of New York, as Trustee (incorporated by
reference to Exhibit 99.1 to the Registrant's Current Report on
Form 8-K dated October 24, 2000 (File Number 001-06686; Film
Number 744846))
4.4*** Second Supplemental Indenture dated as of December 14, 2001
between the Registrant and The Bank of New York, as Trustee
4.5*** Form of Zero-Coupon Convertible Senior Notes Due 2021
(included in Exhibit 4.4)
4.6*** Registration Rights Agreement dated as of December 14, 2001
between the Registrant and Salomon Smith Barney Inc., as
representative of the initial purchasers named therein.
5.1* Opinion of Nicholas J. Camera, Esq., Senior Vice President,
General Counsel and Secretary of the Registrant
8.1*** Opinion of Cleary, Gottlieb, Steen & Hamilton as to certain U.S.
federal income tax matters
12.1* Statement of Computation of Ratio of Earnings to Fixed Charges
23.5* Consent of Nicholas J. Camera, Esq., Senior Vice President,
General Counsel and Secretary of the Registrant (included in
Exhibit 5.1)
23.6*** Consent of Cleary, Gottlieb, Steen & Hamilton (included in
Exhibit 8.1)
23.7*** Consent of PricewaterhouseCoopers LLP
23.8*** Consent of Arthur Andersen LLP (with respect to NFO
Worldwide, Inc.)
23.9*** Consent of Arthur Andersen LLP (with respect to True North
Communications Inc.)
23.10*** Consent of J.H. Cohn LLP
24.1*** Power of Attorney
25.1*** Statement of Eligibility on Form T-1 under the Trust Indenture
Act of 1939, as amended, of The Bank of New York under the
Indenture
* Filed herewith. The version of this exhibit filed with this amendment replaces
the version originally filed.
** Filed herewith.
*** Previously filed.
EXHIBIT 5.1
[The Interpublic Group of Companies, Inc. Letterhead]
May 15, 2002
Securities and Exchange Commission,
Division of Corporate Finance
Washington, D.C. 20549
THE INTERPUBLIC GROUP OF COMPANIES, INC.
REGISTRATION STATEMENT ON FORM S-3
------------------------------------------------------------
Ladies and Gentlemen:
In my capacity as General Counsel to The Interpublic Group of
Companies, Inc., a Delaware corporation (the "Company"), I have been asked to
render this opinion as to the legality of the securities being registered under
a Registration Statement on Form S-3 (the "Registration Statement") being filed
by the Company with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Securities Act"), and the
rules and regulations under the Securities Act. The Registration Statement
relates to the registration under the Securities Act of the Company's
$701,960,000 aggregate principal amount of Zero-Coupon Convertible Senior Notes
due 2021 (the "Notes"). The Notes are convertible into shares of Common Stock
(the "Common Stock"), par value $.10 per share, of the Company.
The Notes were issued by the Company in accordance with the terms of
the Indenture dated October 20, 2000 between the Company and The Bank of New
York, as trustee (the "Base Indenture"), as supplemented by the Second
Supplemental Indenture dated December 14, 2001 between the Company and The Bank
of New York, as trustee (the "Supplemental Indenture" and, together with the
Base Indenture, the "Indenture").
In connection with this opinion, I have examined originals, conformed
copies or photocopies, certified or otherwise identified to my satisfaction, of
the following documents (collectively, the "Documents"):
(i) the Registration Statement (including its exhibits and amendments
thereto);
(ii) the Base Indenture, included as Exhibit 4.3 to the Registration
Statement; and
(iii) the Supplemental Indenture, including as an exhibit thereto the
form of Global Note, included as Exhibit 4.4 to the Registration Statement.
In addition, I have examined such certificates, agreements and
documents as I deemed relevant and necessary as a basis for the opinion
expressed below.
In my examination of the Documents and in rendering my opinion, I have
assumed, without independent investigation, (i) the enforceability of the
Documents against each party to them (other than the Company), (ii) that the
Notes were issued in accordance with the Indenture as described in the
Registration Statement, duly authenticated by The Bank of New York, as trustee,
in accordance with the Indenture and in the form reviewed by me and that any
information omitted from the form was properly added, (iii) the authenticity of
all documents submitted to me as originals, (iv) the conformity to the original
documents of all documents submitted to me as certified, photostatic, reproduced
or conformed copies of validly existing agreements or other documents, (v) the
authenticity of all the latter documents and (vi) that the statements regarding
matters of fact in the certificates, records, agreements, instruments and
documents that I examined are accurate and complete.
Based on the foregoing, and subject to the assumptions, exceptions and
qualifications set forth in this letter, I am of the opinion that (i) the Notes
are valid and binding obligations of the Company enforceable against the Company
in accordance with their terms and (ii) the shares of Common Stock reserved for
issuance upon conversion of the Notes have been duly authorized and reserved
and, when issued upon conversion of the Notes in accordance with the terms of
the Notes, will be validly issued, fully paid and non-assessable and the
issuance of the Common Stock will not be subject to any preemptive or similar
rights.
The foregoing opinion is subject to the qualification that the
enforceability of the Indenture and the Notes may be subject to: (i) bankruptcy,
insolvency, fraudulent conveyance or transfer, reorganization, moratorium and
other similar laws affecting creditors' rights generally and (ii) general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity), including principles of commercial
reasonableness or conscionability and an implied covenant of good faith and fair
dealing.
The foregoing opinion is limited to the federal law of the United
States of America and the law of the State of New York, and, where necessary,
the corporate laws of the State of Delaware.
I hereby consent to the use of my opinion as herein set forth as an
exhibit to the Registration Statement and to the use of my name under the
caption "Validity of Securities" in the Prospectus forming part of the
Registration Statement.
Very truly yours,
The Interpublic Group of Companies, Inc.
By: /s/ Nicholas J. Camera
------------------------------------------------
Name: Nicholas J. Camera
Title: Senior Vice President,
General Counsel and Secretary
EXHIBIT 12.1
------------
THE INTERPUBLIC GROUP OF COMPANIES, INC.
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in thousands, except ratios)
3 Months
Ended
March 31, Year Ended December 31,
---------------------------------------------------------------------------
2002 2001 2000 1999 1998 1997
---- ---- ---- ---- ---- ----
EARNINGS..............
Pre-tax income from
continuing operations. $ 111,997 $ (524,188) $ 826,441 $ 671,955 $ 695,805 $ 390,235
--------- ------------ ------------ ----------- ------------ -----------
FIXED CHARGES........
Interest expensed.... 35,302 164,631 126,322 99,469 86,538 79,998
Rent interest factor. 36,438 156,939 143,101 128,415 115,932 96,189
--------- ----------- ------------ ------------ ------------ ------------
Total Fixed Charges 71,740 321,570 269,423 227,884 202,470 176,187
========= =========== ============ ============ ============ ============
Adjusted Earnings.... $ 183,737 $ (202,618) $ 1,095,864 $ 899,839 $ 898,275 $ 566,422
Ratio of Earnings to
Fixed Charges........ 2.56x -- (1) 4.07x 3.95x 4.44x 3.21x
- ---------------
(1) For the year ended December 31, 2001, we had a deficiency of earnings
to fixed charges. Additional earnings of $524,188,000 would have been
necessary for the year ended December 31, 2001 to provide a one-to-one
coverage ratio. The decline in the ratio of earnings to fixed charges for
the year ended December 31, 2001 primarily relates to lower income from
operations, including restructuring and merger related charges, as
compared to prior periods.