[Exhibit 10.4]
EXECUTION COPY
AMENDMENT
AMENDMENT dated as of December 31, 2002 to the Note Purchase
Agreement dated as of April 28, 1995 between The Interpublic Group of Companies,
Inc. (the "Company") and The Prudential Insurance Company of America, as amended
(the "Agreement"). Capitalized terms used but not defined herein are used with
the meanings given to those terms in the Agreement and the Notes (as defined
below). The persons listed below as Holders hold at least 66-2/3% of the
aggregate outstanding principal amount of 9.45% Senior Notes due 2005 issued
pursuant to the Agreement (the "Notes").
1. The Company and the undersigned Holders hereby agree to the
following amendments to the Agreement, in accordance with subsection 5H of
Paragraph 5 of the Agreement:
(a) Subsection 5H of Paragraph 5 of the Agreement is amended
in full to read as follows:
"5H. Automatic Amendments.
(i) So long as Standard & Poor's' and Xxxxx'x
Investors Service, Inc.'s ratings for the Company's long-term
senior unsecured debt are at least BBB- and Baa3, respectively
(and, if such ratings are BBB- and Baa3, respectively, they
are not the subject of a credit watch with negative outlook),
the covenants contained in Sections 6G, 6H, 6I and 6J shall,
automatically and without further action by the Company
(except as set forth below) or the Holders, be amended to
reflect (a) any amendments or new provisions that make the
terms of any corresponding covenants contained in the Citibank
Agreements, or in any credit agreement that replaces either or
both of the Citibank Agreements in its or their entirety, less
restrictive and (b) the elimination in whole or in part of
such covenants in the Citibank Agreements or any such
replacement agreement. Any such automatic amendment to this
Agreement shall be effective as of the date of, and upon
delivery by the Company to the Holders of an executed copy of,
any amendment or agreement referenced in clause (a) or (b)
above. As promptly as practicable, but in no event more than
10 Business Days, following receipt by the Holders of a
written request by the Company together with a true and
correct copy of any such amendment or agreement and a proposed
draft of the corresponding amendment to this Agreement, the
Required Holders and the Company shall execute a written
amendment to this Agreement (in form and substance reasonably
acceptable to the Required Holders and the Company)
incorporating the terms of any such automatic amendment
effective as of the date of such automatic amendment.
(ii) Until Standard & Poor's' and Xxxxx'x Investors
Service, Inc.'s ratings for the Company's long-term senior
unsecured debt are at least BBB and Baa2, respectively (and,
if such ratings are BBB and Baa2, respectively, they are not
the subject of a credit watch with negative outlook), in the
event any of the financial covenants set forth in Section 5.03
of each of the Citibank Agreements as of December 31, 2002 is
amended in any manner to make such financial covenant more
restrictive, such financial covenant shall, automatically and
without further action by the Company or the Holders, be
included as a new covenant in this Agreement as of the date of
such amendment. As promptly as practicable, but in no event
more than 10 Business Days, following receipt by the Holders
of a written request by the Company together with a true and
correct copy of any such amendment to the Citibank Agreements
and a proposed draft of the corresponding amendment to this
Agreement, the Required Holders and the Company shall execute
a written amendment to this Agreement (in form and substance
reasonably acceptable to the Required Holders and the Company)
incorporating such new financial covenant herein effective as
of the date of such automatic amendment."
(b) Paragraph 5 of the Agreement is amended by adding to the
end thereof a new subsection 5I to read as follows"
"5I. New Credit Facility. On or prior to April 15,
2003, if a Proceeds Target has not occurred, the Company shall
enter into a commitment letter providing for a new credit
facility for a term of no less than 364 days, containing
financial covenants no more restrictive than the financial
covenants contained in this Agreement as of December 31, 2002,
which will be available beginning May 15, 2003 to finance any
of the Company's payment obligations arising under the put
option exercisable on December 14, 2003 in accordance with the
terms of the Zero-Coupon Notes."
(c) Subsection 6A of Paragraph 6 of the Agreement is amended
in full to read as follows:
"6A. Cash Flow to Total Borrowed Funds. The Company
will not permit the ratio of Cash Flow to Total Borrowed Funds
to be less than (i) 0.22 for the consecutive four quarters
ended December 31, 2002, (ii) 0.20 for the consecutive four
quarters ending Xxxxx 00, 0000, (xxx) 0.17 for the consecutive
four quarters ending June 30, 2003, (iv) 0.16 for the
consecutive four quarters ending September 30, 2003, (v) 0.21
for the consecutive four quarters ending December 31, 2003 or
(vi) 0.25 for any consecutive four quarters ending on or after
March 31, 2004, in each case, such ratio to be calculated at
the end of each fiscal quarter, on a trailing four quarter
basis."
(d) Subsection 6B of Paragraph 6 of the Agreement is amended
in full to read as follows:
"6B. Total Borrowed Funds to Consolidated Net Worth.
The Company will not permit Total Borrowed Funds to exceed (i)
117% of Consolidated Net Worth at the end of the quarter ended
December 31, 2002, (ii) 111% of Consolidated Net Worth at the
end of the quarter ending Xxxxx 00, 0000, (xxx) 104% of
Consolidated Net Worth at the end of each of the quarters
ending June 30, 2003 and September 30, 2003, (iv) 95% of
Consolidated Net Worth at the end of the quarter ending
December 31, 2003 or (v) 85% of Consolidated Net Worth at the
end of any quarter ending on or after March 31, 2004."
(e) Subsection 6F of Paragraph 6 of the Agreement is amended
in full to read as follows:
"6F. Related Amendments. The Company will not amend,
modify or change in any manner the Five-Year Citibank
Agreement (or any credit agreement with one or more commercial
banks that replaces the Five-Year Citibank Agreement and
provides for a revolving credit facility for a term of more
than 364 days), the 364-Day Citibank Agreement (or any credit
agreement with one or more commercial banks that replaces the
364-Day Citibank Agreement and provides for a revolving credit
facility for a term of no less than 6 months and no more than
2 years) or any other long-term Debt of the Company (excluding
the Notes), in each case (i) to amend any of the covenants
therein in a manner that results in covenants more restrictive
than those contained in such agreements or instruments as of
December 31, 2002 (unless the same covenants in this
Agreement, if any, are similarly amended), (ii) until Standard
& Poor's' and Xxxxx'x Investors Service, Inc.'s ratings for
the Company's long-term senior unsecured debt are at least BBB
and Baa2, respectively (and, if such ratings are BBB and Baa2,
respectively, they are not the subject of a credit watch with
negative outlook), include any new covenant therein that is
not contained in such agreements or instruments as of December
31, 2002 (unless the same new covenant is included in this
Agreement with terms no more restrictive than those of such
new covenant in any such agreement or instrument) or (iii)
until the Super Proceeds Target and the Zero-Coupon Notes
Target are met, to shorten the maturity or amortization
thereof, provided that the Company shall in no event shorten
the maturity or amortization thereof to a date prior to July
31, 2005, or prepay with cash or Debt any amounts under the
foregoing (other than (x) in connection with a refinancing
thereof with Debt having a maturity no sooner than the
maturity of such refinanced Debt or (y) prepayments pursuant
to the terms of the Citibank Agreements); it being understood
that the Company shall be permitted to make any such
prepayment with capital stock of the Company."
(f) Subsection 6G of Paragraph 6 of the Agreement is amended
in full to read as follows:
"6G. Acquisitions. Except as set forth on Schedule
6G, and except for required payments, or optional payments
made in lieu of required payments when in the best interest of
the Company (as determined in good faith by the appropriate
officers of the Company), pursuant to agreements relating to
purchases and acquisitions entered into prior to January 31,
2003, the Company will not purchase or otherwise acquire all
or substantially all of the assets, or a business unit or
division, of any Person except to the extent that (i) the
consideration of such purchase or acquisition consists solely
of capital stock of the Company or (ii) the cash consideration
of all such purchases and acquisitions shall not exceed (a)
$15,000,000 in the aggregate for any calendar year or (b) if
the Proceeds Target is met, $25,000,000 in the aggregate for
any calendar year or (c) if the Super Proceeds Target and the
Zero-Coupon Notes Target are met, $100,000,000 in the
aggregate for any calendar year; provided that, if for any
calendar year, the cash amount permitted above for such
calendar year exceeds the aggregate cash consideration of such
purchases and acquisitions for such calendar year, the Company
and its Subsidiaries shall be permitted to make cash payments
in respect of purchases and acquisitions in the immediately
succeeding calendar year, in addition to the cash amounts
permitted above for such succeeding calendar year, equal to
the amount of such excess."
(g) Subsection 6H of Paragraph 6 of the Agreement is amended
in full to read as follows:
"6H. Restricted Payments. The Company will not
declare or pay any dividends, purchase, redeem, retire,
defease or otherwise acquire for value any shares of its
common stock now or hereafter outstanding, return any capital
to its stockholders as such, or make any distribution of
assets, equity interests, obligations or securities to its
stockholders as such (any of the foregoing, a "Restricted
Payment"), except that, so long as no Default or Event of
Default shall have occurred and be continuing at the time of
any action described in clause (i), (ii), (iii), (iv) or (v)
below or would result therefrom, the Company may (i) declare
and pay dividends and distributions payable only in common
stock of the Company, (ii) purchase, redeem, retire, defease
or otherwise acquire shares of its capital stock (a) with the
proceeds received contemporaneously from the issue of new
shares of its capital stock with equal or inferior voting
powers, designations, preferences and rights or (b) in
connection with the exercise of options by the employees of
the Company or its Subsidiaries, (iii) issue preferred stock
(or the right to purchase preferred stock) of the Company in
connection with a stockholders' rights plan, (iv) make
Restricted Payments in an aggregate amount from and after the
date the Proceeds Target is met of not more than $25,000,000
in any calendar year and (v) from and after the date the Super
Proceeds Target and the Zero-Coupon Notes Target are met and
EBITDA for the four fiscal quarters most recently ended is at
least (a) $1,000,000,000, make Restricted Payments in an
aggregate amount of not more than $100,000,000 in any calendar
year, (b) $1,200,000,000, make Restricted Payments in an
aggregate amount of not more than $150,000,000 in any calendar
year or (c) $1,300,000,000, make Restricted Payments without
limitation.
(h) Paragraph 6 of the Agreement is amended by adding to the
end thereof new subsections 6I and 6J to read as follows:
"6I. Capital Expenditures. The Company will not, and
will not permit any of its Consolidated Subsidiaries to, make
any Capital Expenditures that would cause the aggregate of all
such Capital Expenditures made by the Company and its
Consolidated Subsidiaries to exceed $175,000,000 in any
calendar year; provided that, if for any calendar year, the
amount permitted above for such calendar year exceeds the
Capital Expenditures made in such year, the Company and its
Consolidated Subsidiaries shall be entitled to make Capital
Expenditures in the immediately succeeding calendar year in an
amount equal to the sum of (i) $175,000,000 and (ii) the
lesser of (a) such excess and (b) $40,000,000. For purposes of
this paragraph 6I, "Capital Expenditures" shall mean, for any
period, the sum of, without duplication, (A) all expenditures
made, directly or indirectly, during such period for
equipment, fixed assets, real property or improvements, or for
replacements or substitutions therefor or additions thereto,
that have been or should be, in accordance with generally
accepted accounting principals, reflected as additions to
property, plant or equipment on a consolidated balance sheet
of a Person or have a useful life of more than one year plus
(B) the aggregate principal amount of all Debt (including
Capitalized Lease Obligations) assumed or incurred in
connection with any such expenditures.
6J. Subsidiary Debt. The Company will not permit any
of its Consolidated Subsidiaries to create or suffer to exist
any Debt other than (without duplication) (i) Debt owed to the
Company or to a Consolidated Subsidiary of the Company, (ii)
Debt existing as of December 31, 2002 and described on
Schedule 6J hereto (the "Existing Debt"), and any Debt
extending the maturity of, or refunding or refinancing, in
whole or in part, the Existing Debt, provided that the
principal amount of such Existing Debt shall not be increased
above the principal amount thereof outstanding immediately
prior to such extension, refunding or refinancing, and the
direct and contingent obligors therefor shall not be changed,
as a result of or in connection with such extension, refunding
or refinancing, (iii) Debt secured by Liens permitted by
paragraph 6D, (iv) unsecured Debt incurred in the ordinary
course of business of the Company's Consolidated Subsidiaries
organized outside the United States, (v) book overdraft
amounts outstanding at any time, and (vi) unsecured Debt
incurred in the ordinary course of business of the Company's
Consolidated Subsidiaries organized in the United States in an
aggregate amount at any time outstanding of not more than
$25,000,000; provided, that the foregoing limitations shall
not be effective as to any such Subsidiary that has entered
into a guaranty for the benefit of the Holders of all payment
obligations of the Company under this Agreement."
(i) Subsection 7A(v) of Paragraph 7 of the Agreement is
amended by inserting the phrase "5I," immediately preceding the phrase "6A,
6B, 6C or 6E".
(j) The defined term "Reinvestment Yield" in Subsection 10A of
Paragraph 10 of the Agreement is amended by inserting the phrase "0.50%
plus" immediately preceding the phrase "the yield to maturity implied by".
(k) Each of the defined terms "Cash Flow" and "Consolidated
Net Worth" in Subsection 10B of Paragraph 10 of the Agreement is amended in
full to read as follows:
"Cash Flow" shall mean the sum of net income,
depreciation expenses, amortization costs and changes in
deferred taxes plus to the extent deducted in the calculation
of net income for any period (i) post-retirement and
post-employment benefit costs recognized prior to the period
in which such benefits are paid, (ii) non-cash charges related
to investment impairment and write-offs of uncollectible debt
incurred by the Company in an aggregate amount of no more than
$28,600,000 with respect to the fiscal quarter ended June 30,
2002 or prior periods on a cumulative basis and (iii)
non-cash, non-recurring charges in an amount not to exceed
$500,000,000 taken by the Company in accordance with generally
accepted accounting principles (a) with respect to the
impairment of the assets of Brands Hatch Leisure Limited,
Octagon Worldwide Limited and Octagon Worldwide Inc. and their
respective Subsidiaries, in the fiscal year ended December 31,
2002 (which shall be allotted to each of the fiscal quarters
of 2002 in a schedule to be delivered to the Holders on or
prior to March 31, 2003) and in the fiscal quarter ending
March 31, 2003 and (b) with respect to all such other charges,
in the fiscal year ended December 31, 2002 (which shall be
allotted to each of the fiscal quarters of 2002 in a schedule
to be delivered to the Holders on or prior to March 31, 2003).
"Consolidated Net Worth" shall mean, at any date, the
consolidated stockholders' equity of the Company and its
Consolidated Subsidiaries as such appear on the financial
statements of the Company determined in accordance with
generally accepted accounting principles, without taking into
account the effect of cumulative translation adjustments, plus
(i) any amount by which retained earnings has been reduced by
reason of the recognition of post-retirement and
post-employment benefit costs prior to the period in which
such benefits are paid and (ii) to the extent such charge
occurred during the four fiscal quarters ended immediately
prior to the applicable measurement date, non-cash,
non-recurring charges in an amount not to exceed $500,000,000
taken (a) with respect to the impairment of the assets of
Brands Hatch Leisure Limited, Octagon Worldwide Limited and
Octagon Worldwide Inc. and their respective Subsidiaries, in
the fiscal year ended December 31, 2002 (which shall be
allotted to each of the fiscal quarters of 2002 in a schedule
to be delivered to the Holders on or prior to March 31, 2003)
and in the fiscal quarter ending March 31, 2003 and (b) with
respect to all such other charges, in the fiscal year ended
December 31, 2002 (which shall be allotted to each of the
fiscal quarters of 2002 in a schedule to be delivered to the
Holders on or prior to March 31, 2003), in each case
determined in accordance with generally accepted accounting
principles for such period.
(l) Subsection 10B of Paragraph 10 of the Agreement is amended
to include the following defined terms:
"364-Day Citibank Agreement" shall mean the Company's
364-Day Credit Agreement with Citibank, N.A., as agent, and
the other lenders party thereto, dated as of May 16, 2002, as
amended and supplemented and in effect from time to time.
"Citibank Agreements" shall mean, collectively, the
Five-Year Citibank Agreement and the 364-Day Citibank
Agreement.
"EBITDA" shall mean, for any period, net income (or
net loss) plus the sum of (i) interest expense, (ii) income
tax expense, (iii) depreciation expense, (iv) amortization
expense and (v) non-cash, non-recurring charges in an amount
not to exceed $500,000,000 taken (a) with respect to the
impairment of the assets of Brands Hatch Leisure Limited,
Octagon Worldwide Limited and Octagon Worldwide Inc. and their
respective Subsidiaries, in the fiscal year ended December 31,
2002 (which shall be allotted to each of the fiscal quarters
of 2002 in a schedule to be delivered to the Holders on or
prior to March 31, 2003) and in the fiscal quarter ending
March 31, 2003 and (b) with respect to all such other charges,
in the fiscal year ended December 31, 2002 (which shall be
allotted to each of the fiscal quarters of 2002 in a schedule
to be delivered to the Holders on or prior to March 31, 2003),
in each case determined in accordance with generally accepted
accounting principles for such period.
"Five-Year Citibank Agreement" shall mean the
Company's Five-Year Credit Agreement with Citibank, N.A., as
agent, and the other lenders party thereto, dated as of June
27, 2000, as amended and supplemented and in effect from time
to time.
"Net Cash Proceeds" shall mean, with respect to any
sale, lease, transfer or other disposition of any asset by the
Company or any of its Subsidiaries or the incurrence or
issuance of any Debt in the capital markets having neither a
put exercisable, nor a maturity, earlier than July 31, 2005 or
the sale or issuance of any equity interests by the Company,
the aggregate amount of cash received by the Company and its
Subsidiaries in connection with such transaction after
deducting therefrom only (without duplication) (i) reasonable
and customary brokerage commissions, underwriting fees and
discounts, legal fees, finder's fees and other similar fees
and commissions, (ii) the amount of estimated incremental
taxes payable in connection with or as a result of such
transaction and (iii) the amount of any Debt secured by a Lien
on such asset that, by the terms of the agreement or
instrument governing such Debt, is required to be repaid upon
such disposition, in each case to the extent, but only to the
extent, that the amounts so deducted are, at the time of
receipt of such cash, actually paid or payable to a Person
that is not an Affiliate of the Company and are properly
attributable to such transaction or to the asset that is the
subject thereof, as determined by an appropriate officer of
the Company.
"Proceeds Target" shall mean the receipt by the
Company and its Subsidiaries, from and after December 31,
2002, of Net Cash Proceeds of not less than $400,000,000 in
the aggregate from a combination of one or more transactions
involving the sale, lease, transfer or other disposition of
any asset by the Company or any of its Subsidiaries or the
incurrence or issuance of any Debt in the capital markets
having neither a put exercisable, nor a maturity, earlier than
July 31, 2005 or the sale or issuance of any equity interests
by the Company or any of its Subsidiaries.
"Super Proceeds Target" shall mean the receipt by the
Company and its Subsidiaries, from and after December 31,
2002, of Net Cash Proceeds of not less than $600,000,000 in
the aggregate from a combination of one or more transactions
involving the sale, lease, transfer or other disposition of
any asset by the Company or any of its Subsidiaries or the
incurrence or issuance of any Debt in the capital markets
having neither a put exercisable, nor a maturity, earlier than
July 31, 2005 or the sale or issuance of any equity interests
by the Company or any of its Subsidiaries.
"Zero-Coupon Notes" shall mean the Zero-Coupon
Convertible Senior Notes of the Company due 2021.
"Zero-Coupon Notes Target" shall mean not more than
$75,000,000 aggregate principal amount is outstanding under
the Zero-Coupon Notes.
(m) Schedule 6G to the Agreement is amended by replacing it in
its entirety with the Schedule 6G attached hereto.
(n) The Agreement is amended by adding, as a new "Schedule 6J"
thereto, Schedule 6J attached hereto, in its entirety.
(o) From and after December 31, 2002 the interest rate on the
Notes shall be 9.95% per annum and the interest rate "9.45%" shall be
deleted each and every time it appears in the Agreement or the Notes and
replaced with "9.95%." The Company hereby agrees to execute and deliver to
each Holder who shall request the same, upon surrender to the Company of
the outstanding Note held by such Holder, a new Note in the same principal
amount as the surrendered Note, but having an interest rate of 9.95%. Until
so exchanged, the interest rate on all outstanding Notes shall be deemed to
be 9.95%, notwithstanding any other interest rate set out in such Note.
2. Except as expressly provided herein, the Agreement shall
remain in full force and effect and this Amendment shall not operate as a waiver
of any right, power or remedy of any Holder, nor constitute a waiver of any
provision of the Agreement.
3. The Company hereby represents and warrants that:
(a) After giving effect to this Amendment, no Default or Event
of Default will have occurred or be continuing.
(b) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business.
(c) The execution, delivery and performance by the Company of
this Amendment, are within the Company's corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene, or
constitute a default under, any provision of applicable law or regulation
or of the certificate of incorporation of the Company or of any judgment,
injunction, order, decree, material agreement or other instrument binding
upon the Company or result in the creation or imposition of any Lien on any
asset of the Company or any of its Consolidated Subsidiaries.
(d) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body or
any other third party is required for the due execution, delivery and
performance by the Company of this Amendment.
(e) This Amendment has been duly executed and delivered by the
Company. This Amendment is the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the rights of creditors generally and subject to
general principles of equity.
(f) There is no action, suit, investigation, litigation or
proceeding pending against, or to the knowledge of the Company, threatened
against the Company or any of its Consolidated Subsidiaries before any
court or arbitrator or any governmental body, agency or official in which
there is a significant probability of an adverse decision that (i) would
have a material adverse effect on (x) the business, financial condition or
results of operations of the Company and its Consolidated Subsidiaries
taken as a whole, (y) the rights and remedies of the Holders under the
Agreement or any Note or (z) the ability of the Company to perform its
obligations under the Agreement or any Note or (ii) purports to affect the
legality, validity or enforceability of this Amendment or the consummation
of the transactions contemplated hereby.
(g) The Restatement Date (as defined in the Citibank
Agreements) has occurred.
4. In consideration for the amendments set forth in Sections
1(c), 1(d) and 1(k), the Company shall pay pro rata to the Holders a fee in an
aggregate amount equal to the product of (x) the aggregate outstanding principal
amount of the Notes and (y) 0.125%.
5. The Company agrees to pay all out-of-pocket expenses
incurred by the Holders in connection with this Amendment in accordance with the
terms of Section 11B of the Agreement.
6. This Amendment shall be construed and enforced in
accordance with the laws of the State of New York, without regard to conflicts
of law provisions.
7. Each of the Holders agrees to keep confidential, in
accordance with Section 11H of the Agreement, all information disclosed by the
Company to the Holders in connection with this Amendment relating to the subject
matter hereof (other than any such information (i) which was publicly known or
otherwise known to such Holder at the time of disclosure, or (ii) which
subsequently becomes publicly known through no act or omission by such Holder).
8. This Amendment shall be effective as of the date first
above written and the Agreement shall be deemed amended upon delivery to the
Holders of a fully executed copy of this Amendment and payment of the fee
referred to in Section 4.
IN WITNESS WHEREOF, each of the Company and the undersigned
Holders has caused this Amendment to be executed by its duly authorized
representative as of the date and year first above written.
THE INTERPUBLIC GROUP OF COMPANIES, INC.
By: /s/ XXXXXX XXXXX
----------------
Name: Xxxxxx Xxxxx
Title: Vice President and Treasurer
HOLDERS:
--------
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /s/ XXXXXXXXXXX XXXXX
---------------------
Name: Xxxxxxxxxxx Xxxxx
Title: Vice President
Schedule 6J
Consolidated Subsidiary Debt
(US$s in Millions)
Payable to Banks $1,389.6
Capitalized Leases 1,140.0
Mortgage Payable 86.2
Letters of Credit (Undrawn) 37,529.2
---------
Total $40,145.1
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